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national bank to borrow money to lend again, or to receive deposits payable at fixed future dates with interest thereon.

Notwithstanding the fact that it has been held that national banks could not receive deposits payable otherwise than on demand, it is possible that in view of the fact that the custom of purchasing deposits by the payment of interest is so universal the courts might hold that national banks would have the same rights as other bankers to receive deposits subject to repayment upon a notice of from five to thirty days; and if this should be the case it is submitted that they should pay interest only upon deposits of this character, for there can be no doubt that it is extremely injudicious to receive current accounts payable on demand subject to interest. It would appear that if this course was adopted two classes of accounts would have to be maintained with most of the country correspondents of national banks in reserve cities, as it would be impracticable for a national bank in the interior to have any portion of its reserve deposited in such a manner that it could not be drawn upon demand. In view of the facts as stated, it is doubtful if any legislation upon this matter should be had which would discriminate against the national banks.

NOTE D.

BANKING REFORM PROPOSALS IN NEW YORK IN 1884.

A. ADDRESS OF GEORGE S. COE."

At a meeting of the New York Clearing House Association, held on Wednesday, June 4, 1884, E. H. Perkins, Jr., Esq., chairman, presiding, the following resolution was unanimously adopted, viz:

Resolved, That the experience of the associated banks in the New York clearing house during the recent panic, having again shown that every member of the association, in a time of general and serious financial disturbance, is involuntarily compelled to make common cause with every other member in the risks attending any practical expedient for general relief, or of any effective combination for the public good, it is therefore proper and necessary to enquire whether the methods of business, as conducted by the several members of this association, are uniform and correct in their operation with the public, and equitable to all the banks which are thus bound together in the Clearing House Association.

Mr. George S. Coe, president of the American Exchange National Bank, in presenting this resolution, made substantially the following remarks, which were ordered to be printed for the use of the members:

Mr. CHAIRMAN: In offering this resolution, I may at first warmly congratulate this association and the country at large, upon the great good which has been accomplished in the recent financial crisis by means of the organized power of this combination of banks.

After the failure of the Marine Bank, followed as it was so soon, by the announcement of the startling events connected with the Second National, the whole community was stirred to its depths with excitement and apprehension, fearing every form of financial disaster. The reputation before enjoyed by these institutions and the eminence of some of the men directly and indirectly involved in their failure were such that faith in human character was for the moment almost destroyed.

a Bankers' Magazine, July, 1884, pp. 44-51.

As bank officers, we were called here together suddenly by the promptness of our friend Mr. Tappen, and unanimously decided to reestablish our clearing-house expedient for the issue of loan certificates, which had proved so effective in former great public exigencies, and we appointed a committee of safety to provide for any new event that might occur. Immediately after that meeting the suspension of the Metropolitan National Bank was reported, which added still greater intensity to the already inflamed condition of the public feeling.

Under these circumstances the clearing-house committee were summoned together at midnight to examine the condition of that institution and to decide what action should be taken respecting it. A fearful responsibility was thus hastily thrown upon that committee. It was impossible in a few short hours, and in the apprehension of further possible events, to reach a definite conclusion upon the value of the large and diversified assets of that bank. When we examined its books, this most important fact at once appeared: That it owed some eight to nine millions of deposits, a large proportion of which consisted of the reserves of interior banks, which could not be imperiled or locked up for another day without producing a further calamity of widespread dimensions throughout the country. It was also evident that the consequent certain suspension of many banks in the interior cities would occur, and be followed by the suspension of business men depending upon them, and by heavy drafts upon those banks which held similar deposit reserves, and that the imme diate danger to our city institutions was great, just in proportion to the extent of such liabilities and to the amount that each bank was expanded relatively to its immediate cash in hand. That, should the threatened wild excitement pervade the country, a general suspension of banks, bankers, and merchants was inevitable, and in such case the magnitude of the loss to every institution would be incalculable.

The committee therefore came to the unanimous conclusion that it was better to confront the risk of losing one or two millions, if need be, by taking possession of the total assets of that bank, and by paying off its depositors, rather than by waiting to incur the hazard of an indefinite and greater loss, by a general financial and commercial derangement throughout the country; and that it was their manifest duty to promptly accept this grave responsibility, confidently relying upon their associates for approval and support. On behalf of the combined capital and surplus of the banks in this association, amounting to about a hundred millions, and also to protect the property and assets held by them together, of more than three hundred millions, your committee unhesitatingly acted, and thus saved the nation from immeasurable calamity. The Metropolitan Bank was, obviously, the key to the whole situation. When this decision was announced the next morning, confidence was instantly restored and business resumed its even tenor. Seven-eighths of the deposits of the Metropolitan Bank have already been paid off. Its many shareholders have been saved from

threatened personal responsibility, and time is gained in which its large property may be more deliberately converted into money. The restoration of confidence was as sudden as was its loss; so sudden, indeed, that the immensity of the danger can now hardly be appreciated.

