The news & observer., 1897-05-28
TENDENCIES IN MONEY AND
BANKING.
Springfield Republican,

The effects of the industrial depression
upon the money market and the banks
have not been more pronounced than at
the present moment. Idle money con-
tinues TO accumulate iii the chief centers
to such an extent as to force the lending
rate down to about the lowest level ever
known. At New York the large banks
have been compelled to abandon their
long-maintained minimum nate of = per
cent on call and come into market whose
prevailing figure is close to l per cent,
with no particular demand at that AT
Chicago the banks have been forced to
reduce the rate paid ON deposits from the
country institutions to ~ per cent
Other reserve cities are being similarly
affected.
This unusual glut in the money market
is producing exactly the same effects up
on the money-lending industry which a
glut in any other market produces upon
the industry engaged in supplying that
market. We have first a run of failures
and then consultations and the tendency
of business to concentrate in the strongest
hands. Bank failures since the panic of
1893 number far into the hundreds and
continue comparatively numerous. The
number of national hanks alone reported
to be in voluntary liquidation during the
past four years is 213; and the number of
insolvencies is 147; so that after deduct
ing the number of new banks organized,
we have "a net reduction of 127 in the
number of national banks in the United
States since the panic, and this makes
no account of the, failures and hquida-
tons among national banks which have
taken place this year.
Now comes the Commemorative movement
consultations among money-lenders, as
in the case of the industrial trusts, i'll
order to reduce the ratio of expenses to
volume of business. The business of one
of the large New York banks fails into
the hands of another larger and stronger
institution. Two Of the leading banks
of Kansas City combine, the weaker
passing into the name and business of the
stronger controlling interest in the
national bank of the Republic and in the
Metropolitan national bank at Washing
ton passes to the Columbian bank, whose
purpose is said ito be to bring several
other banks at the capital into a species
of trust. The necessity of extensive con-
solicitations among the banks of Boston
has only recently been pointed out by the
savings banks of this State, which own
large amounts of Boston national bank
stock.
Such is the drift in banking no less
than In other businesses. 1t is q time Of
extraordinarily low returns ON capital,
and capital engaged in collecting and
lending deposits must accommodate itself
to the change, which appears to be ac-
cepted as in a measure permanent. 1t
must econOmiZe and concentrate in order
to adapt itself to the reduced margin of
profit.
The rate OF interest has no direct rela-
tion to the value or purchasing power Of
the money unit, or dollar. 1t depends ON
supply and demand of capital. The pre-
sent low rate is the product directly, not
of the appreciation in money, but of the
stagnant industrial situation, which re-
duces demand, and Of the greater abun-
dance Of capital caused by the growth and
greater maturity of the country What
ever demand, therefore, may come to be,
supply Of capital must continue to in
crease and make for permanently low in
terest rates, more nearly on the level of
those prevailing in older countries. This
is the situation ITO which capital i'm the
United States must now accommodate
itself. The days of its average high earn
ing rate have gone by, not to return.