New-York tribune., 1874-10-24
THE FUNCTIONS OF BANKING.
THE ENGLISH SYSTEM BETTER THAN THE AMERICAN
RAISING THE RATE OF DIsCoUNT-BENEFICIAL
RESULTS OF THIS DEVICE.
G. ". 6.

THE ENGLISH SYSTEM BETTER THAN THE AMERICAN
RAISING THE RATE OF DIsCoUNT-BENEFICIAL
RESULTS OF THIS DEVICE
TO lhe Z ditor OF The Tribune.
SIR The admirers of American banking,
think may derive considerable benefit from study OF
the English system for while the system is not perfect
il is 80 near perfection be in striking contrast TO
our own Banking is essentially tie same the world
over: hut the extent which is carried the haDlt OF
lending deposited money Is matter OF the
most vital Importance in each business community
Banks and bankers receive deposits Of money upon the
understanding that these may be withdrawn at any mo
ment without notice and, experience has shown
that only small portion Will actually be Withdrawn
large portion Is lent at interest for stated periods and
some is used buying securities that have ready sale
IT, therefore, from cause large portion OF Inc de
posits should be demanded at once, suspension and
failure necessarily ensue unless there mas been
practiced considerable conservation Banking stlmu-
ates business and If carried on reckessy and without
due regard for the time when deposits may be IN gene
ral demand encourages speculation and the extension
OF business beyond proper and safe limits In justice to
their depOsOrs and TO the whole business community,
bankers should keep fair on hand and have DO
right 10 place the deposits in wildcat" adventures.
that may result in great gain and therefore may prove
disastrous Some failures last Fall notably that OF Jay
Cooke & Co.. show wonderful disregard OF the rights
of depostors and Of the panest principles Of banking
The financial tornado that burst upon Eng
gland with the failure Of OveTend Gurney Co., May1
1906 was met and checked by the nerve and decision OF
the Governor and Directors Of the Bank Of England IL
advancing at once and without fnching oneha Of it
reserve. 1 may note here the words OF the Governor
in regard TO the failure that firm bearing upon
own banking habits: THE downfall of Overend Il Cur
ney Of many other houses must be traced 10 the
policy which they adopted Of paying interest on de-
posits on call. while they themselves tempted 10
invest the money received sDecuatOns IN Ireland
or in America the bottom of the where
not available when moment Of pressure arrived" The
policy Of the Bank Of England in panic OF 1873
well remembered. Our decline of prices attracted
bullion in large quantities. and stop flow the Bank
advanced its discount steadily, week by until
it reached. think, ten per cent when the drain
ceased There is in England enough money do
all the business without drawing some from the Bank,
hence its have necessarily, TO be followed
by the other banking Institutions they, however, Keep
ug traction per cent behind advancing the rate.
order TO get much business they do OF course
the keeping of a large means small dividends
and the stockholders Of the Bank complain that otner
joint stock banks depend upon for aid in time Of need
while they lend than 80 per cent Of their deposits
interest all the time.
II our banks had power change the rate OF in
terest as sc hslness or pubic policy dictated this
power w0nld be found very beneficial TO all suppose
The New-York Clearng Association 10 meet once
and IL the discount for city Dauks-its action
would be followed IN some measure bY all country
banks An advance would warn large operators
throughout the land ahd check wild adve ntures At
present the Illegal interest charge 10 most aD
suTd extremes but as the banks keep lending per
cent people say tnat the hgh low outside rate has
reference only stock operations and think II OF no
consequence 10 legitimate business. When you put up
the price Of a commodity, those buyers need it
least drop 0f. second advance causes loss OF
buyers and the Of advancing becomes sitting
process. by which those buyers only who need the
commodity most are left TO purchase. Money may
be considered a commodity, and the rate OF
interest its price. The sane sfting process
be applied. Last Fall merchants who
could obtain discounts did without needing them
merely because per cent the only price and the
money might possibly be needed II the price had been
Is per cent mucn less would have been kept idle
and more left TO meet the pressing engagements
who could afford 10 pay this The steady advance
10 such figure would have gradually and without
shock caused very beneficial curialment OF business
and made the panic much less Our currency
being OF a defuIte amount aud not used in other
countries an advance OF interest woud probably be not
so ehectual as the English advances found 10 be
bat We may conclude tnat upou specie Dass such
power the Bank OF England Possesses, II conferred
upon banks. would operate to check wild specua-
ton, sift the less needy borrowers. attract
money other countries and 70 prevent, east
cure. commercial crises kADIX
AeU York, Oct 20, 1874.