I rapidly review these important events, Mr. Chairman, because they have once more illustrated the power and importance of this voluntary association, and have also shown how the several members comprising it are mutually dependent upon it and upon each other in any great emergency for the safety and stability of their own banks.

It must be borne in mind that the banks in New York, holding as they do the reserves of other institutions and of bankers in this city, and also of banks and bankers throughout the country, and standing between home and foreign commerce, are the last resort of this whole nation for cash reserves, and that a financial disturbance or distrust in any part of the land is sure to bring upon them a greater or less demand. Acting singly and alone, what could each one of sixty or seventy independent institutions have done to stem the tide, which, in such an unnatural and simultaneous call for money from every quarter of an alarmed nation, must have swept over them? No time was allowed to any bank to gather in its loaned resources, and no power on earth could so suddenly respond to a demand that—not any natural commercial want, but-general demoralization and wild panic alone had so unexpectedly created. It is perfectly apparent that without this combined support each bank would have been not only powerless in itself but the occasion of peril to others. It was only because we were thus associated and had in hand the printed forms and instruments provided in past experience that we were able at the tap of the drum instantly to fall into line and present an unbroken front and a disciplined force to this formidable enemy. Our numbers, now no longer a weakness, were thus converted into the greatest strength, and we were able easily to carry away this heavy and disabled member, and to relieve its creditors, shareholders, and friends from the danger of utter destruction, and also to arrest the panic so rapidly spreading. I think the association may well feel proud of this achievement, which for promptness, efficiency, and breadth of influence has no superior in the annals of com

merce.

Now, the association being of such importance and the connection with it of each member being of this peculiar character, how can any honorable gentleman among our number claim the right to selfishly pursue his business in utter disregard of these delicate relations by which the association itself is sustained and the business of the nation is safely conducted? We are in a most important sense directly responsible for each other and can not avoid being disturbed by the ignorance, selfishness, or immoral conduct of our most remote members.

Crises will arise in the future as in the past, and it is not only just but necessary that we adopt such safe and uniform methods of business as expe

rience has approved, that we clearly understand what those methods are, and freely invite from each other the utmost scrutiny in their observance. In the light of recent experience, it seems no longer credible or possible that an intelligent body of men, composing an association of such dignity and importance as this, can deliberately consent to remain responsible partners in times of peril with those who are eager competitors and antagonists in days of prosperity. The burdens, responsibilities, and profits of this great trust ought to be shared together upon recognized and uniform conditions, with special reference to the public welfare; and the only basis of competition for such business should consist in superior character, fidelity, and intelligence in its management. Thus can this association become one homogeneous body, composed of many members, like the Government under which we live, and capable of efficiently performing the highest duties, such as single financial institutions-conformably to their political constitution-in older countries, render to commerce, in being the safest custodians, and the ultimate resort of the money reserves of the people.

The issue of loan certificates, although practically equivalent to a supplemental issue of currency, exclusively for local uses between the members of the association, are only, in fact, convenient instruments by which the bills receivable and negotiable securities belonging to one bank are readily transferred to another, in exchange and as a substitute for its ready money, thus covering the weaker by the stronger, and, in fact, by all the other banks in the association during a time of common peril. For the time being, these certificates form a connecting medium between the banks, by which they all substantially become one in power, through the ebb and flow of the vital elements which compose them, and by which their total money in hand is made available at any special point of danger. In one sense our action was outside of law. In fact, the law could never anticipate such experience, nor establish a union so effective, and any legislation to enforce such generous and voluntary cooperation would only prevent it. The occasion was sudden and momentous, and the banks proved equal to the occasion. It was the same after the panic of 1857, when, as state institutions, our similar organization first originated. Also in 1861, after the battle of Bull Run, when with our colleagues in Boston and Philadelphia we united and furnished the Government from week to week in its greatest extremity a total of $150,000,000 in gold. Likewise in 1873, when the country was again convulsed by financial trouble. In all these great financial disturbanceseach one like the present, but originating from a different cause--the beneficent influence and power of this association were fully illustrated, and some of us now present can bear testimony to the fact that several banks here represented owe their continued existence to the protection afforded them upon one or another of those important occasions.

I appeal to you members of the association to give this subject the most serious consideration. We are responsible not alone to our directors and stockholders. Our responsibility takes a far wider range. Like the

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