The Idaho recorder. [volume] (Salmon City, Idaho) 1886-1927, 1907-11-14

1 III, because when loans are made oY
banks, 10 is very seldom that tne
money Is handed out, but Is made a
deposit in the same bank, thus be-
coming available for loan after loan,
each time tying itself UP until IL all
becomes Preserve. I"
In order to prevent congestion oi
the actual cash IN the vaults OF Ihe
banks, a sort OF fictitious cash re-
serve was Invented. Whether TINS
was don't by operation OF la" or ny
one OF the arbitrary rulings In FAVOR
of financial transactions which have
come TO be so common these IaIe
years, is not known to the "liter,
but It matters little; the arrange
ment VAS made.
The comptroller OF the currency,
under whose control national banks
are placed by law, designates certain
hanks as preserve banks for each
national bank. A large part OF the
"reserve" OF 30 per cent OF each de-
posit, as mentioned above may be
sent to these reserve banks which
pay two per cent interest on the av-
eraQe amount on deposit. Either by
operation Of law or by ruling OF the
comptroller Of the currency, TINS de-
posIt In "reserye BANK Is consid-
cred as cash on hand and as part OF
the legal PRESERVE" so that a BANK
having 81, 200, 900 10 deposits and re-
auired TO have legal cash reserve
of about $500, 900 may actually have
in cash only 800, 900 or even $4,000.
The reserve banks for Boise
banks may be designated as Salt
Lake or Portland banks, or some
other convenient bank so that In
case sudden demand for money is
made, the neighboring preserve
bank'' may hasten the currency to
the demanding bank here, or more
than one for each bank may be desig-
mated, one OF which would be an
eastern bank.
But the Salt Lake or Portland ire
serve bank has itself preserve
bank which, of course, Is farther
east. TIE second preserve bank
will have for itself a PRESERVE bank
still farther east and so on, until
they all concentrate, or nearly all OF
them, In the New York banks.
Now what happened the other day
was like this: The Boise banks felt
that conditions were such that they
would better call In some OF their
"reserve' cash, which wasn't re-
served at all, hut was In a neighbor-
Ing bank, supposedly for immediate
use. But when the demand was
made, 1t was found that the neigh
boring bank was feeling the need of
more money and had called on its
PRESERVE bank" and so 1t continued
on down until New York was
reached. All this was done, OF course,
by telegraph In single day, but
when the last "reserve bank in
New York, it found New York banks
were In actual trouble and .couldn t
spare any of their money under any
conditions. This, as can readily be
seen, placed the whole string OF
banks of the entire country In the
predicament of not being able to get
hold of the leash" supposed to be in
Its own vaults.
The comptroller of the currency
conceived the idea OF permitting the
New York banks to issue cashiers
checks and clearing house certificates
and also to permit them TO refuse to
pay out money under circumstances
which would permit the money to
be shipped away. 1t saved the banks
there together with other heroic
measures adopted, so consent had to
be given to other banks of the coun-
try to do the same thing because the
condition of the New York banks
had frightened depositors all over the
country and a demand Tor coin be
gan to be made. 1t is clear that
there isn't anywhere near enough
currency In the country to pay all
deposltors II they all demanded the
money, nor any considerable proper
tion of 1t for that natter, so some
plan had to be devised, and the one
described was the one hit upon.
All the banks, all over the country
were In excellent condition except
those OF New York, but as the first
draft In the long chain of reserve
banks had to be made from there,
1t Is easily understood that the pan
icky condition OF those banks alone
affected the whole country, showing
the very close intimacy that exists
between all the banks Of the coun-
try.
The New York banks are getting
money With which to pay their banks
their deposit, AMI Immediately upon
that being done, each bank in the
long chain will be relieved.
The unexpected ana unusual con
dition was one for which no banks,
except possibly those OF New York.
were responsible. Capital News.
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Is this government for the people
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