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Mr. E. H. Perkins, jr., chairman of the clearing-house committee, presented the views of that committee, as above expressed.
After a protracted discussion, in which several members of the association participated, the following resolution was adopted:
Resolved, That a committee of five be appointed, with the President, to receive from banks, members of the association, bills receivable and other securities to be approved by said committee, who shall be authorized to issue therefor to such depositing banks loan certificates bearing interest at the rate of 6 per cent per annum, and such loan certificates shall not be in excess of 75 per cent of the market value of the securities or bills receivable so deposited, and such certificates shall be received and paid in settlement of balances at the clearing house; and all the rules and regulations heretofore adopted in the issue of loan certificates shall be in force in the present issue.
The president, Mr. Williams, appointed the following gentlemen as the loan committee: Mr. F. D. Tappen, Mr. E. H. Perkins, jr., Mr. J. Edwards Simmons, Mr. Henry W. Cannon, Mr. William A. Nash, and Mr. George G. Williams, president ex officio.
The loan committee met immediately after the adjournment of the association, June 15, and organized by the selection of Mr. Tappen as chairman, and Mr. Nash as acting chairman in the absence of Mr. Tappen. The form of certificate to be used and the necessary blanks were adopted, and the manager was requested to have the same prepared for use. The first issue of certificates under the above resolution, $2,550,000, was made on June 17. The first cancellation of certificates, to the amount of $100,000, took place on the 6th day of July. The committee have met daily up to the present time, and have held 105 meetings. The aggregate amount of certificates issued was
$41,490,000. The greatest amount outstanding was $38,280,000, on August 29, and continued at that amount until September 6. The amount of collateral received by the committee, in a round sum, was $56,000,000, 72 per cent, or $40,000,000, being in bills receivable; 28 per cent, or $16,000,000, being in stocks and bonds. The total number of pieces deposited with and examined by the committee was 11,029. Four thousand and forty-nine pieces were also examined as substitutions.
It has been frequently stated and feared by some that the amount of certificates issued during the present crisis was in excess of the amount issued, in proportion to the deposits held by the banks, during any previous panic. On examination of the figures, however, we find that this has not been the case, as in 1873 the deposits were $152,640,000 and loan certificates $22,410,000, being 14.7 per cent; in 1884, on deposits of $296,575,300, certificates were issued to the amount of $21,885,000, being 7.3 per cent; in 1890, on deposits of $376,746,500, $15,205,000 certificates were issued, being 4 per cent; in 1893, $374,010,100 deposits, certificates $38,280,000, being 10.2 per cent. The greatest amount of certificates in proportion to deposits was issued in 1873. Had the same proportion of loan certificates been issued in 1893 as was issued in 1873 the amount would have reached the sum of $55,000,000.
The percentages of loan certificates used in the payment of balance have been as follows: In June, 9 per cent; in July, 78 per cent; in August, 95 per cent; in September, 30 per cent; in October, nil, being a total of
certificates used in the payment of balance $299,273,000. The amount of interest paid on certificates has been $535,513.33. The expenses of the committee for stationery, clerk hire, etc., $562.27. All of this work has been accomplished without loss to the association.
The committee takes this occasion to express their thanks for the courtesy shown by the Chase National Bank and the First National Bank in allowing the committee to use the vaults in their banks to deposit the securities held by the committee, there being no suitable accomodations connected with the clearing house for this purpose.
Full and complete statistics of the transactions had with each bank by the loan committee will be filed with this report.
F. D. TAPPEN, Chairman,
GEO. G. WILLIAMS, Ex-officio.
WILLIAM SHERER, Secretary.
THE BANKS AND THE PANIC OF 1893. BY A. D. NOYES.
It was on the western banks that the shock of panic fell in 1893 with greatest violence. The records of no previous panic show in this regard such impressive sectional contrasts. The list of national and state bank failures for 1893 shows for the New England and Middle Atlantic States 17 suspensions, with total estimated liabilities of $13,138,073. This list includes such financial centers as New York, Boston, and Philadelphia. On the other hand, the failure of similar institutions in the five States of Ohio, Indiana, Illinois, Michigan, and Wisconsin numbered 49, with aggregate liabilities of $23,163,537. In the 11 granger and Rocky Mountain States, still farther to the west, the state and national bank failures reached the yet more disproportionate number of 147, and reported liabilities footed up no less than $24,781,181. Taking the country as a whole, the record shows that out of 360 national and state banks suspended during 1893, with liabilities of $109,547,556, no less than 343 failures, with liabilities of $96,409,483, occurred in sections of the Union west or south of Pennsylvania. The failures of private banks and savings institutions were distributed in almost exactly the same proportion.c
a This note contains rather more than half of an article by Mr. Noyes which appeared in the Political Science Quarterly, March, 1894.
b Figures compiled and published by Dun's Mercantile Agency. cTotal failures of such institutions in 1893 were 250; liabilities, $41,895,346. Outside of the New England and Middle Atlantic States failures were 224; liabilities, $35,543,801.
For this remarkable disparity there were several reasons. Rapid development on other than local capital had been the chief feature of the West's recent career, and this was a double element of weakness. The collapse of the "land booms" in 1899 and 1890 had served as a wholesome check to speculation, but the two enormous grain harvests of 1891 and 1892 had again revived it. The warnings of 1890 and of the brief succeeding period fell in that section on deaf ears. The evils of a vicious currency took root for this reason far more extensively west of the Ohio. "Bad loans" made up a startlingly large proportion of the assets of bankrupt institutions. The East, on the other hand, where foreign capital was concentrated, felt much more severely the shock and the significance of the London crash of 1890. When, in 1891, the expulsion of gold by our accumulated paper currency began, it was the eastern banks from whose vaults the gold was first withdrawn to meet such export requirements. It was through these banks that the "run" began, with 1893, on the Government's gold reserve for the redemption of legal-tender notes. It was on the eastern stock exchanges that foreign investors poured for two years continuously their holdings of American securities. These multiplied signs of coming trouble were not ignored. The eastern institutions were indeed subjected to the same demoralizing pressure from currency overissues, and they furnished their share of reckless ventures and dishonest speculation. But the weeding out of such concerns was very thorough in 1890 and in the ensuing year or two, and, as a rule, the policy of the Eastern city