[.Volume XXV
THE CHICAGO B A N K E li
22
Trust Companies
New York City
Under Present Legislation
was to the possible needs of their brethren in the smaller communities, even to an extent unwarranted by the general conditions prevailing throughout the country.
The trust companies of New York City were to a large extent depositaries of the funds active and inactive of banks, bankers and financial institutions throughout the United States, and I should like every member of this association to appreciate just how promptly and fully these trust companies fulfilled their obligations to their depositors under conditions which have never been equaled. On January i, 1907. the deposits of New York state trust companies amounted to $1,084.376.517 and their total resources to $1,-365,245,430 and on January 1, 1908, following the panic, they had reduced their deposits to $732,278,460 and their resources to $1,012,747,-930. Taking the case of the trust companies of New York City we find that from the high record of 1907, of $1.017,813,344, on June 4th, their deposits dropped to $587,069,318 on Decem-
and seek employment elsewhere, and he would in the end have to meet similar demands from new labor in nine cases out of ten of inferior grade. It is I believe generally recognized that conditions which impose excessive wages are usually accompanied by a minimum of return on the part of labor. This would, of course, materially increase the cost of production and this is exactly what we find to have been the case, for it was reflected in nearly every known commercial activity from the railroad earnings in the United States to the far away diamond mines of Africa.
As in our private life so in our national finances, the year 1907 seems to have been one of exceeding cost and expenditure. The government statement at the end of the fiscal year, June 30, 1908, shows a deficit of $59,656,361, and the increased deficit for July and August amounting to $28,728,000 brings the total deficit for the preceding fourteen months up to $88,434,361, with reduced revenues of $65,000,000. The year preceding we had a surplus of $87,000,000. The government disbursement was $659,552,124, being in excess of the revenues in any year except 1906-1907 and $54,500,000 more than in the year when we conducted our war against Spain, landing armies in Cuba, Porto Rico and the Philippines.
With the first premonitions of financial disturbance came steady liquidation of American securities on the New York stock exchange. Europe was also experiencing its difficulties and was a large holder of our securities which they were influenced to dispose of through the agitation in the press and by the administration's hardly understood attitude towards corporations, federal control and individual wealth. England was struggling to uphold its national credit while its consols sold at 84. ¡-16, the lowest point reached since the Crimean war in 1848. An idea of the tremendous loss entailed to investors^ throughout the country with the attending shrinkage in credit and borrowing capacity can be gathered from the fact that the shrinkage of fifty active stocks from January 2, 1907, to August 26, 1907, was $1,235.084,738, and of this the railways represented $891,319,720, and the industrials $343,765,018.
How serious the disturbance in money was going to be was strongly brought home when on August 12, 1907, New York City offered $15,-000,000 of its bonds at 4 per cent and received bids for only $2,713,485, and Mayor -McClellan after making^ strenuous efforts to find a further market said "1 find that in the present condition of the market there are no takers of citv 4 per cents at par except contractors forced to take bonds in settlement of their claims.” Finally at 4/4 per cent an emergency syndicate of bankers guaranteed the sale of at least $20,000,000 of an offering of $40,000,000 and made the sale a success. 1 his action did much to give confidence to the financial situation as evidence of a disposition on the part of financiers to come to the front to support the city credit and relieve the strain. But such action could net stem the tide which was setting in.
Between August 22d and December 3d the national banks in central reserve and reserve cities lost $87,000,000 of cash, and during the same period the country banks increased their cash holdings: over $46,000,000. During about the same time the currency of the country was increased by new national bank notes, clearing house certificates through the country by $74^ 000,000 and by additional government deposits and gold imports aggregating in all upwards of $273.000.000; it can be seen how fully the response of financial institutions in the great centres
L. L. Gillespie, vice-president of the Equitable Trust Company of New York, delivered the following address before the Trust Company section at Denver last week:
In no history of human experience are cause and effect more clearly in evidence than when we have to deal with financial disturbances and their outcomes, although the resuks are dependent upon so many circumstances unforeseeable and difficult of analysis, that it is only after the events have rolled by and new conditions have been evolved and the hypotheses and conclusions have become realized facts, that the direct connection between each step and the final outcome becomes apparent. Thus it was that when we parted after our successful convention at Atlantic City last autumn, perhaps very few, if any, had any positive convictions as to what the com-ing year would bring to us of experience and trial, embracing the most violent and far-reaching־ financial disturbance that this or any other country has probably ever seen.
We must all now admit that there were at that time innumerable signs indicating that the conditions under which we were living and thriving were not all that they should be. One of our leading bankers, in a well-directed speech before the chamber of commerce of New York had referred to the currency laws of the United States as “disgraceful” and characterized the lack of elasticity in the currency as “barbarous.” Necessity not having as yet pointed the way, we were very slowly coming to the point where some remedial change was a thing of the near future and much time was being devoted to reconciling conflicting views on the most expedient method of revision of our financial laws, when an acute emergency intervened and. brought about immediate action.
The extravagance of this country and of the times in which we live is well recognized and is prevailing in Europe as well, and with extravagance go as a necessary concomitant material advances in the price of raw material and labor. At the same time the world was engaged in new developments and extensions of industries as never before. Capital was extended to its limit and was doing more work than it could in safety be depended upon for, and any unexpected withdrawals from it would be conductive to forced reductions that would be far-reaching in their results. There had also been in the last ten years vast destructions of property which had to be replaced. 1 he cost of the Boer war had been fabulous to England, and this was followed closely by-losses to both sides in the Russo-Japanese war and the internal struggle which ensued in Russia, with its accompanying unsettling of credits, hindrance to trade and depreciation of the value of its national debt. Then there was the great destruction of property in the earthquake and fire at San Francisco, and the natural timidity aroused byr similar manifestations in Chile and elsewhere. There was also considerable danger felt by many at the rapid commercial development in Germany where speculation had been going to great lengths for many years, and where heavy taxation and an overbearing military regime combined to create what might lead to a serious situation. Labor in the meantime had throughout the world become more insistent in its demands. It was as though the laborer felt that advancing prices and increasing production could never stop. Usually the employer of labor was too much occupied with the rush of orders in which prompt deliveries were of far greater importance than the prices demanded and' cheer-fully paid to resist demands for higher wages, and usually was faced with the difficulty that if he did not submit his laborers would leave him