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Deseret evening news. (Great Salt Lake City [Utah]) 1867-1920, January 23, 1897, Image 14

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A Ohat With Controller Eckels About National
BunkfeThoir Profits find Their Losses
The Question of a Iintc The Causes of Tank Tailures and Hard 1 for Rank
Directors What Uncle Sam Makes Out of the Banks What Our Govern
went Debits and Our Interest Account hckels Speaks of Jresi lint Cleveland
and the fond Itsuet Are the Banks Safet lloM They Are examined The
Great Credit Uustness oj the IDold I and my lie Do Not Med More Money
The Hard Times Their Causes and the failure
Copyrighted by Trunk G Cirpenlor I
anoint CorrcftpondeDre of too NEW I
WASHINGTON D C Jan loth 1897 I
W ° di RE we on the edge
l IJ of i panic
1 S tat m I we have n
21 1 Y repetition of I the
+ l n rt a t I troubles of 1893
What do the bank
r 1 gi
at v failures ol the past
j two months mean
T h b s e question
tire uppermost In the minds of our bust
ness men The last great panic had to
do with banks rather than with business
and commercial establishments The
panic ol 1872 was almost altogether a
business I panic wi was the same itu
the financial troubles ol 1854 and also
with those of 1890 ioTbe panic ol 1893
ke 18r
was a bankers panic Banks ot all
kinds failed National banks state
banks and private banks went down
Within ten weeks beglnnmj May 1893
one hundred and sixty tics national
banks closed their doors Fifty I I
ot these had to have receivers appoint
ed for them and the others were only
allowed to resume under conditions im
posed by controller of the currency
At this time the people lost confidence
in the banks Thousands of men with
drew their money and stored it away In
safe deposit boxes Today businessmen
men arc watching t I I the bans as they
never have done belore and the real
condition ol such institutions is a matter
of vital interest to all classes of our
The man who knows more about our
banks than any other is Mr James H
tickets the controller of the currency
lie it In tact the great financial nerve
of the United tales He has his feelers
reaching out to the banks of every town
and every city Hundreds of millions
of capital and more than a thousand
million ol I dollars ol deposits owe their
safety largely to his care AH the
national banks hate to report to him
and he has a large corps of bank ex
amines or hank detectives who are
moving about over the United States
and writing or telegraphing him daily
as to how our fimncml institutions stand
lie Ii l in i close touch with the greatest
financiers of the country and the toast
change In our financial condition Ii 1 al
most felt by him before it comes to pass
Mr tickets Is I a financial geniui He
has I one of the clearest and coolest heads
that has ever presided over millions in
the treasury department Still helooks
like a boy He does not appear to be
thirty hough I venture he hat passed
the forty year mark lime ago He
makes you think more of an overworked
college student than one ol the most
responsible i ofhciaU ot our government
fcolil il
d his fcol intellectual smooth shaven
face shows the refinement ot a scholar
rather than the gros beefiness ol the
average overfed politician
The first question I asked Mr Eckels
when 1 met him in the treasury depart
ment today was that which begins this
letter It was as to whether we arc not
on the edge of a panic Mr Schools re
I think not I don t see any occasion
which suggests that a panic Is possible
much less probable It is true there
have been a number of bank lailures
since November tat but with he I ex
ceptlon of the National Hank of Illinois
in Chicago the national bank failures
have been unimportant bullion to capl
Sal and deposits The number of failures
has also been slight At the close of
the report year ol 1896 we had 3679
national banks and since that dale
several new ones have been organized
Of this number only sixteen have closed
their doors within the past ten weeks
This Ins very small record as compared
with the first ten weeks ol 1893
What were the causes ot the ail
ores I asked
rhe lailures were in each instance
brought about by local condillons nod
local causes They resulted either Iro11
internal bad management or from the
accumulation of assets during a boom
period These boom assets under the
financial depression which uc have had
during the past four years have not been
cOnveuihlu Into cash They were not
goo l assets In other word and the
same banks with the sane character ot
assets in the same management woulj
I believe hive filled sooner or later
