Show onIS UNDER NATIONAL SYSTEM Monetary Commission Issues i Statement of History of 01 Crises Under Banking Regulations RESERVE OF LENDING POWER 11 I mitt f of uC Iii ne rin Ii ii I iti Summary of ii r Hank Hanking 1111 ing III I history Washington July Jil The mom mOlt im summitry of lt it the tho banking history of ot the tie KII urle of sr hIs 1818 isi 1 1114 1 11 1997 1907 JIT which lists it t t bon e rii prep r l 1 It Is In itt II a tt I by Prof O 0 OM 1 M 1 i W TV of ot It has Ile just JUel lx I ii I I public bUe by b tile thu lio national Prof Kue not nol only enters Into Inlo n a 1 careful analysis covering e ll butt huu hUl fined pages of IC f the banking cud and history of uC those thoM events event but bitt pre nt cia II In Imi II nn an 11 appendix ov of ut if the tha most artIcles which have bruit been hn ll on un these the nub ahi Jet by h of ot the thu treasury und uld comptroller of or the tite currency and Ind by such euch nn tie 0 Mr 11 A 1 I l Ni of th the Now Nol York Io Post t Dr Hr A Andrew now flOit secretary of nC the Ih I I nd tile th of nf tho thu York bonne commit committee tee 11 I sc ie clearing teeThe The account of nr the crittis of oC 1907 OT will wil attract the of ni the tue Ih recent ditto of the ov nt the lite III manner me titter In It which Prof Sprague discusses he hi h describes an as f defects In iii titu th existIng monetary He Ifs I declare that tilt rill Ih the judg d by Ii h tIle the Ih I lIR I 0 of or tile tho th 11 were sar 8 In a normal condition of strength and ald that thorn of oC New ew York mid nd St SI StI I were scene In lum a slightly stronger con condition Cl dlton In Itt II 1107 11 than Ihan In It rhia rh up I ti waid wal of lon lonne nan was wan 11 not si 1 marked luk In Ill New York Vork ns at 11 In Itt this the th cn 11 of C the banks benks In Iti 11 general Tile The TI of or New e York l hank loan In ill II 1 was waA nearly SO It 2 per par 1 rent of all 1 tile the tl loam of tho thin national banks while hil tile the th In iii 11 1907 l i wait waa Ju just t above 15 16 I per pr cent of oft the t total lold The Tho increase In tho the of state banks and trust trul companies however how 11 held h t by b thin th or New York lenk wal was as striking and una Prof thinks might well ell have hae been alarmIng In 10 years 1 froth from 1597 1 to t n 1007 the Ih net mist deposits poU due dos dUl na national ni banks by hy those tho of oC Now New York York In reaped from tutu om IO to while hil net nt duo due 10 to 10 state all banks trust companies etc Increased from to U Prom A n little littlemore l te temor more mor than n l the th aggregate of ol banker 11 m In II U thio V i I H WJ to 10 those thOM lut lot to 10 MI tie the national beaks bok The e f ease n with tl hh the tho tie of oC the T made possible the th shifting of oC tens rf rr millions of If loans Jal and depo lt seems Im to lo bites hl oh almi tin the th e nature of 01 the tb situation WOULD WOUD HANnI Prof out If It for fir Ii I It should become Y for this Ih trust to 10 their banking op nH It I would be for Cor tile the 11 I bunks banks to shoulder tits the burden In order to save 1 the Iho lo local al 11 situation There her was ira also 11 the time element of oC outside e cull 1 muted In 1 to 10 amount to nt lit lt le tnt stat Time The outside banks bank It I U It I de te Ihli feel fee no re r for fOI this the course nf or o the Ihl market They The will wi nal tuat Ial ul withdraw from It I when hAI affairs at al home hor require more dome 00 of their fund or o when they come oe to 10 t distrust time the th future It 1 therefore becomes ome tar for Ih flu local bunk blinkS In iii the money renter center to b bable bu able at t nil 11 limes Ine to 10 shoulder at least n tl apart part of this the loans losne which may flIPs Y be bp liquidated dated bv by tn banks bank bak and Rd all amp lv li a supply tile the ca shi h which la iti thus drawn a Taking up the Ih relation between this Ihl New York banks bk themselves Prof Sprague points nut that the Ih seven n lead I lie bauh bul controlled In Iii II 13 only Ol about 90 IA pei Irr cent ceat t nf of the Ih resource of or n all I the New York batik banks In 1907 mime Uie 0 alK Alx principal banks the rity Clr It Com Commerce son merce I First Park Phase base h 1101 controlled over 0 60 0 per ncr cent lt of the t total Their rash cash IRh reserve r hal baj ha Inci In rId eased from fr m leeS ecu 1 Ihn to 10 about of oC that held by nil all ni the th banks The Th h net itt 11 obligation nf of these there th six Ix hanks banks to other oth linker lk on tin Attic Aug Al U II 1 1907 07 wee was WAi J out Olt of ur a I net lt obligation for this the IS 3 1 na tie national 11 hAnk banks of oC this the city of The TIm Th only 01 certain resource tar for bunks banks holding large Ir hankers bunkers deposit dIJ I I us I a large cash esh reserve antI and that thAi 1111 Prof says was as a conspicuously heckleS In iii 11 lt 07 UK us 1 It hail had been In III In Iii II both boll years year net bankers banker deposits well nere more than twice the th cash cah re me rl serves of these themie banks bank and anti their pro proportion portion 1 of n ca cash h to net deposits was 1 but bil slightly above a p the I 25 per pr cent required by hy II law II The nh a 1 reserve 1111 of all 11 banks bk wee was w of nr whIch the lii Ih six 11 leading banks held O It 1 In Ii declared that as is I few f of o tits thu UI trust corn com companies Im snI held cash ah reserves In receiving deposits from them Ih the Ih bank were as assuming suming a R risk II k of nf a s particularly ulo its alve character hut but hit they did not on en thus this maintain rv greater than those held In former fornier vears ar T OF 01 WI After rn n ii lively account of or the tho felines failure of nf the Morse 10 banks end and n the therun Ih certain trust It ItIs ittu run ruin upon trl I Is tu 1 declared that but for the Ih powerful Influence of oC If Mr II J 1 P I Morgan It I Is I probable that thal no united action what whal whatever ever pr would have ha been taken anti and tat tatI It II I U Is I certainly In Mn n element of weakness In our dir central money market that In Influential rt Institutions should have to ie t be us b Into Inlo doing doln what ht In Is aft after tt er Cl all iii In iii their own 00 Interest as al well 1 a ato aIn ii to In the th general advantage p When hAn It If ions f derided to In limos Issue tUI loan lean lOn certificate anti to e each sli h It I wan In Iii 11 pursuance of nr a I tradition which whit Is I an anever a ever vr present source of nr anil 1 which thIh wh Prof tIU says I ruin can r n only IM iv hI by his tl successful endurance by the Ih blinks banks ni nf of this the II strain of fr n ii crisis crick 1 The This opiniOn Is 18 e 1 r re d that there can Im al he be h little It limit thit th to of I r this the th general ec n w Wil was v 1 l I Os nh In InS S cw York nf of ihN 11 Is I found In the limited nl of bank bankIng Ing lo which UM and Ind this the tl short chart duration of nt general generel In business bo de depression 1 with either Ins 1ST nr or contrasted lh I 19 In the actual management nr ef f the Ih r I It N I that n nf or e rash li h payments l wa was e eH H rl anti In 1 that tha the additional nines money secured after suspension served tin IKI urt nl purr Nowhere throughout the country countr wn wes a titers there any ant tn e Increase In national hark hank leans n except In n Vew ew n York ork where the t 11 hy y yo o from to tn S POO In oven Ian previous period of finan financial cial eal strain tho New Tork York banks banka hod h been able to In rout contract me I loans loan In 11 the trust situation company Il ll I on theta to It liquidate loans loan pos le and the followed the th same caine oare course COlli CALl cU CALlOne LOANS tONI One 00 of nf the lessons drawn by b Prof fn l front from the experiences or of na cc national n banka In fit II the th absence abonce of oC ties ness 8 In mill call Mi menu n Out of oC a total loan Increase nf or t SoO call 11 nil loans account for rr or 1400 This The only kind of nr loan which won was U reduced nl nt nil all 1 was A one of oC the lbs varieties of commercial loan the tints time tm loan lon on i paper aper with until a 1 tad Indi Individual vidual nr or firm nr name nanie lam The Th opinion Is I ventured tutu that I a New York bank hank would he be In n R better position to an Il If it nil all al Its I loans were r upon commercial taper It I la is under tinder ex cx circumstances though of course It I not irni 11 then Ih l hi b In III position to 0 slide Ile along just above 1 the h X 36 Ir er cr cent nt requirement n normal tImes time In hi hit final c conclusions in n 1 the Ihn lessons 1 of nf til HI cHat Tr Prof f Sprague S declare 1111 In Ill tile the Ih banking system In of or o a R country there should be lie 11 a us reserve nf of lending power er end It II should b be r found In Its ftc lt central market marketAbility Ability In New pl York ork to Increase lor Pains loons n and nd In to meet mI the th demands nf or depositors fir fr pr money would wI have h allayed R IRI every I C t nl the th establishment of nC the banking hanking system Provision for f or such re reserve orve power may ma doubtless doubt be made mat In n ft 1 number of C different ways wa This tR Investigation Int will 11 have hass served lt I its purpose If IC In tn showing chewing the this causes fu r consequence nI n of oC ittu l absence hene n 1 the past t tIt It I brings brines home bonus hon to the reader the Ihl need not mint only of this reserve power but al also all r nf of r the th readiness to use It U In future |