The sun. [volume] (New York [N.Y.]) 1833-1916, 1893-08-07
OUR UNoRGANIzkD BANK SYSTEM.

Tho disappearance OF currency from the
usual channels OF business. making 1t neces-
snry to offer premium for II to coax 1t out OF
it's hiding places, has been by all odds tho m ost
prominent event OF last weeks financial his
tory. During the bank suspension of 1873 n
similar phenomenon occurred. but It did not
last long. and It was not attended with much
general inconvenience. Now. the scarcity OF
coin and OF pnper m oney seriously i'm pedes tho
payment OF wages and OF small debts and ro-
stricts the trade OF retail dealers. People. II is
true. will soon accommodate themselves to the
situation. and by an enlarged uso OF bank
checks and OF book credits will manage to get
through their necessary transactions. The
gold now on It's way from Europe will 90 into
circulation. and the little currency obtainable
will mect tho more pressing demands for 1t.
but the state OF things is uncomfortable.
Unexpected as the trouble was II is only the
natural and necessary consequence OF the
scramble for currency which has been going
on between the banks OF the different sections
OF tho country ever since last February. when
Secretary Foster announced that the United
States Treasury. although it had S10S. 100000
gold in its vaults was In imminent danger OF
being compelled to suspend gold payments.
Tho very next day after this alarming an
nouncement was made. the banks Of tho in
terror began to prepare for the crisis which
they feared was coming. by drawing on this
city for legal tender notes. and they kept up
their drafts steadily until our banks. in solt-
protection. had not only to resort to the Issue
OF Clearing House certificates but to refuse
full payment in lawful money OF their de-
positors' checks. OF course, every man who
needed actual money In his business. has
been keeping oil OF It he could get
and paying out as little Of It as possible. In
stead. therefore, OF its going into the banks. as
it docs in ordinary times. 1t has gono into
safes. safe deposit boxes, and other receptacles.
and tho wonder Is, not that 1t is so scarce now
but that 1t did not become scarce long ago
1t Is not lost because. as the lrishman said Of
the tea kettle which he let fall overheard at
sen, we know where 1t lie. but the knowledge
does us no good. There ia too much OF It In
the country for it to be withdrawn entirely out
Of sight. but at the moment. much OF It prac-
tlcally does not exist. The temporary lack OF
1t might be supplied il Congress would author
lie the issue of. say. S54.OOo.0oO greenbacks.
or enough to bring the total am cunt of them
up to $500. 100000. and the purchase with the
issue OF four per cent bonds at their present
low market prices This measure would both
relieve the monetary stringency and diminish
the interest on the public debt: but the OBJ
lection to It Is that when the immediate need
Of the greenbacks had passed they would re-
main to initiate the currency. and thus to start
another speculative rise Of prices like tn Mt from
the collapse Of which we are now suffering.
The national bank interest would also oppose
1t. because 1t would diminish their circulation
and tho profits they derive therefrom: but
that is q consideration Of minor i'm portance.
While the concert Of action by which tho
banks OF this city have for some time past been
receiving In the settlement Of balances be-
tween themselves Clearing House certificates
in lieu OF cash has eased the strain upon
debtors and prevented general bankruptcy. it's
beneflcent effects have been impaired by the
refusal Of banks in other parts OF the country
to Join cordially in it The attitude taken by
the Chicago banks. especially has been amos
hostile to those Of this city: the banks OF Phil
adelphia have made at least O passive resist
ance to the calls upon them. and the mum erous
little country banks have each been individ-
ually Strengthening themselves at the ex-
pense OF the metropolis. That much OF the
boarding OF currency which is now making It
so scarce Is done by private persons may be
true but II 1t is true they are only following
the example set them by bank officers.
The latest report Of the Comptroller OF the
Currency gives the whole number Of national
banks In the United States as g. 1873 and that of
State banks 3.101. making altogether 6.979.
OF the national banks 4S are located in New
York city. and Of the entire deposits OF both
the State and the national banks OF the coun-
try these 4S national banks usually hold about
one-sixth. and OF the entire specie and legal
tender reserves about two-llfths When now
the remaining 6.03l banks scattered through
out the Union simultaneously begin drawing
upon the reserves OF New York. a very small
draft from each ono makes formidable ag-
gregate. An average only Of $4,000 comes
to total OF S89.3lO.000. and one Of $4,000 |
to total OF $1O3 965.O0O. or more than the en-
tire stock OF specie and legal tenders held by |
all the New York banks put together.
No argument. therefore. Is needed to DEM |
onstrate that II. like the New York banks. all |
the banks OF the country could DO banded to- !
gether instead OF being as 30 many OF them |
are. disconnected units. they would both i'm |
mensely strengthen themselves and in times
like those which now prevail they would not |
subject the public to the Inconvenience from |
which it is suffering. The boarding now go
ing on. and which was begun by the banks OF |
the interior nearly elk months ago. Is inspired |
solely by dlstrust OF the banks in ono another
and OF the public in them ALL No one pre-
tends that more currency Is needed to. day for
The transaction OF business than was hooded
six months ago: yet. while there Is actually
more of 1t In private hands. 1t is scarce and
hard to get.
One remedy which has been suggested for
he evil Is the extension OF the New York
Clearing House system to all the banks OF
zach State at least, and, possibly to all the
banks OF the United States Tho union OF all
he banks within q manageable area. such. for
as New England. New York. and the
adjoining States. Is certainly not insuperably
lifflcult. whlle Chicago. Cincinnati. and St.
Louis might be made each tho centre OF
group OF banks. and together include the re-
nainder OF the Union. What practical OBJ
tacles exist to the formation OF such associa-
ions could be discovered only by experiment.
'ut the experiment Is certainly worth trying.
more thorough and radical plan. but. at
he same time. one which would be much
more efficacious for good. Is the conversion Of
he majority Of the little independent country
ranks into branches Of a few largo institu-
ions. the chief management Of which would
% vested In central offices conveniently To-
'ated. This plan has long been acted upon in