Evening bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1895-1912, 1910-08-01
Defects IN
OUR SYSTEM

WASlliNGTON, u. C., July s.
The most complete summary OF bank
ing history Of the crises Of 1873.
1884, 1899 and 1907 yet prepared Is
embodied in monograph by Pro-
lessor Sprague of Harvard. made pub q.
lie by the national monetary commits.
sion.
In the account Of the crisis OF 1907
Professor Sprague discusses defects
in the existing monetary system. He
declares that all the banks, judged
by average of the preceding half
dozen years. were In normal condl-
ton and strength, and that those
outside New York and 81. Louis were
in a slightly stronger condition in
1907 than in 1906.
The upward tendency Of loans was
not so marked In New York as in
case Of the banks in general. The
$i0S, 00O. 900 OF New York bank lOans
In 1897 was nearly 20 per cent. OF
all loais of national banks. while
the s712.OO0. 900 in 1907 was just
above Is per cent. Of the total.
The Increase in deposits of state
banks and trust companies, however.
held by national banks Of New York
was striking and might well have
been considered alarming. In ten
years. from 1897 to 1907. net de.
posits due national banks by those
of New York increased from $685.
100000 to $2t3,SO0. 900 while net
deposits due TO state banks, trust
companies, etc. Increased from $751;
100000 to s193.3OO. 900.
From a little more than one-third
the aggregate of bankers deposits Ia
1897. the deposits due to state lnsti-
tutions had become in 1907 almost
equal to those due to the national
banks. The ease with which growth
of 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.
~ iol my itaobh, ~
come necessary for trust companies
to contract their banking operations
1t would Obviously be necessary for
the national banks to shoulder the
burden in order to save the local sit.
uation. There was also the element
of outside loans, estimated in 1906
at least $500, 900, 900. The outside
banks, 1t is declared, feel no respon-
.sibility for the course OF the market.
They will naturally withdraw from
II when affairs at home require more
OF their funds or when they come TO
distrust the future. II therefore be-
comes necessary for the local banks
In the money center to be able at all
times to shoulder at least part of
the loans which may be liquidated by
outside banks and also to supply the
cash thus drawn away.
In New York the seven leading
banks controlled in 1873 only abou;
30 per cent. OF resources OF all the
New York national banks. In 1907
the six principal banks-City, Com
merce. First. Park. Chase and Han
over 60 per cent. OF
the total. Their cash reserve had in
creased from less than two.hfths to
about two-thirds OF that held by all
the banks. The net obligation of
these six banks to other bankers on
22. 1901. was 1904, 200. 900
out Of a net obligation for the thirty
eight national banks OF the city OF
$41O,200,000. The only certain re-
source for banks holding large bank.
ers' deposits is large cash reserve,
and that was as conspicuously lack
ing In 1907 as 1t had been In 1873.
In both years net bankers deposits
were more than twice the cash re.
serves OF these banks, and their pro-
portion Of cash to net deposits was
but slightly above the 25 per cent.
required by law.