The news-democrat. (Providence, R.I.) 1906-1909, 1907-12-14
VANDERBILT
FOR CENTRAL
BANK OF ISSUE

New York. Dec. 14.--Frank A. Wander
lip, vice-president OF the National City
bank lectured at Columbia yesterday on
tho modern bank
Mr. vanderlip pointed out I'm his adj
dress that Canada, which IS subject TO
all the conditions which exist here, has
been enabled 10 pass through the crisis
without any disturbance to It's banking
system and supplied the funds TO move
the crops in the northwest when our
banks were helpless. At the close OF his
speech he went into some OF the reme-
dial measures that have been suggested,
and recommended a combination OF the
branch banking system Of Scotland and
the German system Of q central bank of
issue.
On that point Mr.. vanderlip said:
Under perfectly normal conditions
the use OF money as a medium OF ex-
change shows a considerable variant
Nearly SO per cent of the people Of the
United States are engaged in agriculture.
The results Of their years labor are con-
centrated in the autumn's harvest. That
harvest period marks an extraordinary
demand for money a. a medium OF ex-
change. 1t has been estimated that dur
Ing the autumn months 5000, ,000. 900 OF
currency In in active uee as a medium Of
during the remaining months of the year.
Of national banks II roundly 500. .00o, 900.
The relation which the extra demand for
$500, 900. 900 of currency bears TO the total
reserve requirements OF the national
banks Is thus seen to bc extremely i'm
portant.
BANK CREDITS.
During. say. nine months OF the year
the medium Of exchange for 95 per cent.
OF the transactions Of commerce are
bank credits. These credits answer
every purpose Of safety and convenience
and answer those purposes In q degree
far greater than would money Itself; dur
ing three months Of the year a large
portion Of the population Of the country
has a very considerable need for me-
dium Of exchange. but having no rela-
tions with banks are unable to make use
OF bank credits In the form Of the or
dinary bank deposit.
II would seem TO be one Of the most
obvious Of conclusions that II banks were
permitted to issue their credits in the
form OF circulating notes. 80 restricted
as properly to safeguard the involuntary
holder the part which bank credits play
as a medium OF exchange would be prac-
tically uniform throughout the year. In
stead Of there recurring such a condition
as now comes with every fall, where
500, 900, 900 must be taken for this pur-
pose from the bank reserves.
There Is another consideration affecting
reserves, as they operate under our bank
ing laws, which is of the most vital con-
sequence. We have no banking system:
that Is To say. We have no related organl-
zation of banks. Instead of that we have
5000 individual banks, each financial
unit, each operated in regard to its own
position rather than with regard to its re-
lation 10 the whole situation.
IN TIME OF CRISIS.
in time OF crisis two things are like
,ly 10 happen. The public becomes sus-
picious of the banks and resorts to money
as store of value. converting it's bank
credits into cash and boarding the casa.
At the same time the bankers are likely
10 become suspicious OF one another as
we'll as apprehensive OF the probable de-
mands on the part OF their customers,
and there begins a scramble for reserve
money. Each institution stands alone.
concerned first for its own safety and
using every endeavor to pile up reserves
without regard to what the effect may
cost the financial situation at large.
II requires but a moderate development
OF fear OF such character to produce a
most disastrous result There are II TO Il
billions OF deposits I'm all the banks IN
this country. The decision on the par
of the managers Of each individual bani
to increase that banks reserve but l pc.
cent above the normal absorbs s120.0c0,0 [
to sl40,oc 900 and becomes boarding on g
gigantic scale.
If our laws permitted branch bankin
by banks OF issue such a condition won Il
not arise.
POINTS TO CANADA.
Throughout the terrific crisis which we
have been experiencing. affecting as l.
has every banking institution In the Unit
cd states and bringing most OF them e.
a point where they were forced tempo
rarilyS TO suspend full cash payments. we
have heard no word OF difficulty from.
across the national border. Canada tas
been going through a land speculation
more important when compared to her to-
tai resources than any speculation that
has been engaged i'm here for many years
she has experienced all the difficulti. 9
that have followed the worldwide strain
upon capital which the Industrial actlv.-
ties OF the last two or three years engen-
dered; she has had no wiser bankers and
no more conservative men than are the
rule in this country-but there has been
hardly a ripple on the surface OF her
financial affairs, and TO our shame we
have seen the banks OF Canada perform
a great service In moving crops OF our
own Northwest while we stood financially
paralyzed, with out credit fabric shaken
TO the foundation.
IDEAL SOLUTION.
There are many solutions, In my opinion.
that will measure true and solid by an APP
plication OF these principles. I believe
that one ideal solution would combine the
Scotch system OF branch banks with the
German system OF central bank OF issue.
recognize that there Is profound posti-
cal prejudice against both OF these ideas
but ! believe 81 is a prejudice absolutely
1..1t rF-t.
mobility of reserves that is an essential "a
safe banking system may possibly be
secured through a utilization OF clearing
house relationships.
The disposition to provide merely for ar
emergency currency TO be secured By
bonds other than government. believe