Friday, September 26, 2008

On banking crises c. 1908

From Division of Labor:

More from the "there are no new problems, only our problems" drawer, the Sept. 23, 1908 NYT reports:

"Europeans believe that the world panic of last Autumn was caused by our banking system; that there is no assurance against a recurrence of the trouble until the banking system is reformed. And I agree with Europeans," remarked Jame B. Forgan, President of the First National Bank, upon his return from a trip abroad today. He continued:

"Over there in Europe, when a monetary scare occurs and spreads, there is at once a unanimity of action among bankers. Money begins to flow to the country's financial centre. The Bank of England, for instance, raises its discount rate; it gets gold from everywhere; the monetary resources of the country are laid under contribution for the benefit of the big bank or banks. The people are then shown the strong position of the large institution or institutions, and are calmed thereby.

"Here in the United States we are the victims of a process the direct reverse of that obtaining abroad. when apprehension seizes the Nation our one or two big piles of cash are pounced upon by a myriad of little bankers throughout the country, who make hundreds of piles of them, and who, after getting the money, do nothing but stare at it, having really no use for it....MORE