The representative. [volume] (St. Paul, Minn.) 1893-1901, 1897-10-13

| aHu ability OI Vuc lN0W YORK BANKS TO
make loans on stock exchage securi-
ties. If the banks had not extended ac-
commodation to brokers on easy terms,
such brokers could not have bought the
stocks thrown on our markets by Euro
pean holders, and an advance in prices
would have been impossible. But the
ability and readiness Of the New York
banks to further extend accommodation
in this line is about exhausted Yet,
loaded up with loans upon stock ex-
change securities, they dare not refuse
further accommodation, knowing that
to do so would lead to break in prices,
and depreciation in the market value
of the stocks they hold as securities
for loans. So the banks are in a di-
lemma, for their cash balances have
been drawn down and their reserves
are approaching that point at which the
imperial mandate of the law forbids
the extension of accommodation.
Therefore, the New York banks look
| for gold imports as a means of build
ing up their cash resources and keeping
their reserves above the minimum legal
limit of rs per cent of their deposits
below which they cannot permit their
reserves to fall and continue to make
loans. To enable them to make furth-
er advances to stock brokers and bank
ers, and so bolster up stock exchange
! prices, gold imports are necessary.
And two of the banks have set about
bringing gold imports about, have
! brought gold from abroad though it's
! bringing has entailed loss. Both the
| banks concerned are engaged in the
| exchange business, that is, buy and sell
drafts on London, but it is not their
| habit to either export or import gold.
! They leave that to the exchange bank
ers. But in this instance they wanted
| gold, they bought gold abroad and i'm
ported it direct, though such importa-
tions were made at loss.
Such importations were, as exchange
operations, losing business to the
banks, for if the banks had, in the
cumulated credits in London, they couln
have drawn drafts against such credits
and sold such drafts in New York
for a greater sum than it was possible
for them to realize 5n such credits by
drawing them from: London as gold.
But the banks did not want to convert
their London credits into bank money
in New York, they, wanted gold eagles
and SO they imported gold eagles, the
City National Bank $1,5OO, 900 and the
Hanover Bank, $1,000, ,OOO-imported
this gold although they could have
sold drafts against. the gold imported
and saved about $4,000 on each million
dollars of gold imported.
So it is apparent that the banks
wanted gold so badly that they were
willing to import it at loss. The
banks made diplomatic denial of this,
but their denial did not gain credence.
The New York Times strove, indeed,
to give the denial Of the banks cred
ence, by asserting that the banks are
not engaged in business for the fun Of
it, but for profit, and that it is absurd
to suppose they would import gold at
loss. That the managers Of these
banks did not engage 'in such business
for their health is undoubtedly true
but it is equally true that they may
have had, no doubt did have, reasons
that made it quite worth while for
them to buy gold eagles abroad and i'm
port gold at a loss. They no doubt
calculated that that gold would be
worth more to them than the loss
made in importing it, that to have
such gold in their vaults at needed
hour would amply recompense them for
the loss entailed in importation.
And what inclined them to the belief
that it would be worth while to import
gold at loss? The banks are not
given to announcing their needs and
no one can authoritatively speak for
the banks CONCERNED, but what could
have been the reason save that gold
imports were needed to bolster up the
stock market, save that the banks
deemed they would need this strength
ening of their cash resources in order
to- extend further accommodation to
stock brokers absolutely needed in or
der to prevent collapse?
This would have constituted an all
sufficient reason But why is it that
the stock brokers, especially the large
brokers and bankers with foreign con-
nections, should be in constant need
of further accommodation and the
banks obliged to extend it under pain
of forcing a serious break in stock ex-
change prices which they do not care
to face? 1t is because foreign holders
of our securities are returning such
securities for sale ON our markets, and
such offerings must be taken off the
market, or, under the pressure to sell,
prices must shrink, which shrinkage
would be disastrous to the brokers who
have been engaged in booming the
stock market. And to enable the spec
ulators to take up such offerings of for
eigners and hold the market, the banks
must extend accommodation. There
fore so long as such offerings continue
to be made our brokers must have
further bank accommodation in order
1