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Index
Two Sections— Section Two
Page
Editorial Article—
The Bankers’ Convention-----
7
General Session—
Addresses_______....................
Committee Reports__________
10
36
National Bank Division—
Addresses_________________ ___
Committee Reports________ _
40
47
State Bcrfk Division—
A d d r e s s e s .............. .................
Committee Reports___________
60
66
Trust Division—
Meeting for Elections Only___ 68
AMERICAN
BANKERS’ CONVENTION
SECTION
Savings Division—
Addresses........ ............
Committee Reports..... ..............
69
66
Clearing House
Round T M e Conference—
A ddresses..........................
67
Constructive Customer
Relations Clinic—
Addresses_____________________
74
G IV IN G P R O C E ED IN G S OF T H E
State Secretaries Section—
Addresses__ _____________
Committee Reports......... .........
78
81
CONVENTION OF
AMERICAN BANKERS ASSOCIATION
HELD A T SAN FRANCISCO, CAL.
For Index to Advertisements
SEP T EM B ER 21 TO SE P T E M B E R 24, 1936
See page 9
October 10, 1936
Copyrighted 1936 by
W ILLIA M B. DANA COM PANY, PU BLISHER S
William Street, eerner of Spruee Street. New York
T HE H O M E
INSURANCE
COMPANY
NE W YORK
STATEMENT— JUNE 30, 1936
A SS E T S
C a sh in Banks and Trust C om panies . ................. ( 13,991,862,08
United States govern m e nt B o n d s ........................
2,818,958.99
All O ther Bonds^and S t o c k s ...................................
97,354,211.19
Premiums uncolledted, less than 90 d ays due . . . .
Accrued Interest . . . ..................... .................
Other A dm itted Assets . . ................................
6,971,644.75
231,676.00
773,202.00
$122,141,555.01
LIA B ILIT IES
C a p ita l Stock
..................................................... $ I4,500,000.00f
Reserve for Unearned P re m iu m s..........................
39,207,558.00
Reserve for L o s s e s ..............................................
Reserve for Unpaid R e in s u r a n c e ............................
Reserve for Taxes and Accounts . . . . . . . . .
4,437,7^.00
796,364,77
1,500,000.00
Conflagration R eserve .......................................
2,000,000 001
N ET S U R P L U S ...............................
59,699,875.24f
_________
S U R P L U S A S R E G A R D S P O L IC Y H O L D E R S
$122,141,555.01
$76,199,875.24f
NOTE: On the b asis of June 30v 1936 market quotations for all
Bonds and Stocks owned the total admitted A sse ts would be in
creased to $128,224,799.33, the Net Surplus to $65,783,119.56,
and the Surplus a s regards Policyholders to $82,283,119.56.
Securities carried at $2,620,655.00 and cash $50,000.00 in the
above statement are deposited a s required by law.
----------- f — ----------------------------------------------------------------- -------------------- ---------------
Strength « »
Reputation « »
Service
American Bankers Convention
SECTION OF THE
Commercial and Financial Chronicle
Vol.
143.
NEW
No. 3720.
YORK, OCTOBER 10 1936
have
The Convention and the Public Finances
increased
contra-seasonally
to
the
highest
levels since
As Mr.
Fleming pointed out in his presidential
address to
the American
national bankers'
cisco
as
long
Bankers
gathering
ago as
was
Convention, the
held in San Fran¬
It has made that city its
1892.
headquarters in two notable autumn
seasons
a
highly disturbing financial set-back, and
again in 1929, when it
was
visibly confronted with
the
prolonged financial reckoning from which
are
now
emerging.
Mr. Fleming took
a
and
other
measuring sticks, business is rapidly reviv¬
ing, and we all know that ample bank and invest¬
ment funds are available for business expansion."
since
tlpt time—in 1903, when the country was recover¬
ing from
October, 1931, and factory employment
payrolls are also up.
According to those and
we
strongly
hopeful view of the present financial outlook.
Re¬
But Mr.
definitely under control.
of taxation
"It
is
encouraging to^ note the
being made in industrial
production
steady progress
recovery.
Steel
the increase; construction con¬
tracts awarded reached the highest monthly total
during July since June, 1931; electric power output
has
is
advanced
Also,
ia^bound
policies of
we
have the problem
which, if allowed to increase substan¬
result in
to
,
recovery."
which is
com¬
plication, "we must all realize that expenditures,
Federal, State and municipal, must be brought more
tially,
garding this, he said:
Fleming qualified his view of things by
adding that, in addition to the unemployment
Conceding, freely
our
government
most unusual economic
retarding
that
were
business
the emergency
necessitated by a
situation, he had this to
say:
on
to
a
new
high record;
car
loadings
"Making allowance for these factors, if we are to
business recovery we must take
steps by which the budgets of Federal, State arid
continue the present
1936
One Hundredth
If you
contemplate establishing
connection
in
Company invites
Girard
EFFINGHAM
B.
Anniversary Year
Philadelphia
your
a
banking
the
Girard
Trust
Company
MORRIS
AND
trust
Trust
consideration of its facilities.
ALBERT
Chairman of the Board
BROAD
or
A.
JACKSON
President
CHESTNUT STREETS,
Member Federal
A
PHILADELPHIA
Deposit Insurance Co-poration
*
BANKERS'
municipal governments will be brought
.
more
CONVENTION.
clefi-
ing of
nitely under control and work as rapidly as possible towards budgetary balancing.
If this- can be
accomplished, business will be assured that we are
firm
on
foundations, and
can
forward
go
tion
crealte
to
channels
new
for
greater employ-
■
uncertainty surrounding
far
the
possible
as
rules
under
sums,
that
an
be
positively declares
politics, but is
a
a
concern to
us
simple but comprehensive view
to strike the
honest and
President
to
not
On its early,
necessarily in large
practical
before
clearly,
men
of
that,
been
become
on
this
occasion
anu
people."
the
what would
be
grown up
a
govern-
in the past
years.
men
of
experience in American politics and American history,
.«
is
that
the
industrial
evitably follows such
a
which
recovery
in-
period, the return of what
end to these popular delusions.
that
There
was
the much larger dan-
as a
economic
return of
prosperous
times would not easily
impossible not to overlook entirely the immi-.
possibility that
so
a program
haphazard
a
fashion
of relief, conducted
as
that of the past
and involving so enormous
public
our
breakdown,
standing factor
in
history developed after
and which
our
money,
an
expendi-
would result in the pauperiz-
as
became
congressional
1933—has vanished from the
extricate them.
seen
money
remedy for financial depression—an agitation
and the
taxpayers were caught in a net, from which
We have
already how the organized demand for fiat
which has always in
ture of
corn-
call "good times," will usually of themselves put
powerful
that, with the best intentions, our responsible
few years
banking
The reassuring fact, in the mind of all
public officers would discover that the government
often in
the
To
we
so
ger
It is
should
people
an
engine
opportunity.
nent
"the
no
political
the
even
words,
people which have
three./fr four
as
would
in this year of grace,
even
politician would be willing to relinquish
a
ambitious
administered
to
It is, to teach the people that, in
Cleveland's
support
ment
The
sometimes feared, government relief
as we
has
with
politically
surrender to the ideas of relations between
that
danger of the existing situation has been, not only
it
contented
together
both to government and citizens,
judgment will not in the next few weeks be clouded
by the partisan talk of a political campaign.
herded
the inevitable fiscal and fiduciary consequences of
measure
affairs,
be
were
munity, the important office belongs of showing,
depend, and it is well to have the matter set "forth
so
an
support the government but the government should
intelligent solution the country's longer
future will
financial
or
meet
to
out
all other thinking citizens, have* a paramount duty
in the matter.
keynote of the whole problem which
practical bankers have to consider.
thrifty
of the
put
Responsible bankers in this country, along with
all people,
appears
could
unpleasantly suggested,
regardless of what political party is in power."
This
loans
the activities of certain political agitators have
as
question "which involves partisan
fundamental
taxation
through
government
not
He emphatically expressed his belief
that this is not
.
insist upon outright drafts on the public treasury,
rapidly), looking toward elimination of waste and
duplication."
?.
.
,
What might be the
their lot
(which of necessity had to be developed
program
«
accumulating public deficit.
review by the government of its whole relief
a
present scale, the greater will
*
upshot, if citizens who
important step in that direction "would
very
itg
,,
raised
through
which
operates," and he
on
,
been the possibility of. accustoming our people to
the distribution to individuals of such prodigious
any
business
Of
«necessarily be the danger of deterioration m the
standards of our people. Hardly less menacing has
r
He believes that "the major factor in this problem
as
working population.
jng sinister indications, and the longer such a sys-
\
necessity of removing
our
possibility there have not been lack-
as a
tem continues
(.
is the
large part of
the
in
tradition^ spirit of American enterprise and inyenment."
a
this result
scene
it did in due course in the
at
an
an
out-
oratory
of
Washington,
recovery
after the
troubled period that followed 1893 and 1873.
But
the present menace, which differs from that historic
delusion in form if not in purpose, needs to be met
by unremitting vigilance and intelligence.
/
u
Index to Advertisements
Page
Page
BALTIMORE, MD.
Safe
Deposit & Trust Co_
NEW
17
.
CITY
YORK
Brown Brothers Harriman & Co
Chase National Bank (The)
Chemical Bank & Trust Co
21
.___'
____
;_
....
Devine (C.
BOSTON,
J.) & Co., Inc
Empire Trust Co
MASS.
Brown Brothers Harriman & Co
Devine
2-t
:
(C. J.) & Co., Inc
Kidder, Peabody & Co___l.
New England Mutual Life Insurance Co
___________
.—
Salomon Bros. & Hutzler___
o
lx
_
______
_____
V
Fulton Trust Co
15
3
6
2
2
Home Insurance Co.
Inside Front Cover
11
(The)
Kidder, Peabody & Co_
Moulton (R. H.) & Co._l_
—
______
Salomon Bros. & Hutzler...:
5
1
1
PHILADELPHIA,
CHICAGO,
Devine (C. J.) & Co., Inc
Salomon Bros. & Hutzler—
PA.
Brown Brothers Harriman & Co._
ILL.
21
Corn
bit.
—
_____
6
1
Exchange National Bank & Trust Co
Devine (C. J.) &Co__
Fidelity-Philadelphia Trust Co_
5
6
4
7
Girard Trust Co
Kidder, Peabody & Co
:___
Pennsylvania Co. for Insurances on Lives and Granting Annuities
3
(The)
CLEVELAND, OHiO
Salomon Bros. & Hutzler
Salomon Bros. & Hutzler
—
1
-
PORTLAND,
Bruce
Outside Back Cover
Chrysler Corporation
___
Tradesmen's National Bank & Trust Co.
■i
DETROIT, MICH.
(Conrad) & Co
ST.
-11
2
Baring Brothers & Co., Ltd
Empire Trust Co
LOUIS,
MO.
6
FRANCISCO, CALIF.
Bruce
LOS
Bruce
ANGELES, CALIF.
19
6
(Conrad) & Co___
Co
Moulton (R. H.) &
(Conrad) & Co
Crocker First National Bank.
Devine (C. J.) & Co., Inc
Moulton (R. H.) & Co
,____
Wells Fargo Bank & Union Trust Co
Northwestern National Bank & Trust
Salomon Bros. & Hutzler
19
13
6
5
11
SEATTLE, WASH.
Bruce
MINNEAPOLIS, MINN.
19
18
(C. J.) & Co., Inc
SAN
.1
5
ORE.
_____
LInited States National Bank (The)
Devine
LONDON, ENGLAND
11
19
(Conrad) & Co
WASHINGTON, D. C.
Co.
'
2
1
Riggs National Bank (The)
14
%
American Bankers Association
"
■"
-r
'
...
'•
.
.
'
'
*■
V •* :v;
•
'■ /. .vy. V.
'f.
!
'
.
*
'
•
-
s
Sixty-Second Annual Convention, Held at San Francisco, Calif., Sept. 22-24, 1936
-a
INDEX
TO GENERAL
CONVENTION PROCEEDINGS.
Page 10
Make Haste Slowly, by Leroy A. Lincoln*
16
The Banker's Part in Trust Service, by Gilbert T. Stephenson
20
Investment Portfolio, by Lindsay
A Bank's
Bradford
Proposal for Taxation Reform, by Robert V. Fleming
Hero or Villain, by Clarence Francis—,
A Banker Looks at Europe, by Rudolph S. Hecht_.
Is Democracy in
Business and
Banking
on
Ayres
the
graduated from Yale in 1914, after which he was
was
where
.%
he
was
a
of the
Board,
achieved
York Trust Co., special¬
City Bank Farmers Trust Co. in
director of the
H. Perkins became Chairman
bank's
a
the hardest
well but
as
jobs in
I
a
banking institution to do consistently
approach the task of talking about it and try¬
ing to develop successful theories of operation, I honestly
think that that is more difficult than the job itself.
And,,
if investment of
been
always
bank's funds in the security market has
a
problem in the past, the difficulties have
a
certainly been multiplied
many
times over at the present
invested.
The
this
of
extent
increased problem becomes
only too obvious when we picture that in 1914 only 17% of
the
assets
figure has
steadily
1930 and in the
current
in
the banks
of all
grown
were
in investments and that
to 23% of all member banks in
spring of this
year
reached the approximate
Indications are that your difficulties
figure of 41 %.
continuing to invest this large percentage of your assets
continue and at least my difficulties in talking about
may
them will be
over
complex that it is impossible to establish
principles which will prove profitable for
perioctsNuch
as we
speak of
a
have recently passed through?
bank's portfolio, I have first in mind the
portfolio consisted of an amount
undivided
profits plus, roughly, a similar .amount of deposits, the
problem fell within such limits that it was possible to' point
equal substantially to the capital, surplus and
out
a
reasonable
however, with
and logical
40% of
variations
inevitable in
unknown
paths
develop
a course
and
it
procedure to follow.
Now,
exposed to the price
public market, we are treading
our resources
a
becomes
incumbent
upon
us
to
of conduct which will not only guide us
through the current phase but which will contain inherent
safeguards
years
The
any
so
that possible developments over the next few
will not result harmfully to our
banking system.
problem is great indeed, and it is not a question
of us
can
invested in the
too many
ignore because we all face it by the very nature
that these theoretically represent a
ence
I
"theoretically" because in
proved to be the proverbial snare and delusion.
whatever extent, however,
profits, and of
this is the situation today, to
course
the
degree
large
surplus and undivided
of the capital,
beyond the limits
principles
same
To
the portfolio is expanded in size
a very
of management should
prevail.
In
go
consideration of the matter it
our
seems
to
wise to
me
back to the fundamental reason for the existence of capital
funds of the bank and
by the
use
of the term, I
essentially
mean
the
These funds
capital, surplus and undivided profits.
are
guaranty fund to the depositors of the bank.
a
They stand between the depositors and the losses resulting
from bad loans
If. this is
or
other functions of the banking business.
correct
a
existence, it
seems
estimate of the
basic
reason
for
their
to me that it follows automatically that
emphasis in their handling should oe on the side of the
The first thing we
conservatism.
utmost
mind in their
use
is the ability
them.
Needless to say,
sophy must inevitably
should have in
promptly to convert them into
cash at, or within a few percent,
of the amount invested in
variations in degree in this philo¬
occur
due to the necessity of banks
housing themselves and hence having a certain amount of
fixed assets.
But I think all of
clusion that assets not
minimum.
While
it
us
would agree in the con¬
promptly convertible should be at
can
be
advanced
with
plausibility tnat varying conditions under
a
considerable
which
a
bank
operates justify a different approach to portfolio manage¬
versus
a
a
bank with
bank with
a
a
large amount of demand deposits
large amount of time deposits,
never¬
theless, I .personally, would feel that the basic community
/
\
say
instances during our recent hi^trory, their exist¬
ment, to wit,
that
capital, surplus and undivided profits
sense
bank's secondary reserve.
the
shortly.
When the value of the
pitiful
so
portfolio
When I
by vitue of the increased percentage of our assets thus
time
the
and
cases
Is the task of handling a
bank ta follow in normal times and prove a factor of safety
in
are
Bank's Portfolio" has always been one of
some
fundamental
some
securities in which the
Mr. Bradford's address follows:
a
in
results
President.
"Handling
question needs
that the
And
banking business.
points of view followed by banks the country over and the
Bradford became the City Bank Farmers thirteenth
Mr.
the
of
resulting in others.
1934 and in March of this year, when James
:
President Robert
Bank Farmers Trust Co., New York
disasters
By 1927 he was Assistant Vice
President, when he left to become Vice-President of the Farmers Loan &
Trust Co., which merged with the National City Bank in 1929.
Mr.
elected
39
39
39
Upon his discharge in
Lieutenant.
1919, Mr. Bradford entered the employ of the New
was
Service to Retiring
excellent
izing in the handling of trust investments.
Bradford
38
Fleming
He was in the Navy during the War,
commissioned Junior
of
Convention
Trade Council
Presentation of Silver
V.
of
Session"
"Banking
to
exploring is only too clear when we contemplate the different
following outline of his career:
Bradford
Invited
National Foreign
38
38
—
s'kInvestment Portfolio
naB
introducing Mr. Bradford, President Fleming gave
Mr.
y
Report of Committee on Nominations
Remarks of President-elect Tom K. Smith
By Lindsay Bradford, President City
connected with Hambleton & Co.
37
Special Resolutions..
Boston and Mexico City Extend Invitations for 1937 Conven¬
Members
36
37
-
E. Baum
A
In
37
Resolutions, by Thomas R. Preston.
36
Chairman of RFC
Report of Protective Committee, by James
on
tion
Commission, by Leonard P.
Policy
Economic
of
Report of Committee
31
Cutler.
Page
Council,
by Raymond Dunkerly
33
35
the Way Out? by Merle Thorpe._
Education, by Leland Whitman
Communication from Jesse H. Jones,
Report
24
28
Report of Official Acts and Proceedings of Executive
■
GENERAL SESSION.
Government and
Municipal Bonds
Investment Securities
1
Corporate Financing
Foreign Exchange
Travellers' Letters of Credit
issued jointly
with
BARING BROTHERS &
CO., LTD.
of London
KIDDER,
PEABODY
Members New York and Boston Stock
17
115 DEVONSHIRE
WALL STREET
•
f>
CO.
Exchanges
NEW YORK
ST.
1416
BOSTON
CHESTNUT ST.
PHILADELPHIA
Commercial Bankers
since
Wells
1852
Fargo Bank
Union Trust Co.
SAN
Member Federal
RESOURCES OVER $240,000,000
FRANCISCO
Deposit Insurance Corporation
CAPITAL, SURPLUS, AND UNDIVIDED PROFITS OVER $17,000,000
BANKERS'
12
CONVENTION.
responsibility undertaken by a bank in its acceptance of
of these
stray far from the more
banks
among
portfolios should be adminis¬
various policies that were followed, there
to how their
as
tered and of the
several that would appear to
were
stand out
somewhat
as
philosophy
along the lines that the capital funds and such other
typical of banking thought on this question. One
was
of
resources
bank
a
were
as
used in the portfolio should be
expected to yield a profit to the institution and I mean a
profit
and above the current rate of/interest ton the
over
securities in which the funds were invested, to
tive
part of wisdom to purchase
the
a
specula¬
The advocates of this system conceived it a
profit.
V
that
wit,
prices should go
bonds with a primary motive—
up^-either selecting speculative
bonds which would be favorably
affected by rising security
grada bonds of com¬
panies which apparently were on the up-grade and where
^the improvement in their individual cases would give a
better credit rating to their securities, and hence they would
prices in general, or second or third
sell
higher in the market.
Another school of though was
represented by those who' considered it expedient to seek
from
of
portfolio investments more than the going rate
their
for
return
and who,
money
therefore,
were
prone
to
purchase 6 and 7 % obligations in a money market where the
"Most of us
existed.
It
may well be said here that the impelling motive was fre¬
quently to invest their own funds at sufficiently high rates
prime credits were yielding perhaps 43^ to 5%.
probably have forgotten the time when that
differential
to make a
they
were
have
over
and above the amount of interest
deposits and while the motive may
understandable, the adoption of an unsound
paying
been
on
the
long run and as experience has shown, misfortune has
frequently been the outcome.
Even the commendable prin¬
ciple of diversification fails to safeguard the banker whose
desire is to get consistently more than the going rate.
The
unanimity of the decline and defaults in second and third
grade bonds during a depression is amazing to behold.
Both of these policies seem to me essentially and funda¬
mentally wrong.
So far as the speculative approach to the
problem is concerned, I am convinced that it is improbable
principal to achieve it is likely to result unfortunately in
that any of us can
speculate successfully, consistently, for
it is inconceivable that any of us are
tained intuition and
in which the
a
going to have the sus¬
judgment to speculate only in the years
speculation will
The bank, in theory, is
pay.
going institution of indefinite life and it is only by
develop¬
ing consistent policies that the management is going to carry
successfully through the ups and downs of a
on
Hence, unless
economic existence.
complicated
all maintain that we
second
grade securities only at exactly the right time, this whole
philosophy must break down as none of us would subscribe
to the theory that it is suitable for a bank to be managed so
are
(
we
geniuses enough to indulge in the ownership of
that it makes large
speculative profits one year and hopes
to be out of the bond
But the most
next.
theory
of
similar to
market and not take large losses the
important
speculative profits
that which
causes
reason
for condemning the
from the bond
portfolio is
the breakdown of the policy
by those who endeavored to invest their money
followed
consistently at
a
higher rate than that prevailing for con¬
servative securities.
.
Namely, the
very
time when capital
serving
be needed for their primary function of
funds may
would, in all
crisis,
speculative bonds would be at a substantial discount and
high coupon bonds of second grade credits would in many
as
a
guaranty to the depositors against loss
probability, be exactly the moment when due to a
cases
have defaulted.
within
a
them would
satisfaction
in
Therefore, their convertability at, or
reasonable percentage of, what had been
be likely to prove an
was
speculative
received 6
or
illusion indeed.
it to have made unusual and excessive
or
same
What
profits
second grade bonds in the 1920's or to have
7 % return from
second grade credits when in
the time of stress and strain of recent years,
of these
paid for
the pursuance
policies resulted in a depreciated bond account
At the very time when
capital funds intact to carry out our
policies proved disastrous.
needed
most
we
conservative principles.
there has been-a definite divergence of policy
In the past,
our
justifiable indict¬
obligations to our depositors, one of the
against
ments
the funds were not
had violated the very essence of their
that in
us was
Some of
there.
us
many cases
bank failures would have been avoided
and I
certain that many
am even more
figures
would
substantial
worries and
banks
the part of. the executives of many
on
which did not fail would have been
servative
recent troubles
our
estimate, but that the number is
not venture to
am sure
in
depreciation in bond portfolios I
had there been no
liarassments
How many
convertibility.
handling, namely, their prompt
I
pursuit
When the test came, the
running from 30 to 50%?
deposits puts the burden of proof upon those who would
avoided ha'd more con¬
Apropos of this, the actual
policies obtained.
losses and depreciation on investments for
on
the
1930 to 1933, inclusive according to the annual report
the Federal Reserve Board, totaled something over a
years
of
discouraging for a
I know of nothing more
billion dollars.
board of directors o£ a bank or
for the officers who have to
perhaps
irksome
even more
recommend it to the board of
the year's
directors, than to take a substantial amount of
the portfolio to the
market, a necessary procedure which—even disregarding
recent banking history—has been far too usual.
It is not
earnings and apply it in writing down
issued some
bankers of the
country against investing their funds in certain classes of.
securities, securities somewhat in the category of those upon
which I have jijst commented.
The thought which insti¬
gated his ruling persumably arose, although I hastily say I
have no specific information on the subject, from the fact
long
that the Comptroller of the Currency
ago
regulations containing prohibitions for the
widespread indulgence
that his examination still showed a too
the
in
^hese presently prohibited bonds. It
that the Comptroller had cause to
purchase of
to me regretable
appears
think that this
ruling
much the
thing
same
To
necessary.
was
as
the president of
a
it would be
me,
bank instructing
vice-presidents not to make any bad loans.
his
But there is another type of
while not
spbject to
so
portfolio management which,
much criticism
as
the methods I have
sufficient specula¬
unacceptable to many of us
previously mentioned, has nevertheless
tive
aspects to it to make it
As it is the method
according to best banking standards.
which most of
have followed in greater or less degree,
us
refer
the general theory of a
to
versus
short
a
term
in
and
I
I
its desirability.
think it bears the closest scrutiny as to
long term bqnd policy as
general,
to
the
practice of
endeavoring to reap trading profits by virtue of
successful
I said earlier that the dif¬
under which banks, operate inevitably give
forecasting of the interest^rate.
ferent conditions
some
theoretical
leeway in carrying out in a practicaly way a
And- I think it is in
perfection of portfolio management.
connection with
long term bond policy with the accompany¬
a
would have its greatest
ing maturity risk that such variation
Most of us were in the banking business in the early
1920's when Norfolk & Western 4s of 1996 sold at 67.
play.
credits
other competent
Obviously,
same
When
basis.
we
selling
were
only
19% above par, we get a dramatic example in
and
a
on
the
picture this bond today selling at
a
decade
possibilities of price variations in even the
half of the
highest standing credits, and hence, the extent of a maturity
risk as such. - While I believe that a maturity risk, namely a
speculation in the interest rate, is a lesser evil in portfolio
management than a credit risk—to
wit, buying anything
even the ma¬
security—I believe
except the highest grade
Of
turity risk should be reduced to a minimum.
of the fatal hazards of such a
the commercial demand for
necessitate
necessary
liquidation of
Thus,
of
it
mercial
probable
seems
other
time when
reason,
might
of our portfolio to provide the
a
seems
response
to the money
market.
clear that a commercial bank with com¬
demands
luctuations of
v
some
or some
would have tended toward a depreciated price
the
loanable funds
funds it
credit
course, one
very
funds, would presumably be the time when a long
term credit
because
risk is that the
at
at
certain times of the
year
and excess
other times, should certainly avoid the
long term credit.
With such
excess
loanable
equally reasonable tliat an institution
with
a
SESSION.
GENERAL
earning nothing for any extended period of
time. And even if they perchase had the patience of Job,
the constant prickings of their executive committees generally have had a tendency to shake their faith in their acumen
and in their economic wisdom. It almost always results in
going back, ipto the market again at about the same or
higher levels.
In the past, the methods of buying bonds for the portfolio have differed enormously among various institutions,
In many cases, skilled and experienced security men have
been employed to supervise actively the portfolio management, and obviously this seems to be—by the very nature
of things—entirely desirable. In hundreds of other cases,
however, the buying of bonds has been done by individuals
who had but little knowledge of bonds in general or the
usual methods of evaluation, and who made but little
pretense of such knowledge or ability. It has always been
of interest to me that a banker who in making a straight
commercial loan of $5,000 would be most punctilious in his
examination-of the proposed borrower and the purposes for*
which he wanted the funds and the exact method he contemplated using in paying the loan back, would in the next
few minutes make an investment of $10,000 or $15,000 in a
security which he had perhaps not heard of until informed
of it over the telephone and about which Jhe would know
little or nothing. The inconsistency of such performances in
the use of depositors' money cannot be defended. If the
size and earning power of any particular institution makes
impossible the employment of a man skilled in this phase of
reasonable perthe
a quick liquidation would be less likely to arise,
the important element, and at such periods in
see our money
relatively stable portfolio in size can have a
centage of
necessity of
and this is
our
such portfolio in long term credits where
have
available
on
embarking
based
skepticism
my
buying
to me,
wisdom
portfolio is
to the
the fact that such an approach to the
on
seems
as
loiig term bond policy in a
problem may
similar security at 115 and still
a
And such depreciation,
owning it .when it is selling at 70.
it
Obviously, I
suitable return basis.
level but
on a
often result in
as
a
quarrel with the purchase of high-grade long term
no
bonds at the 70%
of
that the investment appears
bond market fluctuations
be
to
the risk
safeguard
non-fluctuating capital and
it is not suitable for a bank to run
incurring when the real function of a bank us to
of
its
dejiositors by maintaining a
surplus.
I have
on
here, "except that it is all right for it to
the up
am sure
fluctuate
side," still another method of operation
all of
us
have pursued
the last few years,
in many cases we
repurchase at
a
that I
with indifferent success during
has been that of trading in
Government securities.
say
short term
"indifferent success" because
have sold out and taken the
profit only to
If I seem to speak somewhat
higher level.
desultory
Our
judgment has not proved infallible, as regards our ability to
gauge
accurately money conditions and marketing conauthoritatively here, it is perhaps due to some
experiences
ditions
cases
even
along this
line in our own institution.
six months
or
a
year
where bankers have divested
ahead.
13
-
I have known
themselves of their entire
Government portfolio, and I hasten to say this
determination to leave
the money idle indefinitely/unless the opportunity arrived
to invest the funds again at a lower level of prices.
These
bankers comforted themselves with the fact that the 2%
banking, or if entirely disinterested and sound advice on
the subject is not available from some other source, I would
suggest that such institution limit its portfolio to Government
considered a 1% income for the
next two years.
They have sat happily basking in their
brilliance for perhaps the first month after their sale of the
bonds but it is more of a strain than most of us can bear to t
principles, I am nevertheless conscious of the fact Jhat the
present situation of bank portfolios the country over presents
a current problem of huge proportions and one that is
entirely new to American banking. I refer, of course, to the
short term
is not
a
personal experience, with the
premium obtained could be
bonds and small variations in quality therefrom,
While I have talked thus far along the lines of
general
or
10V
Western Business
ROCKER
FIRST
NATIONAL
BANK
OF
Member
Federal
Deposit
SAN
Insurance
FRANCISCO
Corporation
14
BANKERS' CONVENTION.
fact that whereas in
accustomed to
the
ments,
portfolios in the past
our
having perhaps
investment
average
approximate 40%.
The
commercial paper
as
we
holdings of
are
yourselves.
have been
in the past, the probable
assets in invest-
our
for this
reasons
knowledgeable audience
a
20% of
banks
not
today
had various data
obvious to such
There is
a
reasonable
this situation has^tended to make the banks resort to the
the
profitable
security market.
use
in Government securities due to the
as
result of the substantial
a
few
this
lack
increase
in financing the Government, deficit.
commercial
loan, demand
portfolios is
our
a
banking situation, I would not
exists
by
of
a
•
with its
change in
permanent
venture to say.
aspects of
make
must
us
eventuate over
necessity for
borrowing,
keep the question before
folio point of view would be
can
make what
our
think
we
portfolios and have
decision
of which
some reason
we may
take actions which materially affect
With these additional elements to face,
portfolios plus the controlled
our
ever
to follow
policy which limits to
a
more
very
a
portfolio.
least
If only because of the lack of other available
inevitable that the larger proportion of all
continuing
be in governments.
bank from the port-
a
us
handling of
if
now
large degree the risk of serious variation in the value of the
ihit shpuld
us.
the next few years that this is a
cpndition, the difficulties of running
at
not
credit market superseding to some extent the
our
essential than
manufacture, resulting in less necessity for large inventories
less
may
any
was
natural play of economic forces, I think it becomes
up
corporations, the existence of the present quick means
transportation, and the actuality of improved methods of
consequently,
ignorant,
the money market.
our
and
within
error
to have grave consequences
as
namely the increased size of
At least it
The facts of the large surpluses built
present.
well be
our
margin of
conclusions thrown completely awry due to a
our
resultant
in
his
by those in authority who, for
Whether
of
years
wise decisions for the
are
the last
over
least
existing, I submit that all of
was
large amount available
borrowing done
At
upon
to what
as
But at the present time with the machinery
wrong.
It has been the fact that up until
of investment
time.
likely to be great 'enough
for their deposits, namely
recently at least the most available form
credit
conclusion
sane
the trend of the money market was likely to be
and demand for commercial loans, and
other most obvious
the supply and demand of
on
which he could rely to form a
lack of
market has
of the money
course
always been entirely clear but the thinking banker has
all know
substantially enhanced and I
the
They do give
premiums
subscribe to the
our
paper,
minus yield but
a
as we
represented by the rights
are
securities, but there is going to
new
it is
holdings should
to
come a
would
expect greater managerial emphasis on this end of ..." time, I assume, when those
rights will have no value. With
banking to exhibit itself.
To indicate the potentialities of
the shortest term government bonds giving a minus yield,
the situation—if a bank with a
$1,000,000 of capital funds
it would be an extreme policy indeed to advocate/having
and $10,000,000 of deposits now has
40% of its assets, or
only the shortest term governments, thus actually costing
$4,400,000 in the security markets, only a 5% variation in
price would deplete the capital funds by more than 20%.
I recite this to
emphasize the
grave consequence
of
small variation in the level of the bond market and
a
greater seriousness of the problem
size of the portfolio grows.
no means
in
use
rules
in
And the
we
are
facing
perplexities
new
under
portfolio but
which
we
more
are
serious
ones
playing the
Of
With the longer
basis to yield slightly
having potentialities of variation in price in
the
as
are
by
new
course,
over
risk.
I make
effort whatever to
no
the risk
or
I
indicated, it
have
money
market
an
or
we
effort
we
me
can
period of time rather than
that
reasons
philos-
a
follow with confidence
philosophy of expediency
a
to
For the
must have
estimate the duration of
the likely time element involved in
possible Federal Reserve actions tending toward control.
For the
reasons
must have
Washington, D. C.
to
seems
which would involve
Banking Service
prophesy the extent of
the time element involved.
ophy of management which
our
I
3%, and because of their maturity
a greater or less
degree, the question arises whether the yield is worth the
over a
in
to be in business.
money every year
term corporation credits of the highest rating selling on a
hence,
exist in the
game.
us
a very
confined to the additional
percentage of our assets
our
v
a
that I have
indicated, it
with confidence
over
a
ophy of expediency which
would involve
time
element
involved,
and
today
market
possibility
tending toward control.
follow
we can
period of time, rather than
to estimate the duration of our
money
actions
to me that we
seems
philosophy of management which
philos¬
a
effort
an
the likely
or
Federal
Reserve
In getting better than
a
minus return,
Riggs National Bank
therefore, and in refusing to undertake the
risks
The
in
inherent
long maturity, it
a
to
seems
that
me
a
permanent policy of serial maturities is the only answer to
our
problem with
ably the suitable
present inflated portfolios, and prob¬
our
answer
if
even
changes in
our
banking
situation tend to result in returning to a more normal rela¬
welcomes the opportunity to
Bankers, their clients and
serve
friends
tionship between loans and investments and the size
234
money at
had
Nation's Capital
a
were
or
3% today, they well remember that they
market in 1921, to select another
extreme, when
buying the best long term credits
I indicate this* only to show that
Fleming
George O. Vass
President and
Vice-President
Chairman of the Board
and Cashier
over
$100,000,000
Founded 1836
X
Member Federal Deposit Insurance
Corporation
5 to
they
6% basis.
they have to look at their
ing the return and estimating the performance
period of time.
we
a
long
While appreciating entirely that the
con¬
face from the
point of view of
our
over
demand deposits
differentiate us entirely from the insurance
companies, I
nevertheless believe that in handling the bank portfolio we
must
,
on a
problem from the point of view of investing their money at
the going rate at the time the funds are available and
averag¬
ditions
Resources
our
While the insurance companies do not like to invest their
in the
Robert V.
of
portfolios is cut down.
develop the
same
investment
insurance company buyer has.
I
assume
he must have this trend of
going rate for
today is
money
1M%> and
investment, I think
trend of thought as the
I have
never
thought.
been one, but
If the
average
in the prime credits from 1 to 10
we
our
have
years
adopted the serial plan of
point of view must be that
accept that return in the hope that
as our
we
will
early maturities
,
we
paid off,
are
that
time
will be reinvesting at
a
higher rate and our
at
which looks
return
average
dis¬
so
thus
will
today,
couraging
15
SESSION.
GENERAL
in¬
be
creased.
I should like to be able to suggest
cover
the
which
management
portfolio
is
complicated
far
would
However,
contingency.
every
question
TRADITIONALLY
to be followed in
simple rules
some
BANKERS' BANK
to do
to attempt
even
A
broad and
too
this but I do think if those of us who
charged with this important duty
are
have in mind certain basic
will
it
tend
keep
to
us
middle of the road than
in the past.
ophies
The Chase National Bank is
advocate with
A
From
con¬
fidence:
to high grade credits.
In other words,
Limit the maturity risk.
2.
own
long-term bonds that you do
any
never own
one
of its guiding policies has
development of correspondent bank-
ing relations. For years it has served thousands
pwn at as
nearly the bottom of the market as possible,
and
inception,
been the
1.j Confine the portfolio
,
bankers' bank.
a
have been
we
traditionally
the
Among such basic philos¬
would
I
principles
nearer
of the
very many.
country's leading banks.
Be satisfied with the going rate of return
3.
high grade credits.
on
Do
4.
with
The Chase is
put emphasis on increased earn¬
not
(Taken
ings from capital gains in the portfolio.
—the efficient way
secured.)
5.
portfolio
the
Confine
securities
to
promptly marketable.
serially over a limited period.
One
is
to
of return
lower rate
a
bankers have in the past
take from their
to
money
—the
give
t
have
not
—its value in many matters
in
our
I
proverbial.
ability always
should
be
business
I
do not
in
are
the
CHASE
NATIONAL
OF
banking
is, if
taken in
Most of
ducting the business.
tfeve
THE
the
why
see
do not think it
safeguards
proper
to the
and
BANK
operate profit a l)ly
to
inherent
and
correspondents.
of railroad earnings
and downs
ups
to
sold in
were
class,
a
as
important
are
history when
this country to yield a profit
manufacturers,
where its size,
There
years.
enough automobiles
are
prestige and connections
The steel industry,
been times
country.
the present,
the problem, this does not
me concern.
section of the
manage¬
But from the
such, has had losing
as
knowledge of credit, business and
financial conditions in every
point of view that I think it is proper
to .gauge
friendly cooperative spirit of its official
staff and its
than many
portfolio
rates.
corre¬
promulgate
been willing
during periods such as
low
daily transactions of its
spondents.
ment, and hence, lower bank earnings
of
in which it handles the
accompani¬
such conservative policy
endeavored
have
I
inevitable
the
of
ments of any
as
routine
tends to
portfolio so that it
the
Invest
6.
mature
outstanding because of
inadvertently
if
however,
pleasure,
CITY
THE
Member Federal
OF
NEW
YORK
Deposit Insurance Corporation
con¬
us
Avill
to admit that the bankers of this
have
country
in
recent
years
lost
considerable of their traditional stand¬
ing.
Whereas in the past, the banker
has been
r
respected for his probity and
his wisdom and his unselfish interest in community affairs,
depositors.
events
deposits
to
occurring in the last few
change his
standing,
although in
majority of the cases, unjustly.
to say now
have had
years
I
am
that
as
community.
among us
we
a
opinion in the
my
or
by outside agencies, but if
record of bank failures which have taken
me
body
we
have something to
Evidently
there
was
a
tendency
not here to attempt
justified this changed feeling is
has been inflamed
a
how much it
we
look at the
place, it
answer
certain
seems
to
for to the
percentage
who failed to appreciate fully the fiduciary capacity
occupy
toward
our
depositors.
much during the past 15 years
institutions,
forgetting that
our
Perchance
we
thought too
of making money for our
first obligation is
to
the
was
If
this
shareholders,
present.
we
did fail to appreciate that the safety of
of more importance than dividends for the
is
Therefore,
carrying out
a
more
reason
for
need not be concerned
or
caution
at
troubled by
portfolio management policy where
our
first
the safety of the funds which have been
consideration is
deposited in
the
all
we
our
care.
A policy of greater conservation,
greater liquidity, will result in better service to the com¬
munity,
fewer
financial
prosperity for the banks
will better carry out
and,
period of
therefore,
years.
their important share in
life and the banker will
esteem of
disasters
over a
-
greater
The banks
our
economic
again take his rightful place in the
the community.
*
BANKERS' CONVENTION.
16
Make Haste Slowly
By Leroy A. Lincoln, President Metropolitan Life Insurance Co., New York, N. Y,
I
delighted
am
to be
address you.
to
sion, that
to
also
over
and that
people.
By
and for
the
Both are conceived
common.
on
scale
huge
a
and
the
of
prosperity
by
they
why
in
we
allied
two
lines
There
all
If
'activities toward
business
all
to the
directed if
be
must
it
I11
the
those
business
turned
is
confirmed
would
today
the
only as the public prospers.
long run,
every
affect the public welfare.
which
It is
through these
continuing determination and an
a
Such
take advantage
conditions
general
which
situation,
in
we
and
discuss
to
life
the
insurance
with the
numerous
contacts
company,
for example, there
located
throughout
business-
insurance
with
you
business,
States and
In our
Canada.
their
to
today
are
cross-seetion of the urban
to
as
warrant
of
some
in
us
employees
other
of
public.
Our contacts
attempting
to
the prevailing conditions in
weight
com-
our
intimate touch with
very
Of
first
satisfactory
condition.
I
people
that, in spite of depression
this
that
of
been
never
well
to
or
At
over
any
60 years
been
limited to
tame
It
any
affects
the
added
to
life
the
indicate
the
on
physical
small
is
110
is
the
stamina
matter
to every
of
when
we
subject
the
find
no
American
evidence
people.
health
other human activity.
In
reflected in
our
,
whole,
we
can
department
every
registered
which
lives
well
the
group
the life
companies
the
Metropolitan
we
a
recently
have
In the com-
American
people is
insurance
expression
again rising, and
the
011
is
now
Ten billions of this amount repreon
of
large
numbers
enlightened
of
employees—an
industrial
Among policy holders whose premiums
are
relations,
paid weekly
or
legislation
against
are
their de-
designed to
other hazards, under
.,
,
.
.
authority,
pioneers
who
Federal
whether
a
measure-
State,
or
security
of social
In early anticipation of probable
first
our
company
investigated
was~ainong
governmental
pro-
existed in this
in
insurance
over
a
long
period
to
focus
of
years
order
we
to
coun-
Our operations in the pension field have
attention
on
the
desirability
of
suitable
In these and other ways
have sought to be helpful to those who have been interin the broad field
of
social insurance,
consideration
of
one's mind the old English maxim,
I have
no
this
subject
brings
"Make haste
to
slowly."
doubt that these words, or their equivalent, were
y»used iixjhty proverbs of many ancient
In\
recovery.
whole, the face value of the insurance
as
highs in the amount of insurance in force,
$103,000,000,000.
eloquent
in
definite evidences of
very
of
as
sponsorship.
Any long-range
,
aggregates close to $21,000,000,000.
as a
of
about
new
now
panies
sent
see
as
lives
whose
the field of
ested
the records of the life insurance business.
company,
security
financial protection for the aged.
This
consider how essential
country
of themselves and of
considering current
of responsible
served
to
Substantial gains in the economic well-being of the people
are
a
when
tries in this field.
permanently adverse effect of the depression
any
of
this
voluntary
There are
security.
understand the results of the experiments of other
birth,
expectation, at
Students
in
,
social
two
since _1929.
in
country. #We have followed the movement in
entire
over
social
grams abroad and such private programs as
the average length of life is
for the American people, and
provision
factor of tremendous importance to be borne
those
stratum
one
people
for the American people.
particularly impressive is
section.
one
the present
have
years
is not
such
and quite
huge
a
public interest in these questions,
measured by the death rate,
What is
better.
phenomenon
society
Nation.
people,
of
the protection
pose
conditions long continued, the
as
our
110
normally subjected,
making,
of
in the direction of effecting
at this time
report
In
evidences
We find ourselves quite in accord with the avowed pur-
to be in a very
seems
able to
am
still
are
program
any
governmental
physical state of
has
for
provide compulsory
the light of our busi-
importance, it is gratifying to brlnf testimony
that the general health of the
and
63,000,000
in mind
interpret
relations.
ness
such
pendents,
are so many
and
there
are
insured for
large
a
world
in the aggregate, constitutes
They
Close
and
to pro-
individual plans for protection—provision which,
own
pany
agents
the
have made,
try
back-log
necessarily in
of years,
period
of life to which families are
include persons of every economic level and social stratum.
50,000
long
a
In greater or less degree millions of families in our coun-
27,500,000 policy holders
are
in
country
hazards
very
our
over
voluntary provision to cover the various contingencies and
things
some
from
other
the
on
public, have observed.
United
the
throw
can
people,
American
the
that
vide for the financial protection of their families.
of this occasion to show what light certain
in the life
business is
insurance
initiative and
own
I would like to
which the country lias experienced.
their
and
perhaps more than any other, have learned, through their
larly pertinent at this time after the six or seven difficult
years
themselves
of
care
,
life
the
review is particu-
a
take
Another fact which is demonstrated by the experience of
desir-
often to take stock of conditions
so
to
other
demon-
seem^ to
families.
prosper,
ability
corner
in
Many indicators in
people have come
the American
troublesome times with
public welfare is,- perhaps, a bit more intimate
Nevertheless, all business is public service and
the
to
ago.
years
have
which
conclusion
a
insurance
life
increasing
in
ex-
relation
in
nearly 10
of
people
American
the
strate that
and direct than is the case in many other fields of business,
able, therefore,
for
company,
our
for policy loans
lines of business, including your own.
is to justify its
can
years,
judge from the experience of the life insurance
economically,
The relationship of banking and of insur-
existence at all.
time.
some
demand
comparable with
one may
companies,
people is the great objective toward
our
declining for
to levels
goal—the public good.
of
number of
a
the. amounts subject to such demand lias lately been down
business
of
for
been
have
Demands for policy loans and cash surrenders have
liiglis.
the country
raising the standard of living of the people.
Welfare
.
than
ample, the actual
savings
exchange views and dedicate our
which
foundation
The premium income of the life companies is reaching new
activity and are
same
ance
There are other evidences from the insurance record that
been
reason
families of
in the
are
volume of new writings
the American people'are today 011 a much better economic
people into pro-
every
a
opportunity to allude to
thrift
for
whom
larger
strong disposition and ability to preserve and increase
a
of the
instrumentalities
of
and
we
channels, they maintain economic
ductive
should
the
accumulated
all
find
earners,
their insurance equities.
occa-
protect the economic status of the American
encouraging
directing the
basic
I welcome this
practically
wage
business of life insurance
gives me an
of banking have in
to further and
is
it
points of view which
some
monthly,
particular joy to me, 011 this occa-
deliberations.
your
because
and to have this opportunity
here
a
good friend, Mr. Fleming, lias the honor
my very
preside
sion
It is
r
peoplerth order to emphasize,
as well as modern
in apparently contradictory
terms, one of the basic rules of successful accomplishment
How shall
tions?
we
May
apply this maxim to these present-day ques-
we
not,
with
considerable propriety, consider
the applicability of this old adage to the current movement
for advances along the whole broad line of what has
to be called social betterment?
the suitability of
population
as
some measure
to those
come
Probably few people deny
of protection for the whole
inescapable hazards against
it is not feasible, for the majority of the people to
which
protect
GENERAL SESSION.
themselves
by the exercise of their
established
instrumentalities
of
initiative through
own
their
17
It
choosing.
own
not be inappropriate to remind ourselves, in this con¬
may
Chartered 1864
nection, of somewhat collateral steps in the common inter¬
est
which
have
For instance,
been
one
taken
civilization
as
developed.
has
cite police protection, public health
may
administration, and laws in behalf of the. weaker members
of society.
spiration
All these, in their last analysis, find their in¬
motives
in
similar
to
which
those
dis¬
are
we
cussing.
If
current
which
ress
to
are
we
these
give enlightened
problems, let
made
was
consideration
to
some
of
measured prog¬
us examine the
respecting somewhat parallel
ques¬
CHARACTER—ability—integrity and
■'Vv; ■''"
human
•
tions during the past few decades.
Naturally, I turn to
our
Examples
social
conception has proved itself
spread
social
acceptance
than
In
through
the
this
this
light
progress
ance.
has made
on
of
medium,
I doubt if any
worthy of wide¬
more
what
can
might
be
now
understanding
qualities in
which
is
men
to
who direct
function
essential
are
v
.
.
.
•
organization
an
smoothly and do the
of good.
greatest amount
accomplished
that
suppose
'^
'
greater contribution to
a
of protection through life insur¬
one
■'
business of life insurance to
own
illustrate that real progress is made slowly.
4
abundant.
are
prin¬
the
sucli
TWELVE
men are
selected
to
direct the
ciple of family and other insurance protection would have
received
is
as
early and
the
universal acceptance.
However, sound
principle in the abstract, desirable
would
it
as
be if every bread-winner were adequately insured, progress
toward
rapid
the
as
general
of life insurance has not been
use
might
now
one
Perhaps
suppose.
that the economic complexion of the country was not
the
to
scattered
in
For
whatever
realize
some
80% of the population
agricultural pursuits
communication
the
facilities
sense
of
security
comfort
first
at
was
life
which
enjoyment in order to
or
premiums required to
of
of
the
the
even
some
is
of the few companies in
one
necessaries
Early
country
which devotes
its
whole effort in
managing and conserving estates and property
The Board is made
exclusively.
following twelve
of
life
in
of
case
life
the
-
up
of the
men:
could
passing
be able to set aside the
forms of
the
to
slow
insurance
it
which is unique in
Edward G. Baetjer
Venable,
for dependents some continu¬
assure
bread-winner.
transport
our
that
v
was
under-developed.
so
public
the
reason,
when
and
were
give; slow to accustom itself to the denial of
ance
suited
propagation of the life insurance idea in the early
days when, for instance,
and
as
Deposit and Trust Company
of Baltimore—a company
was
reason
one
affairs of Safe
Baetjer
&
Howard
death
insurance
were
Charles H. Babcock
Reynolds & Co.
simple and the technique of salesmanship developed slowly.
Gradully,
idea
the
as
achieved
wider
understanding
and
William G. Baker, Jr_ _Baker, Watts & Co.
popularity, efficiency in salesmanship increased and policy
forms became
One
more
benefit
demonstrated
conditions.
were
and
after
its
soundness
Policies
"added,
was
and
became
serviceable.
more
adaptable to wider needs.
more
another
adaptability to
desirable
more
Then,
they
^•ahd
and later of group health and accident insurance
group annuities,
tion
and
more
had
made possible
of the business to social
more
accustomed to the
The public became
idea
that life
insurance
definite place in every family budget.
a
The volume of life insurance in force in the United States
has grown slowly and surely, not in "fits and starts."
many years the increase has averaged between
per
The amount in force per capita,
year.
social
stable and
of the very
as
has
all
The contribution of
slow
as
the less
fact that it
been
usefulness
ment
$800.
progress,
the
must
widens
it
liable to
8% and 9%
for the entire
the vision
business toward
our
seem,
sudden
is
all
the
reverses,
by virtue
President of United
States
Fidelity & Guaranty Co.
Lyman Delano
Chairman of the
Board of
Atlantic Coast Line R. R. Co.
Robert Garrett
...Robert Garrett &
Sons
Norman James.
■
c
President of James
Lumber Co.
-
J. Edward Johnston.
Capitalist
.
Blanchard Randall/
Gill & Fisher
Splendid
of
lie
Asbury Davis.
more
not hastily achieved.
was
progress
surely
might
E.
For
population $vas $100 in 1900, just under $400 in 1920, and
is no\^ about
President of Safe
Deposit and Trust Co. of Baltimore
wider contribu¬
yet
a
progress.
of Baltimore National Bank
George C. Cutler
25 years ago, plans for
some
Chairman of the
Board
chaining
because
wholesale distribution through the system of group life in¬
surance,
Howard Bruce.
experience
as
life
insurance,
ahead.
Each
still
level
toward other levels
of
greater
Charles E. Rieman
attain¬
President of Western
National Bank
beyond.
Take another example of the gradual gain in public
fayor
of
what
now
seems
an
incontrovertible
to child labor, against which
in a
"
proposal.
I
campaign prolonged for fully
a
generation.
Not
the ratio to the whole population, but even the actual
ber,
of children up to 16 in all
of the
various
since 1900.
700,000,
or
fewer
By 1930 the number
than
there
had been
was
only
num¬
industries,
trades, &c., combined, has been declining according to
census
refer
great progress has been made
JfaU Jfeposit and grost Crr.
