The Nezperce herald. (Nezperce, Idaho) 1900-1957, 1920-12-16

eel TO eNcnange their paper lof golt
and consequently thousands OF these
banks, being unable to pay in gold
went down and took down with
them many business houses. Be
tween 1887 and 1889 there were 33,
600 failures.
In the interval between the close
of the Civil War and 1878 the coun-
try had another period of feverish
prosperity. The Government had
issued ereenbacks- that is, bank
notes which could not be redeemed
in gold and they were at a heavy
discount, although they were legal
tender. A great speculation took
place III the building Of railroads
and other enterprises and also in
gold itself The New York Stock
Exchange had what was known as
the "Gold Room" in which gold in
terms of greenbacks was daily trad
ed in just as though it were wheat
or cotton. Jay Cooke and Company
had been the leading financiers of
the Civil War; through them the
Government bonds had been market
ed and they attained position of
prominence greater than any bank
ing firm ever attained in this coun-
try.
On September IS, 1873, this firm,
which was heavily committed in
new railroad enterprises, found it.
self unable to meet maturing obliga-
tons and was obliged to announce
its suspension The people were as
frightened as though the earth had
caved in and as usual they ran to
the banks to get their money out,
and as usual the banks could not
pay, were forced to suspend, and Of
course tied up business. For three
months, scarcely a wheel in the
country turned and it was five years
before the people got back to any
thing lika.a normal basis. Then the
Government resumed specie pay
ments that is, resumed giving gold
on demand in exchange for green
backs. That was the worst panic
the country has ever known
The year 1898 was preceded by
great railroad expansion and gener-
al extravaganza and overproduc-
ton. A makeshift law required the
Government to purchase a large
amount OF silver each month, for
which it had to pay in Treasury
Notes, which notes in turn were re-
deemable in coin, but since the Gov
eminent was committed to the pol
icy OF maintaining the parity Of
gold and silver at the coinage ratio
those presenting the notes always
demanded and obtained gold. The
exchange resulted in a large profit
to the producer of silver and in
three years by this process the Urea
sury gold reserve dwindled from
Sl9O,O0,000 to $95,000,O0O- Follow
ing the panic Congress repealed the
aw in November, 1893. The acute
stage of this panic lasted about go
lays, but it was at least 4 years be-
tore conditions were right again.
1t will be seen that each Of these
oanics began with a sudden finan-
,ial shock and that immediately
people started drawing their money
tut OF the banks. They wanted to
get all of their possessions into gold.
o get their money jingling in their
pockets That is, they obeyed a
primitive instinct to return to the
lays when there were no banks in
Existence and each man trusted only
Iimself.
We cannot have currency panics
nless we have bank runs, and we
annot have bank runs unless a num-
er of people think that their mon
y IS unsafe But why cannot a
ank pay off all Of it's depositors on
Is not a bank simply an
Institution that agrees to receive
nd safely keep your money for
oug And such being the case, why
1t not always ready to repay you?
he Chief Function of Banking
Business.
A bank is not an Institution fo,
eeplng money. That is only part
Its funution. Long experience
as shown that in normal times
lere will never be, ON any one day,
demand on the part Of more than
JIo OF the depositors for their mon
7. 1t is on that average that, de-
osit banking is founded. The chief
lslness of a bank is to lend money.
I'd the money that it lends is part
It's own and partly that Of it's de-
osltors. 1t lends this money part
on securities and partly on prom
sorry notes of business men and
hers. Bank officers are presum-
to be able to judge the credit Of
ose to whom they lend The iudg-
emit OF capable bank officers is
very sound.
A Ii u on OH IL