Western Kansas world. [volume] (WaKeeney, Kan.) 1885-current, 1907-11-09
THE FINANCIAL TROUBLE.

the article on the present finan-
cial situation appeared in The
Wallace Farmer, and as we
thought it so nearly hit the nail
on the head, we give it space.
The practical suspension of
currency payment on the part of
most of the banks of the princi-
pal cities of the west on Monday
of this week no doubt came as a
rude shock to most western far
merS and business men. While
everybody in the west knew that
New York was having quite
severe financial trouble, it had
not been supposed that it would
effect western interests to any
extent. The action of the New
York banks last week suspend
ing currency payments there,
however, brought trouble to us
in the west very quickly. We
will endeavor to give our readers
a working idea of the situation at
the present time.
Banks in small towns and vii
lagos do not for obvious reasons
care to carry any large surplus
of cash in their safes. Whenever,
therefore, they accumulate more
cash in their safes than they
need for the ordinary conduct of
their business they send the sur
plus to a bank in some conven-
lent nearby city, Des Moines,
for example,. The DeS MoineS
bank pays them small interest
on this surplus cash and stands
ready to send it back to the coun-.
try bank whenever the latter
calls for it, by letter, phone, or
telegraph.
Banks in cities like De Moines,
in turn, keep their surplus cash
in the larger banks in the same
city, or in Chicago, or New York,
and when they need this they
call upon the banks with which
they have it deposited
The Chicago banks in the same
manner send this surplus cash
to their correspondent banks in
New York City.
When business is running
along in a normal way the money
flows back and forth between
these different banks as it is
needed to meet the business
transactions of the country.
The country banker finds that
his cash on hand is running low
er than it should to meet the de-
mands of his customers so he
calls up the Des Moines bank in
which he has his surplus deposit
ed and tells it to send out by ex-
press five thousand or ten thou
sand or more dollars in cash.
The Des Moins bank in turn calls
for some of its surplus cash from
the bank in Chicago with which
it is deposited. and Chicago calls
from New York This is the
best and safest way for the
banks to handle their cash.
For some weeks past there
have been panicy conditions in
New York. These conditions
grew worse until people became
and began to draw
their money out of the banks and
store it away. This caused sew
eral small banks in New York to
close their doors, not because
they were not sound financially,
but because they did not have
enough cash on hand to stand a
run. The closing of these banks
more people and the |
grew daily worse until
on Friday the banks of New
York got together and determin-
ed to refuse to pay out money
but instead to pay demands for |
cash in clearing house certifi- |
Gates, checks and drafts. In
every large city the banks or
ganiZe what is known as the |
clearing house. The strong
banks in the city, and, in fact,
all of the banks, are
of this clearing house.
1t keeps track of the conditions
of each bank and stands ready to
help any bank which belongs to
it and which for any reason gets
into financial difficulty. Next
week we will explain more fully
the purpose of the clearing
house. For the present it is
only necessary to say that a
house certificate has
back of it the combined resources
Of all the banks which belong to
the clearing house. 1t is like a
l., IL 4 L Il