Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-11-18
TERMS OF THE DISPATCH.
PITTsBURG, TUESDAY, NOV. IS, 1890.
REsCUING EMBARRASSED BANKERS

hESCIlNG EMBARhASSED baNhEtSS.
The action of the Bank of England and
the Rothschilds in coming to the rescue of
Barring Bros. and checking the panic by
putting up guarantee fund of e10, 900, 900,
has evoked general approval among the
organs OF financial opinion. Indeed, ap-
proval goes so far as to induce some En-
glish journals to say that the same course
should have been taken in the Overend,
Gurney s. Co. failure, while in this country
some of tie papers have taken up the same
theme as indicating the duty OF the Lational
banks and United States Treasury to have
supported Jay Cooke & Co. in 1873.
With regard to this growth of opinion as
to the duty os great financial institutions to
furnish funds or credit to pull important
concerns out OF their embarrassment, it is
well to remark that the theory has certain
well-defned limits. 1t depends wholly on
the solvency of the firm that needs help. If
either the Bank of England, the United
States Treasury or the national banks
undertook the task of sustaining firms whose
assets are not greater than their liabilities
the result would not be doubtful. Even those
institutions could not stand the burden of
making up the losses of reckless banking.
That course would inevitably lead to their
own insolvency, and the smash would be so
much the greater, on account of the CON-
manding position of those institutions.
Their function, if they have any in the
premises, is the same as that Of an ordinary
bank to its customers. If a merchant or
manufacturer can show a solvent condition
of business, it Is the duty and interest of the
bank alike to help him out of temporary
stringency. But if his solvency cannot be
demonstrated, the bank that pursues the
policy of sustaining him will eventually
come to grief and make 3 greater smash
than the original one would have been. 1t
is worth while to recollect that Barring
Bros failure was caused by the connection
OF that firm with government that under
took to make good the condition of its entire
people.
1t is also worth while to consider whether,
ii it could be done, the function of money
power that undertook to protect financial
circles from the consequences of their care
lessness, recklessness or dishonesty would
contribute to the stability of business.
When men become accustomed to the idea
that If they get into tight place some great
financial power will come to their rescue,
they are sure to be more reckless for the
knowledge. Wall street has for years
learned to RELY on the United States Treasury
for rescue when it gets itself hard up, and
the consequence is that speculation has
gone on regardless of monetary conditions.
Now that it has become evident that the
Treasury is no longer to be used as reserve
for the kIte-fyers to draw on, Wall street
Will undoubtedly become more conservative
There is no surer way to inspire caution in
business than the knowledge that if man
makes loans on doubtful security or backs
speculative bubbles, be will have to stand
the consequences OF disaster, and can look
TO no higher power to pull him out of his
self-created troubles.
The way in which the representatives of
financial opinion embrace this idea of gov
ernmeutal finance to be used in pulling great
fnaneiers out of the difficulties they alone
are responsible for presents a remarkable
contrast to their attitude on some other
questions. They are unanimous in con-
demning the idea that the Government
should lend its credit to farmers as the Wild
est moonshine Taken by itself, this opin-
ion is correct; but contrasted with their en-
thusiastic support of the policy of govern
mental institutions lending their resources
to support great bankers who are caught in
the collapse of their own initiation, it raises
a rather remarkable question. Are the pub
lie funds the peculiar property of the finan-
ciers, or is it the function of the Govern
meut to support and cherish only the great
spectators? The people who want the
money lent to embarrassed bankers, but ex-
claim against lending 1t to producers, would
seem to think so.