Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-12-28
RESERVES UNDER THE BANK ACT.


Now that monetary complications which
started in Wall street last month have come
to an end, our esteemed contemporaries are
full Of wise reflections on the cause of the
trouble and the way to prevent such dis
turbances of business finance. These re-
Elections are not entirely in the line of lock-
ing the stable door after the steed is gone.
The full comprehension of the causes should
be the best safeguard against producing such
disasters anew-if the nation as a whole
was capable of remembering such lessons
longer than for the eight or ten years which
it takes to go around the circle of specuIa-
tion, initiation, panic depression, ecou-
omy, improvement, expansion and
thence to speculation and initiation once
more. The suggestions as to coin
age, bank circulation. clearing house
certificates and other measures are good, bad
or Indifferent each on its own basis; but
there is an evident disposition that more
immediate cause of stringency than either of
these remedies would meet is to be found in
the practice of, concentrating the idle funds
of banks all over the nation in Wall street,
and used as the vehicle for bubbles.
1t would require but superficial observer
to see that the monetary strIngency would
never have amounted to anything if there
had not been a speculative interest in Wall
street to be squeezed, and if the banking re-
serves of the nation had been entangled in
the squeeze. The Barring difficulty might
have produced a slight contraction in the
New York money market; but when that
contraction was utilized to get up none
tary furry in the stock market the epidemic
of universal caution was started all over the
country. The connection between the Wall
street panic and the disposition of banks all
over the country to contract their loans,
would have been still more remote If the
concentration of bank funds in Wall street
had not implicated the whole system in the
putatiye losses, so to speak, which might be
feared from such a cataclysm.
1t is not the province of the law to place
any restrictions on the banks so far as keep
ing in the central cities whatever deposits
may be necessary for the adjustment OF ex-
changes. 1t is also to be recogniz ed as a
fact that the attempts of legislation to curb
the vice of speculation are likely to prove
futile, so far as its effects on business move
ments are concerned. But it is not the
province of the law to offer premium on
speculation by stimulating and exaggerat-
ing the concentration of funds in Wall
street to be loaned out to the spectators; and
that is what is done by one feature of the
national banking law, which in its charac-
ter as whole is the most successful work of
banking legislation the world has ever
seen.
Under the national banking law the
banks are required to keep a nominal re-
serve of % per cent OF their deposits in the
reserve cities, and Is per cent in those out
side those cities. But this reserve is actually
decreased by the further provision that all the
banks outside of New York may keep hall
their reserves on deposit with the banks in
reserve cities. Now, while such deposits