Richmond dispatch. [volume] (Richmond, Va.) 1884-1903, 1897-03-04
FIR. STUYVESANT FISH, or NEW
YORK, ON THE SUBJECT.
FAILURE OF NATIONAL BANKS.
Necessity for BETTER system-A'
RubStitution of Credit for Hypothc-
cation-The Time for Change at


sniS week a comprehensive i'NN' VIZ" Ni'N'
tbe need Of better banking laws, ana
among other things says;
.sTbe difficulties 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 obtainabie'
and those prevailing at the same time IN
the money centres. taken with the sudden
and tremendous variations in the rates FOR
money i'm New York during the past eigh-
,,en months. demonstrate that our bank
ine system is neither national nor IA
tonaL
.,,rho laws governing national banks
e.i,iror,, showed I'm their title that they
xr.rc intended TO provide currency Sc
cured nv a pledge OF government bonds
r-l were framed in order TO force the
ra state banks. which had both capitu
and credit. TO support the governments
enances As "a war measure, this may
1--we been wise and defensib.e, although
A. was cruel and unjust TO the merchants
81 whom those banks owed irst du'y'
AS "a scheme Of banking for q great ana
widely scattered commercial people these
lows are unwise, In that they make no use
I'D
ts the basis of banking. The law requir-
irr national bank TO lock up $4,000 IN
government bonds I'm order 10 obtain the
-.vlege Of issuing $4,000 Of circulating
notes Grst diminsbes the available tunos
D. every small bank 10y one-quarter or
more. and then teaches those operating
rrler it. especially men new 20 the bust
ness TO favor loans by the banks against
"a pledge Of securities. rather than on ie-
Ultimate paper given by the buyer TO the
seller I'm a commercial transaction ana
endorsed by the latter. Loans on ny
t,thecation generally and naturally drift
through renewals. into making the bank
r special partner in commercial, manu-
featuring. and agricultural enterprises, II
bot also in street-car and other railrodu
corporations.
"Ihat a bank must at all times keep in
reserve "a certain portion of the depos-
rors' money Is, of course, necessary. But
the provision OF the law that part Of the
reserve may be deposited with other
banks. I'm distant cities often places the
reserve out of the control of the bank
when ils needs are greatest. The law also
creates congestion in the money centres.
Il also tends 10 leave the country banks
az an times without sufficient cash 10
adequately care for the legitimate &C.
hands 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 strict
d and invariably followed, would, in every
crisis. lead to the bankruptcy of all OF
She banks commercial depositors, ana
necessarily TO that of the bank ITSELF
Figures are presented by Mr.. Fish to
show by the dimin. shing capital of New
York banks that the business there has
not been particularly attractive. He
sketches a comparison of the banking
systems of the United States, England,
and France. in which are revealed the
advantages of the latter two, and says;
why then. this difference between our
national banks and those Of other coun-
tries? Chiefly because. after thirty-tour
years Of experience. Congress still in
sists upon keeping on the national banks
the bonds and letters which il was
thought necessary TO put on entirely new
and utterly untrled institutions. with
small capital. at a time when the govern
ments credit was none Of the best, and
the financial outcome of the war purely
pr0blematic."
REMEDIES.
Mr Fish suggests as remedies for
existing evils a law 20 establish safe
system Of banking on credit and not
on hypcthecaton, that the necessary cost
OF banking be made as small as possible,
consistently with safety, by establishing
branch banks. and amalgamating the vast
number of small concerns, with limited
MEANS and. therefore. limited and UNI
known credit. into large Institutions; that
banks bee divided into two classes. those
OF deposit and discount only and those of
deposit discount, and issue; that the
latter be given the privilege of issuing
circulating notes TO the amount equal 10
their capital and surplus. less the book
value OF its land and other permanent
inye ,meuts. and that the former be re-
leyll OF the requirements Of holding p
Ier cent, or any other fixed per cent
az lar deposits. in cash.
"The interest" continued Mr.. Fish
''wh.ch I have IN one Of the largest Of
The New York banks, much Of whose
business is with other national banks in
every State I'm the Union would preclude
me u other reasons were wanting, from
advocating an unsafe, or even a doubtful,
method OF banking. What L have said
or may say. represents only my own
individual opinion as a citizen, having
or rather representing, varied interests
in many States IN the West and South.
Concerning these opinions, or their eX-
Ire .ou. i have had no manner Of con-
f1ltau0n or conference with my col
leagues in the bank. Indeed, it is mani
TEST that the changes above advocated
are not in IT'S interest, except in so far as
no evil can continue to happen 10 TINS
country without affecting 50 large an
institution; SO, also. of the good TO the
whole country, which will surely fol-
low the release of the national banks
from the swaddling clothes, IN when
Congress put them in 1868.
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
lar as the mere safe-keeping Of the
money or depositors and its prompt
payment on demand, are concerned, the
misunderstanding system has worked bet
Ter than any system of which the coun-
try at large has had experience. As %
system of banking for those engaged in
commerce, who base their operations on
securing from their banks lines of dis
count commensurate with their average
deposits, the system has failed whenever
seriously tested. 1t failed in 1S69-black
Friday; % failed in 1873: IL failed In 1881
one Marine Bank and the Metropolitan
Bank going under in New York;; IT failed
again in 1880, on the Barngss suspension
in London; again. IN 1893. and again, IN
1856
IL DO not say that the national banks.
or any great number OF them. failed;
but 1 do say that the reliance Of mer-
chants on their banks failed them at
each Of these times. and that the fault
hes in the provisions OF the national
bank act as now I'm force The time for
change has come"
NO TRACE M THE FIIIUISTfR.