—OF
BALTIMORE—
13 SOUTH STREET
every
actually below
among
the smaller
The Oldest Trust
Company in Maryland
BANKERS' CONVENTION.
18
Excluding
population as far back as two generations dgo.
agriculturef the number of children in gainful occupations
was 700,000 back in 1900, and by 1930 was down to a bare
200,000.
employed in this
shows
1900.
In 30 years the percentage
The 1930 census
70% of all young people five to 20 years of age as
contrast with less than
attending school, in
and
just one-tenth of the corre¬
1% to one-tdntji of 1%.
60% in 1910
has been made in providing better work¬
Great progress
One
conditions.
clean
rule
need
contrast
the
light,
airy,
factories and workshops which are the
and sanitary
with those
today
only
recall
we can
as
bxisting only
a
generation ago when little attention was paid to comfort
and
These improved conditions were
working conditions.
minimum standard
by law to comply with at least a
of safety and sanitation,
number of employers
various entirely
productive
measured
as
working
is
a
which
were
measure
veys
in
a
of
reduction
comprehensive
any
its progress.
Consider
and
represented by increased leisure,
standard
the
more
full-time
recent years.
statistics
This
since long before
with
which
to
The latest Federal Government sur¬
show reductions in the standard
group
large
the increased "social dividend" of
through comparatively
work-week since 15
of from two to as many as 12 hours a week,
to 20 years ago
in
the
the increased
"social dividend" in another
striking form—the increased
volume and wider
dispersion of physical goods throughout the whole popula-
increased
automobiles
two passenger
provide
Housing has greatly
"real wages"
Average
many-fold.
devices
opportunities for
greater
the purchasing power in terms of goods
by money wages, had, before the
commanded
and services
The actual
since 1900.
expanded a full third
and manufactured product
of mineral, agricultural
capita, available for consumption, has expanded corre¬
per
Of course, the depression interrupted much of
spondingly.
the
up-trend in
item
of
social and economic well-being, but the
our
for services has nevertheless main¬
compensation
tained,
that
depression,
the
throughout
two-thirds
same
1929.
share in the total national income which is enjoyed in
attributable to mechanical
Better standards of living are
invention
and
them
to
are
women
A
of
percentage
greater
in industrial,
commercial
For both reasons more
pations.
men
our
and
other gainful occu¬
or
goods and more services
produced and afforded for consumption and enjoy¬
be
ment
improved technique in manufacture, but not
alone.
by the public.
much
There has been
expansion in the services rendered
While
by the various units of government in this country.
holding to the theory that government should perform only
which
functions
those
cannot
be
otherwise
satisfactorily
fulfilled, we must agree that much of government's expan¬
sion of services
such
services,
can
be justified apd, in respect to many
of
Never¬
would not take a backward step.
we
theless, since government is not organized to engage in pro¬
duction, in
of important industries.
also
have
in this country, or
depression,
and
labor
the
of I our
majority
the
11 persons in this country.
lessen
leisure
can
trend that has been going on quietly
there
a
materially excel the legal standards in
economy
week
while
voluntary ways.
that part of
Consider
our
States today the backward
In most
employer is compelled
by
made in
been
have
enjoyed
said to be
are
not required to demon¬
are
that
improved in comfort and the number of mechanical
provided not only, because it was right, but because it was
profitable .to do so.
comfort
There
volume
barely half in 1900.
ing
of
for every
advances
great
standards
people.
was
sponding percentage in
had declined from
the
of age
10 years of age who were gainfully
group,
Elaborate statistical data
strate
to the
In 1930 the ratio of children over 10 years
employed in the manufacturing and mining group,
total of all persons over
tion.
ment
and
the ordinary sense, each addition to a govern¬
payroll not only takes out of the production of goods
of
out
and workers the
ber
of
has
come
by the
private service, every person employed
government, but also places upon
the remaining producers
responsibility of supporting a greater num¬
Expansion
non-producers.
services
in government
gradually, and the mounting cost of government
has had to
be niet
by slow and painful adjustment in the
citizen's personal budget.
Since 25 years ago public employees have
nearly doubled,
whereas gainful
workers generally have increased by only
about pne-half.
In 1910 the percentage of employees of our
various
governments
while in 1936 it is
IN OREGON
Even
I
it's the
NATIONAL BANK
Five
complete
Portland
strategic points
units
and twelve others at
in
throughout Oregon enable
afford a banking service of
still
am
was
4.8%,
referring to governments in the aggre¬
gate—Federal, State and local—not to
STATES
UNITED
workers
startling is the growth of government expendi¬
more
tures.
gainful
total
to
6.4%.
particular
any
arm
of government.
much
So
that
our
we
of
may
our
taxation today
governmental expenditures—Federal,
The
following
tabulation,
invisible
is indirect and
not always appreciate the full
partly
weight of all
State
estimated,
and local.
furnished
is
to me:
to
state¬
us
wide proportions.
P. C. Tax
P. C. Govt.
Tax
110 Millions
1890..
1913
1919 (war)...
1925
1930
1936
The
TT
United Stales
National Bank*
Broadway and Si?tih. at Stark.
huge
quarter
Portland, Oregon
MEMBER
FEDERAL DEPOSIT
INSURANCE CORPORATION
enues,
to "National
to "National
Income"
increase
of all
.
7.1
6.1
7.0
5.9
7.9
10.6
33.0
9.3
•
13.1
14.1
18.4
16.7
28.8
expenditures in
times
as
to
emphasize
haste
slowly in placing
cause
of the borrowing,
heavy government
appreciated.
must
citizens'
new
the
importance of
obligations
on
rev¬
govern¬
making
the people.
Be¬
the increase in the burden of this
expenditure has not
so
far been fully
But the day of reckoning comes
necessarily be
earnings
the last
by declining
has occasioned such prodigious increases in
mental^ debts
^There
such
accompanied at
century,
Expenditures
7.2
$855,000,000
$875,000,000
1,570,000,000
1,382,000,000
2,187,000,000 2,919,000,000
7,465,000,000 23,000,000,000
7,884,000,000 11,126,000,000
10,266,000,000 13,428,000,000
10,000,000,000 17,300,000,000
1903
invited on matters per¬
taining to business, agriculture and
finance in Oregon.
Inquiries
Collections
Expenditures
Income"
Resources Over
Government
Collections
Fiscal Years
which
a
ultimately.
limit to the percentage of the
can
be
taken
by
government.
19
GENERAL SESSION.
Whenshall
that
reach
we
maximum,
capacity
reserve
Whence will come
ability to pay even the interest on the debt, if the cost
the
of government shall already have
the running expenses
of
what
have left for later emergency?
we
Nevertheless,
faced today with many schemes to
are
we
that
in
budgets—charges
permanent charges to governmental
natural
the
of events
course
We
diminish.
rather than
must
will
inevitably grow
sympathize with,
all
and
support, reasonable forms of public aid to needy old people.
But before
impose an unbearable and permanent burden
we
national
future
the
on
it
income,
behooves
tax, but for the sake of those very individuals who
be
Is
beneficiaries.
its
lavish
generosity
which
taxation
now,
there
entirely
may
not
a
add
may
wre
think
to
us
those who must pay the
soberly not only for the sake of
top
of
burden
future
to take
ability
destroy our
should
by
that,
danger
a
than
and
one
half times,
a
while
reduction of the age
a
from 65 to 55 multiplies the cost by
nearly two and a half
times.
reached the limit which its citizens can bear?
add
multiplies the first year's cost as of 1934 by more
60
to
shows, to reduce the pension age from 65
above table
the
presumed to lay before you and abstruse prin¬
I have not
ciples,
anything particularly new in either fact or prin¬
nor
ciple.
I
well
over
trations which
I
social
are
history,
would
effort
to
I
well known.
the
aid those
have
familiar
examples
discourage
not
and
development
the
unless
we
of those who are the real objects of our
suggested, and without reference to their possible
ultimate
but
cost,
to all
deduct
security.
of a monthly pen¬
and then to
65 years of age and over;
of age and over, and then to those 55 years
is made
No attempt
estimate
to
maintenance costs that
present old-age
and
might
build
to
solicitude.
up a
Nothing
false
sense
the young of
It
$200 Monthly
$100 Monthly
$4,422,000,000
6,864,000,000
Age 65 and all ages above
Age 60 and all ages above
Age 55 and all ages above
is
these
today so heavily to meet the burdens of today
ment.
10,074,000,000
take
no
to
assume
that
that
a
besetting
are
The
answer
lies,
restoring opportunity to
$8,844,000,000 $17,688,000,000
13,728,000,000 27,456,000,000
40,296,000.000
20,148,000.000
business
solution
permanent
today
us
be
can
general trend in
of the
account
country toward a larger proportion of old persons.
as
has
work
been
to
said
on
those who
all
sides, in
would work.
on
the part
The
be directed with sympathetic understanding
of everyone that the solution involves
responsibility.
I know of
no
group
a
because of your close contact with the people through¬
out the nation, to encourage
constructive thought and action
along those lines among all of your customers.
definitely to increase the proportion of per¬
very
the
at
older
of age
to
of
population,
the
Ultimately,
we
computations
our
about
to
or
12,000,000 people.
expect to have from 20,000,000 to 25,-
may
000,000 of persons
financial
instance,
the proportion of persons 65 years
will have increased from its present 6%
and over
9%
For
ages.
indicate that, by 1950,
65 years
Therefore,
of age and over.
figures that I have just given—enormous as they
really understatements of the future annual
may seem—are
load which such plans would necessarily impose.
lem is
to set
claims
and
of
up
who must
It
behooves
but there
of
new
whom
any
is
pension program
remember
that, when
Commercial Paper
certain
groups
own
demands increase
time goes
as
natural tendency toward the formation
a
demanding to be included
groups
public
a
time break the backs of
special beneficiaries of the public treas¬
as
not only do their
ury,
Investment Securities
beneficiaries themselves.
to
us
singled out
are
same
the burden and end in bitter disap¬
carry
pointment for the
on,
beneficiaries of
prospective
which would not at the
those
The prom-
sdheme which would satisfy the present
a
funds are to
those
to
The danger
in
among
be distributed.
democratic system of government is that these various
groups
of special beneficiaries
cally powerful, and,
without
possibilities for their
own
may
organize, become politi¬
appreciation
group,
of
the ultimate
to say nothing of the pub¬
lic, may compel the expansion of such obligations far beyond
the power
ence
of the Nation to
upon our
whole
mension to those
age
been
some
per
suggested in
year
than
State
and
poses
all
combined
assume
economy.
without destructive influ¬
Even to provide
than
of
quarters, would require
our
governmental
more money
bodies—Federal,
local—are estimated to be spending for all pur¬
in
half
American people.
in pension
monthly
65 and over, in amounts which have
1936.
In
fact, this increased expendi¬
ture, added to our present burden, would
more
a
age
the
total
It is
an
present
be equivalent to
national
income
inescapable fact that
a
of
would greatly, increase the yearly cost.
the
reduction
As
mutual
better able than your
declining birth rate and the improvement in mortality are
sons
of
had
alone, but the sober thought of the whole body
politic—must
own,
figures
safe
not
problems
merely by resort to the use of the taxing power of govern¬
nor
operating
of
Nothing could be more unfortunate than to tax
To this end the national intelligence—not government alone,
by such schemes.
$50 Monthly
our
than
destroy the potential capacity to care
(excluding administration)
be eliminated
These
harmful
more
in turn, may be among the needy.
over.
any
be
could
helpfulness, diminish our capacity to take care
for them when they,
persons
and
age
I
suitable
any
population estimates of 1934 of the cost
on
those 60 years
of
of
and tomorrow as to
based
for that year
sion
illustrating
of
purpose
to
the immediate burden, I present a few illus¬
what may be
trations
the
for
simply
tried
of us.
merely
to all
proceed cautiously, we may, by a mistaken sense
need?
are
of the
be unable to care for them¬
who may
of generous
that
homely
a
selves, but rather I feel bound to emphasize the fact that,
reasonably good care even of those who may be in direst
Without reference to any particular scheme among many
upon
centuries
chosen from our own economic and
have
of
some
dwell
to
generations
That old adage, and the historical illus¬
world's progress.
marshal
chosen
have
tested
Instead,
truth,
CONRAD BRUCE & CO.
San Francisco
Portland
Los
Angeles
Seattle
20
BANKERS' CONVENTION.
The
in
field
of
social
the whole realm
most
our
Our
adjustment is the most complicated
of human
The construction
effort.
of
complex machinery, the running of the most com¬
plicated business, is
mere
lems
interplay
involving
the
huge numbers
bring
been, there
never
we
nor
will
greatest number.
population will say:
ponderables
of
social
we
improvement,
psychological
complicated
emotional
and
1■:
we
tion
of
of
wise
are
the
our
with
elements,
-
with
is
we
im¬
these
large-scale
maladjustments arising from
We
must
cannot
never
nor
will be,
millennium.
a
children's children,
our
situation when the whole
a
"Enough;
is desiredI"
no more
And
in conclusion, I say we must move cautiously lest
the failure of
and
attempt
We
commitments.
we
prejudice the whole future of social betterment and lest
virtually
are
millennium,
a
see
so,
-
shall
we
it
as
such
In the field
motives, feelings and instancts.
as
novices.
If
confronted
are
and considered.
never
children,
our
beings, to the end that the greatest good shall accrue to the
Here
small
millennium into full bloom by statutory enactment.
a
Neither
of human
be
plunge headlong into rash
There has
child's play compared with prob¬
of
beginnings must
not
efforts along these lines leave us abashed
our
discouraged.
If
would
we
build safely for our future
solu¬
the complexities
each
society only after thorough study of the situation.
step, that
we
right direction.
are
Let
sure
we must
and
progress
be certain, at
ground and headed in the
sure
on
make
society,
make haste slowly.
us
The Banker's Part in Trust Service
By Gilbert T. Stephenson, Vice-Preside nt Equitable Trust Co., Wilmington, Del.
'?
.
Under the American system of trust business as presently
constituted the future
hands of the banker
of trust service lies
of the trust
as
himself
man
Nearly all of the trust companies
that
in
system, too, the future of banking is interwoven -with that
of trust business.
Most of
banking departments.
Under that
.
So, the American banker has
with
a
bank. In
a
bank.
some
in trust business and in trust service which he cannot avoid
owned
and which,
of
How
distinguish at
me
trust service.
in
pay
between trust business and
once
what
By trust business I
we
doing for
are
ficiaries—the services
At the
I
spoke
with
we
what
mean
our
Memphis conference
on
the
opening statement
Committee
American
I
Bankers
Association,
the
one
action—is
that
calls
of
placing
that
paying basis and keeping it there.
unmindful
in
the
of
presenting
directing attention,
some
business
a
on
this report
we
as
time to come, to
At the
to
and
prompt
business
trust
same
con¬
on
time, I
President
a
am
that
in
we
must beware of
expense
banking in
have
any way, we
a
corporation exercising trust
a
associated.
men are
trustee
;
as
he
is
connected
with
a
corporation,
that in most
cases
doina I hope to help somewhat in
balance of emphasis between (rust
service.^
subject of earnings, let
business is
an
However, before leaving the
me say
that profitableness of trust
essential element of trust service, that a trust
institution cannot continue to render good service unless it
makes
a
reasonable profit on its trust business.
^
Coming
now
to the subject of trust service, let
service?
Is it not true that
different
businesses
and
members of different
true also that for
and
in
the public
been associated
Of
the
64
officers
and
members
of
committees
in
carrying
In
on
bankers
callings?
nearly 100
such have
any
and
inquire,
trust
men
men
length of time
same
have been associated with each other
trust institution
in the United States that is not associated in
some way
A majority of our 3,000 trust institutions
trust companies with which
I mention this only for the purpose of
connected.
distinguished from the practices, of trust in¬
as
stitutions still is largely
for the most
in the hands of the banker and that,
part, the trust man is an administrative officer
charged with the execution of policies in the adoption of
an
influential, if not
no
person can
reasn
that
a
dominant, part.
have such
an
influential
part in the formulation of the policies of a business without
having
a
correspondingly influential part, in the services
rendered in connection with that business.
What,
service?
do ?
the
with
are
then,
What
is
can
the
banker's
help of the banker?
major role.
distinctive part in trust
the banker do that the trust
For what part of trust
tinctive parts
a
(1)
these enterprises.
a
or
the
directing attention to the facts that the determination of the
policies,
are
in organization, in law,
For the
presidents of the banks
are
of
Association, only
are
mind, banking and trust business have
Organization—Today there is scarcely
banking.
me
part in trust
Yes, that is true; but it is
years,
are
they
It stands to
banking and trust business
that
enterprises.
bankers and trust
as
of
he, rather than the trust man, is the executive
which the banker had
The Banker's Relation to Trust Service
first, wherein does the banker
department
i_
head of the corporation.
so
trust
the banker
»
one
which. is^emgagedjmtrustJMsinessiancL
(2)
men
shares the reputation of the banker.
man
that
executor,
Almost universally trust
has in trust service arises from these two facts:
over-em¬
of service.
proper
a
and
as
The Banker's Distinctive Part—Whatever part
(1)
than
Whether in praise or in blame,
bankers.
five
business
even more
though the institution to which
even
trust company.
a
referred to
the trust
public mind,
People speak of "the bank"
guardian
or
they refer is
are
powers
banking and trust business and bankers and trust
earnings, I wish to direct attention to the banker's part in
maintaining
as a
Under the Revenue Act of
Trust Division of the American Bankers
By
In at
is defined
bank.
in the law,
Earnings and Trust Service—Today, without drawing
service.
are
few left.
together.
State (Arizona) a trust company
one
attention from the still unsolved business problem of trust
trust
very
recognizes the association between
In the Public Mind—In the
shall be doing persistently for
payii^g basis,
trust
governmental supervision is included in the definition
Callaway
the publip,
a
eliminate all the trust institutions that
we
(Section 104),
of
with respect to
the need for putting and keeping trusts
phasizing profits at the possible
Trust
for
to which
fact,
If
1936
pressing
most
the banks
cases,
under
the
men
business—the
alluded
least
the
Trust Division of
Trust Policies of the
on
of
associated
the bank is wholly
cases,
banks and trust companies are codified
to
still in full accord
that
structive
not
am
are
the trust company is
In still other
bank exercising trust powers.
the recent report
problem of bankers and trust
business
trust
By trust service I
banking service last March
of
In other
trust company.
a
In Law—The law also
trust customers and bene¬
special reference to earnings.
with
some cases
banking and trust business. In most States the laws relating
the bank's responsibility for its trust department,
on
trust companies have
community have cooperated in establishing
a
doing for
we are
rendering them.
are
by
associated with
trust departments—settling estates, administer¬
our
way
company.
ing trusts, and performing agencies.
mean
What is his part?
he make the most of it ?
can
Let
therefore, he should improve.
our
engaged in trust business exclusively
are
wholly owned by
part both
a
...
departments of banks.
much in the
as
I
■
service does the trust
I shall
name and-
man cannot
man
require
discuss five dis¬
in trust service in wnich the banker must play
They
are:
taking the mystery out of trust service;
(2)
making trust service more generally accessible to the people;
(3)
making trust service more generally available to the people;
(4) providing special training for trust service; and
(5) maintaining the standards of trust service.
*
31
GENERAL SESSION.
p*ri^r?riB553£HMite8i
Taking the Mystery Out of Trust Service
During the past three
great deal has
years a
been done to take the mystery out of
The
banking.
"Constructive Customer
handbook,
Re¬
CONDENSED
lations," and the constructive customer relations
clinics already
have
long
gone a
Up to the
customer relations with
have not had
Co.
&
PRIVATE BANKERS
respect to trust business
corresponding amount of
a
1936
Brown Brothers Harriman
time constructive
present
CONDITION
OF
towards
way
simplifying and clarifying banking in the public
mind.
STATEMENT
SEPTEMBER 30,
NEW YORK
em¬
PHILADELPHIA
BOSTON
phasis, and the mystery of trust service remains.
However, there is
to be issued
soon
ASSETS
supple¬
a
Cash
mentary book in the field of customer relations
designed
do for
to
business «what
trust
Valued
formidable
simplified.
trust
Those of
of the work have
us
idea how
no
such everyday terms
are
Valued
executor,
as
trator
I
cestui que trust, corpus,
testamento
cum
fully
am
fession
have
must
But trust
its
bonis
business
every
technical
to
absolutely
use
to
technical terms any
technical term,
a
non.
or
beneficiary
say
corpus;
as
istrator
Greater
Market whichever lower
.
.
care
on
.
.
.
.
.
Acceptances
on
.
12,012,526.34
.
.
759,037.83
.....
.
13,406,519-32
....
221,963 05
Deposits—Time
administrator under
Acceptances
J^e
Held
in
Portfolio
as
13,963,476.73
363,022.20
....
Accrued Interest, Expenses, etc.
197,668.80
Contingencies
for
1,770,100.01
.....$ 2,000,000.00
as
■.....[
Surplus
the estate,
$14,326,498.93
.........
to
trust;
will
a
5,022,453.71 $59,528,203.78
Less Own Acceptances
as easy
que
$54,505,750.07
....
....
.
.
to
necessary
cestui
annexo
Stocks
and
or
LIABILITIES
admin¬
12,001,413.85
10,001,413-85
$87,460,863.17
de bonis non?
part in reducing the use
our
as Private Bankers and
subject to examination and regulation
by the Superintendent of Banks of the State of New York and by the
Department of Banking of the Commonwealth of Pennsylvania.
Licensed
and
words
phrases
and greater
thoughtfulness in explaining simply the tech¬
nical
do
Cost
Deposits—Demand
Reserve
testamento
cum
technical
of
at
testamentary trust; prin¬
the unsettled part of
1,105,764.86
.
.
17,899,795.28
Capital
cipal,
to
say
.
$87,460,863.17
than is
more
Is it not just
as
632,138.15
Other Assets
they should be careful
it is to
as
under will,
trust
5,677,917.89
pro¬
explain its meaning without waiting to
questioned about it.
16,528,878.98
.
terminology.
When it is
necessary.
.
.
Market whichever lower
or
and bankers should be careful,
men
use
Cost
.
Other Banks
Maturing Within 1 Year
or
Customers' Liability
when they are talking with or writing to people,
not
at
of
Banks
from
Other Investments
and adminis¬
de
annexo
that
aware
$19,216,321.47
.....
Advances
and
Valued
funded, unfunded, not to mention such foreign
as
Banks
Market whichever lower
or
Acceptances
Marketable Bonds
administrator, trustee, revocable, irrevocable,
terms
from
to the
awesome
Loans
public
Cost
and
Securities Called
in the midst
are
Due
and
Time Deposits Due
terminology to be
who
at
Call Loans
Simplifying Trust Terminology—First of all,
a
Hand
United States Government Securities
the
original book did for banking.
there is
on
that
terms
cannot
we
avoid
using will
great deal towards removing the mystery
a
from trust service.
"The
For
American
long time
a
we
System of Trust Business"—
have needed
trust business for the
Division
possess
the
has
publiched
little
a
"The
book,
System of Trust Business," which attempts to
simple language the facts that the banker should
before he undertakes to discuss trust services with
man on
(4) the authorized paragraphs for
Retaining the
The
state in
(3) the schedules of fees for those services, and
on
attempt has been made to supply this need.
an
Trust
small, untechnical book
the street.
at all times
the trust
one
arrow
in the
quiver of those who would
remove
the
It is hardly to be expected that
it
circulation
public.
That is
and
will
have
wide
a
among
Something else is needed for the
a
the general
man on
the street.
handy, simple, untechnical, easily understandable,
more
or
less standardized statement
services rendered
For the
or
descriptive of trust
by trust institutions generally.
suggestion I have to make
now
I have
good
a
practice of the English trust corporations.
(I
see
that
we
have here one representative of the English
banking
fraternity and I Hope that he is in the audience this morning.)
trust
question the propriety of looking to English
corporations for
they have made
new
a
precedent, let
more progress
to be recognizable
particular
a
company,
to date by issuing new
up
Whenever
a new
service is offered
shcedule of fees is adopted, a new edition of the
me say
that in 30
years
in developing personal trust
I have the latest official
pamphlets of six leading English trust corporations. In con¬
tent they are more or less standardized. Each of them contains:
However, I
that the public has
a
am
are
standardized
fully convinced that,
ready for it and the
should issue official pamphlets.
also toward
many trust
that
for
soon
as
sooner
They will
as
insti¬
purpose.
trust in¬
the better, they
go a
long
way
not
right to know;
simple description of the trust services offered by the company;
standardizing adequate fees for trust service.
Banker's
The
Part—The
bankers'
part
in
taking
the
mystery out of trust service is attributable to the fact that
so
frequently he is the point of contact with the public, that he
is the first person
with whom the
connected with
man
on
and that from him the
a
bank
or
the street discusses
man
on
pression of the mysteriousness
service.
trust company
trust
service,
the street gets his first im¬
or
the naturalness of trust
However, the banker cannot make trust service
simple
or
natural to the
man on
the street unless it
simple and natural to the banker himself.
Making Trust Service More Generally Accessivle to the People
1
company
sufficiently
are
stitutions
is
pamphlet of
corporation keeps it
pamphlets, I doubt if the fees of
tutions
sound
a
the official
so as
sufficiently standardized already to permit the issue of
official
business, especially executorships, than the American trust
(1) the facts about the
as
general format
Although the services of most American trust institutions
institutions have made in 100 years.
(2)
different
only towards taking the mystery out of trust service, but
begin to get ready to issue official pamphlets./ My precedent
Lest anyone
a
are
precedent. My suggestion is that American trust institutions
is the
in
pamphlet is issued.
mystery from trust service.
ever
company
>
same
editions from time to time.
Ojjicial Pamphlets—However, at best this little book is
but
the
naming
fiduciary capacities.
Now at last
American
a
of the banker who meets the
public.
use
We who live and work in the larger cities take for granted
that
trust
service
already is
accessible to the American
BANKERS' CONVENTION.
22
people generally; whereas, the surprising fact is
now
there
in which
areas
tllat
and in
numerous,
some
The
Survey oj the Trust Field—Two years ago
a
the Trust
size of the personal trust accounts in the trust
located in 15 northeastern
are
these 18 States have
than
institution; and that there are 105 cities with a popu¬
lation of 15,000 each or over
in which there is not a trust
great deal still remains to
trust service within reach of all the
more
received with favor in trust
circles. Under one plan a trust company has established a
number of fully, manned and equipped trust departments
with a centrally located head office and has located these
to
so
strategically
the
of
most
3,000,000 people of the State.
established numerous local
with a head
Under another plan a bank has
trust
to make trust service
as
offices and several district trust offices,
offioe, and in this
most the
way
broken down and the accounts
has made trust service accessible to
plan has been suggested by A. Key Foster, of
Birmingham,
trust insti¬
well established
whereby
Ala.,
tutions, with unquestioned resources and standing, would
make
working arrangement with local banks in smaller
a
communities located within the
same
State, under which the
trust institution would serve as executor or trustee
local bank would
serve
and the
agent for the exeoutor or trustee
as
in managing local property
Recently I have made
institutions
co-fiduciary relation¬
Total
a
small way.
one or
Account^
practical
the farms
it is accessible already to those of us
people living
purposes to
and in the villages as
on
The Banker's Part—Since
is involved, the
16
35
^0,000,000
59,000
12
29
40
Executorships
115,000
11
32
43
64
56
Guardianships
11,500,000
400,000
7.160
45
86
80
93
$5,516,959
....
'600
depend fully
a
much
as
No bank
man.
trust
upon
the banker
trust company
or
department
or a trust
any
of these plans
the trust
as upon
is justified in establishing
office
in making
or
a
working
arrangement with a local bank merely for the sake of offering
trust
bank
In offering trust service under any
service.
or
trust company must
of the trust
man as
as
plan
a
be governed by sound business
principles and policies, passing
function of the banker
upon
which is
more
the
head of the whole institution than
$37,416,959
each
In
these four
of
accounts
bring
accounts
it is
living
trust
accessibility of trust service,
refers to the
availability
refers to its
Problems
estate
a
I have used the term,
service,
which I shall-discuss next,
I have in mind especially the availability of
trust service for
estate is
as
adaptability to the requirements of people of all
walks of life.
people of small
of less
Anywhere in the United States an
than $10,000 would be regarded as a small
estate; and in the centers of population an estate of less
$25,000 would be
so
than
regarded. " Whichever amount is ac¬
cepted, the small estate offers three problems.
The first one
arises out of the
preponderance of small accounts compared
with large ones;
the second, out of investing the funds of
small accounts; and
small accounts.
it
of
is
of accounts
a
the third, out of the cost of administering
few large
In the 105 miscellaneous
$1,000,000; in the 339
over
six
totaling
accounts
100 executorships, it
nearly
three
is
estates
totaling $5,000,000; and in the 56 guardianships, it is
of
account
one
$236,000.
These 600 trust accounts may be accepted as a fair cross
section
of all
as
our
to size of the accounts in the trust
trust
institutions.
Unless
we
departments
prepared and
are
willing to accept accounts of $25,000 and less,
deprive of trust service by banks
must
we
trust companies fully
or
two-thirds of the American people who have e£tates to be
settled and trusteeships and
guardianships to be administered.
Investing Funds of Small Accounts—Diversification is now
generally accepted principle of trust investment.
But
satisfactory diversification simply cannot be had in small
invested
accounts
trust
investment
independently.
have
men
with
amount
which
from
$10,000 to $100,000 and
them
thinks
trust fund of
to
that he
$10,000
be invested
or
can
diversification
range
way
None
diversification with
some
a
satisfactory method of
other
found
be
than
through inde¬
pendent investment.
.
Cost of Administering
of
all the
less. So, if the funds of small accounts
properly,
must
obtain
the
of
about $37,000.
average
29
of
group
opinions
satisfactory
be accomplished and their figures
of
A
given their
may
making trust service
Small Accounts—The third problem
more
generally available is the cost of
administering small accounts.
Normally the costs of setting
the account, keeping the books, making the required
up
accountings, investing the funds, and servicing the trust
property
proportionately much greater for small accounts
are
than for large ones.
themselves
faced
So far trust departments have found
the
with
unhappy alternative of either
a
loss
or
making the charge prohibitive and thereby depriving
of trust service many
of those who need it most.
Solution of These Problems
The
Through Common Trust Funds—
problems of the small trust accounts have had the
special attention of trust
men
the past six
1929 and 1930 several trust institutions
massing of the funds of
the
common
fund
a
as
numerous
unit
years.
During
began the collective
investment of the funds of small accounts.
the
estates^
oj the Small Account—Large or small applied to an
variable term.
groups
account
one
63
60
'
,
average.
accounts,
$7,500,000; in the
else
goegraphical location of trust institutions; the
of trust
the
up
46
accepting and administering small accounts at
head of the trust department..
Making Trust Service More Generally Available to the People
The
$52,545
general and far-reaching policy
adoption and execution of
P.C.
Under
$10,000 $25,000
Living trusts
diversification
a
Under
$5,000
339
are
living in the larger cities.
P. C.
Under
$1,000
-100
minimum
tainly it is socially desirable, to make trust service as accessi¬
ble for all
it is
small.
Under
P. C.
of
AcctS.
Miscellaneous
another of these plans, it may be
practically workable and economically justifiable, as cer¬
P. C.
Avge.
of
trust
ships, have been suggested, and some of them have been
By employing
the
of accounts
groups
Accounts
105
a
tried out in
up
classified by size,
are
study of several
a
Kind of
Accts.
and in rendering personal services.
StiU other plans for cooperation between trust
and local banks, some of them involving
bring
But when the totals are
with the following results:
6,000,000 people of another State.
A third
A very few large accounts
found that by far the most of these accounts are very
of
generally accessible to the people have been
departments
to believe that the
reason
to these impressive figures.
average
has been suggested recently and
trust
no
departments of State-chartered banks and trust companies
would be much less.
No.
adopted and put into successful operation and a third plan
accessible
I have
be done to bring
American people.
Suggested—Already two plans for making trust
The Plans
service
departments of National banks is $71,322, which is a sizable
anywhere.
one-hal^and, outside these 18 States, fully three-fourths the
area of the country is outside a radius of 25 miles of any
a
in the trust
average
only one-half the population of the country; that more
So,
misleading.
are so
two-thirds of the
American trust institutions
institution.
departments of American banks
surprising. Averages
account
and three Pacific Coast States; that
trust
and trust companies is
special committee to make a survey of the
The survey shows that over
trust field.
small accounts in the trust
The average size of the personal trust accounts
reach of any trust instituion.
Division named
Preponderance of Small Accounts—The preponderence of
even
places populous
people who need trust service are not within
large,
are
By this I
mean
accounts and investing
with each account having
a
participation proportionate to the amount of its investment.
Through the
for it now,
cost
trust fund, which is the
administration
of
common
out the
common
proper name
diversification of investments and reduction of
are
achieved.
trust funds made a very
By comparison, the
creditable showing through¬
depression.
These
common
trust
funds, however,
certain tax and accounting
their continuance.
soon
encountered
problems that seriously threatened
The Trust Division,
awakened to the
/
^
;-:'v
necessity
named
v.?general session.
the problems
solving
of
special committee
a
committee made
the small account,
of
on common
This
trust funds.
study of such funds here and abroad—
a
including funds in long and successful operation in New
Zealand,
Canada,
Australia,
Japan—and
trust fund is
Denmark,
basically sound and that it is the best, if not the
only feasible,
of investing the funds of small accounts.
way
in trust business in which 1,553 students
courses
enrolled. These American Institute of Banking courses,
were
however,
designed primarily for the needs of the
are
women
of
Work
Graduate
younger
in banks and trust companies.
and
men
and
Norway,
to the definite conclusion that the common
came
offered
23
-
the
School
Banking—The
of
special
training of officers of trust departments began only last
with the opening of the Graduate School of Banking at
year,
Rutgers University
activity of the American Bankers
as an
The opening of this school
of real
Whereupon the Trust Division, with the approval of the
Association.
Executive
Council and
moment in the history of both banking and adult education,
operation
of
and Federal
'
the
with
the spirited support
the Federal Revenue Act of
and
tax
Committees
Association's
1936
co-
Taxation
on
Legislation, urged the adoption of
and
section of
a
designed to solve these
The Congress, sensing the
accounting problems.
was a step
When the history of American banking is written,
chapters should
Rutgers University
record
where and June, 1935,
one
of the
the place
as
the time when American banking
as
emerged from the realm of the arts into the realm of the
sciences.
At Rutgers in 1935 there was done for banking
(Section 169) to the Revenue Act which meets the desires
what
done at the University of Pennsylvania in 1765
of the Trust Division and of the Association in every par-
for medicine when the first college of medicine was estab-
social
well
as
ticular.
as
the economic issue involved, added a section
the
In
broad
trust fund opens
small
means
ment of the
is still
trust
of
common
beyong the
The Banker's
the
service
by making trust service
it is to the person of
as
field
large
available to him
as
At this stage of develop-
means.
trust fund its ultimate
grasp
social significance
the final analysis
the solution of
the problems of administering small accounts
largely
should exercise the
same
ihg
as
small account
a
account—never
—>»
large
and thereby
generally available to the people
more
A bank or trust company
the banker.
upon
and disciimination in accept-
care
it should exercise in accepting a large
accepting
any
account merely because it is
small, but accepting it, whether large or small,
or
lished and what
business, but last
At the present time 400 bankers and trust men are taking
course in the Graduate School of Banking,
Next
200
there will be 200 more. Beginning in 1937, about
year
will be graduated annually and returned to the
men
banks and trust companies of this country, about one-third
of whom will have had special training for trust service,
These
of
reserve
service.
establish
trust fund unless it actually
company
needs
and
common
a
It should not establish
one.
one
unless it is
one
It should
:
prepared and resolved to give
the fund vigilant and intelligent
supervision, not
once
in
a
The
point I wish to make and to emphasize is that, while
trust fund is
common
tration
small
of
Certainly
invaluable aid in the adminis-
an
not an automatic device,
accounts, it is
the
during
formative
period
the
of
collective
investment of trust funds, the establishment and maintenof
ance
trimt funds
common
professional attitude towards banking and trust
a
In time they will be
leavening influence through-
a
The Banker's Part—What is the banker's part in providing
this special training for trust service?
He
part.
officers
may
select
to take
one or
the
It is
practical
a very
two of his most promising trust
in trust business.
courses
He
may
make it financially possible for them to attend the Graduate
while, but all the time.
the
of knowledge—one kind of
reserve
a
of which there can be no excess—an inquiring
out the entire banking and trust fields,
unless it is manned
equipped properly to administer the fund.
not establish
trust
or
will take back into their institutions and into
men
their communities
mind, and
bank
a
at Rutgers we witnessed the opening
year
the three years'
only if trust service is needed and if good trust service can be
Nor should
done at Harvard in 1817 for law when
of the first college of banking, including trust business,
rendered
by that institution.
was
the first college of law was established. A few colleges and
universities have offered courses in banking and trust
of our comprehension.
Part—In
making trust service
rests
common
the door of opportunity to the person of
was
deserve, in fact they require,
School of Banking.
He
may
give them time to attend
other than during their vacation period.
word for it that the time they
are
You
may
not a vacation; it is hard work night and day.
and
encourage
take
my
attending the school is
He
may
help
them in doing their extension work and in
He
preparing their thesis.
may
make them feel that he
the best thought and attention of the banker as well as of
gards
the trust
re-
part of their work for the institution.
man.
Providing
Special
Training for
mainly
three
from
sources—the
Trust officers still
law
the
office,
department, and the trust department itself.
taken
the active
from
over
transferred from
up
as
department; and
the art of trust service in
Every profession
apprenticeship
read
law in the office
doctor drove the
one
just the
discount
same
older lawyer
present conditions.
an
this
Pioneer
ment sets forth the business standards of trust service and
some
grow
as
young
lawyers
and the
young
Let
method if training, but
adequate method of training under
Today preparation for trust service is
period between apprenticeship and formal
Work
of
training for
R.
,
the
American
service
trust
on
trust
Judd to the Manhattan
more
trust
Banking.
began
of
Oct.
banks
to
may
I
pause
and
just
trust
a
companies
as
corporations,
moment to pay a tribute of ad-
miration and of deep affectoin to the memory of
the great
sons
one
of
of San Francisco, Maury Sims, in the, union
of whose big heart and clear head was conceived the Statement
of
Principles of Trust Institutions.
Let honor
go
where honor is due. He is entitled to go down in banking and
trust history as the father of the Statement of Principles of
Trust Institutions.
Personal Standards—Now trust men are giving attention
These standards
to the personal standards of trust service.
apply to trust
men as
individuals.
A trust
man
has certain
was
Banking—
different from the guiding principles of the trust institutions
22,
in which he is employed.
1901,
delivered by
(New York) Chapter of
During the past nine
than 10,000 students, regularly employed
banks and trust companies,
in
Institute
business
vthe American Institute of Banking.
years
applies
And
personal, ethical obligations which are in addition to and
when the first lecture
Orrin
This state-
are
schooling.
Special
Business Standards—First, they formulated and adopted
statement of principles of trust institutions.
some
organized, systematic,
long since
trust men have been paying
a
horse-and-buggy for the old doctor.
the value of
it is not
in the transition
the
of
so
years
special attention to the standards of trust service,
are
the school of experience,
the stage of
to
It has not been
During the past three
banking
through the stage of training through
goes
on
special training.
no
come
in the trust department. All of them learn the science
well
integral
Some
practice of the law;
the banking
an
Maintaining the Standards of Trust Service
Service
Trust
Up to the present time, the apprenticeship method of
training for trust service prevails.
their special training for trust service
business
offered
have taken systematic
by
During the school
the
year
American
Institute
1935-36, 39
in
courses
of
Chapters
Already
a
special committee of
the Trust Division is at work on a statement of the ethical
obligations of trust
men.
It is time, I think, that such
a
statement should be adopted and published for the guidance
of trust men.
We trust
men
need
a set
accepted standards by which to measure
practices.
from
of recognized and
our
ideals and
our
Furthermore, the best results will be obtained
self-imposed||and self-enforced standards of service.
BANKERS' CONVENTION.
24
So, let
our
trust men take the initiative in
us
statement of
own
formulation of
ards, whether written
unwritten, will depend as fBuch
or
the attitude of the banker
give life to
make
or
his
own power
to
dead letter of any set of standards
a
He can
give life to any statement of obligations of the trust men by
understanding himself that there are certain business and
personal standards peculiar to trust service and, therefore,
affecting trust
that
men
be formulated.
ever can
different from those of banking,
and by giving the trust man
his moral support in living up to
those distinctive standards .
failing to
He
make
can
a
dead letter of any such statement
understand it himself and by expecting or
trust
if
the doing of
man
not
requiring of the
In still
another way
the banker may influence for the
by conducting his banking department at
That is
that is wholly
Where standards of service
all times and in all its relationships in a way
creditable to
trust institution.
a
concerned, the public does not distinguish
are
distinguish between the banking department
have to
not
and it should
and the trust
department
or a
bank
or
trust company.
The
atmosphere of trust service, redolent of the business qualities
of
soundness
well
and
personal qualities of patience, tact, sympathy,
the
as
judgment, foresight, and conservatism as
of
human
should
understanding,
permeate
the
entire
In the words of President Fleming:
institution.
before trust men
not be the
must
sound future growth of the trust business
relationship exists, there shall
conducted that, when a dual
so
takes precedence. We
act in a
interest in the commercial departments of our
slightest question as to which obligation
banks should never be allowed to conflict with the
high duty of our trustee¬
ship.
is two sentences,
that
ought to exist between our
trust institution that is a member of the American
Because the banker has such power to
ards of trust service,
influence the stand¬
1 hope that, if a statement of ethical
By the President of the A. B. A., Robebt
we
Association,
I
sure
am
Bankers
all those present in expressing to the
I speak for
for their cordial invitation
beautiful city.
No city in
enjoys a greater reputation for friendliness and hospitality than
Francisco which, for years,
has been one of the le^ing shipping
bankers
Francisco
San
of
this
hold
deep
their
in
and
industrial
centers
of
the
world.
Forty-four years
ago—ub September,
San
Francisco, which was the first time we held our meeting in this most
hospitable city.
We met here again in 1903, and still again in 1929.
Association
1892—our
held
its
annual
eightennth
The members of the General Convention Committee
convention
in
have spared no effort
entertainment, and they, together with
the bankers in various other parts of California and the West, where we
have been entertained en route here, have seen to it that., our trip to San
in
providing for our comfort and
Francisco
On
wijl be an enduring and happy memory.
the membership of the American Bankers Association, and
behalf of
especially the delegates assembled here, I desire to express to
Mr. Mcintosh,
the members of their
efforts which have been
put forth to make this convention an outstanding success and our stay
here an interesting and enjoyable experience.
By custom and tradition, it is my duty to give you an accounting of
my stewardship and a general summary of the activities of your Associa¬
tion since you paid me the honor of placing in my hands the responsibility
of directing its affairs.
In carrying out this trust I have endeavored to
perform faithfully the duties of this high office strictly in accordance
with our constitution and by-laws, and, with the advice and counsel of
deep
Council,
for
the
and
splendid
Administrative Committee and the Executive
set down in resolutions adopted by the
the various positions on
economic and banking
the
fulfill the mandates
to
Association
subjects
Vice-Chairman,
Brigham,
appreciation
associate officers,
my
well
as
by
taken
as
the legally constituted
committees and commissions of
well-thought-out statement of ethical obligations of
loyally as they have supported the statement of
any
Once adopted, that statement will be morally
principles.
binding
upon every
I
also
four
divisions
assistance.
On
faithfully
of the
of the
Association
by lending them every support and
the other hand, these able gentlemen, who have discharged
endeavored
have
and
to
efficiently
trust man whose institution is a member
Association.
of the American Bankers
Partnership Between the Banker and the Trust Man
The
By this time I hope that I have
cooperate
the. duties
■J
fully
of
with the Presidents
their
offices,
made it clear that I
regard the banker and the trust man as partners who are
essential to each other under the American system of trust
As
business.
each maintains his individuality
partners,
engaged in associated enterprises.
Business—At Memphis I tried to make it clear
while they are
In Trust
in trust business—-partners in duties,
that they are partners
responsibilities, partners in liabilities, partners
profits, and partners in losses.
partners in
in
I have tried to make it equally clear
Trust Service—Today
in trust service—partners in taking
that they are partners
service, partners in making trust
more
generally to the
the mystery out of trust
available
and
accessible
service
people,
in providing special training
partners
and partners in maintaining the standards
for trust service,
of trust service.
May this partnership continue, not for
business alone but for the sake of trust
its best.
Won't you bankers
the American people
hope for the future of trust business.
my
have given
me
well, to
as
democracies of trust service I am basing
On the growing
along with us trust men in giving
come
the sake of trust
service
American citizen who really needs trust
service may have it at
entitled to get?
quality of trust service that they are
good business for us and, believe men, it will be
It will be
4
great service for them.
Discussed
D. G.
take this
fine, helpful support on all occasions, and, therefore, I desire to
opportunity
I
express
undertake
the maximum
necessary
was
the
unite
to
that if our Association
degree in serving its members and
for some time
conviction
to
public interest, it
appreciation to them.
deep
my
strong
a
be effective
to
was
the
to
had
have
that the leadership of the Association
including the four divisions,
membership,
entire
goal—the improvement of
rendered by our
under¬
standing on the pai*t of the public of the true functions of banking and
a
realization
of the vital part it plays in the economic life of every
into
banking
our
banks
to
towards
all working
team,
one
common
a
of the service
betterment
the
and
system
of the country, and the promotion of a better
the people
individual.
On several
of
common
occasions
during recent years, when really critical situations
banks in the field of legislation affecting
confronted
interest
bring about a large
groups and
organizations.
This enabled them to present a more united front on such
major questions, in
place of the cross purposes among bankers that
legislators had complained about in the past.
This proved of great value
in arriving at a workable solution of the problems involved, both in the
interest of banks 'and! of the public.
It demonstrated the essential need,
banking, the American Bankers Association was able to
measure
coordination
Nation
the
for
of
leadership „for
lines
of
well
as
special
or
various
among
for
as
group
banking,
influential
of
banking
the maintenance
of a unified
whole, without precluding action along
interests wherever called for under particular
profession
our
as
a
circumstances.
Of
this unity is dependent to a large degree upon a strong
course,
well-informed
Membership
our
of
E.
N.
members
net
his
who
for
committee,
423
of
of
I
the
12,488
the
members, whose
banks
in
the
of
Mr.
cooperation
While
total net increase,
the
too
"Van
Home
during this administrative year
members.
dhes, at
praise
cannot
new
we
and the
secured a
members admitted to member¬
after giving effect Jto those members
resigned because of consolidations
delinquent
had
and
With
Home.
Van
of
increase
and
highly the work of
Committee during the past year under the chairmanship
membership,
ship exceeded the
Association.
our
so
Mr.
and
Chairman,
committees,
now
trust men as
appreciation
meeting
important
America
San
am
V. Fleming, President Biggs National Bank, Washington,
the 6ixty-second annual convention of the American
open
that the Asso¬
the individual bankers will support
Proposal for Taxation Reform—Other Topics
A
As
confident
I
ciation will adopt and
the
departments with respect to trust service.
trust
our
relationship
banking departments and
mind that statement is classic of the
and to my
^adopted by the Executive Council
Bankers Association.
other day
in, a personal letter that you wrote to me the
to
was
the end that every
Mr. President, that statement from you
asked to
thereupon became and still is morally binding upon
and
every
always realize the high trust placed in us when we agree to
fiduciary capacity, and our
are
Statement of Principles of
It will be remembered that the
Trust Institutions
American
It is absolutely essential to the
that banks be
individuals
as
subscribe to it.
things that are contrary to the spirit,
better the standards, both business and personal, of trust
service.
rejected by the boards of directors of banks and trust
companies
the letter, of the statement.
to
is adopted by the American Bankers
men
Association, it will be presented to, considered, and adopted
that of the trust
as upon
The banker has it largely witnin
men.
obligations of trust
or
of any set of stand¬
The Banker's Part—The binding force
upon
standards.
statemet of business
our
the formulation of
personal standards, as we did in the
and liquidations and those dropped
31, 1936, we
represented roundly 91% of those
close of the fiscal year, Aug.
resources
continental United
States,
25
GENERAL SESSION,
In
the
it is necessary that there be a
finances, and that the budget be
During the year we have carefully
our Finance Committee and approved
Assoaiation such as
great
a
ours
adhered
budget set
the
to
by
up
costs
of
prudently,
yet
make
the
of
use
the
of
funds
reserve
of
interest
the
sound
banking,
the
economic
no
most
their
for
which
of over-chartering of banks,
subject
sent to our entire
was
bound
is
be
to
Other
studies
which
contributed
much
so
difficulties
the
to
of
such as a survey of
by this commission,
progress
changes
Nation's business
the
in
commercial
loans
Federal
and
Government
made
of
and
methods
investments
the
increase
banks,
commercial
by
in non¬
especially
this
been
have
issues.
keenly
alive
adopted
resolutions
the
to
the
at
belief
our
that
the
subject
approach to this
proper
it was
Savings System,
Postal
the
of
first
to
was
secure
a
buildl a
sound case.
To that end a questionnaire was sent to 9,533 banks which
could accept savings deposits and were located in towns having Postal
Savings facilities.
It is gratifying to report that 9,067 replies were
background
received,
The
of
representing
the
of
located
were
presenting
and
our
of
for
is
being felt
of the
legislation
this
coming
work
it
was
by
the
lending
such
chartered institutions to
confidence has
retumedl and ample
be resumed
funds
offered
that
created
Studies
in
that
order
accurate,
these
activities
have
work,
had
reliable
be taken
may
splendid
bulletins
and
Banking
on
methods
on
of
been
authoritative
and
by the chartered banks of the Nation.
over
from the heads
cooperation
have
data.
released
This
the
by
be
will
of
setting forth
committee
followed
this
in
government
by
detailed
more
reports to the Secretaries of State Associations for the purpose of acquaint¬
ing the members of the State Associations,
with
the
facilities
In order
that
and
tion
on
take
soundly the
that
this
which
this
subject,
from
policies
pursued
definite
assurances
discontinue
by
our
fine
the
pieces
to
fixing
these
from
heads
agencies
as
these
this
In
of
soon
they
agencies,
kept
under¬
can
is
necessary
changes
operation
of
of the
and the
connection
government
that
had
have
we
they
adequate service
as
it
abreast
methods
the
in
agencies.
the
members,
own
the government.
be rendered
can
do
year
of
Bank Management Commission
research
with
fair
the
and
and
practices
made
legitimate
service
analysis has been suggested
field
of personal
such
available
them
banks
of
in
to
analyzing
by the commission.
plan
One
and
accounts
of
in
account
It has surveyed also the
departments.
Our
farm
affecting
farm
Time
will
structive
Presidents
credit
credit.
not
of
a
It
permit
the
the
vention reports,
One
of
School
of
the
most
Bankers
Banking.
made
am
and
also
to give you a
to the
respective
and I
thoroughly into the subject of
gone
a
study on factors
study' on soil
outstanding
betterment
all of
resume
this report,
in
divisions
sure
published
an
of
will
our
banking.
