The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1902-10-01
A NEW DEPARTURE IN FINANCE.

Secretary Shaw's new order in regard to
bank reserves is an important departure in
government policy and will materially re-
lieve the money stringency, which had be-
come acute and threatening. New York
dispatches of Sept. 20 reported call money
up TO IS per cent. with the local banks en-
tireIy out of the money market and the
trust companies very small lenders. With
the supply of money available for business
reduced to this low ebb and with wild
scramble for loans during the closing hour
the situation was one that called for
prompt action About two weeks ago the
secretary of the treasury arranged to re-
lease about 100000 by Notifying banks
throughout the country which held free or
unpledged bonds that by sending them to
the treasury Of the United States they
would receive temporary deposits Of public
money to the same amount. At the same
time he announced that he would antici-
pate payment of the October interest,
amounting to about s4.2OO.O0O. AS these
measures did not afford adequate relief to
the money market. at least in New York,
the secretary now announces that here
after national banks will not be required to
carry reserve against government de-
posits secured by government bonds 1t
has been a mooted question whether banks
were obliged to keep the legal 25 per cent.
| reserve on government deposits secured by
government bonds. The banks have con-
| tended that as the depositor-that is, the
| government-was amply protected by the
securities pledged as collateral, the Is per
| cent. reserve was unnecessary and not
it forced the banks to tie up % per cent. of
the resources acquired by government de-
posits which were already sufficiently safe
| guarded by the deposit of bonds. Secretary
Shaw is the first secretary of the treasury
| to take this view. He made the announce
ment in New York. and a dispatch from
that city says:
| Secretary Shaw said he had never seen
/ any good reason why banks holding a gov
| eminent deposit secured by government
bonds should be required to carry a reserve
against 1t. First, 1t is deposit not likely
10 be called In a time OF stringency; and,
| secondly. If called, the collateral will al
ways sell for cash and in excess Of the de-
post. He has, since he took control of the
treasury, contemplated relieving the banks
| of this burden. The controller of the cur
| rency agrees with the secretary, and there
| fore 1t Is announced that hereafter banks
| Will not be required to carry a reserve
| against government deposits secured by
| government bonds.
The government deposits now in ma
tional banks throughout the country are
about s1sO.OOO,oOo, secured by deposit of gov
eminent bonds and by Is per cent re-
serve in addition. The new order will re-
lease the reserve, amounting to over $50,
100000. and add that much to the bank re-
sources available for business. The order
! ought to afford immediate relief in the New
York money market, and, incidentally
benefit business throughout the country
The new order is designated as one for the
relief Of the banks. but as it adds to their
loanable funds 1t is really for the benefit OF
the peopIe