The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1900-11-26

To secure sufficient call loans they must go
TO the speculative exchanges, and the in
furious results of that practice are easily
understood
1t is only by loaning money on specula-
tive securities that the banks are enabled
10 pay the high rates of interest on bank
deposit balances which form the attraction
to the country banks for the deposit of SO
much larger portion of their funds in
New York than is needed for the clearance
or exchange During the summer of 1899
there occurred a marked demonstration of
the evil effects of this practice upon the
that time there was marked siackening
in the demand for money in the interior
of the country, and the banks of that sec
funds. As result the interest paid by
Eastern reserve agents upon deposit bal
ances attracted an immense surplus to New
York and other Eastern cities.
This redundancy of money in New York
and the East and the ease with which
loans upon speculative collaterals were
there obtained Immediately created a spec
ulatfve movement in stocks, which was
carried on with a constantly rising range
of prices until the fall of last year At
that time the crop movement in the West
and the rising rate OF interest there led the
banks of the interior to draw upon their
balances in New York and to order the
shipment of large amounts of currency as
against these balances. 1t is to be noted
that at the time these demands took place
the business of the country was in pros
porous condition. with tendency toward
an increase in general prices and in the
wages of labor. There was no lack of con-
fidenee in the country and nothing which
indicated panic conditions, and yet this de-
mand by the banks of the West for the
shipment of currency on deposit with re-
serve agents resulted In a panic upon the
Stock Exchange of New York. which in
stantly became grave menace TO the en-
tire business of the country
In the abnormal demand for money Gre
ated by this panic on the Stock Exchange
the ordinary credits of the legitimate busi-
ness and commercial enterprises of the
country were necessarily curtailed by the
banks, and unquestionably great damage
would have been done 10 such interests
had not the secretary of the treasury see
ing the possibility of evil to the country
at large, interfered TO prevent rapidly AZ
creasing stringency in the money market
II is TO be remembered, of course that
the exchange business of the interior banks
will always necesSitate large deposit bal
ances in New York and other reserve cit
les. and that at certain seasons of the wear
abnormally large balances of idle funds
may be attracted TO different parts OF the
country, following higher interest rates.
But il Is suggested that public policy de-
mands that banks Of the country should
not be allowed 10 deposit with other banks
so large a portion OF that fund which in
the protection OF the interests OF the de-
post0-s. They should be compelled to hold
q larger portion OF this fund In cash in
their vaults, so that IL can always be de-
voted To its proper use beyond peradven-
ture.
IN TIMES OF PANIC.
In the panic OF 1896 the New York banks
refused to ship currency in response 10
demand from banks In the interior for a
considerable time showing in the extreme
test OF panic that the reserve which had