The reports
be printed in the
con¬
of the
book of
con¬
members will find them profitable
well
them
observe that
constructive
Last
June
pieces
was
of work
the
at Rutgers
ever
establishment
undertaken by
of
the
University the second
the
Graduate
term
in
we were desirous that the public
accurate portrayal of the serious
an
press
and
have
great national
of
I
editorials,
am
satisfied
considerably increased public understanding of bank¬
firmly of the belief that the American people
I am
of the
with
portrayal of
the
Association
conducting the sessions in
character
not
were
these meetings and reported
deliberations and, upon our
of the staff of the
instances where discussions of a
who attended
press
their
in
accurate
consulted
technical
heads
the
and
reports
press
communications I
From
and
men
when they understand
gentlemen
were
business
from
as
public.
the
with
and
this country.
always fair
The
members
any
clear to them.
first
at
our
and
officers
Through these conferences I believe the members of our profession have
acquired
and
under which
officers
the
most
in
and
have
each
At
of
the stimulation
an important
our banking
I believe, has been
in
confidence
clinics
conference,
the
of
soundness
Constructive Customer Relations
on
gratifying.
the attendance at which in each instance was most
held,
Much
operate and, by
they
important results,
restoration
the
structure.
been
has
make
banks
our
of the new banking laws
the interchange of
unquestionably brought the
closer together in the solution of their
understanding
now
the subject of customer and public relations as
interest in
were
of
we
possible,
problems.
of
factor
made
views
and
One
knowledge and
better
a
regulations
ideas
said
with
but
each
that
knowing
felt
have
I
of advertising to"
respect to a national program
and to fully inform the public of
banking understood
services,
conditions
that
community
national
a
program
its functions
its own peculiar
generally referred to
has
as
could in their
operating officers,
through each and every employee of every bank and by such advertising
programs as are appropriate to conditions in their communities.
It should
be recognized that in
his or her social sphere, every employee is the
banker of that group.
These conferences and the program of Constructive
could
not
accomplish
much
as
as
the bankers themselves
the public, not only through their
daily contacts with
but
Relations
Customer
in
sponsored bv
our
awareness
the
Association have made
fine progress
of
the
importance of this factor in bank operation, and I am hopeful that in
due
stimulating
an
time each and every
At
and
conventions
that
on
intensified,
an
in
vital
have
Associations
year
the
organized
Relations to function
as
for
the
of
annual
I have also noted
standing
committees
advisory counsel to their
subjects.
If this movement
is
continued
and
understanding of banking and Its functions will spread
each and every individual in the country will acquire a
functions of banking and
plays in his economic life.
completely understand, I have
banking,
I have observed the
programs
these
part banking
citizens
executives
other groups.
and
State
Customer
on
until
fan-like
banking
of
and during the
conferences
State Associations
the
Public and
membership
groups,
regional
of the
of
some
part
urged that similar meetings be held by the State
county
the
of
on
institution in the country will undertake this program.
conference I
each
Associations
the
people
A meeting was
Secretaries
territory
of
and
of
America
an
understanding of the
I sav when our
Again,
fear for the future of American
no
are
fundamentally
fair
when
they
Association
might
of
meetings
of both
of the
State
secure
in
turn,
and
better
objectives
resulted
organizations.
a
that the
in
Associations represented
conference
Bankers Association,
edge of the aims
these
officers
by the respective
covered
American
the
also held at each of these conferences of the Presidents,
other
Associations and,
earnest consideration.
Association
our
from 40 States
4,000 bankers
over
to
as
press,
the
relations
these conferences
ing in
are
the
^
bankers
as
newspapers,
that
of the activities -ffMhe
but they have made
of
study their
understand.
"Protecting Investment "Values in Land."
on
Association
reading and worthy of
American
me
has
statements
has
booklet
contributions
of
for instaling
services
the
take
to
knowledge of the true
and
issued
divisions
andl formulated methods
plans
Agricultural Commission
inventories
erosion and
four
income loan
by
interesting
is
through
their
from
influence
completed two
members.
our
their
uniform
A
charges.
has
would
opportunity
being put forth by the bankers present to better their service
improve
anxious
are
chartered institutions to enable them to withdraw from this field.
During
has
by
these
by
the data
time
to
our
determining wherein
performed
time
as
be furnished currently accurate informa¬
may
basis for
a
well
as
of these agencies of
be continued and
made
to
as
functions
survey
are
operations
members
our
of
receive
received
of
'be furnished the members of
may
the
attended
were
it
representatives
the
consistent with
information
up-to-date
have
and
operating
Association, to the end that wherever sound banking policy will permit,
We
conferences
Union,
common
sound
operation of these government agencies
the
the
is
would
the main those
who
attended were the
operating executives of their institutions.
No
entertainment
was
provided,
as
these were strictly business sessions,
divided into general meetings covering broad subjects,
and supplemented
by clinics or forums on the more detailed phases of subjects of vital and
specific importance andi interest.
Debates from the floor were encour¬
aged and general discussions stimulated, and the sessions were open to
in
available through
people, these
comprehensive program of regional
-a
which
membership and provide a means whereby the bankers
the
Nation
the
of these agencies,
banking policy.
Therefore, this survey has been undertaken by the Committee
Committee
service
banking
on
to
efforts to take the mystery out of
public mind, and to this end I laid
best
existed in the
problems, the
laws and regulations under which they operate and, in common counsel,
devise the best methods of operation, at the same time fostering a better
understanding on the part of the public of the true functions of banks.
This program was approved: by the Administrative Committee, and three
conferences were held in Philadelphia, Memphis and Chicago, respectively.
of
are
of
-
my
Administrative
Association
fairness,
In
use
it
wherever
some
needs
wherever it
by the banks
and
important
as
would
invitation,
people several years
our
now
the financial
meet
at
I
conferences
over¬
yet
competition
agencies.
emergencies
for the government to create
as
and
intrest.
equally
of
fears aroused in the hearts of
necessary
should
best public
done
has
in
forward
banks,
chartered
survey
national
be able to secure
developed in the past.
I commend
of all those who as yet have not taken
have
as
inducted into office at New Orleans last November I gave a
was
the
before
in
to
the System
paid by
will
we
the
to
its
government's
in
our
our
banking
efforts
facts necessary
long step
a
our
Studies
with
the
that
with
prejudicial
but
functions
constitute
Banking
realize
by the widespread
ago,
will
be
connection
banks
all
must
have I believe
now
competition
not
on
in
chartered
our
will
Committee
effective
we
which
phase of
time
same
The
the
which
I
that
should
government and
of
competitive rate
of the
the
to light evidences of conditions which
the purpose of avoiding recurrences
from time to time for
similar character.
a
When
associations
voted to undertake research projects of this character.
This
cannot be completed within ^a short space of time, but
t;
depositaries
acutely by many banks in our membership.
The
on
Banking Studies will be printed shortly and
members of the Association, and with the back¬
so
to
facts
of
basis of
heads
administrative
established
Savings
Committee
available
remedial
the
an
Postal
where
with the proper
us
the
might
we
clearly
medium
this
territories
elimination
Congress
that
95.1%.
through
in
order
in
of
response
fortifies
case
which
ground
a
secured
banks
report
made
information
accurate
information
sentiment
we
steps of
the
the present time
at
containing 84% of the banking resources of the country,
activity to the consideration
These
to the competition
regard
that
advised
am
situations such
unhappy
this
important committee.
With
a
which
correction
pledge
last
convention of our Association regarding the competition with our char¬
tered
banking institutions represented in the operation of the Postal
Savings System and the government's lending, agencies.
A Btudy of these
two subjects was entrusted to the Committee on Banking Studies, whose
membership consists of two or more representatives from each Federal
Reserve District who, at the same time, are representative of every size,
type and classification of bank in our membership.
This work has been
most ably and energetically carried on under the leadership of First VicePresident
Smith, who at my request continued in the chairmanship of
We
I
38 States,
work
a
need
shrinkage in the field of pure commercial credit through the economic
the
in
in
are
is
in
are
intimate knowledge of
measures.
some
familiar with banking conditions in the
position to make recommendations, based
these conditions, for corrective legisla¬
bankers
of
who
areas
requires continuous study to bring
banking has suffered during the recent depression.
which the business of
Committees
the supervision
have formally
strong
a
evils
over-chartering
of
the
in
effort
pioneering
and
their
tive
banking structure in this
sound
a
this exhaustive study by this important Com¬
influence in preventing a recurrence of
The circulation of
country.
mission
the
in the maintenance of
interested
others
a
State
respective
membership, the heads of government, leading educational institutions and
this
number of research projects have been undertaken
other associations of bankers "^which we heartily
have been appointed to gather and disseminate data
the year
endorse.
upon
of
success
education.
various
under
the
towards
ability
During
published a
Economic Policy Commission,
our
of
by
end, we
To that
existence.
prepared by
comprehensive report
the
on
necessity
and
regard to
paid, particular
have
we
of over-chartering of banks by the creation of new banks or
establishment of competitive branches in communities where there is
the question
The highest praise should go to those conducting this school
the faculty who have given so generously of their
the members of
to
time
Association.
In
of Dr.
Banking.
and
field
effectively,
to
understand¬
fundamental principles of banking and economics than that
in the Graduate School of Banking under the able direc¬
Harold Stonier, Educational Director of the American Institute
the
of
tion
matters of moment respecting legislation have come up
action, and educational work has been undertaken,
of which cannot be estimated in advance, we have not hesitated
committee
requiring
doubling that of
enrollment
an
being carried on
\vhen
ing times,
with
completed
was
I know of no undertaking which will be more productive
year.
high ethical standards of bank management and a thorough
ing
In these chang¬
by the Administrative Committee and Executive Council.
the
of
School
Graduate
the first
supervision and control of
adhered to as strictly as possible.
careful
in
and the officers
grasp
of
the
problems
of
of
our
Association.
understanding
I
am
between
State
knowl¬
satisfied
the
the
staff
Bankers
the
State Associations might gain a
better
in
and
order that the American
that
officials
26
BANKERS' CONVENTION.
Another
that
benefit
they
trate
upon
much
the
which
to
Nation-wide
a
the
of
these
unable
to
attend,
place
has
believe
accrued
of the
conferences
these
is
to concen¬
character which will contribute
conferences
and in order that
those who
and discussions which took
be made available to
might
debates
the addresses,
a valuable addition
banking literature in portraying present-day banking thought in this
to
Banking."
Unquestionably, this book constitutes
one
is not possible
it
year
conferences as may be held
gained this year, such
in the future will be
ever-increasing value and productive of even greater benefits.
would like to record my
I
of
whom
made
undertaking.
the
staff
these
conventions
ciation,
with
burden
appreciation
of
well
and support from
like
was
conduct
holding
meetings of
limitation
of
thus
program,
and
the
three
the Asso¬
time
for
entailing
fine cooperation
their
the stock
in
the
Association,
felt
of
well
which
trative
Federal
the
pretty
was
Administration
proposals
many
not
be
able
to
not
be
able
small
and
the
felt by our
and leaders
Con¬
in
M.
in
and
interests of
involved
Chairman of the
In
and
these
both
of
consideration of
the
free
Federal
and
the
these
have
we
the
the views
Senate
have
we
opportunity
submit
the
to
have
of
where
legislative
changes in
of
the
and
officials
of
sit
with
the
Bankers
Association
we
been
has often
policy
well
as
govern¬
in
as
and
appear
made of
pursued
legislators in the
banking structure
the
of
instances
many
Association
the
of
have had
regulations and affording
the
Mention
America
in
helpful in
such
of
and comments.
bankers
government.
have
which
I
can
assure
in
other
drafting
rules
and
of
regula¬
During recent administrations
have
you
existed have been
been
building
up
closer;
a
officials
that
during the past
year
the
most
satisfactory in that we have
frankly discussing these matters not only with the
the opportunity of
supervisory
in
supervisory authorities
most
representatives
in
We
cooperative contact, both with the Congress and the supervisory
of
relations
these
drafts
by the supervisory authorities.
American
more
had
with
have been
adoption
countries,
issued
Comptroller of the Currency.
tentative
us
recommendations
desirability
tions
System, the Federal Deposit Insurance Corpo¬
the
agencies
making available to
us
of
discussions
frank
and
ment,
Reserve
office
of
but
government
with
the
committees
of
the
of
may
is my
of
be in
Bankers
Association to continue to have the opportunity
the leaders in Congress and the officials of government
practical, operating bank executives on the subject of
presenting to
the
viewpoint
of
such
regulations and interpretations prior to their issuance.
In order that
the viewpoint of those of us who are daily engaged in rendering this great
economic service to the people may be given
consideration, our approach
be
should
between
will
such
the
that
Association
our
fine
and
and
the
cordial
relations
which
supervisory officials
have
of the
most
difficult
problem regarding
legislation
which
with
we
were
during the pastry ear developed in connection with the Revenue
of 193®.
■>;'-''" y..
Among the provisions of this bill
tributed
earnings,
conflict
with
strengthen
the
additional
include
to
if
program
the capital
made
were
which,
was
one
applied to
undertaken
structure
banks
of
in
in
The
banks
tax
on
of
this
Proposals
country.
undistributed
earnings
with
which might have temporarily taxed the banks at
but the principles involved in these proposals were destructive
to the capital structure of the banks upon which the
security of depositors
a
exemptions
lower rate,
depends, and
for
we
all know that with the FDIC in
strong bank capital,
to
down
tear
the banks
this
the
and
strength
existence
we
legislation which would have
any
would
not
be in
the
best
must
a
build
tendency
of
interests
either
Thousands of banks failed during the depression
sufficient capital structure to withstand the
tremendous
depreciation
of
assets
which
took
place.
The American
Bankers Association took the position that
banking Bhould not be included
because
in
the
flat
they
public.
did
not' have
proposals to tax undistributed earnings,
but shouldl be
our
showed
strengthen
and
conserve
the
capital
structure
of
banks
of
of
funds
depends
upon
reserves.
the
the
the
These
layman,
regulations
philosophy.
the
at a
were prepared which
banking law and regulation to date aimed
every
urged prudent management because banks
the
a
hearing
and
the
accumulation
and
briefs,
were
showing
Many
on
people
which
were
supplemented by
the
integrity of their
preservation
of
are
and
the
were
their
a
structure
surplus
and
drafted1
an
in
language understandable
outline of all previous laws and
proposed legislation was of
conferences were also held and
an
entirely
briefs
contrary
submitted
the bill before the Finance Committee of the Senate.
of
custodians
capital
under
been
that
law.
without
these
estates
history
The
the
and
which
fiduciary
corporate
a
existing
of
advice, guidance
legacies are soon
at
the Revenue Act of 1936
as
to
exclude banks from
well
as
in
as
the
passed
was
we
provisions of the
phases
regard to other
the
done
membership of
this
in
Association
our
connection
and
the
the
splendid!
assistance
fine
of
rendered
Vice-President Smith; Robert M. Hanes, Chairman of the
Federal Legislation; Charles H. Mylander, Chairman of the
Taxation, and the office of
constitutes
of
General Counsel.
our
report of the high points of the year's
and I feel it is now appropriate that I give
a
the Association,
resume
is
views concerning general conditions affecting banking
my
encouraging to note the
industrial
able
recovery,
these
to
course,
All
of
to my
all
payrolls
also
are
According
up.
funds
and, of
available
are
outldok,
encouraging
an
this business
without
revival
but the
question
be sustained
can
readjustments
some
in
certain
comes
to
trend
the
and!
vital
factors
of
situation.
economic
our
gives
whether
continue
upward
and
expansion.
this
to
as
con¬
since June,
sticks, business is rapidly reviving,
all know that ample bank and investment
we
business
for
mind
other measuring
and
monthly total during July
factory employment
and
1931,
the highest
favor¬
a
the increase; construction
on
power output has advanced to a new high
record; car
increased contra-seasonally to the highest levels since Octo¬
electric
1931;
loadings have
ber,
which is being made in
progress
Steel production is
reached
tracts awarded
steady
general business conditions have continued
as
upward trend.
remains
still
serious
a
unemployment
situation
with,
be met
to
mind, is the key to many of our problems.
Furthermore, we must
that
expenditures, Federal, State and municipal, must be
realize
definitely
brought
more
taxation
which,
in
deficit
times
in
control.
under
if allowed
retarding business
caused
to
Also,
With
recovery.
have
we
substantially,
increase
regard
bound
expenditures
to
financing, I think every fair-minded
emergencies, occasioned by war,
duty to the people of the Nation,
expenditures of funds.
sion,
which
during
economic
ployment.
All
conditions
shelter.
values
of
must
us
people
our
Likewise,
shrank
millions
depressions
have
we
that
in
such
to
starve
been
confronted
in
deflationary
of
unable to
were
allowed
agree
cannot be
that
some
or
by virtue of its
workings
the
people
our
have
serious world-wide depres¬
very
a
through
of
which
undertake steps involving unusual
must
We have been in
and
forces,
result
to
recognizes
man
national
of
times
obtain
and
recent
fertile
farm
land,
floods
and
have
also
want
for
of
with serious
years
brought
em¬
such
under
suffer
or
droughts, dust storms and other disasters which have devastated large
of
of
problem
the
is
cataclysm of nature, the Federal Government of necessity,
areas
and
distress
great
destruction.
During these emergencies, when the people located in
rendered powerless
been
government to assist
factors,
take
if
be
will
ments
possible
as
to
are
we
to help
in such
business
the
continue
forward
create
in
channels
business
rules have
for
the
far
as
that
affected
areas
duty of
the
the
are
this
If
andl
must
we
work
rapidly
as
accomplished,
be
can
foundations
firm
on
recovery,
State and municipal govern¬
and
can
go
enterprise and invention
to
greater employment.
major
factor
in
business
definitely
established
will
to
add
this
problem
the
is
uncertainty surrounding
any
When
operates.
been
assurances
business
present
Federal,
spirit of American
possible
as
we
the
was
definitely under control
more
traditional
it
But making allowance for these
budgetary balancing.
assured
mind,
my
removing
such
be
the
new
In
brought
towards
will
themselves,
calamities.
steps by which the budgets of
their
leaders
and
these
that
to
forward,
go
their
increase
of
rules under
assured
are
encouraged
are
confidence,
necessity
the
willingness
extend
to
their operations, and thereby increase the capacity of business
unemployment through sound reemployment.
A
toward this goal would be a review by the government of its
to cure
One step
whole relief program,
which of necessity had to be developed rapidly,
looking toward the elimination of waste and duplication.
/
The question of taxation is vital and related! to this problem,/and it
to
seems
on
that
me
serious need
of
sounder
a
about
33%
income
taxes
onlv
of
income
77
of
1925
when
This
involves
I
State
and!
1935.
it
the
In
31%.
by
that
advised
am
to
diminished
burden
billions.
Federal,
cur
municipal
systems!are
tax
study and consideration of the possibility
basis.
from
was
serious
total
10-vear period
same
out
of
in
increased
the national
taxes
national
a
in
of being placed
burden
tax
Ten billion dollars
be collected
muBt
the
is
very
a
income of
58
was
approximately the case in 1935.
In 1925, however,
about 7% billion dlollars were collected out of a national
billion
dollars.
politics
partisan
do
I
but
not
of
is
believe
this
fundamental
Is
a
which
question
all
to
concern
people
regardless of what political party is in power.
An
philosophy of
nature which
to
taxed
approach to this subject of taxation, briefs
the
provision allowing common
as an association.
We
a
taxed
and the national welfare.
rate.
In
to
or
it
has
efforts
our
advise
foregoing
activities of
you
direct
by the government to rebuild and
the
the
which placed a tax on undis¬
banks, would have been
undistributed earnings
on
that the beneficiaries under small estates
proper
handle
legacies
in
was
First
which
confronted
Act
by
me
existed
government
be continued.
The
to
corporate fiduciary
a
to
work which
have
belief that regardless of party politics or what administration
power, in the best interests of all concerned it is imperative
for the American
correspond to the
legislation.
desire
I
Congress
charge of banking matters.
It
being
undistributed earnings,
taxing
There
and
without
will therefore note that
successful
were
adminis¬
conferences
members
many
Committee
of the Association with
Congress.
officials
government
analysis
Hanes,
and the officers
leaders
affect the
some
The Banking Act of 1935 required interpretation of certain provisions
through the promulgation of rules and ^regulations by the Board of Gover¬
of
help of
law
expressed.
ration
A tax
group.
place this business with
and
estates
You
my
satisfactorily
was
only right and
shouldl
on
affecting banking,
to
appear
careful
most
the House courteous and attentive
nors
the
in
handled
would
on
enacted in the last session, this did
was
of Robert
part
and
the
from
none
glance did
Legislation,
officials
received
and
the
on
Federal
on
first
required
all
conferences
the
as
introduction of
at
even
but
banks,
banking legislation
be
to
was
Committee
and helpfulness in this
of the Banking Act of 1935, it
Although
Congress.
preclude the
it
Committee
major banking legislation should be enacted in the Seventy-
no
funds
trust
It
passage
as
that
fourth
the banks
of
the
in connection with all other matters during this
major
There
whose
make. loans,
or
built up to
would have defeated this purpose.
great
a
the staff.
I would like to express
Manager Shepherd and the members of
for
as
of
question
settled with
not
deposits
and
business.
I am referring to strictly trust institutions.
problem of the holding companies.
The Banking Act of 1935
provides that in order that depositors be protected1, a bank holding com¬
pany must build up its surplus according to a percentage of its ownership
in
administrative year.
gress,
legislation were 'many.
this
accept
preserved
the
of
of
Executive
to
as
the
of
the
of
out
members
Association
the
undertaking,
conferences
this
of
success
execution
customary scheduled
problem
carrying
the
planning,
these
the
to
further
the
upon
the
in
Conducting
and
the
toward
the finest possible cooperation
Association
in addition
preparation
As
with
either
dissipated.
those who conducted the clinics,
contributions
valuable
I received
the
of
conferences.
staff
not
to be
their
increase
appreciation to the 108 speakers who addressed
the conferences and led the debates, and to
all
connection
did
Also, we were desirous of having included
administrative
short
to cover all the
ground which should be covered, and, to a great extent, our efforts this
year were
of a pioneering character.
I am therefore most hopeful that
this program of regional conferences will be continued in future adminis¬
trations of the Association, and I am quite sure that, with the experience
of
in
which
We had
country.
In
problems
banks
capital structure had
compiled and published by "Banking," under the title "Present-
were
Day
Our
were
a
of
program
from
country an opportunity
development of the best banking service,
benefits
were
I
bankers
afforded the
examination
of
the
municipal governments
the Nation
tion.
tions.
to
of
a
as
There
objects
is
whole, there
burden,
devising
for
measures
by
that
quite
large
administrative
Moreover,
imposed
fact
are
exceedingly
an
Imposed
from
a
the
by Federal,
standpoint
effect
few situations which need
number
of
where
cases
and
State
of
duplication and overlapping of taxes practically
unnecessary
tax
taxes
upon
correc¬
the
same
taxation are subject to taxation by different taxing Jurisdic¬
This
taxpayer.
the
various
discloses that,
other
the
in
I
for
most
doubt
raising
expense
cases
that
effects
the legislators
are
these
of
always
Consideration
of
annoyance
it brings about unfair
revenue
jurisdictions.
economic
and unnecessary
the
to
distribution
mindful
are
leads
Jurisdiction,
one
should
duplications
always
be
of
the
given
not
to
always
of
in
faxes
the
con-
27
GENERAL SESSION.
fined
is
particular State in which the taxed individual or corporation
to the
taxes
tax system is its
our
devised,
being
continually
are
being
in
defect
serious
New
lack of certainty.
and^the old
taxes
continually
are
in form and: effect.
In making plans for the future,
and corporations cannot foresee the new forms of taxes they
changed
individuals
called
be
may
threaten
tions
the
feel that the
and yet these future taxes may seriously
of their businesses.
Often even past transac¬
For example, I cannot help but
retroactive tax.
on
undistributed profits, enacted on June 22 of this
to
Jan.
tax
new
has
1,
had
the
disturbing effect upon
a
of our corporations.
It may be that there has been some
avoidance through the unnecessary retention of corporate earnings, but
future
tax
plans
evil in some other way than by an undistributed
attempt to cure this
an
profits tax might have been
I believe in the right of
the wiser course.
self-government, which has contributed so much to the growth of America
and American institutions, and I fear the effects of a penalty tax on a
earnings.
Legislation
which is aimed not only to raise revenue but to effect a social change
must be considered and designed most carefully if we would escape grave
dislocations to our economic structure.
Moreover, such legislation must
wide
be
imperative
even
or
accumulation
less
avoid
to
complexity
in
being carried
now
both
the
and
laws and a more practical and busine6s-like
whole subject and a common understanding between
tax
our
this
of
examination
to
inequities
current
the general theory of our income tax, in
double taxation.
We need certainty and
with
synchronized properly
order
of
Such
on.
is expensive
retards business and
litigation
and
government
the taxpayer.
standardized and no
sudden
changes in method are made.
It would seem to me that an
eramination of this whole subject and a common understanding between
the States and the Federal Government as to which types of taxation will
I
advised
am
that
in
their
England
taxes
bond portfolio is playing an important part in the
and I believe it is highly essential that each and
on its staff officers and employees trained in the
and analysis of securities.
Pursuant to requirements of law,
are
have
institution
every
examination
Comptroller of the Currency recently issued a regulation which is a
step in pointing the way to the purchase of sound securities.
the
constructive
The
pay,
existence
retroactive
but
year
to
upon
very
reaohed by a
are
thatNhe
but
question
earning assets of bathks,
throughout the Nation.
but may extend
located,
Another
of
purchase
bond
a
is
extension
an
of credit the same as the
this part of the
of a loan, and officers and employees handling
granting
should be just as conversant with the trends, and as
carefully schooled in the examination and analysis of securities as the
lending officers must be in that phase of the bank's activities; even
more so,
because in the extension of credit to borrowers, the officers are
usually well acquainted with the borrowers, whereas very few of those who
manage the corporations whose issues we buy are intimately known to the
officials of the purchasing bank.
Another factor to which I think we must give careful consideration is
bank's
operations
Federal
of
that
is no doubt but
There
insurance.
deposit
that in this
occasioned by the lack of demand for loans on
part of the public and the abnormally low rates at which funds can
be employed, the assessments for Federal deposit insurance, coupled with
other increased costs,
presents a serious problem to the management of
our banks.
When the existing law was under consideration by the Con¬
period
earnings,
low
of
the
of the American Bankers Association took
FDIC should be given some latitude
levying of assessments.
We felt that at whatever percentage the
assessment was fixed, the directors should have the right to assess up to
that amount, so that if the operations of the corporation were successful,
and when the assessment proved too heavy a drain upon the members, the
Committee
Special
the
gress,
position that the Directors of the
the
the
^in
directors would have the right to adjust the basis of assess¬
Representatives took the position that the rate should
Corporation's
The House of
ment.
fixed
be
at
and be mandatory, and when the
of 1%
%
bill went to the
assist in assuring
business stability.
If this question can be settled and our taxes standard¬
ized in form, changes then would not take the form of new taxes, with
their
resultant
unsettling
economic effects,
but revenue requirements
would be adjusted by raising or lowering the rate.
I realize that this may be difficult of accomplishment; nevertheless, I
think the question of taxation, which in the past few years has taken
between 25% and 30% of the income dollar of each citizen, is worthy of
the most serious consideration and study, to see if satisfactory readjust¬
ments cannot be made.
It is my understanding that some thought has
been given to this problem, and I feel it is important for our consideration
because of the taxes burdening the individual and corporate customers of
banks, for inequitable, uncertain and complicated taxes imposed upon the
public are bound to react unfavorably upon the business of banking.
With a total public debt, Federal, State and local, of approximately 58
billion dollars, it is obvious that the tax burden for some years to come
must be considerable.
I therefore urge that you lend a helping hand in
1/12 of 1% was agreed upon as a compro¬
mise, with no latitude being given the directors of the Corporation in
levying the amount of the assessment.
We have all observed the successful operation of
the Corporation as
reconsideration of this vitally important question.
future of American banking.
During the year,
address Leo T.
Crowley, Chairman of the FDIC, made the following statement:
levied
be
to
the
support
stimulating interest in
few words
A
as
a
the
to
have
I
through
the
country
governments would
respective
bankers
with
made
from
of
conventions
able
State
nationally-known leaders in various types of banking, I have
addressed to
been
Conferences on Banking Service and the annual
Associations, and from replies to inquiries I have
to
secure
a
All
of
as
to
which
constituted a large percentage of our earning assets at the time of the
inauguration of the Federal Reserve System, and immediately thereafter,
have shrunk to the point where they can be considered no longer the
major source of bank earnings.
This decrease in commercial borrowing is
not directly attributable to the depression, although, of course, such com¬
mercial
borrowings as did exist were lessened by the ravages of the
depression.
In
judgment, for the present at least,
my
relied
which
were
commercial loans cannot be
that the position of
relief in the amount
law to provide the
directors of the Corporation with latitude.
It would seem that a step
toward making this possible would be for us to give full cooperation to
the supervisory authorities in our relations with them regarding the con¬
assessment,
dition
of
not need this banking
change in the method and
capital position to the point where they did
service.
nated
of
of
the
been
has
are
some
the
will
increase,
resultant
economic
of
commercial
credit.
But,
as
earnings
a
not be
of the Federal
balancing
rates
created by
budget
for earning
assets
deficit financing and,
there will be a restoration of the volume
present at
for the
least, this
does not
seem
feel, it might be brought about by the tax
some
which, however,
introduces other factors
requir/
for an extended period of years In order to meet
The Federal Deposit Insurance Corporation Is anxious
that consideration be given to an adjustment of the assessment, but It Is not willing
to do so until bank management and supervision have clearly demonstrated that the
statement
This
look
to
than
other
to
fields
commercial
true
to
employ
where
loans,
soundness of the borrower,
in
of credit,
6uch
over
making loans of this kind
reasonable period of years,
and other
credit and home financing.
However,
a
instalment
as
loanable funds, such as loans other
the credit will be based upon the
the assets Securing the loan and the borrower's
ability to amortize the loan
types
our
every
banker must
take into consideration
the
type and character of his deposits and see if the volume and terms of
the
credit to be
extended
ing what I would
I think
we
applications
able
term
should
are
should
the best
in
are
an
realize
public interest, always maintain¬
adequate degree of liquidity.
that our customers are not bankers, and when
made for loans
which
at first do
not appear to be bank¬
the proposition to see if it cannot be
placed in bankable form.
If the loan can be made bankable, we will
acquire a good earning asset, and if it cannot be made bankable, then,
in .the interest of good public relations, I think we should take pains to
clearly and frankly explain the reasons why the request cannot be granted.
Looking at our immediate future, attention must be directed also to
we
increase
the
believe
great
examination
the
|
in
carefully
the
care
of
the
analyze
investment
be
must
records
portfolio
exercised
of
these
in
of the banks of the
the
purchase of
institutions
wjiich
Nation.
securities.
failed
I
An
to survive
depression clearly indicates the necessity for carefully analyzing the
character
of
securities
prior
to
and
clearly indicates a
Crowley
by Mr.
The answer rests
sympathetic under¬
)
which, if adopted, I believe would be
have in mind another suggestion
I
sound basis.
authorities and with the bankers themselves."
standing of this problem.
helpful in the operation of the FDIC and the maintenance
most
of a sound
That is, the appointment of an Advisory Board con¬
sisting of well-trained bankers, who would be selected with due regard
for geographical representation, and rotated annually or bi-annually, which
could do much to assist the Corporation and the insured members, who
have such a vital interest in its successful operation.
These men should
banking structure.
without
serve
receiving
compensation,
only
reimbursement
for
such ex¬
they incur incident to the discharge of their duties.
will recall that in his address before our annual convention
as
You
New
the creation of such
a
in
Crowley gave expression to the desira¬
Mr.
November,
last
Orleans,
board.
With deposit insurance in exist¬
all concerned that there be the
I believe it is to the best interest of
ence,
closest
We
been
cooperation between the bankers of this country and the FDIC.
have all learned much in the trying years through which we have
.
There is now greater knowledge
passing.
before
among
bankers than ever
regarding economic conditions and the influences which occasioned
in the past
Furthermore, governmental statistics and informa¬
available which give us a better view¬
and which were not at our disposal
in the past.
The capital position of the banks of the country has been
materially strengthened, and I view with optimism and confidence the
ability of the banks of the country to make healthy and sound progress,
for chartered banking is as vital today to the economic life of the Nation
and as able to service the needs of our people as ever in the history of
tion
following
purchase.
There
is
no
respecting banking
now
are
point of general banking conditions
country.
President
The
to me that at least for the time being we will have
seems
has been put on a permanently
banking system
our
ing careful consideration in the extension of credit.
Therefore, it
promptly
of
difficulties
confidence,
business
funds will
unless,
occur
with
that
of
conditions improve,
undistributed
large inven¬
borrowing.
feel
return
surplus
as
likely to
who
and distribution which has elimi¬
formerly existed for carrying
which
need
requiring commercial
There
and
complete
a
transportation
manufacture,
much
tories
there
Also,
rapidity
on
brought about where many corpo¬
at seasonal periods built up
was
borrowers
policy
bank supervision If we should be required
•'It would be a serious indictment of
bility of
situation
a
the
the bank losses of the future.
which
commercial
to
than allowing them to accumulate.
to collect 40 million dollars annually
for
were
adhering
by
regard it is interesting to observe that in a recent
In this
rations
securities,
and
institutions,
our
charging off all losses currently rather
market
their
it would seem
Corporation would justify the granting of some
which would necessitate a change of
the
penses
earning asset
the chief
as
and
trend
Nevertheless,
depression.
of
period
of
in our portfolios, for due to con¬
ditions following the 1923
deflation, when huge inventory losses were
sustained, coupled with the activity of investment houses and the strong
upon
Since the Corporation was
a period where values of assets
the capital position of the banks
licensed to reopen has been strengthened, so that to date we
a true basis of experience upon which to judge its needs in a
have gone through
we
upward
an
last July.
published
its report
course,
on
not have
do
of earnings and the shrinkage
recognize that true commercial loans,
We all
loans.
commercial
in
of
been
have
with the supervisory
the business
concerned with the question
are
us
good cross-section of banking thought
of banking.
very
what the future holds for
by
created,
rate of
mandatory
a
disclosed
all parts of the
at the Regional
contacts
conferees
Bankers
American
the
of
Association
is
extended
the
invitations to address many public gatherings..
During the
past year I have felt it was my distinct duty not only to accept invita¬
tions
to address banking groups but business
groups as well.
I have
courtesy
of
companies
broadcasting
radio
afforded through the courtesy of the
present our objectives to the public,
myself of opportunities
availed
also
to
desire to render every helpful service, and in
to clear up any misunderstanding
of banking which may have been created in the minds of the people by
those who have preached fallacies regarding banking.
acquainting them with
our
by public utterances I have sought
all
I have also tried
In these addresses
their
in
ment
efforts
to
prevent
a
to assist the departments of govern¬
return
the overchartering
of
mania
proved so disastrous to our banking system in the past, by showing
these audiences the fallacy of the belief that more banks create greater
which
prosperity
in
this
served
and
conditions
while
that
country,
to
must have an adequate number of banks
In communities already adequately
return of the same
many failures.
I have pointed out to these
we
charter
banks
banking facilities would only result in a
with
which
caused
so
that any hanking institution, it it is to properly serve the people,
be strong, a id that it can only remain sound when its earnings are
groups
must
I
adequate.
which
fact
have
that
have
been
banks
also
made
do not
endeavored
that
banks
to
coin
coin money but
expose
the
money,
fallacy
of
statements
to the
calling attention
that It is coined by the Federal
BACKERS' CONVENTION.
28
Government
tion;
that
by virtue of
that
neither
while
with
do
is true
it
transactions
between
a
when
in
faith
assume
future
risks
itself
to
nor
grant
which
men
in
but
of credit,
field
the
be repaid
to
are
credit
originates in business and not in banks.
before these groups, and in the wider audience provided
In
appearances
have been able to bring about a
by the medium of the radio, I believe I
better
In
understanding between bankers and the public.
the formulation of
am
sure
gentlemen
are
to
my
express
their
time,
which
also
preparation
the
and
information
us
subjects of specific banking interest,
such
and
appreciative
trust
two
gentlemen,
respective
views
I
who
subjects
these
on
feel it
which
and
relations,
is
approach
the questions of investments
as
of the
in
here
coming
courtesy
that I
I
express
to
problems.
the
public and
all
must
for
proposals
character of our
recognize that unsound
introduced in the various Legislatures
understanding of the true functions of banks, and that in their activilegislators
I
ents.
tion
that
urge
to
the
normally
correct
a
create
will
it
condition
some
desires
and
it
sections of the
wjder understanding
J&nks
of
the views
reflect
people^of the various
create
tions
great extent due to a lack of knowledge
of
constitu-
their
recognize that where there is a demand for legisla-
we
or
usually reflects the opinion of
Therefore,
country.
if
we
much
to
are
not in
the public interest.
allay
for
demands
changes
in
the
or
By Clabence Francis, President
audience
great honor to be invited out here to speak before
a
important
as
this—before
as
men
influential
as
And by "influential" I am thinking at the moment not
voice in the market place.
your
American
confidence
do
Rather, I have in mind
as
amendments
such
opposing
doing
constructive
bankers
that
should
we
if
the
public and
partisan
a
duty to the
our
and
we
not
well,
as
in
Association
we
enacted,
take
ever
fail
to
pro-
If
constructive
are
legislation
bound
are
Bankers
of
will win
as
serve.
we
the public interest
upon
we
our
such
as
be
which
the
of
believe
not
do
we
interest
banking
i
I
well
is
#which it
which
sessions
prior
call
to
which
cannot
present
shareholders
whom
position
the
bound to
will
public
gift which
The greatest
opportunity for useful service.
that
me
by
opportunity
Committee
Federal
on
endeavored
have
have
placed
in
the
to
you,
my
betterment
of
con-
proposals
new
session
Acts adopted
of
in recent
reconsideration,
by
man
serve
his
some
associates
years
you
of
the
is
have given
you
Chairman
as
Vice-President,
as
and
last November
me
and conscientiously
banking.
of
In
in
of
the
finally
as
desire
deep
my
the
Orleans,
trust
you
contribu-
some
extend
to
appreciation
and for the opportunity
me
New
fulfill
closing, ,1
banking world,
honor you have bestowed upon
to
this
next
hope I have been able to make
the
in
to
to
me
elected
you
and I
associates
the
In
At the close of this convention I retire from
faithfully
to
me,
in
During the last five
Legislation,
office to which
for
up
given
selecting
President of the Association.
the high
of emergency
of
bankers
operation,
be
can
The
constructive approach
our
introduced
come
which will vitally affect financial
high
depression.
the
be
number
a
expiring
are
the
the
continue
future will bring.
to the fact that many
attention
are
to
way
to
must
we
problems
change
its
on
enjoyed
recognize that
desire
legislative
for
I
In
also
must
conduct
our
effects
American
best
the
America must
me
Hero
I consider it
'"the
of
in
case
tion
can
the part of the public of the true func-
on
do
banking structure which
carefully
serve.
we
the
upon
and
ties
membership
I
if
for
Congress, and in addition
depends
We
are
Association,
an
political position,
our
is
should realize
banking interests but
upon
As
detrimental
nection
their
in
Federal Congress to a
simply
the
the
in
present
opinion upon the manner in
my
with
relations
think much
proposals for banking legislation
we
that
and
one
in dealing with the
and
the
should
we
the confidence afr the people of the communities
us
the
of
authorities
outstanding
as
them,
to
our
two
these
ideas
timely importance.
handle
for
to
recognized
of
legislative change,
Very
am
are
appropriate
should
we
I
assigned
topics
give of
to
the addresses
of great value.
of
glance at the program that there are included
a
feel
opposed.
strongly
Association
fession is a dignified
of
of interest and
for their willingness
them
from
note
the benefit
us
messages
in
to
I
when it makes definite constructive proposals, but
as
show
appreciation to
available
make
work, just as truly
be
Bankers
should
give
to
experience
should
it
which has been to promote a better
and
deep
energy
will
You will
leaders
leaders
find their
think
American
offer recommeiyaations for
their views,
value.
These
in their respective fields of business, and I desire
will
you
made
are
when offering such opposition
for
understanding between banking and business, and, therefore, I have invited
I
I
the
cannot
to carry out another of my objectives,
and
then
ciples,
measures,
for this convention I have endeavored
the program
nationally-known business
proposals
experience and practical knowledge to help to so shape it.
On the other
hand, if it is the type of legislation which would change the character and
form of our government and is contrary to fundamental American prin-
obligations
transactions
out
carry
such
I have stated that
are willing to
or
at some
time, that through their services to business, chartered banks enable
citizens
our
on
into
where
analyze them and investigate the underlying causes for their introduction
in an endeavor to discover their effects upon banking and the public
interest if enacted into law.
If an analysis of the proposals indicates the
legislation can be made workable and constructive, we should use our
currency
extend
consumer,
enter
However,
create credit, explaining
credit, credit is initiated
confidence between buyer and seller or
and that the banker in extending credit
issue
secondary part in the creation of credit.
the future exists in the business world,
and
the Constitu-
under
granted Congress
power
predicated
producer and
only plays
the
banks
that banks
to
the
for
have given
you
serve.
Villain
General Foods Corp., New York, N. Y.
an
you are.
so
much about
your
influence for
man's
mouth
for
water
tempting foods, and when
you
to~it
down
come
about the only difference between your business and mine is that most
people
believe they have to sing for their breakfast, thank goodness!
But
still
as
for money, there is a belief that thai stuff ought to be distributed with
the good of the community, the example which you can set—and the rest
the compliments of the
of
of garden seeds.
expect you to set it!—in straight, hard but human thinking and in
us
playing the
That is
the
in a way that is both sportsmanlike and constructive.
game
It is enough to make
big order!
a
banking business, and
Sometimes
once
speaker likes to hold his message—and perhaps his audience
a
—for the end of his talk.
the best thing
say,
and then I
is
Well, I believe that if
And
to say it.
going to try to
am
hesitate about entering
any man
in, it is certain to test the stuff he is made of!
prove
so
1
am
room
have something to
going to say to
it—that
ership of the United States is in this
you
you
right
now—
important share of the lead¬
an
today—the economic and moral
Congressmen, like the
I will stick to the facts.
cause,
as
So this summer, while you
riding
or
your
indebted
am
use
was a
me
nights and Sundays and
that it
we
the habit of
we are
the general
problem of product
well.
And further, that I
convinced, from what I know
now,
that
am
of you banking chaps are not
a lot
taking the place in the front of the picture where
If I
can
selves
in
do
leap among
that each
so
full stature, if I
your
that will
today than to hold
no more
man
you
sincerely and heartily
up a
you
you see your¬
only strike the warm, human spark
can
from elbow to elbow, from shoulder to shoulder,
will become
aware
of his neighbor as if for the first time,
and will suddenly say to himself:
can
get you to do something like that, I will feel that I
you,
and in
with
you
am
to
generous
today.
measure,
Yes,
I
am
I went into pretty much
Lord, what do they want
what
mere
are
a
termed
message
dither.
a
for?"
gentlemen,
way
asked
I said to
I
My temptation
was to
me
we
of the food business
ramifications
talK about the wide scope and the ramifications
a
discounts?
Or
should
money—the
I
cinch, for I
assure you
we
have the
advances
nold them spellbound
of
the
Reserve
banks,
by setting them straight
gold standard, the commodity dollar, international
or,
cur¬
perhaps, somebody said, in this
tolerant California setting, the Florida Ship Canal dollar
might win a sym¬
After
there
ear.
much
new
cogitation, I said: "No, by golly!
That is out.
about boloney that I can tell to a banker?
ing what should be
in the
cards."
rearrangement
our
of
our
anyone
to
say
most of our thinking is
prejudices.
And
so
What is
In fact," I said to
with finality anything regard¬
permanent monetary policy?
You know,
No, that just isn't
oftentimes merely
I decided to stick to
what
through,
am
gentlemen,
perhaps
more
important,
are
very
much worth while.
you
will know
more
yourselves
yesterday;—and,
about the tremendous job that lies ahead
more
Briefly,
we
have made two nationwide
in the
cornfields
and in
the
trying to learn how to make
B. A. bankers,at the crossroads
metropolis—about
your
problems and
your
customers.
Second,
we went to
50,000 average citizens—a scientifically fair sampling
—In all walks of life, on Park Avenue
poor,
and "back of the tracks," rich and
workers, housewives and storekeepers, in all parts of the country, to
learn what John Citizen and Mrs.
The
done:
mine.
answers are not
I interviewed those
among
had
a newspaper
of
some
you
were
helped by the
good friends that I have in the banking world.
The
re¬
bankers—an astonishingly outspoken response, straight from
shoulder, it
eral public.
reporter would have
The questions in the survey
news.
members of the American Bankers Association
advice of
sponse
Citizen think about you.
I did what
who
too—guided
was,
Let
us
our
countrywide inquiry among the
look at the facts.
First, what have
gen¬
you bankers been
telling me?
A business
his bankers.
than
the
goodwill
a
lot
bronze
may
Banker Survey
write off "goodwill" at SI.
The chances
manufacturing
as
more
man
as
you can
Association members reveals!
a
on
the question of
is
a
steelfand
a
friendly attitude
tragedy, an economic tragedy
friendly attitude toward the banks, the
you
Is
you say
how
manyl
Only 58 bankers out of every 100 believe that the public
has
nearly half of
more
banker?
word of you bankers yourselves the Ameri¬
impairs the national wealth to the tune of—well,
million dollars.
a
I think it is worth
sculptured marble, fireproof
toward the banks—and I say that this
that
goodwill at
about
pack into a bank structure.
public is far from unanimous
can
how
to the manufacturer?
than all the magnificent
grillwork that
Now,
properties.
important to him
But he is only kidding
he values his cuptomers'
are
I
a
We obtained, first, the
surveys.
views of the banking world—of 7,400 A.
a
have had to learn in the food industry—the human
equation, the X quality
which is mankind.
I have spent a lifetime
some
And I tnink that
I
Our survey shows that, on the
myself, "how is it possible for
hard and
about
Bank deposits, bank liquidation, the
industrial
stabilization, the boloney dollar;
pathetic
same
in the dark about the facts in
inquiries, I think,
The
credit,
We used the
in the food business have gotten into
aole to bring to you facts, not theories; an up-to-the-minute Candid
aplenty.
Well, what should I talk about?
availability of bank
devoted
before
the
bankers.
It would be
my
It kept them hustling
and about what the folk outside think of you than you did
myself:
I could not imagine
more
s
be¬
one.
Camera picture of yourselves, not a pretty studio pose.
repaying
endearing customers—I couldn't imagine wnat
of constructive, useful and original import I could bring to an
our
of the food industry.
rency
of
me out there
"prune peddler"—on, yes: that is what
by
assemblage of tne Nation
on
guest; but,
your
going to confess that when Mr. Fleming in his courteous
speak here,
am
for the privilege of appearing here
too,
proud to be
"Good
than
for American banking.
"Why!
I am not alone!
I have got mates on both sides of me—good,
trustworthy fellows, too.
And we are sharing the dangers and the tri¬
umphs: so let's get together in a brotherly way; let's take our rightful place
in the sun!—and together we will go places."
If I
am
to you,
use
ways
the merchandising of that product.
or
The results of these two
I
belong.
mirror and let
turning to whenever
tough job.
Labor Day.
even over
uncompromising research which
as
more
of this convention, and
leadership which should set the tone not only of American business but of
public
in
you
were out there in your palatial yachts,
I stayed benind to direct two difficult and
helpers
convinced
vo
chaps
polo ponies,
unique surveys, especially for the
soon
used to frank packets
I wanted very much to be of
industrialist, I
an
way they
survey
of American Bankers
Think of that, gentlemen.
In other words,
bankers are in doubt about the goodwill of your customers
and potential customers.
There is danger In such
a
situation.
And 11%
29
GENERAL SESSION.
This
Now let
public says later on.
us get at
the bankers' reasons for
A bank president in the
wasteful hostility or indifference.
this costly, this
corn
was
laconic.
Why?
belt said his community was "just indifferent."
He
"Past
wrote:
in
a
His answer
Western
Middle
Another
"too much propaganda adverse
on
Another wrote: "Some people who lost money in closed banks
to banks."
friendly."
Here is
experience."
antipathy
bank president blamed the
are not
We will see
of the bankers themselves, mind you.
the word
on
what the
town of more than
proportion of his sales
which
friendly
was
"indifferent."
as
banks.
of
management
He didn't bother to check the
25,000 population.
area
lumped the customers
bank in the Mississippi Valley
a
Bank
or even
should
executives
He just
unfriendly.
"Incompetent
He said,
Why?
required
be
to
pass
A banker in
elements."
a
town of under
He said: "The bankers
were
friendly.
who had to
called all kinds of names by those
A New
said,
England banker said the public
I wonder if it is the whole trutH*
but
I
The reason,
not friendly.
was
Well, that is an easy "out,"
"Dislike of people you owe."
was:
just wondering if the boyB
am
with the unfriendly customers aren't trying to alibi their own
to
adjust themselves to
Isn't there
.
changing day and
a
here on the Pacific
reluctance
of
a
us
Four out of five bank¬
have taken away business they would like to have.
said the bankers are increasing their personal loan
ers
a year ago.
A third of you bankers reported that the public
Now look at this one.
is reading your
advertising more than in the past; only 4% said "less."
Excuse me, gentlemen, but how
obtainable from your advertising
years?
they do
before that?
counters?
Why,
and
going out and making friends only in the past two
That is perfectly astonishing to
isolationist
an
behind
attitude
the
hardboiled survey of the problem.
a
Survey
tabulations, such as the statistics on the
banks in obtaining new business, in counseling local
As I said, we have many other
activities of American
outlook,* improving
of banks and the participations of
appearance
manufacturers
their
run our
friendship.
But J me, I am sorry to say,
on
truck
salesmen,
our
made all
drivers,
forces me to skip over to the larger cross-
This public inquiry was
sary;
less
and the company's products
to their
For instance, we asked
last-minute trends.
public: "Do you think it is as necessary to save for your old
It
significant question, as you
was a
Forty-four and six-tenths per cent §aid it was as neces¬
doubt realize.
no
everlastingly to sell the
company
Let UPdiginto it.
it was in your father's day?"
age as
I think it offers some
It is exciting news.
country.
We wanted trends—popular,
executives, stenographers, dietitians, demonstrators, and factory employees
friends.
the
over
valuable suggestions.
the American
legs off trying to corral the customers
We depend
lofficers
in community tasks.
marble
Wait for business to walk into the bank ?
we
win
Take
What did
food manufacturer!
a
that some
machinery; and one good way would be
section survey conducted among your customers.
Bank officers
seems to me
might well set about discovering the maximum "pay load"
of you fellows
to make
It
don't want guesses from bankers.
men
It is interesting, if
We
do you know that?
the crowd taking things for granted?
But isn't someone in
business
business for greater
About half said they are making more real estate mortgage loans
earnings.
business, data on the bankers' ideas of harmful legislation, the banking
Because the officers and employees
making friends and
regaining the confidence of the people, and have succeeded very well."
'Why?
in the past two years have gone out with the intent of
What?
27% said
Is instalment buying a good plan?
On the question:
The Public
thusiastic view of the public's attitude, when he wrote:
examine our survey.
We find
third said it
"Yes"; 33% said "No," and 34% said "okeh" with limitations and control.
Almost one banker in four said the small personal finance companies
small town banker out
Coast, where, incidentally, the survey showed an en¬
"Yes, the public is friendly.
Let
have charged?
some
as
changing market.
a
clue to the solution In the reply
a
1929,
a
that more than half of the bankers believe it did and about a
true.
find a'goat.*"
he
in
25,000 blamed "preaching l)y the radical
Another banker said the public's attitude was not
legislation has
banker in a Middle
Western city of over 25,000 population said: "I believe the FDIO weakens
good banks to keep poor ones alive."
Well, what about instalment buying?
Did it help wreck the country
But
given the public more confidence in the banks.
today than
examinations."
banks will make for fewer but much sounder ones." A banker
new
Eastern city of under 25,000 population said that the
an
didn't.
Well, that is possible.
forthright fellow, the head of
a
in
banker said he believed that "the restrictions on the
New England
forming of
public is "just indifferent."
that the
A
A fourth of you feel
of the bankers tell me that the public is not friendly.
47.3% said it
and only about 5% of the public said it was
horse-and-boggy days.
