Bedford inquirer. [volume] (Bedford, Pa.) 1857-1884, 1866-03-30
Condition of American Banks.

The London Economist, of the oath Of
February, very high authority in matters
Of finance and commerce, has in it an elabo:
rate article headed, ''The Sound State of
American Banking at Present, in which
cur national system is thoroughly analysed
and exposed for the information Of the peo-
pie of England; comparison drawn between
it and their own system, and the conclusion
candidly and unequivocally stated that the
banks Of the United States evince amazing
s2lidity; perhaps no banks in the world on
the same scale show as much. "
The liabilities of the banks of the United
States are stated at $500, 600, 600, and their
ever 25 per cent Of their liabilities. It is
true that both the Bank of England and the
Bank of France keep larger amount. On
the 18th of February the Bank of France
had a little more than 81 per cent Of its
liabilities and on the l4th Of February the
Bank Of England 343 per cent But these
reserves, and especially that Of the Bank Of
England, are the banking reserves of the
whole country. The amount Of specie held
by the London and provincial banks Is
trife In proportion to their liabilities it is
simply the ready money Of the day The
reserve in the Bank of England, to bring it
into comparison with that Of the American
banks ought to be measured BY its proper
ton. not to the liabilities of the Bank Of
England only, but to the liabilities of the
other banks Of England. These, the writer
saws, are not known to him, but the liabili-
ties of three banks named Ey him amount to
to $3.50, ,000, 900, while those of the Bank of
England. including It's circulation, are only
$2l0, 1000, ,000 which gives some idea of the
vast masses Of credit which in England are
secured BY that single reserve in Che Bank
of England. The American banks hold in
mere cash twenty-five per cent of their liabili-
ties, when together.
1.-THE English banks we're thrown together
we doubt if they would hold FIVE per cent.
But, he further says. this comparison
does not bring out the, true solidity Of the
American banks when measured by English
examples, for in the excess Of Government
securities held by American banks as com
pared with the English banks, their strength
to an Englishman is perfectly astounding,
for fourteen sixteenths Of their whole liabili-
ties are in Government securities and cash
whilst an English bank which holds twoffths
considers itself an example of caution, and
many Of the best banks in the country hold
proportion very much smaller, ''The
American banks are able to hold so large a
reserve, and yet advance large sum to the
public, because their capital is so enormous
An English bank does not consider it begins
its proper business till it begins To deal with
the property of others, but an American
bank lends mainly its own money, and so can
keep almost all its customers money,,in hand
and tangible. The loans of the American
banks are $437, 5000 against a capital and
reserve of 1882, 900, ,000-a proportion of
capital to advance quite opposed to English
maxims and experience on the correlatiYe
proportion ofliabilities to the public to avail
| able reserve. No English bank lends four
teen per cent. more than its own money, any
more than an English bank keeps fourteen
! sixteenth Of its liabilities in cash at com
mand.
The conclusion which is reached is thus
summed up The banks of America are in
a very sound state; they have larger avail
| able reserve against their liabilities than any
| European banks; they depend far more on
| their own capital, which cannot be with
drawn from them, than any European
banks. The inference is plain. A nation
in which the banks are SO sound is particu-
laTly unlikely to suffer from a collapse of
credit In former times, in 1887 and 1857,
| the State banks of America kept very small
reserves, and failed by Wholesale but this is
not the case with the new National banks
If America were subjected to the difficult
ties of 1887 and 1851 probably her banks
would resist the strain. We say that the
bank OF England manages so much better
than she used to manage that a panic now
is much more likely to be rare than formerly.
Just so these new American banks are So
much better than the old banks that a great
humiliation of banking credit seems all but
impossible, and if banking credit stands
firm no general failure is likely. Individual
failures may happen there as here, but no
wholesale bankruptcy of ordinary traders.
vi course, America must pass through the
! trying change from an ineonvertible But
We see that in both changes she viii be as
sisted by a sound system of banking, and
therefore we need be much less fearful of a
momentous crash than if, as at former pc
RODS OF danger and difficulty, her central
institutions of credit has been, even when
not insolvent, at least grossly deficient in
available resources.