New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1897-03-04
BANK LAWS CRITICISED.
PRESIDENT FISH THINKS 1T is TINE
FOR A CHANGE.
WHEREIN THE INSTITUTIONS FAIL TO DO JUS
TIcE To MECHANICALLY REsTKiO-
TONS SHOULD BE REMOVED.


TIcE TO INTERCHANGEABLE REsrRlC-
TONS SHOULD BE REMOVED.
Baltimore March S--stuyvesant Fish. president
OF the Illinois Central Railroad and Vice-presldent
OF the National Park Bank. of New-York. has
given 10 The Manufacturers Record an inter-
view on the need OF better banking laws. Among
;he suggestions Mr. Fish makes these
The laws governing National banks originally
showed in their titles that they were intended TO
provide currency secured by pledge or Govern
nnent bonds and were framed in order to force the
OLD State banks which had both capital and creoit,
10 support the Governments finances. AS a war
measure this may have been wise and defensible,
although IL was cruel and unjust TO the merchants
20 whom those banks owed first duty. As a
scheme. of banking for great and widely scat
tered commercial people, those laws are unwise In
ths; they make use of the element OF credit,
which necessarily is the basis Of banking. The
law requiring a National bank TO lock up $4,000
IN Government bonds in order to obtain the prvi-
lege Of issuing $4,000 OF circulating notes first di-
ninshes the available funds Of every small bank
b. one-Quarter more. and then teaches those
operating under st. especially men new to the bust
ness. 70 favor loans by the banks against pledge
Of securities IA. her than on legitimate paper given
BY the buyer TO the seller in a commercial trans
action and Endorsed by the latter. Loans on by
pothecation generally and naturally drift. through
renewals, into making the bank Il special partner
IN commercial manufacturing and agricultural en-
,srprses not also in and other railroad
oorpovations
That d bank must at ali times keep in reserve
, ccr,ain portion Of It's depositors' money is OF
course necessary. But the provision of the law
,hA: part OF the reserve may be deposited with
other banks in distant cities often places the re-
serve out of the control Of She bank wnen its needs
are greatest. The law also creates congestion IN
the money centres also tends TO leave the couh-
nv banks al all times without sufficient cash ade-
ouately 10 care for the legitimate demands OF their
commercial depostors.
The further provision that when the reserve OF
-. hank falls below the per cent named in the law
me directors shall not make new loans or dis
,ourts If strictly and invariably followed, would
N every crisis Lead 10 the bankruptcy OF al! the
hanks commercial depostors, ana necessary? 10
fhst o. the bank itself.
NJ Fish suggests as remedies Tor existing evils
8 law n establish safe system of banking on
c~sdi and not on hypothecaton. that the necessary
cost Of banking be made small possible con-
se,snt with safety. by establishing branch banks
and matchmaking the vast number Of small con-
Germs with limited means. and therefore limited and
unknown credit into large institutions: that banks
~ divided ir:o two classes. those or deposi. ana
discount only ana those OF deposit. discount and
issue that the latter have the privilege of issuing
circulating notes 20 amount equal TO its capital
ana surplus less the book value Of its land and
other permanent investments. and that the former
Re relieved Of the requirement Of holding % per
any oher fixed per cent OF their deposits IN CAST