It is needless to say that these suggested institutions, whilst undertaking operations of the special character above indicated, should also aim to secure the best class of deposits and to discount the higher class of paper. As the national bank laws would prohibit to them the profits of circulation, it might well merit consideration whether they should not issue to customers of high standing their own acceptances, within certain safe limits. These credits, yielding the current rate of interest, would be a highly profitable, as well as an entirely legitimate branch of business; and they have the sanction of successful usage among the best banks of London. I am unable to see what objection there should be to further following London precedent by allowing on deposits a rate of interest below that current in the market for the time being. Such a course would attract accounts and would immensely increase the power and the earning resources of the banks. Moreover, as such institutions, being exempt from embarrassing reserve restrictions and other needless limitations, would be less subject to the oscillations of the money markets than are the present banks, they would afford better advantages to members of the Stock Exchange in the form of loans upon securities than they now are able to get. The importance of this business may be inferred from the fact that the yearly transactions in stocks at the Exchange have averaged, for the last six years, 102,000,000 shares, which, at an estimated average of $60 per share, represents an annual business of $6,120,000,000, to say nothing of the business in bonds, which also is very large.
Banks of this character would naturally attract a large portion of the Stock Exchange houses, which experience has shown to be exceptionally safe and profitable. The single fact that these banks would not be obligated to conform their loans to arbitrary 25 per cent. reserve would be a decisive reason for Wall Street firms doing their business with such institutions.
To some extent the wants here alluded to have been met by our loan and trust companies. As institutions of loan and deposit these institutions are doing important public service, and the deficiencies in the functions allowed to the national banks are diverting to them a large and valuable business. The companies of this character in New York and Brooklyn have nearly $14,000,000 of capital and $15,000,000 of surplus and profits. Their resources aggregate $175,000,000, and their deposits $137,000,000. Their rapid progress is indicated by the fact that, since 1883, their resources have increased $32,000,000, or at the rate of 27 per cent. during three years of depression in business. But while this success demonstrates the great necessity for enlarged local banking facilities, the facilities afforded by the trust companies are entirely too limited to satisfy the large special requirements of a great financial centre above referred to, and only add to the necessity for a class of banks which shall do for New York what the great joint stock banks and the mammoth private discount houses of London are doing for the business of that cosmopolitan centre.
These suggestions are offered for what the men of Wall Street may deem them worth. They demonstrate that there is ample scope and urgent need for a new element in our banking arrangements to accommodate the larger operations of finance and commerce; and it would not be difficult to prove that the country is suffering seriously from lack of such facilities. It will not be pretended that there is any lack of either the capital or the managerial talent requisite for such enterprise. Nor, since the rate of interest has come to rule as low in this country as it is in Europe, have we any longer anything to fear on that ground from the competition of foreign bankers. At any rate, if New York aspires to a position of financial independence and to become, in the broadest possible sense, the financial centre of the vast and growing exchanges of this continent and of its transactions with other nations, there should be no delay in giving this greater breadth and scope to its banking institutions. Our merchants, I am satisfied, are ready to respond to a movement of this character; are the bankers and the capitalists equally prepared to provide the facilities?
CHAPTER LIII.
EARTHQUAKE THEORIES AND WALL STREET AFFAIRS.
The Shock of Every Calamity felt in Wall Street.—Earthquakes the only Disasters which seem to Defy the Power of Precaution.—Becoming a Subject of Serious Thought for Wall Street Men and Business Men.—The Volcano Theory of Earthquakes.—Other Causes at Work Producing these Terrific Upheavals.—Why Charleston was more Severely Shaken Up than New York.—Why the Southern Earthquake did not Strike Wall Street with Great Force.—Earthquakes Likely to Become the Great Disasters of the Future.
