The herald., 1893-07-06
THE TRUTH ABOUT THR RECENT BANK
FURRY.

The late bank crisis in Los Angeles
should receive temperate and intelli-
gent discussion, in the interest of both
the people and truth. A great wave oi
financial disaster has passed over the
country. 1t has had rsmitications fai
and near, and was led up to by a crisis
of international significance. opening
with the failure of the great banking
firm of Barring Brothers, a bank which
ranked in England Immediately after
the Bank of England and the English
branch of the house of Rothschilds.
This crisis was 80 severe that it really
resulted in the bankruptcy of the whole
British empire, followed as it was by the
syndicate and Australian failures.
In this country the foundation for serious
troubles was laid by the enactment OF
the Mckinley bill, nefarious measure
that was bound to unsettle values here
and abroad. The HERALD early took
the position that tariff enactment
that professedly aimed at injustice
was bound to react on the country
that formulated and Illuminated it, and
no prediction was ever more fully or in
stantly fulfilled. Perhaps there was
never better instance Of political retri-
button than the fact that Governor Nc
Kinley, the author of the famous DILL OF
that name, was the very first man to be
thrown into the bankruptcy pit. Call it
retribution or poetical justice, as you
will, the fact remains that the great tide
of prosperity that was to be inaugurated
by the Mckinley bill was accentuated by
the fact that, in the ensuing misery, it
was necessary to pass the hat around for
Bill himself.
Following the bankruptcy of Ohio's
Sweet William" failures of banks and
individuals began to be reported from
every point of the compass, from Chi
csgo to Podunk, and from indianapolis
to Oshkosh. A man could scarcely dare
to pop his head out OF his nightcap to
reach for his morning paper for fear OF
detonations OF failure from every side.
1t was merry, merry game OF what
firm or what institution should first
streadle up towards the empyrean and
bust" There was an amount of ex-
ploded villa;nous financial saltpetre in
the air that would have given a head
ache to Rothschild.
1t was under such circumstances that
a run was precipitsted on our Los An
geles banks. That this feverish move
ment was altogether unnecessary the
amplest investigation of their affairs
since has shown. There are hers and
there persons 30 absolutely unsophisti-
Gated that they suppose that the pur-
pose of a bank in receiving deposits is
to sit upon them, after the manner of a
hen with eggs. Now this Is by no means
the purpose which underlies either a
commercial or savings bank. These
institutions are organized with the idea
of making money for their controllers.
Nobody has contended since the world
began that they were organized for any
other object. The man who should sug.
gest that they were could scarcely keep
out of an insane asylum for a calendar
month. Accepting the fact that a bank
is expected to use large portion of its
deposits in discounting commercial
paper and other profitable uses. the law
has indicated the portion of cash reserve
on hand that ought to be in banks. In
the case of the Bank of England this
Of inf hoo hoan Gvo1 NJ OIL
cent. of its deposits. 1t should be borne
in mind, however, that in the case of
the Bank of England the British parlia-
ment always comes to its aid, with
the very sensible view that it
would not do any Englishman any good
to have his country bankrupted, and
large issues of temporary notes are
thereupon authorized to tide over the
crisis. By the national banking laws of
the United States the cash reserve in
cities Of the size of Los Angeles has
been placed at fifteen per cent.
When the financial cyclone struck Los
Angeles it is safe to say that, as respects
all the conditions of good banking, ours
were the soundest banking institutions
in the United States. The proportion of
each to the deposits was something
simply out of the ordinary. Some of
them, like the Farmers & Merchants
bank, had an unprecedented reserve.
One of them, which was obliged to close
its doors, did 30 only after it had paid
100000 in gold coin over its counters.
With perhaps one exception, and it is
thought that it will ultimately repay
dollar for dollar-we allude to the City
Bank-they are all solvent and they will
probably all resume.
To summarize: When the cyclone OF
folly struck Los Angeles, what between
commercial and savings banks, we had
twenty-one banks altogether. OF these
four suspended under the most causeless
and eenseless panic ever known. They
suspended at time when they had the
largest average OF cash on hand compared
to the amount of deposits of any banks
in the United Statee.
The thing is inexplicable, but the cir
cumstances are such, as are the ele-
ments of instant recuperation, that
this community will show no lasting i'll
effects from furry that has had few
parallels for downright idiotcy. 1t was