, 1873-10-14
THE BUPpOsED PROTECTION OF DEPo8-
ITQRg,

OF 70 per cent OF tno aBBfeehto n1uoul1t VI W.
poalta aud circulation Of overy National Bank.
It ia reported that President Grant, among othor
recommendations for financial Legislation, will
suggest to Congresa.the repeal Of this section 30
fur as It roIatoa to deposits. and will recommend
tho requirement that the rosorve on the motto
circulation shall bo gradually changed into
gold. This iB stop in tho right direction, md
particularly that portion Of tho recommendation
wlich suggeats teat National Banks allal not DO
required to hold rosorye on account Of doroa-
ita. The repeal OF tlis requirement WAS |
advocated by THE TRIBUNE aud lilto- |
wigo in tho columns Of tho Financier during |
the monetary striugonoy Of last autumn and |
winter, and is In accord with tho practice which |
has always exiatod among tho aoundest financial
institutions in Ohriatenaom, tho Scotch banks.
There is radlcal difference betwoon the |
character Of a noto circulation and TINT Of do
| post accounts. It is proper and necessary, 80
| long "a tho Govornmont provides o systen OF
bauking on tho faith Of tho national credit, that
| it should not only secure the ultlmoto con-
vertlbihty OF National Dank notos, as 1t does by
requiring deposit Of bondg, but also domand
reasonable security for the immediate converti-
| bility Of such proportion Of theBo notes aB aro
lilso1y to bc presented ut once. Thts can
be done only by requiring tho banks
| to koop on hand a cortain propor-
or legal-tonder for the redemption OF their
uctos. National Bank notes circulate oil over
the country. Those Of Chicago banlts may bo
found in Maino or in Florida, and uice ucrsd.
Under tho prcaont Law, they are takon ovory-
where, without roferouco to tho location OF tho
banks, on tho faith Of tho Government. and 1t
Is necessary TINT they should DO mado abHo-
lutcly good in tho mannor Indicated. 1t is DIFF"
fcrcnt with deposit :account. This Is moro
business transaction botwoon bankors and their
customers. THO only WY In which the Gov
ernuont could afford absolute protection Of do
posita would be to require banks to retain all
the deposits in their vaults, which, as matter
Of course, would render banking utterly Inn
/ possible as business. Gu my other
, basis thau this, tito Government cannot
, fully protect dcpositors, md It is In
the nature ofa deception, or certainly doluson,
) to mako protonso Of doing 1t. It is in ovory
way bottor that depoaitors should understand
that they must themselves decide on tho security
, which bank furnishes them for tho money con-
! | ildod to its care.
/ Thero arc other good reasous in political
economy, and in the practice Of tho banks Of all
: commercial countries, why there should DO no
t compulsory reHoryo Of deposits. Bro1y stated,
tho rcsoryo helps toprecipitate pancsin tfmca. Of
il money striugoucy by locking up portion of tlo
q money which might roliove tho strngoncy, and
is utterly insufficient to meet the demands upon
tho banks whom tho panic coulos. It is cast
a iron barrier which opposes tho iutoroats OF the
8 public on both sides. There are certain acasonR
i Of tho your whom there is q necessity for 1
B larger volume OF currency than at other sea-
j. sons. It was estima ted during tho finnncia
II Btringonoy Of tho fall Of 1874 that, If tho M
!, tioual Banks had been permitted to put ont thoil
resources, thoy could layo added $780, 900, 900 t.
r their loans ind discounts, which would hayo ro
[y loved tho distress Of tho uorchants contributed
or to tho moro rapid movemont Of tho crop8, an
t. thoroby brought tho country buck to its nor
IL nal condition. 1t Is apparent that tho prohibi
AstsA~N~@~ 0@N-N@f
40 lending beyond rs per cent Of their deposits
=. is calculated to produce a panic q
Of any timo when money is tight. Til
he would bo bad enough by itself, btu
1t becomes worso In view Of tho fact TIM
whom tho panic coraos and thero Ia wild rus
s- upon tho banks the resoryo ls worthless, becauf
hc 1t is inadequate to ray all the dopositore. It
| ,ht4; ;4.,&o II. :,
to the Judgment Of business mon In q matter
10Y purely private concern.
to Wo layo said that tho practice Of the be
90 banking communities il opposed to tho osta
ls- liahmont by law OF an intlcxiblo reaorvo. IT
On | Scotch banks which aro unquoHtionably tt
In soundest and tho best In tho world, arc aubIet
1T, cd to no such restraint. There aro twelve pri
on olral and 700 branch banks In Scotland. vi
rt- $500, ,0o0 600 deposits, mud yot they ilayo bc
ot- able to suetain themselves during oil t
M financial crisos that hayo visited tho Unit
Of Kingdom since 1909. Evon whom t
lgo Danl Of England has boon fore
to to suspend, tho Scotch banka hayo HI
ted up thoir heads as proudly and ttrny as In tir
Of tho greatest easo In financial circles.
roasons why thoy have boon able to weather
us' tho financial storms aro two, viz: ~ They
- good bankors, attoud closely to their busine
IoA atudy tho condition Of tho country. and know
characteristics of tho people; and (2) thoy h1
M ra1 capital (tho only roaorve that ID tangible
1Ao roable, because It belongs to tho bauls) In a
toe- w. -, ,.-.u,. 49,, .,o;u .,a,xo
al financial paptcs Ia In no wise to DO attribu
~. M to reserve kept for tho protection Of dope
=. tors, except "a 1t constitutes feature OF tt
~. management variable according to clrcumst
' ,i COS, aud depending altogether upon private tu
49, mant,
.ont Tho Ban Francisco Ohroaicle estimates II