Wall Street is the financial centre of this country as much so as London is recognized to be the financial centre of the world at the present time. Hence it is really the heart of the nation, through which its financial blood flows to invigorate and impart new life to every section of the land. Hence, also, every section and city have an influence on Wall Street. When the Chicago fire occurred it immediately created a panic. When a calamity occurs at any part of the country the shock is first felt in Wall Street. When a large failure happens, such as that of a bank or important railway, in any other locality, the influence is at once imparted to Wall Street. This is owing to the fact that Wall Street is the recognized and only market for securities of every description. All sections are dependent upon it, because it controls the money market. It is the great connecting link of the financial transactions of the whole country. A probable disaster through fire, like that which occurred at Chicago, is now no longer a terror to the Street or to the country, as was the case for a long time after that terrible calamity, for the reason that methods have been adopted for the purpose of restricting the conflagration and confining it within narrow limits. Fires which occur now are soon extinguished, and it is unlikely that they can ever play such havoc as they have done in the past. The possibility, with our enlarged experience, of taking precaution against those various calamities has robbed fires of most of their former terrors. Science and machinery have furnished us with the means of grappling with them.
But the one great, and now very alarming exception, which seems to defy the power of science and every human precaution, is an earthquake. This remarkable phenomenon has awakened great interest and inspired terror in the minds of the people at the present time, because the exhibition of its destructive powers is fresh in our memories on account of its terrific visitation at Charleston. Hence, many people are in great fear that some other section of the country may be stricken at any moment with a similar overwhelming disaster. It is the insidious and uncertain nature of the calamity that strikes the mind with awe. There is no possibility of anticipating it or making the least provision to avoid its dreadful consequences. The Charleston earthquake wiped out over ten millions of property. It came, like a thief in the night, and before morning the greater portion of the city was a mass of ruins. When we reflect on the extent of the destruction of property, it is marvellous how few people were killed—only about one hundred, and only two or three hundred were wounded. One of the greatest wonders why this calamity should have occurred in Charleston is, that part of the city has stood for nearly two centuries, and the recent earthquake has been the first it has experienced. Another curious circumstance is, that the disaster should have occurred on so large a scale there, as the locality is so far removed from the region of any volcano.
This clearly demonstrates that the old “volcano” theory of earthquakes is thoroughly exploded, and we must seek for causes and the explanations in other quarters. Although Wall Street has not been governed by any known law of earthquakes, except as regards the fluctuations of the properties in a bear market dealt in at the Exchange, yet a great number of Wall Street habitues, as well as other business men, are beginning to think seriously on the subject of earthquakes, and are attempting to penetrate their causes. Reflecting upon the upheaval—or rather the settling down of Charleston—I have come to the conclusion that similar disasters may be looked for in other localities, hitherto not subject to them, and considered by scientists absolutely free from these phenomena, at least on so large a scale. These peculiar disturbances that now make life so precarious on this planet, I attribute to the innumerable and so largely increasing excavations going on in various parts of the country, in the different mining operations, which displace the underpinning of the surface and cause it to sink beneath the weight which it carries. Of all the great mining industries which conspire to produce earthquakes, I think that of oil plays the most important part, and is the most treacherous in its operations beneath the surface of the earth. The pumping of oil from the bowels of the earth has been going on for thirty years in this country in several districts. I believe it is not too large an estimate to state that in that time an enormous lake of oil has been removed, that would probably fill the basin of Lake Erie or Ontario. That fluid made its way, probably, some of it from long distances in subterraneous rivers before reaching the place where the nature of the soil permitted it to gush through a shaft to the surface, as it does in such abundance in the oil regions of Pennsylvania. Some of those undercurrents may have come from other States, percolating through and disintegrating the soil in their passage for hundreds of miles, until they found an outlet, on the principle that all fluids have a tendency to find their level. There may be a great underground reservoir of this oil, which has taken many years to penetrate through the earth owing to the tendency stated, cleaving, in its subterraneous journey, fissures through ranges of mountains, and thus loosening the earth and taking away the support from the surface wherever it has penetrated. The fluid, percolating through various strata of clay and rock, has displaced these in its course. Owing to this displacement there must, of necessity, be a settling down of the land in the various regions through which the oil has passed, which will, of course, differ in degree owing to the density of the rock or clay. If the earth should be of a pulpy, soft nature the settling will be greater, and when it happens to be the foundation of a town or city the catastrophe will also be greater in inverse proportion to the degree of consistency of the earth. It is presumable, therefore, that some of the streets beneath the foundation of Charleston is of this pulpy, yielding character, and hence great was the fall of that city.