The Washington herald., 1918-03-22
RESERVE BODY
HALTS PANICS
Holland Comments on In
fluence Of Federal Board
in Financial World.

W. p. q. Harding. one Of the orig
inal members Of the Federal Re-
serve Board. is understood to have
spoken for the board when he rea-
soned . few days ago with the
bankers Of New York. setting forth
arguments why the banks should
not establish interest rates for de-
postts that would result In competi-
don with the government. espe-
cially at the time OF the floating OF
new loans. There In no doubt that
In due time the banks will adopt
some method which. to use the
words Of the very able veteran bank
er. William A Nash. will serve ito
curb the disposition some institu-
tions have shown so to act as to
anect money rates.
Just at this time. In view OF the
stagnation In the securities mar
ket. there II. in comparison with the
days Of stock-market activity. little
demand for call loans The infiu-
ence of the government, the moral
force exerted by the managers Of
some of the leading banks, the atti-
tude Of q majority of the members
Of the New York Clearinghouse As
sociation. have served greatly to
change certain conditions or Gus
toms that prevailed before the Eu-
ropean war began. There Is to be
less disposition to take technical ad-
vantage of the necessities Of bor-
rowers
The Federal Reserve Bank will
exercise q restraining influence
upon institutions which. but for that
Influence, would be disposed to take
undue advantage of conditions.
Some of the changes that are un-
der way and some which have been
established. as 1t Is believed. per-
manently. may perhaps be best
suggested or illustrated by anec-
dotaI reference to certain things
that were done a few years ago by
some banks and by some lenders
OF money
Take for instance times of panic.
The best opinion now is that the
influence and authority of the Fed
eral Reserve Board at Washington,
supplemented as it is likely to be
by the great powers that are to be
given to a government institution
with a capital of S50O.Oo0.0oo. VIII
be sufficient to prevent any panic
and IL panic is prevented there can
he no recurrence Of certain drastic
or excessive arbitrary accidents
that characterized panics, especial
ly since 1854.
OIeott's Experience.
About two years after the late
Frederick P. Olcott became presi-
dent of the Central Trust Company
(soon to be consolidated with the
Union Trust Company. an acquain-
tance called upon him for the pur-
pose of asking his advice.
This acquaintance said that ne
had borrowed 100000 from man
Of capital and had given as secur-
ity stock of the Standard Oil Com
pany. The loan was represented
by, four notes, each of S5O.OO0. but
single block of stock of the Stan
dard Oil was given for security for
the entire loan.
Suddenly there came the panic OF
1854. Just at the time when the first
Of these notes fell due. The Dor
rover hoped that the lender would
show lenity to him and allow him
to renew the note but he found that
the lender. although esteemed a
personal friend, insisted upon the
immediate payment of s50.OOO. and
where was the money to be found?
Mr. Olcott. after considering the
matter for a moment. said that the
Central Trust Company would take
over the entire loan. But the lender
was not willing that this be done.
He would not transfer the loan to
the trust company.
He insisted upon the payment Of
the $4,000 note or else keeping the
Standard Oil stock. The result was
that he obtained at low figure
block of Standard Oil stock which
was worth a good deal more in the
market than the quotation for it
when he made the loan.
Mr.. OIcott, who was a somewhat
impulsive man. got very angry and
he never would permit himself or
his bank to have any dealings with
that lender. Such an incident would
be impossible now.
what James ). Hill Did.
The late A. B. Stickney, that Maine
school teacher who afterwards ven
tured to promote the Great Western
Railroad, constructed his line. or
part Of it. in competition with a line
owned by James ]. Hill. In the
panic of 1884 Mr.. Stickney found him
self in grievous embarrassment.
He had borrowed $4,000 from an
institution in New York, and pay
ment of the loan was insisted upon
ar. -Stickney was in despair. He
could find no one nor no bank to