The morning call., 1890-11-22
rnE SITUATION AT THE EAST.

We are told day after day that the skies
are clearing at the East and that the finan-
cial storm has blown over. But somehow
the facts hardly confirm this view OF the
situation Side by side with Mr.. Jay
Gould's roseate representations appear
daily reports of failures. and, what Is more
ominous than these, reports OF runs on
savings banks. These events certainly 40
not indicate that confidence has Deen luily
restored. The failure of the Wharton mousse
at Philadelphia ID not matter OF much ihi-
portance; the last operation IN WhirI tiat
concern figured was scheme 10 Oulid rail-
roads in China. with the aid of the adven-
turer. Mitkiewicz. But when the working
neople of New York begin to draw their
money out of the savings banks, there must
be a widespread feeling of distrust
Mr.. Gould says very wisely that periods
of financial depression occur every few
years and that people ought to be prepared
for them. AS a general rule, their occur
renee may be traced to some immediate
cause. The panic Of 1887 was the fruit of
rapid development of an unsound banking
system; that of 1857 was due to the excessive
conversion of floating and largely hctitlons
capital into fixed investments in railroads.
that of 1873 TO a premature extension Oh Inc
railroad system into unproductiye territory.
But as the bacilli of disease cannot make
Roadway in a system which has net been
previously weakened so as to offer con-
genial field for their ravages, so financial
paroxysms caused by the embarrassment
of a certain class of enterprises cannot affect
the community at large unless the mer-
camille Interest generally has drifted into
an unsound position. To a man who owns
nothing, though he have but sixpence In his
pocket, the price of money matters little; ,
all the banks in the country may break
without disturbing his repose. The ques-
ton, therefore, whether the present trouble
in New York is TO be mere Wall-street
furry or a general commercial crisis de-
ponds on the Indebtedness of the great body
of merchants and on their ability to pay
Indebtedness at maturity.
1t is bad sign that the New York banks
have felt compelled to resort to large issues
OF Clearinghouse certificates. These certi-
ficates are issued to banks which apply for
them on the deposit of collaterals; in other
words, the associated banks as a body re-
discount the paper of the individual MEM
bers of the Clearinghouse. The plan an
swered very well on former occasions, when
the main trouble grew out of the scarcity of
currency. But it will scarcely meet case
where the trouble arises from the deprecia-
ton of the collaterals. If the paper held by
the individual banks is not met at maturity,
it will not ne met when it is held by the
Clearing house. The mere change Of owners
will not make the paper any better or the
securities more valuable. In former times
the issue of certificates allayed distrust.
But now the quoting effect Of the step is
impaired by the general consciousness that
clearinghouse certificates are not money.
1t IS comfortable to reflect that whatever
may happen at the East, we on this Coast
are not in the fight No commercial crisis
at New York or Chicago can shake the
banks of San Francisco. We are i creditor
community. We send to the East far more
merchandise than we take from there Our
Indebtedness for dry goods, hardware and
manufactures is trifling in comparison
with our credits for wine, fruit, grain, hops,
bullion and other products of the SOIL A
general commercial crisis in the Eastern
States would probably involve some losses
to houses which are identified with Eastern
industries; but these would not be large
enough to cause ripple on the surface of
our financial waters.