The Richmond Virginian. (Richmond, Va.) 1910-1920, 1913-02-11
Mobility of Reserves

The hearings before the Glass committee
nave shown some divergence of opinion over
the problem of what is called Capitalization of
reserves. me Aldrich plan centralized bank
reserves. There is doubt of that 1t pro-
vided that the deposits with the National Re
serve association could be counted as reserves
1t called into existence a huge fund backed by
tangible assets and supported by a great horde
under single control.
mittee hearings, would be the reserve holders
under the inchoate plan suggested They would
nave no such great fund in one pile as the Ma
uonal Reserve association would be expected
to accumulate. but would they meet the
requirements which any financial exigency
would develop?
The purpose to be served by a reformed svs-
tenn of reserves is to strengthen the loaning
power of banks This is to be accomplished
whatever the machinery devised, through the re-
discount of banks holdings Of commercial pa
per Compared to this, everything else within
the contemplation of advocates of banking re-
form is Incidental Under present conditions a.
bank must stop lending when It's reserves are
down to the legal limit When such a condition
becomes general business stops, confidence Is
shattered, and we have stringency, distress or
panic
Would the regional banks make continue
ton OF loans under such circumstances posi-
BILE? They could rediscount; and their credit
accounts could count reserves. They could
pay out notes. They could redeem In gold.
They would be linked together in co-opera-
tive union under an uncapitalized advisory
board. Their sources would have mobility. The
relief of localized stringency would not be linn
tied by the power OF a single regional institu-
ton.
Isn't Capitalization. after all, a mere phrase :?
The accounts of one business concern in hun
dred banks are centralized in that the funds
on deposit have mobility. They be shifted
at will FThe regional banks would be in bet
ter position) They could transfer bank credits
among themselves without shipping cash. The
hnacal condition of the whole country would
be shown in the reports of all, and the condi
ton of each district would be shown by itself.
There would be all the advantages of CEN
tralizaton with of the drawbacks The
thing absent would he the great horde under
single control, to which could point with
pride the index of our banking strength
This could shake before the face of the
world evidence of our wealth We could
count on it's moral effect In allaying unrest and
inspiring popular confidence.
But the confidence is not the exclusive pro-
duct of knowledge of a huge horde of gold
gathered into pile. The sum of the re-
sources of the regional institutions would be as
much of an inspiration Once a week once
a month this statement would be published as
evidence for the doubters This sum would be
a convincing indication of natons financial
power because the reserves held would have
mobility They would all be at work when there
was work for them The operation OF redis-
count would not be interrupted and could not
be so long as there was forthcoming acceptable
commercial paper. Capitalization of reserves
is not necessarily physical The advocates of
a single central institution have failed TO see
that mobility of reserves is the essential thing,
one form of machinery.~-BanSing Reform