ing banking firm, the commotion usually subsides without the wave of trouble being able to reach more than a very limited circle. The sufferers mostly obtain speedy and easy accommodation elsewhere; for, partly from sympathy, and more from policy, other banking houses are led to do all they can to prevent the panic from spreading or becoming general. Hence, in a short time the great wheels of the financial machine revolve as before. Now, every one who has intelligently watched the monetary movements of the last five years, can point out half-adozen occasions or more when the symptoms of approaching panic were appalling, but the glowing embers were extinguished before they could spread and rise into a conflagration. What, then, shall we infer from this state of the facts? First, it is evident that a financial revulsion, if appropriate timely means be used, may be prevented. "A panic which everybody expects," says the proverb, " never comes." It was partly because of their fancied immunity from danger, that the recent disasters in England were so fatal; and it is because of our acknowledged exposure to financial troubles, that we have enjoyed such freedom from their most formidable consequences. For the mariner who carries too much sail, and too little ballast, is most in danger from the sudden squall. Let our richly freighted barque be more cautious beforehand, and it may safely ride out the storm, come when and with whatever violence it may. Moreover, as we have heretofore avoided the long prognosticated panics, so we shall perhaps continue exempt, if we only persist in making use of the same means as we have found effectual hitherto. A financial crisis is not like an earthquake or a volcanic eruption, or a malignant epidemic, produced by causes that are unknown or beyond our reach. It rather resembles an incendiary fire, the materials being heaped up by ourselves beforehand, on which, but for our own misdoing, the sparks, though cast by a careless, or ignorant, or malicious hand, would fail to do much harm. We must, how. ever, be well assured that during the next year or two, nothing but the most firm circumspect and judicious care will preserve us from panics and revulsions of a most disastrous character. The great lesson which the late English monetary crisis teaches us is the danger of over speculation. Bankers and finance companies, by offering high rates of interest, attracted heavy deposits. The money thus obtained they engaged to pay back to the owners on demand. Regardless of the danger that it might suddenly be demanded, they lent it out at very high rates for one year, two years, or even a longer time. Now, there are not a few of our own bankers, who, like Overend, Gurney & Co., and others, forget that high rates for money mean large risks, and should either be protected by adequate reserves, or preferably refused altogether. From the statements of the London journals it appears that in this matter of reserves the most infatuated [negligence seems to have prevailed among the finance companies and private banking houses of England. All those which have succumbed are reported to have invested their whole, or nearly their whole available means, trusting to the reserves of the Bank of England to help them out if any difficulty should occur. A more perilous course it is difficult to con ceive. The reserve of ready money held by the Bank of England, according to this method of banking, would be relied on as a basis not only for its proper and known liabilities, but for the vast unknown mass of floating obligations incurred by a multitude of independent and uncontrolled institutions, who are making the greater gain by working without adequate reserves of their own providing. In the conflicting mass of testimony on the subject, it is not easy to find out to how great an extent this vicious and dangerous practice has obtained; but it well deserves, and we trust will soon receive, a thorough exposure by a Parliamentary commission If there be one feature of our banking system which has chiefly and most of all tended to give solidity to the whole fabric, we think that feature is the positive obligation by which each institution has to keep a reserve of legal tenders equal to one fourth of all its liabilities for notes and for deposits. This provis ion is the great safeguard of the system, and has tended to neutralize and arrest many of its evils. We cannot too jealously guard the legal tender reserves of our banking institutions. And it is a gratifying fact, pointed out by Mr. Freeman Clarke in his last report, that the aggregate reserves of our National Banks are considerably in excess of the requirements of the law. It is one of the many valuable functions discharged in our financial system by the compound legal tender notes that they act as a reserve and give strength to the banks, while as they earn interest, an inducement is offered to the banks to carry more compounds than they are actually compelled to hold by the law. This, doubtless, is one chief cause of the interesting fact relative to the excess of the legal tender reserve for which Mr. Clarke does not in his report attempt to account. It also furnishes us with an additional reason to those we have frequently detailed in these columns for disapproving the policy of withdrawing the compound notes which is advocated in influential quarters. To sum up our whole argument, we may say that in proportion as we have abundant reserves in our banks and abstinence from inordinate speculation in all departments of financial enterprise shall we be likely to have an exemption from the worst evils of monetrry panics. The money market during the month has exhibited considerable derangement, in great part due to the sales of thirty millions of gold by the Government within the ten days ending May 24. The sudden increase of our foreign indebtedness by the return of Five-twenties from London, and the falliug due of from eight to ten millions of coupons of Five-twenty bonds held abroad, at the same time with the stoppage in our exports of cotton, necessitated the shipment of an extraordinary amount of specie. To meet this demand and to prevent a rise in gold the Government very unwisely opened its coffers, and as the bulk of the pay. ments fell due in one week, the result was a sudden and heavy drain on the banks, with considerable derangement in monetary affairs. Late in the month there has been a steady recovery. each week: Below we give the current rates for loans There have been, during the month, about twelve millions of Five twenties returned from Europe, and the market here, towards the close of the month, has yielded somewhat until the rise in gold caused an increased demand, and the price rapi ily recovered. There are two things which, to us, render it probable that the return current of our securities from Europe will not, for any great length of time, be kept up. First, there are comparatively few of our Five-twenties in England. Of the 