The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1908-01-04
Recent Experience Has Taught
Them a Lesson.
SECRET is EXPOSED.
Cash Which New York Always
Sent to Move Crops
Was That Which Already Be-
longed in the West.


Washington, D. c. Jan. 4.-The
business year starts out with a condi-
ton of decided encouragement from
the point of view of government f1nan-
ciers.
A month or six weeks ago condi-
tons were admittedly dangerous. A
string of banks in New York had been
in trouble during October and later on
a few big institutions in San Francisco,
Kansas City, and other places were
forced to the wall. The treasury had
put out all the money it possibly could
spare to supply the necessary surplus
of currency. A proposition to is
sue certificates of Indebtedness was
made and s5O,000.000 worth of
Panama bonds were put on the mar
ket, although 80 per cent of the pur-
chase price was left with the banks.
BY shifting of securities almost as
much more in national bank circula-
ton was put out. The controller OF
the currency shut his eyes to a good
many things which the law requires
him to see.
All these acts were extraordinary
and they never would have been per-
UllllSQ HdQ the SlludllOA lOl OOCil 81
critical that the chief officers of the
government and wisest men in con-
gress were agreed that the law itself
must be stretched to meet the
exigency of the public need.
Only a Want of Confidence.
1t does no harm now to say that six
weeks ago the country was trembling
on the edge of financial disaster. 1t
was caused by an unreasoning want
Of In fha face, of l.
pied prosperity. but the danger ex-
listed just the same, and the crisis was
just as real. These things can better
be said now because the crisis has
passed. The reports received by the
treasury department show this beyond
a shadow of doubt.
These reports do not concern in any
way the condition Of the speculative
market in Wall street. That market
long ago ceased to have direct inf1u-
ence ION legitimate commercial cond1-
TONS Wall street tfnanciers'i caused
an incipient panic and Wall street
finance" was responsible for the fact
that the money of New York banks was
diverted into speculative channels to
such an extent that nothing was left
for legitimate business. wan street
swallowed all of the deposits, including
the balances of western bankers. and
when money was needed to move the
crops and to facilitate the ordinary OPP
erations of business, there was none TO
be had
Damper on Stock Speculation.
Since then stock speculation in New
York practically has .. ceased. Banks
which once were conservative realized
when it was too late that they had de-
parted from their old traditions and
had put their money behind margin
speculation on the stock market, SO
that they had none left for their old
customers Ever since the early days
.of the crash in October these banks
have been struggling to get out from
under the Wall street burden. 1t was
not an easy job, because there was dan
ger of precipitating further loss in Sc
curity values, which meant an impair
ment of their own loans.
The process has gone on, however,
steadily and reports received here show
that New York banks are in much bet
ter condition now than they were two
reduced their speculative loans wher-
ever it is possible to do so.
Nisconception as to Reserves.
There is great misconception in re-
gard to the question of reserves in New
York in western banks. Every now and
then some New York banker breaks
loose in some one of the local financial
columns in a TRADE against western
banks because they have built up their
reserves away beyond the statutory re-
Quirements.
The New York banker invariably
takes to himself great credit for hav-
ing sent money to the west, and gen.
orally manages to create the impress
sion that these remittances are ad-
vances made by a New York bank to
tide over western institutions. There
could not be a more preposterous as
sumption. The money which has gone
west ever since the panic began was
in tho fret rlQno de-
posted in New York merely as a
convenience. 1t was sent west by
New York banks because they could
not help themselves. They did not pay
anywhere near all the western money
on deposit in New York, and they have
not yet paid it.
The western banks have built up
their reserves simply and solely be-
cause they found it impossible to get
money from New York when they
needed it in a hurry. They have
stopped depositing in New York for
back to the west all the money they
could get hold of in cash.
Western Banks strong.
The result of all this is a peculiar
condition of affairs throughout the
entire Mississippi valley and in the far
west as well. The reports received at
the time of the last bank call. as we'll
as later ones sent to the controller of
the currency, all show that western
banks are ina particularly strong
position. Many of the banks in small
er towns away from reserve cities have
built up their reserves as high as 35
per cent, which is 10 per cent be-
yond the reserve required even for
central reserves cities like Chicago
and New York.
AS matter of course, depositors in;
these banks are amply secured. With
such a reserve as that no run could
continue. The percentage of actual
cash to the amount deposited was so
extremely large that every depositor
knows he can get dollar for dollar