Vilas County news. [volume] (Eagle River, Vilas County, Wis.) 1896-1927, 1909-01-06
BANK RESERVES
NOW FALLING
PHASES OF A SINGULAR YEAR
END BANK CONDITIONS
REVEALED.
THE. LATELY THREATENED DEFI
CIT. AFTER AN ALMOST REC
oRD-BREAkING SURPLUS.


reported a surplus reserve of $6S,2S3,
600, it was possible to say that no
such accumulation of idle reserves, an
no such intrinsically strong position
had ever been witnessed in American
banking save in the other after-panlc
year 1894, when the surplus, on Feb
ruary 3, reached the record-breaking
figure of $111,623,000. The cause for
this astonishing exhibit of bank re-
resources-the heaping up In bank
vaults of cash released from trade
channels by the industrial reaction
was clearly understood. It's necessary
uence-abnormally low rates
for money during the balance of the
year was equally forseen; indeed, it
had been foreseen by all experienced
men as far back as February and
March when the emergency currency
bills" were being urged in congress,
to the amusement of the banking com
munity, on the ground that unless such
machinery were at hand, we were like
ly to have this autumn another
money squeeze, worse than October,
1907 The Marine Corps was more
likely to be impressed with such pre-
diction than was Wall street
But while cause and effect were thus
universally recognized, two questions
arose last June, concerning which
there was more or less dispute They
were, first, how would this enormous
bank surplus affect the speculative
markets; second, what would become
of the surplus itself, and how would it
be brought back to normal figures?
Pulling Down the Surplus.
No one will any longer ask how a
$66, 100000 surplus should concern the
stock exchange; it has been used by
spectators as their plaything through
out the year, to impart fictitious values
to securities, on the basis of huge
bank loans, and to sell out at the in
Hated prices when the public had been
lured in. But whatever doubts might
nave been entertained, on June 27, as
to the probable duration of the "rec,
ord-breaking surplus" it may be aues-
toned whether any one would have
ventured to predict, that in the middle
OF December, the New York banks
would be Immediately confronted with
a deficit in reserves, to be averted-
only by shifting loans to the shoulders
OF other leading institutions. Yet this
Is exactly what occurred Last Satur-
days statement of the actual position,
at this weeks end, showed that if
loans of the associated banks had
been maintained at the level of the
preceding week, the week would have
closed with deficit of $1,700,OO0. 1t
was only through the weeks unprece-
IDENTITY large reduction of $48,111 900 in
outstanding bank loans with the ac.
eompanying reduction of deposit liabil-
tues against which the rs per cent
cash reserve must be kept, that the
surplus was maintained.
Loss of $43,OOO,OOo cash by New
york banks since June-to the trust
companies, the government. and FIJI.
rope-partly explains the remarkable
change; this however, was no greater
than the loss in cash through gold
exports and government loans he.
tween the high-level surplus week of
1894 and the middle of Decamhor
mat decrease footed ST. 900 900 Rut
the loan account in the present wear
between June ~ and December -. in
creased SlOS,000,00O, and it was in re.
allty the consequent rise in demos Ii.
dollltles which broke down the SIR
plus. In last weeks loan-shifting one
ration, therefore, the banks followed
the line of least resistance.
How Loans Are Shifted.
II is OFTEN asked as a practical fac
tor in the matter, just how the banks
shift loans without disturbing the
money market, and how long the pro-
cess can be kept up at the present rate
fear OF stringent money? That depends.
-Ihe shifting is more or less automatic
the bank does not take the initiative
In the last statement to the State
Banking Department, the New York
trust companies reported something
like $20O,000,000 funds deposited in the
banks This deposit draws low inter
e 4 rate, or none at all; it is loaned
out by the depository bank for its own
account But if money rates advance.
and the trust company wishes to GET
the benefit, it takes such loans as it
sees tit, and checks on its bank de-
posit for the borrowers account. The
checks thus drawn reduce the banks
net deposits and compel it to call in
It's loans; but since the trust company
habitually notifies the bank of such
INTENDED drafts on bank deposits. the
bank is able to notify borrowers whose
loans it calls that they can renew
them with the trust company. The
money broker may attend to this. the
only result to the took Exchange Dor
rover may be higher interest rate
When an out of town bank similarly
draws on ire danocite ,x-;t1.