The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1913-07-15


We usually carry cash means Of A
per cent Of u gross deposits, so tina
a $100,000,000 deposit gives us a. loan.
ing power of 100000. 1000. To take ava,
from the banks of Chicago the re.
serves thus carried by its banks fol
their correspondents, or 5000, 0O0, 900
would decrease their loaning abilit.
s$12o,000,000. In like manner, tax,
away from New York city banks $240,.
100000 in deposits of this character
and o would reduce the loanins
power of the banks of that city $780,.
100000.
add to this the disturbance of bus.
mess that. would be. caused by a SINH.
lar and proportionate shrinkage in the
ability of banks in nearly fifty Other
reserve cities and in country banks &c
furnish credit to their customers and
will get some idea of the effec,
this redistribution of reserves will
have upon general business. We are
told that this shrinkage in our loaning
power is to be offset by the right OF
member banks to rediscount with the
federal reserve bank.
Offset Declared Ineffective.
Now, if we, in our bank, should car
ry a continuous line of ~rediscounts
with the federal reserve bank equal to
our capital, we would, in the event we
should lose our bank balances, still be
obliged to reduce our loans $40, 100000
TN order to continue to extend the
same amount of credit to our custom
ers hat we now do, my bank would be
obliged to carry with the federal re-
serve bank of our district ~rediscounts
in an amount equal to two and one
half times our capital stock. Can you
conceive that there Is a banker in the
country, worthy of the name, who
would think of assuming such an
enormous responsibility, taking the
risk of loss incident to carrying such a
large line of loans simply because he
could loan more money than he would
have, or to assure the success of a sys-
tenn of banking which. would give the
government the major portion of the
profits of such transactions? A system
Of banking, the success of which would
require that banks dealing with the
public should carry excessive lines of
rediscounts continuously, would pre-
ITCHY in u credits, and would defeat
the chief purpose of legislation on the
subject. . .
ut is only by running without re-
discounts, or at least with the average
of ~rediscounts at a low level, that the
banks operating under our system can
insure a proper elasticity in credit,
The larger and maximum lines should
never be- taken except in emergencies
when an unusual amount Of credit or
hank notes is needed to serve the pub
lie. and then such lines should be re-
duced to the minimum as soon as pos
sible.
eff the reserves of all of the ma
tional banks in the country, other than
those carried in the vaults and as pro-
vided in this bill, should be forced into
the federal reserve banks, it would re-
quire that these should be ultimately
deposited with those banks, as reserves,
the following amounts:
per cent of the $780,
100000 Of country bank
deposits, or NEUTRALITY-SUSPICIOUS.
10 per CEN of $1,933,000,-
200, the deposits of or
binary reserve cities, or. : $4,000, 600
per cent of $1,725, 600, 900,
the deposits of ordinary =
reserve cities. or ....... 172'OOO, 600
Total reserve of banks that n
would be required to be
on deposit with federal
reserve banks ......... $704 200, OUU
"In the event that under the discre-
IlUl1dIy "poWSIS VI Ia ASNCL oil NSS -
board 5 per cent of the required re-
serves of the country banks, or banks
outside of reserve cities. should be al
lowed to consist of balances with their
correspondents in reserve cities, 1t
would reduce the amount of the de-
posits it would be necessary for the
banks to make with the federal reserve
agent $169, 000. 900. leaving the total In
one instance $704,0 900, 900 and in the
other $685.. 000. 900.
add to this the 500, 900. 900 which
the national banks of the country
would be Obliged to subscribe as cap
,ital to the federal reserve banks n 1t
would make a. total in one instance OF
1904, 100000 and in another of $685.
deduct from these amounts $1s2,-
900, 900 that will be released on account
OF, the reduction of reserves required OF
banks in reserve and central reserve
cities, and you will have. $622,000.00
one instance and $453, 600. 1000 in the
other, which the banks of the country
would have to give up in cash or its
equivalent.
"It is only a simple problem in
mathematics for you to ascertain how
much the national banks of the coun-
try will have to contract their loans
when this amount is withdrawn from
them. After having arrived at a con-
cIusion on that point, you will readily
see how much the aggregate red1s-
counts Of the national banks will have
be to prevent a serious contractor
in loans.
Hits Large Borrowers.
''Then, too. under this distribution OF
reserves where would our large bor-
go for credit? The banks,
though carrying their reserves in the
centers, furnish the largest volume OF
deposits against the smallest percent
Of loans, while corporations, indi-
viduaIs and firms who are borrower
furnish smallest percentage OF deposits
to the largest percentage OF demand
for. loans.
Take away the reserves we now
carry for our correspondents ana you
away our ability to furnish large
amounts Of money to one borrower.
Where. then, will those who require
large amounts Of money for the con-
duct of legitimate business so TO Sc
cure their accommodations
''To my mind, this is a subject a
concerns the business man much more
1T does the banker; especially
since. as have before stated, the ef-
OF whatever changes are made
must ultimately fall upon n be borne
by the people.
II do not, of course, assunle 70 De
lieve the passage of this Dill Y
take away all OF bank balances,
because most bankers carry casn
mea largely in excess of2 their iegai
requirements, and, besides, many q
our correspondents may not join the
system: in which event their balances
would remain undisturbed. + cannot,
tell definitely to what eS-
tent our deposits would be affected by
tha aanntinn az he plan embodied in