Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-12-28
CRISIS IN MEXICO
LIKE PANIC OF 1907
Scarcity of Currency Forces TEN.
porary Closing Of Second Largest
Bank in the Republic.
Special "Bank Holidays" Save Finan-
cial Institutions From Collapse.
Small Checks Only Paid.

NEW YORK December 27.-Monday
there occurred in Mexico City the most
serious financial event which the pres
ent unsettled state of affairs in the
southern republic has brought about.
IT was the temporary closing OF the
Bank of London and Mexico. the sec
ond largest banking institution in the
republic and the virtual suspension OF
cash payments against bank checks.
following Immediately on the issuance
Of presidential decree proclaiminS
that a legal bank holiday existed from
December % to January 2. This de-
cree meant that the banks would not
be obliged to pay checks. letters of
credit or other drafts upon their
funds. and that it would be impossible
to make their non payment within the
period fixed a question of litigation or
dame ges.
None of those dispatches which told
OF the event of the closing of the Lon
don and Mexico Bank called it a bank
failure" especially as it opened it's
doors the following day. If expecta-
tion is fulfilled. events will show that
the utter inability to secure silver and
gold currency was alone responsible
for the closing of the bank. Its man
ayers described the bank as having
excellent collateral. but maintained
that il was Impossible to secure cur
rency with which to pay depositors.
Like Panic of 1907.
In this, as in some other respects. the
position is not wholly unlike that
which arose in the United States six
years ago when practical suspension
of cash payments TO depositors oc-
CURED at all our banks, with certified
checks on Wall streets largest insti-
tutions selling for % cents on the dol
lar or, in other words, with premium
OF pc ccns on currency Ihat cpl
sode occurred because money was be-
ing boarded in huge quantities by the
people. Exactly the same thing has
happened. and for obvious reasons. in
Mexico. Even President Huerta's proc
lanation of series of special bank
holidays" reminds one of the recourse
adopted during our panic OF 1907 by
the governors and legislatures of our
own western states.
Only Small Checks Paid.
Our banks in 1907 continued to pay
out cash sparingly to depositors. and
never closed their doors. Under the
first uncertainty the Bank of London
and Mexico closed temporarily. 1t has
since reopened. but. supported by the
presidential sanction. the officials have
refused to pay checks of more than
10 pesos, a concession which they
consider SUFFICIENT to enable depOsitors
TO meet their urgent needs.
That this event has been a reflection
on the Mexican banking system can
not be maintained Until the disloca-
tion of affairs in Mexico by Huerta,
that system worked we'll Back in 1907
1t was subject to a severe test, and out
of the precautions made necessary
then grew the banking legislation of
1908, which imposed restrictions upon
all the banks of the republic.
Reforms Adopted.
Prior TO the year 1908. the banks of
issue COT which the Bank OF London
and Mexico was one) were led in some
cases to invest their resources in assets
which were not readily convertible. and
at one time the minister Of finance took
note of the narrow margin of cash in
the hands of the banks in proportion
form soon followed, and it is that re-
form which in the end should facilitate
resumption by the Bank of London and
Mexico
But the problem will remain, whether
the bank viii be able, as was ours in
1907. TO draw on the cash reserve of
Europe In the present unfortunate
condition of things in Mexico, this relief
IS not easy to obtain. Even the Bank
or France shut down for a considerable
time on payments of gold and silver
WIN he russian army was at the
gates OF Paris in 1871.