The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1893-08-03
THE FURRY IN NEW YORK.

Inc panic In the New 0rk St0cE
Exchange, which appears at last to have
subsidized. Is a curious phenomenon. 1t il
said that prices have declined In few
days to such an extent that S50.000 00(
worth of property has been wiped out
Banking and brokerage houses engaged in
perfectly legitimate business. with ade
Quate capital to carry it on, have either
failed or have been compelled to sacrifice
their assets to avoid failing. and are now
mere shadows of what they were. Ye
nothing had happened to impair the value
of the securities in which these brokers
and bankers dealt. The railroads are do
ing good summer business. The leading
staples are selling at fair prices. The
crops promise to be bountiful. The gen.
eral commercial prospect is healthy. Why
under so serene sky did hurricane sud
denly spread panic all found?
1t is said that money became tight: tHa'
is TO say that the demand for accommoda-
ton at the banks was in excess OF the sup
ply. Bnt this condition OF affairs is
chronic. At least twice year. ana occa-
sionally three times. the New YORK CITY
banks are drawn upon by their country
customers to such an extent as TO impair
their resources and to compel them to call
in their loans. The pinch rarely LEADS 70 a
panic. People know that it will pass over.
Prudent houses ale prepared for it and are
sailing under close reefs when the squat
strikes them. This course was pursued
this wear by the leading New York houses.
Again, it is said that the treasury goiu
reserve ran below the usual limit stimuli
taneously with a demand Tor bullion III
Europe. But the Secretary OF the Treas
ury was always able TO replenlsh MS re-
serve by paying acceptances In silver, as
the law gave him the right to do; ana as
to the European demand for bullion. thar
also is an accident which occurs regularly,
aud is always followed by reaction III
yolvipg flow of gold to this side. Again.
when a commercial boom takes place the
banks generally expand their discounts
beyond the usual limit, and the reaction
finds them with too much sail set. IL is
suggested that this was the case in July.
But, as a matter of fact, the banks dis
counts were not unduly inflated when the
gale arose.
For the panics of the past satisfactory
reasons can be given. The crisis of 1857
1S47 was caused by tariff tinkerlng; that
of 1857 by a too rapid conversion of float
ing capital into fixed capital in the share
of railroad bonds and stocks; that of 1867
was the consequence of the war; that OF
1873 was the result of the contraction
which preceded the resumption of specie
payments. In all these cases the money
crisis could be traced to specific and
manifest cause. But the furry Of 1885 and
the panic which Is now passing over cannot
be accounted for on Ineligible grounds.
True, in the former case, the inevitable
reaction from the boom of 18S0-S2 required
the banks to curtail. and in the present
case the topping of small rotten banks all
over the country warned sound banks to
be conservative. But nothing has hap
pened in the pasttwO or three years which
warranted such a devastating cyclone as
New York went through in July.
Just twenty years ago it became appar-
ent to clever-headed fnanciers that the
defect of our system was its want of elias
ITCHY. 1t needed machinery which would
enable the banks to impart mobility tG
property in seasons when confidence was
impaired. That machinery was devised
In the shape Of clearing house certific ates
and they answered the purpose. When
ever a wave OF distrust paralyzes business
aud merchants and banks alike get fright.
ened without substantial cause the banks
meet, and acting as a clearinghouse redis-
count the paper of any bank which is un
able to fulfill its purposes of usefulness
and for the time the certificates answer
the PURPOSES of money. Iu, July over
SIS, OOO. 600 of these certificates were issued
In New York, and the consequence was nc
bank failed.
The method only answers when the
banks are sound. when their assets are
good and when the crisis Is the result oil
unreasoniug and causeless alarm. 1t has
happened two or three times since 1877;
that the committee of the New Yorb
clearinghouse has refused to issue certifi
Gates to bank whose collateral was no,
satisfactory. On the present occasion nc
bank was refused assistance. Aud the
consequence Is that the crisis will pass
over with no failures except on the Stock
Exchange, and among merchants vino
would probably have failed sooner or later
in any condition of the money market.