Mercantile Conditions of Crisis of 1S93 99 



19,341,200 in tlie three years succeeding. The terrible 

 sufferings of banks were probably due largely to the revo- 

 lution the banking business has undergone in the last score 

 or two of years: instead of banking, as once, upon their 

 capital, banks have more and more operated on deposits, 

 wherebj^ has been brought about a vast extension of the 

 purely credit element in banking, radical "financiering,'' 

 and a great rise in business risks. On the other hand the 

 bankers' credit obligations, unlike those in other busi- 

 nesses, are always on demand ; yet at the close of 1892 the 

 loans of national banks that were placed on demand 

 amounted to only 18 per cent, and those secured b^^^ collat- 

 eral were only 12.5 per cent. Of the last class 65 per cent 

 were loans in New York city. It is quite evident, therefore, 

 how nugatory are reserve requirements. Add to these 

 facts the truths as to the carrying by city banks of the 

 one-half legal reserves of interior banks and the holding 

 as deposits of three-fifths of the 15 per cent cash reserve 

 of country banks and one is ready to believe that a crisis 

 could do almost anything with our national bank system. 

 There certainly seems full accounting for what happened 

 in 1893. 



It will be noticed from the table of bank failures^ that 

 the ratio of assets to liabilities of all failed banking insti- 

 tutions was in 1893 equal to 1.08, and for the three years, 

 1891-96, 0.83. Here again, exactly as in the case of mer- 

 cantile failures, we see this peculiar characteristic, the 

 sharpness of which reflects the acuteness of the crisis pro- 

 ducing it. Of course, the more special explanation is 

 that, owing to the fact that the city banks carry the legal 

 reserves of the interior banks and the cash reserves*^f 

 country banks, a gTcat many institutions of the latter 

 classes "failed" that were upon their books still solvent. 



^Appendices VII and VIII. 



305 



