The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1910-10-14
BANKER SUMS UP DESIRED LEGAL CHANGES

we can obtain this power bv taking
steps to encourage and build up a dis
count system, which can be done with
out establishing a central hank, and
without interfering with the banks now
in existence
We bankers who have TO- sit ont on
the firing line want the privilege Of
dealing with the central reserve cities
and particularly New York, with the
same facility that we deal with Lon
don, Paris and Berlin The central re.
serve cities are not performing the
functions of financial centers to us;
they are merely giving us safe places
to keep part of our reserves and pay
ing MS two per cent. thereon. To earn
this two per cent, they sometimes get
our funds locked up so that they make
the whole country feel uneasy when we
begin to use our balances for the very
purpose for which they were kept idle.
Many writers deplore the fact that in
terest is paid on these balances, saying
that it attracts money that would
otherwise stay at home, but idle money
will seek rewards where it can do so
safely, and do not criticize the central
reserve cities for paying interest on
balances, but for paying too much at
one time and too little at another
If discount market were built up
and the central reserve cities or CEN
trail bank adopted discount rate, the
banks could then adopt n rate on re-
serve balances of say one to one and
a half per cent. below the official rate.
If some other locality made a better
bid for the money and the owners of
IL felt that it could be safely employed,
it would go there. The ebb and flow
would be controlled by the rate.
I believe that by an amendment to
the National Bank Act, allowing Ma
tional Banks to accept time paper (con-
fning this power, if you wish, to Ma
tional banks in reserve cities and CEN
/ trail reserve cities-and / believe that
| the central reserve cities would he suf-
fcient), You win lay the foundation on
which viii spring up large discount
market, and at one stroke put New
York and the other central reserve
cities on basis where they will become
| real financial centers. The banks
throughout the country, State and Ma
tional, viii provide the largest market
/ for first-class aceeptances and discount
companies will spring up in New York
and Chicago as soon as the opportuni-
ties which will be developed are recog-
nized, and believe will attract money
from England, Germany and France.
The National Discount Company was
established in London about 1856 and
was received very coldly by the London
| banks as an unnecessary competitor;
| however, it grew and now has paid-up
| capital of ESQ 900 and an earned re-
serve Of 100000 The Union Discount
| COMPANY, another large factor in the
London market, was established in 1885
/ and has, under able management. a
paid-uD capital of e750.000 and an
earned reserve of 100000. In addi
ton TO these powerful companies there
! are large discount houses like Samuel
| Montagu G. CO.. Brightner & Co, and
manv others. who contribute as much
if not more than the joint stock com
panies to the efficiency of the system.
| Rediscounting goes on from day to day
I and the facilities which they afford are
| Of inestimable benefit to the CONNER
cial world and to the joint stock banks.
Why, gentlemen, we have millions of
| dollars locked up in crops and mer.
ehandisc. moving to all parts of the
United States (actually sold. not seek
ing markets) subject to all the vicis-
STUDIES of transportation. and placing
| us in a position where each wear we
are worrying and wondering if we are
/ going to be able ia, find the means to
keep these crops moving without fore
ing our merchants to curtail their lepit
innate business. This thought never
enters our minds in connection with the
same character of products when thew
are shipped to foreign port. During
the panic of 1907, we were forced to
| refuse to accept as cash, drafts against
these products when moving to any
part of the United States, but never
hesitated second when the products
were going outside of the United States
Some of you will remember that there
was period when it was difficult to sell
Sterling in spite of the fact that the
possession of it meant the power to
draw English gold. We had to contend
with this difficulty and cut the central
reserve cities out of the circuit tenn
porarily when confidence vas SO inn
paired that but few Sterling bills could
be sold, and we succeeded becase we
had the power to draw gold from Eng
land, the Continent, Japan, Australia
and Central America and to pay for it
in London with the Sterling bills when
could not be handled through or fnan.
cial centers.
Give us the power TO accept time
drafts, and we viii gradually cease to
pay the tremendous tribute which we
pay each year to London in connection
with our commercial letters of credit.
We are obliged TO force London credits
on many merchants who could use do
nestle credits aud prefer to use them
when they can, as il saves them from
the uncertainty as to what the Sterling
quotations may be when they are called
upon to make their payments. Gentle.
men, we are one of the greatest CON
'ributors TO the wealth and power of
London. Every pound of our imports
pays tribute o-that center and every
letter of credit creates supply of ex.
change on London and demand for
exchange on that center.
We have the making of a handsome
discount market in this country. Onr
banks ESPECIALLY our country banks)
have difficulty in employing their funds
In what We all term liquid assets. They
do not understand commercial paper.
know nothing Of the responsibility Of
the makers are dependent upon their