The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1904-04-13
THE MONETARY SITUATION.

There are three things in the money situation
which deserve careful study at this time: first.
the great increase in loans; second. the large
payments which must be made on foreign ob-
cations, and which have already resulted in an
engagement of gold; and third, the necessity
of trust companies paying in interest on
deposits than the rate of interest which they
can obtain On call loans. their own deposits
in the banks.
The increase in the amount OF loans OF the
clearing house banks to the high record point
has not excited as much attention as IL de-
serves. because this increase has been attended
with corresponding increase in cash holdings.
Nevertheless. out of this cash must be paid
as soon as the Panama tange IS cleared up
many millions OF dollars account of that
canal. and many other millions on account of the
Cuban and Havana loans. Altogether ii is esti-
mated that there is upwards of $1,000 900 which
is to out of the country this summer More
over. this increase in loans is confined TO the
New York banks. 1t is even more clearly dis
closed in the March 2S statements of the four
teen national banks of Chicago. These banks
since Jan. p have increased their loans over
$40, 900. while their cash resources have de-
creased over Sc. 100000.
The situation in New York city is complicated
by the deposits here of the government money
awaiting the Panama canal payment. These
special deposits are now in ten national banks
Ihese banks nave since Jan p, increased their
United States deposits by more than $40 900 600
1t is a significant fact that these same hanks
have in the same time, increased their loans
than the in the United s sent more S
posits There has been. however. in the same
time. material reduction in the bond and
security holdings OF these banks. two of the
with over S.00o,O00 worth OF bonds and securi-
ties.
We have. several times of late commented
upon the practice of the banks in paying in
terest on deposits of trust companies and ont
oi.t9wn banks. and of the trust companies pay
lect to withdrawal by check. This practice has
been on the increase in the past few years and
such excessive limits that drummers have been
sent out all over the country to solicit ac-
counts. offering exhorbitant rates of interest
Tor them An amusing instance of the way
this competition is carried on is given in az
case of a clergyman who, having RECENTLY ac-
cepttd charge in New York city received
before he had landed in the city, and ALI sorts
or Inducements were given to him by different
institutions.
This. of course. is fundamentally WRONG Tho
best bankers realize this. but seem to be unable
TO apply the remedy. Its practice results in a
peculiar situation just now. in that the rates
for call loans are so low that many of the in
stltutions are paying larger interest for de-
peslts than they can receive in employing the
banks. II is quite likely therefore thai the
uust companies, like the banks. have largely
Of .neir oans' so that at the opening
currency and the necessary payments on ao
count OF foreign obligations will increase The
withdrawals of funds from the New York civ
institutions. the volume of credit bes 10y 10y
pushed TO a high limit. and the margin % @
Plus ample as II seems at the moment is no,
ments of the future. The banks shouId ronrr
the lesson not 10 use up in times of ease tba
margin of surplus that will be needed in the
nal. Ni