Audubon Republican. [volume] (Audubon, Iowa) 1894-1925, 1907-11-07
OFFICIAL PAPER OF AUDUBON COUNTY
AND OF THE TOWN OF AUDUBON.
The Financial FURRY
Some Observations Concerning The
Cause OF Our Financial Trouble

1
The general opinion of bank is that
1t is good place to depositmoney for
safe-keeping; that the banker makes
his profit by loaning his own money
and the capital of the bank; that when
money is deposited in bank, the
banker will pay interest for the pleas
ure of keeping IL in his safe and il
necessary will sit up nights to prevent
the burglars from breaking in to car
ry it away. And many intelligent peo-
pie do not understand how financial
trouble down in New York City can
in any measure affect the banks in the
country towns Of Iowa. There are two
things that should be kept in mind :;
that the banking system of the country
is like network or nervous system
with its ganglia in the great cities;
and that whatever affects one of these
centers will affect all othersto great
err or less degree; and that not more
than five per cent of the whole amount
of business is done by the use of mon
ely, the other ninety-five per cent being
done with the use of checks and drafts
and certificates.
Banks receive money on deposit and
pay interest on time certificates. In
order to do this they must loan it out
or deposit in larger banks where mon
ely is in demand so they may receive
interest. The result is that large per
cent of the deposits in country banks
is loaned out TO individuals or corpo-
rations, or il is deposited in several
of the city banks with which they do
business. The fact is that most of it
is loaned to the farmers aud business
men of the community in which the
bank is located. The creamery men,
the grain buyers, and the stock deal
ers, all issue their checks on the local
banks and those who receive them 90
to the banks and get their money. But
when they sell their butter and their
grain and stock in the cities they re-
ceive drafts in payment which they
deposit in the banks at home. The
banks must then send these drafts TO
the city banks and get them to ship
currency by express so as to have mon"
ey TO pay the checks issued by these
men. Ordinarily the smaller banks can
| get all themoney needed from the city
| banks on short notice. But at this time
that cannot bedone because of the un-
usual drain on the banks in New York
City.
The prime cause of the trouble was
over-speculation on the part of some
| financiers on Wall Street. There was
break in the speculative market
which disturbed the confidence of the
people and caused a run on some of
the banks. Many depositors became
so excited that they built fires on Fifth
Avenue and remained there all night
so as to be first in the line when the
banks opened in the morning. Some
thing had to be done to vent general
disaster. To check the trouble and
save some of their currency the banks
acting together issued certificates back
ed by the clearing house which could
be used for the transaction of business,
When the banks in the large western
cities could not get currency from New
York they had to adoprthe same meth
DDS and this prevented the country
banks from getting currency from these
| SlblOS5 Wb'Su bucJ Can wv III OTQludFy
times without any difficulty.
To sum it up in few words: A break
among the spectators in Wall Street
caused lack of confidence; lack of
confidence caused arun on some of the
banks; drawing out and hidingsaway
fifty or sixty millions of money alarm
ed the bankers and they determined to
put a stop to itby paying out but little
to depositors and none to the banks
outside the city. This action made it
necessary for other banks to follow
suit. For time 1t has checked the
stock and grain markets but the indi-
cations are that these matters will adj
just themselves in short time and
business will go on as though nothing
had happened. The outcome will be a
benefit to the people by checking I'M
due speculation and giving the people
greater confidence in the financial in
situations OF our country.