Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1911-11-14
NOVEMBER

when uniformed persons begin to
draw cash for their demand obligations
at bank, of course all can not get It
The bank has sound assets in the short
time paper on which the loans are
based; and this paper represents goods
which. IL business continues normal
and sufficient time IL allowed. will al
way liquidate the loan. But no reserve
can ever by any possibility equal all
the deposits.
Can't Lend When Leans Are Needed.
Under the present system Of rigid
laws, banks find 1t Impossible to lend
just when loans are most needed.
When Q reversal Of business comes.
men ought to be given time to dispose
of their goods and securities without
the frightful loss due to forced and I'm
mediate sale. II legitimate business
men can be given loan, and time to
wor kout of difficulty, ruin is avoided.
The safety Of the industrial and busi-
ness world depends upon the power of
the banks to make loans. Under our
present banking organization absolute
ly destructive conditions arise, as soon
as danger appears. Whenever need
less demand for cash arises-from
either individual depositors or from
correspondent banks-it, draws down
reserves. The legal ratio Of reserves
to deposits is quickly reached (and in
fact usually over -passed), and the
lending power Of the banks is strangled.
This is a crime against society. 1t is
Numerically opposed to the practice
of the advanced countries Of Europe.
In Europe, in an emergency, the banks
increase their loans, and their deposit
Cor note) liability. and at the same time
pay out their reserves: that is. they
work to aid the business public. In
this country, we slam the door in the
face Of the borrower just when he Is In
the greatest need. This Is why we
have panics which other countries es-
cape. This is why the great business
world is now demanding reform in
the interest of the borrower and of the
workingman.
Other Serious Defects.
Morever. there are other serious de-
fects to be cured. We have today a
practical Capitalization OF credit, which
is very undesirable. Precisely because
we have had no organization Of credit.
we find the small bank or the small
borrower, at the mercy Of the big fell
low who has the power OF great bank
deposits under bis control. Much Of
the talk about "Wall Street" and the
money power is no doubt exaggerat-
ed by those who are largely ignorant
of the facts. But there Is apt to be
some fire where there is 80 much
smoke. One does not need to be very
to know that today. In times
of pressure, certain persons or insti-
tutions are favored to the neglect OF
others who have quite as good bank
able paper. When financial up
heaval comes, the bank having large
resources has Its own troubles. Of
course; hut, at the worst, It can pro-
tect itself by sacrificing some OF Its
customers. It L. the small -institu-
ton that must 90 down on Its knees to
seek help, as. favor. from those who
grant it. This 10 the situation which
excites 80 much irritation in the minds
OF thinking business men. In othe1
words, exactly because Of our lack OF
an organized banking and credit sys-
tell, We nave q SlludtAOH Au VIA
questionably. the strong more or less
dominate the weak: in which central
control over credits is practical
fact: and in which the central control,
being unauthorized ana irresponsible,
is difficult to locate and harm ,ss. Now
and then we hear opposition expressed
to a central bank; but, curiously
enough, we do not seem to realize
that we have today Capitalization
of the most effective kind Because
we have no regulation of credit. we
have no liberty for the small borrow
er. Therefore, what we must now
strive for-as in all other great demo-
cratic movemeEts-is liberty under
law, to the end that all banks-large
and small-shall be placed on an es-
equal footing.