Appar¬
was more,
to save today than in the
necessary
It has gotten so that even the stockholders are now eager to boost
ently the public isn't intending to rest back on the oars and trust to social
the sales record—they volunteer as the advance line of attack when a new
security legislation to provide entirely the green pastures of one's old age.
product is put
The response
Let
on
the market.
get on with the survey; then perhaps we can let the tabulations
us
preach their
own
I wonder, by the way,
Seven out of ten bankers believe that the public knows that failed banks
result from bad assets.
clearly indicates that the American public intends to keep the
banks and insurance companies busy
morals.
A third of the bankers said the public charges them
deals
the banks?
at
is
then go to work to get more
the depositor, and
15% said the public thinks
the borrower.
a
sprt of scattershot manner.
were too
a
your
case any
give
me to
Many replies
you some
were
of these results
qualified.
However, I have with
me
wish to have sets of copies, and I
can prom¬
detailed and final report will be available shortly.
more
Others
the pre¬
business and more profitable business out of
wanted to know if some were scared to walk into your handsome
replies postmarked from that rocky refuge out there in that
no
most beautiful of
bays.
public this question: "Are you treated just as friendly by
We asked the
your
into eight geographical sections, separated so as to show the differences of
fourth of the public said "No,"
I have
seen
have been very
or
below and 25,000 or over.
interesting to
Those which
Darned if I know why!
Our nationwide survey reveals that about a third of the bankers believe
their customers
understand
to
seem
what
bank really is.
a
Almost
an¬
tered
Maybe
the bankers answered that people have
only a partial
ing back on your customers.
'Problems of banking—I am only
some
standing here—as
a
understanding.
nothing about the internal
borrower of banks, which may give
we
old campaigner in the fields of advertising and
an
merchandising I cannot refrain from offering the remark that misunder¬
standing breeds fear and hate, and that, contrariwise, to stimulate loyalty
and
confidence,
is to hold
a
one
of the immediate jobs of the banking world apparently
big housewarming and invite Mr. and Mrs. John Citizen into
the bank to see, in simply understood
demonstrations, how and why the
wheels go 'round.
Of course, we food manufacturers since the turn of the
century have done
Just that—and profitably.
We have made
operations worth watching,
so
thousands to
foods.
see
our
the scientific conversion
of
raw
over
come
by the
materials into prepared
We have stimulated this public curiosity by sampling on a tremen¬
dous scale, but of
course
I won't go so far as to recommend sampling as a
solution of your problems.
Another illustration
banking is the item in
that their
own
our
public misunderstanding which hamstrings
revealing that a fourth of the bankers feel
survey
customers do not understand
service charges on unprofitable accounts.
their customers
have
only
a
why it is necessary to make
And another 15% believe that
partial understanding of this matter.
But
there is hope here, because banks reported that they are
holding staff meet¬
ings to help the employees acquaint customers with the bank's problems
and policies.
Certainly
exert every
a
bank—that essential of modern economic existence—should
possible bit of energy and strategy to win over its trading
area,
not only to increase the business of the bank but to make quite sure than
the
banking fraternity
court when
As you can
illogical
or
as a
whole will have
a
thumping crowd of friends in
crackpot legislation is offered for the voters' approval.
understand, there is entirely
politics in
no
my
I think that you will agree with us business men that no
talk today; and
politician
nor po¬
litical party has any monopoly on crackpottery as a
high art.
1
Here is more from the survey: Many bankers reported that the
insuring
of
deposits has made their depositors feel secure.
said:
"The
A banker in the South
banks, instead of the Government, should manage the insurance
fund and weed out the useless banks."
security of bank depositors and stockholders generally;
legislation had lessened the security.
wnile
18%
said
While 53% of the bankers said
such legislation had assisted the banks in renderihg the maximum service
to their
communities, 27%,
or
more
than
a
hindered the rendering of maximum service.
fourth, said these laws have
Who is right?
I have never encoun¬
been hold¬
Surely, it can't be an inferiority complex?
surprised if it was, what with all the lambasting you
take these past few years.
76% favorable answers to that question.
this statement very
I
frankly surprised to find
was
But, gentlemen, I want to make
plain: that if we thought that 24% of our customers
unfavorable, we would be sick, and I can't help wondering whether
were
would think us a good risk if you knew that 24% of our customers
you
were
unfavorable to us.
Let
Wait!
^
_
get another slant on the public's opinion of you.
us
Inci¬
the questioning required no signatures,whence the replies were
dentally,
candid and outspoken.
We asked: "In your
a
opinion, are banks in your locality doing their part
This was, you
help business and employment?"
to
job
you
see, a
test of how good
Well, only
have done of selling yourselves to your community.
43% of the people said the banks are pulling their weight, and 57% said
Bight or
It is not my
It is a general opinion.
"No, the banks are not doing their share in the job of recovery."
that is the public's belief as it existed up to 13 days ago.
belief; I doubt if it is the belief of many business men.
And
would like to ask: Please,
I
There have been made theories
and I myself have
what
are
going to do about it?
you
advanced to light up the way to prospesity,
insisted, perhaps too emphatically, that
a
modernization,
replacement and rebuilding of America was the surest of cure-alls;
think
we
are
solid footing with the public—and hon¬
fellows, your friends can't do it for you.
estly,
but I
all going to realize that we won't really pick up momentum
until the banks get on a far more
But they can and will
gladly help you.
Now
we come
without regard
to a question that I toss on the table for what it is worth,
for political significance.
I might explain that what we
wanted to do here was to measure the heroic proportions of the
the eyes
Is he
so
Once the banker
of the man on the street.
today?
Let
was
the
financier in
tycal big shot.
us see.
We asked the public: "Is there any man in public life with whose
on
money matters you
said
"Yes."
And
who
agree?"
was
views
More than 6 out of 10 men and women
he?
At
the risk
of stirring some
partisan
emotions almost on the eve of the election, I might begin by revealing from
the
nationwide tabulations that the bankers didn't fare
The
But for the Nation, 67% of the bankers surveyed said that the banking
and monetary legislation enacted since the crisis has increased the long-run
such
have had to
wrong,
of the
A. convention.
The suspicion dawns on me that you bankers have
And I wouldn't be
factories immaculate, the
that tourists the world
ought to invite the public to come
you
warmly human and companionable crowd in my life than I
more
a
have here.
or
meaning that three-fourths of the public,
in and meet you fellows at an A. B.
other third said the customers do not understand, and the other third of
While I confess freely that I know little
And about a
by the stores where you regularly shop?"
as
76.2% to be exact, said that they were just as favorable.
or
me.
bank
At any rate, we
public enemies numbered from 1 to 100.
and when they are available and you want them, they will be broken down
opinion between those in 25,000
submitting this question to any of
Of course, we refrained from
eminent
received
And if
That
clientele.
edifices.
our
adults in all walks of life
Now, all you have to do is to get your share of it and
hopeful figure.
We
lengthy to report in this talk.
liminary tabulations in
ise that
banker's first duty is to
a
I
Understand, please, that time forces
in
a
banker's first duty is to
long time yet.
used the banks at the present time.
revealed that 87.9% said they
munity.
a
a
survey among
our
with being too strict in making loans and in not properly serving their com¬
More than half said the public thinks
for
if you know what percentage of your community
Well,
top four in. the vote—just
Roosevelt, Father
in that order.
Coughlin,
to
end the
Senator Glass
Trailing the leaders
were
an
so
well.
suspense—were
President
Governor Landon—and
the following in this order: Herbert
Hoover, Henry Ford, Congressman Lemke, Dr. Townsend, Senator Borah,
Norman Thomas and Ogden
Mills.
Interpret that as you will, gentlemen.
untouched photograph of American
miles of this country
But remember, after all. It is an
public opinion snapped
across
3,000
BANKERS' CONVENTION.
We of
<
When
received other nominations, but these were the chief ones.
course
we
stop to realize the contributions which banking has made to help
build this country to greatness in a brief 150 years, when we consider the
banker's devotion to
average
It is,
ously In this
worded.
ship.
poll.
banker
no
Personally,
I
and the Ration's interests,
bankers stood out conspicu¬
or
believe the
For certainly we need your voice.
question was improperly
We need
the public forum.
on
Well, let
hear from you.
us
You fellows have proved you can take
I here and
My time is getting short and I will have to hurry, but I wanted to let in
a
little
■
light
more
the public mind
on
We asked the public: "About what year do you tbink America will reach
We hoped thus to get
an
insight into John
Citizen's private plans for investments and his expectations for good times,
course
means
boom in buying.
a
This boom—if you want to call
people between
and 1940.
now
it that—is expected by at least half of the
A quarter of the people expect
a
view the picture through the other end of the
us
We asked the public this question, too: "Do you think
the United States will have another depression?"
responding said,
yes,
said: "When?"
17% replied that they could
dolorous date.
they tbink we will have another depression.
hazard
not
make about as much headway as a
this time,
peatedly
my
come
buggy-wnip salesman at
while I have been exploring these
hard to see how
you
auto show.
an
with
surveys
mind returns to the experiences
much difference between your
We sell
money.
the food industry
re¬
whale of
a
and
more
a
^livable for
our
terrific competition aided
a
thinning margin of profit.
an ever
...Go back two
score
Consequently,
boxes,
we
have had
good
measure.
always with the customer in mind.
years;
thumb back
few
a
barrels and bins, dusty,
If I have sounded
The foods lying loose in
unappetizing,
But
making.
We
vinced.
manhandled—and
I
mean
The atmosphere wasn't conducive to courtesy or cooperation.
packaged food manufacturers.
denly housewives
They
offered their
were
merchandise of constant weight
convenient
to
Little
use.
I will tell
changed
choice
And what
have grown
and
wonder
the
in part the
was
"cracker-barrel"
which
ladies
was
said,
Sud¬
stuff,
or
both clean and
"Give
And
for
the
quickly.
groceryman,
the
boon, too.
containers
He could wait
on a
He eliminated his big losses from spoilage,
He
overweight.
packaged foods—in
a
could
show
instead of order-fillers.
his
clerks
how
become
to
assuring
customer
breakage and
merchandisers
The food packagers prospered; and
Even during the
appetizing, easier to
as
they
will
be
they stuck religiously to their advertising.
lesson.
To
some
it
was
hard lesson!
a
was
tremendous
a
this: When you claim
merit for your product, Heaven help you if you do not pack it full of
not
spasmodically, not 75
you
have built
or
merit,
90% of the time, but all of the time!
up at great cost a
Once
reputation for quality, that quality must
find its way into every one of your packages
every time, every day,year
In and year out.
Food manufacturers have learned that the public will desert you
overnight
if you try to take a short cut—if you become slipshod in either your manu¬
facturing methods
And
or
in
your
the public thereby
advertising claims.
quality and the price will be the
the main
Quality standards
^road.
grocery store
same
in the metropolis
as
years
so over¬
almost everything in the
will be packaged and improved.
The other
ways
and
quality higher, economies to effect price reductions,
means
new
and
better products, new designs for packages, new uses, new conveniences for
noses so
close to
over
belt.
partly that
some
of you have
good unless you shift the lever and throw It
into gear.
started
going.
When
poeple—customers—began
manufacturers cleaned house and
soon
were
factory.
inspecting
the
plants,
vying with one another
Ahd, inspired by public
praise, management and workers took price in themselves and in their jobs.
We
This is largely your task
'
•
new
The record has been
long
so
and better
of
one
co¬
human beings operate banks there
as
mistakes, to almost
of the heart.
I
perfect score,
a
not
am
I still believe that 95% of all of
have been
attempting to white¬
regardless of our sta¬
us,
day
author asked me if I knew the difference between
an
a
villain.
a
a
villain
or
a
The hero," he said, "is actuated by motives of unselfish¬
Examine
by personal motives.
book,
any
The only difference between the hero and the villain is what
thinks each fellow is aiming at."
In cold dollars and cents, wherein lie
As hero, or villain, in the public's consciousness?
It vitally
tion does not concern you alone.
every
your
But the ques¬
concerns every
business man,
investor, every property owner, every responsible citizen in the land—
all dependent upon you.
we are
But even
well-meaning public does not understand
a
And that is costly to
illustrate that.
cational job to do.
in
third partner In this accomplishment.
as a
They say we have crossed our last frontier.
us not
on our
stop pioneering.
We
that is not true.
say
unprecedented,
just
We,
Pshaw!
are
suffering
from
making enough products to fill the need.
Who dares
say
industries and
as our
educating the
We cannot rest
Let
I
watch
America's
they are
our
as
under-production.
Who
right here in our own land people are eating
they might ?
living
as
on.
Overproduction?
are not
been
has
progress
well
edu¬
an
And if anybody thinks that the social
started in this country.
industrial
say that
as
Our
business.
And the Government should
We must have the courage to go ahead.
oars.
your
Banks have
you.
It calls for self-enlightenment
So has industry got to do this job.
public.
come
Gentlemen, isn't that true?
to home, what do you want the spectators to think
bankers are aiming at?
profits?
We
And the
movie, any Broad¬
any
play, take the plays of Shakespeare apart, and always you will find
And coming closer
and
char¬
can take any
It is merely a matter of
he is doing something for others, he is saving someone from disaster.
public always cheers the hero.
for
"You
hero.
The villain is self-interested, he is actuated
as
among you
much
dares
well as
or as
adequately equipped for modern
scientists and bankers
are
capable of pro¬
viding?
Millions of houses, stores
and factories
stand in the way of progress.
a
menace to
are
antiquated,
worn
out, ready
They are too wastefully old and Inefficient; they
only for the wreckers.
Battered automobiles throng the highways,
Five million farm houses need electrification.
life and limb.
They need air-conditioning, mechanical household devices, modern
ings.
recreational and cultural facilities—all the blessings which our machine age
is
so
well designed to provide.
It is right here at home, working
Where, gentlemen, is our frontier?
and scheming to
men
provide
more
and more of the great
masses
of
our country¬
with the facilities for enjoying a rich, full life, a useful and stimulating
There is
trialists know
nation
can we
a
goal worth while.
that
And work for all here—for
only in a widely employed,
we
indus¬
well paid and contented
hope to find the customers required in our age of mass produc¬
tion and distribution.
So
common
sense,
past
experience, calls out to
us:
worn
machinery! Make our own prosperity.
portunity.
It is
yours.
Yes,
your
Rebuild America!
That is
our op¬
opportunity is to win the people's
goodwill by financing the big undertakings to the mutual profit of all
cerned.
What
a
con¬
vista lies ahead of you!
For who dares say that the
that its functions from
banking business has reached its full growth,
now on
should be routine without imagination, sta¬
bilizing without self-discipline, constructive without a strong undercurrent
of
See how It motivated the packaged food folk, once It
to see who could have the most attractive
and
and make him either
ness,
Psychology, a silk-hat
It is the mighty power up there on the whirling
But It is no
Human nature!
the
answer
traditional duties that your gaze could not
magic word "Psychology"?
word for human nature.
leather
Is the
your
important
By your financing you have aided
Replace the
I wonder, is there another clue here to the so'ution of the problems con¬
focus sharply on the
a most
young nation.
a
take over the job and seek improve¬
"They are one and the same man," he said.
acter
selling
the industry and its Importance and merit to the American public.
kept your
we must
This is
"And what is it?" I asked.
life.
the home cook, better service rendered the retailer, and, above all,
fronting the banking world ?
have played
rendered to industries by financing
of the head—not
hero and
in the village off
And this trend toward the packaged product is
Today the food people think, dream, talk improvements,
to boost the
were
The public now buys
Everyone knows that the freshness, the
whelming that I predict that in the next ten
The
have done for the food indus¬
People need new clothes, new shoes, new hats, and shirts, and silk stock¬
has been the gainer.
raised; prices, due to stiff competition, went down.
packaged foods with confidence.
am con¬
tion in life, are honest and mean to do the right thing.
their researching, and
They had learned
And it
Of that I
a
our
I am
depression, when the banks have been criticized, the
But these
more.
mistakes
pros¬
serve.
up
Now
There have been errors,
smoke from now
more
so they
operations and inventions has been great.
foods
nutritious,
of
were
right track.
economic and financial wisdom
What the banks
By doing
extent.
like Topsy.
have only
more
your
swift progress it has been.
a
pered, they set aside money—millions of dollars—for research laboratories,
for experimental kitchens, to explore the secrets of Mother Nature, to make
And during the past several years they kept
problems, that is
no
the
on
employment over a long period of years.
surveys
handling and display—were
more
are
The trend is right.
Certainly, without
service which you have
the
me
packages!"
easy
of the food business
We have seen your worth.
ours.
you
the whole picture.
of
and quality,
It
you.
we
role in the marvelous progress of our country.
the spectator
What brought about the change?
troubles,
no
try they have done for other industries, notably the durable goods industries
the merchandise displayed.
as
have had
we
record is very clear on that.
this is true.
crude
if
planning for the future.
are
way
as
a
Food is essential, but the proper handling of the people's money likewise
manhandled—and too often, in the less reliable stores, you didn't know
just about
as
speaking of trends, not perfection.
goods.
was
What
lot of good bankers
a
We have had plenty of troubles, and many of them
whether you were buying the dealer's thumb or a full weight pound of bulk
And the service
I will be accused of trying to tempt
point of view.
for
more
Remember the old grocery store of that day?
little bit better.
a
You must have begun to think the food industry is
wash anybody.
spurred by
we are
of pride in accomplishment, the more likely the effort,
sense
year-in and year-out effort to do the job just
mistake.
and abetted by the millions of housewife shoppers daily thronging the
400,000 retail outlets and demanding more and more service, higher
quality,
forcing
whole box.
a
to remodel their movie palaces and turn them into food stores.
have had to learn, perhaps because you are more
isoltated, perhaps because
and
good health of their competitors,
spoil
can
fact, too, tnat the larger the company the more likely
a
pretty picture.
bank?
a
functioning at
are
us
lot
a
If you will allow me to say so, these surveys make it patent that the banks
to learn to do business
on the
operation of which the banking fraternity may well be proud.
grocery store
a
countrymen than it would be without us.
we
likely the
more
the
of—thQ
businses and mine.
When both of
prunes.
top-notch efficiency, we make life
haven't learned what
investments, and second, the realization
depended
bad tomato
one
ment, send Topsy to a sensible finishing scnool.
I
you,
might profit from them; and
After all, what difference is there between
You sell
Generally it is
often
so
and giving employment to millions in many fields—and I'm blessed
can see
their livelihoods and
to an even greater
oldest and largest of all our industries, taking a third of the national in¬
if I
realization of their responsibilities to those who had entrusted
a
fact that
a
the best fight
was
and counsel, the food industry could not have shown such progress.
that they stretch your credulity as well, and get you so snarled up that you
All
for it is
fight
is most essential.
Sometimes I
they have been stretched end-to-end around the equator
have been trying
-*4
clean
a
So we
1940 and 1950.
Well, thank gracious we are through with the statistics.
think
And even a
to the
a guess as
In fact, 4 out of every 10 saw It coming somewhere in
the decade between
first,
was,
them with
And 9 out of 10 people
The two favorite years for the next depression were fixed
at 1945 and 1950.
meanja
the question: "Does it
on
employees, stocknolders and customers?"
our
Probably what made them decide that
own
Let
moment.
on a
glasses.
to
fair deal to competitors, too.
prosperity
peak to hit us
a
after 1940 and before 1945.
Hold
deal
garden of roses.
peak will arrive by 1938, and 12 out of every 100 expect
opera
hours,
depression, we find the
a
does the management realize its responsibility to thousands of others, the
another peak of prosperity?"
which of
their Sunday manners in business
on
during the strain and confusion of
even
profits, and instead basing jfcheir policies
fair
find it today and as it affects
as we
business and mine.
your
find them puting
we
that their own welfare
call for volunteers!
now
to
sound leader¬
your
This is not the hour to shrink back from the spotlight, or the brick¬
bats thrown
it.
his institution
I think, lamentable that
So
until,
established companies rejecting the temptations of the chiseler's shortcut
social
We
are
consciousness?
egotistical enough to think we will get along on any set of rules
But the going will be easier with your help, your inspira¬
they will write.
tion—moral
and spiritual, as much
Men, there is
a
big job ahead.
as
economic.
No one of
us can
do it alone.
Let us all
join hands—and I Include imperatively our Government, regardless of the
31
GENERAL SESSION.
'
/
of
the country's potentials for shared progress.
on
Let
make it clear that, in a whirlwind start,
us
our most
world from any
you.
in the
have merely been stopped for a few
Conditions
Observed abroad, by
as
is scarcely long enough to send
countries there
rushing.
are
However, if
of inflation pursued by the present Government will of necessity require
adjustment.
The most drastic step thus far taken by the Blum regime is the virtual
nationalization and complete reorganization of the Bank of France, and the
installation of a new Governor of the Bank, Emile Sosthene Labeyrie.
which the various
forearmed with a real eco-
one is
nomic interest in the life of these nations and takes time to make contacts
with
as
many
different kinds of people, from financial and economic lead-
down to hitch-hikers, as I did, as I traveled about,
ers
and if one asks
as
to form some very
distinct impressions
have farreaching consequences the world over.
that is that America cannot stand
problems
there and are likely to
Of one thing I am sure,
wholly aside from these world
might wish.
as some of us
Perhaps there could have been
my
as
no
better time and place for me to collect
thoughs and try to review the kaleidoscopic impressions of such a trip
than
a
homeward journey aboard the majestic "Hindenburg," as she
a still further deficit in the
back to the United States in comfort and the calmness of the
problem
airs above
upper
which
I
tumultuous sea.
a
Foremost among
the feelings which I think any American would have, and
desire particularly
to express with
of and studies the social, economic
the better satisfied
new
a
emphasis, despite its
that the more one
and political problems of Europe,
is bound to feel with conditions in the United States,
one
in spite of the many problems which we, too, are facing at
as
second and equally important thought which
result of my
a
it is
There is
home.
I brought home with me
observations and studies of those few weeks abroad, and
the importance
carefully watching the
of our
social ideas and ideals which are rapidly
new
developments of the
spreading over the Continent
there and the need of our gracefully accepting some of
the more moderate
evolutionary changes going on at home lest we, too, may face some of the
social upheavals which have taken place
out
and
are
still taking place through
•
Europe today.
By this I do not
infer that there is any real danger of facing such
mean to
conditions in the United States, because I am confident that our present
business organizations have within themselves greater flexibility and adapt-
ability to social
form
progress
of representative
than have those of Europe, and that our present
democracy has within itself ample means for pro-
tecting the interests of the
masses.
I shall refer back to this subject once more, but will first put down my
impressions of the several countries in order in which I visited them.
as
.
I arrived and the great "stay-in"
and ultimately the day of reckoning will have to
How this
be faced,
the few
weeks
previous to my visit indicated a slight reversal of this
tendency.
"Front Populaire" Government was
new
already badly unbalanced budget.
be overcome without! new and radical forms of taxation is
see,
either through devaluation or some form of artificial control of the country's economic system such as is now practiced^by several of its neighbors,
In the meantime, the new Government is testing its credit by the issuance of a domestic loan in small denominations of very short maturity,
Treasury bonds in denominations as low as 100 francs are being sold all
over the land through banks, post'offices'and other government establishments.
They have a maturity of 6 and 12fmonths and bear the high rate
of 4 and 4K %.
To the extent that this offering succeeds, the Blum Government's financial problems will be eased, and no limit has been placed on
the amount of these bonds to be sold.
The first response was said to have
been satisfactory and up to expectations, but so far as I know no figures of
total sales to date have been published.
In any event, the Government will
take all the money it can get in this manner in the hope that thus its financial and economic program may be helped and as much as possible of .the
new credit at the Bank of France be kept open for future emergencies,
In this connection the views of some of the leading bankers in Paris with
whom it was my privilege to talk will be of interest.
Just as bankers and
others in America are greatly concerned over the huge deficit piling up in
Washington, so do the financiers of France look with concern upon the inflationary effect of the new Government's policies and actions.
The flight
of capital from France has been tremendous because of this fear of inflation
and possible devaluation, although the return of gold to the Bank of France
in
France
The
can
difficult to
*
perhaps somewhat hackneyed sound, is simply this,
sees
t
Although the capital of the Bank is privately owned, it will now be entirely
dominated by the French Government.
Since this century-old institution
has always been considered the mainstay of the country's currency system,
such political domination appears all the more dangerous because of the
frequent and drastic changes in governmentiwhich the country has experienced in recent years.
Simultaneously with this change of the management a new unsecured
credit of ten billion francs was granted by the Bank to the new Government, which appears to insure the present regime's ability to meet its increased disbursements over the next several months, but also makes certain
us
on
carried
a
possible
the significance of the great
as to
social and political changes which are taking place
and
mostly by motor,
questions as I managed to do, it is quite
many
National Bank,
some ultimate
home with fixed opinions
one
Europe
Rudolf S. Hecht, Chairman of Board, Hibernia
European history
Six weeks spent in the rapidly evolving panorama of
about present-day conditions or the fateful future into
dedicate
Men, I envy
bigger and better and happier united nation.
before Executive Council Meeting
New Orleans, La.,
these days
started
in the minds
Yours is a great responsibility and a great opportunity.
A Banker Looks at
on
maybe stock-taking, that we have
ground, hallowed by the achievements of pioneers, let us
On this
this country of ours—
ourselves to a
A Memorandum
or
ambitious pioneers.
starting from scratch—has erected an institution second to none
point of view; that we
breath-taking,
running again, and that we are going places undreamed of even
citizens, sell them
put our own houses in order and then sell ourselves to our
also
short years for
Let us
ploitical power in office—and freely realize our inter-dependence.
just taking hold in France
strikes, made effective by the physical
In discussing the question of the possible
devaluation of the franc, one of
the ablest bankers of France made this interesting
observation: He said that
relations between capital and labor and the internal strife which was every-
had come from
chance of competing In the
world's markets and thus building up the exports of France lay in the adjustment of the franc.
They now realize, however, that such a devaluation
where in evidence through street demonstrations, frequent and open dis-
would probably be of little help to them.
play of the red communist flag and clashes between the authorities and the
ments" and other artificial trade barriers and the ever-rising spirit of na-
occupation by the workers of the business houses and factories affected,
being
were
settled
by
practically
government
Little
decree.
wonder,
therefore, that the' country seemed uneasy and upset over these disturbed
radical element of the left wing.
more
but
ance,
difficult to draw safe conclusions from their casual observ-
more
I discuss their causes and probable meaning I want
before
even
to record my opinion
will, perhaps after
that France is not likely to go "communistic," and
experiments with extreme left wing politics,
a few more
through its difficulties with the capitalistic system still intact,
come
though operated
basis.
take
on
a
far
more
liberal and somewhat
even
cooperative
more
into
consideration
had forced
on
two
The
factors.
gold
preservation
the
years ago,
succeeding French governments a policy of economy and de-
flation which not only made foreign business increasingly
adverse
an
throughout
basis, fixed about 10
effect
on
domestic
business and
difficult, but also
are
constantly restricting the flow of international
they frankly fear that if any devaluation of the franc took place in the near
future, labor would be likely to use its
immediately be lost to the manufacturer and little real advantage
for him in competing for
Summing
up,
and financial problems will somehow
be solved
and all will be well with
its future if only a serious outbreak of civil strive among
avoided.
be left
increased foreign trade.
I left France with the distinct impression that its economic
the masses can be
hope and safety
Personally, I believe that the country's greatest
lies in the French peasantry, which
still is the mainstay of the nation,
employment.
The cost of living was slowly rising, thus
Italy.
newly-found power to enforce furdevaluation would
ther increases in wages, so that most of the benefit of any
Germany
generally, their standard of living has been materially below that of either
or
trade, so that
goods would be very small,
Moreover, after their recent experience with enforced increases in wages,
Secondly, French workers have been habitually underpaid, and, speaking
Germany, England
The so-called "clearing agree-
the possible increase in the export of French
To understand just what did happen in France, it is necessary to
world depression of,the franc on the
had
the large industrialists, who felt that their only
tionalism
It is not easy to appraise these outward evidences of a disturbed populace
and it is still
until recently much of the pressure in favor of such action
For
one
who has studied recent political and economic events in Germany
that country
I think almost any American to whom
something}more than empty words is
apt to enter the new Germany, as I did, with certain prejudices, because of
the ruthless means and methods by which the present regime has come into
and held itself in power, and because of certain class and racial hatredsrand
only from afar, and largely from newspaper reports, a visit to
making conditions increasingly more difficult for the laborers, but appar-
is
ently employers of labor,
"Freedom and Liberty" still mean
too
were
It
not
surprising, therefore, that almost the first acts of the
Government
whose
in the profitable and successful industries,
short-sighted to grant reasonable relief voluntarily.
was
Blum
even
Necessarily, these
new
concerned themselves with the fate of the workers
whole-hearted
support
new
social
the
"Front
measures
Populaire"
were
owed
its
to
success.
hurriedly prepared and
are
faulty in many respects, but they have, temporarily, at least, brought
measure
more
of industrial peace and have given
reasonable wages, paid holidays and
giving the working classes
political era
was
as
a
laws
were
better living conditions, besides
whole the feeling that a new social and
measures on
behalf of the workers,
being introduced to assist the farming interests, and
par-
ticularly the producers of wheat, all of which of necessity tended to raise
the level of prices.
increase in
How well this increase in the price of living and the
earnings can be balanced is, of course, uncertain, but on the
outcome of this delicate economic
ernment
rests.
problem the future of the present Gov-
Meantime, Mr. Blum is faced with an equally difficult
financial problem.
Contrary to the predictions of many students of
nomics and finance at the time of the recent elections, the new
has not devalued the franc and has, as yet, put no
ment of
gold.
Moreover,
as
eco-
Government
restrictions on the
move-
I see it, there is no likelihood of either of these
things happening in the immediate future, though I recognize that the policy
of a
revelation.
with this
order of things.
But if one
the remarkable transformation in the physical appearance of the country, as well as in the spirit
of the people, a certain admiration for their accomplishments can hardly
injustices which have gone along
new
lays aside these feelings and dispassionately observes
be denied.
It was my privilege to talk with Dr. Hjalmar Schacht—who still is the
country—and'with|many leading bankers.
Motorlooking hitch-hikers in
various parts of Germany, just to learn something about the frame of mind
of the masses, and in shops and at the Olympic' games I engaged people in
conversation and asked many questions.
Granted that many of these
people talked with a good deal of reservation, and granted, also, that every
effort was being made to give, especially to visitors at the Olympic games,
the best possible impression, and finally, making allowance for the fact
that two weeks spent in such a study is not enough to see much under the
economic dictator of the
dawning for them in France.
Contemporaneously with these relief
new
a
the workers Of the lower grades
something
ing alone, I not infrequently picked up interesting
surface of things, nevertheless, one could not fail to
admit industrial activity
is everywhere in evidence and that the mass of the people appears more
content than in many years.
And this appears to be true in spite of the
but the most necessary
fact that, due to Germany's inability to pay for any
v
BANKERS' CONVENTION.
32
imports, there is frequent shortage of certain food supplies.
instance, several of
moment very
there
was
was
should
be
hitch-hiking friends told
me
Thus, for
that it was for the
concentrated in Berlin and other tourist centers so that there
shortage of
no
kind
any
apparently good-naturedly pulled his belt
German
The average
visitors.
for
little tighter and did without.
a
It would lead too far to attempt to describe even briefly the changes which
have been brought about in the leveling of class differences, the increased
Opportunities
for the enjoyment of life by the working people, the physical
and mental education of the youth of the
land, both boys and girls, and last,
but not least, the reawakening of the national spirit as
evidenced by the
feverish increase in military activities.
So far
tremendous
way,
business is concerned,
as
and the existence of small, independent undertakings
is considered essential because it helps to maintain a strong
Capitalism, in its broader
middle class.
is apparently in no present danger, but
sense,
its status is probably best expressed
by
a
declaration made early by the new
regime, which said:
One conversation with
tioning.
Mussolini and
nized the necessity of conforming to these guiding principles of new National
Socialism, for those engaged in what
we
would call "big business" who co¬
operated in this spirit fared relatively well, while the fate of those who
attempted to "stand pat" and fought this new order of things was anything
And whatever serious objections
may
be raised to this new
order of things by which the all-powerful Government enforces its will, it
be
must
admitted that the
disturbances
practical result tras been the complete sup¬
and the absolute elimination of strikes, wage disputes and
of that
character.
Extremely interesting, from
the many
social
as
well
economic standpoint, are
as
the working classes and, incidentally, also to encourage an increase in the
I will mention but two of these.
married
get
get
can
a
"marriage loan"
Any young man desiring to
of 1,000
marks
$400) for the purchase of household goods, which he
period of
Whenever
years.
marks is made on the loan
(approximately
can repay over a
child is born to the union,
a
a
long
credit of 250
By this and many other
by the Government.
special privileges which the father of several children receives are large
The other important innovation which has been encouraged
by the
new
(strength through pleasure) organizations which, through government
co¬
operation, make it possible for the masses, at an unbelievably low cost, to
enjoy such pleasures
as
attending the theatre, taking delightful week-end
journeys and going to the seashore,
or
even
taking steamer trips for long
distances through their legally-fixed and paid-for vacations.
those who
Government do not reflect the free will and thought of all
almost forced to go to the polls, but I am firmly
basis
the
its
of
convinced
.and secret election the present Government,
would receive a very substantial
accomplishments,
majority.
a
developed
make reference only
in recent weeks in the trade re¬
practical standstill all export and import business between the
countries.
Under
legal
This is
tent
opinions—certain so-called
posed
is based
"countervailing"
bounty or grant has been paid
of any article which is dutiable under this
on
came as
a
paid by them
but
contracted for, this
The
Germans admitted that premiums were being
certain exports, but that they were not government boun¬
on
paid out of voluntary contributions by certain industries.
were
They argued,
was
Since con¬
considerable blow to both German and American export
import houses.
ties
conformed
before anyone can
with
hands."
undoubtedly
somewhat exaggerated picture, based to some ex¬
a
the patriotic enthusiasm of the Italian banker in question,
on
lot to think about, and there is
gave me a
a
after the humiliation which
England suffered
moreover,
Switzerland
that these premiums were only allowed to equalize
tunity to observe how severely that country is suffering because of the rela"
tiveiy high cost of living resulting from its faithful adherence to the gold
standard.
The predominant
business in Switzerland has always been the
tourist business, and that has suffered
exchange rates
terribly in recent
greatly discouraged travel from
have
exchange
Swiss
recently
has
countries,
and
travelers from Germany, which in the past furnished the largest number of
As
visitors.
a
the better hotels were painfully empty and
consequence,
not a few were closed
entirely.
Switzerland's industrial activity is largely limited to the production of
light, high-grade articles such as watches, textiles and food products, but
supports
large
a
the
of
percentage
population.
Generally
speaking, farms are heavily mortgaged at high interest rates and banks hold
such obligations which
many
Banks have also suffered
in default.
are
greatly by the German crisis, because financial transactions with Germany
always large and enormous sums of Swiss capital are tied up in Ger¬
were
"Sperr-mark"
in
many
and
similar
view notwithstanding the fact
and railway
However,
accounts.
situation is gradually improving and Swiss
bankers
seem to
banking
that the country's budget shows a deficit
which flow to the Treasury,
earnings,
the
take a hopeful
far below usual
are
totals.
prospective visitor by making it possible for travelers to-
buy Swiss francs at special rates, such as can be done in the case of lire or
marks, but special concessions are granted by very low railroad fares and
by substantial rebates on gasoline purchased in Switzerland if one remains
a
minimum of three days.
England
General
conditions
economic
this time.
those of any other European country at
There
are two
principal
For several years past England has enjoyed a real build¬
for this.
reasons
f
England are undoubtedly better than
in
ing boom, especially in residential construction for the middle classes and
small workers, and the benefits of
this activity are widespread.
Secondly,
English industry is benefiting very largely from the country's change from
age-old policy of free trade to one of protection, and many articles never
heretofore manufactured in England are now being
with similar imported goods which are
Since the adjustment made as
produced in competition
subject to substantial duties.
result of the nationwide strike
few
a
the country appears to have been free of any major labor troubles,
years ago
unemployed
on
the dole the number is de¬
Figures given me by one of the leading economists in London
creasing.
the
that
are
a
number
unemployed has gone from
of
2,800,000 to about
Altogether, the impression one gains is that there exists social
1,700,000.
and reasonable prosperity in the land.
peace
In London it
was my
good fortune to have conferences with a number of
the financial leaders, including Montagu Norman,
Reginald McKenna,
England;
Governor of the Bank of
Chairman of the Midland Bank; Charles
Lidbury, Chief General Manager of the Westminster Bank; W. M. GoodVice-Chairman
enough,
with
talked
the Bank of
ested
me
Barclay's
of
of the outstanding
some
Bank,
and
others.
many
economists, such
as
England; Professor T. E. Gregory, and others.
most was the very
A
also
Henry Clay of
What inter¬
liberal attitude which British conservatives
are
taking toward many of the great social changes going on in the world, and
as
standard
question of "managed currencies."
American ruling was a new German
No inducement
standard and to prevent speculation in it as far as possible.
is offered to the
"Lombard Street"
of this
The high
years.
all
unobtainable by prospective
been
almost
what
cannot overcome in any other way.
sequence
oppor¬
Several days spent in motoring through Switzerland gave me an
the German exporter
unpleasant
especially
result of their complete
as a
exchange differences resulting from the devaluation of the dollar, which
The
but it
challenge in this present stiua-
tion which I believe is causing British leaders considerable worry,
the manufacture or export
Act, then the Government must
siderable business of this sort has been done and
and
been im¬
This action
additional import duty equal to the bounty or grant.
an
ruling
have
the provisions of the Tariff Act of 1930, which provides that
on
whenever any
levy
duties
certain German goods imported after July 12, 1936.
on
be
Thus the leadership in European diplomacy
and while there are still many
Treasury Department—based on definite
recent ruling of our
a
cumbersome formalities must
dare speak with authority.
or
will pass to new
lations between Germany and the United States, and which threatened to
two
Alliance without consulting
in all future European disputes act
can
England, where embarrassing questions must be answered in Parliament
and
its
As to Germany's foreign commercial relations, I will
to the acute situation which has
bring to
parliaments, and they
All I want to convey is that those who believe the present
that in any absolutely free
on
a
But enough
Of course, the 98% election returns which have been reported
are
Hitler,
the Alps and to all
across
or
regime in Germany is doomed to early failure are very likely to be dis¬
appointed.
Schussnigg could shake hands
Every effort is being made to maintain the currency on the old gold
regime to please the working man is the so-called "Kraft durch Freude"
in support of the
particularly worth men¬
dispatch and independence absolutely impossible in a country like
families encouraged.
of such details!
seems
whole diplomacy of Europe will
with
agriculture
a
things which the Government is doing to improve the status of
population.
the
parties
pression of the communists, who were alarmingly numerous in Germany a
few years ago,
"how
intents and purposes re-establish the old Triple
nation."
Wise has been the industrialist, merchant and banker who early recog¬
but pleasant.
Italian banker
he said,
failure in the Italian sanction episode.
the
system
"Watch,"
an
shortly be dominated by those countries governed by dictators.
"All activities will be governed by the law that the nation does not live
for the benefit of the economic system, nor the economic system exist for
the benefit of capital, but capital serves the economic system and the
economic
with Austria and Germany has given the
agreement
new
country an increased feeling of power in European affairs.
Bigness is being discouraged in
changes have taken place.
possible
every
and the
name,
difficult for the average householder to get eggs, first, because
shortage in the country, and secondly, because the available
a
supply
my
surprised
beyond
me
and the
well
as
measure
was
the new
"Threadneedle Street"
point of view
now
which
take of the gold
England, went off
regulation prohibiting the use of so-called "A S K I" marks for the payment
the gold standard without a flurry nearly five years ago, and its "managed
of imports into Germany.
currency" has been so well managed that almost everybody seems to be
tions, "A S K I" marks
Without going into detailed technical explana¬
created by German exports and constitute
were
almost the only means at present available for the payment
cotton and other
nately,
materials exported from the
raw
by Germany for
United States.
because very recently a second ruling was sent out by our Treasury Depart¬
indicating that the German Government has taken measures to dis¬
ment
continue the
objectionable concessions made at home, and, therefore, mak¬
ing it possible for the American Government to eliminate the burdensome
countervailing duties.
tries
Thus at least
a
limited trade between the two coun¬
be carried on.
can
My travels in Italy
real
were
confined to brief visits to the cities in the north¬
bankers and business leaders was Milan.
opportunity to talk with
There the
new
spirit of Italy is everywhere in evidence.
as
does Milan, and there is
a
activ¬
remarkable amount of optimism for the
are
high for both agricultural and industrial products, and the
budget is sadly unbalanced,
even
without the
enormous
extraordinary
military and naval expenditures connected with the Ethiopian campaign.
Italy's debt
now
devaluation
the
has
of the
recent
*
convertible into gold.
war
and his
f
so many ounces
of gold.
Everybody in and out of
The remarkable part is that
people from all over the world come to London to take inconvertible pound
preference to their own notes, some of which are actually convertible
notes in
into
gold.
One English banker said to me rather
so
well
on
our
dull when it
seriously: "The reason
we get
along
present basis is that, fortunately, our population is rather
comes to
They
But this banker
do
was
financial matters.
not
care.
They do not understand this gold
A pound is simply a
far too modest.
pound to them."
It is not the dulness of the English
populace, but their confidence in the competent management of their cur¬
rency
and their country's financial affairs that makes them feel that "a
pound is simply a pound," no matter what is behind it.
And indeed the
English banks and the remarkable his¬
However, the successful
tory of the British banking system
justify this confidence and faith.
victory over the
League of Nations
through the elimination of sanctions have added much lustre to II Duce's
is behind the pound and apparently worries not at all over the fact that
the pound is no longer
fine record and innate strength of
really depreciated about 25%
against the actual price of gold within the country.
outcome
age
when measured
exceeds 150 billion lire, and while there has been no official
lire
The general public does not know just what gold cover¬
market operations.
question.
future of the country.
Prices
sys¬
both
through the cooperation of the few big joint stock banks and through open
No city I have
visited in recent years in any country showed such enormous building
ity
England's compact economic and banking
England, which is a privately owned and managed insti¬
pound really meant
The most important one in which I spent some time and had a
part.
The truth is that under
tem the Bank of
tution, can regulate the flow of money and the currency perfectly,
England accepts the pound without question, just as they did when the
Italy
ern
found little interest displayed in the
subject of formal stabilization of the pound.
Fortu¬
solution for this acute situation appears to have been worked out,
a
satisfied with the status quo, and I
Leaders
order
of
in finance
say
that they are quite satisfied with the present
things, and while, for the protection of their own international
GENERAL
SESSION.
trade, they are doing all they can to keep the pound as stable as possible
taxes will be
with the dollar and the franc, they are not at all interested in formal sta¬
even
bilization and are not likely to be
European political conditions,
For
find this
as
long
London
upon
it
the
as
of perfection
acme
particularly surprising to
was
It is argued that the gold standard worked all right
natural'trade relations between nations, but that it is folly to think it can
take
of the violent movement resulting from the flight and
care
occasional
I went to Europe in the hope and belief that
repatriation of capital.
some¬
thing could be done in the reasonably near future toward formal stabiliza¬
tion of the
principal exchanges; I left London fully convinced that while
real cooperation is
and the
possible toward practical stabilization between the dollar
pound, the question of
lies quite a long ways in
the future.
All
was
made for economic stability.
bit of
be
told by competent
now
It
economic reading and
my previous
teachings had always been to the effect that it
comes
as
a
the gold standard which
shock, therefore, to
a
and important people that the
it is not
reason
instability.
How the world changes!
as
have occurred in England could hardly be duplicated in the
control
United States.
Instead of having a half dozen banks with many thousands of branches,
finances of our country are handled by nearly
This
to create in America the
compact, centralized control of our monetary and banking systems and of
other economic processes which has been developed in England.
our
More¬
the size and diversity of the United States and the constitutional dis¬
over,
taste of our
that
either from
long
so
as
a
World
men.
the present tendency toward
It cannot be denied that this economic nationalism is in many instances not
based
desire for selfish advantage, but rather on absolute necessi¬
on mere
Accordingly, international trade is doomed to
for
time to
some
This does not
come.
artificial restrictions
many
that
mean
should give up in
we
despair and do nothing to improve the situation and try to rehabilitate
world trade, but in making future plans it is best to look
tl^se unpleasant
facts squarely in the face.
The gold supply of
the world is
nations that it has become
now concentrated in the hands of so few
fundamental necessity that goods and services
a
be accepted in payment of international obligations or else interna¬
must
tional business transactions must stop altogether, because the debtor coun¬
tries
practically without monetary
are
Meantime,
Russian
to
neighbors
some of our
by
England's
$50,000,000 of
15,000 independent units.
would make it impossible
condition alone
the
cheerful one,
a
ties of the countries in question.
illustrated
It may be worth while to add here that such changes in monetary
,
whole is not
economic nationalism continues and every nation strives for self-sufficiency.
practical just now to go back to the old orthodox gold basis is because we
have so much economic
a
political standpoint or from the point of view of the business
formal stabilization of the exchanges
any
European picture as
stability cannot be brought about
it only had to take care of the normal fluctuations resulting from
as
expenditures, and I believe
Conclusion
The
attitude and to be told in high places that the gold standard
new
pay for these enormous
especially
until world conditions, and
in all things financial,
"out of date."
was
looked
who has always
one
imposed to
England's budget will fall far short of being balanced this year.
far more stable than they are today,
are
and until some measure of international economic confidence is restored.
and conservation
33
British
most
goods
resting on their
action
of
be
oars, as may
authorizing
the
sale
Russia against their issuance of
to
of
5}£%
Treasury notes, payment of which British authorities undertake
guarantee in due course.
In
resources.
are not
recent
\
European country after another, business
one
have had to recon¬
men
cile themselves to progressive socialization of industry and commerce, and
increasingly large surrender of their individual rights, until they have
an
reached the establishment of
It is true that
something approaching the totalitarian state.
result the acute and unbalanced relations between capital
as a
and labor have been greatly improved, but at a cost far greater than would
shall have established here the amount of central authority which
we
people for highly centralized personal control makes it unlikely
have been possible by far smaller voluntary concessions before conditions
would be necessary as an effective substitute for the impersonal and effective
became
ultimate restraint exercised by an adherence to the gold standard.
lowed.
One other incident which occurred
during
brief visit to England seems
my
worth recording because it expresses in so few sentences England's present
frame of mind
the international situation.
on
cellor of the Exchequer, speaking on July
Mr. Chamberlain, the Chan¬
Fourth at
Unionist meeting,
a
after pointing to the domestic prosperity which had come to
result of tariffs and other factors, continued
as
England
as a
conscious that their future may conceal dreadful
side of peace and good will.
"It has fallen to me, as Chancellor of the Exchequer, to have to ask the
people of this country to submit to further taxation just when I had hoped
to be able to give them further relief, and I must once again pay my tribute
to the spirit in which they have accepted that new burden.
"I know they understand that the safety of the country must be our first
consideration, and that we could make but little contribution to the peace
of the world unless we were so armed and equipped as to be able to meet
our share of any risk that might be involved.
In that task, the task of
arming and equipping our country, the Government is engaged without
remission, and I know that in the accomplishment of that task I can safely
appeal for your continued confidence and encouragement."
Everywhere there is convincing evidence that Mr. Chamberlain's policy
aggressively carried out, but I doubt very much that enough new
When
the
hard
times
come,
banking eystem."
machinery
capital
of
V',/
The
changes
supervision,
because
America
country
is
in
in
and
the
had
nas
by
political
least
of
the
with
continue
represented
involve
more
This
political
democratic
that
the
a
is
and
power
has
and
a
the
individual
Discussion
make
been
is
control
of
any
people today
method
all
of
handling
is,
How will
funds?
who
shall
Shall
national
allocate
be
it
done
or
Discussion
important,
spirit
of
seeking
appraisal
partisanship
and
says
bureau?
light
by
or
matters
a
questions
momentous
but
than
be
savings
heat.
No
an
Princles
personalities.
use
of
or
by
in
said)
is
what
alone
deserves
tinued
That
political
allot
the
first
had
one
the
of
It sounds like
agencies
savings
Marx
is
of
should
the
10
of
paramount
are
analysis
Who
and
mouth-filling
is
in
shibboleths sired
discovery, something new, but it isn't.
capital, in other words, should
the
his_
axle
of
platform
the
communistic
wheel.
of
communism.
American industries
In other words, I
does
with State capital and an exclusive monapoly."
of
through
who
days
has
recognize
been
its potency.
deified
as
the
Lenin,
father
of
an
avowed
modern
dis¬
Russian
Communism, observed:
"Through the nationalization of banks they"—the small business men—"may
be tied hand and foot."
Elsewhere
he
said:
"One'State hank
as
huge as possible, with branches In every factory—this Is al¬
ready nine-tenths of the Socialist apparatus."
approaching
our
present free institutions and
our
alijil social problems
totalitarian state through still greater
a
but rather that
deal with these problems
we
enlightened business policy,
an
without the necessity of strikes or government compulsion.
the Way Out?
on
Even
disavow
appeared
House
of
banking
control
to
urge
witness
the
Coles,
D. H.
G.
prevention
to
Nation."
national
"It
is
that,
and
the
the
said:
he
achieve
to
and
policies
added,
the
in
"to
long
since
Committee
certain
of
business—it
of
is
for
the
representing
body
a
a
the
objectives—
responsibility
improve
from
comes
Not
ends.
Currency
stabilization
authority
monetary
necessary,"
and
said
speculation
of
concentrate
of
formulation
emphasized,
socialistic
or
Banking
He
thus
resources,
communistic
before
Representatives.
"necessary
the
machinery
our
of
control."
monetary
The witness,
in
his instance,
Governor
was
speaking
of
Eccles
Title
the
Federal
Reserve
laid
Marx
"control
II
of
of
the
establishment
possible
Karl
leader,
a
who
others
He
British Socialist
labor government nationalizes any industry, it should nationalize the
With the banks in our hands we can take over other industries at leisure."
banks.
the
recently the
more
"Before
was
the
Federal
so-called
Much
he
Reserve
Banking
of political
System.
what
not attacking the capitalistic system.
control
has
water
conceived to
Board,
Bill,
would
the
was
make
operations
un.der
gone
he
and
which
the
over
of the
bridge since
be the communistic cornerstone, the
of
the
monetary
for
any
increase in political management in
system," but
his
plan
still
to
seems
serve
the
democratic country.
a
Why is political control
to
program
any
and
planning
individual
of credit and capital regarded as so essential
which undertakes to substitute governmental thinking and
acting
citizen?
for
The
declaration, describes
it
the
thinking
United
and
States
planning
Chamber
of
acting
and
of
Commerce, in
the
formal
follows:
as
real needs of commerce,
to the spending
agriculture and industry could be subordinated
plans of the government and to its dictation concerning the volume
and! kind of credit to be made available from time to time.
be made to control the level of
.
.
.
Efforts could
production, prices and employment, through adjust¬
and credit, by a Washington bureau which thus
ments of the mere volume of money
would be permitted to experiment with a most dangerous
form of so-called central
planning."
the phrase
this
board
buy
later
lie in
not
centralization of government,
Note
Marx,
they will only use this power intel¬
convinced that the great lesson of Europe
am
to the United States is that the solution of our economic
does
of
I believe, further, that through
have the power in their own hands to combat com¬
munism and to minimize social unrest if
ligently.
was:
Marxians
be employed.
can
The
"Centralization of credit In the hands of the State by means of a national bank
ciple
nation, and that its prosperity and con¬
based upon its ability and willingness to be the best
are
con¬
allocate
people,
"points"
a
many
wide¬
a
liberalism in their attitude both towards employees and towards the public,
"The
by the depression.
Karl
existence
economic servant that
purpose
sideration.
"Capital allocation"
sincere consideration for the
business leadership that the capitalistic sys¬
tem must be in the service of the
a
intelligent
atmosphere
attributed to proponent and opponent alike.
little;
the
of
approached
reached in
the
drawn.
are
if not
among our
will
Simply,
us.
bankers asTm the past,
futile,,
be
it
Who will have the
generating
of
will
decision
later
or
because
spend—the
the battle lines
will
in
political
sooner
one
confronting
invest—or
or
Already,
indulging
sincerity must be
it,
be
by individual
rather
intelligent
nor
between
the struggle
such allocations be made?
political board
is
will
decision
other
people?
a
in
initiative.
freedom and
The
the
question
the
objective
important today because this Nation must
decision.
determine
main
our
Fortunately, there appears to exist in the United States today
The
regulation,
is natural
savings through bankers or put these savings into the control
political administration.
