The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1900-11-28

Lilo per cent. Of their total assets.
The comptroller states that in his judg-
altered. should allow the banks OF larger
communities 10 have more nearly the
privilege Of loaning a given per cent o.
their total assets to one individual. which
now belongs. under a strict compliance
with the present provision. to the banks
OF the smaller communities From this
privilege they are now deharred by law.
str~enGth~nins Cash Reserve.
n question 0. those laws which af-
feet the right Of one national bank TO
consider as a cash resource a deposfior
In another national bank, called Its re-
and involves the most fundamental prin-
ciples Of safe banking The extent to
which the reserve Of one bank can safely
be represented 10y what II practically =
loan To another bank. instead Of BY cash
In its vaults. Is a proper subject FOR con-
sideration at this time. in view OF the
financial experiences through which this
country has passed during the past few
years.
In times OF financial crisis. such as 1855.
when there are widespread withdrawals
IN currency, no, only IN reserve cities,
but throughout the country. the reserve
cities are subjected to a strain which en-
dangers the stability Of the entire bank
The reserve banks, as a rule. recogniz-
ing the instability Of bank balances. must
loan a large proportion OF their money
on ALI. To secure SUFFICIENT call loans
"t'4 $50
changes, and the Injurious results of that
practice are easily understood.
II Is only by loaning money on specaia-
tive securities hat the banks are enabled
to pay high rates OF interest on bank
deposit balances which form the attrac-
tion 10 the country banks for the deposit
OF 50 much larger a portion OF their funds
In New York than is needed for the clear
ance Of exchange. During the summer
OF 1883 there occurred q marked demon
sfratiou OF the evil effects OF this practice
upon the legitimate business OF the coun-
try. AT that time there Nas a marked
slackening in the demand for money In
OF that section found IL difncult to safely
loan their funds. As a result. the interest
paid by Eastern reserve agents upon de-
posit balances attracted an immense sur
plu 10 New York and other Eastern
cities.
In the panic Of 1898 the New York banks
refused 10 ship currency in response TO
demand from banks in the interior for a
considerable time. showing In the ex-
IRENE test OF panic that the reserve which
had been counted as cash by the banks OF
the country was not. in fact. at all times
available 10 enable them 10 meet the de-
mands OF their depositors. While ~restric-
lions placed upon the power of banks to
ton OF money on deposit IN reserve cities
will not have the effect OF preventing
speculative transactions In money %ceniers,
y viii not have a tendency TO encourage
them 10 50 great an extent as does the
present law. at a risk at times TO the best
interests OF legitimate business and at the
cost Of weakening the banking system as
a whole by creating too great A dispropor-
ton between the aggregate cash resources
and aggregate deposit liabilities.
Too Great Latitude.
The comptroller believes that under the
present law regarding reserve cities too
great latitude i nov given the banks in
the urinary object Of which is the pro-
tcetton Of the depositors OF the banks,
and he recommends that amendments TO
tho laws be passed requiring that a larger
proportion OF the reserve should be kept
In cash In the vaults OF the bank Con-
sidering the banking system AZ a whole.
the present ability Of banks to use cred
its with reserve banks as a basis OF loans
creates too great an extension OF aKgre-
gate deposit credits as compared with ag-
xrexate cash resources. which, In times
OF liquidation and financial panic. In
creases the necessity upon the banks az
demanding payment OF loans from the
community and adds to the demoraiixa-
ton of business incident 20 such period.
BY increasing the restrictions upon the
right OF banks to count deposits with re-
serve agents as casn; a nrner and safer
credits Of the country, and II 10 the belief
OF the comptroller that In times Of liquid
alton the greater strength of the banks
VIII more n compensate them for the
loss 81 the small amount OF interest on o
portion Of their balance which may be
due to a chanse In the present law.
~ - tAtt Nt'Dft1itttlAtcu AitAt rtttAQn
aiss OF the Revised Statutes Of the United
States be amended so that under It's pro-
visions hut one-ffth instead OF thrpe-nfths
OF the reserve % rs per cent. required by
law TO be kept by hanks not reserve
agents mas consist of balances due 10 re-
serve banks and that section sl9S OF the
Revised Statutes OF the United States,
which authorizes banks IN smaller reserve
cities 10 keep one-half OF their lawful
money reserve In balances In central re-
serve cities, De repealed.
Recon me as ca Fees.
The comptroller repeats the recon.
incubation made by his predecessors that
the present law should be so amended as
to provide Fixed salaries for bank exam
liners. TO be paid from a fund collected
from the banks. 10 take the place 81 The
fee system now In force. The amount
allowed Va examiner for the examination
~ smaller Banks Ia not Sufficient to com-
aensate hin for the time necessary in
many cases for an extended examination.
The present system encourages. to 800
great an extent superaclaiity In examina-
tiens, and interferes greatiy with the
proper ana wise apporttonmeut ~ tiree
Of examiners among the different banks
Among other recommendation, the
comptroller strongly urges laws regulaf~
ing International and in~tarcolanIaI hapk-
ING as distinguished fram domestic fAnk.
tng. ard prints IN an appendix the re-
suit OF Investigations into barking CON-
.4fftanx fA ltsAr4 RfA4 H.. -