New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1873-11-07

hand forty per cent OF what you agreo
to pay on demand and keeping only twenty
per cent. The maximum percentage of legal
tender notes held by the New-York banks as
reserve against the demands of their depos-
itors has not at any time within the last four
years been equal to thirty per cent OF their
debts to depositors. On the 18th OF October,
the date of the last return of the Bank OF
England received by mall the reserve of notes
and coin in the banking department after
having been drawn down from sixty-six mil
lion dollars to thirty-nine millions, was still
thirty-one per cent of the public and private
deposits. The rate Of discount was then TX
per cent (since raised to oigh0, showing
that the proportion which our banks
consider safe, indeed proportion when
they have never once reached Tor
the last four years. is regarded by the directors
of the Bank of England as insufficient for the
safe conduct of their business. True, large
mart of the cash reserves of the London joint
stock banks is left on deposit at the Bank OF En-
Gland, and so is large proportion OF the re-
serves of the national banks throughout the
United States left on deposit at New-fo
Investigation will show that the strains to
which the bank reserves here are subjected
under the existing system are as violent anu
"a frequent as those which the reserve OF the
Bank of England has to encounter, while, so
long as our banks are hampered by the usury
laws, they cannot attract money from neigh
boring cities by raising their discount rate.
We cannot agree with the American finan-
cial critics who attack the Bank of England
for protecting its banking reserve by borrow
a. ftxy Of
object of this proceeding of the Bank Is to
raise the rate of interest IN the open market
to a closer approximation to its own rate OF
discount This being effected, the conse-
uuences are, first to discourage new commit
ments with fOreigners-such, for instance, rs
the Turkish loan aud the new loan OF the
Philadelphia and Reading Railroad Company
undertakings which, however secure III them-
selves would at the present time danger
onsly increase the drain of specie from
England secondly to give sort OF
advertisement to Englishmen who are
borrowing at home and lending abroad
70 call on their foreign debtors to pay
I'D; thirdly, to inspire all capitalists with
greater caution by inforling them that the
directors of the Bank see danger ahead. To
coupare this action Of the Bank with the
"locking ND of money" by stock-gamblers
seems to us unfair. The object of the Bank
il n salutary one while that OF the stock
Gamblers is the reverse. AS the Bank sells
copsols for money and buys for the account"
the direct effect on the stock market of its
purchases and sales can be very little. The
operation does not affect the price of exports
and imports ut ALL since a considerable period
OF time is necessary to influence the prices OF
commodities 10y dear money alone. Lastly, the
charge that the Bank in this abuses its mo
"nopoly of issuing notes" is unfounded,
since the operation is entirely discon-
pected with the issue department, and is
solely for the protection of the reserve in the
banking department. The Bank had received
from the Government, from the private and
Joint stock banks and from the public $780,
100000 of deposits. 1t had but S99,OOO,OOO with
which to pay this sum, Merely to borrow Tor
fortnight few millions in cash on the
security of consols, for the purpose of dimin-
jsbipe its demand liabilities to depositors,
seems to us not a step which merits con-
domination. On the other hand, we should
have been glad at any time this Summer to
see the banks of this city borrowing on
United States bonds to strengthen their
shaky reserves, instead of weakening them by
lending on stocks, the fatal consequences OF
which imprudence we have now for nearly
seven weeks been experiencing.
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