The Savannah morning news. (Savannah, Ga.) 1900-current, 1900-11-26
THE NATIONAL BANKS.


as a cash resource a deposit In another
national hank, called its reserve agent. 10
one OF great importance and Involves the
iiiSss fundamental principles 81 safe bank
ing- The extent to which the reserve Of
one bank can safely be represented by
what Is practically = loan To another
bank. instend OF by cash IN its vaults. is
proper subject for consideration ~ this
Time. IN view Of the financial experiences
through which this country has passed
during the past few years.
Ia times OF financial crisis. such as iS92
when there are widespread Withdrawals
m currency. not only ia reserve cities but
throughout the country. the reserve cities
are subjected go a ssrain which endangers
the stability Of the entire banking system.
The reserve banks. as a rule. recogniz
Ing the instability Of bank balances. must
lean large proportion q their money on
call. To secure suficient call loans they
must 20 10 the speculative exchanges.
ard che injurious results OF that practice
arc easily understood.
IL is only hy loaning money on specu-
lative securities that the banks are en-
ahlcd 10 paw the high rates Of interest
on nk-deposit balances witch form the
attraction TO the country banks Tor the
deposit OF 80 much larger portion II
their funds la New York than IS needed
Tor the clearance ~ exchange During
the summer Of 1899 there occurred a marx
ed demonstration Of the evil efrects OF
this practice upon tho legitimate business
o. the country At that time there was
a marked slackening IN tho demand for
money In che interior 81 the country. and
the banks of that section found Il dlrncult
TO safely loan their funds As result
the interest paid by Eastern reserve
agents upon deposit balances attracted an
immense surplus 20 New York and other
Eastern cities
This redundancy Of money In New York
and the East and the ease with which
loans upon speculative coliaterals we're
there obtained Immediately created a
speculative movement In stocks. whic n
was carried or with a constantly rising
ranFe OF prices until the fan Of last year.
~ that time the crop movement IN tho
West and the rising rate Of interest there
led tho banks OF the interior 60 draw upon
their balances ia New York and 10 order
the shipment Of large amounts Of cur
renCy a. against these balances. II IL
10 be noted that a. tho time these &C.
nlands took place the business Of Tho
country was IN prosperous condition.
with a tendency toward an Increase N
general prices and IN the wages u labor.
There was no lack OF confidence IN tho
country and nothing which indicated
panic conditions and set this demand b.
the banks OF the West for the shipment
OF currency on deposit with reserve agents
resulted In q panic upon the Stock Ex-
change OF New York which instantly ha-
came q grave menace 20 the entire bust
ness of The country.
In the panic % 1898 tho New York hanks
refused to ship currency In response 70
demand from hanks in the interior for .
considera bile time. showing In the extreme
test Of panic that the reserve which had
been counted a. cash by the banks 81 the
country was not. IN fact. at al times
available 20 enable them 90 meet the
demands o. their depositors- While re-
strictions placed upon the power Of banks
TO count as banking reserve 70 large a
portion OF money on deposit IN reserve
cities will not have the effcct OF prevent
Ing speculative tranea tons IN money CEN
tiers. Il will not have tendency TO en-
courage them 30 50 great an extent Ne
docs the present law. 81 a risk ~ times
10 The best interests Of legitimate bust
ness. and at the cost Of weakening the
banking system oe ~hole by creating
too grea. a dispro on between the
aggregate cash resources and aggregate
deposit liabilities
IL Is 20 he remembered that so FAR as
the ability Of the banks TO serve the pub
lic IL concerned II viii not be materially
impaired by smaller balances Ia reserve
cities The hanks. OF necessity. must
furnish exchange and viii accordingly
keep the balance with correspondents nee
essary for such purpose Tho permission
given by the law 10 the bank 10 count az
a part OF their cash reserve balance
with their reserve agent ts primarily for
the banks. and not for the convenience o.
the public In any Of its relations 10 the
bank
The controller believes that under the
present law regarding reserve cities too
great latitude - now given the banks In
connection with the use 81 the reserve.
the primary object 81 which a. the protec-
ton Of the depositors Of the banks. and
he recommends that amendments 70 the
laws be passed requiring that a larger
proportion Of the reserve should be kept
IN cashin tho vaults Of the bank
Fees for Bank Examinations.
The controller repeats the reoommenda
ton made by his predecessors that tho
present law should be so amended as to
provide fixed salaries Tor bonk examiners.
10 be paid from a fund collected from the
banks. TO take the place OF che fee sy-a-
tenn now IN force The amount allowed
an examiner for the examination OF small
er banks Ia not sufficient TO compensate
him for the time necessary In many cases
for an extended examination. The pres
ent system encourages. to too great an
extent. superhclaliiy IN examinations. and
interferes greatly with the proper and
wise apportionment OF time OF examiners
among the different banks
Among other recommended ona the con-
iroller strongly urges laws regulating In
ternatlonai and intercolonial banking as
distinguished from domestic banking. and
prints Ia an appendix the result OF inves-
legations into banking conditions IN Porto
Rico Hawaii and The Philippines.