The Saint Paul globe., 1896-10-16
BANKERS NOT TO BLAME.
AS NECESSITIES OF TRADE
DICTATE.
LIGHT ON FOREIGN EXCHANGE,
Great Majority of Bankers Interested
in Keeping the Reserve Up to
the Full Limit.

ter to Assistant Secretary Dabney Of
the department Of agriculture, in
which he defends the New York bank
ers from the allegations often made
that they are interested in the with
drawals of gold from the treasury
Following is the letter:
Referring to your letter and our conversa-
ton OF yesterday, concerning the campaign
attacks upon the bankers of New York in
their relations with the gold reserve, | de-
sire to submit the following consideration
The term raids by hanksrs of New
York upon the treasury is one frequently
used by writers and speakers who have no
accurate knowledge of the method by which
notes are presented for redemption at the
subtreasury in New York, or the character
or number or persons making such presenta-
tfen. The term banker seems to be assumed
IN NEST cases to cover class of men who
are apparently engaged in withdrawing the
gold from the governments reserve and put
own selfish purposes and to accomplish
tain alleged improper objects. The facts in
the case are so different from these fancifu
statements, that 1t seems worth while to call
attention to them
By operation of certain natural commercial
laws, without the interference of legislation
New York has come to be the settling place
OF almost all contracts for the sale of
products abroad, and in that market the bills
OF exchange, which represent products ex-
ported, are offered for sale, AT the same
TO pay obligations er to buy merchandise,
are in the same market, and in order to pay
their obligations, purchase these bills of ex-
change to remit to their creditors abroad
Large amounts Of Coffee silk, rice tea, su-
gar and other foreign products consumed
here have to be purchased with foreign cred
its and paid for in New York with foreign
exchange.
The natural result is that when we are
selling more goods abroad there more
bills of exchange in the market than there
iC demand Uyf ict 10 f6n at
the price of exchange falls. On the other
hand, when we are not selling as much
abroad, or are buying more or are paying
our debts to a greater extent abroad, the
price of exchange rises.
The people who engaged in the bank
ing business in New York may be divided
into three classes: First, the officers Of the
regular banks of deposit or issue, including
the national banks; second, the dealers in
securities, some of which have foreign con-
nections through whom they market a large
amount Of securities and whom they draw
a corresponding amount of exchange, in pay
ment for securities sold abroad, and TO whom
they remit exchange or gold in payment for
securities sold here; third, agencies or
branches of foreign houses, who are, per-
haps, also dealers in securities, but whose
main business is buying and selling exchange
on Europe for the profit which can be made
in the operation itself
The first class are especially interested in
the general prosperity of the country and in
keeping up the value Of securities, because,
if there is a fall in securities held by them
as collateral, they are compelled to call in
their outstanding loans, which reduces their
lines of credit, diminshes their profits, pre-
vents them from discounting commercial pa
per, restricts mercantile and Industrial en-
terprise, and in the end creates failures in
business and general financial and CONNER
cial distress
The second class are directly interested
in keeping up the valid securities in this
country, which they have largely SOLD abroad,
and their interests are TO avoid gold exports
and the public apprehension arising from
REDUCTION OF GOLD RESERVE.
The third class buy or sell exchange when
ever an opportunity for profit offers. If
there are few commercial bills to be had
in the market and the demand by remitters
is great, exchange rates rise, and if dealers,
having credit abroad, ind that they can sell
their bills at a higher price than the prob
able cost to them Of Withdrawing gold from
the treasury and shipping it abroad to meet
their bills at maturity, they do so, thus
making a profit on the transaction.
The leading members of the third class in
New York can be numbered on the fingers
Of both hands, and in fact three four do
almost all of the Withdrawing of gold for
export purposes, as will be seen by an ex-
animation of the list Of parties exporting
gold to Europe, published in the daily press
during it's continuance. Each shipment made
usually represents in the aggregate large
number of single transactions. One concern
may sell million dollars of exchange in
one day, but it may be represented by $50
to 25e different bills running from f100 up
words, and they pay these bills abroad by
shipping gold for that purpose, which they
draw out of the treasury in sum and send
in one shipment.
1t will thus be seen that great majority Of
bankers peeuniarily interested in keep
ing the reserve up to its full amount, and
for this reason they have been willing in
the past and still willing to make con-
siderable sacrifices, and, in order to prevent
shipments of gold, have contributed large
amounts of money to pay the dealers in
foreign exchange the profit they would have
made by such shipments. This was notably
the case in the operations Of the so-called
syndicate which bought the bonds of the
government under the contract Of Feb. s,
1885, and again in the early part of this
summer
Although withdrawals for export have been
going on for several years, it is only within
two years that an apprehension that the gov
ernment might be unable to redeem it's obli-
cations in gold has caused Withdrawals for
any other purpose and at not time has there
been any evidence that Withdrawals of gold
from the treasury were made for the purpose
of affecting the markets.
The fact that the banks were able to fur
nish all the gold required for export up to the
middle of the summer of 1892, and did SO, was
because large amounts Of gold were being
paid to them, and by them into the treasury
and paid out again in the course of business
and it had not begun to be displaced by the
silver issues, the amount Of which had not,
up to that time, reached such volume as to
form an important portion of the ordinary
commercial transactions in the New York
market
During the past few weeks and at present
and for the first time in this administration,
various factors are in combination which
have produced low rates Of foreign exchange
and consequent importations Of gold. The 4
principal ones are the favorable trade bal
ance, the reduction in the volume of cur
rency outstanding and in active circulation
and the continued high rate of interest for
call loans at New York, this latter condition
being partly a result of the preceding situa-
ton. The low rates for foreign exchange
cause importations Of gold from London and
other foreign cities, because at these points
exchange on New York is scanty and rules
at very high rates, and the dealers and draw
ers here and their associates across the ocean
find a profit in the difference of price at
which gold be obtained for abroad and at
which 1t can be used here.
In other words, those foreign markets are
in the same condition that the United States
has been in at various times during the last
five years. 1t is true that gold has been i'm
ported upon one or two occasions lately when
purchases of government bonds were being
made but for this premium was paid and
it was purchased and shipped like cotton, or
wheat without regard to the rates of ex-
change ruling here, and was an abnormal
proceeding. During the years succeeding the
resumption Of specie payments and until the
CURRENCY QUESTION
disturbed our monetary relations there was
a regular movement Of gold to this country
in the late summer and autumn. white we
abroad. return flow from this country
abroad began in the spring and continued
through the early summer to pay our debts
for imports and for other purposes. Low ex-
change rates in the former and high rates in
the latter periods caused these movements
and the balance of trade usually in our
favor, as it is at present.
The excess Of merchandise exports over i'm
ports for eight months up to the 1st day OF
September of this year amounted to SOS q97-
945 while the corresponding time last year