The Daily Ardmoreite. [volume] (Ardmore, Okla.) 1893-current, 1911-11-22
INTERNATIONAL L BANKER SAYS
ENORMOUS STOCK EXCHANGE
LOANS ARE DANGEROUS.
MAIN ASSETS OF A BANK
Should Not, He Says, Be Stocks and
Bones, Nor Loans on Stocks and
Bonds, But Should Go into CONNER.
cisi Paper-Nis Address.

New Orleans, La, Nov 2i,-"Wall
Street is ruler on a hcg OF csna-
mite, said Paul Warburg. the New
York banker. member OF one of the
great international financial firms. to.
day, in pleading for banking reform
and panic insurance before the Amer.
lcan Bankers Convention,
Mr.. Warburg said that the great
weakness of American banking, lay
IN the dangerously large use of Stock
Exchange collateral as the basis for
5ank loans instead of the use, as in
Europe, of commercial paper arising
out OF the normal day-to-day movement
of goods from producers to consumers.
THE main assets of a bank he
said. ought not to be stocks and
bonds, nor loans On stocks and bonds,
but commercial paper. But bank,
the deposits of which may be with.
drawn on demand at any time must
have assets which can be reduced to
bank credits within the quickest time
and with the smallest possible loss
Commercial paper and bank accept
ances form the main asset of European
| banks. These bills have the widest
| possible market, where millions are eX-
changed daily with margins of l-16
per cent or is per cent in the inter
est rate, without scrutinizing the pa.
Fer when the bargain is struck.
The mobilization of the promissOr"
note the system which enables Eu-
rope TO transform bills into bank cred
its as quickly as staples or securities,
is the explanation of Europes success
where We fail II banking system
as ours, is built up on promissory
notes which have no free market, the
Consequences must needs be that when
! deposits are withdrawn heavily, or
when there is a strong commercial
demand for money, that stock eX-
change loans must be called and hold
| ings of securities must be sacrificed,
these being the only available liquid
assets.
| This means great economic waste
and often calamity, for it is an abso.
lutely perverse system that expects
/ la normal investment demand, in times,
moreover when money is scarce, to
he able to supply a sufficient sum to
satisfy all the immense commercial
demands of the entire nation. More.
over. it follows that prices of secur-
! titles have to be so far reduced that
at bargain, or sometimes bankruptcy
| prices, an abnormal demand for Sc
curities at home or abroad must be
stimulated.
This method is rot only wasteful, but
as the past has shown us, it is most
/ dangerous. A modern system must
provide for means for banks to rely
upon their ability of marketing their
bills receivable, which represent the
! trade and commerce of the whole ma
ton In a modern system this can
be done without appalling losses, there
being no question of sacrifice of cap
ital in selling securities, but only a
question of difference in rate of in
terest in selling paper. Moreover. it
can be done without creating panic
since gradual liquidation of CONNER.
clal paper means a reduction of the
volume of all commerce and trade.
"Contemporaneous financial history
furnishes US constantly with illustra-