Omaha daily bee., 1909-11-10
ALDRICH ON BANK RESERVES
Senator in Kansas City Speech Praises
European Methods,
HOW ELASTICITY IS SECURED
Banks I'm England md on Continent
Carry Nearly All Their Reserves
I'm Big Central
Banks.

declaration that neither he nor the None
tary commission, Of which he is the head,
has any pet scheme Of financia reform,
Senator Aldrich tonight, in this city, dwelt
at some length upon some of the advan-
tages of the European banking systems
over the systems in the United states.
He spoke after a dinner given by the
Clearing House association at the Balti-
more hotel. Senator William Warner Of
Missouri introduced the Rhode Island SEN
ator.
Mr.. Aldrich found in the reserve system
the most striking characteristic Of the
European banks, he said. He said that the
central banks Of England, France and
~Germany-the Bank OF England, the Bank
of France and the Reichs b~ank-hold all
the resources of all the banks of their re-
spective countries.
He pointed out that there is no legal re-
quirement rendering 1t necessary for the
foreign banks TO keep In their vaults so
large a percentage as is necessary in the
United States, and that the subordinate
banks regard money in the central insti-
tuition just as available for their reserve
purposes as II 1t were in their own vaults,
Little 9TH Money"
He said that the foreign banks do not
hold as It'll money" a sum greater than
or 4 per cent of their liabilities, while Ia
the United States the average is 10 pei
cent. The London banks, however, have
either in their own banks or in the Bank
Of England IA or Is per cent Of their de-
posits, the deposits in the central bank be
Ing Just as available to them az ia thu
money they retain.
In addition these banks loan large sumi
to discount houses, subject to call on shorr
~ -AaA 49, ~A2nN an nnnthol
source of reserve. Another item Of still
greater Importance, he said, was the com
mercial paper held by the secondary banks
This paper is receivable at the Bank O.
England and it is considered by the bank
ers as by far the most important portion
of their reserves. f
Mr.. Aldrich dwelt upon the fact That tn
European laws make no requirement eithe
as to the amount OF the reserves or o
their publicity. The percentage is left t.
| the wisdom of the bankers. lie said tina
the Credit Lyonnais, the greatest private
banking institution in the world, kept pre-
cisely no money in it's vaults, depending
entirely upon the Bank of France in thu
case of large demand But, on the othel
hand. the reserves Of the central banl
! amount to about rs per cent OF It's Habit
ties, not only rendering 1t exceptionally
strong, but making It a sure bulwark fol
other French banks.
Methods of Protection.
Asking himself how the great centra
banks protected themselves in times Of
trouble, Mr.. Aldrich said:
They advance the discount rate as they
did the other day. For what? To attract
gold from other countries, which has tht
effect of building up their reserves. This
process is always successful. In 1907 the
Bank of England advanced the rate tc
~ per cent, and that step brought gold
from twenty-five countries. 1 asked Mr.,
Campbell, the then governor OF the bank
wha he would have done II he had not
secured the gold. He replied we would
have put the rate up to 10 per cent and
that would have brought gold out OF the
earth
What else do they do? They extend
credits literally to every one who Is sol
vent and who has a right to borrow. In
stead Of shutting their doors and stopping
the extension Of credits, and refusing tc
give credits to their customers, they dc
these two things: They protect their owr
reserves, and they extend credit literally
TO everyone WHO ueSeINe5 IL aho VIM
wants 1t,
That is the whole secret OF the method
of these great banks and how they take
care and regulate the affairs Of those
great countries in cases Of probable
trouble"
Contrasts with United States.
Contrasting this system with the rigid
methods OF the United States, Senator
Aldrich said:
II think this statement will afford
| sufficient suggestion to you to show tina
we certainly ought to consider very care
fully the question whether our banking
system in that respect should not be re-
constructed.
Il have no doubt myself. that the oPin
ion which is everywhere expressed In Eu
rope, that our system Is ~barbaroust Is cor
rect. 1t certainly Is against the experience
Of modern banking everywhere else
Senator Aldrich did not go further. blu
II was evident to all that he found II
the European reserve system teatuTeI
which in his opinion are superior to ours
He spoke especially OF the confidence en-
gendered by the foreign method.
The speech received most courteous at
tention and MI. Aldrieh was literally ap
plauded.