Omaha daily bee., 1906-12-09
Nebraska Bankers Views on Asset Currency

a lsrge extent perform the service Tor when
money was formerly required.
IL viii be admitted. ] think. that II there
Is a large movement OF funds ia the fail
from New York TO the interior it would be
manifested by reduction Of the deposits
yf the interior banks in the New York
banks. Inc only figures at hand for this
investigation are found In the cOmptroller's
reports. / do not pretend to say that these
figures are conclusive Of the question.
There may be intervening periods which
would show differently. But certainly the /
comparisons ] now make are very sugges- 4
tive and may not be easily explained 4
otherwise than as they show. The comp /
trollers report for 1876 is not out The lat I
est statement IN the 1895 report is that Of 1
August .. OF near September l-prior to I
this is that Of May g. These two state I
ments FOR New York City compare as fol- /
lows.
Loans: May =. $40, ss5. S97; August IS $685. !
6b0l; increase SH1le.li Casu: National p
bank notes, legal tenuers, specie fraC uonal,
May -. Sz46,4i ~; august p S-2+, ~, 81,
increase So,ySelL Deposits Of banks; Mdy
~ &56 -. sosi August - SsSl, 81, IN increase
AIS, los
Going back TO 1904 in order to get later
date than August Is. with which to com
pare the summer statement we have as
follows
Loans: June .. s7S.lO0.E54; November 10.
S7Ss,lsd,445; increase. S60O5o,sgl. cash: June
g. S155o42.e4I; November H. SIS ll,asl; de-
crease N,i5l,0l6 Deposits; June 3, &jiS l04,-
95s.s7g
It will be seen from the above that with
no considerable change in cash the de-
posts from May % to August rs, 1905. in
creased nearly SS5,O0l,OOO, and in the period
from June 8 TO November 10 1891, they
increased about S48,OO0o0O. In both cases
there was q large Increase in loans.
From this it can be easily seen that the
reserves Of the New York banks may be
vitality affected, without the banks parting
with any cash. A large increase in loans,
as a rule, is attended by a coincldent in
crease in deposits-not Of banks, but in
the accounts Of the parties concerned in
the loans.
This increase in deposits demands under
the law increased cash, and heul 81 fol-
lows that the banks reserves become
strained. Currency undoubtedly Is fire.
quentiy sent to the country. but this de-
mand does not necessarily affect the loans.
II II affected anything Il would be the de-
posits, and the lowering Of deposits would
also lower the reserve required.
This comparison, / think, will confirm the
popular impression which has long existed.
that the extraordinary high interest rates
which sometimes prevail not only in the
fall, but at other periods Of the year in
New York, are due TO conditions peculiar
20 that market and not to the ordinary
business demands Of the country.
The volume Of securities depending al
most solely upon New York for the sup
port Of their current prices is enormously
large.
We cannot know, OF course, to what ex-
tent the holders OF a large portion Of these
securities have personal control Of some OF
these banks, but II has been demonstrated
on many occasions that Spectators in them
have 1t in their power to put up the in
terest rate when il suits their wishes. or
Is demanded by their necessities 1t is
also clear that Spectators for a decline in
stock prices, in order to attain their object
may take advantage Of the period when
money is in extra demand for legitimate
business purposes.
These operations do not necessarily afect
in any manner the supply OF currency, as
, checks answer the purpose.
l do not consider II as a positive fact
because l have not the means Of verifying
the statement, but II as many believe the
critical conditions referred TO are due to
stock transactions, II would be folly TO
relieve such conditions. II one Of two
= things must come down-the price Of Sc
curiues or the value Of our money-let il
!. be the securities, not the money.
The New York Chamber OF Commerce
favors the establishment Of a great ma
e uonal bank, with branches, and Prof
johnson, in his address before the Nebraska
/ Bankers association, elaborated upon the
[ subject This may be what is in the back
- ground in all these asset currency schemes
\ and it will be conceded that II an un.
secured bank note currency must be issued
Y Il would be FAR better that il should be
Il issued in this way than indlscriminately
s by banks all over the country
The same interest which favors the cen
l. tral bank idea would also abolish our in
re dependent treasury system. which ha,
It served US so well through many tryin,
n years Indeed, It IS already proposed tina
= the money in the national treasury sbal
ID be deposited IN the banks without security
q This consolidating OF banking function
j. In the manner suggested involves a oues
y ton which is too large for the limits o
5e this article Only this may be said: I
is would involve the destruction Of our pres
ent system OF independent banks. which
r notwithstanding the imperfections whicl
as will be conceded but in time will be re
y moved, is the best system OF banI,inl
I'd for the interest OF the people the worl
:" has ever known. HENRY W. YATES.
10 Omaha November a. 1906