The sun. [volume] (New York [N.Y.]) 1833-1916, 1896-03-30
oUs ssNsrrrvE CREDIT srsrEM.

NHN ~
bond sale, and fears OF n renewal Of gold exports.
have combined, lately, almost to paralyze opera
lions on the Stock Exchange and TO create n very
uneasy feeling elsewhere. To an observer not
directly Interested the effect produced by these
causes seems undnly great. The failures ro-
ported are not extraordinary In number or In
magnitude, the debates in Congress are becom-
ing more moderate In tone. the worst said Of tho
suspected banks Ia that they have mot with
heavy losses, the withdrawal Of the Government
deposits has not yet suficed TO make any strin-
Eency In the money market, and exports OF gold
are TO all appearance, yet a considerable way
on. So far. at least, as the prices OF stocks are
concerned there Is no good reason for their being
any lower now than they were n month ago.
in commercial circles the uneasiness has more
Qualification. Tho influences that affect the
Stock Exchange also affect tho minds Of n
great many bank officers and alarm them for
the safety of loans, which hitherto have given
them no nnenslness. From a fear that the fail
ures announced mny be followed by others by
which they will become losers. and that the re-
manning Government deposits will soon be
chilled for, ms tho first instnllnent of them has
been. the banks have begun TO prepare for
emergencies and to restrict their accommoda-
tons TO their customers. Each customer. thus
deprived OF the means of meeting his obliga-
tions. has to ask forbcarance from his creditors,
$50 aa'ba AiA'AA ~ oN NbhN nv "a III VI
disturbance goes on widening, and II the causes
that produce II continue TO operate much longer
~ may extend over the whole country. The
ehd Will not be a panic like that of 1893. be-
cause the conditions now are not 30 favorable
for II, but that is all that prevents 1t.
The trepidatlon over the withdrawal OF the
$4,000 600 Of Government money, out OF the
10000, 900 left on deposit with the banks since
the bond sale, and over the expected call within
n short TINA for thu rarnoIoInC N1a nm nm Ia
significant ommen upon the proposal Of the
Administration to fund into bonds. and thus to
destroy, the entire outstanding issue of legal
tender notes. The proposal has been approved,
hitherto. by many bank officers. who have been
captivated by the iden OF replacing with their
own notes those OF the Government, and
thus Of increasing the profits OF their institu-
lions. It is to be hoped that their present expe-
rience of the effect of virtually cancelling n
small fraction OF the legal tenders, will con-
vince them of the folly OF asking that the whole
$500, 900, 900 shall be retired. For. II the with
drawal OF only $4,000 900 OF bank reserves
sends n ehiver OF apprehension through the
country. the withdrawal Of the remainder. so
far as II consists of legal tenders. could not
fail to intensity that SILVER into a shaking to
pieces OF the entire commercial fabric.
In the same way. the beneficial operation of
the Treasury. in furnishing the gold required
At SAbohN, uih ~ N'iio ~ wv phiiho "
that duty. seems likely to receive a fresh demon
strAtion from experience. Loud as have been
the complaints of the present financial system.
which permits the depletion Of the Treasury
gold to supply the export demand. they would
have been vastly louder IL that demand had
fallen upon the banks. particularly II the banks
Mad been compelled to pay in gold. not only their
depositors, but the holders Of $500, ooO. 900 Of
currency issued to take the place OF the legal
NAAA eNA ava a. md Dp1y M hark ~naata Tn thA
panic OF 1909 national bank notes were boarded
rs of equal value with those OF the Government,
because everybody knew that they were vir-
tunlly, IL not in TO m, obligations Of tho Govern
mcnt, and. therefore, were perfectly well Sc
cured. Otherwise, they would have been pre-
sented for payment, and the banks would have
had either to pay them, at great Inconvenience
to themselves and to their debtors. or else to ac-
knowledge their insolvency.
Beyond these lessons of minor importance, the
present commotion in banking and commercial
circles calls attention more especially to the
delicacy of the business system Of the country
and its sensitiveness to the slightest shocks.
The leaves of the aspen tree do not respond
more quickly TO a breath of air. than do the
minds of our business men to rumors of disaster
however unfounded, or however trivial. As for
real causes for alarm. they seem TO be irresisti-
Bile. On their first appearance. every individ-
uai. every corporation. and every financial iustt-
tuition hastens to protect itself. regardless Of
the others. like n frightened audience escaping
from a burning theatre. The banks Of the city
are, In a measure, an execution TO the rule, and
have shown. latterly. a trustworthy dctermi-
nation TO stand by one another in times of trial,
but, unfortunately, their union is only for their
own benefit and for local purposes, and their
example has not been initiated by the banks of
the country as q whole. Outside Of the banks.
fie bNsinesa community I'm every crisis act9
like A mob. and not like n disciplined army.
The reason of this lies in the enormous extent
10 which credit enters into our business trans
actions. For the most part we buy and sell
stocks. bonds, merchandise, agricultural prod
ucts, real estate, and everything else that can be
bought and sold, not for money paid down at
once, but for promises to pay, to be fulfilled at a
future date. These promises. like the fresh
PROMISES received upon resales, the banks are