Evening star., 1907-10-27
Financial News Letter
RY W. @. NICHOLAS.

in Wall street the old-line bankers took
advantage OF the occasion to summarlly
eliminate a number of individuals who
had become Objectionable. and II was
| hoped that with their effacement quiet
and confidence would be restored. The
result did not Justify these expectations,
and then came the collapse of the huge
knickerbocker Trust Company. with its
$61.OOoUO deposits scattered throughout
2o.OO accounts. This failure attracted
wholesale attention to the trust compa
nies. a great majority of which had de
parted from the business for which they
were organized to engage in general
banking. Then. to use a phrase much
heard in New York these days, Hell
broke loose"
The chorus for more sacrifices grew in
volume and force. and the heads of every
body who might be catalogued in the sin
ner class were demanded. There is no
telling how far this clamor would have
extended. The mob spirit was rapidly de-
veloping and the lust for blood was get
ting almost beyond control 1t is In
emergencies of this kind. however, that
the really big men In community come
to the front and take the leadership. On
this occasion the stalwart and seasoned
]. Pierpont Morgan was placed in com
mand and the work of checking the de-
mora!iZation was turned over to him. AS
on many other critical occasions. he rose
to the emergency and speedily marshaled
about him the active working forces of
the street 1t was seen that this was no
time for the carrying out of personal re-
venges and no time to allow to run un-
bridled the craze for the further eIimina-
ton of offensive individuals. For the time
being all this sort of thing was put into
the background. and every solvent man
of large affairs was drafted into service
for the general support OF a badly jeop-
ardized situation
Much the community would like to
see men like Thomas F. Ryan and E. H.
Hartman backed off the board, II seem
ingly was not to be. If these objection
able characters could have been retired
leaving their fortunes and financial credit
behind. there would have been unanimous
approval. but unfortunately there were
no means Of disassociating their names
with their unduestioned financial sire myth
and so they were seen standing In the
front rank shoulder to shoulder with the
Morgans and the Stilimans and other gi-
ants of legitimate banking and reputable
financierlng. Sudden silence fell upon the
lips of the many who were but a moment
before proudly asking for the instanta-
neous retirement of the Harrimans and
the Ryans and the Rockefellers and all
of their class. Obnoxious as these men
are. they had the money. and their money
was needed-needed badly. Even the sin
full rich have their uses: thus It happens
that the possessors of some conspicuously
swollen fortunes are given Communication
of sentence that they may repent
The lesson of this latest banking excite
ment in New York will be to discourage
trust company exploitation Of the strictly
banking field There will be less disposi-
ton on their part to compete with the reg
ular banks for deposits by paying large
interest thereon. There will also be de-
mand for legislation placing stronger re-
strctions about trust companies confining
them more rgidly TO their legitimate
sphere. All this will work to the advan-
tage of the banks. which are better safe
guarded and where the money Of the pub
lie is more secure. This feeling is almost
universal and 1t may be that In the course
of the next few months many trust COM
panies which have weathered the storm
will be obliged to wind up their affairs
There will undoubtedly be heavy and con-
tinuous Withdrawals of public money from
these concerns with a corresponding in
crease in the deposits of the regular
banks. Savings banks also will be likely
to benefit in the matter of increased de-
posits
The tendency on the part OF trust COM
pany arrangements to engage in specula-
tive ventures has been clearly brought out
In the case Of the Knickerbocker. Investi-
cation shows that this company Is carry
Ing on its books nearly $50. O.OOO.O0O of un-
derwritings. 1t having been found impos-
sibe to work out of these commitments at
a profit, the management carried the load
down through a terrific decline in prices
rather than take the loss and get out from
under. Figuratively speaking they might
as we'll have had their vaults full of scrap
iron. They were carried down under a
burden Of undstributed securities which
common prudence would have required
them to dispose Of long ago for what they
might bring. The stuff will now have to
be liquidated on a hopelessly demoralized
market. where the salvage brokers will
sink the knife in deep and exact the last
dollar for what they contribute to the
fund. The books and accounts OF all trust
companies are undergoing rigid analysis
and those that will not pass muster must
take the consequences and go the way
The path Of financial folly and imprudence
will be strewn with many corpses before
the end is reached. The liquidation from
this quarter may have an important In
fuence on subsequent market conditions
The outpour Of securities for which there
is a poor demand may tend to keep the
general list depressed for a long time, de-
spite the good will and substantial sup
port accorded 1t by the large interests
The Knickerbocker might have wealth
cred the storm but for the discovery of
q piece Of bad faith on the part of Of
floials and favored customers. The night
before the suspension SIS 900. 900 had been
guaranteed One Of the first institutions
to make good It's guarantee was the
Hanover National Bank. which came to
the center with 81. 500 900. Very soon
Thereafter word reached the Hanover
Bank that Knicke rbocker officials were
drawing out their own deposits. The con-
clusion was quickly reached at the Han
over that II Knickerbocker officials had
no confidence in their own company they
should not expect others to help out.
Within ten minutes trusted messengers
were sent over to the Knfck kar bo ker
with check for 81. 500 600. accompanied
by a stern demand for a return of the
81. 100000. That was the beginning OF
the end. The doors closed half an hour
later.
The developments Of the past week or
ten days are likely to bring home to the
densest understanding the real effect OF
continued political campaigning directed
against the credit structure. For months
men OF affairs and all we'll governed
corporations and institutions have been
steadily engaged in process Of con-
traction. They have foreseen the COM
ing of the storm and have been putting
themselves in shape for these emergen-
cies All new enterprises were stopped
and rigid scrutiny and economy of ex-
penditures entered upon. The period Of
real contraction began at least six
months ago. The shrinkage In quotations
Of securities has been the register by
which Wall street has measured the
progress Of contraction. To the u2th!nk-
ing this has given to the development an
appearance OF being local. While the
decline in securfties has been going on