Deseret evening news. [volume] (Great Salt Lake City [Utah]) 1867-1920, 1910-07-05
Monetary Commission Issues
Statement Of History Of Crises
Under Banking Regulations.
RESERVE OF LENDING POWER,
Prof. Spraguc OF Harvard Finishes
Complete summary of Bank
Ing History.


OF the great crises OF 1873. 1854 1899 aud
1907 which has yet been prepared j.
embodied IN a monograph by Prof ~.
NJ. W. Spraguo OF Harvard university,
which has just been made public by
the national monetary commission
Prof Sprague not only enters into
careful analysis, covering several hun
drcd pages. Of the banking ana financial
history OF these events. but presents
also In an appendix several of the
most authoritative articles which have
heretofore been written on these sub
jccts by secretaries OF the treasury and
comptrollers Of the currency and by
such specialists as Mr.. a. - Noyes, of
the New York Evening Post; DIT. y.
Piatt Andrew, now assistant secretary
of the treasury, and the chairman Of
the New York clearing house commit
tee.
The account OF the crisis of 1907 viii
naturally attract the greatest interest
among bankers because OF the recent
date of the event ana the manner in
which Prof Sprague discusses what ne
describes as defects In the eNistiug
monetary system lie declares that all
the banks, Judged by the average OF the
preceding half dozen years. were in
normal condition Of strength. and that
those outside OF New York and 81.
Louis were IN a slightly stronger con-
dition In 1907 than IN 1906 The up
ward tendency ~ loans was not -
marked la New York as In the case
of the banks in general. The slOS 900
Of New York bank loans In 1897 was
nearly 90 per cent Of all the loans of
the national banks, while the S7l2 600, COO
In 1907 was Just above II 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 ana, Prof
Sprague thinks, might well have been
considered alarming. In 10 years, from
1897 20 1907 the net deposits due ma
tionaI banks by those or New York in
creased from S165, 600 900 to sara 500. 90
while net deposits due TO state banks
trust companies. etc. increased from
s75 800 600 to sia6. 300. 900 From a little
more than one-third tho aggregate Of
bankers deposits In 1897, tho deporits
,dAle e st9t,s-lnstliutlonis had become N
rational banks. Tho ease with which
the growth OF the trust companies made
possible the shifting Of tens Of millions
OF loans and deposit liabilities seems 10
have obscured the essential nature OF
the situation.
WOULD CHANGE BURDEN
Prof. sprague points out that IL. for
any. rea son, IL should become necessary
for the trust companies to contract
their banking operations it would obvl-
ously be necessary for the national
banks TO shoulder the burden in order
10 save the local situation. There was
also the element OF outside loans. esti-
mated in sos 10 amount to at least
$500 0u0 0OO The outside banks, II is de-
clared feel no responsibility for the
course or the market They viii nat
urally withdraw nom II when affairs at
If ID
when they come to distrust the future.
NJ therefore becomes necessary for the
local banks IN the money center To be-
able at all times to shoulder at least a
part Of the loans which may be lqul-
dated bv outside banks and also ,c
supply the cash which is thus drawn
away
Taking up the relation between the
New York banks themselves. Prof
Snracue points out that tho seven
leading banks controlled Zen 1873 OILY
about 70 per cent OF the resources Of AL
the New York national banks. In 1901
the six principal bauks-the city, Com
merce. First. Park Chase and Hanover
controlled over so per cent OF the total
Their cash reserve had Increased from
less than two. hfths to about tWo-thirds
OF that held BY all the banks. The net
Obligation ~ these six banks TO other
bankers on Aug. 22 1907, was s3O4 200
"a
tionu banks Of the city ~ $4,000 900,
The only certain resource for banks
holding large bankers deposits IL q
large ash reserve, and thnt Proi
Spraeue saws was as consplcuously
lacking In 1907 Us IL had been in 1873,
In both years net bankers deposits
uerc more than twice the cash re-
serves or these banks and their pro-
rortion Of cash TO net deposits was but
slightly above the % per cent required
bv tav. The total cash reserve Of All
bapts v.as S2lS 500 900. of which the six
leading banks held $A0. 900 II is
declared that ne few ~ the trust COM
NAMES hold cash reserves. in receiving
deposita from thcw the banks were as
sun,iuc risk Of particularly eVplo-
sive character; but they aid not on this
account maintain reserves proportion
atelv greater than those held in former
wears
ELEMENT OF WEAKNESS.
After lively account 81 the failure
Of the eo-caued Morse banks and the
nun upon certain trust companies. II
il declared that but FOR the powerful
influence OF MIR J. r. Morgan Il Is
probsble that no united action what
ever would have been taken. and t'ist
cit rs certainly an element 81 weakness
IN our central money market that IN
AuentiaI credit Institutions should have
10 be draeooned into doing what IS aft
OF an I'm their own interest az well as
10 the general advantage" When II
vos decided tn issue loan certificates
and to suspend cash payments II was
In pursuance OF a tradition which Is an
ever present source ~ weakness anu
which. Prof. Spra sur saws can only DO
broken by successful endurance by the
banks ~ tho strain N O. crisis.
Tho pt,fwfan q vfraaurN that thpFn