during a period of ordinary business
conditions It can be confidently
argued tint the recent failures do nut
indicate any such changed condition in
the banking world as to warrant any
suggestions ol a panic On the other
hand our returns received under the
last call December ilh 1896 for a re
port of the condition of the Innks show
then to be stronger In cah reserve
than the law requuei They show that I
the amoui t ol their deposits as well as I
the amounts of their loans I ant i discounts
have Increased though of course the
Increaso ot the last two items has not
been so largess might hive been hoped
lor The reason for Urn I believe has
been the agitation ol cettlln subjects
both domestic and foreign which has
made the investors timid nnd those who
have money to lend doubtful about loan
ing tt
But has the Increisc been as Iirge as
was expected Mr ckels 1
Ma not in the way ol loans and dis
counts but rile reason Jar this has been
the agitation of subject both foreign
and do nestle which has m ide investors
timid and those hating money to lend
gil el
doubtful I about loaning it ml I believe that
as soon as these agitations are at an end
we ought to enter upon a condition of
business affairs which will give employ
ment tb labor and business 10 all con
ducting the operations of trade and
How much money is there in the
national banks today >
According to the last report made
Octoler gum the amount was 343143
362 and the amount ol deposits was
ft 597 891 059
l here are these banks >
They are scattered ill over the
Union replied Mr ckels Those
having the largest capitalization are in
the eastern states Here you find 1539
national i banks with a cipial stock in
round figures of more tl11n14JIOOOOOO
In the western states there are 1583
such banE with a capital stock of more
thin no ooo ooo while in the southern
stiles there are 557 banks with a capital
ol more than 138000000
Is the number of national banks in
No I do not think you could expect
that they would increase during such a
period as we are now having The bur
dens of financial losses tall upon the
banks and I dont think that lug honking
institutions of any kind have been In
creasing within the last year or so On
the other hand there has been a ailing
off brought about by the failure of some
bank the liquidation ol others and the
fact that llmere have not been many new
banks oganlzeJ I imagine that this Is
true nS 10 slate banks IS well nS to
national banks
What ii the biggest national basket
the United Stales
The largest national hank in point of
de WIyst the National City t f ink of
New York while the largest in point of
capital stock U the American Exchange
flank and the National bank of Com
merce ol New York city Each of these
banks is capitalized at < 5 ooo ooo
4 Tell mo Mr ckeU where do the
ntional bank make their money They
make a lot out ol Uncle Sam do they
noliThey did at first replied Mr Ethel
but nut now When the banks were
first l organized there was a large amount
ol profit in liking out circulation and
at first the circulation feature of the
t rou Ir II loryJl heo hl
Jinks predominated hen the ton is
Increased in price nnd under the law
which permits but 90 per cent of the par
value of the bonus to be Issued to the
banks In circulating notes the profits ol
the clrcuhtion leature vanished The
most of the money made by the banks
now comes boat deposits and discounts
This is thy feature ol profit in banking
In Lngland Scotland Ireland 1 and the
United States No the profits of the
national banks do not come from the
Docs Uncle Sam W anything by
the ational banks
No Indeed replied Mr Eckels as
he picked up a paper of figures and
looked it over So far from losing by
the national banks the government has
made n great deal out of them A care
but t estimate of the amount of profit to
the government shows that from the
organization of the first national bank
unto the end ot f the report year of 1896
tlSealn i
Uncle Sam has netted t 5157 439 248 93
This amount standi out in startling
contrast to the greenback Issue I which
instead of having been source of profit t
has bee i1 I source of direct loss ot him
dreds of millions to the people >
Do the national banks m kc as much
now as they did in the pas
1 No was the reply For some
time after their organization the per
ntage of profit was large Daring
recent years the profit has steadily fallen
so that taken throughout the period ol
twenty seven yeirslor which the figures
are tube obtained the average dividend
on capital and surplus invested in
rl nkntu
national banks has been only l 6 4 per
