Evening star. [volume] (Washington, D.C.) 1854-1972, 1903-09-12

those who look beneath the surface. Then
comes some sudden and unexpected calam-
ity that produces an explosion like lighted
match in a barrel Of powder. Fear devel-
ops: confidence in men and In institutions
Is shattered runs on banks begin, boarding
of money sets in, prices of securities and
commodities fall, firms fail, corporations go
into the hands of receivers. factories close.
workmen are discharged. and distress, pow
erty and long depression ensue. 1t takes
long to repair the injury of such disaster.
and every panic is succeeded by years OF
stagnation. in which men are gradually
gaining strength for further enterprise.
Banks Defense Plans.
It will be asked whether Wall street has
developed any mechanism to prevent or
check panics There is such a mechanism,
but that 1t has not been sufficient to pre-
vent panics is seen from the fact that there
has been big one every twenty years and
small one every Intervening ten years.
There are those, however, who believe that
with the concentration of the railroads the
industries and the banking power of the
United States into few hands the busi-
ness of the country has been established
on so firm foundation that II cannot now
be shaken by a panic like that of 1899. 1t
is held that the country has outgrown the
excuses and the weaknesses of its period
of youth. and has now come into the
strength and maturity Of manhood. This
opinion does not. however. coincide with
that of one Of our greatest bankers, who
not long ago predicted that our next panic
would be a great commercial one. He did
not. however, undertake to predict when
such panic would strike the country.
But while Wall street has not been able
to prevent panics 1t has a mechanism that
lessons their evil effect. This mechanism
is supplied by the bank clearing house in
it's issue of loan certificates. AS explained
in a preceding article. the issue OF these
certificates in time of panics has served -
a breakwater against disaster. saving banks
and merchants from failure. But IL there
is another panic it is probable that they will
not again be issued. In 1893 Chicago is
sued no loan certificates, and IL is certain
that New York, in issuing them, while 1t
protected countless institutions and firms
from failure in a measure, at least. suffer-
ed thereby. In the place of the loan certih-
Gates the banks, now greatly strengthened
In capital and resources, Will, II occasion
requires, import gold to replenish depleted
reserves. and will thus be able to stand the
strain of any severe demand which may
come upon them In time of panic The
creation of the great banks and chains OF
banks, while these have not as yet been
tested by the experience of adversely, has,
1t is believed, established strong line OF
defense against the approach of disaster.
The banks. handed together by ties or COM
mon interest, have on several occasions
shown they were able, by the formation of
money pool, so to control the market as
to check any ordinary Wall street panic.
Undoubtedly it has been largely due to
their conservatism that the liquidation of
this year has been so gradual. That we
shall always have our periods of expansion
and contraction there can be little doubt.
but we develop in our national resources.
growing stronger all the time. the periods
of depression should become less frequent
and shorter in duration.
Danger Lessening.
When a new town is opened new soil has
to be turned. and malaria develops. This
malaria frequently takes the form of alter
mating days of chills and fever. Now. in
the United States we have been for CEN
fury or more creating new country. We
have settled on new lands. We have dug,
canals and built railroads. We have cut
forests, spanned rivers with bridges land
planted on a new continent a new govern :
ment under new conditions of life. Is 1t
any wonder that financial malaria has de-
veloped that has taken the form of alternat-
ing periods Of the fever of speculation ana
promotion and of the chills of doubt, OF
fear and of depression? But as the new
town grows older. with a more settled state
of affairs, with scientific sanitation ana
boards Of health. the malaria gradually dis
appears In like manner SO the nation ma
lures, financial sanitation, in manner, II
established more wholesome conditions OF
the markets are developed, and the danger
of panic diminishes or when Il arrives its
power for mischief In less. Panic Will un-
doubleday long be q regular feature OF our
financial history. bat the markets ought,
with the increasing strength Of the country,
to recover more quickly from the effects
DuREN0 q PRATT.