The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1902-12-28
BIG PAN|CS
0F THE PAST
Financial Shocks That Shook
Two Continents Recalled.
BARRING BROTHERS CRASH
Plans of FinancierS to Meet a
Money Crisis.

New York Dec. .2I.-Format ton TINS
week, of a bank pool 10 protect the
money market aaginst a possible serious
crisis, is not a new eXpedient IN American
finance. The only novel element in last
Mondays announcement lies in the fact
that it was made before the crisis had
arisen
4 classic instance of such bank move
rnent occurred i'll London, on Friday, No
vember /, 1890 1t became known that day
at the Bank of England, that the firm of
Barring Brothers, as a result of its Argen-
fine operations, was on the verge of fall
ure for twenty-one millions sterling. The
Bank of England, after consulting the
Chancellor of the Exchequer, called all
the leading hanks and banking houses
int consultation, with a view to joint
guarantee of the Barring assets. The priv
ste banking institutions signed guaran-
tees in the total sum of 415,0OO,Oo; the
Rank Of England then guaranteed the
whole. When panic struck Lombard street
OF the following day, the private banks
virtually stopped loaning. This had SO
had an influence, that the governor OF
the Bank of England, Mr.. Littledale,
warned them that such a policy would
not do Thenceforward all banks dis
counted for their own customers at per
cent and and to outsiders these be-
ing panic rates. These moves, with the
bank s import of s4,50O,OOO gold borrowed
from the Continental banks, allayed the
panic
During twenty years, management of
New Yorks bank pools in crisis was
intrusted regularly to very remarkable
man. Frederick D. Tappan. Mr.. Tappan
took charge Of the bank situation in the
Wall street panic Of 1884. On May 6, the
Marine Bank failed, followed by the
failure of Grant & Ward. The Second Ma
tionaI Bank nearly went over, after its
presidents 100000 defalcation. On the
18th the Metropolitan Bank went down,
end eleven banking houses followed
Money at one time rose to per cent a
day Mr. Happen then bound the asso-
riated banks into an agreement. AS the
surplus reserves were soon exhausted, is
sue of clearinghouse loan certificates be-
gan-a scheme. as is we'll known where
by banks short of cash turned into the
committees hands their collateral on
which certificates were issued, receivable
OF balance by creditor banks at the clear
ing-house, in lieu of cash. and bearing
6 per cent interest The total issue in 1884
was 81. 9l5 600. On this basis loans We're
freely made. at a rate which fell gradual
Iy. by the end OF May to per cent. This
was the end of the panic
The Barring panic of 1890 hit New
York. 1t began on Saturday. November
Is and on Monday, Stock Exchange loans
rose to 1S6 per cent. Surplus reserves Of
the New York banks were already below
the legal limit and on Monday the banks
were -again summoned to meet the emer-
sency. In all. Mr.. Tappens committee
issued So. 600 of the Clearinghouse
lean certificates The banks loaned at
high rates. not letting call loans go be-
low eight per cent until after two days.
There were several failures. and new
lean certificates were taken out by banks
as late as December (. They We're not
wholly retired until 1891, surplus reserves
not being restored until late III Deem
Der. 1890.
The panic in 1888 called for organized
bank management; which was not begun,
however. until full month after the sit
nation had become acute. On June Is the
management Of the bank loans was plac-
ed in the hands of F. u. Tappen and
committee Of five. The banks then held
a surplus reserve Of $4,000 co. but call
money commanded - per cent. and the
market for time loans and commercial
paper was virtually closed. Before the
panic ended. $32.2Se. 900 Clearing house GER
t.ficates had been issued at New York,
a.gF. .Iaa III
phia, Baltimore and Pittsburgh. \ strik-
fng fact of that years experience was
the long life OF the Clearing house certifi-
Gates. The last WAS not cancelled in
New York until November l. although
or thar Associated Banks held surplus
reserve Of S4S.00000o. II is probably true
that in 1899 the worst side Of the loan
certificate plan betrayed itself At this
distance Of time there is little doubt that
the suspension OF cash payments To depos-
itors. by numerous New York banks. was
due 10 the fact that all their balances
were paid in loan certificates. so that they
really had no cash TO use. on The other
hand the buying OF gold In London. on
July e. was mode possible through issue
OF 100000 loan certificates in New York
The resultant credits We're used by thyee
powerful banks and by Lazard Freres 10
obtain the sold from London. where il
was bought between 50 ard AS FOR de-
nand bills. II was this gold Importation
which really ended the panic.
No loan certificate has been issued since
1895. In the Venezuelan panic of Deem
her. 1895. plans were made FOR their is
sue and on Monday. December 3. (ive
days after President Cleveland's message)
n committee was appointed TO .ssue them
If needed But no hank asked for them.
Again ia The third week Of August. 1855.
curing the silver fright the Bank Of
Commerce applied II the Clearinghouse
for loan certificates. stating that il did
nor need them. hut merely acted so as TO
give other banks courage II do so. No
hank followed the example. however. and
ne certificates were issued. At present
the wei known opposition Of Washington
authorities Ia the plan makes their use
in future emergencies rather doubtful.
Concerted action by The banks. too. took
thereafter q somewhat different form from
previous occasions. In January, 1874. when
the governments gold reserve was going
TO pieces and the treasury's IS 81. go
per cent bond issue seemed foredoomed
to failure. Mr. John 4 Stewart personally
formed 4 hank pool 70 take the loan.
ard the same thing was done by him and
ether fnanciers In the second loan of the
autumn. This. however was not a
move for the money market primarily. nor
vas the formation Of the 1885 pool Of
hanks and banking houses. by Messrs
Belmont and Morgan 10 take the { per
cent loan and blockade the outflow Of
gold an three howeNer HSer,. in q sansa