[Volume XXV
THE CHICAGO BANKER
6
Pittsburgh has 31 National Banks, 25 State Banks and 38 Trust Companies, with total deposits of over $360,000,000. The oldest of all these
financial institutions, having been in continuous existence for 98 years, is
1. H. RUSSELL
1st Assistant Cashier
J. D. AYRES Assistant Cashier
H\e
Rank of Pittsburgh
-L/Natioira! JLAssociation w׳
Surplus $2,800,000
“THE BANK THAT HAS GROWN UP WITH PITTSBURGH” ESTABLISHED 1810
WILSON A. SHAW President
JOSEPH R. PAULL
Vice-President
W. F. BICKEL Cashier
Capital $2,400,000
.	.	President
. Vice-President .	.	. Cashier
Assistant Cashier Assistant Cashier Assistant Cashier Assistant Cashier Assistant Cashier
$30,000,000
C. H. HETTIG .
W. B. WELLS
G.	W. GALBREATH J. R. COOKE
D’A. P. COOKE R. S. HAWES
H.	HAILL .
J. F. FARRELL .
3rd NATIONAL
OF ST. LOUIS BANK
Capital, $2,000,000	Surplus, $2,000,000	Deposits,
---------- ACCOUNTS SOLICITED -----
business; or they must in the fall eat into their reserves and undermine the safety of the system. In one week last November the Imperial Bank of Germany issued ioo million dollars of credit currency notes to exchange for its other credit obligations, (being about the amount of gold imported into this country, to allay the panic). In this country while banks may issue book credits for deposits, even though such credit is assured in lieu of a deposit of circulating notes, yet the vital function of exchanging credit notes for both credits, such as is enjoyed by the German Bank, thereby preventing trouble, is withheld from the banks and therein lies the principal weakness of our system.
I believe that a currency provided with sufficient elasticity to overcome these defects will add much to the stability of our financial system, and in a large measure aid in preventing future trouble.
One of the most important points taken up by the currency commission was brought out in the earliest discussion of the subject, that being whether credit currency should only be issued in panicky times, when general distrust was abroad in the land, or whether there was also a need for the issuance of special currency to take care of the unusual conditions which prevail in certain seasons. In a word, whether we should establish a currency responsive at all times, in seasons of activity or seasons of panic, to the demands of commerce for it, contracting and expanding automatically taking care of such needs, or whether we should issue a currency to take care of emergencies only. In other words, a panic currency.
The words “Emergency”—“Panic,” are I am sorry to say, somewhat familiar to bankers and the business public. I believe they have been the cause of more mental worry and loss of sleep than almost all the other words in our vocabulary. Just as these words are unfriendly to our ears, so does the character of money which they represent grate upon the intelligence of economists and students of this subject.
It seems to me one might just as well attempt to quiet a mad bull by flaunting a red cloak in its face, as to undertake to quiet a depositor who is thoroughly inoculated with the germ of “lost confidence,” by publishing the fact that a bank was taking out a high-
why should not currency—another form of credit—be given the same freedom of issue to meet the current needs for it?
The volume of the United States notes is fixed by law and cannot respond to unusual conditions which come up through expansion of business and increased needs for currency at given periods to move the crops, etc. The inability of banks to use their credit as freely as any other corporation, although subject to much greater demands, places the banks in a very awkward position. While the supply of money may be sufficient, we cannot marshall it to meet the requirements in different localities.
As fall approaches, New York and Chicago will be called upon for currency that they must provide. In 1907 New York shipped to the interior $420,000,000 and received from the interior $306,000,000, a net loss for the year of $114,000,000. Chicago shipped to the interior in 1907, $169,000,000 and received from the interior $120,000,000, excess shipments being $49,000,000. In total the shipments in and out of New York amounted to over $726,000,000 and the total shipments in and out of Chicago amounted to about $289,000,000.
This demonstrates the currency requirements of the country and it seems to me our present system, compelling such enormous shipments of cash for the purpose of providing only a medium of exchange, which might just as well be based upon the credits of the banks and be issued by the banks, saving a very large amount of the transporting expense and making it quickly available, is not only unwise, but unsound.
The paramount feature of our present system is this lack of mobolity in our credits. It will be admitted by any one who has given the subject any thought that money conditions in this country are at a violent variance with conditions prevailing in other countries. Interest rates here range higher and lower than in any other country. Every fall we have a season of unnecessary expansion and activity. This is occasioned because we are not equipped as are other nations. We have no elasticity in our currency. In order to be in a position to furnish actual cash to move the crops, banks in large cities must carry a reserve throughout the summer, which would amount to contraction and would not provide a profit sufficient to encourage capital to engage in the banking-
eight millions of dollars beyond the requirements of the government, and with over 950 millions of dollars of gold in the United States Treasury, the Bank of England was selling us basic metal at a profit, although its total stock of gold at that time was only about 165 millions of dollars?
When we consider that the international transportation of products throughout the world is based upon London exchange, and that all settlements of balances of trade are arranged by remitting drafts drawn upon London, that city being the final place of payment, also when we consider that the financial stringency was world wide and that the foreign banks of issue were endeavoring to keep themselves in a strong position, this sale of gold to us with such limited quantities in their own vaults was all the more surprising, and now that the panic is over, this same gold is being returned to London practically without cost, demonstrating the flexibility of their note issues and their superiority over our rigid irresponsive currency.
Instead of a properly regulated credit currency, secured by a gold reserve, which would be retired as the gold is shipped out of the country, the gold being decreased and compelling retirement, our exportation of gold at the present time in response to the requirements of trade (about $35,000,000 having been shipped up to this time) has not had any effect whatever upon our bond secured notes.
The commerce of our country has been seriously retarded through the lack of contraction and expansion in our currency at times when greatly needed. I think that a method of basing our currency upon the assets of banks secured by a gold reserve rather than upon an unstable, fluctuating, uncertain government debt, limited at times only by the ability of the government to borrow money, should appeal to all.
It is contended by many that with a per capita circulation of about thirty-five dollars in this country, we have sufficient currency, if properly handled, to meet our needs. When it is considered that there is no limitation placed upon the issue of checks and drafts, the credit medium of exchange, which occupied such a prominent position in the financial affairs of this country and which automatically contracts and expands to meet the current needs—then