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

1 ter experience. is the fact that we have no means whatever for providing the additional issues necessary to meet or to prevent panic conditions. Events hav- l ing brought this defect to the attention | of Congress in the most forcible manner, we cannot wisely or prudently fail to give l it serious consideration. It is perhaps 1 true that the most complete monetary | system will not prevent at times the | hoarding of money by frightened bank managers or individuals.
 1 Neither the strength of our monetary l system nor the extraordinary efforts which were made to avoid this serious result prevented a general suspension of | payments by national banks, with most | deplorable and far-reaching results. This 1 suspension commenced in New York on 1 the 26th of October and was followed ] promptly by a suspension of the banks | in Chicago and other localities. The issue of clearing house certificates fol- | lowed in most of the principal cities. complete disruption of the exchanges | between cities and communities through out the country took place. 1t is inn
 possible to estimate the losses which were inflicted by this suspension of pay ments by the banks and the resultant | Interruption of exchanges There was
 financial embarrassment on every hand, | and an impossibility of securing the | proper funds to move crops or to carry on the ordinary business of the coun- | try. The suspension or Encouragement | of business operations threw thousands of men out of employment and reduced the wages of the employed
 The Steps Taken.
 During the progress of the crisis, in it's more or less acute stages, the fol- lowing extraordinary steps were taken to avoid final disaster.
 The SarratarV If the Trpa S11rV added to bank reserves by increasing l the deposits of public. moneys in New York and other banks between Septem-
 Der 30 and December to the extent of $7o,0O0,OOO
 i 2. Clearing house certificates were l issued by the various clearing houses of the country to the extent of about $780, | OO0,000.
 3. Checks were issued by clearing houses, banks and private individuals. ] intended to be used as currency, and
 which were so used, to the amount of at least $75,000,O00
 4. An enforced enlargement of the bank-note circulation took place, through an exchange of bonds and by
 other means, from October 1 to January 1 to the amount of $94759115. l 3. Importations of gold were secured amounting. during the period last named, | to $107,000000 and resulting in an enlarged
 issue of gold certificates in the, same 1 period of $56, 6,000, ,O00.
 From this it appears that from time to 1 time during the crisis there was an en- l forced increase in the amount of cur
 rency and currency substitutes, not in 1 cluding additional deposits of public moneys in the banks, to the extent of | about $468000,000.
 Of the expedients adopted, the use of clearing house certificates was unques- | tionably the most effective. I need hard | ly say that the clearing houses by which
 these certificates are issued are voluntary 1 associations of banks formed for mutual | convenience, assistance. and protection. | In many ways the usefulness of these as- l sociations has been shown from a public 1 point of view.
 | The employment of clearing house cer- 1 tificates for relief in time of financial l disturbance commenced in 1860, and has since been repeated from time to time on eight different occasions, ending in ] 1907.
 Available Certificates. 1 These certificates, it should be remem- 1 bered, are only available for settlement | of balances between banks in the locali- ties in which they are issued They are
 issued upon deposit of bonds and other securities, the best assets of the bank l loaning committee of the clearing house. | Certificates are issued to the amount of | 70 per cent of the value of the securi- 1 ties deposited. Interest is charged by the l clearing house to the depositing bank at
 varying rates from per cent to per
 cent. They take the place of currency in ] settlements at the clearing house, in- | ereas1ng, by this means the amount of money available for other purposes Their l al at 1ac l in preventing a serious disaster. but it 1 has sometimes resulted, as in 1907, in such | derangement of exchanges as to make 1 it doubtful whether from the standpoint 1 of public interest the disadvantages were l not greater than the benefits derived from | their issue
 | The conservative bank officers of New ] York. for fear of the effect their issue would have upon the credit of that great
 commercial center, resisted their use, un- | til it became apparent that there was 1 no other means available to prevent gen 1 eral bankruptcy. The scrip issued by clearing houses and by banks and private 1 individuals in the form of circulating
 notes, and used as currency, were is
 sued to meet local necessities for pay rolls. for movin crops, etc In the I spirit, if not by the letter of our cur ! rency laws, these notes should have been
 
 l sued.
 | The great losses which the people of | the country suffered from the partial I breakdown of our credit system through l bank suspensions, and which the abnor- 1 maj increase in the volume of money | and it's substitutes-legal and illegal failed to avert should lead Congress to seriously consider the question whether it is possible to provide such a legislative remedy as shall prevent the recurrence of these conditions in the future If the experience of last year should be repeated-and who can say that this is impossible-the methods of relief that were employed in 1907 will not be avail able, certainly not to the same extent. Methods of Relief. 1. It is not at all likely that the treasury will be in condition to make increased deposits of public moneys in national banks. With the strong proba- bilities of a considerable deficit, and as matter of wise policy, government de- poslts in national banks must, and I am quite willing to say should be, largely diminished.
 2. The fact that very large propor- tion of United States bonds are now held by the national banks, an amount which cannot be materially increased, makes it probable that there will be a
 diminution rather than an increase of national bank notes based upon United States bonds. In fact, it would be almost, if not quite impossible, to further increase the volume of such notes in case of an emergency.
 3. It is quite possible that We may not be able to command large importa- tions of gold. The very large increase