New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1898-03-21
BANKS, WAR AND PANIC.
MR.. GILMAN's OPINION AS TO THE NEED
OF IMMEDIATE REFORM
MORE IMPORTANT EVEN THAN THE PREPAhAe
TONS FOR COAST DEFENcE-PREsENr
CASH RESERVES INADEoOAiE-
SAFE CREDIT CURRENCY


SAFE CREDIT CURRENCY.
To the Editor Of The Tribune.
Sir: The possibility Of war with spain haS
led our Government to examine into the condi-
ton of our Army and Navy to ascertain what
is needed to place these departments on war
footing and a similar inquiry should ne made In
regard to our banking system.
The country has been startled TO learn how
much needs to be done to enable this country
to cope even with thrd-rate Power. Congress
is promptly meeting the emergency by authoriz-
ing the expenditures called for by the Army and
Navy. and In the same spirit laws should b
enacted to reform our banking system 50 that
il may be able to protect commerce and SUE.
tain values even In the face Of a declaration Of
war The strengthening OF our banking system
is even q important matter than tho
preparations for the defence or our coast line
bordered with rich cities because 1t affects the
entire country with its estimated $4,000 10000
NJ property The defence OF values and Of com.
n,crce is the work and duty Of our banking sys-
tom alone. and IL we are sure that i has power
N moot all shocks even that ~ the declaration
Of war. then one of our great sources OF anxiety.
II not the greatest. will DE removed.
Money ia the sincv's Of war. and II those
sinews are paralyZed the combatant IS handi-
canned at the start. We all know that war
would impose a burden on our banks which
they could bear only with the greatest difficulty.
From our experiences in the last few years
lack confidence in the ability Of our banking
system to sustain the country in an emergency,
and we know that declaration OF war would
certainly be followed by severe panic IN all
markets both financial and commercial
CALLING BACK GOLD FROM EUROPE
To strengthen themselves against these
chances Of war our banks are now calling gold
back from Europe. just they did IN 1860 ana
1861 and later in 1873. and in 1893, and at other
times, but in none OF those Instances was tns
amount OF imported gold sufficient 70 ward of
disaster. Nor is It sufficient at the present trne
70 protect the vast obligations Of New-York 70
the rest OF the country II war is declared A
glance at the situation reveals this. The de-
posts of New-York banks are, in round NUM-
bers. S6SO.OOO,OOO. They hold a reserve above
laoal reouirements of about $50 100000 gold
This is "A per cent Of their deposits, and II that
small nercentage should be called for by depos-
itors the banks Of New-York would be poweress
10 assist the country to pay 10 country banks
their deposit reserves, which form large pars
Of the remaining cash reserves.
The amount OF gold now being imported seems
large in itself considered, but when compared
to the total deposits OF New-York banks II
dwindles TO only another A per cent, ana oy
the time 1t arrives. IL war should be declared u
will all be wanted by correspondents all over
the country, and will have disappeared
The irnportations OF gold should be looked at
principally with reference 20 the needs OF the
entire country OF which New-fork IS the rep
resentative. Compared with the S3'OOVoo"
TO S4OOOOOOOOO OF banking deposits OK the
country the inadequacy Of importations OF golo
to relieve stringency. meet demands or depositors
and support commercial credit becomes al once
apparent. This statement Is sufficient 70 estao-
lish the correctness OF the conclusion tna' so!o
imnortations are an inadequate resource and va
have also experience Of the results or lnnporta~
tons of gold in previous years. all OF when
shouId convince even the frmest believer IN this
method OF giving stability 10 our finances tnas
It Is insufficient.
Not only are the banks OF New-York in con~
dt,on UNPROTECTED against sudden failures OF
confidence but an examination OF cash reserves
shows that all the banks Of our country are IN
similar condition. The thirty-four hundred
country National banks hold cash reserves or
only about j. per cent Of their deposits Ths
eighty-two hundred National. state and private
banks. comprising all the commercial banks OF
the country hold less than 20 per cent OF cash
as a reserve.
TWO DANGEROUS FEATURES.
These reserves are small In themselves. and
there are two features OF our banking system
which make them specially dangerous 10 the
commerce and property Of the citizens OF the
United States One is that this Is all the casn
reserves which the banks have. and there IS no
provision in the banking laws for any lut'ner
protection TO commerce and credi' eNCeP. =.
fIafs ND
when a slight decline in the reserve taxes pace
the National Banking act foroids any IIesn
discounts until the reserve Is restored ana Il
that Is not accomplished in thirty Gays re-
ceiver may be appointed for the delinquent oank.
The passing this deadline inausura'es
panic. -. $50
country make it peculiarly liable 10 panies ana
spasms OF apprehension. The question Is; What
would be the effect on our country WIN suC.i
a banking system II declaration OF war was
announced? Every one knows that declara-
ton Of war would be the signal or disastrous
panic which would cause many FAILURES ana uh
told losses Of property. Banks could not support
business, but would be obliged to take care OK
themselves and augment their small reserves as
best they could by competing with each otheI io'
the floating cash. :,
The frst effect Of a declaration OF war would
therefore be the infiiction OF great catastrophe
on our own people. This condition or anars
Is caused not so much by the smaliness OF mo
reserves as by the fact that there is no pro-
vision in our banking system Tor the pro'ecIloh
Of banking and commercial credlt "hen re-
serves are Impaired. Our reserves are sutnclen.
for ordinary times. but they are not suhlcient
for emergencies. -.
This difficulty can be cured in the simplest
manner bv first the incorporation OF our clear
ing houses under Federal law; and. second
by giving to at least one in each state the power
to issue clearing house currency on pledge o.
bank assets at ~ per cent OF their value 70 any
bank member. the currency 10 be gooc al any
clearing house.
A CREDIT CURRENCY ISSUE.
That provision by law for the issue OK =
credit currency Will accomplish the object OK
giving stability to a nations commerce undeF
STRESS Of panicky conditions is shown by mo