The Birmingham age-herald., 1908-02-11

standpoint of experience and results must lead us to the conclusion that while there is no necessity for the immediate recon- struetion of our monetary system there is an imperative demand for some pro vision for additional notes to be used ill emergencies.
 Currency legislation can, however, furn- ish but a partial remedy for existing financial evils. A general demand for ia reform in banking methods is quite as insistent in the pubic mind as that for q modification of our monetary system. The great mass of the men who control the national banks of the country are strong and liberal minded Their influence and that of the institutions they represent has been helpful in the great work of na- tional development. But these men, in trusted with the management of great financial institutions, which can do so much to make or to mar the prosperity. of our country, should realize that they have serious responsibilities with refer enee to existing conditions and the ne- cessity for reform in banking methods.
 1 have already alluded to the made quacy of bank reserves. When We com pare the reserves of our banks with the reserves of similar European institutions this inadequacy becomes painfully ap- parent. But this is not the only-per- haps not the most important-element of weakness in the banking situation. The change which has taken place in the relation of capital to liabilities and to credit expansion naturally causes ap- prehension in the public mind. | is, of course. true that the great financial cen ters Of the world have all felt the in- fluence of speculative spirit which has resulted in general and dangerous over expansion of bank credits, but this fact only emphasizes and increases our sense of the dangers existing in our. own coun- try.
 An examination of the changes which have taken place in the relation between capital of national banks and their loans and discounts in 20 years will furnish evidence of the extent to which an ex- pansion of bank credits has taken place. In 1887 the relation between capital and loans and discounts was as 1 to 2.61; in 1867 it was at to 3.2I in 1907 it was as to 5.22. Tn 20 years the capital of our national banks increased IBIS, ,025, 900, and in the same time their loans and discounts increased $3,09S, ,4SS GOO.
 Disqueting Element.
 There is another dlsquietng element of quite as serious a nature. It has been discovered that many national banks have been directly or indirectly furnishing capital for speculative ventures. Some of them have been largely engaged in pro- noting or underwriting questionable bus mess schemes. All of these operations are clearly outside of the scope of legit- innate banking and serve to bring dis. l credit upon all our banking institutions. | The habit of banks in the large cities of paying a high rate of interest upon the deposits of other banks has led to | large accumuations Of loanable funds in the great commercial centers at times when the demand for trade purposes throughout the country was less than nor 1 mal This dangerous accumulation has naturally led many times to speculative and ifnprovident loans.
 l Our experience in the recent crisis shows that necessity exists for a closer cooperation between the banks in dif- ferent parts of the country. I can see no reason wh. these banks should not establish central clearing house. a vol untary organization of clearing house as- sociationS which should in way rep resent the banking interests of the en- tire country, which would exert beneficial influence in facilitating and regulating both domestic and foreign exchanges. But these are matters which must be left largely to the discretion and judg- ment of bank managers. while the whole question of currency issues is committed to the control of Congress, and we are clearly answerable for any defects or omissions which we have in our power to remedy. If We should fail to take i some effective action to provide against i crises such as that through which We { have just passed. we should assume a i grave responsibility, which I feel that we cannot afford to take. It is difficult
 to overestimate the magnitude of this ! responsibility.
 1 We cannot forget that we have to deal | with the business and future prosperity ! of a continent. Our country has bank i ing power and wealth of resources and a volume of commerce and industry equal 1 to all the commercial world besides We cannot afford to make a mistake that will injuriously affect the credit or the soundness of our circulating medium.
 The enactment of the pending bill will i furnish evidence that Congress is not unmindful of its serious responsibilities in this regard. There can be no req sonable doubt of the effectiveness of the measure. The committee firmly believe that through its enactment an atmos- phere of confidence and feeling of se- i curity will be created which will be in- valuable in improving business conditions and in giving Q new impetus to the work of national development.