New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1895-12-23
VOICE OF THE PEOPLE.

m STRENGTHEN THE CREDIT SYSTEM.
srrpERAT1oN OF RANKS IN INCORPORATED
CLEARING HOUSES PROPOSED.
-, the Editor of The Tribune
c,r. Every panic or disturbance ir the money
~,arket affords an opportunity to make diagnosis
80 the currency system OF our country. 1t is pos
1e then to see better than at any other time what
~, of the system works well and what needs adj
.,s,,ng so that II may work smoothly. l have at
sormer similar called attention to what APP
..rs 70 me a simple and adequate method Of sup
norting commercial credit and afording financial
0uef 10 the business community and i VIII ask a
srou space in your columns to present the subject
ornin at time when the financial situation is en-
crossing the minds of the public.
We must FIRST separate the finances OF the Govern
r,ent from the operation OF banks organized under
state and National laws The Government does not
issue It's currency in accordance with the Nationai
banking ard for clear understanding OF the
matter Federal finances be differentiated from
the commercial banking system. II is plainly evil
dent In every commercial crisis that our banking
system is laboring under two difficulties, which are
merely the fault OF our system The first is lack
Of power to support credit and the second in
elasticity Of the currency. These two difficulties
authorities both at home and abroad Ill. :,
The absence OF a means OF supporting credit is
inherent in a system which provides only for the
Incorporation Of individual banks with moderate
dividual banks forms the basis of system: but Il
,he hanks are not organized with relations to each
OF seciomeraton individual banks are organized
on an independent basis and are empowered 10 take
care OF themselves and their customers. They are
competitive and not mutually supporting They 90
NOT afford a means 10 support general credit; and
when panic comes each endcavors 10 strengthen
iseN at the expense OF its neighbor. A large cen
trai bank is un American, and II strong system OF
Individual banks is wanted II m'Wt be attained by
uniting the separate banks into some kind OF federa-
ton by which they can act together;
such federation Is American IN It's ldea, ana Is
develoDmcnt in conformity with our institutions IL
leaves the Individual banks free to compete for bust
common protection \ union among all the banks
OF a locality would enable that union to WELD sum
Gent power to 10 the support of the credit OF
their entire business community. Such union
can readily be secured by a law of Congress In
cooperating clearing houses and granting them
nowers which will enable the banks to act In legal
manner in their united capacity. Such law would
Introduce q system. where now there Is only com
petitivc agglomeration and no system at all
The second difficulty with our banking system IS
,he inclastcity of currency II clearing houses
should bc incorporated under act OF Congress.
Tie legal right could be given them TO issue clearing
hons, cert feat es based upon commercial assets.
ic5,od with the clearing -house as trustee for the
note holder The safeguards thrown around these
certificates should be the same As are adopted with
Is. they should be issued only on pledge of col
laterals Al - per cent Of their market value. with
the guarantee of the bank to which they are issued
and OF the banks associated in the clearing house
and of ali the clearing houses in the Union. This
would make q currency TO be issued on emergency
or for business wants. which would be good at any
there could never be loss to any note-holder.
This development OF our National banks into sys-
tern by the Incorporation of clearing houses under
United States charters would be in accordance with
American institutions would give us a perfectly safe
currency and would relieve from the constantly
recurring spasms which seem inevitable with an
"''p'''e'''1 N'@'' THEODORE GILMAN.
New-York. Dec. 81. 1895.