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During this period there passed through the hands of the committee, including original deposits of securities, substitutions of securities (both withdrawals and deposits) collateral aggregating in amount $453,000,000, of which $330,000,000, or 72.92 per cent, consisted of commercial paper and $123,000,000, or 27.08 per cent, was made up of stocks, bonds, and short-time railroad and other similar notes.

Of the 52 banks constituting membership in the association 32 took out loan certificates, from whom was received in interest $1,116,245.83, which amount, of course, was paid to banks holding said certificates.

Three thousand five hundred and forty-eight loan certificates were issued, as follows:

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The greatest amount of certificates issued to any one bank was $17,000,000 and the smallest $250,000, the latter amount in two cases.

The time elapsed from the first issue, October 28, 1907, to the final cancellation, March 28, 1908, was twenty-two weeks, or one hundred and fifty-four days, as compared with nineteen weeks, or one hundred and thirty-three days, in 1893.

Respectfully submitted.

JAS. T. WOODWARD, Chairman.

W. A. NASH,

DUMONT CLARKE,

A. B. HEPBURN,

EDWARD TOWNSEND,

A. GILBERT,

NEW YORK, April 7, 1908.

Clearing House Committee.

Additional data relating to loan certificates:

RESOLUTION APPOINTING COMMITTEE.

(Adopted October 26, 1907.)

Resolved, That the clearing-house committee, with the president of the association, be authorized 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 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 rules and regulations heretofore adopted in the issue of such certificates shall be in force in the present issue. Said committee shall have power to associate with it such other bank officers as they may judge necessary. The percentage of maximum amount of certificates outstanding December 16, 1907 ($88,420,000), to total net deposits of clearing-house banks ($1,066,865,900) was 8.28.

The percentage of aggregate amount of certificates issued ($101,060,000) to deposits as above was 9.38.

Table showing use of loan certificates in paying balances at the clearing house:

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stocks, bonds, and

other securities.

1873

Sept. 22, 1873

Nov. 20, 1873

Oct

3, 1873 Jan. 14, 1874 26,565,000 22, 410,000

Oct. 3,1873

7

Bills receivable;

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1907

Oct. 26, 1907

Jan. 30, 1908

Nov. 14, 1907

Mar. 28, 1908 101,060,000

88,420,000 Dec.

16, 1907

a The certificates of all the banks, except part of those issued to the Metropolitan National Bank, were canceled by September 1, 1884, and these were gradually retired as the bills receivable became due and were paid.

SUBSTITUTES FOR CASH IN THE PANIC OF 1907."

By A. PIATT ANDREW.

The autumn of 1907 witnessed what was probably the most extensive and prolonged breakdown of the country's credit mechanism which has occurred since the establishment of the national banking system. Upon no previous occasion have the banks of so many cities resorted to clearing-house loan certificates for the settlement of their mutual obligations; never before have they issued them in such large amounts, nor for such long periods of time; and never have these certificates been so extensively issued in small denominations to meet ordinary bank obligations in lieu of cash. Even during the critical periods of 1873 and 1893 it is unlikely that as many banks limited the payment of their obligations in cash, although the proportion of existing banks which so restricted payments may have been as large. In the pages that follow will be found some record of these phenomena, of the several ways in which banks and other firms limited their cash payments, of the issue of loan certificates in the clearing houses of the country, and of the ingenious invention of multifarious other substitutes for legal currency during the weeks of hoarding and suspension.

Of official encouragement to suspension, singular and striking examples occurred in several States. The most extreme instances were the legal holidays declared by

a The Quarterly Journal of Economics, August, 1908.

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