It is an issue as old as the world itself;
it
whose welfare
masses upon
spread recognition
change
the people's
of
by these developments
Editor and Publisher "Nation's Business," Washington, D. C.
"Let's
agencies.
such
me
national safety and prosperity
attributed to the
are
is
convinced
have
•
issue before the American
The great
shall
we
it
invariably
America
operation
the world.
whether
Likewise
conditions
a
-
appears;
adversity
of these
ultimately escape similar political unrest and
can
will ultimately depend.
the promise of a better world lie in such change.
proposed
control
always
the ills of
credit.
and
hope of recovery and
solution
one
Most of
we
liberty and privileges of the individual with
'
•
observation
and recognize these changing conditions by tempering our demands for the
Democracy in Banking
of Address by Merle Thorpe,
Abstract
that
ever
bring about the political upheavals which fol¬
to
as
close
of
social upheaval only if we have the wisdom to profit
possibilities, it is to
Empire that they turn for hope and encouragement, because
they feel, they know, that the British Empire will always be found on the
Is
than
more
the British
s]being
unsettled
so
weeks
rights of the
follows;
"Above all, in these days of stress and anxiety, when the peoples of Europe
are
Six
in
buy
all
at
one
social
a
Man
of
in
the volume and
the
Washington would have
longer under
some
the
to
mean
automobile
an
may
"dictation
part
his
cn
all.
purpose
of
the
It
control
a
Street?
the
instalment
means
through
power
plan,
that
his
in another section
larger
policy,
his
It
to
which
of
means
credit."
that
deposits
but
indeed,
Professor
the
in
may
a
if
style,
the
be
foreign
Tugwell
What
bureau
a
decide for him
the price,
bankers,
or,
kind
or
he may
or
bank
if he
are
allocated
land.
It
describes
no
for
is
as
follows:
"Capital allocation would depend on knowledge, from some planning agency, of
a measured future period ought to be put to one use rather than to
Given thisfinformation the first step In control would be to limit self-
how much for
another.
BANKERS' CONVENTION.
84
1
allocation.
This la the first great
problem In this field.
past and present, regardless of temporary luck, grow
and expand their own activities beyond all
This
alarms
Industries, because of their
over-confident of the future
reason."
the
Professor
Tugwell
talks
occasions
other
on
"Capital
allocation"
bankers in America, under the urge of a
what
is
banks were estab¬
lished.
Until recently, for 30 years, approximately three billion dollars
have been
"allocated"
annually for the creation of new industries, the
launching of new enterprises, and the maintenance and development of the
vast
have
method,
doing
been
since their
ever
industriaj[ andl trade organization by which the country gets its
bread
and
that
the
butter.
those
What
who
advocate
change actually
a
is
mean
not by the
banker, who is supposed to know his community and his borrowers.
Government, in other words, should take over the function of banking
as an
essential step in the reconstruction of society in accordance with a
allocating should be done by political authority and
definite
in the rest of the world, toward
political control.
The pity of it is that the many "do not recognize it;
it would be more hopeful if the issue were brought out in the open for an
aye or nay vote.
The movement is away from the traditional, democratic
method of "capital allocation" now represented by the American banking
tide
is
strongly here,
running
as
being replaced by a new autocratic method of allocation
under political supervision and control.
Through the exercise of the power
of
taxation, for example, the Federal Government is collecting capital
and allocating it, by appropria¬
tion, for the building of dams and power plants, the erection of model
towns, the electrification of rural homesteads, the manufacture and sale
the
without
formality
deposit slips,
of
This tendency is not of recent origin.
began before the New Deal was thought of.
of various descriptions.
goods
It
The
financial
the
the
when
especially
people,
persuaded
easily
When
of
shadows
depression
gather,
are
believe that bankers are irretrievably reactionary—
henchmen of Wall Street and that fabulous monster,
to
Bourbons,
patriotic,
are
Secretary
a
The record stands
the
in
for
example,
earners.
during the
essentially
is
be by
democratic institution,
a
because
it
Take
innovation.
means
and the Amer¬
profession "liberal," if being "liberal" means to
others, and not set against change
the banker's
away
traditional
glass
invented by those who know very little about him, and banking is a
eye,
cooperation.
The banker, probably more
any other
professional man, except, possibly, the politician, must
keep his finger on the public pulse.
If he were the arrogant person he
is often pictured to be, he would have no depositors and, therefore, no
bank.
If he were an irreconcilable reactionary, who opposed change, how
striking
of voluntary
example
made
allocations
edge
of
successful
The
primarily
advance
order
upon
funds
which
it
forward
of those
judg¬
march
restless
to develop
improve
the
To do
this
He
No
bank
and it
invest,
under
runs
own
of the public to entrust to it
in the same degree upon
the
productive
funds.
of
use
'
The banker
cannot accumulate
capital resources by the imposition of
arbitrarily
funds
con¬
ever
He
allocate
cannot
hopes to get them back
the
take
ment,
The
believes
banker,
as
unlike
He knows that he must give
of
the
enough
to
have
known him,
so-called
the extent,
liberals
progressives,
really
Calvin Coolidge put it, "that he
as
permit the people
is the real exponent of
and
make
to
and
their
correct
mistakes."
•
authority.
I
have
with
takes
Government
the
said,
promise
spirit
to
doorway.
pay
formality
in
its
a
at
often
hangs
you
"I'll
change my mind."
as
How
,
own
What
we
capital
finds
it
deposit
slip,
it
as
gives
a
single
allocates
of
thousand
in
York
a
through
as
get
run
the
political system,
the
the
route
of
more,
in
the
in
taxation
or
would
trusteeship of
account
a
yearly
of stewardship can
average
the
of
16,000
$50,000,000,000
bank
What
on
Presidents,
is
its
deposit?
responsive
is
immigrants
of
allocation"
"capital
America
the
clear
who,
by
the
advantage.
up
The\
demanding the change to authori¬
are
individuals.
The
of
Even
proof.
No
It
been
reform
All
The
points
out,
Office
by
take
took
it
by
the
50
of
boards
what has
over
from
perfect.
them,
but
a
school
of
the
sell
to
the
com¬
idea
of
developed
who
private collection
and
already
in
the
Excesses
and
dis¬
and
be
and
world
a
example
long for
blind
of
the
to
to
man
sound
selfishness
despite
good
the
and
earnest
everywhere,
men
centuries.
all
are
in
greed,
no
man,
been.
if
Attempting
to
mare's-nest.
a
we
world where there is
a
inhumanity
no
be
reformers
have
down.
where
of
throughout the
honest
of
there
has
fool¬
not
preserved
direction,
new.
That
is
way
abuses
this
in
nothing
pioneered.
been
democratic
should
world,
church
sure,
in
engage
sound program laid
a
Progress
although
ideals
injustice,
not
and
insurance
engineers
would
perspective
ideal
more
eliminated.
slow,
us
aerial
development
a
the
years
British
from
grew
political
Capital allocation
wants
the
should
cash;
is
telephone
automobile—
the
bank
of
created
buildings—
radio
that
the oil derrick,,
humanity by reforming machinery is
With
no
mines,
plants,
power
prog¬
effort
never
These
street.
overhead,
cooperating.
to be arrived at and
are
exhortation
has
the
stores,
airplane
Germany
Post
far
is
Everyone
down
go.
economic
mail.
are
trickery
Walk
coal
in
voluntary
the
safeguarded his customers'
to
condones
one
through
and
come
forward
political organisms have
department
ships,
Spencer
the
simply
premises
Further¬
pooling of risks by traders.
record.
the
Such
the painless
Federal board.
a
Every step
been
has
individuals
allocation
would
been
rails,
who
a
as
tribution of
It
of
water-works
them.
by
individuals
of
democracy.
to
a
Such pooling
whether by
political managers, who
upon
corollary is true;
house,
Herbert
As
city
responsive
allocation
thought:
began
poles,
jeweler
began
cooperation
enterprises.
product
the
pany
voluntary
banks,
State socialism,
is
commercial—the
and
motion-picture
the
placed
world
telegraph
all
to carry on.
of
agency
disturbing
the
dwellings
The savings of
10-cent store.
a
be pooled
the
compulsory
or
is
it
a
since
ress
sympathy.
hearty
selfishness, avarice;
acquisitiveness.
no
But
we
that
fact
probity, uprightness and honor
among members of the business community are so much the commonplace
that they escape notice by their very prevalence.
A good name in banking
is no curiosity in the United States.
•
Is
democracy in banking on the way out?
Yes, in spite of its
phenomenal record, in spite of its habitat in a democratic America, unless
-
tho
present course
faith
that
It
is
reforms
attended
is
men
changed, unless
and
we
"should
women
into
go
the
on
unless
out
way
furnishes
Liberty,
the
tragic
freedom
seductive promises
history,
The
today
only be
can
blood,
make
return
and
to
correct
the
people
realize
that
ill-considered
spectacle
and
of
action,
of benefits to
of
regained
wo
also
are
free
by long
know
being
come.
men
tbat
and
times
by
away
liberties,
arduous
many
their
forging
whittled
Such
we
effort,
once
by
lost
own
subtle
know from
sacrifice,
tbey have
regained.
banker
has
always
been,
and
contrary
the
to
wise-crackers,
is
community looks to for counsel on complex public ques¬
responsibility is to appraise and understand these larger ques¬
then to arouse the active support of his neighbors to the realities
a
tions.
man
a
Hie
tions,
that
to
through the centralization and expansion of political authority are
by grave dangers, dangers no less real because they are intangible.
America*
and
and
reverse
be allowed
mistakes.'*
own
the
bility
citizen
cannot
is
be
alone
custodian
delegated
to
of
anyone.
his
own
Even
destiny.
the
This
responsi¬
Supreme Court has
no
muskets.
The
citizen's
responsibility
is
also
great.
he
fails
to
American tradition
will
be
If
preserve the
American tradition of the march toward higher standards of life and
work,
ordered liberty under law, the culmination of man's
greatest effort to be a
free
spirit,
will be
a
if he
fails,
then
tradition without
.
/
do,
knowl¬
instance the hazard is left with the people where it belongs;
one
other
Here
been
one
busy
Nation
democracy in banking worked out in America?
millions
of
must
under
instrumentality
the
of
If the banking system of the country had been
have
those who
been
has
pooling by a political
often
$40,000,000 bridge
City had better
gives
individuals
thousand
America
never
it
as
Alloca¬
can
with uncanny
success,
of
blessings
You can't buy a turbine in
generator.
its
office-holders who happen
official, such
magnet
the
down,
top
proof is upon
its
shadow
the investment, to "suit the needs
The allotment of
New
It
political
without,
it,
or
examiners
chooses.
it
by
of
•
irretrievably bankdqpt long ago.
has
record of
as
of
No bank
as
the whim of
recall announced that
casually
have been
bond.
upon
authority.
upon
who
run
where
a
the predilections of the political
or
the moment to be in
project
capital
accounting
its
pleases, regardless of the return
of the hour"
"allocation"
issuing
of
the form of
makes
It
the
Mistakes of
Large-scale operations in a large-scale country require large-scale pooling
savings.
A bundle of faggots are replaced by a 100,000
horsepower
chains.
this
Contrast
basis
wage-
nations
59
methods.
tarian
the
if he has made mistakes of judg¬
°
we
the
democracy, to
strong
him
to
9,000,000
of the
single great enterprise.
a
the
the
from
fledi
say,
from
not
their
He,
in
for his depositors.
stewardship and!,
entrusted
consequences.
American
democracy.
is
of his
accounting
an
the
a
in
formity with his preconceived Ideas of what ought to be—not if he
tax.
than
more
single other
a
which,
18 of
By any test the handling of the people's savings from the bottom
and
power.
depends
of the people in
energy
its
for
not
industries,
new
,
burden
of
dreamers
and
ways
new
of the people and
limitations.
and
his
and
their aspirations.
for
temper
may
resourcefulness
the
these
go-
and choose the most likely ones.
groping
the
the
for
way
the visions
the voluntary cooperation
depends
the
a
of the family to
enterprises and new projects—
new
the
sift
must
existence,
of
understand'their
must
It
banker
understand
must
than
more
no
understanding,
his
integrity,
clears
which
guard
The
constantly
are
present
he
is
fact,
is the paterfamilias, the head
he
attempting to launch
are
civilization.
who
of
matter
a
his
the other,
those who
the
as
hand, he is the trustee of funds of many depositors
one
today
that
on
America
in
man
to
strange
employment
ideas
America has from 2,000,000
years
and is
ages,
Capital
confidenceyin
On
ment.
banker,
the
On
have
products,"
factory
State.
long would! he last in this fast-moving age?
between.
of .South
countries
our
public's acceptance.
The wealth produced is the miracle
so widely distributed as to make the condition of the
to the
as
the
than
who
the
to
buy
daily,
and
banking
loans
they'll
but infinitesimal compared with larger benefits.
corrected daily as only private operation
yes,
made
tions
50
period developed!
same
judgment,
In
coincidence
no
American
ican. banker must
and
up,
the
developed hundreds' of
furnish
is
It
-
wealth-producing
be tolerant of the ideas and opinions of
urged
them
clear.
office,
patent
trust."
The banker, therefore, becomes the whipping boy
of the unscrupulous politician and the demagogue.
All of this is done,
ironically, in the name of the new "liberalism."
Ironically, because
"money
Commerce
of
build
"Help
fine cooperation
again responding to
they cooperated to that end.
It is
system.
of
banking system invariably
with industry.
people.
When political
leaders exhorted "Lend money to Germany;
bring Germany back so she
will again be a trading nation among the nations," the banks responded!.
Bankers
to 6tudy our
to report its
to praise,
back
go
average
plan.
The
time has more than 1% of the $50,000,-
any
in actual jeopardy.
been
America,
word.
democratic
Not at
people, make?
000,000
Foreign commissions sent over
of
"discipline," that I "must subordinate" myself, "must consent to func¬
tion" along lines "defined" for me.
Lenin likewise had much to say of
"strictest discipline," and so do Stalin, Mussolini and Hitler.
They also
overwork
the
worm
"must."
I
may
be old-fashioned, but I dislike
for
me,
the
to
It
a
the
country.
homeless;
it
GENERAL
v.
'
•
•;'
v
-
;
.
,'
•
■
'
By Leland Whitman Cutler, President
President,
Mr.
Ladies and Gentlemen: To Follow Merle Thorpe on any
To me, it is most difficult now when
I am listed to speak on business and education, because over 30 years ago
Merle and I went to University together and we formed a friendship which
is a difficult assignment.
We went to this University not like many of our
Merle worked in the library for 18 cents an hour, and I
only death can end.
lads do
now.
envied him his job because he had this golden chance to
loved while he kept the rest of us waiting at the counter
books that were
Once in
with cards for the
while he violated his trust and slipped me a library
a
We worked our way
book be¬
textbooks for the
who
because he
The student body took a vote one time as to
the worst cornet player,
Merle or myself, and Merle won
the notes read,
trick, which has stood me In good stead over since:
part that I couldn't play, I just stopped and beat
kept right on playing regardless of how it sounded or how
while I learned a little
I
Whenever
came
to a
affluent and
they used to pay $25 for a band to play at a Democratic rally or a Re¬
publican rally, and one night the Democrats had a rally in Mayfield, and
the Republicans in Redwood City, some 10 miles away.
So Merle and I
divided the band into two parts.
He took the basses and baritones with
him to Redwood City because I could play higher than he could, way up
where the clarinets belonged.
I took the reeds and the base drum and a
few other things and went to Mayfield with my cornet.
I want to ask you,
whether the Republicans or the Democrats won that year d won't tell you)
If what Merle and I did would be called boondoggling or whether the cer¬
the Republicans and Democrats alike were
Merle has taken his education into business and he is
I
am sure
of the East, but I
he will remember that
Thanksgiving
and when we
played cornet duets together.
And it is to me more than a coincidence
that I follow him.
It is an honor.
I very humbly offer to you the words
of education in business which we learned together.
But before I speak
day in
a country
church when we said thanksgiving together,
of education in business, which is my theme,
that
I want to impress upon you
here In this city
which all San Franciscans have that you are
the delight
love, to admit our gratitude that you have come so
we
far to to see us,
the only privilege a host can
that you cede to us, your host,
and to ask
claim; that is, the desire to make you feel at home,
and the sensing that you
and
want you to
we
have faith in the West, as our bankers here have
jWest, because, after all, we are a nation, not a compass, and
be any trembled point between the East and the West.
In the
Here in San Francisco we like and respect our bankers
there
lancl where men stood together and
I don't know of any city in the
would have smahed
I
doubt that some of them even speak to each other, but they are grand,
fine, dominating personalities and I have seen them disagree so violently
fast if it had not been for the fine,
to an
issue at one time that you
understanding bankers we had.
would have thought the world was coming
end, and the next day, they decided to put it over and went zealously
I remember five or six years ago in the
that of suretyship—I went to New
ordinary course of my business—
York and the East to see how many
Colorado River.
banker I saw,
and undoubtedly
might be developed to build a dam across the
Every contractor I saw referred me to his banker and every
while he treated me knidly,
looked very pityingly at me
could hope for help on such a
wondered what sort of a fellow I was who
project.
It
was
tall that high upon its
floods that flet each year on their way to Mexico,
granite canyon, I was told,
a
crests were water marks of
a
turbulence that could not.be
advise his contractor not to
so
stand the West.
Just
a
a
western
was too
their
contractor, the
because the East did not under¬
the Prseident of the United States
day or so ago,
building of it made possible by western bankers
the building of that dam to its
think
of
that
it
through.
western
to
I
wouldn't
bankers wei;e
build
York,
or
an
be surprised,
thinking a tribute to the
could be done and to
of course, if those self-same
approached by western contractors to be permitted
acqueduct, say, from the Catskill Mountains down to New
build
a
subway back there, or dam the Hudson River, the western
the western contractors to stay
bankers might have vision enough to tell
home and do their
ever,
own
digging and building in their own
back yard.
How¬
the point that I do make is that we of the West know more about you
the East than you of the East
I would speak,
the magnet of opportunity.
attract us.
We have more
accomplishment, for such would mean the death of education.
Please may the education of the East
and North be strengthened by the
those opportunities are heart¬
encouraged by the accomplishments of your great cities, in build¬
opportunities of the West and South, just as
ing, injculture, and in domination, and, if you
please, in guiding the course
over
heard
the breakfast table about bills, or whether
i
unex¬
v
what
They have been
living when they get out of college.
taught by masters, trained in theory, but underneath the drone of precept
thought of the student: How does all this help me
President of the Board of Trustees of a great uni¬
It is my honor to be
versity, a trusteeship which has to do with the preservation and proper
application of
millions of dollars, but
many
a
trusteeship which must con¬
itself with the preservation and the proper application of many
cern
of dollars and a trusteeship which also must concern itself
millions
with the education
know the difference
of young men and women so that they may grow up to
work of life.
Education is dependent on the men and women of the faculty who select
those to be taught.
It is dependent upon the response of those selected for
the things that they are taught
and for the ideals which prompt the teaching.
It is dependent upon the men who administer the trust and the policy of
the
University.
There is probably nothing in the world that is more illusive than education.
Men have tried for ages to define it and they have tried to obtain it.
and I do not clearly know
You
what education is, but this we do know: that
country can rise above, nor does it fall below the teachings of its schools,
no
and
whatever it is
and needs
now
world
the
than
more
needs
most
be
must
in its history, are
ever
accomplished through
leaders whom other men
will follow on the right road in the doing of right things,
tion into the
making of this world
a
and translate educa¬
better place in which to live not only
for themselves but for the countless thousands they can never see or
The
universities
this
of
country are on trial
as
know.
whether they shall
to
devote themselves to science and the professions and the arts alone, or give
equal place to clear-eyed respectful young men who don't want to be
an
doctors
lawyers
or
engineers, but who have the right to know what the
or
ordinary things of life
all about and to be fitted for the doing of the
are
and the business of the world, upon which, after all, the profes¬
commerce
sions and the arts must depend.
trial as to whether above the routine of the
are on
classrooms they can place a sftaf to light the paths of young men and women
in the years
they
ahead,,and all of
give, als
can
will remehiber
as
I know literally
men
teachers,
our
universities are on trial as to whether
men whom younger men throughout their lives
counselors and friends.
£V;
r-
.
rijcores and hundreds of fine men, who are the great, strong
of their communities,
who, I think, remember very little of the routine
of their youth,
teachers who treated them
mature men on the
faculty who
as
comrades and friends, fine
instilled ideals into their hearts which cannot
be defined but which have stayed with them to this day.
I think the sound continuation of business rests upon
can come
from
our
to the soundness of business and to our
over-brained teachers
on
the faculties of
contribution to the world should
be
at least a standard from which
or
the education which
universities, but there can be nothing more destructive
an
we
democracy than to have sneering,
our
universities.
Any university's
advocacy of ordered government,
start toward one,
standard which
a
disbelieve.
We all need each other.
The West has been a wilderness long since first
cities of the East and South strolled their aristocracy upon a
that
their purpose to the preservation of democracy, to
they must hold
study all they want and get all the degrees they want, but not to sneer at
the foundations of a country
boulevard of
too, must
walk hand in hand, and although it
thing, I would not speak now of the education which comes
a
faculty can slyly teach
If in your lifetime or mine men thought it worth the while of their own
stand
to
that
our
With
God,
a
are
horses
can
do
is
to
take
the sneering
disbelievers—faculty
alike—by the heels and throw them out.
great respect for the older men of business, many of whom, thank
still in control,
in the grocery store,
our
America and take their chances unto death, the least
up for
universities
and students
or
you
know well that no longer is business learned
around the cracker barrel, or'in the trading of hens
in the wise chewing of
tobacco.
You and I wish that
some of
youngsters could have the philosophy of the cud and know when to
cast part
of it into the cuspidor.
We wish they could have the understand¬
ing of the storekeeper who had to keep the cracker barrel filled so that he
might have
a
change to hear of the outside world and how to run the Govern¬
ment, the while his glance wandered to his shelves and wondered how he
could pay
for the things he had bought with the money he knew would
not come in.
^Business isn't learned that way any more.
universities
proper
Business
is taught in
now
throughout the land where there are graduate schools where
taught the theory and the principles of business and the
application of it to the things which business has bulit up.
r
You and I know that the youngsters from our universities cannot bring
us
anything at the start, but why not give them a chance?
to
profit and not to loss and take them into your organizations where they
can
put the things they have learned to work.
in trustees and
not
to
Charge it
If our universities
up
are right
faculty, the studentship will be right and you can trust them
termite
into
the
foundations
livelihood ^depends and upon which
of
youi£
business
which
upon
your
America must rest.
thousand diplomas for young
They let
men
and women
me
talk to them at their
graduation dinner and, being a bit facetious, I said,
"Your diploma will
just getting out of Stanford University.
by the hand and lead them to Democracy, and so from this
believe In us, have faith in us, and
Business and education,
member of
why men have died in battle for America.
nently enough,
learn from us as we have learned from you.
no
indifference to democracy nor can students hold to jest and scorn the reason
admitjyou into
great land of opportunity I ask you to
which made their thinking and their learning
And, above all else, that
possible.
Education can take Wilderness
opportunity and accomplishment alike.
and (Aristocracy
What any university must demand of its faculty and students
is, whether they agree to any particular accepted academic course or not,
Last year I signed over a
of the country.
is a mighty
when they are
help to business
of jthe lads who work their way and wonder
too,
is the errant listening
And while it is in the mingling of the two—
accomplishment and opportunity—that education comes, education cannot
ened and
dad
a
a
young men are
know about us.
You have the magnet of accomplishment to
ever rest upon
but of the things
in business,
could possibly be stretched to take in the eager,
pected things they want.
or
conclusion.
mighty dam without
bankers who had the faith and the wisdom to know it
see
or
allowances
souls
far away.
who, still mindful of the trusteeship of the funds entrusted to their care,
never
are
you
all, and when all they know about business is what they have
at
from a mother
button which released the waters of that mighty river built by a
touched
I
once
in their teens or scarcely out of them, when they are of no
Each one told me that he would
curbed.
bid because the West
There weren't any bidders from the East
saw
things you learn,
the
will rhyme with a belief in God or stern respect for the wishes of those who
about doing it.
contractors
' '
colleges and universities should teach young men and women
Francisco, and I don't know of any city in the land which
on one
1'*
;.
things they learned in their classrooms, but who had, in the formative days
and have faith in
helped each other in the troubled days like they did right here in San
so
.
Board of Trustees, Stanford University
from
faith
must not
them.
•
.
feels about you,
and we want you to like us and accept as unreservedly and as genuinely
the things we have to offer as we offer to you in that same fashion every¬
thing that we have.
We are glad that you are here to see the West, all ©fflfei
the city's welcomer, but I do know how the city
am not
r
j;.*'
All of our universities
know well you are welcome is a true one.
*gl
1
education, and what the world has always needed, and will always need,
called inflation.
tainty of $25 to the actuality of $50 would be
know he loves the West.
' V
.
between right and wrong in daily thinking, in conduct, and in the
time and of course it sounded better.
In those days,
•
•
eat, or help me amount to something in the world?
together and I hate to admit it, but we even led the
Stanford band together.
•
they will do for
prescribed for us to read.
that we studied together.
courses
was
read the books he
he knew that maybe I couldn't afford to buy the
cause
.
Business and Education
X
program
35
SESSION.
;
any
business house in America and if you display it promi¬
it will give you; the exist just as readily."
graduation my secretary
one
of these graduates
will get you into any
dame in with
a
grin and offered
A day after
me
the card of
with the names of 10 of them signed, "Your diploma
business house in America.
Please may
Of course, they came in and three or four of them got
jobs.
we come
in?"
36
BANKERS'
Business should be
CONVENTION.
taught in our universities and it is right that our
isn't given the the opportunity to take our traditions and our knowledge
and
men should, in the thing they want to do in life, be held to the
discipline of classrooms and of books, but it is right, too, that you older men
is going to
of business take up where universities leave off.
so
young
One day your fine names will be tradition and tradition of itself touches
our
understanding—pitiful
they are—into the days ahead?
as
happen to the Government of the United Statse, which
blandly and
much
so
as
matter of course?
a
happen if you men of business
are
What
take
we
I will tell you what can
patient with the youngsters of business?
only yesterday, but tradition kept alive by youth walks in warmth from
You
day to day.
the manhood which all business and all civilization demands and you can
Knowledge with
still believe in men.
has survived disillusionment and you
you
Why not put the mighty
of your knowledge and
arm
train these
can
clear-eyed, respectful
and bring them to
young men
help the universities bring them to the stubborn faith
that
kindliness about youth's shoulder so that he may walk a way with you before
rests on the promise of a
you are tradition?
young men if you will call them from your anteroom and give
just match
Lads learn to walk in sunshine and if you now and then
theirs, they will know how far their stride can go
your step to
before their pace is yours and some day when you least expect it, they will
take your traditions into
traditions of
how
-
to
their
in
use
youth
tomorrow's
the
from
own
which you have taught them
the remembrance of your own workman-
ship.
wants to be
banker himself—comes in and says,
a
just out of college and he wants
job."
a
"There is
but please let him in and talk to him.
them
chance.
a
There
was
ancient
an
French
philosopher who said, "My
in your
son,
youth lay up a stock of absurd enthusiasms, else you will lose a great many
of them
by the
and reach the end of
way
journey with
your
Don't let youth reach the end of the
Recall your own absurd enthusiasms.
empty
an
journey with/empty hearts.
Give youth work to do.
We have had anxious days as has all the world, but
you and I know that
kid outside,
a
I know how you frown and shudder,
government
train clear-eyed
can
put knowledge in their minds; you can put understanding in their
can
heart."
I know how you frown and shudder when your office boy—who probably
You
on forever.
hearts and all their lives they will hold your traditions in their trust.
sunshine and in that sunshine build
materials
and from
You
flag to fly
of* America
this United States
is
better place in which to live and face
a
job,
our
future than any
but you can given him encouragement and if you talk to him a little while
our
future without trained youth and so
you may sense in him yourself
in government and in ideals and in the character of America, for in those
What is going to
portunity to
Maybe you can't give him
when you wfere goung.
happen to you and
if youth i^n't given the op¬
me
What is going to happen
accomplishment in his nostrils ?
sense
to him if some older
a
does not give him the benefit of understanding and
man
tradition and knowledge?
other country in the world.
ideals and in that character you and
and
we can
And yet, we cannot face
by your precept, give youth faith
I
can
face our future without fear
face other countries with pride and this country of ours through
all stress will stand like oak and rock until time's end.
What is going to happen to you and me if youth
And such is the offer and the plea of education to
business.^
Address
By Jesse H. Jones, Chairman Reconstruction Finance Corporation
Presented
Not
While I have entirely recovered my health, I am still
With regard to the omission of the above
dent
Fleming, said:
-
We had expected that the Honorable Jesse
as
first speaker,
our
When
I
arrived in
Mr. Jones asked
to give us
San
H.
his viewpoint
Francisco
he had been pretty much under
Jones would be with
o'clock
one
weather,
and
Sunday,
on
He advised
to see him.
come
the
us
business and banking.
on
shortly before
if I would not
me
address, Presi¬
he
.
R.
V.
Fleming read
the
to
your
convention
little shaky [on
and accept the will for the deed.
during the trying period
from which happily we have emerged, and I
hope time will further cement
the ties and
friendhsips we have made.
We
all take satisfaction
can
of the Nation's banks.
They
as
well
are
Withibest
the
and*pride
comfort
as
in the condition
strong enough in capital and
resources£to
great and growing country.
our
for[afconstructive^meeting,
wishes
following letter from Mr. Jones:
Sincerely[yours,
Sept. 20,
1936
jesse'H. jones.
Dear Bob:
As you
a
expressing my regrets to the Convention
on your program,
properly meet the credit demands of
asked to be excused from
appearing before the convention.
President
taking my place
I had intended talking quite
informally, but do not feel quite up to it.
It has been a pleasure to work with the bankers
that
me
therefore
.
.
pins, and will appreciate
my
for not
know, I have been convalescing
thejpast
the Coast foi
on
weeks, intending to attend and address the Convention.
few
Honorable Robert V.
Fleming, President,
American Bankers Association
^
Committee and Officers' Reports-General Session
Report of Economic Policy Commission by the Chair¬
man, Leonard P. Ayres, Vice-President of Cleveland
Trust Co., Cleveland, Ohio
Outlook for
The
Commercial
changes.
the
banking
in
Perhaps they
the
since
closing
Congress
this
country
the
are
Commercial Banking
most
enacted
important
facing
that
it
70 years
over
confronted
has
In
ago.
that
developed
bank
checks
The
that
that
the
it
termed
constitutes
depression,
has recovered.
until
is
it
little
now
levels
than
more
much
1934.
dition
It
is
is
10%
probably
Commercial
has
as
larger
merely
When
we
exchange
America
of
banking.
It
As
has
they
and
in
to
otherwise
the
be
his
term
which
dominating
to
gaps
of
that
loan
a
since
the
merchant
of
They are
their lowest
in
it
is
not
year
likely
more
been broadened,
in
liquidity and
has
that
on
in
we
days
its
of
in
some
it has been
its
a
the
idle
form
pure
sum
form
the production
is
Smith.
which
seasonal
He
the
of
and
Bank
almost
complete
These
been laid
degree become
that
point of
no
Banking is always
has
concepts
but they have
true
one
loans
a
been
national
an
their
port¬
They have all made loans secured by
capital loans and,
directly or indirectly,
By delving
through the annual reports of
the
Comptroller
it is possible to compile figures showing
earning assets of all our commercial banks for
rency
For this
purpose
being
as
three
The
loans,
loans.
The
sist
all
of
we
true
which
third
class
needs
The
of
banks
intervals
in
have
the
term
commercial
customers.
All
loans
that
hardly
nevertheless
this
and
loans;
bankers
so
deserve
broad
assets
in
consists
second
of
real
and
con¬
realize
will
they
that
defined
be
to
estate
include
classified
grouping
a
as
will
serve
our
com¬
discussion.
figures show that
mercial
to
but
loans,
this
may
earning
The
whole the commercial loans
a
proportion
for
we
banks
their
collateral
of
the
of
years.
classify
up
the Cur¬
period
of
investments.
made
of
composition
long
except the savings
banks
our
may
of
mostly
loans
as
We
consists
are
other
the
commercial
our
banks.
first
taking the country
considerable
consider all
may
commercial
groups.
the
a
since
been
the
distributed
following
percentage
1900
in
earning
these
assets
three
of
all
groups
at
five-year
percentages:
distribution
of earning assetstof all
commercial banks
Capital
Year
Commercial
Investments
Loans
Loans
1900
22
29
49
1905
24
30
36
1910
23
36
41
1915
23
37
40
1920__
23
26
51
28
21
51
merchant
1930
28
35
37
1935
56
23
21
60
21
19
he
function
of
even
always
was
the
pure
com¬
retained
the
granting
of
feature of
which
safety
that
did
that paper that it did not
not
have
these
qualities
1936
have been
when
partner in
known as capital loans.
banker made capital loans he
another man's enterprise, and in
a
considered
bad
integral part
of the
ever
conformed
business life of
is
fairly accurate general statement to say that since this century
began, and up to the advent of the great depression, there has been a
pretty steady tendency for our commercial banks to have one-half of their
earning assets in commercial loans and the other half about
equally
divided between investments and
capital loans.
The variations from thiB
a
rule have been
considerable, especially when business
general tendency has been fairly well defined.
In
marked
a
to
them.
nation,
and
one-quarter of
are
that
nof;
have
but the
of
much
not
our
commercial
banks, instead of being
are 60% of them.
The capital
21%, but the commercial loans have declined in volume
instead of bring about half of all
holdings they are only about
about
19%
inactive,
period of this depression, and so far during the
recovery,
a
change has taken place in these old established relationships.
At
the present time the investments of
so
was
the
loans
banking.
banking system has
It
of
of banking have been formulated in the text
books, and
by the courts, for many decades both here and abroad, but
fact
securities in
loans.
1925
theories
down
banks of all
wrote
by him at other times if
accepted
cardinal
value.
least
by fine¬
counsels
through the
They have made
they have made real estate loans.
com¬
activities.
the
mean
in
Adam
that
for
to
always been recognized
theory at
it
commercial
v
have
depreciate
the
...
gone
paper
times, and not
restrict
that
to hold investmet
come
commercial
as
to
and
mercial
well
as
and
about
come
and
England,
capital.
principle
has
it
leading countries have
con¬
finance seasonal requirements
arising from the pro¬
exchange of goods.
Commercial loans have characteristically
6elf-liquidating loans, andi when they have been represented by com¬
duction
the
Thus
and conditions of the
constrain
collateral.
are
this
national
our
banking
only
compelled to keep
own
credits
feature
banking
have
fundamental
loans
business banking,
our
time and credit
years
short-term
as
deposits
demand
imported from
we
commercial
banking
mercial
proportion
consider whether
whether
or
just
1928.
averaged
report
far
so
was
production has increased
they ~4vere
as
temporary,
the
been
it
in
banking
has
what
nearly
early, in 1928,
than
Commercial
should
furnished all
in
of
but the totals of commercial
of this
a
refer
goods.
bank
a
would
had
recovered
industrial
of
banking
fraction
adequately descriptive of
been
never
in
perfection.
would
1
is
banking which bridges the
that
commercial
of
was
great
purpose
banking
been
never
has
merce
It
busi¬
transacting
of long duration.
prove
been
for
the volume
that
not
reached,
third
the
has
it
as
before
a
than
more
it
is
small
a
The volume
great
as
never
place
strictly
but
and
business
at
taking
now
be
properly
may
before
it
medium
theories which
capital
change that is
declined
of
principal
our
payments.
ness
are
of
into
of
year
10% annually on the notes of all State
banks, and by that Act suddenly drove out of existence a large part of
the money with
which business was transacted and banking was done.
That change made National bank notes our chief form of
currency, and
tax
a
governed by ihe needs
folios
be
to
appears
important
of the Civil War,
year
is
it
spun
their
earning assets,
about
them.
more
As
has
fhan
a
increased
much
already
third
as
been
as
the
noted,
much
recovery
as
the
they
has
gone
commercial
were
in
forward.
1928,
loans
and
are
they
GENERAL
Now
they
situation
this
minor
highly
a
than is
loans
for
consist
to
are
is
important
and staffed to handle a
equipped
are
commercial
period
long
any
available.
now
of
be
would
It
natural
commercial
of
that with
to assume
the
in
continuing general recovery
a
activity there would result important increases in the volumes
business
in
only
in
be made
loans,
of
and
investments,
important changes will have to
policies and in the personnel of the institutions.
degree
because
banks,
much greater volume of
earning assets of banks
the
mainly
the
for
one
very
If
There
loans.
be little
can
doubt that
business
further
ex¬
in more commercial borrowing, but it is difficult to
suppose that it can soon restore anything like the old volumes of loans.
If it were going to do so the increases in loans up to the present stage
pansion will result
the
of
ought
recovery
In
been
and
well
far
than
greater
Federal
the
the real
production
without
Almost
levels.
mal
actually
they
has
exception
has
claim
been
repeatedly
good advances toward nor¬
made
such claims
the commercial loans of
loans and
based
are
reporting member banks.
loans
after
the
loans,
1921.
together,
taken
of* 1921
depression
by
breaking
levels
recovery
No
been
has
that
development
such
under
this
in
of
perous
the
to
A plausible explanation of this wouldi
the automobile industry is con¬
industry has been
durable
of
exceptionally
an
pros¬
also the largest producers of many
as
agricultural implements and iron
are
such
goods
having
in
of durable
goods will result :n still more commercial loans.
Nevertheless, it does
not explain why loan
increases generally have been so small, and why
they have not appeared in greater degree in other parts of the country.
Probably there are two chief reasons for the declines in the absolute
it
loans
products
If this
in general.
justifies
relative
and
further
hopes that
the
the reason for
is
The
loans.
increase
in the outputs
increases
commercial
of
volumes
is
first
the
during
that
business
to replace
themselves
from dependence on the banks for financing their seasonal requirements.
The progress of this process was made evident by the great shrinkage in
the volume of commercial paper available in the financial markets.
enterprises
bond
able
by
selling
second
increase
found in
comparably
the
failure
with
the
numbers
great
volume
business
in
demand
floated
has
bank
deposits,
deposit
Another
hold
also
banks
considerable
in
business
of
factor
increases
and
in the form
the
in
record-breaking
these
degree
enterprises.
tending to curtail
reduction of the
through
As
credited
are
result,
a
figures
of
amounts
of
de¬
rapid
more
probable
that
of
commercial
than
before
the
to
their
The
the
to
the movement
in
Council declared itself in favor of nationwide voluntary fingerprinting.
The
banking
for
justed
to
appears
as
while the volume
that
is
a
as
basis for employees of the American Bankers Association, and the
tory
changing of the group life insurance
to conform with the
and Retirement Plans, which embraces the principles
and retirement
It
plan.
It ordered that this report be printed and distributed
Following careful study and approval by the Administrative Committee,
the Executive Council considered the Statement of Principles of Commercial
Banking prepared by
special committee of the Bank Management Com¬
a
Statement of Principles of Commercial
This
mission.
the Statement of
the next few
are
used
does
main
of
to
only approved this Statement of Principles of Commercial Banking, but
has ordered its
publication and distribution to
President Fleming;
the
and proceedings
report
hear such
It is customary that
earning
assets
Elliott
S.
ment
first
Does
the
Chair
move
the
[The motion
was
duly
seconded and carried and the resolutions adopted.
Report of Protective Committee
Indications that the bank crime
the report
in
wave
has been
broken
were
presented
of the Protective Committee, submitted to the convention
meeting of the Executive Council by
Association's Protective Department.
James E.
Baum, Manager of the
The report said:
"For three successive years since 1933, marked reductions in crimes
against banks have been reported, but the sharp reduction in 1936 is un¬
paralleled in the records of the Protective Department.
"The peak year for bank robbery was in 1932 when 631 bank burglary
and holdup attacks were reported.
This unprecedented total dropped to
407 in 1934 and was again reduced last year to 311 attacks.
"In the Association's fiscal year ended Aug. 31, 1936, banks and trust
companies in this country were the victims in 148 daylight holdups and 41
night burglaries.
Although a total of 189 Dank robberies in a year must
be regarded
the courageous
and tireless work of all classes of arresting officers, and
wider and more intensive use of modern protective equipment
a
and preventive
within the banks.
measures
points out that while banks not members of the Association
represent less than one-third of all eligible banks, they were the victims in
about
of the bank robberies
60%
during the year.
strikes where the least resistance may be
"The bank robber
expected," the report said, "and
it is not by accident or coincidence that non-members suffered 114 robberies
while their
neighbor banks under American Bankers Association protection,
and aggregating more than twice
their number, sustained but 75 attacks."
in
National
Resolutions—Budget Deficits
on
Government
If
Impede Complete Business Recovery—Urges Against
the
to be of the sorts indicated,
they
Indiscriminate
of banking ^policies.
They appear to
banking has entered upon a period of considerable
and
Taxation
of
the
of
expenses
the
to
operation will
bank
changed income-producing
need
to be
read¬
The report of
as
follows
of the earning
power
not
be
they
song,
appear
true
are
to
eav
of
all dressed
to be true
American banks
up
but have
that they
are
that
in
place to
no
the
Burdens
Chartering of Banks
the Committee
on
Resolutions
was
presented
by Thomas R. Preston, Chairman:
of
It would,
go.
all prepared to
words
where they
go
possible for them to go these, nor
it seem likely that it will be possible in the near future.
Their
activity used to be the financing of the fluctuating current needs
go,
and
that
business
equipped
to
do
it
is. not
now
through the making of commercial loans.
it
on
a
far larger
scale than
they
are
They
doing it
the
LEONARD
P.
AYRES,
Chairman,
Business recovery
progress in
almost all phases
Neither unsettled conditions abroad
nor our
national
political campaign at home seems to disturb our domestic business activity.
Despite industrial, commercial and financial improvement, unemployment
continues in such serious proportions as to delay the establishment of a full
rounded
at
continues to make good
of our economic life.
are
They should now devote more attention than they have hereto¬
problem^ of the wise and prudent handlipg of their invest¬
accounts, in the realization that these problems are not only of the
importance, but also that they are not merely temporary problems.
to
Executive Council.
(Commercial Bank, Thomasville, Ga.): I
adoption of the report, Mr. President.
with
developments
present.
fore
of the
member banks.
motion?
a
William
our
motion be passed approving
a
Business Conditions
American
now
The Executive Council has not
modifications
American
which
years
Banking parallels
Principles for Trust Institutions adopted by the Associa¬
tion, which has proved of much benefit.
these prospects
Commission does not view
does deem them important.
it
conform
wouldi
however,
which, in its opinion,
to the members of the Association.
assets.
the old
employees to a contributory basis
on
pension plan.
The Executive Council approved the report of the Committee on Pension
Report of Committee
but
over
in
Orleans,
„
„
about one-half of their
of having
it
business recovery advances,
whole will soon be able to return
increase
banks
that
higher than it used to be
conclusion
The second
our
is
the proportion of the earning
normally be invested in securities
be much
to
surely
first
come
will
that
The
Policj
thoughtful
to
by the Council at New
Nov. 14, 1935, to inauguarte a pension and retirement plan on a contribu¬
given to the Federal Government in 1934 and 1935 to punish bank robbery,
merchan¬
transportation, thereby
the Nation's cur¬
motorized
and
continue
will
practice
indicate that
duration
Council approved the action of the Administrative Committee in
carrying out the order delegated to it
borrowing
of
loans.
Economic
apprehension,
call
loans
unlikely that
commercial
time
banks
depression.
old
variety of routine business.
a
Credit for this desirable result is given in the report to the jurisdiction
element
justified.
seem
long
a
loans will
commercial
seems
of
for
in
Divisions, Sections, Commissions and
Association; the review and approval of various acts
Upon the recommendation of the Protective Committee the Executive
The report
rather
it
of the
Committee.
devoted to detailed reports from
as excessive, the current period reflects a further decrease of
40% compared with a year ago and a reduction of 71% in four years."
of commercial
the volume
time
railroad
conclusions
general
assets
of
and
business.
Two
were
corporations
such
reducing the total volume of credit required to finance
rent
foreign countries, and approved
affecting legislation, all of which are covered in various committee reports,
actively seeking commercial loans.
has been the
dise
The
huge
the
for
account
and
accounts
not
are
these
investments.
mand
issues
bond
has flowed rapidly
The banks now hold great quantities of the Federal
deposits.
and
to be
is
recovery
resulting from them
money
loans
commercial
of
through business channels, and found lodgment in the banks
securities,
Springs, Va.,
and consideration of the work of the
of
long-continued deficit financing of the
Administration
the
As
the
of
advance
of the
effects
indirect
depression
the
the
expended the proceeds, the
of
The session at Hot
to build up corporate surpluses, and
stock, so that they largely relieved
for
reason
Government.
Federal
before
were
issues
The
to
period
prosperity
long
Nominating Committee, elected members of
appropriations recommended by the Finance
Committees
Taylor,
Shepherd, Executive Manager; and, in accordance
of the
various committees and Vice-Presidents for
the
Execu¬
1935 at New Orleans; April 28
14,
Sept. 21 at San Francisco.
At the meeting in New Orleans the Council elected Arthur B.
Treasurer, and F. N.
with the nominations
Federal Reserve
in the two
loans
districts where
two
that this
Those two districts
kinds
steel
and
the
are
and
year.
other
almost confined
increase in
moderate
a
Chicago and Cleveland.
these
centrated,
way
held meetings Nov.
should be considered by banks contemplating the inauguration of a pemsion
taking place.
districts
be that
is
commercial loans
An analysis of the Federal Reserve figures shows
months
few
past
has been
it
1923.
Council has
and 29 at Hot Springs, Va.; and
the commercial loans had reached new record-
period.
During the
Since the adjournment of the convention at New Orleans, La., the
tive
studies
on
did recover slowly after the depression of
The figures of the Comptroller of the Currency for commercial
in all commercial banks do not tell any such story.
They show that
Those
Report of Official Acts and Proceedings of Executive
Council, Presented by Raymond Dunkerley
late in recovery periods,
figures which until recently have lumped together
Reserve
estate
the
matters
in bank loans normally come
industrial
after
these
of
discussions
current
made that increases
of
have
to
been.
have
37
SESSION.
ment
The
prosperity.
recovery appear
and
the
most
formidable
barriers
against
a
complete
to be the continuing budget deficits of our national Govern¬
growing
burdens
of taxation.
These
problems
are
non¬
partisan in character and call for joint effort and unity of purpose among
all of our
people.
.'
Banking-Supervision and Legislation
We reiterate our stand, expressed in the resolutions adopted at our last
NATHAN ADAMS,
annual convention, that the chartering of new banks be limited rigidly to
THOMAS
the economic needs of the nation.
B.
McADAMS,
CHARLES
J.
R.
ZIMMERMAN,
S.
P.
HAWES,
S.
McLUOAS,
GIANNINI,
FRANK
K.
JAMES R.
■
HOUSTON,"
LEAVELL, *
EDWARDS,
it during
the banking emergency and
capital owned by the
4.
THOMAS R. PRESTON,
GURDEN
the correction of over-banking is making sound and orderly progress.
The
strength of the banks is attested by the fact that they have repaid to the
Reconstruction Finance Corporation 88% of the funds they borrowed from
STEWART BAKER,
WALTER
A.
F.
With the reduction of the number of
banl^ng institutions in the country to something less than 16,000 units,
MAX B. NAHM,
decretory.
investment in the
structure.
RFC
banks
American
has
now
a
substantial proportion of banking
been retired.
constitutes
banking is
now
less
well
The Government's
than
15%
total
of their capital
able to finance by credit ex¬
tensions any expansion of sound business enterprise that may accompany
business recovery.
BANKERS' CONVENTION
38
aroused to prevent the over-production of
Public opinion must be
banks
Special Resolutions—Commending
institutions in places which
are either not large enough to support a bank or in which there are alreadyavailable sufficient banking facilities.
"We view with concern reports
which have reached us of a tendency in some localities to establish new banks
President Fleming—Regret at
through the indiscriminate chartering of new
which
bear upon super¬
resisted unjustified expansion of banking
We recommend that support be given the
required and to bring political pressure to
not
are
Jones to Address Convention
such conditions.
We believe that the Banking Act of 1935 and the regulations issued under
should be submitted to further practical test by experience before being
supervisory authorities under
it
The Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, and
the Comptroller of the Currency, as well as this and other business associa¬
tions, are conducting extensive researches into the sufficiency of its provi¬
sions.
We believe that these researches when completed and studied care¬
by
changed
amendments.
important
and practical bankers will indicate whether
major changes in the banking laws will appear desirable.
fully by the Government agencies
Postal Savings
and Government Lending
Resolutions
Association's Committee on
to the Postal Savings System and Govern¬
particularly commend the steps taken tn
Banking Studies with respect
We
agencies.
lending
presented by the Committee on
takes this occasion to
Association
Bankers
American
The
were
adopted:
duly
and
sincere admiration for the able administration of the affairs
rendered to all banking through the influence of his office
of
his
personality have contributed
own
and the powers
invaluable stimulus to the
Bankers owe him a deep debt of gratitude for the
profession.
banking
an
origination and successful consummation of the series of regional
on
ences
in
confer¬
They fully accomplished his purpose of aiding
banking service.
taking the mystery out of banking and in providing an
the bankers of the country to come together to
opportunity for
give intensive consideration
problems.
to their common
leaders in business and banking
We also here express our thanks to the
given us the benefit of their time and experience as speakers
be¬
Each of them has made a
various meetings of this convention.
fore the
its
express
of this Associa¬
The services he has
retiring President, Robert V. Fleming.
tion by its
who have
the researches conducted by the
We approve
ment
Agencies
resolutions
The following special
visory authorities when they have
facilities in their jurisdictions.
Administration of
Inability of Jesse H.
valuable contribution to its success.
particularly regret that the Honorable Jesse Jones, Chairman
We
Finance Corporation,
Government
officials that they are desirous of discontinuing certain of these agencies as
soon as adequate service can be rendered by the banks.
We entertain the
hope that when the facts have been fully ascertained it will be possible to
suggest legislation which will be in the public interest and which will
moderate competition between the Government agencies and the chartered
of the
unable to prolong his stay in
ity, the local committees of San
banks.
loyal endeavor in preparing for
establish
Assurances
facts.
the
been received from
have
Bank Management
Certain economic changes in
Thqse changes, coupled
d
the nation's business practices have reduced
commercial loans required to finance current operations.
of
the volume
^Unfavorable
an
with constantly lower yields on investments, have
effect upon the earnings of many
Reconstruction
cities
en
complete restoration of his health and strength
a
San Francisco bankers, the bankers of the
thank the
We also
various
convention who lightened our journey with hospital¬
route to this
Francisco who have put in long hours of
the sessions of this convention, the hotels
for their excellent entertainment, the many representatives of the press
from various parts of the country who have given such adequate news treatment to our meetings, and the citizens of San Francisco for the cordial
hospitality which they have so generously
Association.
banks.
We extend to him our sincere good
convention.
California to address this
wishes for
was
extended to the members of this
~
sound banks cannot continue to be sound without
It is axiomatic that
the
the
forms of credit extension, and of adjusting
We urge that all banks devote special attention to
problems of improving their portfolios of investments, of canvassing
adequate earnings.
possibilities of developing new
urge
with the changed conditions.
Convention
that all banks which have not
schedules of compensation for
Taxation
We heartily
that
City Extend Invitations for 1937
Boston and Mexico
We also
already done so establish fair and just
the actual services they render.
payments in conformity
interest
endorse the constructive suggestion of
be taken better to
immediate steps
President Fleming
by various
excessive administrative expense, unnecessary an¬
noyance to the taxpayer, and an unfair distribution of the tax burden.
