The National tribune., 1908-01-16
REAL NAPOLEONIC
FINANClERING.
Continued from pags on.)

of self-protcction and mutual help. The
National banks were in good shape. The
Secretary of the Treasury fastened to
New York, and made deposits of Gov
ernment money, based on. approved Sc
curities. with them. The trust companies
stood the runs as best they could. The
Lincoln Trust and the Trust Company
of America were finally aided thru a
financial deal which involved the taking
over of the Tennessee Coal and Iron
Company by the United States Steei
Corporation. The banks and the con-
tending financial interests drove the
best bargains they could with the sup
plant trust companies.
There is a great deal of Jealousy be-
tween the banks and the trust COM
panies. The National banks are re-
quired by law to keep 25 per cent of
their deposits in their vaults in cash.
The trust companies are organized un-
der the State banking law, and need,
in fact, to keep only five per cent in
actual cash in reserve. The result is
that the trust companies can loan more
recklessly to step-ladder financiers, and
they have been blamed for much of the
speculation of the past two years.
The panic was felt severely in the
stock market. The spectators. unable
to secure loans from the banks to carry
on their operations, were compelled to
dump their stocks upon the market,
and prices went down. On one after
noon it looked as If there might be a
complete crash, which would necessi-
tate closing the Stock Exchange next
day. Mr.. j. p. Morgan in half an hours
time talking over the telephone. raised
$25, 100000 to support the market. If
the market had been left unsupported
some banks which had long lines of
loans out on stock collateral might have
suspended.
Work of Rehabilitation.
The work of rehabilitation of the
financial situation has been slow and
tedious. 1t was assisted by the Gov
ernment coming to the relief with a
$50, 10000 issue of bonds and the offer
of s100,000,000 of three per cent one
year certificates of Indebtedness. The
crisis is now over, and the country is
gradually resuming it's normal condi-
ton. Step-ladder finance will long be
remembered. 1t will never be forgot
ten by the family and friends of Charles
T. Barney, of the Knickerbocker Trust
Company, and of Howard Maxwell, of
the Borough Bank of Brooklyn, who
committed suicide as result of their
troubles brought on by step-ladder
finance in which their institutions en-
gagged. 1t will be keenly remembered
by the thousands whose savings are tied
up in the failure of the trust companies
and banks in New York and Brooklyn.
Some of them will get a portion of their
money after years of waiting; some of
the money will never come back.
Panics Teach Lessons.
But the country has had it's lesson.
Everyone agrees that it has been salu-
tary. Panics teach lessons-the lessons
of adversely, to be sure, but none the
less valuable, as history has demonstrat-
ed In the past. This country has never
gone thru a period of panic and de-
preston without emerging therefrom
purified as by fire and gamer in the
long run. The recent panic, from which
the country is now struggling slowly to
recovery, will be no exception. 1t will
be proven again that adversity hath it's
uses, and the financial body polite and
the business and banking world will
benefit by the teaching.
The panic of 1857 was the result of
wildcat banking and the wildcat cur
rency. When the country recovered
from the effects of the jolt the bank
ing and currency of che Nation We're
put upon a more secure foundation.
The panic of 1873 was occasioned BY
soft money. The lesson which the coun-
try learned then incu1cated better finan-
cial principles, and brought about the
use of a higher class of currency
The panic of 1893 was due to the fear
that cheap and deprecated form of
money would come into vogue. and that
free trade, Specter which often had
affrighted industry, would prevail. Com
ing out of the prolonged throes of that