The daily sentinel., 1910-10-08

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bly, not take place with the same reg
ularity as now If the banks did not
have branches or if they We're Obliged
to deposit security against their is
sues. Canadian banks are national,
not local. institutions. All but a few
of them have branches in every part
of the dominion, and these branches,
as fast as they receive the notes of
other banks, either send them in to
the nearest redemption center or con
vert them into lawful money or it's
equivalent, bill of exchange through
branches OF the issuing banks located
in the same towns The 29 chartered
banks have 2,200 branches, and each
bank is seeking, through its branches,
to satisfy all the legitimate needs of
the people for a circulating medium"
For from being a source of weak
ness, Professor Johnson considers the
lack of legal-tender quality and of a
government guaranty as a source of
strength to the Canadian bank note.
Bank notes, like bank checks are
mere promises to pay money, and are
more convenient than money because
they can be created as a need for a
medium OF exchange arises. When
either has done the work that called
1t into existence, it should disappear
from circulation and be redeemed. If
it is made a legal tender, like money
itself, or if its redemption is guaran-
teed by a strong government, there is
always the danger that ignorant
classes of people will regard it as
money itself and withdraw it from
circulation
The author finds that the strength
of Canadian banking lies in two fea-
tures-the elasticity of her note cir
culation and the solidarity or unity
of her system. Panics arise because
of the lack of cash. This lack is not
felt in Canada, according to the au-
thor, because when the stress comes
the bank can pay out its own notes,
which are Just as acceptable as law
ful money. Thus its reserve remains
intact. forming the basis of further
extension of credit. The crops are
ordinarily moved without the slight
est financial stringency. The circu-
lation Increases in the autumn to sup
ply the needed currency, and then
decreases when the demand is over,
the notes returning through the
clearing houses to the issuing banks.
Though the elasticity of the note
issue is an essential factor in the
smooth running of the Canadian sys
TEN, the author does not believe that
it is the most important factor. This
in his opinion. is the solidarity or
unity of the banking system. AL
though there is competition among
the banks and their branches. there
is much reason for regarding the
banks OF Canada as one institution.
over so per cent OF the banking bust
ness of the country is done by 6
banks. One of these 6-the Bank of
Montreal-has assets exceeding 20
per cent of the total banking assets
of the country, and is the depositary
of most Of the government funds.
! The law provides for bankers as
/ soCiation, which keeps its members
advised of all pending legislation
/ that might in any way affect banking
| interests. The long system of ap
, premiership required of bank man
| ayers produces experts. each one with
an experts regard for the opinions of
| his fellows. Consequently no mana
ger will adopt a policy regarded as
dangerous by his competitors. Be-
cause OF their many branches the
F., banks are truly national institutions.
; all equally interested in the prosper
ity of the country as a whole and all
equally well informed of the condi-
! tions existing throughout the coun-
try. "As result" the author says,
| Canada has a bankers opinion with
regard to the business situation as
| distinguished from the 'pinions OF
bankers in the United States" The
insistence of the banks that a man
shall borrow from only one bank.
Professor johnson gives as further
reason for the solidarity of the sys-
TEN.
J This solidarity of the Canadian
system the author illustrates by tho
policy adopted by the banks at the
end OF 1906 and continued through
out 1907. Canadian bankers as a
unit prepared for the crisis which
seemed imminent. They cautioned
their customers, over whose business
they exercise greater control than is
the case in this country. against TAX
ing additional risks. AS soon as pos
sible they contracted their loans, and
built up their cash reserves. In the
| crisis that fall, although the banks
for the first time i ma generation were
unable to give all accommodation
asked for, yet it is their boast that
mo man who actually deserved and
needed a loan was refused 1t, and
few borrowers were obliged to pay
an unusual rate of interest"