New-York tribune., 1908-06-18
FINANCIAL FAULTS.
Remedies Suggested.

To the Editor OF The Tribune
Sir: The following suggestions upon the subject
of improvement In financial methods are sub
mitted for the consideration of practical business
Our financial methods are faulty. SO are all
others. But when remember that every nation.
large and small has financial system differing
from all others England has central oank ana
Scotland and Canada have developed systems diff
ferent from the parent country. and business is
done quite successfully under these varying condi-
tous. isn't 1t logical conclude that a scientific
basis for a financial system. CT which we hear
much is hard to find and that viii do bust
ness successfully under any method?
Our system been severely criticised for
long time. but prosperity was greatest with us
last year. Our business faults I'm our
present system and think they be corrected.
One glaring fault is the requirement Of cash in
payments to the government taking currency out
of circulation unnecessarily. Forty years there
may have been reasons for such requirement.
but can any argument for such action be found
to-day?
Why should the government furnish banks
money to buy bonds to secure what is called
deposit? When its own bonds are used for such
security it pays the money deposited
instead of receiving IT, How long would officer
of. the United States Steel Corporation hold his
position If he handled the finances of that
pany in like manner.
Depressions IN business come from time to time
Last year there worldwide condition Of
this kind. but in this country there panic
until some New York banks closed. this action
increasing the ordinary lack of confidence in our
financial institutions till it became epidemic
Some two years ago the Chicago banks united
and paid off the depositors of the Chicago National
Bank. which insolvent. knowing that by so
doing they would prevent runs and avert serious
financial disturbance. This action was guarantee
ing deposits 1t not? After they have known
the value Of such an idea it looks strange to have
Chicago bankers opposing srch action by all the
banks. Is it unfair to Call them inconsistent
In normal times over one-third OF our currency,
or 81 900 100000. is out of circulation. the larger
share of IT hidden showing strongly the ordinary
lack of faith in our banks 1t is not lack of cur
rency that pancs. for we have Issued nearly
five times as much capita as has England. but
our people do not have confidence in our banks
and that is a vital weakness.
An elastic currency is suggested. but we do so
much of business through the banks that this
demand is taken care Of and we use the banks
to such large degree that they have become the
channels of trade, and that is why business pa
ralysts comes when undue demands are made upon
them. We little currency in proportion TO VOL
urne of business done-less than per cent some
say-and has any known anything OF
value to be accomplished by working on the per
end Of any proposition?
More currency is not the logical thing TO work
for with the above facts in mind is it? Isn't the
SO per cent end of the proposition the one we
should consider seriously? Should we not put INTO
force some ideas that will produce confidence IN
our banks? Deposits in banks much Of an
obligation the notes issued by them, ana 10
be consistent should rot both classes Of ooisa-
tions be secured? Why favor the few rather than
the many?
Ranks make more money from deposits than
from circulating notes: why should they not pay
a small portion of those profits into a fund TO
secure deposits against loss from failed banks2 Rec
ords of the national banks since the organization
OF the system show that an annual tax OF one
twentieth of ! per cent on the volume Of deposits
would give fund Sufficient to pay off depostors or
failed banks Can't the banks afford TO pay that?
Large banks say small banks would be as good
as they are with such idea IN force Aren't
the small banks good in proportion to their
business as the large ones are to-day? some say
that with depositors secured bad men would or
sanize banks and manage them so they would
fail. What banks organized for? Did any one
ever hear of coming into existence for the
benefit of depositors? Did the fear OF loss TO de-
positors prevent bank officer from stealing
or mismanaSing? Does any one really believe
man would put his money and that Of his
friends into a bank. knowing they would be the
only ones who would lose in the event of failure
and then wreck 1t.
Are not banks organized for the profit that
comes to the officers and stockholders, and when
stockholders know they are the only ones VINO can
lose bv uisnana cement VII they not look after
the business closely than under present con-
ditions? With all banks equally good Will not the
value of personality increase. the aolest manage
rent get the and competition become as fair
and even as in other lines Of business? With con-
fdence in our banks would find ourselves with
too much currency AS a gold basis must De heId'
have specie issued by the government, notes by
the banks the latter secured by a 80 l-S per cent
gold reserve subject a tax sufficient to secure
holders against loss which would be very small
as less than one-twentieth of deposits in banks
consist of currency. banks should have the right
10 nav checks in times of stress in the kind OF
funds received from their customers Then there
would be no currency shortage at any time
If the government handled its financial affairs IN
the same manner the states and large corpora
tions do if the obligations OF banks notes and
deposits were protected by tax ample to prevent
loss nv failure of any bank (and the tax would be
srnan: If banks had the right to pay in same kind
of funds accepted by them for credit if the gov
eminent issued specie. the banks notes for cur
rent use with SO I3 per gold reserve as above
financial system be corrected. banks TO which
wa have fitted our business methods have the en-
tire confidence of every one? Would not all pos
shiIitv of serious panics be prevented and our
financial system upon common sense business
basis?
Is not such action wiser than trying 10 adopt
the system Of some other nation and rearrang1ng
all Of our business ideas TO meet the conditions
that would come by doing? This might result
in state banks and trust companies reorganlzlns'
but would il be better to do away with the
various banking laws now in force and nave a
single system governed by the Same laws and un-
der federal supervision? r 4 L.
Waverly. y. Y. June Is. 1903