The Birmingham age-herald., 1913-12-12

TO furnish object lessons which teach val
liable lessons respecting some features of
modern banking In the United States.
Can 1t Keep Deposits?
The first point discussed by bankers in
this city is this: VIII the Munsey insti-
tuition be able to keep all or the greater
part of the deposits which were carried
by the trust company which found itself
in embarrassment two weeks ago?
Our bankers are inclined to think that
there are two reasons In explanation Of
the transactions either one of which would
be sufficient explanation. First panic
like attack by frightened depostors upon
the large trust Institution might have de-
veloped cyclonic proportions. The bank
ing fabric of the District of Columbia
might have been seriously although only
for short time imperiled. Therefore it
was the wisest policy for strong institu-
tions to cooperate with intent to prevent
panic.
In the second place, there was the prize
Of some 5000, 900 600 of deposits. Any as
sistance which saved an imperiled insti-
tuition to the extent at least of saving its
depositors from loss might be regarded as
fully compensated II the imperiled depos-
itors transferred their deposits to the In
stitutions which came to the rescue. This
is the most interesting question to local
bankers. They point to a number of eN-
periences in recent years which show that
there is no good precedent to justify the
belief that depositors will transfer their
accounts to a safe institution and keep
them there while. on the other hand,
there are examples of the transference IN
block of deposit accounts of one institu-
tion which liquidated or absorbed that
institution.
In Different Parts of the Country
1t is q curious fact that experience in
New York city is not in line with exper-
fence in other cities with respect to trans
ference of deposits. 1t Is the understand
ig in New York that some of the mergers
or llquidations or purchases which have
taken place in Boston in recent years by
means of which strong institutions have
taken over others not SO strong or so large
have not been followed In every case oy
the retention of the depositors carried by
the weaker institutions. Some of the Bos-
ton experiences are reported here to have
been not very satisfactory in this respect,
although in every other respect the trans
of liquidation was successful.
The Boston experience Is understood
here to have been similar to that which
in other cities followed the absorption by
a strong bank of one or two weaker or
smaller banks. The stronger bank has not
always been able to keep these deposits.
On the other hand, 1t has rarely happened
In New York that the absorption or mer-
ger or liquidation of one or more banks
by single large institution has not been
accompanied also by the retention OF
practically the entire lines of deposit.
When the National City bank 20 years ago
1iquidated the Third National almost all
i ut. -
transferred to the National City ard re-
tained there. 1t may be that one reason
for the success, from the point of view
of strength, which has followed absorb
ton or liquidation of smaller banking in
stitutions. is to be found in the fact that
the bargains were made in the open and
upon reasonable terms and the asests and
resources which were taken over found
to be of value and in many instances
liquid.
There will. then be in this city goo1
zeal of interest in banking circles CEN
tered upon the disclosures which viii
show whether not Mr.. Munsey's W
stitution will be able to retain all or the
greater part of the deposits carried in the
other trust institutions.
An Indirect Object Lesson
1t may be that this recent transaction
in the District of Columbia will be util-
lied to explain or to defend certain fea-
lures of the banking and currency bill
which it is now presumed will become a
law before the first of the year. One pro-
fessed object of that measure is to pre-
vent undue concentration of money or of
credit In New York. In times of panic
In the past, New York has been the only
city in the country where money could be
secured Elsewhere banks have been dis
posed In panic times, in fact II not in
name to suspend payments or to make
payments only in devious ways. In the
panic of 1907, bankers all over the coun-
try became very conservative. In some
instances they accumulated reserves rs
of their entire deposits. New York. on
the other hand, was depicting its reserves
at one time. the aggregate deficiency in
reserves of New York banks being q
that time high up in the millions. These
New York banks also sent to other parts
of the country almost all of the 100000 900
of gold which was within three or four
weeks imported from Europe.
The presumption on the part of those
who framed the pending currency bill has
been that if regional banks were estab
lished and If state chartered institutions
came into the system, then there could
be no panics, or if there seemed to be a
panicky disposition. the regional banks
would so act as to prevent its spread. II