The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1909-11-10
SENATOR ALDR|CH
IN KANSAS CITY
Compares Banking Systems In
Europe and America
POINTS OUT EDVAN TAGES
Foreign Banks Are Not Required to
Keep So Much Money in Vault
AS Are Banks in This coun-
try.-Central Reserves.
POINTS OUT kDVAN TAGES

Kansas City Mo-, November 9.-Re-
iterating his declaration that neither he
nor the monetary commission of which
he is the head has a pet scheme for
financial reform, Senator Aldrich tonight,
in this city, dwelt at length upon some
of the advantages of the European bank
ing system over the system in the United
States.
He spoke after a dinner given by the
clearing house association. Senator Will
liam Warner of Missouri. introduced the
Rhode Island senator. Mr.. Aldrich said
he found in the reserve system the most
striking characteristic of the European
banks. He said that the central banks
of England, France and Germany, thu
Bank of France and the Reichs bank,
hold all the resources of the banks of
their respective countries.
He pointed out that there Is no legal
requirement rendering 1t necessary for
the foreign bankers to keep in their
vaults so large a percentages, as is neces-
sary in the United States, and that the
subordinate banks regard money In the
central institution Just as available for
lllclTi ItStINo puIpOScS DIS IL 1t were
their own vaults.
He said that the foreign banks do not
hold as It'll money a sum greater than
8 or per cent of their liabilities while
in the United States the average Is 10
per cent. The London banks have, how
ever, either in their own banks, or In the
Bank of England, Is per cent of their
deposits, the deposit In the central bank
being just as available to them as Is the
money they retain.
Discount Loans.
in addition these banks loan large sums
to discount houses, subject to call on
short notice, which they regard as an
other source of reserve. Another item
of still greater importance, he said, was
the commercial paper held by the sec
ondary banks This paper is receivable
at the Bank of England and 1t is con-
sidered by the bankers as by far the most
important portion of their reserve.
What was true in england was as
largely true in France and Germany. In
this way the banks amass a credit at
TIE central bank which is, in itself, n
reserve, and they thus are enabled to
loan from four to ten times the amount
that they could loan under other condi-
tions.
Mr.. Aldrich dwelt upon the fact that
the European laws make no requirement.
either as to the amount of reserves or
as to their publicity. The percentage is
left to the wisdom of the bankers.
He said that the Credit Lyonnaise, the
greatest banking institution in the world,
kept practically no money in it's vaults,
depending entirely upon the Bank of
France in the case of large demands
But on the other hand. the reserves of
the central bank amount to about 10 per
cent of its liabilities. not only rendering
it exceptionally strong but making it a
bulwark for other French banks.
Bank Protection.
Asking himself how the great central
banks protected themselves in times of
stress, Mr.. Aldrch replied:
"They advance the discount rates, as
they did the other day. For what? To
attract gold from other countries, which
has the effect of building up their re-
serves. This process is always success
full. In 1907 the Bank of England ad-
vanced the rate to 7h per cent and that
step brought gold from 70 countries. /
asked Mr.. Campbell, the then governor