The Salt Lake tribune. [volume] (Salt Lake City, Utah) 1890-current, 1910-07-06
History of Crises Under the
National Banking System

30 per. cent of the resources OF qll the
New York national banks. In 1907 the
six principal banks-the City. Commerce.
First. Park, Chase and Hanoyer-con-
trolled over 60 per cent of the total. Their
cash reserve had Increased from less than
two-htths TO about two thirds Of that
held by all the banks. The net oblga-
tion OF these SIX banks TO other bankers
on August %. 1907 was S30i 200 900 out Of
a net obligation Tor the thirty eight banks
of the city of $4,000, 900. The only Ger
tain resource for banks holding large
bankers deposits is a large cash reserve,
and that, Professor Sprague says. was
as consplcuously lacking In 1907 as IL had
been in 1873 In both years net bankers
deposits were more than twice the cash
reserves OF these banks and their proper
tion of cash 10 net deposits was but
slightly above the 20 per cent required oS
law. The total cash reserve Of all banks
was $500. 600, OF which the six lead
ing banks held $40. 700. 900 II was de-
clared that few OF the trust companies
held cash reserves In receiving deposits
from them the banks were assuming a
risk of a particularly explosive character:
but they did not on this account main
tain reserves proportionately greater than
those held in former years.
Credit Due Morgan.
After a lively account of the failure oil
the so-called Morse banks and the run
upon certain trust companies. il is de
clared that but for the powerful influ-
encc OF Mr.. j. p Morgan, II is proba BILE
that no united action whatever would
have been taken. and that "it is GER
tainy an element OF weakness in our
central money market that influential
credit institutions should have to be dra-
gooned Into doing what is after all In
their own interest as well TO the gem
eral advantage" When II was decided to
Issue loan certificates and TO suspend
cash payments IL was in pursuance Of a
tradition which Is an ever present source
Of weakness and which. Professor Sprague
says can only be broken by successful
endurance by the banks of the strain of
q crisis
The opinion Is expressed that there can
be little doubt that the seriousness OF
the general economic situation was
York. Evidence OF this conclusion is
found in the limited number OF banking
failures which occurred and the short du-
ration of general business depression con-
trasted with either 1875 or 1893. In the
actual management of the crisis ii is ar
gued that resumption of cash payments
was delayed unnecessarily and that the
additional money secured after suspension
served no useful purpose. Nowhere
throughout the >country was there any
considerable increase In national bank
loans except in New York, where they in
creased by S63. 600. 000-from sTl2 900 600
TO 1000. 900. In every previous period
of financial strain the New York banks
had been able 10 contract loans somewhat.
In 1907 the trust company situation com
PEELED them to liquidnte loans wherever
possible and the outside banks followed
the same course.
One of the lessons drawn by Professor
Sprague from the experiences Of national
banks is the absence of liquidness in cal
600, 900. dali loans account for S54 600 900
The only kind Of loan which was reduced
at all was one OF the varieties OF COM
mercial loan-the time loan on paper with
a single individual or firm name, The
opinion is ventured that New York bank
would be in better position to meet an