The Washington herald., 1910-01-02

principally q matter of confidence
Checks are accepted in the belief that
there are funds in the banks 10 make
them good. However. if banks having
funds with which TO meet the checks
decline TO pay them. because Of a scar
city of money. there is a panic. The
banks. as we all remember, suspended
payments in 1867. The panic Of that year
might just as wei have occurred in 1905
or l906-the conditions in all three years
were identical
Not of Same Nature.
I'VE were sound industrlaHy. Business
was booming as never before in our
history. There had been no overspecula-
ton: no money had been put into large
enterprises that didn't pay In 1873. rail-
ways had been built that We're much
ahead OF the time Immense sums OF
money had been poured into properties
from which there were no returns. A
panic was the natural and unpTeYentable
result of the conditions OF that period.
Notwithstanding the seeming strength
Of our position in 1907, every dollar of
Jul IuAi City was III u0C. lCoCEh tN
their customers for money with which
legitimately TO expand their business
some banks had even loaned part Of
their lawful reserves. There was not
single reason in the world for the panic
except the insufficient stock of money"
But the national banks, I said.
could have gone into the market, bought
hnn6G nd %
bonds with the Secretary of the Treasury,
could have obtained new money!"
And they would have had less money
than when they started the transaction"
Mr.. Roberts answered Government
bonds were then at a premium of per
cent. / know Of bank that could have
issued s.. 0O0,0O0 under the law, In addl-
ton to its circulation then outstanding;
but bonds at S1O6 meant that it would
have paid 100000 in cash for the privl-
lege of getting $1,SSo.O0O of new money.
There was no practical way at the
time of increasing the supply of cur
rency." Mr.. Roberts went on to say, land
consequently all through the years 1905,
1906 and 1907, conditions were right for
a scare that would bring on a panic If
some great house had stubbed its toe in
1905, the financial crisis would have Oc-
CURED then instead OF two years later.
We lived through 1865 and 1906 on a state
of mind, when all the facts were against
US.
Caused by HeinKe Failure.
Finally, F. Augustus Heinze failed,
nd ~ &c
down with him. He was the man to stub.
his toe. Another of his banks became
involved in his personal disaster. An
incipient panic started. Depositors began
quietly to withdraw their money from
other New York banks, and. as I have
said, there IVES none too much in the
first place. Almost before we realized it.
ten or twelve banks in New York closed
their doors In the faces of their excited
depositors. In every case the bank, I'M
der a proper currency system. could
have kept on making payments. and there
would not have been q single failure
Saturday. October &c, 1907. was a terri
BILE day all over the country. The panic
had demoralized the East. and men and
women were clamoring at sound banks
for their savings and their money The
scare was rapidly spreading, and every
large banking center in the United States
was seriously threatened. Long-distanee
telephone wires. East and West. were
Kept busy from early in the morning I'M
til late at night on Sunday An agree
ment was reached that included most of
the large banks in all the cities sus-