Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-12-16
BANKS OF DISTRICT
Discussed in Annual Report OF
Controller RidgeIy.
CAUSES OF RECENT PANIC
Official Thinks Banks Lacked Conf
dence in Themselves.
FAvORS CENTRAL INSTITUTION
Cites the Example Of Other Coun-
tries, and Says It Is Better to
Prevent Disturbances.
FAvoRs CENTRAL INSTITUTION

w HiuSCis, SoAi'toiiSi VI 'i'N
currency, discusses the banks of the Dis
trict of Columbia as follows in his an
nual report:
LAS the result of liquidation of the Cen
trail National Bank of Washington, for
consolidation with the National Bank Of
Washington, the number of associations
In the District has been reduced to
twelve. but there has been no change in
the authorized capital stock by reason
of the fact that the absorbing bank
that of the Central National. The CAPT.
tai Of these twelve associations is 5.4O2,-
600. The authorized capital Of the trust
during the year to the extent of 81 Co.,.
States Trust Company. Corporations of
this character to the number of FIVE,
with authorized capital of $7.2OO.OO0, are
now In existence. There are also in OPP
Grafton in the District eleven banks, or
ganized under state laws. and one saw
ings bank, organized under the District
code. These concerns are generally
known as saving banks. all paying Inter
est on deposits and at an average rate
of approximately 2& per cent. There have
banks in the District during the year. The
affairs of the Peoples Savings Bank,
which institution failed in 1906. have
been settled, creditors having received
payment of their claims in full. The
Aetna Banking and Trust Company.
Virginia concern. which failed in 1905.
Is still in charge of a receiver, through
whom a dividend has been paid to the ex-
tent of 20 per cent, mainly from funds
obtained from Montana stakeholder,
who was largely interested in branch
of the bank at Butte"
T;r,oo;,l n;.$rrh.,oa.
In other parts of his report the con-
troller goes with much detail into the
recent financial disturbances, and ex-
plains his proposition Of a central bank.
Among other things, he says:
1T has been one of the peculiar fea-
lures of the situation that there has &C.
tually been more of panic among the
banks themselves than there has been
among the people. The banks have been
fearful as to what might develop, and
finding their usual reserve deposits only
partially available, if available at all,
they have been compelled in self-protec-
ton to gather from every source all the
money they could possibly reach and to
hold on to it by refusing payment wher-
ever it is possible and satisfying their
customers with the smallest possible
how patiently and with what forbearance
the people in the business community
generally have borne with the situation
and helped the banks to deal with the
emergency. With the exception of the
first excitement in New York and some
smaller runs in other places, there has
really been surprisingly little excitement
or uneasiness among the people.
THE greatest hardship to business gen.
orally has been the arrangement Of the
machinery for making collections and re-
mittances. AS can readily be seen, this
has interfered with every kind and class
Of business and led to great curtailment
of business operations of every kind. Fac
tories 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 of at a
time of the year when they should be
at their highest.
Another result has been reduction
Oh the volume of the foreign credits avail
able just at the time they are most need
ed to offset the large imports of gold
which have been made.
Banks Lacked Confidence.
THE conditions which led to the panic
of October and November, 1907. were not
due to the failure of few individual
banks. They were not due to the lack of
confidence of the people in the banks, but
more to lack of confidence of the banks
in themselves and their reserves. Banks
have been fearful that the reserve sys-
tenn would break down, and in conse-
quence it has broken uown, and the re-
serve deposits have been only partially
available. They were also fearful that not
sufficient currency could De supplied to
meet thte demand and, as they all made
the demand at once. there has not been
sufhcient currency. The result has been a
currency Famine.
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 bank where they are surely and GER
tainly available. We must impart to our
currency system some element of elias
den demand for currency 1t can be sup
piled in bank notes. without depicting the
supply of reserve money.
Central Bank Of Issue.
These two most desirable changes can
be best accomplishment fact, they can
only be satisfactorily accomplished
through the establishment by the govern
ment of central bank of issue and re-
serve. This is the system which has been
adopted and found to work most salts
factorily in the great commercial coun
tries Of Europe, and is the one that gives
the surest promise of satisfactory OPERA
ton in this country.
Such bank would not only solve the
two great problems of our banking sys-
tenn. but it would also provide the ma
chinery for conducting the Treasury oper-
atoms in their relations to the banks with
the least disturbance
The chief weakness of our present ma
tional banking system is the provision in