Bisbee daily review., 1908-02-02
FORGAN GIVES PRAISE ID TIE
 NEW YORkERS
in Fine Address Chicago Bank CT Declares Prompt Action of Metropolis Saved Country a Serious Panic.

NEW YORK, Feb. 1.-Speaking oi the financial bills offered as a panacea for present fnncial troubles, David R Forgan, president of the National City Bank of Chicago, in a toast on the question Chicago" at the annual ban. quet of the bankers of this city. com prising group eight of the New York state bankers association, at the Waldorf. declared that in his judgment the country needs less, not more ex pansion of credit. MT. Forgan op posed strongly Mir. Bryan's proposi tion of government guarantee of all deposits of the national deposits. Among those at the guests table were J. F. Morgan and Comptroller of the Currency Ridgely. Mir. Forgan's speech occasioned much applause.
 He said:
 Coming from the second city of the country to the first, and appreciating the financial problems and burdens which fall upon the centers, I feel that my first word must be one of sin. ceTe reorganization. congratulate you that the "stringency"Ai is over, and that you are again in a position to order a good dinner. I rejoice with you that the good ship Finance" has righted herself and is now in fairly smooth water. and that the other great vessels, Commerce" and 'Tn- dustry," are following closely in her wake. If you will allow me I should also like to commend the able sea manship displayed by you of New York during the late stress of weather. We in Chicago are rather proud of the way we weathered the storm. think we came through it better than most cities. But for our courage to face the situation. grit to stand pun ishment and willingness to strain our selves in order to help others, I take my hat off to the bankers of this city western newspaper comparison to the contrary, notwithstanding
 Storms both teach and test sea- manship. For that reason American financiers ought to be the best in the world. A banker may pass a lifetime in almost any other civilized country without learning more than mere mon ey-loaning. But in this country his experience soon develops him into a full fiedged fighter.
 There must be something wrong with him if after single decade he has not come to fully understand the nature of centralized or scattered re- serves, of temporary or protracted liquidation, of expanded or contracted credit, of clearing house certificates, of payroll checks, of rigid or elastic currency. Moreover, he is quite like ly to invent an original and infallible plan designed to cure all our financial ills-and that is one of the greatest obstacles in the way of reform, be- cause legislators become mystified by the wrangling among the bankers.
 The late unpleasantness was so short and sharp that its nature should be apparent tot every banker. It WAS not due to defects in our country. We were having no more than the usual fall scarcity of currency when the storm broke. Extreme scarcity of currency was the result of the panic not it's cause. The cause was loss of public confidence which had been gathering force for months, and which reached the crisis when our troubles here in New York came to the sur face. The defect in our banking sys- tenn brought fully to light by this pan ic relates to the reserves. The sys- tenn which permits banks to count a credit with their city correspondents as part of their reserves works all right in ordinary weather, or when the storm is confined to a particular locality. That locality may-then draw upon it's city credit and find 1t is avail able as the reserves in it's own vaults. But when the storm is big enough to scare the country it naturally Nap pens in one of the centers, and a gen. eral withdrawal of balances sets in from the country banks. This may easily assume proportions quite i'm possible for the centefs to meet. At the time when the centers must need their reserves to help them through some local trouble our system creates an additional and greater difficulty in the sharp withdrawals by their coun- try correspondents.
 That is what happened lately. It has happened before, and New York has several times been driven toclear- ing house certificates as the only means of salvation. Chicago never issued them before. Tn 1893 we had the Worlds fair, which brought a great deal of currency to the city, and besides the bank deposits of Chicago in 1893 were only s179 1000, 900, where as now they are s700.000,000. This time we were driven to the same re- fuge. and after our first experience we are inclined to think clearing house certificates good thing if they did not scare the people SO.
 The way the law regarding reserves works Is best understood by an illus tration: The law requires a national bank in Troy, Y. r., to carry Is per cent reserve. Only 6 per cent, how ever, need be in it's own vault The other 9 per cent may be with it's re- serve agent in New York city. If the deposits of the Troy bank are sI.000.- GOO 1t keeps. $60. .000 at home and $90,- 900 in New York The s9O,00O in New York, however, is not money. It is merely a credit on the books of the New York bank against which a re- serve following for legal dednctsons) of not more than $20,000. Is kept by the New York bank. When the Troy bank, becoming alarmed. deems it pru- dent to have larger proportion of it's reserve at home 1t telegraphs the New York correspondent to send 1t. say,