The uncertainty and hesitation continually created by the flood of new
lead
jurisdictions
to
and effect of old taxes have a
business activity.
Taxes should be
standardized in form.
Changes then would not take the guise of new
taxes with their resulting unsettling economic effects, but revenue require¬
ments could be adjusted by raising or lowering the rates.
by frequent changes in the form
taxes and
serious
destructive effect
and
upon
Government Credit, Expenditures
and Budget
United States of
that it has been possible for
the Government in its efforts to meet
the fundamental credit of the
We have confidence in
We consider ourselves fortunate
America.
banks to lbnd substantial support to
The banks have responded during this
period as they always have in times of great need, having abiding faith in
the resources of this Nation and the character of its people.
But we reiterate the statement made in the resolutions adopted at our
last convention that, while unusual economic circumstances and necessary
efforts to relieve human suffering and deprivation, under emergency condi¬
tions, may justify unusual expenditures of public funds, they should not
be allowed to obscure the vital fact that a definite returns to a balanced
budget should be the prime consideration of a sound fiscal policy.
It is our belief that expenditures, Federal, State and local, should now be
the exigencies
We believe this is essential as an
assurance to business that our national finances are on firm foundations,
and that business and Industrial enterprise are justified in going ahead with
expansion of their activities, which is the surest method to create greater
employment for workers of
control.
all classes.
Hamilton National Bank, Chattanooga,
Vice-President National Bank Division, ViceBank Boston, Mass.
,
President National Shawmut
)*> Leonard P. Ayres, Chairman Economic Policy
dent Cleveland Trust Co., Cleveland, Ohio.
H. M. Chamberlain,
B.
Coles,
National Bank of
Theodore
P.
Commission, Vice-Presi¬
Vice-President State Bank Division, Vice-President
Walker Bank & Trust Co.,
Blaine
has instructed
direction of the Boston Clearing
me to present an invitation to
convention in Boston, Mass.
and has accommodations to care for your con¬
Boston is well situated
New England in
for
yourselves rather than have me explain, with its soft and hardwood trees
feeling the effect of the early fall.
The foliage Is exceptionally fine. The
towns and villages through New England, through its gates have produced
paths to all parts of this great land.
Follow these paths back to the
East, Boston bound for your convention in 1937.
President Fleming: We also have another gentlemen who would like to
vention, the details of which could be
the fall
worked out later.
produces the gorgeous pictures that you will have to come to see
Luis G. Legorreta, Director Banco Nacional
address the convention, Dr.
de Mexico.
Luis G.
Legorreta (Director, Banco Nacional
it is my duty,
ten minutes to
or
address you, and, third, I wish to be excised for my
Before saying a few words, to invite you to Mexico City,
temptation to express in a brief word the feeling I have
English.
poor
received from you all,
committee for the courtesy of granting us
courtesies that the Mexican delegation has
many
second, to thank the convention
five
de Mexico): As a foreigner
ladies and gentlemen, first, to thank you heartily for the
I cannot resist the
of the biggest
problem that we bankers have facing us.
[Mr. Legorreta then addressed the convention
invitation
marks along this
Mr. Legorreta:
is
a new
convention to
the
to
may
briefly on the banking
at the conclusion of which remarks, he extended an
situation in Mexico,
meet in
Mexico City in
1937.
His re¬
line follow:]
I wish to extend you an invitation from Mexico.
Mexico
The objection may
interest every one of you.
country, which will
It does not take more than two or
It is not far.
Although it
is an advantage, and it
invitation because there you could
business with complete freedom, and view it from the outside,
plain view of your own country—which sometimes is better.
from any place in the United States to Mexico.
be considered a foreign country, perhaps that
might be well if you could accept our
Augustine,
F.
First National Bank of Boston, Boston,
(the
the Association to hold its next
three days
Tenn., Chairman.
William
Jr.
Spencer
I am here this morning at the
Association which
House
communications for
I believe Mr. Spencer of Boston
convention.
be raised that it is far.
Resolutions Committee
Preston, President
E.
Charles
Mass.):
of the emergency.
brought more definitely under
Thomas R.
desires to address the
coordinate Federal, State and
Duplication and overlapping of taxes
taxation.
municipal
jjPresident Fleming: I am advised that we have two
invitations to hold our next convention.
Division, Vice-President First
Jr.,
Vice-President
I
assure
you
President
you
will find in Mexico much of brilliance and that we will
or
Fleming:
and with the heartiest desire to satisfy you.
I think we may certainly be assured whether it is
Mexico that we decide upon,
we
shall have
a
delightful place
Does the convention desire to give
in which to hold the next convention.
consideration to this matter at this time?
Portland, Portland, Ore.
Cramer
although in
receive you with our arms open
Boston
Salt Lake City, Utah.
Vice-President Trust
discuss your
State Secretaries
Section,
Association, Portland, Ore.
Frank R. Cur da, Vice-President American Institute of Banking, VicePresident City National Bank & Trust Co. of Chicago, Chicago, 111.
Rudolf S. Hecht, Chairman Public Education Commission, Chairman of
Board, Hibernia National Bank, New Orleans, La.
W. L. Hemingway, President Mercantile-Commerce Bank & Trust Co.,
Secretary Oregon Bankers
Thomas
R.
and I
Mr.
Preston:
of you know, to refer
now move
you
President, it has been the custom, as most
these invitations to the Administration Committee
that
these'
two very generous invitations be referred to
that committee with power to act.
[The motion was seconded by A. D.
of Commerce, Houston)
Simpson (President, National Bank
and Carried.]
-
St. Louis, Mo.
P. D. Houston, Chairman
Board American National
Noble
R.
Jones,
National Bank, St. Louis,
Fred I.
Bank Management Commission, Chairman of
Bank, Nashville, Tenn.
President
Savings Division, Savings Manager
Kent, Chairman Commerce
Bankers Trust Co., New
and Marine Commission, Director
York City.
Houston, Tex.
Charles H. Mylander, Chairman Committee on Taxation, Vice-President
Huntington National Bank, Columbus, Ohio
Francis M.
Law, President
First National Bank,
CJ$abns National Bank, Bowling Green, Ky.
Lewis E. Pierson, Chairman of Board, Irving Trust Co., New York City.
Andrew Price-, President National Bank of Commerce, Seattle, Wash.
Charles E. Spencer Jr., Vice-Pres. First National Bank, Boston, Mass.
Max. B. Nahm,
'
Vice-Pres.
Gurden Edwards, New
York City, Secretary.
Session" of Convention
Members Invited'to "Banking
First
of National Foreign
Mo.
Mr.
Dunkerley:
President
of the
I
have
National
their annual convention
18,
some
19 and 20, and extends
was
announcements.
an
Thomas,
invitation
to members of the American
Mr. Thomas says, "The Banking Session
such a successful feature of
and Houston will be of
Eugene P.
Foreign Trade Council, Inc., announces that
will be held at the Stevens Hotel, Chicago, Nov.
Bankers Association to attend.
which
Trade Council
the conventions held in New York
particular interest.
to the
question of the stabilization of
will be
presented to the Convention."
v
Owing to the attention directed
currencies, a special report on this
GENERAL
Committee
Report of
on Nominations—Newly
Officers
Elected
39
SESSION.
banking is carried
and the greater
The work of
(Mercantile-Commerce Bank & Trust Co., St. Louis,
W. L. Hemingway
Mo.), Chairman of Committee on Nominations: A regularly called meeting
of the Nominating Committee was held in the Borgia Room,
Hotel,
Sept.
are as
The unanimous recommendations
Francis
St.
Committee
follows:
For
St.
22.
For
Orval W.
Vice-President:
First
For
Smith, President
this
National Bank,
Boatmen's
Vice-President:
Second
Executive Vice-President,
Adams,
Salt Lake City, Utah.
Bank,
Bank of Brooklyn, Brooklyn, N. Y.
Stephen¬
the Secretary.
President Fleming:
Gentlemen of the Convention, you have heard the
report of the Nominating Committee.
Are there
any
President, I
Adams for First Vice-President, and Mr.
Mr.
Mo.):
Benson for Second
Vice-President.
President Fleming: You have
heard Mr.
Is there a
Hawes's motion.
second to it ?
regularly seconded by Mark M. Holmes, President,
Exchange National Bank, Olean, N. Y.; the motion was put to a vote and
[The motion
was
carried.]
•;
President Fleming:
Mr.
Dunkerly:
.V-
The ballot having been cast, I advise you now that
Mr. Smith has been elected your President for the ensuing year, Mr.
Adams
First Vice-President, and Mr. Benson your Second Vice-President.
your
The
Executive
that Arthur B.
Council announced,
following its organization meeting,
Taylor, President of the Lorain County Savings & Trust
Co. of Elyria, Ohio, had been re-elected Treasurer and that F. N.
Shepherd
had been re-named Executive Manager of the Association.
:
Remarks
'
I. '
.
President-Elect Tom
of
deeply impressed with the honor
have
you
Smith
K.
I
am
I
earnestly hope for the strength of mind and body which will justify your!
confidence in my ability to meet the obligations imposed upon me as leader
Presentation
As First Vice-President I have had
enthusiasm,
energy
Association.
It is
source
of personal satisfaction that by the provisions
member of
a
our
Administrative Committee
for another three years.
position have
a
However,
extended address
who have elected me to this
you
President-elect
Recog¬
nizing the value of the regional conferences which Mr. Fleming inaugurated
them during the next
It is my belief also
year.
that the problem of public relations, which deservedly received
consideration during the past year, merits our
energy
Harry
Mr.
extensive
to sustain a
sorely
has been
a
period
We have been fighting to keep our banks solvent,
local,
and
State
National
of extensive chahges.
one
and
ance
been
This
governments.
period
New banking legislation has been en¬
There have been fundamental alterations in the methods of issu¬
acted.
distribution
back
(Vice-President,
home
of
First
investment
securities.
Gigantic
banking
new
chartered banks, some to supplement their activities during the emer¬
members
and
of
the American Bankers
October 193i will
that almost overwhelmed that
their
heads,
never
banking legislation
was
introduced, some good,
atmosphere such
an
was
we
as
existed in 1931,
should have
a
years ago are
us.
giving place to
Consumer credit has grown to gigantic proportions.
about
perplexity
bewilderment.
and
During
these
crowded years we have been too busy to give them more than scant atten¬
tion.
It is time for
new seas
as we
in which
us
and take our bearings; we must chart these
to pause
we are
There is
to sail.
imperative need for research
an
face the opportunities and responsibilities of these
Often
we
think of research
as
an
changing times.
elusive pursuit in the realm of theory.
.But there'is another way of looking at it.
To
put
it in plain language,
research is the effort to fund out what we should do when we cannot keep
on
doing what
System
is
an
now
we
The study of the
being made by the Association's Committee
example of
early date
have done before.
a
on
Postal
Savings
sical strength
type of fact finding of great importance to us all.
During
At
an
official connection with the
my
Association I have given a great deal of time and thought to research, and
I am
now
prepared to
administration.
how
serve
this
in
announce
We must
now
it as one of the major objectives of my
take stock of
the interests of the depositor and
we
learn
in
our
banker in America.
every agency
support.
In
our
resources
and determine
rapidly changing business and economic order
studies
If we
are
must
can
best
Education must follow.
The
be conveyed and
explained to every
to make effective the results of our
of banking education must receive
bringing
we
borrower.
Research in itself, however, is not enough.
facts
financial
support
bankers must not feel that they are
to
our
these
moral and
our
educational
research,
financial
agencies,
offering donations out of their bank
funds, rather they must realize that they are making investments; which
will return dividends to themselves
nity.
individually and to the banking frater¬
Of all the branches of business,
banking offers the least tangible
product and is the least understood by the public.
result, much
a
indifferent,
some
as
Chairman of the
Federal
and courage to oppose, as well as propose, whose honesty
and integrity of purpose were unassailable, whose standing was equalled
by
few and excelled by none, and, most important, one who had the faculty
and habit of getting
results.
in good, old-fashioned common sense.
Did such
a man
exist and could he be found ?
If
we
found him, could he
be induced to accept the position as Chairman of the Federal Legislative
Committee, not for
one
but possibly until the crisis had passed?
year,
Could he give it the time and effort necessary to bring about the desired
We considered the availability of a number of men,
results?
and, with
regard for the many outstanding bankers, by
of elimination we unanimously decided to request Robert V.
a process
Fleming to
the appointment.
accept
He accepted, not with the idea of glorifying himself, not with the idea of
an
recognition.
or
These
already
were
his attain¬
among
His sole purpose was to serve not only the business in which he
ments.
was
important factor but also to serve his country, in a crisis, to the best
of his ability along a
line in which he was so admirably equipped to
How well he has succeeded is a matter of record.
serve.
Through his wise counsel,
occupies a plane higher than at any time in its history.
You have shown your appreciation of his efforts tty elevating him unani¬
mously to the highest position within the power of the American Bankers
Association to confer upon anyone, but even so you can never fully render
him the honor which is his for the tremendous service which he has
unto
I know from personal experience that during the past five years
rendered.
he has worked for long periods of time, day after day, and night after night,
until almost the hour of sunrise on the following day—all in the interests
of the banks of this country, its depositors, and borrowing customers, and
the exclusion of many personal, social and family matters.
to
The greatest
problem to me is not to understand what he has done but
how he has stood the strain physically and mentally and my only answer
one
The more intelligently
of the best
no
worries, except to find
more
In addition to all these duties he
banks in this country.
He has been at the head of
of the social and civic organizations of Washington and served
the board of directors of many of its
on
outstanding corporations.
wonder that the District of Columbia Bankers at Hot Springs,
Virginia in 1932, at whose meeting I was present, presented him with a
Is it any
testimonial designating
Columbia?
him as the outstanding banker in the District of
And that is not all.
of the Board of Trade of the
members
were
It
was my
pleasure to attend the meeting
District of Columbia at which
He is an exception which
proves the rule to the
Biblical quotation, "A man is not without honor save in his
among
thousand
a
present when he was designated the outstanding citizen of
the City of Washington.
Banking Studies
shall complete this study and submit it as a basis for the
we
future policy of the Association.
As
bad,
some
Legislative Committee who knew banking, from office boy to President,
who knew the inner workings of Government agencies, who had the phy¬
many
taking place with characteristic American speed, have
brought
naturally
keep
realized that banking legisla¬
we
man
runs
methods.
These changes,
men can
Those who lose
possibly the most important business before the American Bankers
job and it gave him
new
I
but mostly the result of impulse and not clear, ciam, deliberate thinking.
which to labor.
few short
a
And
intimate,
very
forget the Wave of pessimism
frantic appeals were at that time made to our legislators.
than 24 hours a day in
be in direct competition with
depended
Association.
those about them are losing theirs.
when
have been fundamental changes in underlying business practices; forms of
we
pleasure to
their heads would hope to regain their equilibrium through legislation and
financing
which
Philadelphia):
my
At such times few
meeting.
to it is that he knew his
upon
Bank,
National
Convention,
the Convention.
At this time it is
and Gentlemen.
There
gency, and some which appear to
the
of
I have been seclected for this job because of my
in Atlantic City in
institutions, quasi-governmental in character, have appeared, some to aid
our
Haas
President, Ladies
Gentlemen
others, the American Bankers Association has come through this crisis and
crumbling business structure, to bring financial assistance to
distressed
J.
and
a matter to present to
advice, untiring personal efforts, and ability to command the services of
The years of the novr passing depression have
of determined struggle.
Ladies
Smith:
We
attention.
continued
profession today is the adaptation of banking to a changing economic en¬
vironment.
President
first-hand information of the subject of which I shall speak.
convinced, however, that the most urgent problem confronting our
am
Retiring
to
Fleming
and enthusiasm the activities of the
Association in the fields of legislation, protection, taxation and insurance.
I
Service
represent not only the bankers who are here but also those bankers who are
receiving honors
I saall continue the worthy projects initiated by my predecessors.
shall likewise carry on with
Silver
Harry Haas of Philadelphia has
right to expect some announcement of the objectives of my
administration, if only in general outline.
last year, I hope to continue
three
which I base my hope for American banking, and
of
all due respect and
I realize that this is neither the time nor the place for an
from the incoming President.
today
us
These
All these may sound like the possessions of a superman but really result
opportunity to observe the char¬
and sincerity for the Presidency of the American Bankers
a
constitution he will be
our
I
of depression.
solve.
cannot
«5,
which has guided the Association during the past
Rovert V. Fleming has established high standards of intelligence,
year.
of
an
cooperation
Robert V.
of the Association during the coming year.
acter of the leadership
eras
problem in banking confronting
no
and
the American Bankers Association as it faces the coming year.
Association and that
fit to confer upon me.
seen
of prosperity, and
eras
there is
education,
the bulwaks upon
tion
of the responsibilities which go with this high office and I am
aaware
research,
these make up the platform upon which I urge your continued support of
In
■'
'
In accepting the Presidency of the American Bankers Association
fully
droughts,
convinced that
which
Those of you who were at the American Bankers Association convention
The ballot has been cast.
President Fleming:
of the burden.
During the past century, our chartered banking system has progressed
in spite of wars,
suppose
' ■■■K'--; f.' V-;
cast the ballot?
4:
Mr. Secretary, will you
of the Associa¬
who has been called upon
With continuation of this spirit, we cannot fail to advance.
Smith for Presi¬
of this convention cast the vote of the convention for Mr.
dent,
acknowledgment of the services of the officers,
has lacked the ability or the willingness to carry his share
that the nominations be closed and the Secretary
move
an
other nominations ?
Richard S. Hawes (Vice-President First National Bank, St. Louis,
Mr.
without
It has been my experience that no man
tion.
by a
its work
statement that I could make regarding
no
the committees, the professional staff, and the membership
are
This report is signed by the Chairman of the Committee and Mr.
son,
would be complete
am
Philip A. Benson, President Dime Savings
whole.
as a
association of this kind cannot be done by one or
few individuals, and
Mo.
State National
Utah
K.
Tom
President:
Louis,
of
bank
the greater will be the profit to the individual
on,
the prestige of banking
an
own
country
his own people and in his own family."
Now, Bob, I want to say to you that your success is not the result of
inheritance, or chance or luck, but it is the result of hard work, intelligently
directed, and with the full backing of your character.
Those who know
best know that while you have many years of useful life before you,
you
the American Bankers Association is going to continue to have the benefit
of your wise
to
you
advice and counsel, and the American Bankers
desire to present to you this chest of silver.
as a
testimonial
I want to read the
inscription to the members:
Presented to Robert V. Fleming by the American Bankers Association
their best regard and esteem and in recognition of his
with
outstanding
achievements
as
President, 1935-1936.
President Fleming:
upon
very
am
Mr. Hass it is difficult
on an occasion such as
this,
receiving this tribute on my endeavors for American banking, to say
much.
However, I assure you that from the bottom of
my
heart I
greateful to this Association for the honors which they have bestowed
upon
me
and for the opportunities they have given to
President-elect Smith:
of this convention.
me.
I understand that that concludes the
.
.
.
proceedings
Therefore, the Sixty-Second Annual Convention of the
American Bankers Association Is adjourned.
NATIONAL
BANK
American Bankers
Fourteenth Annual Meeting,
INDEX
Real Estate Loans for National
The
Bond
Account from
BANK
Banks, by Russell G. Smith—Page 40
Bank President's
a
Association
Held at San Francisco, Calif., Sept. 23, 1936
NATIONAL
TO
DIVISION
DIVISION
Resolution
Federal
Viewpoint, by
44
Andrew Price
47
Address of President C. W. Allendoerfer__
PROCEEDINGS.
Calling
Reserve
Items
Discontinuance
for
Banks
of
Certain
Handling
of
Non-Cash
by
Page
Collection
48
,.— .
Report of Committee
49
Nominations
on
Real Estate Loans for National Banks
By Russell G. Smith, Cashier Bank of America N. T. & S. A., San Francisco, Calif.
National bankers, as a group, neither
sibilities of increased real
appreciate the
estate lending
pos¬
realize their
nor
it is the commercial banking tradition which
effectively to prejudice
so
responsibility to provide their communities with mortgage
real estate loans.
money.
when
We need
is true!
of the
to
banks
make
to
$150,000,000,
secured by
loans
banks
to
but
their time
around
$7,500,000,000,
$1,340,000,000,
years,
deposit total
estate
real
17.8% of the time
or
time deposits of
by more than $6,000,000,000
National bankers have,
in the
period, increased their real estate loans but slightly
same
Under the law, National banks could
$1,000,000,000.
have
$4,500,000,000
their present time
real estate
invested in
mortgages
on
deposit basis; instead, the total of real
estate loans is less than
The time deposits in
National banks
are
of substantially
deposits in the 10,000 State
banks of the country, yet these
State banks, with $16,000,-
same
character
as
000,000 in time deposits, have approximately $7,500,000,000
in
mortgage loans.
time
This figure amounts to 46.8%
proportion shown for the National banks.
reason
for this
of identical funds, and
great
difference in
their
There exists no
the employment
it is particularly illogical at a time
when National banks are experiencing
of
of the
deposits of State banks, and is nearly three times the
valid
mounting deposits
difficulty in keeping
gainfully occupied.
As
matter
a
they serve, National banks should place a much larger per¬
estate
liberalization
loans by
passage
of
of
the
legal
restrictions
National banks has been
of character in banking
and
savings deposits,
National
of
in process
loans only in the
banks
that
loans of
to
a
when
our
with only a
no
banks
were
commercial
This
banks
small proportion of time deposits, it is slightly
of place in 1936 when time deposits make up 30% of the
deposit composition of our National banking system.
Yet
out
will provide a return sufficient
banks
estate
If
we
their savings deposits.
on
continue to
share in
the
savings
share in the real
must be prepared to
financing in which
employed.
we
to
are
these savings
may
properly be
accept the savings of the American people
it to them to put those funds to work in the proper
owe
channels of constructive activity.
just, but it is
necessary
conomically
Not only is this socially
It
necessary.
for two important reasons.
economically
is
First,
because
sav¬
ings represent capital accumulation, and it is out of capital
accumulation
that
should
Second, because banks must have the higher
come.
earning
money
reasonable rate of interest
Unless
the
National
return for the use of
see
mortgage
their
of
the
country
of these longer term investments if they are
power
to pay a
the
banks
of
on
the
savings deposits.
country
pay
a
fair
savings funds, they must be prepared
savings deposits gradually gravitate to build¬
leaving National banks Avith only commercial banking busi¬
Many
place in a commercial
truly
partly savings require longer term
are
permit the payment of interest
If National
deposits should seek
ing and loan associations and to strictly savings banks, thus
While this attitude was proper in 1913,
National
quarrel with the theory
commercial field, but it is equally clear
which
While
ness.
some
that the
had
will
real
feeling that real estate loans, being non¬
capital assets,
one
character which
selves of the
privilege of increased real estate lending.
institutions with both commercial
No
banks.
banking would
commercial
dwindle
is the case with the great majority
as
that banks having strictly commercial
National bankers, however, have been loath to avail them¬
banking system.
standpoint of the strictly com¬
since
on
the Federal Reserve Act in 1913.
has been due to a
commercial
month by month.
to
centage of their time deposits in mortgage loans.
the
from the
a
bankers still view
posits increase apace and their commercial loans
practical benefit to themselves and to the communities
Gradual
termed
bankers, regardless of the fact that their time de¬
of the people they
$1,500,000,000.
the time
the
be
Although this attitude is perfectly proper for banks whose
have increasd
past 21
during the
loans
estate
could
deposit composition is almost entirely commercial, it is out
of
In other words, while the
deposit total.
real estate, the
banks amounted
real
mercial
banks
great many National
a
of
hovering
amount
24 permitting
banking system,
with the time deposit total of Na¬
11.7%
or
Today,
National banks
over
after the passage
mortgage loans held by National
$1,285,000,000.
tional
to realize that this
the record
In 1915, a little more than a year
of
loans
at
Federal Reserve Act, with its Section
National
total
only glance
has operated
National bankers against
Although the time has long since passed
National
our
many
be
or
argue
good
that
thing,
the
serve
banking capacity.
such
it
majority of National banks
communities and
every
may
a
a
must be
are
transition
in
remembered
in small cities and
people of those communities in
Banks chartered solely for savings
solely for commercial business could not exist in small
cities
and
towns.
Consequently, some communities would
be deprived of banks.
Furthermore, to deny savings facili¬
ties to the smaller banks will force
and
borrow
from
absentee
people to deposit with
institutions
and
thus
deprive
41
NATIONAL BANK DIVISION.
the
of
communities
local
^from
supporting influence that comes
employment of local funds in local building and
the
purchase or
There is a constant demand for loans for the
of
construction
and there is
homes,
demand. will
indication that
every
proportions
increasing
steadily
assume
during the next several years.
The studies of the Federal
Housing Administration have
shown that there is a need
there is
to
building
residential
encourage
purchase
in
way
every
construction of homes in nearly every
or
This demand is and will con¬
community in the country.
tinue to be
local demand and should be supplied by local
a
Not
funds.
of
interests
it is equally necessary for the
banks
National
the
the welfare of the
for
only is this desirable
communities themselves, but
best
and
This means a well maintained demand for loans
possible.
the
those
serving
com¬
munities.
By far the greater proportion of these institu¬
tions have
a
Due
the
deposit composition made up partly of savings
They cannot
deposits.
basis
if
they
of
volume
continue to operate on a profitable
entirely
depend
to
are
economic
to
dearth
which
we
are
trusts in
familiar,
loans has been on the
and these loans are not likely
demand
of
all
In
great volume in the near future.
credit
commercial
for
has
banks taking on the aspects of
already resulted in many
investment
commrcial loans.
strictly commercial
to be available in any
the
on
with
factors
down grade for many years,
fact,
effort to keep their deposits gain¬
an
That the return on this class of investment
fully occupied.
retrogression and is definitely detrimental to the best
sents
of
interests
should
munities
This would improve earnings,
*
greatly increased service to the community.
in
Only by completely serving the deposit and credit needs
and
deposits,
manner,
amount of
savings
a
de¬
If National banks wish to place
posits is clearly evident.
their operations on a
permit the payment of
any
on
truly profitable basis, retain their sav¬
If National banks are not pre¬
in those communities.
ence
pared to do this, they may with confidence look forward
to
and
a
should
communities
sense
proper
they must be prepared to place a much larger pro¬
responsibility to their
of
Mortgage loans, properly made and serviced, are a highly
loans.
estate
An expansion
of real estate loans means increased earn¬
due to the fact that real estate
ings for National banks,
loans yield a
In
consistently high return
investment
from 3%
ranges
real estate mortgages
down,
secured
by homes may be had at rates
to
In period of high bond yields, interest rates on real
6%.
ranging from 6% to 8%.
estate loans have also been high,
Over
26-year period in one mortgage lending institution
a
a
The
loss ratio.
small
principal admitted
estate loans in the past has been lack of
for amortization of principal, by the introduction of the
insured mortgage loan, and
country
indicates
over
mortgage money consistently
better than
A
going rate for many years.
the
rates
time
survey
that
returns
of inter¬
the present
at
average
an
of
5V2%.
Nor is this excellent interest return dissipated by a high
While
ratio.
loss
comparative
real
for
bond
and
stock
data
loans,
estate
on
relative loss
the
commercial
is not available,
investments
due
unsound
estate loans
primarily to faulty methods of financing, such as
lending
appraisals,
unrealized
on
failing to give proper consideration
appreciation,
to the character and
financial condition of the borrower, and to other ill-advised
Most of the ills commonly charged to real estate
practices.
were
in
reality due to lack of a proper technique in
bankers will but mold the
If National
mortgage lending.
accumulated
of many years of mortgage lend¬
experience
ing by institutions specializing in this type of loan into
scientific
real
loan
estate
point of losses than either commercial loans
policy
to-fit
their
a
I
investments.
bond
loans
it is
and
be¬
my
have found that
stock and
or
this opinion is held
quite generally among bankers who have had long experi¬
mortgage lending.
in
ence
Thus
by changes in the Federal Re¬
Other asserted weaknesses of real
Act.
loans
est
In many
5%, and in others 8%
have, on the whole, been more satisfactory from the stand¬
but
liquidity, but this has been corrected by proper provisions
were
6%.
the interest rate on loans averaged close to
part of savings de¬
with
serve
jarying from 4^%
Such loans provide a consistently high rate of re¬
weakness of real
K
the funds invested.
on
period when the yield on bonds available for sound
a
lief, based on 24 years in banking, that real estate loans
satisfactory investment medium for a
posits.
turn
and
bankers actively
National
impel
aggressively to develop their savings deposits and their real
experience
portion of their savings deposits in mortgage loans.
Both enlightened
which will.
competitor institution
a
self-interest
their communities in the proper
serve
their exist¬
of their communities can National banks justify
has been the
interest
and
permit the payment of a reasonable rate of interest,
result
loans available is not sufficient to
of
proportion of such
employ a larger
deposits in real estate loans.
localities it has never dropped below
reasonable rate
banks
National
it.
to
develop the savings business of their com¬
should
and
adhering
banks
the
seek to
plus that obtainable from the small volume of commercial
ings
they will
Such a policy repre¬
accept from any one savings depositor.
question but that the Federal Government will
no
continue
for
housing throughout the country,
additional
much
for
of 2Y2% now permissible
below the already low maximum
and, in addition, have limited the amount which
business.
this
time deposits far
cut their interest rates on
have
enues,
considered
that,
see
we
from
real
angle,
every
estate loans are a desirable investment medium for National
It
banks.
banks are to derive
of
loan
with
of
ciples of mortgage lending.
evolved
principles,
over
trouble, it
in accordance
made
be
is
this type
essential
that
with sound prin¬
It is to a discussion of these
long period
a
in which
entirely apply, and if National
maximum of benefit from
a
minimum
a
loans
estate
real
of credit
however, a special field
is,
commercial practices do not
of years
by
many
institutions engaged in mortgage lending that the remainder
of this paper
First
individual
on
will be devoted.
the list comes the principle
of amortization,
re¬
needs, it will be possible for them to employ a much larger
quiring that every real estate loan belmade with provision
proportion of their savings deposits in mortgage loans, with
for
safety and with profit.
portance
The desirability of such a policy
wre
consider the problem
banks
of the
is at
now
once
evident when
confronts the National
During the past
country.
deposits of National
which
three
have increased nearly
banks
total
years
$9,500,-
000,000.
In the
000,000.
This decrease in loans, coupled with the tremen¬
dous
increase
same
in
National bankers
period, loans have decreased
deposits,
a
has placed
total of more than
at
the
$358,-
disposal
$9,850,000,000, most
of which, due to lack of demand for commercial credit,
gone
With
yield
into the investment account and into excess
these
on
excess
reserves
high-grade bonds at the lowest point in 30
National banks, in
an
has
reserves.
earning nothing, and with
earnings have suffered severely.
many
of
the
years,
The result has been that
effort to improve fading
rev¬
by means of regular payments.
liquidation
Had the
emphasized.
there
to
prior
period
is
mortgage
depression
the
doubt but that
no
foreclosures
rowers
would
not
would have had
a
have
a
loans
been
made
effort
to
retain
the
amortized,
large part of the depression
been
Many bor¬
necessary.
much larger equity in their prop¬
In addition,
it.
during
properly
erty and would therefore have made a much
ous
The im¬
of amortizing real estate loans cannot be over¬
a
more
steady
strenu¬
stream
of
instalment payments in the pre-depression years would (have
brought many real estate loans down to a point
in
line with
have
many
made
the decrease
possible
nearly
less
drastic foreclosure
policy
for
banks.
Unquestionably,
with
a
more
in real estate values, and would
one
of the great lessons of the depression
respect to real estate loans is the absolute necessity
42
of
BANKERS'
providing
instalment
for
the borrower's indebtedness.
steadily
payments
As
a
CONVENTION.
With regard to maturities, experience has shown
reduce
to
result, the flat loan has
making farm loans, short-term loans
practically disappeared and amortization is the watchword
ficial to the farmer and
of the day.
the long-term loans.
Not
only is
but it
amortization essential
in lending on
applies with equal force to loans
business and farm
of
Such loans should be paid off
property.
during the best earning
homes,
type
every
on
of the property, and a pro¬
years
of liquidation, based on the probable productive life
gram
of the property,
should be part and parcel of every loan on
income-producing real estate.
the amortization program
which
the
farm
when
years,
the
In
from
produces
should
be
In
year.
is high,
good
the rate
of
order that the farmer's
in
faster,
to
year
the level of farm prices
amortization
of farm loans,
case
should be based upon the income
farmer to get
be
then
renewed
Placing real
sirable from
estate loans
the
To the borrower
ward
to
the farmer when the lean years
carry
reduced
an
on
a
income.
is
borrower and
de¬
lender.
ownership with
steadily increasing
con¬
It makes possible a single long-term loan without
fidence.
the expense and uncertainty of renewals.
his
assume
expected
obligation
The borrower
with full understanding
of
can
what
is
of him and, further, he is encouraged to main¬
tain his loan in good standing by
the knowledge that every
possible,
as
and the
The maturity should be
In
fast
as
next
his
Through
the farmer's
income
no
indebtedness
permit
of
instead
account of varying yearly
sympathetic
a
will
may
and the
return period
crop
this way
as
year's
The reduced loan
and understanding
rela¬
tionship between the banker and the farmer it is possible
the benefits of long-term credit without incurring
disadvantages.
numerous
flexible
in
way
The short-term farm loan is
which
permits the bank greater lee¬
instrument
the
serving
without
farmer
sacrificing
essential
security.
Some may argue that real estate loans are made on real
of liquidation means looking for¬
program
eventual
instalment basis
both
viewpoint of
the
by set instalments which take
a
come.
quickly
as
the loan.
on
to
repeated.
process
is
possible
as
its
position to
out of debt
the farmer should be urged to apply as much of his
earnings
to extend
better
satisfactory to the bank than
more
arranged to coincide with the period of crop returns and
his period of prosperity.
a
that in
actually more bene¬
After all, it is to the advantage of the
short-term loan helps him do this.
indebtedness may be cut down as much as possible during
The bank will thus be in
are
estate
and
moral
that
risk
secondary considerations.
banks
which
and
credit
responsibility
are
This viewpoint may do for those
willing to acquire property by slow pur¬
are
chase, but for bankers who wish to make loans secured by
real
and
estate
desire
who
to
those
see
loans
schedule, moral risk and credit responsibility
out
pay
on
of para¬
are
monthly payment brings him that much closer to complete
mount
importance.
While the value of the property deter¬
ownership of his property.
mines
the
safety of
From the standpoint of the lender, amortization is doubly
desirable.
The instalments steadily reduce
'risk
the amount
of
the
bank's
the
security of the loan and to offset depreciation of the
in
the
property, serving both to
A revolving fund for loans is provided, and
property.
loans may be made from the
constant
ter to
to
increase
incoming payments.
supply of investment funds, banks
their communities
serve
supply
steady,
a
through being in
it
ment
loans provide
position
a
In the event
a
bank
to reduce its outstanding credit, instal¬
necessary
to
whom
look
we
to
the principal,
it is the bor¬
keep the loan in good stand¬
ing, and the loan should be made
basis that will
upon a
reasonably insure satisfactory performance of the contract.
Foreclosure
and
sale,
if conducted without loss, is
even
highly unsatisfactory method of collecting
In
With this
enabled bet¬
flow of credit, in place of alter¬
even
nating periods of plenty and paucity.
finds
are
new
rowers
ultimate
determining the amount which
a
loan.
be safely loaned
may
piece of real estate, two factors must be considered:
a
on
a
First, the present and probably future value of the property;
and, second,
the income of the borrower,
property, in the
of commercial
case
or
either
from
the
farm real estate, or
from other sources, in the case of the individual home-owner.
I
with
minimum
a
a
of
means
of
accomplishing this result
disturbance
to
the
The
community.
bank simply tightens up on new loans and lets the incom¬
ing payments
borrow
to
provide
a
reduce
the
at
the
total.
Federal
self-liquidating security.
loans furnish the bank with
of the
ness
If
Reserve
loan.
A
a
it
and
amortized
loans
In addition, amortized
monthly check
delinquent instalment
the loan to the attention of the bank for
action
is found necessary
Bank,
the sound¬
on
serves
to bring
possible corrective
greatly reduces the possibility of loss.
the
basis
on
which
the
loan
is
made.
Experience has
shov£|i conclusively that in making real estate loans the
time-hohored three
should
be
erty in judging
borrower that
as
a
moral
tion.
C's—Character, Capacity and Capital—
given equal
the desirability
we
and
weight with the value of the
of the loan.
to all
It is to
should
of
be
given full considera¬
judging the moral risk
and may be passed
rower
is
an
important item.
of age
to
arned income
as
years
assume
the
only
a
To allow
15-
means
or
a
of the bor¬
who
man
20-year
loan,
is
with
50
his
of payment, is unjust both
to the borrower and to the bank.
Loans must be paid
pay
off during its best earning
that home loans which
are
years, so
to be
also it is
paid out of earned income
be arranged to mature within the borrower's best
years.
under
necessary
productive
If the borrower is unable to handle the obligation
these conditions,
refuses the loan.
t*j
the bank does him
a
favor when it
loans,
for
the
an
indication of ability
earn over
maintenance
income
which
loans
the
income
the land at
of opinion.
value
than
the
given
any
of
the
farm
rather
In
than
order
a
of
to estimate
may
of
case
relatively
be
Income value
placed
be
may
appraisal is only a matter
an
over a
on
the
period of
aver¬
years
value
normal
income.
with any accuracy the present and
of
a
given
piece
of
real
estate,
a
appraisal must be made, not only of the property
itself, but of
every
its present
other factor which
or
future value.
premises, together with
and of
be
may
single year, for in this way it is possible to
estimate
probable future
careful
of
The income value should be based
better
get a
farm is
value which
time.
level of farm commodity prices
age
the
In
expenses.
the
the period of the loan is of the utmost
fairly well determined while
some
can
in any way influ¬
A detailed inspection of
knowledge of the district
property values therein, may form the basis for
a
fairly good estimate of present value; but with loan maturi¬
ties
stretching out
over
10,
15
or
20 years,
other factors
into play which must be given full consideration if the
come
loan is to be properly protected until
maturity.
There is the question of depreciation in value due to
age
out
of income, and just as it is necessary that business property
providing
greater importance
the
age
as
importance, for experience has shown that in the
farm
there
making long-term real estate loans the
to
farm
expected to
regard to the credit risk,
further
In
of
ence
several factors which must be taken into consideration.
In
addition
case
with¬
out
of great importance—value as an ultimate
properly service the loan and amortize the principal, in
over
us,
are
comment.
to
the
look for payment, and his standing
must
credit risk
The importance of correctly
is well known
prop¬
are
guaranty of safety, and income
upon
The second principle of sound real estate lending relates
to
Both factors
and
usage.
tent and
While such depreciation
construction and severity of usage.
may
of
is inevitable,
its
ex¬
rapidity is largely conditioned by the quality of
Construction standards
be gauged in the appraisal process, and the character
the
guide
present
as
or
to what
depreciation
potential
to
factor
occupants
expect in
for
furnishes
a
reliable
the matter of usage.
multi-family
dwellings
and
The
com-
43
NATIONAL BANK DIVISION.
mercial buildings of every
and
description as well as for small
the
added consideration due to the possi¬
factor must be given
land through ex¬
bility of depreciation in the quality of the
haustion
and
and
of
value
piece
a
property
of
the appraiser
Hence,
is
He must be able to judge whether
district is on the way up or down,
"dynamic."
He
judge
must
as
whether it is "static"
foresee
to
possible
He must
shifts in population from
such as
city and determine if the various districts,
of the
one
layout
He must be able to analyze the
district to another.
industrial, commercial, financial and residential, are
likely
if there is a probability of further
to remain unchanged or
movenient which would have an effect on property values
Other obsolescence factors
the district under consideration.
include
value due to changes in economic or
use
of
eventualities
these
Next
his
must exercise
in value
through
a
general depression in business
line under consideration.
over-building in the
through
the first factor it is interesting to note
with
In connection
past experience of
many
institutions well versed in
mortgage lending indicates that loans made in depression
due
fact that in good times there is
over-value properties and to
to the other factors
of
depression
order
of
credit
and
the
appraisals
other factors, such
day, and
receive their just
of the
level and for
for
the
and
Proper pro¬
changes in
eco¬
depends upon accurately judging the point
business cycle at the time
both
the
are
income
as
due.
against depreciated values due to
.allowances
of
give insufficient consideration
ultra-consirvative
loans
nomic conditions
tendency to
a
a
of appraisal and making
estate price
inflated real
possible
probable trend of values during the life
against to a large extent by care in the selection of loans
for
new
construction.
for
new
building of
*In judging the desirability of loans
any
be
character, consideration must
given to the actual need for the new construction and to its
commercial
on
loans already
It is important
would be
in
Third
is
on
the list of sound principles
the policy
in
the
desirability of
dential,
may
the
new
of
case
bank's
of
security carry those less desirable.
The experience of
long period
of years indicates
lenders
mortgage
and
the
of property are far more satis¬
clearly that certain types
A
by
property,
in
reduced
reliable guide as
watching carefully
to the
the
trend
of
properties similar to the one under
appraising the property, in determining the proper
terms of
record of the property
payment, the performance
classification in which the security
and
belongs should be taken
property classifications showing a
other
of the property has been made
factors
proper
In
allowances made.
consideration
way
their own
and the bank will be in a position to offer more
able terms
on
this
high proportion of
trouble and foreclosure items can be made to pay
way,
ratio
appraised value, in fixing the interest rate and
of loan to
favor¬
properties showing a good performance rec¬
ord, with resultant benefit to the
bank and to the com¬
munity.
While
of
detailed analysis of the
a
comparative desirability
of mortgage security is not feasible at
the many types
general observations in this regard may be
this time, a few
of interest.
Experience has shown clearly that single and two-family
dwellings
the most desirable types of mortgage
are
Not only do they
furnish
a
closed
sible
loss record on fore¬
They
satisfactory.
very
are
loans, usually under $5,000, and, as such, make pos¬
small
the
likewise
is
property
security.
relatively small proportion of
trouble and foreclosure items, but the
This is important, for
wide diversification of risk.
a
experience of many mortgage lenders indicates
that many small loans are
much
to
clearly
far better than a few large ones.
standpoint of both safety of principal and satis¬
factory performance of contract, 40 loans
of $5,000 each are
preferred over one loan of $200,000.
be
field of real estate financing the
In the
small home owner is surely
coming into his own, for his performance record shows that
he is
definitely
a
preferred risk.
favorable record,
and the
risk
the
affecting
the
present
and
and in, making loans upon these types
both the relation to the loamto appraised value
interest rate to be paid should
inherent
in
the
Jreflect
the greater
By thus tailing cognizance of
probabilities
loss
varying
loan.
in
each!-,type
of mortgage
security, banks will be enabled to maintain their real estate
loaning operations on a more profitable basis.
Thus
careful appraisal
and this knowl¬
lending activities.
edge may be put to good use in future
family dwellings such as apartments and hotels do not show
construction, either commercial or resi¬
be had
various
a
brought into being in a
consideration.
a
over
factory than others as mortgage security,
In
It is no part
practice to make the more desirable types
of sound mortgage
Generally speaking, special purpose buildings and multi-
income
debtors.
rentals and vacancies in
After
in mortgage lending
each type of property offered as
of making
security stand by itself and pay its own way.
ing the value of properties already under fiiortgage to the
to
the borrower's
capacity.
of property,
and,
which
standing today had the initial arrange¬
good
payment been more in line with
for
ments
a
rentals
real estate loans long since foreclosed
are many
community already well supplied can result only in decreas¬
bank,
the property
meeting his pay¬
that this be done, for undoubtedly
New
held by the bank.
residential property
or
consideration must be
keep it in good repair, in addition to
there
•
probable effect
the
the loan is
In determining the
quickly.
monthly instalment,
of the
From the
loan.
the
Depreciation in value due to over-building may be insured
capacity.
for if it is too large
of the borrower,
ments.
entering into the loan, while in the case
responsibility,
tection
This is undoubtedly
periods of relative prosperity.
the
to
loan and the amortiza¬
given to the borrower's ability to pay taxes on
periods are far more satisfactory in every way than loans
made in
of the property, it is
or
should bear a proper relation to
The monthly payment
amount
best
to pay off within the
be scaled to the borrower's
tion program
income
In as much as the
into
factors is the possibility
of depreciation
the list
on
of loss
that
Upon
of prophecy.
powers
or
the appraiser
re¬
mechani¬
lack of adaptibility to diversified use.
cal processes;
all
style and layout of buildings;
changes in the
duction in
in
as
of the borrower
years
important that both the size of the
possibility of
to the
changes in building restrictions and zoning laws.
be able
factor.
obsolescence
an
use
be prepared to prophesy con¬
must
cerning many things.
or
its
estimate
to
which tends to reduce the
influence
any
effort made
an
Obsolescence is a reduction in use
probable proportions.
value,
value due to obsolescence
of depreciation in
considered
be
must
earning
and places
injurious to the borrower,
is
disadvantage from the start.
a
likely to become delinquent
importance.
Possibility
him at
crop
of the farmer are
rotation, irrigation facilities, and the skill
of prime
of crops,
diversity
Here
misuse.
other
or
this
by farm real estate,
secured
loans
of
case
credit
Excessive
loan should be amortized so
potential occupants.
In
a
of the present
be estimated from the character
homes may
purely
far
we
have
technical
sidered from
discussed real
viewpoint
this angle,
of
estate loans
bank
from
management.
it is clear that real
the
Con¬
estate loans,
probable future value have been weighed and allowed for,
properly made, are a desirable investment medium for Na¬
consideration must also be given to the relationship of the
tional banks,
loan to the income and net worth of the borrower.
tively low loss ratio.
rower
A bor¬
whose only assets are his income and his prospective
an
excellent interest return, and a rela¬
However, there is another aspect to this question of real
equity in the property should not be allowed to assume an
estate loans
obligation which is out of line with his total responsibility.
every
with
and
banker.
one
which is worthy
of consideration by
Not only are real estate loans desirable as a
BANKERS' CONVENTION.
44
highly satisfactory
of
source
revenue,
relations.
greatly
their field
service and
of
tions, j'eal
the case,
a
The able addresses
convention of Lindsay Brad-
at this
leave little to be added to
and
problems of
The very fact
four
speakers
banks investment portfolio.
a
bank investments
uppermost in the minds of bankers
are
Those of
hear these addresses
Indeed, the facts
who
you
fortunate enough to
were
reports will recall that they are in
or
substantial agreement as to
lished beyond
selected
extent, is convincing evidence that
an
the
reason
for this state of affairs.
which they proceed have been estab-
on
question by all who have studied the subject.
In its summary of facts,
the able report of the Commission
Study of the Bank Structure of the New York, State
Bankers Association,
published last
year,
said:
Whatever the theory of commercial banking may be, we face an accom-
piished fact,
a
practical condition where true self-liquidating commercial
loans have dwindled to small proportions and capital assets have become
the predominant part of bank
The extent to which this change
Policy
Commission.
has occurred is interest-
In
its
the
showing
reports
distribution of earning*assets of commercial banks
this
since 1900,
report shows that at that time and continuing with
only minor fluctuations until 1925, commercial loans constituted
banks,
approximately 50% of the
compared with
as
in investments.
What
an average
commercial
of
assets
of approximately 25%
marked contrast with the present
a
condition, when only 19% of assets in commercial banks are
in loans
compared with 60% in investments.
as
r
.
As
SO
was
well said
be
well
cannot
for
friend
a
public rela¬
By
overlooked.
will
completely
more
of those com¬
part
a
the benefits, not only of an excel¬
reap
Bank President's Viewpoint
Bank of Commerce, Seattle, Wash.
true in the small bank as in the large one.
The fact that
men's time and thoughts are absorbed with many things in
small banks does not relieve them of this responsibility,
By the same token, the President of a large bank has the
responsibility even though the task of supervision of
its bond account is delegated to a committee,
An outstanding necessity of banks today is for more
thoroughly trained investment men in their official organizations. These men should be selected for their sound,
mature judgment as >vell as their knowledge of investment
securities. It is desirable that they> be»officers of equal rank
and standing in the organization as those handling loans.
Too often, it seems to me, banks which have splendid staffs
of loan officers rest for their investment decisions upon men
who are not well rounded in principles of sound banking as
well as sound investment procedure. Obviously, every
bank cannot have separately constituted bond investment
In such
divisions.
cases,
it is the duty of the individual
charged with the responsibility for making bond investments
,
..
,
,
,
to endeavor so to equip himself by study and application
portfolios.
ingly developed in figures given out yesterday by the Economic
make
to
building good
same
program
this subject, and that the reports have de-
on
everywhere.
discussion of the policy, procedure
a
that those in charge of the
veloped it to such
for
committees and commissions,
of the Association's
reports
and
in
lent investment medium, but of increased goodwill as well.
By Andrew Price, President National
ford, J. Harvey Wilkinson and Mr. Eichler, and the various
a
loans
become
munities and
and with every loan the bank has the opportunity
The Bond Account From
factor
estate
will
banks
larger group than would otherwise be
much
a
services
As
supplying their communities with mortgage money, National
strengthen their
The bank's facilities are made
standing in the community.
available to
other
institution.
the
healthy public
Through increased real estate lending, banks can
extend
merchandise
to
also offer
but they
admirable instrument for building sound,
an
as to qualify for this task.
It is a responsibility, which in
fa^t as well as in law rests upon the banker himself. He
cannot successfully avoid this by delegation to others,
especially those outside his bank.
Bor *he rca-sons I have previously stated, I feel it would
unduly labor the question for me to undertake to restate
many of the points developed by other speakers at this convention. For brevity's sake, I gladly subscribe in general
f° ^r* Bradford s basic philosophies as outlined by him
yesterday, which were:
J- Confine fheportfoUo to high-grade credits.
2. Limit the maturity risk.
by the New York State Bankers Asso-
3. Be satisfied witn the going rate of return on high-grade credits,
ciation in its study Of this subject:
4. Do not put emphasis on increased earnings from capital gains in the
portfolio.
In fact
one
With
conclusion from recent developments seems inevitable.
the growmg volume of cap.tal assets and long-term assets the element
r
As
long
as
assets of
prices
of declining prices and depressions is
are
rising and business is growing, banks
must be
These peri-
expected, and the bank that fails to recognize this
fact in the selection of its assets does not weather the storms.
contingency risk and-speculation.
The bank that fails to recognize
this fact in the selection of
its assets does not weather the storms.
This
bank is
an
organism, not
Any disturbance in
or
c
less the whole.
An
mere
reason
for this is that a
mechanical combination.
of it will derange
error
or
vitiate
bank's management, and
but the evil
the combination.
branches
of
condition.
a
If
may
errors
ac-
in
a
the product of the two is not their
be raised to
a very
high
power
by
Only by the Jiarmonious operation of all
bank's
a
more
in the conduct of its bond
produces fruits which combine with other
count
sum,
a
one part
The
business
bank has
a
can
it
maintain
a
healthy
large part of its investments in
mortgages or in collateral loans on securities, then obviously
its management must
keep this fact well in mind in select-
ing its bond investments.
The
affairs
should
taken
well
be
as
as
to be able to determine how many
bought and how great
,
.
.
,
OP
:
rather amplify, these points
..
a
risk
can
to maturities and kinds selected.
..
.
ample,
the
that for 25
Economic
years
Policy
bonds
reasonably be
This is equally
a
,
,1
given time.
Com mission's
For
ex-
shows
report
commercial banks successfully operated with
approximately 25% of their assets in investments.
