The Ogden standard. [volume] (Ogden City, Utah) 1902-1910, 1909-11-10
ALDRICH SPEAKS
OF EUROPE'S BANKS

Kansas City. Nov. 9.-ReiteratinS
his declaration that neither he nor
the monetary commission OF which he
Is head has any pet scheme OF hnao-
c!al reform. Senator Aldsich tonight
In this city dwelt at some length upon
some OF the advantages of the Euro
pean banking systems over the SyS-
tens In the United States. He spoke
after dinner given by the Clearing
House association at the Baltimore
hotel Senator William Warner OF
Missouri introduced the Rhode Island
senator.
Mr Aldrlch found In the reserve
system the most striking character
Istic Of European banks. he said. He
said that central banks OF England,
France and Germany hold all the re.
sources of all the banks of their re-
spective countrys. He pointed out
that there IS no legal requirement
making II necessary for foreign banks
10 keep in their vaults so large per-
ccntage of deposits as is necessary In
the United States, and said that the
subordinate banks regarded money In
the central institution just as avail
able for their reserve purposes as
If IT were in their own vaults. He
added that foreign banks do not hold
as "tlll money sum greater than
three or four per cent Of their liabil.
tiles, while in the United States the
average is ten per cent The Lon
don banks. however. have either in
their own vaults, or in the Bank Of
England fourteen or fifteen per cent
of their deposits. In addition. these
banks loan large sums to discount
houses, subject to call on short no.
tice. which they regard as another
source of reserve Another item OF
still greater importance, he said, is
commercial paper held by secondary
banks This paper is receivable at
the Bank of England and 1t is con.
Sidored by bankers far the most I'm.
portant portion OF their reserves.
What is true in England Is largely
true In France and Germany. In this
way the banks amass Il credit at tho
central bank, which Is in Itself re-
serve. and they thus are enabled to
loan from four to ten times the amount
that they could loan under other CON
ditions.
Mr.. Aldrich dwelt upon the fact that
European laws make no requirement.
either as to the amount of reserves or
of their publicity. The percentage Is
left To the wisdom of bankers He
said that the Credit Licennaise. the
greatest private banking institution in
the world, kept practically no money
In It's vaults, depending entirely upon
the Bank of France in case of large
demands upon il. But. on the other
hand. reserves of the central bank
n ahO nI 70
liabilities, not only rendering it eX-
ceptionally strong, but making it
bulwark for other French banks.
Asking himself how the great cen
trail banks protected themselves in
times Of stress Mr. Aldrich replied:
They advance discount rate as
they did the other day. For what?
To attract gold from other countries.
which has the effect of building up
their reserves This process Is always
successful In 1907 the Bank of Eng.
land advanced the rate to Z 1-2 per
cent and that step brought gold from
twenty-five countries. | asked Mr.,
Campbell, then governor OF the bank.
what he would have done if he had
not secured the gold He replied. We
would have put the rate up to ten per
cent and that would have brought gold
out OF the earth
What else do they do? They ex-
tend credits literally 10 everyone who
is solvent and who has a right 10 bor-
row. Instead of shutting their doors
and stopping the extension of credits
and refusing to give credits to their
customers. they do these two things
They protect their own reserves, and
they extend credit literally To every
one who deserves it and who wants
it o,otc.
THAT is the whole secret OF the
taking care and regulation of thosc
great banks in probable panicky
times
Senator Aldrich added:
81 think this statement will afford
sufficient suggestion TO you to show
YOU that we certainly ought TO con-
slider very carefully the question
whether our banking system in that
respect should not be reconstructed
Il have no doubt myself that the
opinion which is everywhere express.
ed in Europe that our system IS bar
barOus, is correct 1t Is against the
experience OF modern banking every.
where else
1t was evident TO all that Senator
Aldrich found in the European re-
serve system features which he be-
lieyes superior TO ours. He spoke
especially OF the confidence engenler.
ed by the foreign method,