The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1912-06-25


Clearing House. II was found in tho
first place that the idle funds de-
posted by banks outside of New York
are used as n basis for stock t-ansac-
lions in Wall Street. In other words,
the New York banks lcnd the funds
sent them by country banks Ia the
shape of call loans with sto ,lss end
bonds as collateral The surplus
funds OF tho country ere thus used
to build up huge structure OF credit,
which often is the basis of soecula-
ton
The second important point devel-
oped was that whs1 anythior hap.
pens to impair confidence in New
YORK or cause u financial panic. the
ne" YORK bankers arc not only UNI
aole to enforce the payment OF their
own ioans. but the banky OF Other
cities and towns find it impossible
to withdraw their funds which are
on deposit In New York The result
Is that financial breakdown of any
Importance In New York or in any
other section of the country almost
inevitably results in widespread dis-
aster. The need is, therefore, apoar-
eht for creating some reserve agency.
which will render unnecessary the
present feudal dependency of inter-
Tor banks upon New York and at tho
same time provide facilities which
VIII enable the banks as whole to
cope with financial panics and crises.
Another exceedingly significant
phase of the banking situation was
also made evident when the testimony
developed tho fact that it was the
money deposited by tue government
In New York banks which had checked
the panic of 1907. The Importance
of this disclosure was not that 1t
ran counter with tho generally ac-
cepted notion that 1t had been the
generous action of p. Morgan &
Company, in freely making loans dur
ing the critical period, which had
averted further disaster. The real
Importance OF this testimony was that
it showed the injurious effects of our
present independent treasury system.
The United States government be-
in 1916, after 1t had unsuccessfully
attempted to use state or private
banks for the receiving and disbursc-
ment of government revenues For
more than ffty years the practice of
the government in safeguarding and
disbursing its own funds has been u
thorn in the side of the business and
1,g,, l.
dustry are active, funds accumulate
in the national treasury and are I'M
available for business UNDERTAKINGS
When panic occurs. money is locked
up, as in 1s.., which should be avail
able. In other words. the independent
treasury system has had the effect
OF seSregating resources which Should
be used for business and banking
purposes. That there is serious
need for Legislation providing for u
proper government fiscal agent Is ap-
parent.
The claim, which has been given
such wide circulation, that the New
York Clearing House by It's fees for
collections is unjustly receiving S.
oooUoo each year, was not borne out
by the testimony. 1t was found that
the clearing house banks in New
York. just as is done in other bank
ing centres. were merely charging
fees to recoup themselves for the in
tcrest lost on money paid out for
checks which must be sent TO other
localities for collection. and there is
very little, if any. profit In this prac-
iice.
In general, the testimony before the
Pujo Committee has SO far served TO
emphasize some of the most important
defects in our national banking laws.
| 1t is 10 be hoped that this additional
evidence of the need OF reform lesis
lation Will meet with prompt action