cent A considerable number ol the
banks continue ti add their dividends
to their surplus Others have been com
polled to charge olf losses sustained to
their surplus so that many bank dur
ing the past lew years have either paid
small dividends or none it all
How about Ihe safety of national
banks Mr Eckels Is ones money safe
in them
As to the safely of the national
banking system was the reply t the
host test Is the statistic These show
that of the 5 055 banks organized since
the beginning of the system only r ya3
have passed into Ihe hands receivers
insolvent and Hut these on the aver
age taking the closed and not closed
have paid in the neighborhood of 75 per
cent to their depositors When the
banks now being liquidated have been
closed this percentage will be even
larger The security ot the note holders
In national banks Is I as you know such
that no note holder has ever lost any
How ore the banks examined
I Ihe bank have to send reports of
their condition to the controller five
times every year and these reports ire
published They are also examined by
examine appointed by the controller
The examiners report taut controller
and It is their business to ascertain
whether the eipltal stock of mho bank
is impaired lull impaired the con
troller has to levy an asiosnic upon
the shareholders to make such Impair
ment good The duty of lime controller
Is i wholly supervisory however audit
does not in any way rcl eve the officers
and directors t the bank from the
duties placed upon them The con
troller can suggest methods of safety
but it rests wllh the officers of the bank
and the dim colors to accept these surges
ions or not He I cm suggest methods
of boolke e p m and to dull e s which
directors should discharge If tho
directors and ofhcersdo their duty there
Is hltle danger that a bank will fail but
unless they give attention to such duties
365 days in every year it is unfair to ex
pect the supervising clhccrs to nccomp
lull the complete solely of such banks
In two or three examinations a year I
believe that the supervisIon of the con
troller has precnted the failure ol many
banks though It 1 may be that there are
here and there cases where lacls hnve
been overlooked which might have pre
vented failures I think that such in
stances however are much less in
number than the banks which hate
Leen saved through the supervision of
Ihe controller
Hut will not the national banks slop
with the payment of our government
debt Mr Eckels asked
Not necessarily so was the reply
When the government bonds are paid
some other note issuing device mil be
obtained and substituted Such a plan
has obtained m Canada and is the basis
of what Is known as the Baltimore plan
as well as that suggested by Secretary
Carlisle tO years ago 10 congress
VnSat3oeie owe anyhow Mr
Eckels What is the amount of the
government debt
I can give you the figures to June
30th 1896 At that lime our Inteiesl
bearing bonded debt was fS7 363 890
It is enough said I And wnat
interest do we pay up n m
Last year our interest account
amounted 10 more than 135000 cam
Was not that a great deal I lashed i
t Iki
It doss seem large f but when I you
figure it out you find that the rate ol In
tercst paid on the whole averages only
42 per cent This is much lower than
the interest rates which prevail in the
dealings of private individual or cor
How about the bond issues concern
ing which Cleveland has been so much
The Issuing l of bonds by the present
administration was necessary from the
fact that tt it was essential to the mainten
ance of the credit of the government
tint its demand nbhgitlons ki own as
greenbacks and Sherman notes should
be I redeemed In gold in accord incc
with the enacted legislation ol Congress
which declared it to be the policy of the
government that the various forma of
money In circulation should be kept at
parity bomn of the money obtained
from the bonds was no doubt used lor
meeting the deficiency made by laek 01
revenue but in the lIt instance the
bonds were Issued tar I the purpose
stated and bad it not been for lime law
made lor the purpose they could not
have been issued atoll I think the ad
ministration H entitle 1 to the very great
est credit for having maintained the
parity 01 gold nnd salver and having
prevented II loss 01 lIollonal and in
didual credit The nmounl olin
crest charged is I insigmficanl c0331 Pared
with the laos that would have come 10
every individual citizen if the govern
ment had 1 permitted itself to go to a
silver basis Vhit the people sill t to y
in taxes to meet this interest charge u
trifle as to what they would have had to
