Rocky Ford enterprise., 1907-11-01
A QUESTION OF MONEY AND ITS
ANSWER


From tho Colorado Springs Telegraph.
Some men are asking this question: "If
all these western banks are perfectly
sound. as thoy clam to be. why is it they
cannot pay their depositors all they ask
and not restrict them TO slooP"
Tho reason is this: No bank carries
all its deposits in cash. II II did this It
would not be long in the banking business
for it would make no interest upon this
large amount Of idle money.
Banks are run to make money for
their owners and stockholders. To take
care OF the accounts Of depostors requires
large force Of clerks and cashiers. To
pay these expenses the money must be
loaned. |, Is loaned in varying sums and
for various periods OF time from thirty
days 10 three years.
II would DO maniiestly impossible for
any bank TO convert all these loans and
mortgages into cash. over night They
are time loans and they cannot be called
until they are due.
Almost all OF the western banks keep
at least twenty-five per cent Of their de-
posiss in money. that Is. in their own
vaults and with other banks. Some
banks carry as high as forty per cent Of
their deposits in this form. Tho national
bank law requires twenty-five per cent.
Each bank carries considerable do.
posit in other cities. Thecolorado Springs
banks carry deposits in Now York. Chi.
eago. Denver, Pueblo and elsewhere.
They do this because they frequently
draw drafts on these particular cities. II
q customer wishes 20 pay for bill Of
goods In New York. for example. the
bank here. instead OF sending the money
10 New York. writes n New York draft,
and this drai, Is charged agains, their
deposi, In New York bank. |, saves
sending money back and forth by express
every day and a, heavy expense.
And now as to currency or actual cash.
Banks hold a certain percentage Of their
money In actual greenbaeks, In gold and
In silver. They hold wha, ,hey think
will be ample TO moo; their requirements.
and ;hon some moro for margin.
When ,heY run shor; o! this cash.
through payments. they draw on tho
larger cities for moro. ;hey draw on these
banks where ihoy have deposits. Tho
center Of this distribution Of cash Is tho
New York banks. Blu, now. tho New
York banks. through tho s;fingeney and
fear ,ha, they may have run. will no,
send out tho cash until things have
eased up Chicago eanno. GO, the cur
reney from New York. Denver eanno,
GO; from Chicago. and Colorado Springs
cannot &c; :; from Denver. And 50 tho
banks, In order TO preysn; dram Of
their cash. arc obliged 10 put in this 500
rule.
II this were not done there would b =
drain upon The cash resources Of tho
west for tho bensf; OF New YORK. for a
man with New York or Chicago draf.
could cash !; here and tho local bank
would bomsrsiy credited with tho amount.
but would get no cash In return. No
bank. not even the Bank Ct England.
could stand constant drain Of this sort.
unless {, could rsplsnish iis cash reserves.
Nins-;on,hs Of the business Of tho
world Is d0ns on paper" that Is to say.
by means Of checks, drafts. bills o, OK
change and so on. It is amply sufficient,
sGeSp: on occasions like this when peopls
get nervous. Il Is better than cash be-
cause money may be lost, destroyed or
stolen and that Is the end Of Il, bu,
checks, drafts and so forth may be 70
placed.
And thus !; is that the local banks have
acted with wisdom and prudence in put
ting in The rule adopted elsewhere Until
conditions once more arc normal and the
ebb and flow OF currency begins again.
There is no. the slightest question Of
solSeney. but merely shortage Of actual
currency. The banks are wise in pro-
tsesing their reserves for their own be-
half. and tha, OF their deposi,ors. from
any drain for the benei, Of outsiders.