The Birmingham age-herald., 1907-12-30

to this extent the s6o0, 000, 900 of the present assets of the banks by at least 40 per cent.
 When, then these conditions of infia- tions had been carried to pitch, and many investments believed. to be good were in reality only contingent annuities without value in case of foreclosure and the inelastic currency system was la boring under a heavy discount rate. which is the safety valve of an inelastic cur rency, the psychological blow was struck which caused the crisis to become ac. 3 and universal, the failure of the great Knickerbocker Trust company.
 Sixty Days Notice.
 All savings banks Immediately retired be- hind the 61 days notice clause. The na- tional banks remained solvent by suspend ing. The suspension of specie payments was the result of insufficient reserves. The reserves of the national banks were insufficient simply because trust eom- panies,s state banks, private banks and insurance companies carried little, if any reserves, redepositing in other institu- tions. The result is that within 10 years the average reserve against deposits for the banking industry which should in- clude the trust companies, have been on the average cut In two. As a result a sudden run made 1t impossible to main tain specie payments because the reserves were entirely inadequate for the business attempted.
 The fright engendered by the failure of the Knickerbocker Trust company pro duced a psychological panic. It destroyed public confidence; because the reserves were insufficient institutions through the country suspending specie payments. Sur rency sold as a premium in Wall street. The fear in the land required immediate allaying. Grasping the solution, the ad- ministration acted promptly in a way capable of accomplishing the results de- sired. By immediately offering bond ls- sues of S150,0O0,O00 all told, to be used to provide an emergency currency, psyeho- logical impression was produced at one stroke largely restoring confidence
 As soon as it became apparent that the difficulties had been met, and. the
 intensity of the crisis allayed, it was decided unnecessary to actually sell more than a fraction of the amount offered. Had the smaller amount been offered at the start, little would have been accomp- lished psychologically. The move of the administration, psychologically speak Ing, tended to balance in restoring pub lie confidence to the extent such coni- dence had been destroyed by the opening event, the suspension of the great Knick- erbocker Trust company; the two events making the beginning and the end of the crisis Great credit is due to President Roosevelt and Secretary Cortelyou in so splendidly coping with the extremely alarming situation.
 Now that public confidence in a meas
 ure has been restored, and the time oi normal monetary stringency Is rapidly passing, two disturbing factors have for the time been tempered. The canceling of loans by banks will proceed through out the country. The volume of trade will lessen. In short time money will be- gin to accumulate in the banks, and business will pass into that state of tor DOT which is most discouraging to busi- ness men.
 In the dismay at fortunes wrecked and profitable business swept away. the first mental reactions of men are two; respon- sibility for the crisis, in order to fix the blame, and, second, remedies of many kinds largely designated to affect some of the innumerable minor phases which
 have struck the minds of men in vivid ways.
 Special Interest.
 Many special interests under the guise of remedies for the crisis are suggesting changes in our financial system dangerous to the interests of our people. The move
 ment for a central bank of the United States connot be seriously viewed, wher the conditions, politically and otherwise are known. The reference of such rem
 eddy to Senator Tillman would be de cisive. Leaving out of the question the many impracticable suggestions, the pos
 sbile remedies, when financial, political
 and commercial conditions are carefully 1 weighed, are few. On the whole 1t is | probable that no direct legislation a, all would be most advantageous for the 1 prosperity of the country. Stripped of techncalities, the following measures which are the substance of several bills to be introduced, would be salutary, pro- vided a currency campaign shall not re- suit.
 l. Require the state banks, trust com
 panies and requiring adequate reserve (a) By extending to the national bank | complete powers possessed by trust com | panes and requiring adequate reserv, against notes as against deposits. | (b) By taxing all institutions upon | deposits by a graduated scale dependent upon the proportion of reserves, l. e.. similar in a way to the 10 per cent tax on the bank notes of state banks. These | two laws would if carefully worked out l insure uniform administration of banking institutions and enforce adequate re 1 serves. Trust companies and state bank, | would be forced to become national banks 2. Give to the national banks the righ to issue bank notes, unsecured by gov ernment bonds against which reserves l should be required. provided the bank has already outstanding say 60 per cent of the | present government bond-secured notes | In this way, the transition to the Cana | dian system of asset currency can bt | gradually brought about without injur. l ing the prices of government bonds now l held by the banks.
 l 3. Henceforth, government bonds should
 not be the basis for circulation to a tota
 amount greater than the $600, 0,000, now
 outstanding although they may be giver in exchange the privilege of becoming | the sole security for government deposits Remedies May Be Adopted. | These remedies may be passed by the | present Congress to advantage. But, tht | danger to business is great, since | prolonged currency discussion in Congres, | is apt to throw the entire question int the presidential campaign.
 | The remedy for the problems arising | from gold depreciation, from the irregu | larities in regulations governing the in | vestmepts of trust institutions, and, fin | ally the suffering caused bv the ftnancia