Connecticut western news., 1912-04-11
CANAAN B. M. A. SMOKER.
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l mean, and often does mean, that much human effort goes unrewarded, because those who would make use of it, or who have made use of 1t, are unable to pay for it owing to the banks failure to grant them loans,
 Take the panlc of 1893 for an illustra- tiOn-Of how important bank is to one and all. When the banks of the country during that upheaval were unable to comply with their customers requests for loans, upwards of two million labor. CTS were thrown out of employment and rendered powerless to find a market for thelr labor. And several millions more only managed to dispose of their labor at a reduced price.
 Tine millions who were out of employ ment and the debtors who could not col l lect their claims. because the banks were unable to lend, curtailed the na- tiOn's purchasing power and brought loss TO the property owner, farmer and factory operator alike.
 This experience proves that sound banking and monetary system, which would avert panics, prevent gigantic losses of employment. and ruinous shrinkages in value, is of vital moment to the farmer, the manufactures, and the property owner.
 In 1907 we had the worst panic in our history. When the banks suspended cur rency payments and money was selling at premium, what was the discovery made by the wage -earner, the farmer, and the business man?
 Tine wage-earner found himself out of employment through no fault of his; the farmer found his country bank unable to give him his own deposit Tn currency, and emphatic ill it's refusal to give him credit in the form of a loan. Conse- quently he could not move or dispose of his crops, and his cotton and wheat did not reach market.
 The small business man found his credit utterly ruined. Unable to meet his obligations when they matured, because bank accommodation was denied him, his bankruptcy speedily followed.
 In the cases cited, the wage-earner could have been employed, the farmers produce could have been marketed and consumed, and the distributing power of the small business man could have been engaged, were It not for currency stringency and construction of credit due | A. hxy hor r,LyC kn their customers badly needed accommo: dations.
 In commercial banking fully 90 per cent. of banks transactions are done by means of credit instruments, titles to money, such as bills, notes, drafts and checks. The merchant gives the bank his note and the bank gives him 8 .'credit' in it's books. This credit he transfers by check to others in effeoting various exchanges necessary to his busi- ness.
 I The bank. therefore, is "credit" rather than money" institution. It deals in credits It exchanges or "swaps". it's credit for the individuals s credit ana cOunts HIS hOIe dS ueposlG asset.
 The speaker told of endorsements arising from effectively organized banking system, and from the scattering of the reserves-proportions of deposits which a bank must keep on hand in cash-among more than 1000 national banks. This reserve, by the National Banking laws. must not be impaired; if it is the bank must stop lending.
 Thereupon, it "calls" it's loans and re- fuses credit to it's customers. Its debtors 20 to other banks for the money to pay their loans, which, in turn, puts strain on these banks and raises interest rates to the embarrassment of the small mer- chant or trader.
 When the banks begin to hoard cash in this manner, distrust sets in and busi- ness confusion and paralysis follow. De- positors rush to get thelr money and. in this way, preclpitate panic.
 Factories shut down, banks suspend, workmen are thrown out of employment, orders are cancelled, and production and distribution are arrested.
 It is not true that our banks are with out sound assets; but it is true that they cannot use these resources for public necessity. The reserve obligation forces them to amass cash-of which oar SUD- ply is limited; and with no facilities for the conversion of their sound commer- cial paper into currency-suoh as Euro pean countries enjoy-they fail in their function as credit institutions and be- come mere money warehouses.
 Production is arrested and industry stands still. Human effort is denied an opportunity to labor, and trade, which is founded upon it, is prostrated. Thus bad banking system is a penalty on every citizen.
 The main changes needed in our pres ent system are so obvious that there can