The evening star and Newark advertiser. [volume] (Newark, N.J.) 1907-1908, 1907-12-16
'RIDGLEY ASKS
FOR CENTRAL
BANK
Currency Comptroller Gives
Ills Reasons Of 1.-THE
Crisis Of 'O7."
Ispeoial % the Evenlng star

-
WASHINGTON, Dee. 16. -Attl ibuting re-
cent financial troubles to serious defects
In the banking system of the country, Will
lam r. RidgeIy, in his annual report to
Congress today, urges the establishment oH
a central government bank OF isstc aad re
serve-a bank chat shall have the power
TO prevent and rem sdy contractions OF the
currency. as was recently expeiisnced Dy
the power of issuing notes to temporarily
pass as mediums of trade. Coming from
the most expert banker IN the country
the recommendation created some surprise,
as IL comprises a practical revolution IN
basic methods of banking.
Mr.. Ridgely Sdenies that recent troubles
were due to the lack Of confidence on the
part of the public, but says that they were
the outcome OF the lack of confidence In
their cwn powers by the bankers them
selves, which, he declares to have been
quite natural under what he alleges TO be
n defective system. He recltes the story
of the panic under the sub-head of THE
Crisis OF 1907 In his report, and says that
.ssince the San Francisco catastrophe there
has been no lack Of warning indications OF
financial troubles and possible business
disaster.
For at least ten or twelve years he
continues, there has been an era OF ad-
~vancing prices and great industrial COM
merciaI and speculative activity In all the
countries Of the world. Credits have in
creased and multiplied until the limit mas
been reached in the amount oil reserve
money on which they must be based.
For at least two or three years, now
ever. it has been more and more eVluehI
chat there must soon be Il slaekening OF
pace, il we were to avoid u general ana
universal crisis in financial and commer-
cial affairs. These conditions have been
world wide and not by any means confined
to the United States.
He Aces on TO tell how the cloud grad
uaIly grew, until put to a strain by me
heavy call on banks made by the crop
moving period, and theu the elimination
in the collapse of the tIeinlze corner III
stocks. Which threw suspicion upon the
bank in which he was largely intereSteu.
He tells of how the nervous state OF the
~nancia world grew in seriousness, anu re-
marks:
.It has been one Of the peculiar fea-
lures OF the situation that thele 20
actually been more of a panic anohS
the banks themselves than mere nao
been among the people. the pahks
have been fearful as to what might ueo
Velop, and finding their usual reserve
deposits only partially available, IL
available at all, they have been COM
PEELED in self-protection to gather IRON
every source all the money tney couiu
possibly reach and to hold on to 1t by
refusing payment wherever II IS pos
sible and satisfying their customers
With the Sind1icSL pOSSipiC
cash. 1t has been remarkable now
patiently and with what forbearanee
the people in the business community
generally have BORNE with me sit ttnha tpa
and helped the banks to deal with the
emergency. With the exception OF the
FIRST excitement in Now York ana some
smaller runs in other places, theae u
really been surprisingly litue EXCITE
ment or uneasiness among the people,
The greatest hardship to business
generally has been the derangeneni Oh
h 1,.o rhinorp For making pOliefuO1S
and remittances. As can re9dITy TP~
seen. this has interfered Will, every
kind and class OF business and led 70
great curgailment of business orpera-
tons Of every kind. Factories have
suspended, workmen have been thrown
out of employment. orders have been
Cancelled. the moving of crops has been
greatly retarded and interfered with.
and exports have fallen off at a time
of the year when they should be at
their highest
He then proposes his remedy. He de-
clares that the trouble was not due TO n
failure of two or three banks or to the
public losing confidence. but the bankers
losing confidence in their banks and their
reserves. Upon this he bases his theory OF
n central bank of issue and reserve. lie
says:
THE remedy for this state Of affairs Is
TO Improve the reserve system SO that
the reserve deposits of the banks can
be kept in n bank where they are sure
ly and certainly available. We must
impart to our currency system some
element OF elasticity, SO that when
there comes a sudden demand FOR cur
rency it can be supplied In bank notes,
without depicting the supply OF reserve
money.
''These two most desirable changes
can be best accomplishment fact. they
can only be satisfactorily accomplished
through the establishment by the gov
eminent Of a central bank of issue and
reserve. This is the system which has
been adopted and found to work moStt
satisfactorily in the great commerciat
countries of Europe and is the one that
gives the surest promise of satisfactory
operation in this country.
Such a bank would not only sHiVe
the two great problems of oir banking
system. but it would also provide the
machinery for CONDUCTING the treasury
operations in their relations TO tne
banks with the least disturbance.
THE chief weakness of our present
national banking system is the provision
in regard to reserve deposits, WnlcE
piles reservoir reserve. In reserve cities
and central reserve cities. without re,
quiring a sufficient amount of actual
cash reserve on hand, AS we have seeh
in the present crisis, when a real einer-
gency arises these reserves are not re-
serves at all, because they may In a
day become unavailable.
Speaking Of bank notes and clearing
house certificates Of being of some avail.
he declares that they cannot be depended
on, for being cumbersome or dependent
upon private organizations. He continues:
'Instead Of stopping at the issue OF
clearing house certificates. which, are
really credit notes on a large scale. 1t
would be far better to have these notes
issued by a central bank under gov
rnmen authority and under proper
laws and regulations. This could be
done far more systematically and eff
GENTLY; it would have none OF the
Disadvantages of the other system, and
would have all its advantages and more
besides"