But today,
Let
us
to that portion of our assets
program
with confidence that it is sound in principle and
experience.
j
IhlS can be hedged
*h6 proper timing 01 their application.
proven
when approximately 60% of
assets are in investments, it seems to me we may well
by
our
ponder
with the proprieties of applying the formula to this full
In other words, what we should do with
amount.
mately 35 % of
tainty.
over
As to all
our
or a
lies in the twilight
approxiof
uncer-
substantial part of the present
excess
our assets
normal investment funds, it
zone
seems
to
me
they
should be confined to investments of such maturities and
quality that
we can carry
risk to ourselves
or
them to maturity Vithout undue
restriction of
commercial banking
our
functions.
This is to
a
large extent, of
course, a
and the present low rates lend
banker must therefore know the rest of his bank's
so
I Would, however, qualify,
^th the opinion that in part they rest for their success Upon
apply Mr. Bradford's
principle does not apply to the selection of bonds
alone but to assets in general.
t0 mtur8 serlally over a ,imited
by the relative amount invested at
/
There appears no way to avoid fluctuations in prices or to
eliminate the element of
ten(fc
period
with
can carry on
secondary quality and perhaps make large profits, but the day of
reverses
InTest t„e portfollo s0 tha( i{
appreciated.
now
reckoning always comes when the economic trend changes.
odic
Con(lne the portfolio t0 securities promptly marketable,
6
The extent to which capital values may
quality is of supreme importance.
shrink in periods
g
of
no
cepting "the going rate of return
.
question of timing,
great satisfaction in
on
ac-
high-grade credits"
for all of one's investment funds.
"You can't
said
a
run
good banker.
a
bank successfully
But who would
on
bond profits,"
agree
with him when
45
NATIONAL BANK DIVISION.
lie said, "If the bond account shows
a
running off in income,
I prod my committee into action and get that idle money
working, for the only
way
I
keep income
can
in
up
a
fading
interest market is to buy more (bonds) at a less income rate" ?
During the past three
market has gone
if this
only
banker
same
were
serving
he would temper his remarks.
wisest and most
comes a
No
be
can
will
keep
income is apt
up
But he
do certain things which
errors
of judgment in this
The most important of these is to be constantly
respect.
alert to the three indicators of the financial system:
the rate of
restricted
discount, and the foreign exchanges.
by artificial
economic forces and
orators of the present
Prices,
When
un¬
these register the operation of
means,
point to the time to buy and time to
sell bonds.
Some banks
employed
bonds.
years
if not
Exchange rates
are
now
artificially
trolled by stabilization funds or other restrictions
tically
this
civilized country, and little
every
Discount rates here and
source.
can
in
con¬
prac¬
be learned from
abroad
likewise
are
largely influenced by governmental action.
But
prices
present time, especially those making up the cost of living.
For
these, like the steam
gauge
on
a
boiler, indicate the
temper and pressure of public opinion with respect to the
currency system
In the past
at
a
as
to value
future
Bonds, being contracts to
date, not dollars-wrorth,
are
according to the purchasing
powder
of the dollar.
There is
indicator which is apt to better disclose this
present
trend should it eventuate than the index of the cost of
Under present conditions most
many
or
institutions
are
individuals with
living.
money
uncertainty
the value of the dollar in which these debts will be paid
distant future.
as
And if the cost of living shows a strong ten¬
increased.
In
spite of what has been done with coinage laws, prices
as
they always have been fixed in the world
And here in passing let
markets, in terms of gold.
the personal opinion that
one
me ex¬
of the greatest tasks
national leaders is
which lies ahead of
our
plan which will
again make all contracts gold contracts
once
trade, obviously it is desirable that such
tion of
our
culties.
It
of
simple task, but
a
to
such stabilization,
as
on
with
me
upon
probably
Kemmerer has
so
our
a
plan be under¬
it rests the solu¬
this
way
to
the gold bullion standard,
well said, "the way to stabilize is
type of international leadership not excepting the field of
world peace.
Indeed, it would constitute the greatest single
contribution to peace.
to make
We
war
all
on
credit.
vanced to
Nations, like individuals,
are
slow
with their good customers.
know
legislation,
arrest
class
Then the
The
cure
you
bonds
of
next
the
as
will
cycle
supply of good lower priced
In
Unsound
paralyze enterprise and
appraising various plans which
our
social and economic ills, I
to remember what William
of the Science of
can
are
ad¬
think it well
Graham Sumner, then Professor
Society at Yale University, said in 1896:
The fashion has grown up among
politicians and stufnp orators of using
assertions about prosperity and distress as arguments
for their purpose and
parties come before the public with prosperity policies.
seems
close at hand when
first
to
class
its
ratings.
lower class
when the
paper
Surely memories of 1929 to 1933
course.
too fresh in the
or
be unto the banker who finds him¬
woe
considerable amount of such
runs
only
obtainable under it, but
entitled
be
for this is not
cheaper bonds will in truth be second
self with any
minds of most of
us
to find
in that
us
position.
But for those of
us
who may forget or
have experienced the devastations of a
rate bond
of this
rence
those too
young
depreciated
to
corpor-
portfolio, it is likely well enough that attempts
have been made to throw up
legal barriers against
a recur¬
I refer to the regulations respect¬
experience.
the
Comptroller's interpretative ruling with respect to this
section dated Feb.
15, 1936, and the Comptroller's circular
address delivered
containing excerpts from his
mento
on
most
a
These introduce
May 2, 1936.
important bearing
investment
upon
a new
in
Sacra¬
factor which
the formulation of
an
policy.
This law puts
tipon the Comptroller of the Currency a
duty to prescribe limitations and restrictions with respect
the securities which
to
purchase for its
of
own
national banking association may
a
account, and leaves to him the duty
defining the term "investment securities"
as
he
by
may
regulation prescribe.
State banks, members of
subject to the
This
was
same
a
Comptroller.
should
the Federal Reserve System,
big assignment which Congress
Comptroller's regulations, it
have been directed to him in
not
Like certain other
itself.
the pressure
are
limitations and conditions.
gave
to the
The discussion and controversy which have
resulted from the
seems
to me,
his endeavor
to
but rather toward the law
banking legislation adopted under
of conditions prevailing in 1933 and even in
1935, the full effects and consequences of such broad author¬
ity
contained in this law
as
were
evidently not envisioned
but it
They have pro¬
seems
I do not disagree with the purpose of the latsr,
to
me
inevitably places
that the law is just not
upon
which should be and
ciple
were
that
ous
workable.
It
examiners the burden of decisions
can
of officers and boards of
only properly be the responsibility
If the
banks.
same
general prin¬
applied to loans to be made by banks, it is obvi¬
utterly impossible condition would result.
an
Soon after the
effective, it
was
Comptroller's circular of Feb. 15 became
evident that rating bureaus could not
ap¬
propriately be the final judges of bond investments for banks.
Any successful investor, and rating bureaus themselves, will
testify that their ratings must of necessity reflect primarily
the
past.
of
are
market prices alone the criterion
bonds
can
be judged.
thought today attacks the safety of
too
high grade bonds, not
on
low, but rather that they
when
a
Nor
the safety of
which
other
can't legislate good times.
the other hand,
few
a
small part of
even a
reason
Indeed, the time
grade securities, and
overwhelming ownership
Success in this would far transcend any other
to stabilize."
until only
disposed, the time is fast passing
so
be considered for
bond investments.
s
by Congress.
this Nation to lead the
on
were
a
present domestic and international trade diffi¬
seems
gold it is incumbent
and
work out
conjunction with the other principal nations of the
This is not
world.
to
On account of its bearing upon foreign
in law and in fact.
taken in
are
can
fulfill the mandate of the law,
still fixed
press
plan
bonds decreases.
to
in the
dency to advance rapidly, this uncertainty will be further
are
of these
many
because the risks increase
and
unwilling to purchase long-term bonds,
otherwise lend for long periods, due to
course,
because of the decreasing returns
dollars
pay
bound to fluctuate
Indeed, markets tend to discount such trends.
no
have profita'
rated triple A and only due to the depression
has
and the credit structure of the country.
fluctuations in the value of commodities have
caused great crises.
years
ing bond investments contained in Section 5136, U.S.R.S.,
particularly important indicators at the
are
Of
ago
bank
destroyed by laws which hamper the free action qf
economic forces.
during the past three
part of their funds in the field of low-priced
a
For those who
are
the value of two of these indicators is reduced
The
prosperity where they need to see it for
see
dropped back into lower classifications.
*"
At present
day
of their argument.
purpose
a
can
greatly reduce the hazards of
politicians or
stump orators have any devices at their control for making it so?
when this
100% successful in properly timing
purchases and sales.
and thrift of its population, does any sane man suppose that
to avoid future loss.
or
future headache.
many a
banker
time when the
profitable procedure is to stand aside, to
To buy more bonds at a less rate to
cause
that
say
his investment committee
on
There
forego current income for future gain
to
But I dare
one way—up.
its
If this country* with
country prosperous."
"making the
population, its resources, is not prosperous by the intelligence, industry
this has worked well, for the
years
for
grams
a
the
are
are
and
priced
And yet
necessity of making
given issue of corporate bonds
under the terms of the Act and
issued under it,
that they
priced too high.
bank examiner is faced with the
decision with respect to a
our government
score
by
A large school
regulations which have been
he naturally is influenced by both the rat¬
ing bureaus' appraisals and the price of the bonds in the
market, generally interpreting a low price as an indication
that
a
bond lacks in
quality.
Having reached the conslu-
46
BANKERS'
CONVENTION.
sion that the bond is therefore speculative and not eligible,*
he must report the bond under the caption of "bonds un-
government
lawfully acquired."
banks.
No honest board of directors
welcomes the classification
acts
or
of bank officers
group
implication of
or
has been released in
is little wonder there is such general
law.
I
satisfied
am
that
the
complaint
Not
will
the deposits which they created be «withdrawn from the
There
cost of borrowing down.
other
imposed with the
man,
responsibilities of that office, would find it difficult to define
the
"investment
term
with
securities"
advance.
satisfaction to all concerned than he has done.
There is another
This is bound to exercise a re-
The
is true of
same
present vast holding of
our
gold, which continues to increase.
why I find myself in disagreement
reason
their command to keep the
power at
use every
straining influence on'other tendencies for interest rates to
greater
any
retired by actual payment
It is characteristic of governments under such circumstances to
this Act.
,
are
banks.
Comptroller used his best
judgment in promulgating the regulations he has issued under
I also think any
deposits in our
As long as banks continue to hold the government
until the bonds themselves
to this
as
as
remain in the banking system and will press for use.
being "unlawful" where they have exercised reasonable
precaution and followed their best sound judgment.
vast amount of
a
today
appears
obligations which created these credits, these deposits will
of their
any
banking system
our
credit, which
But if for
heavy withdrawl of foreign gold should
with Section 5136 of the Banking Act as it stands today,
mists
It
any reason a
most econo-
occur,
could happen to us.
offends
fundamental
a
principle of
constitutional
our
form of government; namely, it transfers to an administrative officer
It is
one
of the best things which
of much discussion, not only in banking circles but by the
belief
my
this would likely be
The holdings of government bonds by banks is a subject
charged with the duty of enforcing the law the
right reserved to Congress to make laws.
agree
public at large.
Not infrequently the issues presented by
that the bankers could well direct their particular efforts to
government expenditures beyond current income are con-
getting the Act itself
fused with the
so
modified
leave the responsibility
as
to make it workable and
where it belongs—with
the banks
themselves.
Right here let
The other powers of the Comptroller, the Federal Reserve
eral
Board and the Federal Deposit Insurance Corporation Board
sufficiently broad,
are
could certainly be made
or
so,
indulged in which
tors, such
analysis,
cases
"the
the soundness of
so
of U.
responsibility
consider for
us
knew
a
terest rate, we
summarily.
for
In final
maintaining
moment the
causes
the
high
investments
As far
manage-
subject of interest.
If
in
would be in much better position to judge
prices/
bonds.
were
would
no
rate
present
true
rapidly than it
more
to
The
If this
as a
was
even
at present low levels.
enterprise.
that
of its
no
recorded instance where the
agencies has directly exercised
the banks
as a
whole
or upon any
Certainly
as a
bank
7% allot-
a
It probably can be justly claimed, how-
result of the policies and programs adopted by
that this has brought about
recovery,
a
condition where
banks, by force of necessity of keeping their funds employed
at
But
a
minimum risk, have had to turn to the government
bond market.
Up to this time I believe that, irrespective of
capital beyond the needs
Until within the past few months
at
be found.
any
upon
par
nearly riskless
are as
the Government in its efforts to set in motion the forces of
not
capital accumulating
needed to extend enterprise, it
not the result of accumulations of
of
borrowers,
favors
result of
or
this contention.
present low interest rates tructure is
our
as can
that they
reason
particular to buy its securities.
ever,
doubt be advantageous and would lend confidence
long-term commitments
it is evident that
Banks bought these bonds
ment on subscriptions to the last Treasury offering belies
This
applies especially to government bonds and other so-called
money
banks because of their present holdings
I know there is
as
coercion
any
the fluctuations of the in-
what might reasonably be expected as to bond
lenders.
our
Government bonds.
S.
Government
about what
more
public
maturity and for the
with
ment of individual banks."
Let
continuing Fed-
a
indiscriminate
countenance
because they had confidence they would be repaid at
standards of quality for bank assets rests upon
we
do I
apt to result in loss to the deposi-
be
real
I do not condone
me say
nor
dealt
are
can
deficit,
spending, but I seriously doubt the wisdom of impugning
that if in any particular case investment practices or policies
are
question of the fundamental soundness of the
credit of the United States of America,
opinions
as
personal
our
to the proprieties of the use to which large por-
all
tions of these funds have been put, the banks of this Nation
know that production decreased for the greater part of the
have been justified in their investment in government bonds,
past decade.
We
are
we
all equally well aware that during the
past several years capital has been consumed at
a
rate
In appraising the risks from this point forward
it is
more
rapid than it has been accumulated.
One
our
only conclude, therefore, that the present low
can
interest rate is the result of the large amount of credit
ated
by government borrowing.
fluctuation
It
have experienced does not
as
correspond to the
produce this rate
we
of interest.
If this be true, then the effects of it are not
subject
congratulation.
for
than that
rate
now
not to the bankers
try
as a
now a
whole:
or
real benefit,
just
It would give tone to the
It would be
depositors who have
It
vital
prospects
seen
quartered during the past four
their inter-
seems
est
been
force
can
proven.
well
lose
of
that
will
we
harnessed.
Whether
this
Somewhat dependent upon how
course
your
see
For my part,
it
seems
to
me
continued low interest rates for
are
bright
as
a
dollar
on
am
as
great
corporation
certain: First, that
you answer
that
corollary questions,
time to
come.
There
no
depositor will
the government bonds held by
-
our
banks
,
more to worry
about
and value of their other bond
holdings, which in the aggregate for all reporting
banks
amount to approximately 50% of their total bond invest-
natural
the likelihood is in favor of
some
our resources,
or
those of the United States of
Second, that bankers have infinitely
early
an
viewpoint with respect to the
of the bond market and its
see
bankers and citizens to
other customer, firm
today.
Never before in history has inter-
kept harnessed and under control remains to be
question will depend
future
any
with respect to the Soundness
unlikely, however,
so
be
would to
Of two things I
And
years.
concern.
change in interest rates.
as
we
sound fiscal
America.
banking, in which the entire Nation found in April, 1933,
a
duty
a
whose real worth cannot be seriously questioned and whose
market,
last, but not least, it would greatly reduce the dangers
it had
our
resources
upon to meet
To the extent that
continued support, consistent with
as we
benefit to small
money
a
our
its
or conserve
again be called
is being made in the direction of
policy, I conceive it is
a
lend
a
may
great national emergency.
higher
contrary,
prove a
a
against the time that it
progress
creditor class alone, but to the coun-
nor
dull and lifeless affair.
halved
the
prevailing would
investors and savings
est
On
bankers,
largest and strongest customer, to set its house in order,
policy will be to waste its substance
ere-
normal action of the forces which should
as
task to consider the progress which is made by this,
to balance its budget, and for us to determine whether its
clear that the
seems
our
ments.
-
As to market fluctuations, occasioned by changes of interest rates and other investment hazards, it is obvious sound
banking requires the establishment of
establish
reserves
observation
that
against
banks,
other
reserves
just
contingencies.
both large
recognize the necessity of doing this,
and small,
even
It
as
is
we
my
generally
though it results
47
NATIONAL BANK DIVISION.
in serious reductions to their
earnings, and
In closing,
remote.
as
alreadyjjreatly reduced current
though they
even
may
regard this contingency
I would like Jo^quote once more
Sumner, who in 1879 listed the^qualities^for a great
from
President
of
C.
W.
of
Enactment
of
session
first
such
vital
banking
Executive
Kansas City,
Allendoerfer,
Vice-President First National Bank,
Mo.
legislation
was
as
by the
approved
Congress was followed necessarily by a
the Seventy-fourth
Division's
period of adjustment during the early part of the National Bank
just closed.
New requirements had been laid down for National bank
and new interpretations were being formulated.
These brought
year
conduct,
'
comments which
and: rulings had
to be drawn by the Board of Governors of the Federal Reserve System,
by the directors of the Federal Deposit Insurance Corporation, and by the
Comptroller of the Currency.
They required study, and fortunately, by
invitation, representatives of the division, together with representatives
of other branches of the American Bankers Association, were permitted
sit
to
in
careful
received
and
of
discussion
a
banks
member
from
inquiries
deserves
and
provoked
consideration.
those
of
most
numerous
Regulations
in tentative form, to
regulations,
effect, and offer suggestions for their improvement.
consider their practical
inaugurated by
study the
Particularly significant and commendable is the practice
officials
those
thus
of
bankers .to
representative
permitting
properly so called—
"those of the practical man,
as
Certainly these^are^neededjn the conduct of a
energy."
bank's bond
account
to-day.
Reports-National Bank Division
Committee / OfficersAddress
banker
sagacity, good judgment, prudence, boldness and
obviously the work of the Congress is vital to members of the division,
which follows carefully and constantly all proposals to change the laws
affecting National banks.
However, all other banks, in a greater or
lesser degree, also feel the weight of Federal statutes.
In the last session
of Congress a great many of the bills which concerned National banks—
especially those which affected them only indirectly—touched also all
other banks and, therefore, became the responsibility of the parent body—
the American Bankers Association.
That did! not mean that the National
Bank
took
Division
its
relaxed
never
the parent
with
active
part
They
no
were
efforts.
in
work.
the
it
cooperation
full measure of hearty
On the
contrary,
put forth continuously in
body, to which the division gave a
support.
But there
related
National
to
These
alone.
banks
Congress some bills which
session of
the last
offered in
were
greater number than
in
were
in
Some of
impressed
Congress sufficiently to advance it to any point even near the stage of
final enactment.
Unfortunately, too, some bills which were recognized
as
proper measures failed of enactment.
I am referring now especially to
and embraced a variety of purposes.
sunported by sound reasoning, and no such bill
other recent
any
them
not
were
session,
recommendations made by the
several
of
the
One
of
them
Comptroller of the Currency.
6204 of the
certain that National
preliminary drafts of the several regulations, and later to join in discussion
of them with a view to determining their workability from the standpoint
Revised Statutes of the United States so as to make it
of
banks could declare dividends more
the
It
operator
as
believed
is
well
that
the supervisor.
as
of
some
made
recommendations
the
in
those
con¬
tion
against.
rency
Though it was not practicable, it is regrettable that all of the argu¬
and all of the reasoning back of each regulation considered cannot
ments
be
They would show how, in many instances, understanding
and that proposals which at first may seem strange
published.
dissolves
criticism,
ill-advised
or
nition
frequently
their
of
assume
in the light of recog¬
different aspect
a
render them
changing aims,
is carried
it
debt
in
is
asset
an
as
secures
made by the Comptroller of the Cur¬
committee consideration, but were laid aside
finally due largely to the lateness of their introduction, and to a desire
to
enact only such measures
as were considered immediately
necessary.
However, the reasons urged! in support of these bills still are convincing,
and likely the measures will be presented again when the next Congress
received Congressional
Jan. 5, 1937.
convenes,
Social Security
more
the
Following
of
much
Federal Social Security Act there was
whether National banks were subject thereto.
States" were exempted from the pro¬
of
passage
the
in the question
interest
the
of
"Instrumentalities
United
had decided that National banks
visions of the Act and the Supreme Court
Manual
The
of Lending Powers
following the passage of such a comprehensive law as the Banking
1935, is bound to be somewhat confusing for a time and difficult
ately
of
Act
would
held
be
to
made as to whether these court decisions
provisions of the Social Security Act.
been
ruling had
government
apply
the
to
and in proper physical relation to the
statutes they
elaborate.
To alleviate this condition the National Bank
Division has prepared a manual of powers and restrictions governing loans
and investments by National banks.
This document contains the pertinent
sections from the various laws, andi carries also the adjunctive regulations
Recently the Internal Revenue Bureau has
In addition, much explana¬
has been provided.
Care has been employed to avoid
duplication of publications already In existence.
It is felt that this manual will be a helpful accessory to the equipment
be
National bank.
It is confined to the two
banking functions mentioned above.
It is usable with dispatch.
It is as
compact as its nature will permit without an abridgment destructive of
its purposes.
Grateful acknowledgment is made to the office of the
General Counsel of the American Bankers Association for the great assist¬
ance
rendered in the preparation of this manual.
It has just come from
tection
the press,
mittee
to
keep
issued
form
by the several supervisory authorities.
comment
tory
of
quick-reference
in
lending officer
every
and
has been mailed to each National bank.
copy
a
of a
Real
The
real
division
since
passage
broad
Some
would
it
figures
are
be
desirable to make
available
bearing
upon
a
study of
such
loans
of the Banking Act of 1935, but the areas covered are not
Clear
it
is
that
much
diversification to establish defi¬
real
greater
estate
lending
now
is
possible, just as the McFadden Act of 1927 broadened this privilege mod¬
erately after heated debate upon the desirability of so doing.
The expan¬
sion since the liberalized law became
effective last year has not been
and perhaps could not be attributed to the change in
However, the broadened powers, supplemented by the various
the statute.
factors intended
a
A
to encourage
such borrowing and such lending,
may
result
volume.
larger
committee
estate loans in
the
of
The
division
has
made
subject to be made at this convention
a
study of the history of real
by the committee Chairman.
of Non-Cash Items
frequently recurring discussion of the propriety of the handling of
non-cash
collection
items by Federal
Reserve banks is prompting the
just now to give it
decision
Federal
is the
Reserve
including
determine
some
that
fact
a
consideration.
secial
Partially responsible for
committee of
the Presidents
of the
banks is making a
study of the operations of their banks
departments.
The division seeks to
whether it is the opinion of the members of the division that a
those
of
the
collection
change of practice should be made in view of past experience and present
conditions.
possible to
Aided
by
the
results
suggest a course
all classes of banks.
of
the
earlier
inquiries, it may be
satisfactory to
which will be equitable and
This is the aim of the division.
Federal
State
new
legislation always is
an
Governed by laws
Legislation
important part 6f the National Bank
enacted by the National Congress, and
supervised by officials who receive their authority from that same source,
by the Secretary of this division.
bank
that
for unemployment compensation may
taxes
the States and credit taken by an employer for contribution!
unemployment fund
of
form
been
have
to 90% of his Federal tax.
banks by State authorities would
up
of
threat
National
to
taxation
serious
a
Section
5219,
which
on
we
rely
for pro¬
The problem was thus one which
concerned the Association's Special Committee on Section 5219.
As I have stated, the ruling of the Internal Revenue Bureau had not
been issued at the time of the Executive Council meeting in April, and
unjust local
against
taxation.
during that week a joint session was held of the members of the Executive
Committee of the National Bank Division and the members of the Com¬
Section
on
It
5219.
was
that the Social Security Board!
reported
employees of National banks should receive
the benefits provided in the Act and correspondingly the taxes should be
of
paid.
the
opinion that the
necessary,
attention
legislation
new
would be
a
Bank
National
close
that
to put National banks under the Act, and President
joint committee composed of representatives of both
Division and the Committee on Section 5219 to give
Fleming appointed
the
therefore,
probable,
appeared
It
proposed, if
the form of
to
such bills which may be submitted to
any
Congress.
Trust
The
ties
may
not examine the trust departments of National
in
the
in
The
Trust
Committee
that
there
is
of the largest National
case
in
official
of
our
most
is
not
bank in each of two States.
division has investigated
the Federal
conflict with
some
although
State
banks, unless the
question desires to submit voluntarily to such an
Nevertheless, the right to examine was demanded by State
bank
authorities
the
Departments
Banking Act of 1935 provides in effect that State banking authori¬
particular
the
cases
carefully and found
Statute in
authority
is
the laws
merely
in eight
and
permissive
required to make the examination.
Harmonizing of State laws with Federal statutes is expected during the
of Legislatures,
sessions
next
not considered necessary,
We
States
and
and action by the division
on
the subject is
though it is prepared to be helpful if called' upon.
concerned
much
are
United
the
the
over
the
report
Speaker of
submitted to the President of
the
House
of Representatives
on
representing
a
part of its Study of Protective and Reorganization Committees, and
dealing specifically with Trustees Under Indentures.
If the recommenda¬
tions of that report become law, they might result in the complete segrega¬
tion of trust departments from commercial banks, which would be harmful
June
to
Federal
Division's work.
a
A
to
ruled "that neither the banks
under Titles YIII
taxes imposed
the
to
of the full text of that ruling was mailed
A copy
contemplates
levied by
States,
The
division
Act
subject
are
that Act."
National
each
to
employees
of
examination.
our
National banks, which study is the basis for an address on
Collection
this
IX
considerable,
very
in
their
was
Loans
enough nor do they present enough
trends.
nite
that
felt, too,
loans.
estate
Estate
nor
and
At the time of the meeting
Bankers Association in April no
Council of the American
Executive
the
of
the United States."
"instrumentalities of
are
governing National banks, especially immedi¬
of regulations
number
the association or unlesa
the books of
on
collection."
of
process
other recommendations
and
These
well
thereto
collateral
the
which
to modifications which,
yield readily
often
and
purposes,
adaptable to the wide variety
practices and communities to which they will apply.
The policy of
open and free
discussions obviously is so constructive that adherence to
it by all regulatory authorities is earnestly hoped for.
without
unless
associa¬
for a period of six months,
such debt in the amount at
is past due and unpaid:
which interest
on
such
Another
frequently than semi-annually.
proposals would define bad debts to mean "any debt due an
of his
discussion, brought
changes in language which preserved the ends sought by the super¬
visory boards without disturbing practices admittedly proper.
Generally
speaking, the division feels that the regulations as promulgated are
acceptable and, for the most part, they are not seriously complained
being subjected to searching study and
after
ferences,
about
and clarify Sections 5199 and
amend
would
18,
banks
and
trust
powers,
way
possible
functions
by
1936,
of
the
business
and
alike.
and Exchange Commission,
Some
1,578
National
banks
are
exercising
the National Bank Division is glad to cooperate in any
with
all
the
banks.
bilities for harm in
Securities
Trust
The
Division,
Trust
the report of
whose
Division
the SEC.
is
includes
the
trust
fully alive to
field
the
possl-"
48
BANKERS' CONVENTION.
Federal
The
interest
of
loaning
Loan
in
subject
the permanent program
in
Agencies
the
of
by Federal
competition
Orleans
but
was expressed on
the program of the division meeting
through an admirable address by Wood Netherland.
Dur¬
ing the year an inquiry into the extent and character of this competition
was
conducted by the Association's
Committee on Banking Studies and,
New
therefore,
has not been pursued
further
by
division
our
central
hard
is
this
A
It
The
slow,
tedious
of
progress
Members
to
the
moderate improvement in banking,
Individually
business
well
revival,
and
accompanied
by
a
general business, precipitated
problems of unusual character which required prompt consideration.
Many
of
them
Federal
of
centered
were
agencies
the
still
division's
exercising
affairs
office
They
and
accessible to
were
availed
were
This
Washington,
services.
of
individual
bureaus, but by
Insurance
D.
They
all
banks,
instrumentalities
National
of
banks.
members
to
the
and
because
in
location
render
not restricted
of
numerous
directing
The
C., enabled it
were
the
of
reason
National
over
such
of
as
capital by
authority
clients
of
in
helpful individual
Nation's
number
greater
the
measure
in the
as
viewpoint of
is
some
of
the
variety of
a
National
Association
banks.
without
to
charge,
by banks of all classes.
service
far
had
the greater
Corporation,
the
do
to
part
Board
practically
led
of it
of
the
into
Governors
all
Federal
Deposit
Federal
the
of
governmental
Reserve
System,
the Office of the Comptroller of the Currency, and the Treasury
Department.
The close relationship of member banks with these agencies
makes
those
genuine
made
pointed
out
which
the
of
success
benefits.
contacts
numerous
cooperation
work
all banks will
so
It is
too
well
be
known
these
wonderful
Association
contacts
will
find
and
scope
so
this division
for
the
service
spirit
character
they
has
thus
share
may
to
me
of
uniformly
extremely
helpful
if
need
you
these
You have just
the
listened to
report of the principal
a
Bank
Division
interesting year, less spectacular,
an
activities
during the past
perhaps,
than
meeF
to
developments
It
is
exactions,
denied
or
that
true
its
we
or
the emotion which
in
the monetary
not,
the
capital
standard,
a
recent
given
conducted
It
year.
was
the
of
this
I
into
the
on
these
the
of
have
we
and
emergency,
we
the
out
that,
you
the various
steadily
to appraise
ourselves
serious
contention that it
except
factors
which
The retirement
of
recoveries
Depositors accept
in
willingness
little
the
mention
not
or
being able to
such
wove
of
the
of
to
place
their
subordinate
insured
an
in
influences,
a
bank.
Little
formerly
absence
to
or
Without doubt
failures
of
upon
And
to
yet with
banks?
whether
to
as
is
with
connection
is made
all
there
safety
general feeling
established, and
among
of all
upon
income without
Is this because of the
combination
a
Or
sustained
it
is
due
to
of them?
large part of the restored confidence in banks is
the result of the public education campaigns conducted
by bankers' asso¬
ciations and by individual banks in the attempt to "take the
mystery out
of
banking."
to
carry
some
These
in
men
efforts,
education
asked
"Can
farmers of this
why
one;
interest
Club
been
talk"
you
are
simple
explain
employ
task
and
flattered
into
you
in
express
the
for
powers
clear
Banking Act of 1935,
the
of
has
who
one
business
why
and
men
of
cannot
but
It
our
It
the volume
has
the
of
fact
credit
details
of
It is
or
only
not
our
own
it
was
said
standing
of
cannot be
their
increase
of
true
a
their
reserve
help others
the
and
provided
the
reviewing
law
in
clearly
justice
that
of
public
relations.
or
men
are
to
strength
or
requirements
who
doing
present
but
For
events.
had
no
However,
many
under¬
proper
such
it
the
in
weakness.
regulations which
The
first
use
of
have yet
a
volume of
the
always
are
times
of
which
worry
If
I
of
of
group
These
retired
few
a
I
sense
we
are
certain,
the note.
credits which will be
we
only
were
which
of
maturity
than one
more
over
are
right,
making
which
This will require
and
little
a
more
likely to arise
doing this inter¬
more
are
which
loans
good,
are
for payment.
program
later
things
are
port¬
loans
viewpoint,
which
But
our
final payment
extending
longer
of
loans
are
the
at
operations
little
a
hope
to
say
it,
and
money
us
a
which make
against the contingencies
wisdom
easy
of
slow."
be
to
program
be the
no
but
check
frank
a
probably with fixed serial payments.
approach,
financing.
takes
It
mistaken
growth
"good
longer period.
mediate
whatever may
not
am
the
expected
year,
provide
low
interest
but
I will
do
rates
that
nevertheless—it is in
so
make
we
mistakes
the
on.
Resolution Calling for Discontinuance of Handling byFederal Reserve Banks of Certain Non-Cash Col¬
lection Items
presentation of the address before the National
Bank Division of Andrew Price,
President Allendoerfer of
the Division said:
Let
me
brought
at this time that following our next address there
say
willTbe
tnis matter of the resolution with reference to non-cash items
up
collections by the Federal Reserve banks.
Many of
discussion,
so
you are
interested in
please remain and say
what you have to say on that subject.
With
the
conclusion
of
Price's
Mr.
address,
President
Allendoerfer had the following to say:
Those
of you
who have followed the collection system of the
Reserve banks since it
set up
with the idea that
Federal
first inauguarated will remember that it was
was
needed
we
a
par
collection system for checks'on
banks in this country, and while that idea itself met with
Having
opposition,
some
collection department, the Federal Reserve banks began and
a
have continued to handle items which
has been from time to time
some
were
not
subject, which worked for
some
Recently, there have been
sideration.
Members
of
on
banks.
time but which
There
Executive
special committee
was
was apparent
on
that
finally dismissed.
for giving this subject con¬
Committee
were
particularly
and at the spring council meeting, it
biut it
carefully,
over very
a
some new reasons
your
interested in the subject,
checks
expression of opposition to that practice.
The American Bankers Association itself had
that as
a
was gone
National Bank Division
could not say to the Federal Reserve Board, the Board of Governors of
we
the
Federal
Reserve System,
to the Prseidents of the various Federal
or
Reserve banks officially, as representing the division, that National banks
felt
so-and-so
about the collection of non-cash items.
The
only
get an expression from the members of the division—or rather two
would have been by some form or
without
an
accompanying
In order that
a
to
way
ways—•
questionnaire, which seemed impracticable
explanation and discussion, and the other
that it be presented at our
was
division meeting at the annual convention.
resolution may come before one of the divisions of the
American Bankers Association, it is necessary under the constitution and
by-laws that that resolution be placed in the hands of the Secretary of that
division 15
Committee
days before the meeting, that it be submitted to the Executive
of that
division, and if they recommend it, it may then be
presented to the division.
resolution.
All of that has been done with reference to this
The purpose of your President is to get it before you, so that
there may be all of the possible objections heard and all of the
arguments for.
come
to you
Executive
possible
You will realize that in coming to the floor that it does
with the unanimous recommendation of the members of the
Committee
of
the
division.
I
will
ask
Mr.
Mountjoy,
the
Secretary, to read the resolution.
Secretary Mountjoy: Mr. President, the resolution reads
follows:
Resolved, that it is the sentiment of the National Bank Division of the
American Bankers Association that the Federal Reserve banks should dis¬
continue
the
practice
of handling certain
the
by. almost without
a
earnings
have
forced
bankers
to
power
classes of non-cash
collection
now
the
Middle
West
are
particularly
keen
displaying ingenuity in handling the problems
great drought, the American banker is
the
scarcity
of
gross
income.
Perhaps
in
proving ingeniouus
both
The term,
eases
there
in
will
of
meeting
remain
"non-cash collections,"
toward
The
a
solution of the problem.
used in the above resolution is in¬
as
tended to cover in general all items not
payable by
or at a
bank.
following discussion ensued:
President Allendoerfer:
President of
extension
the
Board of Governors of the Federal Reserve System and the Presidents of the
various Federal Reserve banks, looking
there, that
that in his
collections.
be
special committee, whose duty it shall be to
give further study to this matter, and if in the judgment of said committee
to
ripple, but
a
It is desirable to do so, that it shall present the results of its study to the
words in
about operating problems, and abont the development of services,
of which will produce a little profit.
Just as the farmers
just
hereby authorized to appoint
to
significance has not. escaped the attentive banker.
the
one
I
to be possible to judge properly of
different
to
care
criticism
not
and
has passed
wholesome
a
sincerely and generally studying
only as to underlying tested
are
now,
laws
and
bankers
is
satisfactorily,
more
trends
current
some
body of
as
of
This
pages.
to
us
perception
with
also
Unsatisfactory
of
in
There
display sufficient ability and
who
them the essentials
not
are
appear
or
little
as
clear and understandable language the real
printed
equips
bankers
as
but
demonstrate
in
economics
business
theories,
its
which
season
no
do thus and so rn banking is not only desirable, but
though it will require that some of us do some reviewing
minds
sharpens
years
livestock.
condition
any
If
as
in
liquidated through
unless
we
even
own
thing.
neighbors in
our
why
essential,
in
or
Items, and that the incoming President of the National Bank Division is
give to
reasons
shrinkage
great
presented
well
in the character of our
automatically through the seasonal production
grain
indicate
classified
would
short
a
so,
you.
the
more
in mind.
To
be
will
account
taking place
a
the
and
investment
and
Rotary
"just
If
sympathize with
fashion
pay
the
or
requirements?
orderly
one
I
agreeing to make
can
and
if
you
the
Commerce
of
reserve
control
even
will
the effect of public
Are
charges;
Chamber
increased
of
understanding
upon
to
definitely
make this class of loan and not that
can
service
student of banking, I
to
.better
a
convincingly
the
Has
meaning
theory of the
the
to
around
real
a
I
deposits?"
the
on
business
of
community why I
have
I
on
systematically,
This leads to speculation
upon
bankers themselves.
campaigns
himself,
continued
other lines
principles of banking.
few.
too
believed to have
banks,
interest
of it, and evincing
income
was
banks
of
low rate
very
interest
query
a
seldom
Commercial
safely.
higher
processes
one
stock
pay no
a
purpose
funds
created when the insurance fund
by the almost-total
other
changees
far-reaching changes
preferred
and
this reduction
particular bank is insured.
a
of security
thus
proceeded
now
by depositors of the FDIC unless it is in
liquidation
few
a
them with
has
historically,
obviously realizing the true
complaint,
satisfaction
this
ready
these
to
well, yielded to the
as
earnings.
guided by the statutory restrictions and regulations,
demand deposits, and find it possible to allow only
time money.
is
loan
the
the practice has become almost universal.
In support of the
banking fabric.
are
that subject and we will want a full
permanently.
us
opportunity
able
to
during
seen
adjust
are
but bank customers
remind
may
hears mention of
goes
period.
recovery
experiencing the tenseness
assurance.
adjustment.
way,
of
understanding and
of
Not only the banks,
long
All
in retrospect,
better
greater degree
of
banking or a business crisis, a change
sharp revision of the banking laws, including
the purchase by the government of large sums
passing
study
a
much
the
devoid
means
investment
there
in
remain
income
of
a
of private banks.
with
for
with
in
moment,
no
and the recollection of them will abide with
years,
However,
by
was
position
the
for
accompany
the insurance of deposits or
of
year
important
an
are
the
initiated
have been
never
source
some¬
ing been cast by fate into this most fascinating age, in which the business
of
banking continues to intrigue those who delve into its science or
undertake
main
its
others, but, hav¬
some
nearly
will
now
Prior to the
of the National
name
the
changes
that
goods,
under
all
are
folios
thing done in Washington.
in
will not
be retired
of
the
are
in
speak at length
Secretary, Edgar Mountjoy.
He has
bureaus, and every member of the
our
with
that
Its
splendid
displayed
informed and
to
it, but that work is done by
on
have
agencies
possible.
the
and
necessary,
those
will
that
industry to warrant the borrowing and the loaning of working capital.
a
with
What
certain
marketing
individuals
believe
banking
program.
credits which
Division Aids
to
of
concern
accounts.
on
practices which would
necessity.
it
loans?
such.
as
from
But
agencies
in
division
our
one
own
Ladies and gentlemen, there are some uncertain
are not
definite.
of the Federal
The explanation of that is this: the
Reserve banks told
bank they were handling
There
me
that he had found
64 different kinds of non-cash
are
perhaps some additional kinds in some of the other
Federal Reserve banks.
For example, non-cash collections in the definition
of the Federal Reserve banks include checks which have
once
been protested.
It includes drafts against savings account, with savings pass books attached,
and things of that kind.
the resolution
we
pass
or
So it is not the thought of the man who presented
of the Executive Committee that we would be against—if
this resolution—the continuance of handling of
any
kind of
non-
The explanation at the end of the resolution, and made part
cash items.
of it, indicates that it means the
handling of items which
drawn on
are not
The resolution is before you.
move
Smith
G.
Do I hear
any
motion for its adoption?
(Bank of America, San Francisco): Mr. President, I
motion
was
seconded by H. E. Cook
(Second National Bank,
President Allendoerfer: The motion to adopt is now before you, and we
as
I will recognize Melvin Rouff of Houston, Texas,
ready for discussion.
who has given this matter much thought and who has been
one
in the
I will ask Mr. Rouff to present the
Committee and heard its discussion.
Mr. Rouff: I would like to speak briefly in favor of this resolution which
Bank
Division.
approval of the Executive Committee of the National
Its submission
is/most timely.
now
Particularly is it
timely in that a committee appointed by the Federal Reserve Board is now
completing
a
Federal
of the
survey
Reserve
banks'
activities
directed
September
Reserve
Federal
months of the current year
Bulletin
on
the first six
only two of the 12 banks, St. Louis and Dallas,
The
Further, a review of the dis¬
remaining 10 failed to earn their dividends.
cussions
disclosed that
of dividends for the first half of this year.
had net earnings in excess
time of the passage of the Federal
the floor of Congress at the
Reserve Act does not reveal that it was the intent or the purpose that the
Reserve banks should handle
Federal
The term
Include bonds
please:
or
coupons.
It would not include
benefitting, if
are
you
payable by or at a bank.
bonds
is in¬
It would not
or
coupons?
The handling of these
banks does not benefit their member banks,
please, only corporations, firms, and security dealers,
banks throughout the nation,
penalizing
both large and small.
The
handling of non-cash collections by the Federal Reserve banks is probably
of less direct benefit to member banks than any of the
and the cost to the System is very large.
tions is
now
a
proper
so-called free services,
The handling of non-cash collec¬
function belonging to the commercial banks.
As handled
by the Federal Reserve, it takes from your bank and our bank a revenue
for the handling that
rightfully belongs to the commercial banks.
In conclusion, I am sure you will agree
resolution which
channel.
Allendoerfer:
with
me
that it is wise to pass this
only authorizes the appointment of a special committee
whose duty it shall be to
give further study to the discontinuance of handling
certain non-cash collections.
It is not
a
mandate, but if in the judgment of
the Committee it is desirable to do so, tbey
appreciate comment on this subject by gentle¬
outside of cities in which Federal Reserve banks or their
men
from banks
branches
are
located.
Dunlap C. Clark (The American National Bank, Kalamazoo, Mich.):
passing, in that connection, so far as our contact with the
on these non-cash items is concerned, where those
Federal Reserve bank
come
to use from
handling and
the Federal Reserve, we levy the customary charge
Mr.
Cook:
shall present the results of their
Is there further discussion of this question?
Supporting tnis,
smaller bank, and being fully
Mr. Chairman, from the standpoint of a
convinced as to the reasonableness and the
justice of this reolution, I want to say just this: that we feel in the smaller
banks very much the
need of revenue which would accrue to us by the
handling of non-cash items such as provided for in the thought contained in
for
far as the outgoing items are concerned, we have con¬
so
sistently routed them through our most conveniently located correspondent,
either Chicago, Detroit or New
York.
for the resolution expressing
elimination of
some
If
Is there further discussion of the question?
I think it is understood that we are voting
not, I will call for the question.
the sentiment of this division in favor of the
of the present services of the Federal Reserve
banks with
reference to non-cash collections.
Those in favor of the resolution please signify by raising their bands;
The "Ayes" have it.
opposed.
Report of Committee
on
Nominations—Newly Elected
Officers
In
behalf
of
the
Nominating
Committee,
J.
Cain,
R.
Chairman, presented the following recommendations:
For President:
William F. Augustine, Vice-President National Shawmut
Bank, Boston, Mass.
For Vice-President:
Trust &
Russell G. Smith, Cashier Bank of America National
Savings Association, San Francisco, Calif.
For members of the Executive Committee for a term of three years:
Representing the^econd
Federal Reserve District, W. A. Boyd, President
First National Bank, Ithaca,
N. Y.
Representing the Fifth Federal Reserve District, W.
President Hamilton National Bank, Washington,
J. Waller, Vice-
D. C.
Representing the Seventh Federal Reserve District, Thomas R. Hefty,
President First National Bank,
Representing
the
President National Bank of
'
Madison, Wis.
District,
Commerce, Seattle, Wash.
Twelfth
Federal
Reserve
Andrew
Price,
Respectfully submitted:
study to the Board of Governors of the Federal Reserve System.
President Allendoerfer:
The
Is there other discussion of the subject?
President would particularly
collection items.
large users of this free service to the detriment of and
the individual
placed back in the hands of the commercial banks so that
And may I repeat that last sentence, if you
Items by the Federal Reserve
who
non-cash
collection items," as used in the resolution
"non-cash
tended to include only items not
For that reason,
function of the Federal Reserve System.
President Allendoerfer:
toward the reduction of expenses of the Federal Reserve System.
The
which the banks are entitled, and it is
tnat should be
I might say in
arguments which he believes warrant the adoption of the resolution.
has the unanimous
in our own
States, we find that that same thought obtains:
not properly a
President
Bucyrus, Ohio.]
are
State but from many other
might have that revenue and such business as mignt come through that
the adoption of the resolution.
]The
In meeting with the smaller banks, not only
the resolution.
that here is a source of revenue to
banks or payable at banks.
Russell
49
DIVISION.
NATIONAL BANK
J.
R.
Cain,
Vice-President of the
Omaha
National Bank,
Omaha,
Neb., Chairman;
P. B. Doty, President of the First National
W.
E.
McGervey,
[The report
was
Bank of Beaumont, Texas.
Executive Vice-President of the Third National
Bank & Trust Co., Dayton,
Ohio.
duly adopted and the newly elected officers installed.]
BANK
STATE
DIVISION
American Bankers Association
Twentieth Annual Meeting, Held at San Francisco, Calif., Sept. 22, 1936
INDEX TO
STATE
BANK DIVISION
Hciw, by Harry A. Bryant-Page 50
Country Bank Earnings—Why and
What's in the Customer's Mind About Banking, by A. L. M.
52
56
Wiggins
Address of President Fred B. Brady
PROCEEDINGS.
Statement by B. F. Clark, Incident to Mr. Bryant's Address--Page 56
Report of Committee on Public Relations
56
Report of Committee on Resolutions
57
Report of Committee on Nominations
57
—
--
—
Country Bank Earnings—Why and How
By Harry A. Bryant, President Parsons Commercial Bank, Parsons, Kan.
In
discussing
into
it
two
If
attempt
an
made to tell you
were
how country
bank earnings can be made simple, it would
be
undertaking—but
quite
an
then it will be
a
when the "why"
is added,/
The first part of this discus¬
lot easier.
sion will, therefore,
deal with "Why Country Bank Earn¬
has
been
never
bility of earnings for
few
kind of
a
desira¬
the
bank, and in the past
this subject has been foremost in the minds of
years
bankers.
most
argument about
any
any
Particularly
so
the
with
small
of
this
the few individuals
to
country
town
I'll
combat
to
serve
of
ception
bankers,
the
so
Reserve
our
In fact, with the possible ex¬
less.
or
bankers, we are
city
just
It has always been true that a bank, like any other busi¬
be profitable, if it is to stay in business.
ness, must
what is meant by
with
small
a
Now
Not just operating coverage
profitable?
divi¬
margin, but sufficient earnings to pay
we
then
a
now
On
trial
to
they
if
see
bankers
is
To
best
the
if
reason
answer—branch
our
Otherwise,
for
the
To
operated
as
small
that
we
must first oper¬
good
won't survive.
me
and what
there
under
a
is
That
is
the
only
branch
banking.
independent
be
can
Nothing will make
than profits
favorable
more
and,
on
the
to branch
unprofitable banks.
customer
first
past
few
so
it
bank
to
fair
and
and
will
banking
sound,
Any community
service
by
and,
the
token,
same
any
to and
should^ not be served by an unprofitable bank.
going to increase and the
demands
for
new
charters will
the
trial, I do not mean by the supervising authorities alone, but
by the public and by our customers.
see
if
we
can
serve
them
They are watching
properly
as
unit banks.
us
If
not, then they are going to demand better banking service,
and
the
only answer
While
branch
not the
sion, bank earnings play such
an
subject
under
community
past
experience
service.
able
discus¬
ago.
important part in deter¬
eral
to
overbanked
It would
agencies
operate at
And
to
just and
work in
a
me,
country
bank
cannot
movement in that direction.
answer
is
against
was
a
be
in
avail¬
repetition of
a
few
years
that State and
to this end,
that is the real "why"
public, once they realize just what branch
any
can
without banking
as
they
Fed¬
well
profit.
earnings.
and to their communities, would favor
wise
penalty of too many banks that cannot possibly
bank
them
now
proper
harmony
country
to
profitable banks
not
position this country
seem
tration and control of credit, and I do not believe that the
mean
bank
a
seem
Then, when the time comes, facts will be
banking that it seems proper to discuss it briefly from that
banking would
or
substantiate the argument
know the
First of all, branch banking means further concern
whether
operated in the various communities
mining whether or not we are to have nation-wide branch
angle.
It would, therefore,
not.
or
that bankers see that surveys are made that will show from
the
is—branch banking.
banking is
com¬
As business improves, the demand for banking service is
in
And when I say we are on
that
that
support a profitable bank is entitled to
why we, as small unit State bankers, must do a better
job than we have been doing.
and
sound.
by paying for services
formerly furnished without charge.
can
be
continue to be
can
customers have demonstrated
years
reasonable
his
wants
made, whether it will be profitable to operate
strong undercurrent in that direction,
other
banking
munity that cannot support a profitable bank is not entitled
one
single system.
banking, but
be
a
to
is to show the
and that
There is
to
were
we
as
and
operate profitable banks.
are
banking,
"why" of it,
survive?
banking,
we
existence
earnings
must
nothing
the
of
system
justify ourselves
so
don't
we
justify
dual
the
profitable banks.
answer
is
can
we
under
trial, so to speak.
we are on
branch
against
trying to make
bank
second, to be profitable,
In
know it today.
ate
ambition; it has become
an
More than that,
the spot.
unit
than
more
First, for the reason that we as bankers are
necessity.
on
become
between
said
am
more
we
The
sound banker.
It has
way
is
going to continue to operate independent banks,
are
bank
a
than
This has been the ambition
banking
independent banks should serve
as
be
the point I
relationship
If
increase the surplus
account.
occupies?
now
branch
towards
movement
could
more
now
hand,
every
this
communities
our
dends, cover reasonable losses, and still have a balance to
of
of the chain store
manager
community that supports them.
Much
all country
problems are very much the same.
the same relative position in our
assume
operate sound and profitable banks and at the same time
the
50,000
Do we, as
by the chain grocery store.
don't; and if not, then the most effective
say we
banker, and by that I mean the average small town banker
of
the
He has been practically crowded
grocer.
the picture
that
then why permit
to it,
that are working to this end
groups
We all know what has happened to the
independent
of
out
in
towns
or
bring it about?
small
majority of the bankers
country are not favorable
bankers, want to
ings," and the second, "How They Can Be Improved."
There
If this is true, and since a large
subject of this kind it is well to divide
a
parts.
be
If
the
made
of the necessity for
operation
profitable,
of
the
then
elimination, liquidation, consolidation
wise, and then branch banking is
sure
to follow.
average
the
or
only
other¬
Now,
place,
We
how
all
can
after
being
this
be
honest,
accomplished?
banker
a
going to be practical,
are
vidual problem from
tion
:
the
practical
banker operates under
trimmed
had
better
his
start trimming.
After that,
going to do about it, other than
Of
are
many
salaries have
and
bankers
few
a
been reduced.
Now that business is increas¬
banks.
many
Have
visited the neighboring banks of about your same
size to find out how they are handling the various depart¬
their
in
ments
banks?
Short
found that will eliminate
the
other
day,
items
transit
in
our
had
a
cuts
continually
being
lot of unnecessary work.
Just
bank,
own
increased
to
to employ additional
necessary
are
developed
it
methods of handling these items.
conversation with
a
M. A. Limbocker, President of the Citizens National Bank
of
Emporia, Kan., I found that they had
Recordak
transit
The result is,
saver.
instating
it
in
be necessary
that
we
for
department
methods
personal
big time-
a
found
have
equipment
additional
an
and
this
mention
and
to employ any additional help.
of
salary
machines
several
investigated this system and are
operating this modern
the
been using the
department
and had found it entirely satisfactory and
years
of
their
in
system
-
The Expense
Many
other
today,
use
experience
won't
it
is just about half
clerk.
in
are
of
modern
I
and
show
to
what
merely
be
can
After analyzing
creased?
our
problem, why not reverse the usual
where
see
and
how
earnings
be
can
in¬
That is where the practical application comes in.
