New-York tribune., 1909-11-10
EUROPEAN BANKING
MR. 4LDRICH'S TTEHS.
Points Ont .4dUaRtages IN
kansds City Speech.

Kansas city, No. Nov. a-Reitsrstiar
his declaration that neither no nor ,ha
Monetary Commission. 81 which he Is the
head. has any Pet scheme Of financial no
form, senator Nelson W Aldrich dweit 80
urht on some Of the advantages Of the
European banking systems over the svx
fem IN ~. Cnited States He smoke after
oinner given by the Clearing House as-
ISOLATION. Senator william Warner =,
Missouri introduced the Rhode Islans sen
ater
Mr. Aldiich found IN the reserve .v~,a,,
tae most striking characteristic of the
Europesn bsuks lie said that the ceatra,
hank oi Engisid. France and t;erlnarv
t'he Bank % Engisnd. the Bank OF France
Rrd the RN'chshsn,D hold all the resources
"i sh '"s banks of their respective coun-
tries.
He pointed out shat there VAS no legal
requirement rendering il necessary for the
foreign hanks 10 kee. IN their vaults =
lnrse percentage as was necessary I'm the
nted states. and that The subordinate
banks regarded money IN ihe central in
sriuiion just - available for their re-
ser'e purposes rs IL II were IN their own
vaults
lie said that the foreign banks did.not
Told as IN money" . sum greater flan
3 or per cert OF their liabilities. while IN
thc United States the average was 10 per
cent The London banks. however had
either 40 their own banks or in the Pank %
lnslsnd a or Is per cent of their deposits
Tho deposit M the central hank being iust
rs available 20 them as was Tho money
they retained.
tn addition these hanks lent large sums
10 discount houses. subject 90 call on short
notice. which they regarded as another
source cf reserve. ADcther item Of stin
greater importance. he said. was the COM
nercisl paper held b. the secondary
banks This paper VAS receivable AZ the
Bank Of Englsnd. and was regarded by
the bankers as by far the most important
portion of their reserves
What WaF trra in England was as large
d. true IN France and Germany. IN tnis
way the banks amassed credit at the
central bank which was in Itself . reserve
and they thus were enabled 10 lend from
four 10 ten times the amount that they
could lend under other conditions
Mr. Alcrich dWelt upon the fact that the
European laws made no requirement either
as 70 the amount Of the reserves or OF their
pEbacit,- The percentage was left 20 the
wisdom OF the bankers. He said that the
credit Lyonnsis. the greatest private bank
no money in It's vaults. depending entirely
upon the Bank Of France in the case a
large demands But. on the other hand.
the reserves OF the central bank amounted
10 about 75 per cent OF its liabilities. not
only rendering II exceptionally strong but
making il a sure bulWaTi for other French
hanks
Asking the question hov- rhe great cen
'rsl hanks protected themselves IN times Of
stress Mr. Aldrich replied
They advance ire discount rate as they
rlc the olher osy- For what" To attract
gold from Other countries which has the
ete-t ~ building Up their reserves. This
process is always successful In 1907 the
Sank q England advanced the rate 10
~ per cent. ard that step brought sold
from p countries. 7 asked Nr. Campbell.
tbe governor Of he hank an that time.
what he would have done If ne had not
procured The sold. re replied We should
hsVs put The rate UP q 10 per cent. and
ihst would have brought sold out of the
N-hs, else DO the- ooc They extend
Trecfts literally 70 every one who Is solvent
and who has a Tlght 10 borrow. Instead of
shutting their doors and stopping the eE-
s3s1e resoS =, OF ,Sf Slees ana reigsi1g TO syo
fwo things They protect treir own reserves
ara hey extend credit literally 70 every
cne who deserves u and who wants s.
That Is the whole secret of the method bv
vhich these great banks take care of and
regulate tae affairs Of these great countries
I'm cases OF probable trouhle.
Contrasting this system with the rigid
methods ot The Tinted States, Senator
fldrich said
think this statement vii sfforS 3 suf-
fclenr SUGGESTION 10 YOU 10 show that
certainly ought 10 consider very carefully
TIE question whether our banking system
iD thar respect should not be reconstructed
have no doubt myself that the opinion
Which IS everywhere expressed IN Europe
that our system IS h2rbaroUs Is correct. u
rsrteilly IS against The experience Of
modern banking everywhere else.
senator Aldrich did not 20 further. but ne
spoke especially II the confidence en-
Eendered 10y the foreign method. The
speech received courteous attention and Mr.
Alcrich was literally applauded