The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1868-11-06
RANK RESER YES.
Nom me Ippston Adpsrttser.

holders of stocks and other values, and to drive
prl3es down TO an unnatural level. And 1t Is
Sravely and eveu earnestly argued by those
whose interest lies tn' the opposite direction,
kbat those banks in New York which are not
implicated in this movement should "ase their
reserves TO peutralize 1t; IN plain Eogltsh,
should violate the law under whicn they exist
by losnirg some part OF that portion OF their
funds which they are expressly prohiolted rom
loanlng under any circumstances, aud when
they are bound to hoid in reserve TO meet
the current demands of their drpo.itors.
That these combinations and tricks oil un-
Bcrupulous gamnlng operators are great
moral wrong and great cause OF annoyance to
the business community cannot be disputed.
But 1t is no less clear that the proposed remedy
would merely aggra0ate the disease, III Vue
first place, there ale al ways natural causes
without which sUch operations could not Ce
successfully carried out II money money were rtslIy
nm enough OF il to materially distress the puo-
lie Az the present time, an unusually large
part OF the money capital OF tue country appears
TO be absorbed in q desperate attempt to hold an
enormous amount OF preadstuffs at uuuaturally
high pricps. Toe resources OF Western banks
and capitalists, and Their credit at the East, are
doubtless strained to the utmost in this I Ve
frusn futile undertaking. Not only Eastern
capital, but bank credit, has doubtless been
pressed luio the service, aud the latter has been
in many cases expanded beyond all safe or
reasonable bounds. Tue banSs have gone on
lending not money but their o wn credit until
at last they cen hardly meet their own Liabilities
from day to day, much less come to the relief
The report of October II shows that the New
York banks, with an aggregate capital of about
$S3 500 600, had immediate liabilities OF about
1928 600 900, of which $3.50 000 900 were deposits.
To meet these they had less than S59,0O0,000 in
legal-tender notes and about 50, 000,0 900 of
specie. The two together snow a surolus OF
about 100000 above the strict requirement
OF the law; but, as the specie can only be re.
Rarded as special deposit, the true statement
would be S2l4, ,O00,OO otliaoll1tes and $1,000 600
Of 1ega-tender reserve, or an apparent surplus
of 6Ve and a halt millions. But rs probably
some $25, ,00O 600 of this reserve consisted
OF hree per cent. certificates, which cannot be
paid out 10 the pubic, the actual available
amount OF legal-tenders was PROBABLY less than
S35, 000, O00 or not seventeen per cent. of the
Immediate liabilities of the banks, and not
twenty per cent of the deposits alone. Yet
many of these deposits include the chief
reserve of 'lawful money" held, or supposed
to be held, by multitudes of banks in other
parts OF the country; 80 that this paltry hoard
of thirty or thlrty-hVe millions comprises per-
haps nearly e-half OF all the actual basis by
which nearly nine hnndred millions of money"
is made good.
But this is not all ror oue-half the truth. The
aggregate reserve, Insignificant as it is, is only
made IoleTable by averaging bad aad good
together. 1t seems indeed almost incredible to
what an extent many banks have loaned the
money of their depoSitorS, and how small are
their means of immediate repayment. The
Greenwich Bank, for instance, with capital OF
100000, had loaned 81 100, 00R; and 10 repay
deposits OF above $500 600 it had a reserve Of
$l40,000. The City Bank had loaned above our
times its capital, and had only S440,G OF paper
reserve to meet deposits OF above So 800, OOO The
Peoples Bank loan was three and half times
its capital, and with paper reserve OF less tnau
5000, 700 to meet deposits Of s., 200, 900. The
Park Bank has loaned seven aud half times
its capital, so that depreciation of less than
one-seventh in the yaiue OF its loau would
sweep its capital away. But the climax is
furnished by the 'Bul's Head" Bank, with
capital Of $500, 600 q loan of above $l,700, 900,
deposits of nearly Sl,9Oo,OOO, and no reserve at
ali reported. There are other loans of four,
five, aud Blk times the capital OF the bank, aud
ihe average is more than three times. When
the days of our present paper delusion are over,
will II be credited that such things were done
and were toleratedE
Now, with this high pressure of expansion
upon our monetary Institutions is 1t surprising
that corners" are SO frequent and so fatal?
Can we wonder that BANKS, habitualy owing
from two to ee ht times their capital, should be
poweIless TO help others, AMI in constant alarm
TOR themselves? And are we to be told that the
proper remedy for THIS state of things is to allow
Them 10 break down the last feeble barrier
which sull stands between them and insolvency?
No, the remedy lies in an exactly opposite
direction.
There are conservative banks in New York
though comparatively few even OF these seem
to maintain reserve much beyond the legal
minimum. But there Is one brilliant exception,
to which our attention ie now duected for tue
first time. The Bank of Commerce mas a cap tai
OF $40 000, 600 and o loan or about $24 000. 900.
Its circulation and deposits are about $l2, ,000,-
900, of which some S50000O are Offset by an
equal amount of specie; and to meet the re-
naming S1l,5OOO0O, it holds legal-tender
reserve OF above S6,700 900. or abo We SO per
cent. Ons-balt Of tlls amount might be loaned,
and still leave this bank stronger Than almost
any other in the city. If all the others were
equally tortined, the aggregate legsl-tender
reserve would be $l25 900, 900, aud no possibility
of an artificial scarcity could exist.
That this bank with such a loan, can main
tain such reserves, is due to the fact that it has
never distributed among its stockholders the
exceptional profits OF recent years, but has
wisely held them in reserve after dividing ten
per cent. per annum, 30 thai Its available capt.
tai has been In fact greatly augmented. Other
banks may have done the same; out they have
not Ike this one, employed their surplus to
project the public, but only to swell their
already eXlravagsnt dividends or to crafty
taste for un warrantable expenditure. day of
Teck koning will come when they may wish they
had pursued different course.
The bearing of these iacLs upon the resump-
lion of specie paym entS Is obvious. IL there is
any truth ib political economy and in the les
sons of experience, this resumption cannot be
accOmp mplished and maintained without dmin-
isbing The aggregate lab titles of our BANKS by
At least ore-ouTtn, probably ne.thlrd, perhaps
more. But how many OF the banks in New
York could bear that dmlnution? One, and
one only, could do SO, aud still retain surplus
Atove lis legal reserve. 1t the United State
treasury could have resumed specie payment on
the l7th instant, the Bank OF Commerce could
have done the same, bat probably not another
bank in the country could nave safely folio we'd
Its example
II, Therefore, our banks wish to discourage
unprlDcipled speculation 10 bring gamblers TO
grief and TO aid the Government in Tedeeming
Its dlshonored obligations ana restoring sound
standard of value, they have only to follow this
now exceptional example, and 10 curtail steadily
and resolntely that mischievous expansion OF
their credit which has wrought such lncaicula-
mlachlnf hao lla1