The daily sentinel., 1910-07-07
IBy Associated Press. !

graph by Prof o. NJ W. Sprague OF
/ Harvard University, which has Just
been made public by the national
monetary commission. Prof. Sprague
not only enters into a careful analy-
sis, covering several hundred pages of
the banking and financial history of
these events, but presents also in an
appendix several of the most author
itatiye articles which have heretofore
been written on these subjects by sec
retaries of the treasury and comptrol-
lers of the currency and by such spe-
cialists as A. ID. Moves of the New
York Evening Post: De A. Piatt An
drew. now assistant secretary of the
treasury. and the chairman of the
New York Clearing House committee.
The account of the crisis of 1907
will naturally attract the greatest
interest among bankers because OF
the recent date of the event and the
manner in which Prof Sprague dis
cusses what he describes as defects
in the existing monetary system. He
declares that all the banks. judged
by the average of the preceding half
dozen years, were in a normal condi-
tion of strength. and that those out
side of New York and ST. Louis were
"a a otASAtAN oAi OhbtA NbnilAibl III
1907 than in 1905. The upward
tendency of loans was not so marked
in New York as in the case of the
banks in general. The s40S, 600, 900
of New York bank loans in 1897 was
nearly 20 per cent of all the loans of
the national banks, while the S712,-
100000 in 1907 was just above / >
per cent of the total. The increase
in the deposits of state banks and
trust companies, however. held by the
national banks of New York was
striking and, Prof. Sprague thinks,
might well have been considered
alarming. In ten years, from 1897
to 1907. the net deposits due national
banks by those of New York increased
from S155.00O, 900 to s213,SOO. 600.
while net deposits due to state banks.
trust companies, etc, increased from
S75.sO0,000 to $196.300.0 From
little more than one-third the ag-
gregate of bankers deposits in 1897.
the deposits due to state institutions
had become in 1907 almost equal to
those due to the national banks. The
ease with which the growth of the
trust companies made possible the
shifting of tens of millions of loans
and deposit liabilities seems to have
obscured the essential nature of the
situation.
Prof. Sprague points out that If.
FOR any reason, IL should become ne
cessary for the trust companies to
contract their banking operations, II
would obviously be necessary for the
national banks to shoulder the bur-
den in order to save the local situa-
ton. There was also the element of
n fol "a 1.saV tt,.,.. 4
amount to at least $500, 900 900. The
outside banks, 1t is declared. feel no
responsibility for the course of the
market. They will naturally with
draw from it when affairs at home
require more of their funds or when
thew come to distrust the future. 1t
therefore becomes necessary for the
local banks in the money center to
be able at all times to shoulder at
least part of the loans which NAV
be liquidated by outside banks and al
so to supply the cash which is thus
drawn away.
Taking up the relation between tho
New York banks themselves. Prof.
Sprasue points out that the seven
leading banks controlled in 1873 only
about 80 per cent of the resources
OF all the New York national banks.
In l9Of the six principal banks-the
city. Commerce, First, Park. Chase
and anover-controlled over 60 per
cent of the total. Their cash reserve
had Increased from less than two
lifths to about two-thirds of that held
by all the banks. The net Obligation
of these six banks to the other bank
ers on August %. 1907, was s3O4-
zoo'OoO, out of net obligation for
the 3S national banks of the city of
$40. 900.
Inc only certain resource for banks
holding large bankers deposits is a
large cash reserve; and that. Prof
| Sprague says, was as conspicuously
| lacking in 1907 as it had been in
1913. In both years net bankers de-
| posts We're more than twice the cash
reserves of these banks. and their
proportion or cash to net deposits
was but slightly above the 25 per
cent required by law The total cash
reserve of all banks was S2lS.S 500 :
goo. of which the six leading banks
held $40. 100000. 1t is declared
that as few of the trust comnanies
held cash reserves. in receiving de-
poslts from them the banks We're as
Stunning risk of a particularly ex-
plosive character; but they did not
on this account maintain reserves
proportionately greater than those
held in former years
After lively account of the fail
ure of the so-called Morse banks and
the run upon certain trust companies
IL is declared that but for the pow
eriul influence of j. p. Morgan. it is
probable that no united action what
ever would have been taken. and that
Is certainly an element of weak
ness IN our central money market
that influential credit institutions
should have to be dragooned into do
ing what is after all in their own in
terest as well as to the general ad-
vantage When it was decided to
issue loan certificates and to SUSPEND
cash payments, it was in pursuance