The Democratic advocate., 1908-08-07
-FOUR GREAT PANICS
ALL DUT One OCCURRED when REPUB-
IICANS WERE In FULL CONTROL

ALL DUT One OCCURRED when REPUB-
uCANS WERE In FULL CONTROL
All Could Have Been Prevented by
Proper Legislation
Speech of Robert S. Owen. of Oklahoma, in U. S.
Senate May 26. 1908.
Since the Republican party came
into power there have been four great
panics-those of 1873, 1884, 1898, and
1907 Three of these were confessed
Iy panics which occurred at a time
when the Republicans were in COM
plete control. These were the panics
of 1873, 1884 and 1907. The panic of
1893 occurred Immediately after C1eve-
land went into office, and was pro-
duced by the banks associated in the
New York Clearing House. who con-
stricted credits and suggested to all
their correspondent banks throughout
the United States to constrict credits,
on the alleged ground that gold was
leaving the country, but probably for
the purpose of securing repeal OF the
purchasing clause of the Sherman Act
and to prevent further recognition OF
silver.
All panics have one vitally import
ant feature in common which might
be called 1.-The soul of panic that
is, the withdrawal of money from the
banks and from ciruclation by fright
ened depositors and by the boarding
of such funds. The fear of deposi-
tors may arise from variety
of causes. When bank depositors
realize that a situation has arisen
whereby they can not obtain their
bank deposits in cash on demand,
many will withdraw their funds and
lock them up. Whenever this happens
in any important degree it paralyzes
commerce, causes bank suspensions,
the bankruptcy of merchants, and the
suspension of business activities. 1t
closes factories and throws men out
of employment sometimes on vast
scale, as in each of the four great
panics | have named.
The report of the Comptroller OF
the Currency demonstrated that the
ratio of actual cash in the banks OF
the country as compared to the. actual
deposits of the banks is approximately
10 to 1; that is, the deposits are ten
times greater than the cash in the
banks. If 10 per cent, therefore, OF
all the bank depositors should, on a
given day, withdraw their deposits
from the banks of the United States,
we would not have dollar of cur
rency remaining in the banks. They
would have under such contingency
the same assets as before, invested in
stocks, bonds, and commercial paper,
but no cash. No such demand as 10
per cent. of bank deposits has ever
been made on a given day in the
United States, nor has it ever been ap-
proximately made; yet in the panic
of 1898, during the course of six
months Zone hundred and eighty days.
18 per cent. of the deposits were act
ually withdrawn from the national
banks of the United States, or at a
rate of one-tenth of per cent. per
day during the one hundred and eighty
days. This process did not diminish
the cash in the banks, because the
banks compelled their borrowers to
liquidate. Their weakest borrowers,
therefore, sold their property at very
low rate compared with the normal
values, and those who had ready
money bought such property at
greatly reduced rate, and the money
from the proceeds of such sales went
Immediately back into the bank.
The Comptroller's report shows that
bank Exchanges, consisting of checks
and drafts, ETC., diminished one-half
in the panic of 1893, and the same sub
stantial effect was witnessed in the
panics of 1873 and 1884. These lex
changes" make an enormous volume
of quasi currency, amounting to sum
approximately equivalent to our total
supply of currency in gold, silver and
paper money. The shrinkage of so
per cent. in these Exchanges"
(Which served the function of cur
rency in ordinary business) always
has the effect of causing violent
shrinkage of normal values with ruin
Gus effect upon business, causing
bankruptcy and paralysis in business.
If the Democrats were responsible
for the panic of 1898, it was a griev-
Gus responsibility. If the Republicans
were responsible for the panics of
1873, 1884 and 1907, they were respon-
sible for three panics, and for busi-
ness caIamities three times as seri-
Gus, but the fact is, the Republican
party was responsible for all
four of these panics, because it
lacked the wisdom (it had the power)
to provide remedy against panics.
The primary cause of panic is
the fear of the people that they can
not get cash for their bank deposits.
The immediate effect of this fear of
a panic is the withdrawal of currency
from the banks, and the boarding of
such currency in lock boxes and hid
ing places. The coincident effect of
this withdrawal of currency is fright
ening the bankers into bankers pan
ic, and they make it worse by the sus-
pension of credit, and the suspension
of credit means a paralysis OF busi-
ness, because all men do business on
debt and credit basis, extending cred
it or receiving it.
The best witness of the response
bility of the Republican party of the
panic of 1907 is Senator Aldrich, OF
Rhode Island, the leader of the Re-
publican party in the Senate OF the
United States, and / will call your at
tention to his statement made on the
floor of the Senate, which is COM
plete demonstration and confession OF
the great sin and omission of that
party and it's direct responsibility for
every panic since the war.
In Offering Senate bill No. 1923 as
a remedy for the prevention of panics.
Senator Aldrich, of Rhode Island,
chairman of the Committee on FL
nance, on February 10, 190S,said (Con-=