350 millions of these securities which are in the hands of European holders, it is computed that not more than 50 millions are owned by British capitalists. Hence, if on the Continent of Europe, in consequence of the troubled state of the polit ical atmosphere, a considerable amount of bonds should be thrown on the market, they will be very likely to be taken up in Europe, where there is always an immeuse amount of capital waiting to invest itself in sound and safe securities. The firmness in consols indicates that the scare in the London money market is passing away, and that the financial atmosphere is clearing up. The same cause which has given a turn to British investments in the direction of consols, can scarcely fail to operate in favor of American securities, especially as all the securities of the Continental governments are temporarily depressed and avoided. Secondly, there is in England a growing conviction which is permeating the masses of the people, and is obtaining more and more power over the moneyed and governing classes, that this country is well able to bear its load of debt, and that our unbounded faith in the vast resources and recuperative energy of the United States does not rest on a false foundation. This conviction has recently found expression in the House of Commons in a speech by the Chancellor of the Exchequer, Mr. Gladstone, whom no one will suspect of undue partiality. He observes that "the debt of the United States is in itself something wonderful— wonderful as the creation of four years, strictly of four years, and no more; and yet amounting to nearly $3,000,000,000, or £600,000,000, and the rate of growth of the debt in the last year exceeded, I think, £200,000,000. That is a wonderful debt, and its charge is enormous. Well, now, looking at these figures, a man would be struck with something like despair; but if we look at the position of the country which has to bear the burden, I must confess that I think the future of America, as far as finance is concerned-political problems are not now in question-will not be attended with any embarrassment. I do not believe the debt will constitute any difficulty for the American people. I am confident that if they show with respect to finance, any portion of that extraordinary resolution which on both sides alike they manifested during the war, and of that equally remarkable resolution with which, on the return of peace, they have brought their monstrous and gigantic establishments within moderate bounds, I won't say that this debt, according to an expression which was once fashionable in this country, will be a fleabite, but that in a moderate time it will be brought within very small limits, and may, even within the lifetime of persons now living, be effaced altogether." In these remarks we see not merely what is thought of American securities by Mr. Gladstone, but they are still more valuable as an echo of British opinion, and especially of the opinion of British capitalists and investors. With such testimony before us, we are still of the opinion we expressed recently, that in proportion as our securities leave Germany, they will have a growing tendency to find a resting place in England. We do not wish to be understood as favoring the retention of our bonds in Europe. On the contrary, if we are able to absorb the whole of them in this country, our financial position would be stronger, or less open to disturbance than if they were held abroad. The extent of the decline a London may be seen from the following table of the highest price at London daily, for the four weeks record during the month: PRICES OF AMERICAN BONDS AND RAILROAD SHARES AT LONDON. United States 5'20's, '82. United States 5-20's, '82.. Mon Tues Wed Thur Fri. Sat. Mon. Tues Wed Thur Fri. | Sat. Mon. Tues Wed Thur Fri. | Sat. 684 66% 66 65 63% 63 From the foregoing it will be seen that the decline is from 73§ on April 6, to 63 May 12. Below we give the price at the New York Stock exchange of the several leading Government securities represented by the closing sale of each day in May, 1866; PRICES OF GOVERNMENT SECURITIES, APRIL, 1866. The railroad returns for the month of April show very satisfactory results; since instead of the large decrease in earnings anticipated on the close of the war very many of the roads show an increase. Below we give the earnings for the month compared with the corresponding periods of 1865. The decrease appears thus to have occurred in the great through lines, as the Erie, the Atlantic and Great Western, the Pittsburg, Fort Wayne and Chicago and the Central Illinois. In all others noted above, there has been more or less increase. It may, however, be observed that in the case of the Toledo, Wabash and Western, the mileage operated this year is double that of last year, which converts the apparent increase into a decrease. The market for railroad and other stocks has been quite active during the month. The speculative ardor of Wall street was momentarily checked by the unfovorable advices from the money centres of Europe and a temporary depression of prices resulted. Very soon, hewever, the street appeared to reach a unanimous conclusion that the Bourse and 'Change had little direct bearing upon Wall Street, and the flurry was consequently succeeded by a fresh activity in speculation for higher prices. In the latter part of the month, however, this buoyant tendency was checked by an extraordinary movement in Erie. On Monday about twenty thousand shares of the stock was thrown upon the market, causing a decline of 5 per cent. On Tuesday about twenty thousand more sold, producing a further fall of 5 per cent, the price closing on that day at 57. On Wednesday about ten thousand shares more were sold, but the price reacted and closed at 61-a recovery of 4. Yesterday the price opened at 59, and closed at 60; and to-day on the street the stock was quoted 611@614. This extraordinary movement is explained by the supposition that the speculative director of the road had throwu a large portion of the stock he holds as collateral on a loan to the company upon the market. We understand that the company recently borrowed a further sum from Mr. Drew-augmenting his loan to $1,800,000-depositing fourteen thousand shares of common stock, thereby increasing the amount of stock held by him as collateral to twenty-eight thousand shares. It is understood, further, that the company has negotiated with Mr. Drew for a new loan of $1,700,000, to run two years, advancing as collateral $3,000,000 of the convertible bonds of the company, which bonds Mr. Drew is to have the right to convert into stock at his discretion, and either of which he may use as he pleases, only being obligated to return an equivalent amount of either bonds on stock on the liquidation of the loan. The total floating debt of the company is stated to $3,500,000, which, when the last mentioned loan is taken up, will be represented by Mr. Drew's loans There has been rather more |