The Washington herald., 1908-02-13

the country banks. OF this amount, IN
der the law there is only $500, 900; that is, |
6 per cent of cash in their vaults. and |
| 800, 000 deposited with reserve agents. |
/ Nine hundred thousand and six hundred /
thousand make up the Is per cent upon |
$40 600.0O0 reserves required by law; three |
ffths Of which Is per cent namely, $780,
oo0. are deposited with reserve agents I'M
| der the law, and two-f1fths OF which. /
/ namely. $500 900, are retained in the vaults |
of the bank.
Now. when the $4,000 gets into the |
reserve city banks the law only requires |
| l21z per cent. that Is 10 say Sll2,5o0 TO re- /
/ main in their vaults. The other l21z per /
| cent which makes I'D the p per cent Is |
deposited in the central reserve banks in |
/ New York. Chicago. and St Louis, and |
even Of this amount the central reserve |
banks in those cities need only keep one
4 fourth, namely S28125. Is there any such |
Juggling as this practiced IN any banking
system IN any civilized country Of the
world? Why. sir. the native savages /
upon the banks Of the Senegambian River.
with elephants teeth and the bark of
F.! the mulberry tree as a circulating me-
dihm. have better system Of finance
than this.
shows Danger in Panic Times.
HAS the chairman OF the Committee
on Finance fully considered what this
means in the hour OF necessity and Of
panic. when the confidence Of the coun-
try is gone and the people are hoard
ing their money? II means. by close
calculation. that the city banks keep less
than l1k per cent in cash Of the country
banks reserve deposits. and the country
banks keep only per cent on hand in
cash by law BY an accurate mathemati-
cal demonstration, made by the Comp
troller, you have this situation. that If
there is a reduction of $4,000 out OF the
ten millions Of dollars deposited i'm the
country banks. or only ~ per cent, il
calls for more cash or reserve money
than is kept on hand for the whole ten
millions Of dollars in the reserve banks
You talk to me about moving the
crops. Where is the 500 0040l0 20 come
from to move the crops? The country
banks have only per cent Of their re-
serve and the city and central banks
have not quite IL per cent Of their re-
serves Who has the money! 7 suppose
that the stock market has il 10 a large
extent SO, gentlemen Of the South and
West when YOU want 10 move your
crops. do not apply TO the banks because
they have no money, but apply TO the
! New York stock Exchange for permits
sion TO do so. Is il not frightful that this
iuiquity should continue, condemned by
every intelligent financier and honest man
tn the land?
you will understand that IN the sea-
sons when money is easy. the reserves go
to New York As quickly as they can for
- =. f.r.r
traction comes the New York banks are
unable 10 send the reserves home again
because the money is all loaned out
Asks About Reserves Section.
What has the chairman of the Finance
p Committee done with section OF bis
original bill? That was at least faint
effort TO change the law in reference 10
? the reserves by providing that the - per
cent banks-that is to say, the country
5 banks-shan hold at least two-thirds Of
Z their reserves in lawful money. instead
2 Of two-ffths, as is now required. Why
b. was this section eliminated? What was
! the reason for it2 Who asked for this
vital chauge2 Here we have one Of the
, principal causes OF the panic known 10
! all Of MS who have examined the subject,
Z chairman Of the Committee on Finance
% that practically admits that the most Sc
r rious trouble is in a large degree at
y tributable 10 the reserves. and then We
o. have a new bill reported by the commit
S tee that ignores the cause and strikes out
( the principal remedy against the recuF-
z renee Of the trouble under which We are
e suffering.
10 i am not criticsing the committee. or
e its distinguished chairman. They have
2 evidently done what 10 their minds seems
best as an emergency measure. But If
4 / may be permitted 10 say so. with great
n respect and Difference 10 every member u
y the committee. 7 do assert beyond the
70 fear Of successful contradiction that in
- the radical defect and omission that I
= have pointed out. which disfgures this
I bill IS IL is now. IL works more effect -ely
70 IN the interest Of large dividends 10 the
e stockholders of national banks than il
Q does in the interests Of the American
e people.
I Proposed Issue Not Convertible.
y must frankly confess that do rot
/. Ike the bill in other particulars. even
= II it had dealt with that subject. and
d the reason that do not like il is because
Y 70 simply makes a surface application fer
n the purpose Of allaying an organic
, malady. and does not pretend 10 cut down
o deep into the root Of the trouble
1T may give us an expansion Of the cur
. reney. and I have no doubt it viii. and
- I do not object to it so far as a deposit
n Of State or municipal securities is con-
e cerned. but I DO not for moment favor
j. the artificial method Of taxation that is to
force the currency back and contract eX-
pansion when the money is no longer
needed. II had my way, I would force d
u contraction Of the currency, not by taxa
Z ton, but by increasing the reserves which
c the banks should hold against their
z / issues. To any student OF finance. who
d has honestly studied the subject, it is a
d fallacv 10 tell him that deposit OF
= securities makes an issue Of bank notes
II sound and safe Let it be known that
. a deposit of securities does not create
a convertible currency. When I speak 81
a convertible currency. 7 mean what ans
: sound financier and economist means who
d understands the subject, and that is e
It say a currency that is always TedeemablC
T I'm coin. Every other currency is incon
vertible. call il what you will and secure
e II how you may.
It do not understand me for a moment
s as claiming that the reserves have beer
e the sole cause of our trouble My con
= tention IS that they have constituted one
n Of the principal causes OF the contrac-
: ton that has taken place do not hold
for a moment that it would be proper
TO keep the whole Of the reserves in cash
in the vaults of the banks. What I an
charging is that this bill ought TO HAYS