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MONEY AND COMMERCE.
MONETARY.
WEDNESDAY EVENING, Oct. 22.
Money matters are very quiet in this market, and we find no considerable change to note in the aspect of affairs since the beginning of the week.
New York exchange continues scarce, and sold between banks to-day at 500 per $1,000 premium. Shippers' bills drawn against grain in transit are taken at ¼ and also at ¾ of 1 per cent discount. The amount of this class of bills is, however, very small, compared to what it would be under ordinary circumstances at this season of the year. One obstacle to the free movement of grain is, that shippers of cargoes cannot get the usual advances from their New York consignees, because the latter cannot get the usual accommodations at the New York banks. The movement of Western crops to market is therefore being done mainly on Western capital. The scarcity of money in the Eastern markets also has its effect upon the prices of products, as well as of the foreign exchange made against the shipment of the products to Europe.
There is a very moderate but steady flow of currency from this city to New York, but the stock of currency in the banks here is very large, and some of it can very well be spared. The main cause of the great accumulation of currency here is that the banks of this city are still acting on the policy of keeping their whole reserve here in greenbacks, instead of keeping half of it in New York exchange, -as the Nationals are permitted to do by law, and as has heretofore been their custom. The recent panic gave the Western banks such a scare that, even after New York banks resume currency payments, it will be a long time, perhaps a year or two, before the New York balances of Western banks will increase to anything like the proportions they had attained just before the panic. The accumulations of money caused by the increase of banking facilities, are, however, bound to accumulate somewhere at certain seasons of the year. No amount of currency-tinkering to make the volume of currency "elastic," will prevent this accumulation of bank credits, even if the much-denounced system of paying interest on deposits were entirely discontinued. These accumulations once made, there is no question that inducements of one kind or another will be offered to draw this temporarily unused money out into the prosecution of enterprises and speculations that could not command the money under any other condition of the money market.
In the foregoing connection, we print the following ably-written communication from a banker at Eau Clairo, Wis., in
DEFENSE OF INTEREST ON DEPOSITS:
To the Editor of The Chicago Tribune:
DEAR SIR: By common agreement the "system of paying interest on deposits subject to call," seems to have been chosen as the goat over which to confess all the iniquities of the children of Mammon, and, putting their transgressions in all their sins upon his head, they are going to send him away by the hand of a fit man into the wilderness. The fit man in this case may prove to be President Grant, who proposes to recommend a law absolutely prohibiting the practice, which he, as well as all those whose views on the subject find expression in print, calls by very hard names.
It must be agreeable to those who have been tinkering at our finances in a legislative and administrative way, to be assured that the real cause of all the recent trouble is a natural outgrowth of competition in the banking business, and nothing for which they are in any way responsible. They will thereby be cheered and encouraged to proceed.
It is encouraging, also, for those who may have taken desponding views of human nature to observe the zeal and the high moral tone with which metropolitan bankers are advocating a return to sound and legitimate banking principles, especially in this direction. There is something quite touching in the circulars with which they favor country bankers now-a-days, -the old matter-of-fact inducement style of that literature having given place to something very like gush. So also their opinions, given as the results of interviewing, and reflected in financial columns.
No doubt the enthusiasm of good resolve, which always comes to men in times of adversity, has much to do with this feeling-but the idea will suggest itself whether the leaven of selfishness is not in some degree responsible for this particular uprising of the spirit of reform?
However, manner and motives are beside the question which I beg permission to put, which is: Will so radical a reform as is proposed in the matter of paying interest on deposits be productive of good? Will it result in making the banks keep a larger reserve, and so become safer depositories, -better able to withstand the shock of panics, -while at the same time affording legitimate accommodations to the business community? In short, will it make them fitter to fulfill all the functions which pertain to banks?
This is, in effect, asking-and perhaps this is a more pertinent way of putting the question-will it endow bank-managers with a greater degree of sagacity, judgment, and honesty? Will it make them brave without recklessness; prudent without timidity; firm without obstinacy; amenable to counsel, yet not vacillating? All this, and more, will it do if we are to take literally the somewhat extravagant talk on the subject; yet, when thus put, no one would probably answer the question affirmatively.
We must reduce it, then, still further, and ask: Will the contemplated reform remove any of the allurements that lead men away from the paths of correct banking? Will it free the business from any of the dangerous vicissitudes we are so familiar with? Has the much-abused practice no element which dissuades from undue expansion in some directions as much as, if not more than, it encourages it in others?
It is the object of this article to assert-no matter how indifferently the assertion be maintained-that these are at least open questions. It is indeed much too extended a subject to be satisfactorily discussed within the limits of your space, or the time and patience of the reader of a daily paper.
The best argument to be urged against loose talk on any subject is the logic of facts. Statistics have come to be regarded with a good deal of respect, but, unfortunately, not very much statistical information bearing on this subject has thus far been collected, and, such as there may be, is not accessible to the writer.
It is a matter of general knowledge, however, which of the leading banks of the country have the largest number of country correspondents, and, therefore, pay interest most largely, and if the practice is necessarily fraught with so much danger, it is evident that we shall see these banks betraying the greatest weakness in times of panic.
Take, for example, the two banks which have confessedly the largest deposits of this kind in New York and Chicago, respectively. The Associated Press dispatch of the 17th, from New York, says: "The present system of pooling was gotten up for the benefit of weak banks, especially those paying 4 per cent on balances." Would the writer include the National Park Bank in that category? and yet that bank probably pays more interest in that way, both absolutely and relatively, than any bank in New York, while all advices, public and private, agree that the Park Bank is sound, if any of them are (I say probably because at this distance one can only make a qualified statement of this kind, and I therefore write under correction).
The Chicago bank referred to is, of course, the
