New-York tribune., 1901-12-05
BANKING.

Admirable in many respects, experience siio"s
that our banking system is devised for fair weather
not for storms This can be clearly SHOWN: nS
units, with tie Of mutually between them;
There is obligation of duty from the & stI9ng 10
caticn for protection or defence in pefioos
Of aTeTsity and s Of bank is to give its
money obligations in exchange for the money Oh,
business the bank chiefly prosecutes II it receives
ee If s bane is IS RiS @ by open credit to
borrower upon its books, or II may be by issuing
IN Ether case the Transaction is the sanneex
change by the of its obligation to pay against
@ S ssnce at he By the
AZ the the pere Of their last report the national banks
as whole =, held G asssnss we he tRe pHbe
enjoyed total of credits upon e tns ne 3 SS95s 3 q ea
credits on the banks books are called deposits
II is convenient name. but ii is misnomer II by
It's use II Is enf is 10 tat ehousR money forms
an element in the daily deposits Of the banks in
per cent is in cash The other 80 per cent consists
transfer Of existing bank credits from person
another 1t is these orders Tor the transfer OF pah
and. out Of all comparison with coin or paper
money as TO extent and volume Iney 5 l me
large affairs make use 1t Is important that tins ths
and silver coin perform in the field of circulation
very Important part but their use is ia
and the smaller affairs of life. For all larger mat
fectire currency the real medium of exchange and
means or payment
USES OF BANK CREDITS.
Now. loan Of credit by the bank is essentially a
change. Banks DO not primarily lend money: they
give credit Ss1 so sSen may either be IN the
form Of coin bank notes. out in much the larger
tTsnsfcr from buvep 20 seller to be reranSferred
again and again in the course of trade So we have
dealer desires larger If temporary, power 10 OBJ
tain goods or commodities. A bank credit which he
can transfer another by drawing his check is as
effective actual money and Is less troublesoIne
He negotates his notes with his banker and obtains
comes the subject of multiplied transfers In que
ties he had purchased and with the avails he takes
stored ed 70 its former status The credit obtained by
the trsder is cancelled The total volume OF & na9R
has been contracted the amount involved in the
na4 Ss f. de- b% It Is no to n G To that
through the loaning operation OF the nanks the
day. and is contracted by millions every day
ne senera IN D1th hecanse the buTins
and the selling in the community must be suostan-
There are however. at least three causes which
operate 10 increase The demand upon banks @ II tor #
of loans hank credits. These causes may be thus
securfties an increase in the volume things. and
enlarged activity in the sale and transfer OF
goods and securities On the other hand there Is an
influence which limits the ability OF the banks 10
CONTINUE Indefinitely expansion IN Their bI
them. a responsible duty assumed by the banker
Credit due from him to the public Failure to do
that means insolvency. Hence his cash resources
this regard and the national banking act fixes mini
percentages. which IL is the banks legal duty
TO maintain
DANGERS TO BE FEARED.
Now il is an observable fact that, given business
activity and prosperous course TO industry there
of exchange furnished by bank credits Bank loans
increased, and the so-called deposits, whicn
the diminishing ratio OF cash reserves puts
a strain on the expanding movement and impedes
situation reached we have the familiar symptoms
prosperity. Trade is active manufa cturers busy
and labor well Smployec: Mithin me Lis S o u me ne
indefinite continuance in the happy conditions But
is familiar fact in the past. and il VIII De re-
fact IN the future, that unseting nIuehces
come unexpected periods to disturb finances
ana menace credit operations Some large financial
insrSution has been managed with reckless olsIe-
gard TO best interests; large commercial house
becomes insOlVent: a political party espouses Goc-
trines injurious public and private credit war IS
gold abroad for better bargains Some one or
more of these events occurring IN succession, or
the situation Credit loses in some degree It's Tor
ner power: cash becomes relatively the more I'M,
downward; uncertainty and fear supersede former
confidence and courage.
-. te,- are comm IN 10 ali Countries
The striking is to be found IN the way IN
psrieon is wholly unfavorable TO Explanation
l. 10 be found in our defective banking system No
sooner do the symptoms OF financial and business
principle Of self-preservaion. suspend the furth
est limit possible their operations of loaning and
boohr in Exchange fcr debt Obligations from their
desssrs- he daily creations OF the necessary
medium OF exchange, pank creol.s. cease or oe