pay II l any other policy had been pur
sued Hid these bonds not been I issued
the got ernment so obligations I won d have
had to bo redeemed in sliver The law
to maintain the parity ol the metals
would have been repudiated and our
refit both national and 1 Individual
would have been lost Every foreign
I Investor would 1 have withdrawn lib
money from the United Stales and every
lender of foreign capital would have re
used to send money here
It is I said Mr ckels I that we have
not enough money in the country to do
the business Is that true
I believe replied the controller
that the volume of currency In circula
tion at the present time Is I of less Im
portance than the quality of the cur
rency You will see this when you con
sider the enormous amount that credit
has to do in the carrying on of our
business today The need of actual
money has grown less and less It has
been found on careful Si investigation 1 i that
the average use of credit instruments In
the business transactions of this country
and others where banks of discount and
deposit prevail Is over 90 per cent The 1
use of checks drafts amt I bills of ex
change in making transfers of money
makes every dollar m use on efficient i
dollar so that Instead of supporting a
single transaction it supports many
What is needed continued Mr
ckeU is nn cularged opportunity of
obtaining credit on the part of tho e
who are entitled to it TIh 1 no ild come P
through the establishment of banks of
deposit and discount and the branches IJ
ot such banks Ills 1 demonstrable that 4
the whole surplus loanable capital of
the world Is always available to the
people of every country where credit is f
maintained and where Investments ore
oflercd which promise a lair margin of
profit Modern methods of banking and
modern methods transportation make
it immaterial whether the volume of
money In the world is greater In Lon
don or New York in Cmcago or New I
Orleans In Boston or in San Francisco
It is i q tally + available for one place or
th outer if the capitalist has proper
nowledie 1 of the financial character
and ability of those n lo desire to bor
row If you deprive i community of
its banks and banker you t ite from It
the channel through which it can mako
know I n that It I his good security to otter
toinvestible capital I
ust one more question Air Eckels
What do you think I I is really r the cause cl I
the hard times we are having
I believe replied the controller ol
the currency that the present condition
nl the United States ii due to unwise
financial legislation and the agitation of
monetary questions i t tt huh the continued
attempt 1 to substitute I hen n money
standard which is not recognicd by any J
K re commercial al people with which t w e I
have to deal The threat of sub liIol
mh the slyer for the gold standard has j
throughout I le the past fewycars Irightcned
both home and torei > ii investors so that 4
capital is permitted to remain Idle i with
II Is j
the effect ror closing up factories and
mills and putting an end to great under in
taking The uncertainly as to whether J
the go would be able because
01 t theE herman law to redeem its de JI
mand obligations in gold was the one
thing shish brought to a climax i great
many ft rbrt things which l in and of j
thcmsclvei would not necessarily have
p oduccd the depression we have hid 6
E ndoubtedly there have been contribut 1 r
ing causes In the overcapitalization of
corporations the unwise speculation of
j r
the past hew years the extravagance In 1
public and private expenditures and the i
living by many people beyond their i I
meat and outside their incomes
These things and the agitation ol foreign I
and domestic questions gave rise to a 1
doubt the minds of litany Ai 10 our x il
hnnclal stability Still with oil this we
have had but few failures and it seems 1 2 i
to me that this is an evidence of the 11
great resources of our country dn the I
py J yc
energy ol our people If we can now C
be tree from agitation If our people will
settle down individually i to ul their indivld i
ual business and not undertake to at t I
tend to the business affairs of every one j I
else the financial luture of the country
will at once improve and no will again I
b tinlrove ma nd
become a peop a commanding the con t I
hdenco ol all with whom we have to
deal and one which will be knonnns j
such I and as possessing the richest m
country of 1 the world +
M r
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t ra r II
ri7 r t IBtfu H illfiER 1i
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1 I I
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