The Washington times., 1913-03-10

WASHINGTON MAN
EXPLAINS STRESS
German Financial Stringency Is
EIucidated by Local Bank
ing Authority.

With the financial stringency in Ger
many now overshadowing financial af-
fairs in this country and causing a
slump In the New York stock market.
Washington banker today pointed out
the reasons why Germany's corpora
| ton and banking laws have at once
| made that empire one Of the foremost
industrial and commercial countries of
the world and also placed 1t in pre-
carious position in time of monetary
stringency, as is the case today.
The large interest 'of the German
banks in corporations. bringing them
intimately associated with German
trade, while enormously building up the
trade and industries OIL the empire, has
also made them liable to great risks
In times of financial crises, according
to J. Selwin TAFT, president Of the
formerly Washington manager Of the
International Banking Corporation.
The German banks" said Mr.. TAFT,
after deciding to take an intimate and
extensive part In the development or
the country's business by Identifying
themselves with industrial corporations,
realized to the fullest extent the danger
of Identifying themselves so closely
with interpretations as to compel a
share in practically all the risks OF
trade, and they went into the business
with their eyes wide open. They had,
of course, the experience Of England to
guide them. but although they protited
largely by 1t they did not adopt In their
entirety English banking methods In
relation to corporations as their policy.
Certain great London banks had from
time to time allowed themselves to be
the medium Of launching new COM
panies by offering their securities to
public subscription. Although they had
done this on large scale they did not
identify themselves with new institu-
tions OF the kind beyond the mere ennis
sion Of the securities. When the allot-
ment was made, usually week or SO
after the public advertisement of the
company's capital stock, the banks re-
mot so, however, with the German
banks. The latter felt that in their
country at least, in order to make is
sues Of securities successful. the banks
prestige behind them, and must not only
create public confidence by retaining
sufficient interest in the institutions
whose shares they had introduced to
the public. but must share In the con-
troll of affairs by having due represen-
tation on the board, to satisfy the stock
holders that their investment would
continue to be protected by every pos
sible precaution. From such a continu-
ance il inevitably happened that in
of Berlin were largely and permanently
interested In a number or important
industrial corporations.
This WAS, of course, from a strictly
economic. point Of view, a very undesir-
able condition of affairs, because 1t Is
contrary to all banking principles that
banks should be directly interested in
trade. The danger: Of course. was not
as great as ii would have been under
like circumstances in Great Britain,
where the deposits Of the banks are
much larger than they are in Germany,
and the risks In periods Of crises corre-
spondingly greater on that account;
still, in the periodic panics common to
cry great country the German banks
were found to be much too heavily and
directly interested in industrial cor
porations for their own welfare, and
panics in Germany in consequence of
this connection assumed degree of
severity from which they would have
been exempt had they pursued the
course of the English banks and refused
to be identified. beyond the point Of is
suance CT corporation securities, with
the development of such institutions.
THE German great banks, however,
remained steadfast to their principles
and ii is undoubtedly the case that IL
was through their instrumcntality that
the vast fabric of German commerce.
built up. The end in that way, has, in
the opinion of many, justified the
Eieans."
A good days business was done on
the Washington Stock Exchange today,
with Washington Gas chiefly active. A
total Of 207 shares of that stock sold at
prices ranging between ssh and SSH
Washington Railway common sold at
SR
Corcoran Thorn. vice president and
trust officer of the American Security
and Trust Company, will address the
Washington chapter, American Institute
of Banking, on Wednesday night on the
subject of trust companies. Mr.. Thorn
Is regarded as one of the highest
authorities on trust company functions
in the country.
In his market letter today w. B.
Hibbs says:
There Is dissatisfaction over the de-
clsion To postpone currency reform until
next winter. Some of the nose thought
ful men in Congress fear that disturb
ances of business may result from tariff
changes, affecting the moneyma rket,
and they believe II would be wiser to
frame some currency reform legislation
along with the tariff bill