New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-05-23
sO,OOO.OOO
ACKNOWLEDGEMENTS. 10000 0Ot
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Net imitation only.........................

y,i,s,ion ACKNOWLEDGEMENTS. s2OOOOOOO
As Mr.. Logan computed contraction OF
forty millions under the section requiring
banks to count nothing as reserve except
money in their own vaults, he Indignantly
denounced the Finance Committees bill as
MT ga fair diyidc.D This argument and COM
putaion seem to have been accepted on all
sides as unanswcrable and in order to "split
.stbc difference the Senate adopted Mr..
Wright's amendment, and voted to retire only
one dollar in grcenbacks for each four dollars
of additional bank notes. According to the
above method Of calculation the bill, as
passed, gives net imitation OF forty-ilye per
cent of whatever amount the bank circulation
may be increased by 4" free banking" Issuing
two dollars in bank notes for one dollar III
greenbacbs Withdrawn gives only twenty per
cent of imitation, according to Mr.. Logan,
"and no man with pencil and paper can
"make it out any other way" And" added
the Senator, "yet you contend that this
"is fairness, and say You want to deal fairly
"with Senators ~ at is Ju::ard to lis all
"the time" protested this practical but indg-
nant statesman.
No one who has mastered the first princi-
ciples of banking needs to be told that Messrs.
Logan, Morton. Wright, and Ferry, if they
really believe the argument above summarized
to be sound, are rs ignorant OF the somewhat
weighty business which they have undertaken
"a the oyster that has never been stirred from
IFS native mud So far from being " locked
"upn and inactive, the money which cOnstl-
tues the reserve of banks is the most
efficient part of the circulation. In the first
place, about one half of the money required
by law to be kept by banks as reserve Is
necessary to transact their current business;
Or, as Mr.. IIagehot expresses it, d" to open shop
"vitb.n He accordingly credits the London
private and joint stock banks with no reserve
at all, except the amount of their deposits
with the Bank of England, considering the
rest of their cash to be the same thing as the
cash in the till of a retail tradcr-absolutcly
necessary to the physical transaction OF bus-
ness. Ordinarily the London banks have
as much money in their own vaults
as they have on deposit with the
Bank of England. For example, on the 30th
of June. 1873, the Union Bank of London had
sj,S6SOOO in its own vaults, and only S4,-
$4,000 with the Bank OF England The re-
ports of the other great London banks do not
enable us to separate the cash on hand from
that on deposit with the Bank OF England,
but the average amount of bankers deposits
with the Bank of England is less than S40-
OOOOOO and Oh comparing this with the " cash
:" in hand and at Bank of England' reported
by the principal banks, we find that this sum
must be less than half their cash reserve. We
NAV therefore deduct, to begin with, from the
money locked up" in banks about fifty per
cent, which is actually employed, like money
outside the banks, III passing from hand to
hand.
The remaining sum, which may be called the
"reserven in the strict and proper sense OF
the term, is as necessary to the existence of
banks as the foundation to the existence of
bank buildings. In London this reserve Is
kept by the banking department OF the Bank
of England, its average amount being from
fifty to sixty million dollars 1t is as potent
as the still water locked up" in the boiler
of Mississippi steamboat. 1t is through
the existence of this inactive mass Of money
that the vast payments effected through the
Clearinghouse are made possible. Without it
London would not be London. III flood
should undermine the structures OF that city
the material effect would not be greater than
the moral effect of tho annihilation of the
banking reserve Of the Bank of England.
The payments which are made by means of
tho fifty or sixty million dollars boarded"
nv the Bank of England are far greater than
those made by any equal sum OF money in
actual circulation. The total amount of bills,
cheques, &C., paid at the Clearing house in
London in the year ended with last month
was Hirty thousand million dollars. This stu
pendous aggregate of payments was made by
means of entries in the books of the Bank of
England, without the intervention of gold or
hank notes. What the Clearing house is to
London every country bank is to the region in
which it is situated. On Mr.. Logan's princi-
nles it would be good thing to abolish the
Rank of England and the London Clearing
bouse. thereby adding "a hoard' OF fifty or
sixtv million dollars to the circulating medium
He saws il is not "a fair divide" it is giving
"buzzardn to the financiers of his school, to
mn, them off with less than four dollars of
brand new money for every dollar locked
"upr in organizing Clearing houses in the
local financial centers of the mighty West, and
Morton, Ferry, and Wright emphatically agree
with the learned Senator from Illinois.
The eagerness which the majority in both
Uonses of Congress show to enter upon
the widest experiments with the currency, is
in remarkable contrast to the conservative
spirit which usually controls Anglo-Saxon
legislative bodies when dealing with such
subjects. Ii eau pQly DO accounted for by the