The morning news. [volume] (Savannah, Ga.) 1887-1900, 1897-03-04
BETTER LAWS FOR THE BANKS.
STUYVESANT FISH ON THE RE-
FORMS THAT ARE NEEDED.

qnirIng the Deposit of an Excess
of Bonds to Secure Circulation At
tucked-The banking System OS
This Country Compared with
Those of England and France.
Baltimore, Md, March S-Stuyvesant
Fish, president of the Illinois Central rail-
road and vice president of the Park Ma
tional Bank of New York. one of the
largest banks in the United States, has
given the Manufacturers Record of this
week a comprehensive interview upon
the need of better banking laws, and
among other things says: "The difficult
ties which solvent borrowers encounter
in the smaller towns of the west and
south, the great discrepancy between the
rates of interest charged them when
loans are at all obtalnable, and those pre-
vailng at the same time In the money
centers, taken with the sudden and tre-
mendous variations in the rates for mon
ey in New York during the past eighteen
months, demonstrate that our banking
system Is neither national or rational.
The laws governing national banks ori-
ginally showed in their title that they
were intended to provide a currency guar
anteed by pledge of government bonds,
and were framed In order to force the
old state banks, which had both capital
and credit, to support the governments
finances. AS a war measure this
may have been wise and
defensible, although it was cruel and un-
Just to the merchants TO whom these
banks owed a first duty. AS a scheme of
banking for great and widely scattered
commercial people, those laws are unwise,
in that they make no use of the element
of credit, which necessarily is the basis
of banking. The law requiring national
bank to lock up $4,000 in government
bonds in order to obtain the privilege of
issuing $4,000 of circulating notes first di-
minishes the available funds of every
small bank by one-quarter or more, and
then teaches those operating under 1t,
especially men new to the business, to
favor loans by the banks against pledge
of securities rather than on Legitimate
paper given by the buyer to the seller in
a commercial transaction and endorsed
by the latter. Loans on hypothecation
generally and naturally drift, through
renewals, into making the bank special
partner in commercial, manufacturing
ana dRTlGuAluIdl EbANA III AoNag - AA@N NiNN
in street car and other railroad opera
tons.
That a bank must at all times keep In
reserve a certain portion of Its depositors
money IS of course necessary. But the
provision of the law that part OF the re-
serve may be deposited with other banks.
in distant cities, often places the reserve
out of the control of the bank when its
needs are greatest. The law also creates
congestion In the money centers. 1t also
tends to leave the country banks at all
times without sufficient cash to adequate
ly care for the legitimate demands of their
commercial depositors.
"The further provision that when the
reserve of bank falls below the per cent.
named in the law, the directors shall not
make new loans or discounts. If strictly
and invariably followed, would. In every
crisis, lead to the bankruptcy of all the
banks commercial depositors and necessa-
Tily to that of the bank Itself"
Figures are presented by Mr.. Fish to
show by the diminishing capital of The
New York banks that the business there
had not been particularly attractive. He
sketches a comparison of the banking
systems of the United States, England
and France, in which were revealed the
advantages Of the latter two, and says:
'sWhy, then, this difference between our
national banks and those of other coun-
tries? Chiefly because, after thlrty-four
years of experience, congress still insists
upon keeping on the national banks the
bonds and fetters which Il was thought
necessary TO put on entirely new and ut
terly untried institutions with small capl-
tai, at a time when the governments
credit was none of the best, and the finan-
cial outcome of the war purely prob
lematlc."
Mr.. Fish suggests as remedies for ex-
L.. 40 ffgt, %
TEN of banking on credit and not on hy-
pothecation, that the necessary cost of
banking be made as small as possible
consistent with safety. by establishing
branch banks and amalgamating the vast
number Of small concerns with limited
means, and. therefore. limited and I'M
known credit, into large institutions, that
banks be divided into two classes, those
of deposit and discount only, and thoso
OF deposit, discount and issue, that the
latter be given the privilege OF issuing
circulating notes 10 an amount equal 70
its capital and surplus, less the book value
OF its land and other permanent invest
ments and that the former be relieved OF
the requirement OF holding 25 per cent.
or any other fixed per cent. Of their de-
posits In cash.
'grhe interest" continued Mr.. Fish,
(which have IN one Of the largest of the
New York banks, much Of whose business
is with other national banks In every state
in the union, would preclude me, IL other
reasons were wanting. from advocating
an unsafe, or even doubtful method OF
banking. What I have sald or may say,
represents only my own individual opin-
ions as q citizen having. or rather repre-
senting, varied interests In many states in
the west and south. Concerning those
opinions, or their expression, l have had
no manner Of consultation or conference
with my colleagues in the bank. Indeed,
Il Is manifest that the changes above ad-
vocated are not In its interest except in
so far as no evil can continue 10 happen
TO this country without affecting so large
an institution; so also of the good TO the
whole country, which Will surely follow the
release of the national banks from the
swaddiing clothes In which congress put
them in 1863"
Mr.. Fish notes the mighty changes that
have occurred In the country since the
war as indicating the necessity for
change. and IN conclusion says: "As far as
the mere safe keeping OF the money of de-
postors. and It's prompt payment on de-
mand IL concerned the national banking
system has worked better than any sys-
tenn OF which the country at large has had
experience.
"As a system OF banking for those en-
L.. f.aN