Bankers that have tried it have found it
can
be done.
How?
First by changing from our old-fashioned methods to mod¬
methods that meet present-day
ern
I
would like to give you
show
what
to
ence
so,
our
I hope
own
of
today
is
that will
thinking about.
will pardon the personal refer¬
you
who is
son,
conditions.
actual happening
an
the modern youth
When I do
ciation,
14 years old.
now
the
it
but
waiting,
with modern times.
bank's
some
for
GMAC,
the
by
It was not done by
territory.
finance
field
are
Determine in
available
is
By this I
business, but I
we
what their
observe
ever
Compare it with the per¬
not suggesting that
am
that any banks, for that matter, go into the
or
going
attention
your
be
to
practical,
investment.
case
why
Second, what
this:
do
not
idle
much
how
money
percentage
pened last winter at the breakfast table
winter
old Ford
it
mornings
we
on
able in each locality.
tal
of
For example, take a bank with capi¬
$100,000, surplus $50,000, and deposits of $1,500,000.
Assuming that 20% to 25% of the deposits would be ample
cash to maintain, that would require
$350,000, leaving about
$1,200,000 for investments; 40% of deposits in bonds would
be
$600,000,
other
that
leaving
investments.
at
least
another $600,000 for
would
It
seem
local
to
believe
$25.0,000 of this $600,000 could be placed in
desirable local loans to
small business
farmers, merchants, individuals and
We would still have $300,000 left,
concerns.
if $200,000 of
this amount could be invested in high-
class finance paper and about $100,000 in amortized
on
a
of
one
modern
will
The
mornings, and
said:
son
answer
"Well, dad, do
I started to tell him that when I
no
was
until
I
had
repeated
boy," and then said:
a
in how you
interested
three
is,
is
the
me
modern
boy of his
a
or
standpoint of both liquidity and earnings for the
average
country bank.
The income could be estimated about
as
follows:
5600,000 bonds at average yield of abount 3% and 3H%
$250,000 local loans, other thaa finance paper and real estate, at average
yield of 6%
?200 000 finance paper, average yield
12%
.
$18,000
15,000
24,000
...
$100,000 loans on real estate, average yield 5%
Service
charges, rents and all miscellaneous
deposits, but not including any recoveries
6,000
charges
$1,500,000
on
8,000
to school, &c.
times about
old
were a
He
"When
I
boy; what I'm
going
car
to
start
this
morning?"
That
The operating costs
sound unimportant
to you.
It
did to
Interest on
deposits
important it seemed.
the
at
me
so
important how things
The
important thing
is the
I thought about it,
car
were
is, how
done
are
30
or
40
It is
years
not
ago.
they being done today;
going to start this morning?
to make a profit this year?
the
And then I began to apply it
banking business, with this conclusion:
12,000
4,000
8,000
Fixed operating charges
$48,000
Estimated earnings available for distribution:
Dividends
$8,000
8,000
...
Surplus
Losses and depreciation;.
6,000
22,000
Gross income--.
This would be
It is at least
can
a
and, in
and
my
Is the bank going
And finally, if not, what
am
I
an
ideal set-up, if it could be accomplished.
goal or an objective, and a good part of it
ments
can
the open road of modern
on
be easily
regulated by sales
increased
the
to
account,
desired
if in
an
times.
A
purchases
temporary income until
be secured
are
to
permit
take
me
amount.
more
we
In
other
position, should
excess
profitable invest¬
their place.
to discuss all the various meth¬
being used to increase local loans,
g/oing to take automobile instalment paper
Suppose
or
judgment, should be maintained only until local
Time does not
that
out
can
be
can
be used for
ods
$70,000
be accomplished if we are willing to move over out of
the old rut
words, the bond
to
tele¬
....
...
about what he had said.
more
water, telephone,
^
Taxes
loans
more
follows:
as
$24,000
Miscellaneous, such as stationery, light, heat,
graph, insurance, &c
first, but after I went down to the bank I got to thinking
The
could be estimated about
Salaries and clerk hire
bond account
may
$70,000
stormy
"Dad, I'm really not interested
got to school when you
in
was
a
matter how cold
it was; that my father did not haul
waited
the old bus
you suppose
Instead of giving him
I had to walk to school,
age
to
On this particular morning the
start this morning?"
loans
real estate, it would seem to be an ideal situation from
those
had been impossible to get our young hopeful hauled
school in his usual luxury.
and
loans
reasonable
This hap¬
sometimes have in Kansas.
had been frozen up for several
car
of
cash, bonds, local loans, real estate loans would be desir¬
Gross earnings
cold
loan
a
overlooked.
individual
each
for
calling to
am
that has been sadly
Since
keeping
of their loans originated in
one
Did you
centage of bank losses.
in
policies
aggressive
Every
Universal
the
Credit Co. to build up loan
percentage of losses has been?
all banks,
you
You would be sur¬
response.
possible
Credit Co. and the Commercial
watchful
"When
slogan,
advertising
borrow from a bank."
prised at the favorable
made
heads in doing it.
use our
we
through the Kansas Bankers Asso¬
year,
adopted
borrow money,
What
about
wrong
the prospect?
have investigated
Nothing, if
last
we
is
What
methods.
we
in letting the public know we are willing
wrong
Kansas,
and
accomplished by seeing what the other fellow is doing.
procedure and
is
principles of sound banking, but by
new
after
make loans?
seemed
find more efficient
or
In
the
that
point where it
a
help
of
portfolios totaling millions of dollars?
the banking business.
of reducing operating costs, after
ways
attitude and change our procedure, not
our
application
What
In
he
change
soliciting loans,
If not,
complain about how hard
ing, additional help will be required in
you ever
the
didn't do that."
then—meaning, that to make money today
way
the fundamental
from
to
few reductions in their expense
a
must
we
I was
"Well, when
say,
we
wasn't practical, and it wasn't being
it
not;
course
done that
Also, that he
bone.
the
didn't do this and
your age we
they have been afraid to move, except
it is to make any money in
There
budget, or at least
a
I have known
to bankers' meetings
go
that
us assume
though they had done all they could
as
do, after they had made
account.
Let
charges are.
operating costs to
who seemed to feel
indi¬
our
See what our
and then face the important ques¬
are,
what his average fixed
has
Since we
should first analyze
we
Can these requirements be met?
knows
of us?
same
earning standpoint.
an
requirements really
to
practical.
expect our customers to be both honest and practical,
why shouldn't they expect the
so
the first
In
be
should
51
BANK DIVISION.
STATE
start from scratch,
as
we
as
an
did, \Vith
so
I
am
example.
no
paper
52
BANKERS'
of this kind
would
and
take
too
set
goal at $200,000.
our
CONVENTION.
We decided it
long and be almost impossible to accumu¬
just when
not
late this amount of paper direct from individual borrowers.
Instead,
and
selected
we
two
approached them
loans.
ment
And
automobile
responsible
dealers
the matter of handling their instal¬
on
I
remember,
responsible
said
dealers.
It
be
the
most
but
careful,
been
the
general
experience
who
has
customer
does
that
has
strayed
away
the
desirable
the lure
of cheap
that
with
will soon find out that he has been fooled and will
money
be
should
we
that it cannot be done.
mean
glad
to
back
come
to
his bank
after
become
has
he
They had been sending their paper to our-of-town finance
disgusted with the red tape, inspection fees and other re¬
companies, but told
us
quirements made by governmental agencies.
their notes
They did say, and justly
had
locally.
they would much prefer to handle
always understood that
the
and
paper,
thought
at the
paper
funny part
did
we
not
of
should
it
it.
want
sirable
did not want that kind of
we
that they
is,
We
so,
to that
up
agreed
time
handle
to
rate and under the some conditions the
same
be just
have
and
gone
Not all
supervision.
country
and
expert advice by all means.
reserve
of
each
on
result
has
this paper
and
car,
been
settle with
that
have
we
since March of this
single note that is delinquent
of
work
involved,
necessary,
than
why
not,
week.
each
once
and do not have
year
much
as
constant
sure;
and
sure;
us
acquired about $75,000
15
as
days.
supervision
for
net
a
a
Lots
absolutely
yield
of
better
12%, without
any
selecting
In
real estate loans for investment it is
new
quite evident
that
additional
only
amortized
loans
should
be
made.
Frankly, I think that is the only kind of real estate loans
should
we
estate loan
tion in the
That
have
ever
that
runs
in
of
place in
"Other
item,
local
in
by.
gone
Any
reduc¬
any
Estate
Owned,"
is
not amortized.
were
the
real
local
various
demand,
communities.
How¬
ever, a
progressive, yet sound policy, will develop new de¬
sirable
loans
in
considerable
agencies
to meet this
to
about
competition
unions
small
make
community.
any
the
There
various
competing with banks.
now
If credit
almost
complaint
salary
and
field
it
taking
loans,
personal
a
loan
be
wise
to
investigate
new
any
thoroughly
before
personal
a
department successfully will be glad to give
their
you
that
matter, this
old
a
have
de¬
new
earnings,
our
have
we
we
In
should not plunge
investigated carefully and
the best and safest method being used by those that
had
experience
in
that
particular
line.
Plenty
of
has been lost in the past by bankers trying to force
money
loans
field before
new
found
rule applies to any
same
customary methods of banking.
anxiety to increase
into
in
times
earnings.
having
of
easy
In reality,
in
money
order
in times like
we
to
are
increase
having
their
now
is
the
supervision.
the
on
bond
decide
small
be
can
normal
should
as
$8,000 for
is
for
not
it
a
fast
as
is
be
done.
these
as
other
so
bond
the
you
avenues
and
the
few
To do
then, they
are
figure.
I
the item of
themselves
up on
that because I
say
expects to pay
bankers that
boarding
tendency to let
a
you
earnings has been placed
The customer
still
are
foolish.
are
for
working
There
these charges as other
earn¬
is to admit that the charges were
so
justified when earnings
lean.
were
If they were justi¬
justified now, and should be continued
means.
You may have
noticed that I have dealt almost entirely
with the earning side
reducing
ing for
of the ledger.
for five
expenses
earnings
our
demand for loans.
to
happen.
be
reduced, but there is
There is
and
sense
creased.
good
I
am
come
back
a
the
at
insure
take
the
care
increased
an
may never
bankers, do something to make
as
no
limit, except the limit of
judgment,
old
which
to
methods,
time
same
of
through
earnings
can
common
be
can
in¬
old-fashioned enough to think there is still
reasonable
a
have been
us
limit to which operating costs
opportunity to make money in
under
Most of
six years, and then just wait¬
or
Well, it has not happened, and
just happen unless we,
and,
ex¬
an
bank with about $1,500,000 in deposits, and
being
nothing
not
from
to reduce
set-up that I have given to
unreasonable
an
ings improve.
an
most
position and to the proportion
be in just
good service, and
may
the
banks have today,
be
to
seem
derived
be
many
service charges and miscellaneous
know
good this
so
developed.
In this ideal
this
fast, and
country bank can¬
average
income to
account, such
its
to
it
more,
any
too
largest investment
The
practical thing would
account
changing
logical and wise to give that part
seem
it
parture from the
our
the
by all
desirable
and
it," won't work
are
good last year might not be
was
portfolio
exist
department
experience.
For
the
cessive
Many banks
Any bank that has operated
step.
of
attention
should employ
That old saying, "Buy a good
Conditions
So it would
fied
very
would.
the bond that
year.
not
loan
it
in¬
sufficient
have
they are in this position, then they
ever
community
However, before branching out in
would
the
is,
answer
your
developed this field and have found it
profitable.
been
all desirable loans.
on
might be advisable to meet such competition.
have
has
governmental
The only
being organized in
are
it
at
of course,
bankers
bond and put it away and forget
if
any commercial bank.
Real
loans and
conditions
on
years
10 years, without
or
no
result of loans that
a
The matter
depend
five
principal, has
well-known
largely
made
if
not
expense.
back,
come
formation to operate a bond account without expert advice,
the paper,
The
For the unde¬
to
too bad.
finance companies were handling it; the dealers to endorse
make all collections, furnish insurance, set up a
want
The bond account, like finance paper, must have constant
we
their
that
ones
the
a
return
losses
the
banking business—
perhaps, but under
a
modern
sound,
policy.
One
that
to
stockholders,
that
as
the
we
go
along,
and
still
will
will
have
something left for that well-known rainy day.
What's in the Customer's Mind About Banking
By A. L. M. Wiggins, President Bank of Hartsville, Hartsville,
I
speak to you today as
a
customer and not
as
a
banker.
The larger part of my experience with banks has been as a
customer.
"What's
In
in
not my
purpose
I
tried
have
undertaking
the
to
Customer's
to present
discover
to
my
the
develop
Mind
the
About
subject
Banking,"
it
of
is
personal views, but instead,
views
and
to
find
the view¬
points of large sections of thought among bank customers
about banks and the banking business.
In
a
representative capacity,
and
not
as
an
? Mind
About
Banking."
For
convenience
speaking, this composite customer will address
first person:
you
in
in
the
opportunity of speaking directly to the bankers.
opportunity is
affairs.
our
We
advertising, in
tacts,
an
an
have
evidence of your interest in
a
within
noted
on
changed emphasis
with
us.
recent
Formerly,
your part
on
your
your
recent years you are
As
functions
a
of
in
us
in
our
emphasizing more and
banks
and
result of this changing
the
service
emphasis
and
your
con¬
We have
us.
part in your rela¬
efforts
largely toward soliciting the deposits of
ice
years
public speeches, and in personal
your
increasing interest
noted
tionship
Customer Speaks
customers of the banks of the United States, wel¬
as
this
come
The
also
therefore,
individual, knay I present this brief study of "What's in the
Customer's
The
We,
S. C.
were
funds.
more
spirit
your
directed
Within
the
serv¬
of bankers.
customers,
discovering
are
the
be
may
somewhat
resent an
should
a
and
banking functions
implication that
scorn
on
cies,
well
as
has
efforts to inform the public
oppose
between
stood
If there be
of
Nation
this
methods and poli¬
one
realize
banking
To
welfare.
today
that the people
to the fact
as
the
with such a viewpoint,
among you
before the extent to
never
banking services affect their
policies and
become bank
increasing extent we have
an
which
and
public
banking
the
he himself needs to be educated
which
banker may
a
attempt to dispel the mystery
any
as
always
banks.
Such
of building customer
any program
real functions of banks, their
the
services, who
as
banking institution
a
of its customers.
servant
public goodwill and
to
as
be
look with
also
there
The
the subject
evidence within
i
the
on
ofi improving customer relationship is
Losses
to
logically
depositors during
depositors'
demand for greater safety
losses
Although
funds.
ending in 1933
decade
the
resulted in a general
depositors
all
to
deposits,
extent are small
and to that
in
sustained
other
most
compared with
as
invest¬
business
of
forms
ment, it is also true that individual losses have been high,
in
tors, we have
do
to
to
disastrous
safety
greater
united in
are
for
individualistic
and
safety
for
Many
American banking
the
than
the decade ending
deposits
safety
provided in
system
in 1933.
safety
advantages
of
ment
Federal
centralized
for
governmental
large branch banking systems with adequate capi¬
tal, with trained and efficient personnel which they claim
banks cannot command.
unit
Sound Condition
in
the
provided
banking
systems
banks
maximum of safety to depositors.
a
of
one
laws,
in
changes
both
that will correct the defects which
to
An
Others have
of
dom
State
and
to
is almost as large as
We question the wis¬
and with the end not yet in sight.
Should Speak
Bankers
with
newspaper
is
of
accounts
banking
what the banker says or
with
and
matters,
principal source of
Our
advertisements.
banking comes
and employees,
bank officers
with
contacts
result of
a
informa¬
From the
what he writes.
plaform and in the press have come criticisms and charges
and bankers,
against banks
obviously without justi¬
some
others having a
fication, but
degree of convincing plausi¬
For the most part, bankers have pursued a policy
bility.
Such
silence.
policy
a
midst of depression,
but
should
bankers
we
have been
may
proper
in the
believe that the time has arrived
public
the
inform
and
advise the
on
these questions on which they are best qualified
speak.
The press, which on the whole genuinely seeks
public
facts, is often frustrated in its efforts to discover the
about
banking through
the silence
of the
only one
con¬
has
As
banker.
facts—the
the
your
customers,
we
recom¬
have been delighted at the
growth of a new attitude that is
growing among bankers, that of giving the public the
fast
take
that
amount
Much of what we think about banks and
the
Government itself should under¬
the Federal
reveal that funds have been loaned
an
further increase of these loans in the face of the
a
six years,
Federal,
demning the entire system of chartered banks and
by banks
requirements of sound banking
continuing operating deficits of this customer for the past
who
mending that
safety of de¬
of us have a
other customers.
in
all the loans to all
the experience of recent
voice has been heard
occasional
fundamental
the
customer
one
truth
revealed/
years
and for the
However, many
public interests
stockholders.
bank statements
when
to
recommended
the whole the
feeling of apprehension at the general violation
of
for a
have been
they
being soundly administered today and with due
are
have
that
*
We believe that on
century.
a
in which
condition
soundest
quarter of
when
branch
of
examples
as
be
give all we ask.
The branch bank^
ing systems of Canada and of England have been pointed
out
be provided, the American system
We believe that the banks in the United States are today
of
that small
to
pro¬
Others have advocated the develop¬
regulation and control.
ready
are
we
However, we believe that the
service preserved and that adjustments can
made which will
Some
and have
banks
unified system of
a
Nation,
American
the
of
require may
we
of banking
formal
that demand have been proposed.
answers to
suggested
claimed
banking system unresponsive to the vigorous
means a
development
losses in
with scien¬
If maximum
toll is taken.
a
progressive
recognize that
We
people.
greater degree
a
unwilling ' to
are
people, a system that will not ade¬
forego that degree of safety.
the
in
price we
one
and economic advances,
tific
tion
have
is
>
safety in any-
line represent a price for progress, that
every
as
of
of the American
needs
banks propose
the
our
demand
a
As deposi¬
proportions.
right to know what
the
provide
We
future.
of
cases
some
form of deposit insurance.
some
quately serve the peculiar needs of a dynamic,
positors and
during the recent depression amount to less than 2% of all
and
there
system,
regard for the
Losses to Depositors
funds, 'We
That price is a banking system that is foreign to the
pay.
acceptance of the de¬
itself of the general
sirability of the new program, and it is in the direction of
losses
continuation of
a
banking
bankers associa¬
of
part
furthering that program that we address ourselves.
for
on
banking
the - present
that
provid®s>sj4ety for the depositors'
4
emphasis
greater
on
evidence
unquestioned
will
spite of our concern over the factor of
In
conscious.
tions
is
system
insist
who question the advisa¬
some among you
emphasizing
of
bility
to
well.
welfare as
public
There
banks is
of
function
entire
the
that
only the bank customer and the stockholders, but
not
serve
53
BANK DIVISION,
STATE
perform the banking service of the Nation.
facts, a policy of presenting the true banking picture.
Deposit Insurance
Government
posits
by
setting up
understand
the
tions
and
a
There
demand for safety
system of
for
bankers
unsound
Some
insurance
question
deposit
the
of
insurance.
most
part
de¬
We
condemn
principle, although
a
your
an
admit that
some
emergency
or
temporary
customers are satisfied
our
answers
that
demand for safety.
Others
some
future time
develop to the
same extent
during the period ending in 1933.
sound and well-managed
We
recog¬
banking system needs
insurance, and that it is equally true that if banks
sufficiently
tered,
this
adequacy of the insurance if banking fatali¬
at
that they did
that
of
system
the
ties should
nize
in
have been desirable as
measure.
not
the
that
the
deposit insurance plan as unfair to individual institu¬
it may
no
has answered
insurance
capitalized
will
not
and are not
adequately
soundly
meet
the
are
adminis¬
situation.
On the whole subject, our minds are open and we are ready
to
be convinced
as
present
banking
should
be utilized.
to
changes that may be
system
or
that
some
needed in
different
the
system
However, until over a period of years,
whose attitude is that a bank is
affairs
its
that
feel that it is un¬
be some among you who
may
wise to inform the customers about the
concerns
are
a
of
operations of banks,
private corporation and
the
stockholders,
pri¬
marily, and that so long as the stockholders are satisfied,
the
public may be disregarded.
only
say
make
that
profits
so
for
long as
your
you
To such a banker, we can
are
using our deposits
stockholders,
just
so
to
long do we
demand the right to have full information about the opera¬
tions
that
of
your
when
we
security from
bank.
Your attention
is called to the fact
borrow money from you, you
us
than
you
you,
by means of our deposits.
that
in
many cases
your
require greater
give when we lend money to
Do not overlook the fact
liability to depositors is covered
by a ratio of current assets of not more than to one, and
of total assets of 1.05 or 1.1 to 1.
a
show in
so
As depositors,
we
exercise
greater faith in your institutions than as borrowers you
us.
And of this viewpoint, we have no complaint
long as your institution is soundly administered
basic policy
on
the
that the interests of the depositors come first.
54
It
BANKERS' CONVENTION.
to
seems
more
us
reasonable request
a
complete information
about
bank that heretofore you have given.
ments
mean
little,
very
nothing at all.
and
We want
to
operations of
Your published state¬
Of what do your investments
stockholders
stake
know
a
ened
but in
things,
much
as
Your
as
our
entitled to
we are
revealing report at least
a
of the operations of the institution that holds
year
funds.
our
these
consist?
depositors is many times larger than that of the
as
stockholders,
once
behind
What is the investmetn policy or loan policy
of the bank?
Many banks
policy
already pursuing this enlight¬
are
and customers
generally
expecting other
are
banks to fall in line.
In
the
ployees,
customer.
have noted
This
In years
is
officers
particularly
em¬
passive attitude
a
but in many cases were unreceptive
and made the prospective borrower feel that he was asking
a
favor, and that in applying for
self in
inferior position.
an
loan he had placed him¬
a
Fortunately, such
the part of bankers is becoming
on
customer
mutually
shall do business,
he
profitable
business
will
find
attitude toward
that
banking is personal contacts between bank¬
customers.
is
Many bankers in their personal rela¬
with customers and
inconsistent
ments.
with
Advertising
printed matter
the public
their
through
published
own
the
pursue
newspaper
advertise¬
through
or
by radio is effective in telling
or
policy
a
story
a
but at best it is merely a promise that
requires fulfilment
by
individual.
an
bank officer.
That individual is the bank employee or
No
tising may be
the
matter
nor
how attractive
the
bank's adver¬
arresting the appeal, it must have
now
backing of personal interest, courtesy and
by the men and
serve
women who
desire to
a
represent the institution
advertised.
As customers, we want banks
in
well
as
essential to
than
in
as
the life of
times
sound loans
of
in
liquidation
itors,
such
have
we
should
not
business
a
an
in
The
depend in
we can
Bank
credit
times
of
forced
criticism, but
over-reach
itself
of
liquidation
In
us.
so
No customer wants
convert his loans
when the first cloud appears in the
economic
of
been told that
a-
bank
many
of the
bank
a
plentiful
into cash
sky.
unfair
important
system
economic
factor.
system in
We
manufactures
chooses, enlarging
or
woes
and
ills
that
have
credit
which
been
and
told
the banks
that
deposit
the
are
an
banking
currency
as
it
curtailing the supply at the bidding
of capital and without regard to the needs of
national life.
We have been
system that
told that the banker
represents
can
operate in
such economic excesses
misery and despair
of these
the
charges
facts
which
lieve them.
as
no
were
as came
are
It
to information, reason and understanding on
open
Even in legislative halls there seems to
increasing
an
to
get the
the
about
true facts
banking business, to give due credit to the bankers who
have
of
struggled through the
the past few years
difficulties
disasters
and the
and have brought their institutions
safely through the economic
The banker himself to¬
war.
day enjoys the confidence and esteem of his community to
greater extent than for many years.
a
The public is just
beginning to appreciate fully the sacrifices that were
now
required in, carrying financial institutions through the dif¬
ficulties of the recent depression.
In
spite of the enticing appeals of various economic sooth¬
emerging from the economic wilderness of
sayers, we are
the
past few years
with a
clearer
understanding of the
importance to the life of this Nation, of
owned and
under
other
way
an
than to
economic
produce
witnessed in 1929 and such
in 1932.
We believe that most
untrue, but unless the bankers give
prove
them
Untrue,
many
of
us
sound, privately-
a
privately-administered banking system operated
adequate government
supervision.
The Banker Comments
Now, with
permission,
your
may
I comment briefly
will
us
be¬
on
this discussion brought to us by our customers?
Let
admit that there has existed in this country
us
ing recent
the
years a most
banking system.
tomer
into the whole
or
not
mum
our
dur¬
critical attitude toward banks and
It
relationships,
is
alone
not
but
a
policies and
searching
more
banking system.
question of the
a
cus¬
interrogation
The public inquires whether
complex banking system is performing
maxi¬
a
public service and in the interest of the public wel¬
fare, and if not, what changes should be made by way of
perfecting the
which
present system
might perform
a
more
establishing
or
meet the needs of the American
people.
an
to
mind
discover
is
whether
justified
by
a
new
such
the operations
We should under¬
attitude
of
the
public
and,
of banks
if the
sources
of antagonism can be discovered, we should
them.
But
examine
even
of
more,
entire
our
the
banking
have
the
banking system, complex
conflicting
controversial
should
we
subjects
systems
and
viewpoints
as
one
valuable service and better
take
branch
as
to
it is, and
bankers
hold
on
banking, unification
bank
central
remove
courage
control,
with
the
objective of discovering adjustments that may be made
changes
economic
As
life
bankers,
perform the maximum service in the
may
of
the people
of this Nation.
believe in the American dual system
we
State and National
banks.
We believe
that
the
aspirations of the American people.
American
progress
banking
and
system
and the
We believe that this
contributed
to
the
development of this Nation, to its rapid
eco¬
nomic growth to the
than any other
in
has
of
American
is suited to the characteristics, the'needs
system
or
far-reaching revamping" in order that the
or even a
banking system
nation
have suffered during the past few
years are the product
an
the
desire
as
ruthlessly sacrifice them when
immediately undertakes to
We have
far
financing its customers to
that seeks his business when
money is cheap and
we
of
in¬
some
do maintain that
we
trouble appears on the horizon.
but
more
for the protection of depos¬
in
extent that it must
some
is
depression
early thirties crippled and in
was necessary
no
which
on
prosperity.
the
time the
toward
receptive mood
banking matters.
such
good times.
stances destroyed the business of
such
more
recognizing
As Customers
bad times
most
mechanics of bank operation nor of loan
The most important factor in determining the customer's
tionships
the
be
making of loans
transaction
his customers leaving him for a more satisfactory banking
and
in
The
rare.
connection.
ers
is
attitude
an
increasingly
and that banker who fails to recognize the
a
is
today, if he is entitled to bank loans, is free to
pick and choose the bank with which
as
mind
banking business that it has been for the past decade.
officers.
to loan
true as
have been poor salesmen of
They not only adopted
toward making loans,
and
increased consideration for the
an
past many bankers
the bank's funds.
public
firm conviction that at the present
a
made, the unselfishness displayed, and the unusual ability
day-to-day dealing with bank
we
We have
of us they mean
many
tion of those statements, information as to what is
the figures.
your
interpretation and illumina¬
an
Public Attitude
that you should give
the
the
more
high standards of living of its people,
banking system has contributed to
world.
We recognibze that
it
any other
has not been
perfect, that there have been bank failures, that depositors
have
lost
money,
have been
but
that
such
economic progress of national
suited
to
peoples of
different
with older civilizations
we
to stabilize
which
their national
wellbeing, and who. have been
a
static* condition
control
ernment
and
to^gain from
is
of life.
regulation of
agencies,
attempted in
that
failures
and
such
losses
relatively small in relation to the swiftly-moving
any
State
life.
have been
life
on
our
other great
more
to
countries
willing than
lower levels of public
somewhat content to
We have
and
Other systems may be
temperaments,
accept
accepted the minutest
banking institutions by
Federal,
to
an
extent
gov¬
not
nation.5T We have everything
a banking system that is sound, that is strong,
serviceable, and that promotes the welfare of the
STATE BAE
American
people,
and
have everything
we
lose
to
de¬
in
fending any system that does not meet those requirements.
We
willing and ready to correct
are
difficulties in
any
such theorists
destruction
American
growing
the
American
of development and improvement,
one
notable
most
We
development
of
banking has been
and of servicing the
national
system weighed in
First, that
ment,
public opinion.
having pursued too long
Perhaps
policy
a
when un¬
silence
of
guilty
we are
portraying
tribution
Perhaps
have failed to
we
development.
definite
a
the
out
be
to which
the
lives and efforts
our
dedicated.
are
Perhaps
atmosphere of dignity and strength that pervades our
institutions has carried
the
nature of
very
wdalth
and
business has made
our
Perhaps
power.
Perhaps
suggestion of aloofness.
a
of
some
symbols of
us
been
have
us
un¬
development
banks
and
small
the
country
American
of
century or
a
the
American
date
each
on
subject,
States.
economically
life,
toward) that
prepared in mat form, with
all kinds through¬
such
effectiveness of
its simultaneous appearance;
in
simultaneously
published
and
in printed matter of
The
and
emphasizing the con¬
more,
banking system
advertising will
the reader
wherever
turns
advertisement, whether it appear;, over the name of a
bank or the name of a large city institution.
same
the
of
program
the American
and) of
Association
Bankers
Associations
be continued with even greater emphasis and concen¬
along the lines of public education about banking.
A number of
tration
field
workers
speaking
should be
ability
to
officers
and
district
meetings
the
under
United
Second, that
State
of
in magazines and
entire
see
suggestions:
These advertisements should be
release
multiplied by
appreciate fully the interest of the customers in this businecc
the
the
of
remold
strange patterns.
advertising program be devised, pictorial in its arrange¬
an
socially, during the past half
he will
fairly and unjustly attacked.
and
new
offer two practical
to
me
newspapers
of fair
the balance
all history.
life in
willing and ready to have this
are
is
indicate
people
The whole history of American
needed.
of
of
needs
politicians who seek not improvement but
or
of the banking system in their efforts to
lifeiinto
Permit
banking system which the exigencies of depression or
our
the
55
; DIVISION.
story
bank
to
employed,
the
carry
employee^ in
throughout
capable,
men
the
the customers and
entire
who
country,
the
to
banking
bank
to
in city meetings, and in
meetings,
group
and with public
informed,
American
of
message
in
turn
carry
can
public.
Admitting all of these things for the purpose of
worthy.
Conclusion
reply,
is that the American bankers today face
our answer
their customers and the American people with a clear con¬
that
viction
efficient
they
the
and
economic
life
serviceable
most
American
the
of
worthily
administering
are
the
most
in the
instrumentality
people—a banking system
Whenever I
national life
discouraged at the direction in which
am
to be
seems
powerful trends that
ter and
when,
which would block
to national life.
I
From the
enthusiastic
business,
our
expect
We
expect such recognition, but we do believe
nor
informed public opinion,
an
hardly
can
we
public demonstrations of our popularity.
neither ask
that
of
nature
public educated
a
subject of banking methods, policies and services,
fend the American
the
on
will de¬
banking system from the exploitation of
Nation
enlightened progress of national life,
an
bear the
between
common
true
the
tested
of
the
and
moderation
and
sail
guided this
falls
tolerance
people.
Using
the American bankers,
may
has
the
over
in
almost
crisis, the compass of the sound
American
compass,
people boldly
which
compass
rocks
the
sense,
manship
our
hand,
one
pointed toward chaos and disas¬
are
period of national
every
the
on
the other hand, there appear granite walls
on
unsurpassed throughout the world in the service it renders
bring to
going, when I see,
the
and
this
sports¬
and
true
the American
and
ahead.
seas
Committee and Officers* Reports-State Bank Division
Address of the
President, Fred B. Brady, Vice-President
Trust Co.,
Kansas City, Mo.
Commerce
I
earnestly request that you read this printed, report of
Research.
on
with
pare
Your
State
President,
Bank
institutions
the
their
and
previous
codes
which
years,
work
this
of
period
and
questions
6pend
influence
to
work
association
our
The addresses
country.
more
our
has
brought
following
each
before
subject
been
the
dif¬
timely and the forum
were
the
meetings
plan in keeping with banking progress.
a
The
objectives
stated,
of
purposes
culties,
of
existence.
our
pledge
our
State
our
banking
Better
are:
of
Division,
Bank
and
They
service
better bank
are
to
as
have
we
earnings.
previously
These
the
are
defense against future diffi¬
public,
and our obligation to
Bank
earnings
which
salaries
eliminated
high
in
the
rates
a
loans
for
starvation
of
the
always
the
investment
and
the
low
been
has been
deposits
on
in
have
earning
their inducement.
as
are
offering low
situations
are
rates
foolish
from
interest
of
an
com¬
interest as an
earning stand¬
the need of cooperation in ceasing to loan
is a dangerous time in banking.
Idle
degree for banks, and yield
standard.
The public realizes the
to
believe
them
see
this
earn
a
public
same
reasonable
is
money
funds
temptation to lower
a
economic
return
willing
or
Free service
are
to
pay
their
the time
has
come
to
a
direct certain
fair
stock¬
return
streams
of
commercial channels, and every effort
the banks are prepared
willing to handle these credits, and ask that they be restored to us.
back
credit
into
the
being made to convince those in authority that
believe
I
the
always assert
mittee
Hanes,
on
strength
shows
power
of
our
country
will
Bank
that
total
recuperating
Our confidence is growing.
A survey by our Com¬
Research, under the chairmanship of Robert M.
itself.
State
and
in
banks,
the
1935,
$5,600,000,000.
their
had
with
the time
study
the
read
to
10,473 State supervised banks and 5,886 National
have increased over the year ending Dec. 81,
Deposits over the same period have increased
resources
investments
loans continue to be higher in most states than losses on
on
rather conclusively, that
proves
.
.
banks
are
still
making loans
.
in securities require sound and conservative
policies, based on thorough knowledge
and.analyslslbefore purchase and systematic review at regular Intervals thereafter."
As
and
study this survey
we
write
the
of
story
and prosper.
earn
we
convinced that management is going to
are
future.
our
Bankers of ability will
conditions will
The
Banking
has
been
Federal
Reserve
always
Act of
given
1935
careful
System,
make
under
direction
the
They have tabulated the
membership
in
approximtely
country
have
or
50%,
each
States
12%%
deposits
are
of
the
on
not
System,
that
to be
number
of
our
it
banks
problem
at
in
Harry A.
their
to
which shows
Act,
these
banks
affected,
other
the
on
hand
18
affected.
a
comparatively few States may
developing support in the event of
We
measuring
of
611
while
would be
in
of
agree
stick
that membership
many
Our
with
for
our
committee that
membership
in the System
in
shall be
the
a
mere
Federal
condition
our
such
smaller
banks
membership.
do
feel
there
that
is
the
conclusion
in
the
Reserve
System
and should be left to the individual decision
of each
should
bankers
does
be
that
not
made
membership
make
to
It
not
is
State
committee
effort
of
gained by
should be voluntary,
when
the
on
reference
under this
and
States,
banks that
these
the
Chairman,
with
for
Reserve
Deposit Insurance Corporation.
We recognize the
of membership in the System for certain banks, but we recog¬
fact
the
anything
be
nor
its
subject
Committee
the Federal
joining
advantages
bank.
$1,000,000,
10
legislation in Congress.
should
of
a
Federal
the
our
State banks
System
in eight
than
idea
legislation
with
by
(1,133) of the 9,007 non-member banks in the
over
located
have less
some
Reserve
nize
Federal Reserve
concentration
The
give
remedial
to
the
bank
deals
it
as
consideration
Brinkman.
over
institu¬
exacting.
more
Changing
study.
that
their
cause
The margin will be smaller and the work harder
a
recommendation
amend
as
to
of
the
a
time
the
Banking Act of 1935, but
does recommend that a careful watch be kept on the situation so that
some opportune time prior to 1941 this desirable change
might be made
the Banking Act.
an
is
conclu¬
increase earning capacities of
it
have declined.
certain
increasing'Income on the one hand and reducing
The production of more income depends primarily
and
expenses
by
address
means
granted unless it is proved' that the community needs
investments
into this
they have reached
be
and
decreased
com¬
comparison
follows:
as
increased $2,600^)00,000, while loans
$600,000,000.
In this same period is shown an increase in net
profits, and it is interesting to note in this report that net earnings in
proportion to total earnings show an improvement in nearly all the States,
and responsible for a share of this increase is the fact that gross losses
$6,400,000,000,
Committee
our
ratios, which you may
struck
without thoroughly investigating the financial conditions of the Individual or busi¬
ness concern.
Reduction of losses oh loans means the application of con¬
stant attention to every loan from ita inception to maturity.
Likewise, Investments
size
feels that
division
government
and
Fundamentally, this
"The fact that losses
other
necessity for
for
In
report.
System
lowered
account.
Today they
wish I
its
be
upon expansion of volume of business, growth'of deposits, and intelligent investment
of available funds.
With acceptable loans scarce, the yield on high grade securities
low, and call money rates far belowjnormal, the highest principles of good manage¬
ment should be.foremost in the mind of every banker who is striving to bring about
greater earning powers in his bank.
curtailed,
money.
Our
is
Expenses
third
wants
We
holders.
for
confronted with
are
This
rates.
are
interest
showing
and
these
We
continue.
competitive bidders for deposits.
were
offered
point and clearly show
hanks
will
proper
past
Both
inducement.
at
problem.
reduced, and
were
bidders
petitive
our
make
to
Bankers
and
is
apparently
been
have
I
in
will
"The purpose of proper bank management Is to
banks.
tion to
ourselves.
rates,
complete
items.
You
losses and expenses on the other.
our
the
various
on
interested
bank.
sions, part of which is set forth
its
in
practical application.
It is the judgment of our State Bank Division that
these conferences inaugurated by President Fleming should be continued
on
States
their
be
will
own
has
affecting
well-attended regional conferences held in
planned,
sections
discussions
confronted
were
This
the
rest and
of
one
regulations.
and
for
operations.
stimulating
greatest
carefully
ferent
banking
has been
past year
customer
on
The
the
that
stewardship
his
of
account
an
opportunity to do more association
and public relations and other
an
us
time
finds
Division,
legislation,
new
given
rendering
when he compares it with
relaxation
with
in
You
your
It
banks
is
the
judgment of
should be
a
a
matter
public necessity.
the
of
State Bank Division that the chartering of
careful
There
consideration
should
and
be reasonable
no
a
charter
should
bank and that
assurance
that
the
BANKERS' CONVENTION.
56
bank would
be
profitable from
financial
standing,
and
Committee
Your
on
Malone,
is
other
joining
makes
it
the
more
the
that
necessary
the leadership of
organizations
general
effort
an
to
the FDIC
laws and discretionary
"The Bank Chartering
in
interest
have proper
The publication
in
M.
C.
on
and assist our membership to operate safe, strong, conservative,
banks—banks that build their communities.
The officer*
encourage
well-supervised
of
proposed officers.
under
Our
we
experience,
character,
and
banks.
of
the
to
as
Legislation,
this subject.
regarding
powers
made
committees
the overchartering
prevent
be
qualifications of
State
most important,
earning standpoint, and,
an
thorough investigation should
a
have
a
responsibility to see that their banks are
conditions fairly, serve their communities safely and
meet their customer cheerfully.
Our dual system of banking has always encouraged individual initiative
institutions
our
progressive,
meet
which is responsible for our Nation's growth.
of
Our people
opportunity.
by the Economic Policy
reveals some important
facts.
We commend! it to you as worthy of careful reading and study.
We do need a better coordinating policy between the Federal Deartment
and the State Banking Departments on this subject.
Our State Bank Division recognizes in the State Banking Departments
the
banish
We
ambitious.
are
known
are
Crush
country
as a
them
spirit within
this
and you will
History
Policies
and
Commission of
greatest
of
ment
State
assistance
banks.
that
realizes
United
the
in
keeping
Committee
our
manner
issue
the three
of
covering
single mimeographed volume.
officers
most
the
of
Chairman
important
This
and
his
movement
and
committee
wisely
the
stress
is
sound
a
For this purpose they suggest that a charter
board
be
in
should
commission
nature
that at
so
bank
a
political
A non-political banking board should be appointed
favoritism
the
in
Our
division
postal savings
thrift
but
Orleans
address
J justified
the
operations
President
and
Savings,
Postal
Resolutions,
on
with
competition.
for
concerning
Committee
danger
of
the
of
its inception may have been justified for
at
Hecht in his
which
New
In
I
President
We
to
took
two
with
particular emphasis
fact that competition
on the
1920,
I
.v at,the coming session of Congress at least to modify, if not to abolish, the law govern-
This
mittee
is being given
question
of
the
consideration by the Banking Studies Com¬
Bankers
American
Association.
prospect of some remedial legislation
The
Committee
Kirschner, ha*
they
Legislation to
discontinuance,
by
the
in
the
the
recent
tions.
their
have
bankers
abuse
that
and
it
This
tive
would
should
and
as
public
interested
the
into
in
from
business.
No
I
wonder
if
we
based
on
con¬
permitted
Bankers
I
his
of
part
in
the
that
mystery
bank
a
or
are
division, through
and
surround
to
ever
our
be
give the
the
and
policies
our
seems
should
question,
any
with
and
They
*
customers
our
them
with
Our
in taking
have
we
banking policies
economic life.
the future.
in
now
too
busy
to
why;
reason
personal
character
an
and
loans
assured
teach
income.
and
customer
individuals
to
These
small
and
loans
the
are
say
the
to
what
loan
banks.
is
at
The
basis."
extends
personal
present a
orderly
an
department
large
This
valuable
a
loan
department
of
mass
service
simply
unorganized
department
be
can
which
credit
made
is
serves
and
profitable
organize
to
place it
profitable,
in
this
borrower's
approaching
to
an
the bank for
mind
the
officer.
In
financial
service
fear
other
and
words,
awe
you
and
upon
the
at
of
are
entering
a
bank
educating him
to
and
come
and
advice, and directing these borrowers
toward the fields of private enterprise.
Our committee urges all bankers
to
cooperate with the Customer and Public Relations program of the
( American Bankers Association, and with the Public
and
by
study
Our
the
text book
on
Public
our
Education
most
division
powerful
evidenced
place in
Education
Commission,
Commission.
reaffirms
"Constructive Customer
our
faith
system of banking and recommends
form in
preserving
by public sentiment,
our
business structure.
Relations"
have
I
from
came
a
and 1916.
had
we
surplus
our
with
equal
small
a
bank.
On Sept. 80,
We
capital,
our
Sept. 30,
this year,
when
word
a
if
just take
Sept.
Mr.
me
the
15
Bryant
Colorado
one
bonds,
that I
which
which
and
off down to
$239,000, cash
it
have paid,
out¬
figures.
Denver
of
had
$568,551
profits,
$10,500 in
spent
$3,000.
and
exchange,
bonds,
$848,000.
that
so
equipment,
new
Municipal
the
$65,000;
And
I
may
can't hear
assessor
trustee
a
In
our
hold
to
the
for
family.
own
benefit
And
that
the
of
is
stock¬
invested
in
good notes.
And
Bank
undivided
the
paid out dividends to the extent of $35,000,
we
to
over
keeps
nearly
so
And four years ago we moved
this far from home,
am
turned
was
another
to
room
charged
not
to give you
State
$37,973.94
surplus,
had
moment
a
we
Christmas.
Our
That result
,in
is
Mr.
largely due to the
very
I
And
fact that I was a country banker
didn't know any better than to take hold of motor
may say this: that we commenced first with the
"
Wait
Bryant:
appreciate the help
speaker
Your
in two years and a half, 5% quarterly and 6% at
has paid Christmas
dividends every year for 10
split $1,200 in cash between our nine employees.
we
large city and
a
financing.
I
bank
and last year
years,
when
that I
Mr.
giving
like
boast
can
have
that
It
me.
that and
of
is
thing
here.
bring it in
such
no
down
big help to the
a
can
record
net
profit
that
as
here.
in the
operate.
ClarkI
profit,
dollars.
I
J
are
down
you
stuff
record is wonderful.
gross
now!
minute,
a
that
write
you
mi?ht
this:
say
$71,000, and
was
We paid
That
our
net profit
our
about 17
was
last
year,
our
18 thousand
or
$2,490 government income tax.
of ^Committee
Report
Public Relations—-Would
"Bank"-—Summary of Other
on
Restrict Use of Term
Committee Reports
A recommendation
restriction of the
that
bankers undertake
of the words "bank"
use
Public
on
Relations submitted
was
to
or
a
campaign to bring about
"banker" to
those
actually
made In the report of the Committee
the
State
Bank
Division.
Tne
report
presented by Brewer D. Phillips, Chairman of the Committee. Chair¬
was
man
of the
Board,
the soundness of the
Bank
of Jamestown.
Jamestown.
N.
Y.
Assuming
public policy which divorced commercial banks from
the sale of securities and the
setting
of independent corporations for the
up
handling of the latter, the report said, it follows that organizations having
none of the character or responsibility of banks should not be
permitted
to
published
use
these titles.
Appointment of non-partisan boards
investigation of applictaions for
new
or
commissions to have charge Of the
State bank charters
restraining future over-chartering of banks
mittee
on
State
H. W.
dent Security Bank of Ponca City, Okla., is Chairman.
committee suggested that "all banks be urged to make
and survey of
as
was recommended
Banking Departments, of which
an
one
means
of
by the Com¬
Koeneke, Presi¬
In
addition the
exhaustive study
banking history and conditions in their respective communi¬
ties, primarily for the purpose of being informed, and secondly, to be In a
position to furnish detailed information to the various supervising agencies,
should
a
movement be started for additional
banking^facilities.'
A survey was presented of the number and location of State
banks not
now
members of the Federal
Reserve System, which will be affected by the
requirement in the Banking Act of 1935 that in order to continue
banks under the Federal Deposit Insurance
average
deposits of $1,000,000
the Federal
mittee
A,
on
or
more
Reserve System in 1942.
the Federal
Brinkman,
Harris
Insured
in 1941 must become members of
This survey, reported by the Com¬
Reserve System, under the
Vice-President
as
Corporation. State banks with
Trust
&
Chairmanship of Harry
Savings
Bank,
Chicago,
showed that of the 9,007 non-member State banks, 1,133, or
approximately
and
confidence
to Congress
our
said
will
on
right good times
holders,
same
time you
could be performing a double service of helping these
safe, small borrowers get credit at a fair rate and be helpful in dispelling
from
1915
6mall capital, and it is
a
$50,000
been
States
now
r"
opportunity to
income
I
years.
in
spirit of friendliness.
a
26
Denver,
paying, semi-annual dividends in 1917.
engaged In the banking business
and
our
our
It
home
from
has
say
chance,
Sutgrowthput out by Bank Management instalment financing. In Booklet
of the continued increase in Commission, they
To. 17.
that "The
personal
office
felt
economic illness,
our
back in
first quarterly dividend.
have
not
left
capital,
United
profession.
their
agitator
all
defense,
interested
a
overlooking
are
through
the
familiarizing
answer
interest and
rights and
for
of
Association.
and
into
and
as
work
suspense
turned
long.
too
for
our
greater activity
minds
The
attitude
us
Phillips
relations
public
being
given
banks
for
expect
may
in
is
upon
has
our
are
are
connected
one
an
public relations
concerns
their
and
their elimination.
they
confidence,
operation,
any
show
short,
they
mem¬
our
Bank
loans, $3,000 in furniture and fixtures.
public rela¬
with Brewer D.
protect their
to
listening
that
suggests
our
dispelling
explain
con¬
blanks,
and
customer
indifferent
an
blame
that banks
what
in
been
in
profession
ourselves
to
suggested
fact
fact
committee,
public
has
these
opinion is changing.
be heaped
to
defend
has
recognize the
its
current
would assist
with
interested
more
our
assumed
undignified
to
hesitated
remedy
to
with
State
State Bank
Bankers
in the country banking business.
I have been sitting here and listening
speakers on the subject.
It is an old subject
until
Tt is
our
bank.
our
$50,000
bank
committee,
Public
criticism
be
reluctance
he has not
awakened
become
We
respect.
and
The
and received
Colorado
quarterly dividend.
I
the movement to standard¬
conform
to
interested
this
of
surrounding
unjust
a
been
communities.
and
on
Pending
operations.
have
we
misunderstanding
fidence
harmony
standardization
accounts
report
our
the direction
own
brought into
This
their
up
vears
Under
Chairman,
in
Committee
the System.
the rates paid
is also rendering assistance in
setting
thereby simplify
In
Association's
paid
dealer—
examinations.
respective
in
System
the
be to have
forms used by the various supervisory authorities in making
report
bership
will
semi-annually
bonds and
market.
money
This committee
ize
their
with
discontinuance of
the
secure
their work
Savings
Postal
ditions
the
over
Legislation, under the leadership of C. J.
Postal Savings continually before them, and
the question of
its
encouraged
are
the Postal Savings System.
on
wholeheartedly cooperating
are
Federal
Federal
on
We
F.
experience
years'
commenced
$50,000.
me,
Postal Savings System."
Bryant's presentation, B.
get home, I shall have the pleasure of drawing our sixty-fifth consecu¬
which
passed except perhaps in such rural communities
enjoy other banking facilities.
A serious effort should therefore be made
20
little bank
we
the
Colorado
the
of
It commenced
3%
paid
our
Postal Savings System has really
of Mr.
of
three different
or
Our
through any member of the Federal Deposit Insurance Corporation the need for the
n& the
Clark, Incident to Mr. Bryant's
automobile financing.
up
me.
high) interest rate; and liberal withdrawal privileges allowed its depositors is unfair,
and since every depositor can now get full protection for his deposits up to $5,000
do no;
person
Let nothing be done to
being President of the Colorado
with
country town
lined
which the Postal Savings System gives privately owned banks through the relatively
to
Vice-President
also
When
as
by B. F.
addition
am
been
by
recognized
was
said:
"In this connection I wish to lay
preserve
any
the following statement:
which is
concerned
and
which
system
never
the
prevented.
interested
is
bank charters,
granting of
Let's
help
to
Clark, President of the Colorado State Bank, Denver, made
by limiting authority and eliminating as nearly as possible
over-bank conditions could be
the
is
authority to make a thorough investigation of a proposed organiza¬
tion of
all
entirely non-political
would the judgment of the board be swayed
time
no
by political favoritism.
with
which
appointed
contributes
Address
the
that
fact
forming of
the
policy for chartering banks.
or
that
forth an honest effort.
opportunity.
During tfoe course
proved very valuable.
undertaken
be
to
year it was decided to
indexed and bound into
This
sent to all bank commissioners
was
Bank Division
State
Koeneke
banking system.
present
our
factor
willing to put
American
Statement
term of service, compensa¬
15-year period,
a
for
other
every
preserve
is
State Banking makes a detailed
on
examiners, &c.
appointment,
surveys
who
arguments
our
are
and
it
Suggestions from these
most interesting to our membership.
are
brief,
in
of State banking departments, personnel,
tion,
a
with the laws and manage¬
working with them and
touch
in
interested
is
problems in common.
many
five-year intervals
survey
and
States,"
Bankers Association,
division
Our
have
we
Supervisors
At
of
the American
destroy the factors of American progress.
This same spirit has built communities and encouraged business enter¬
prise and stimulated a pride and patriotism to defend them.
These, in
present
that
In
it
our
he
American
preserved.
dual
The
banking system is the proof
that the banks
Our duty as a
are
serving
their
economic
State Bank Division
is
to
12M%, have deposits of
over
$1,000,000.
The report pointed out:
F^Of these
1,133 banks. 611, or over 50%, are located in the eight States of
Illinois, Indiana, Iowa, New Jersey, New York, Ohio, Pennsylvania and
Wisconsin.
In
Arizona, the District of Columbia," New Jersey, New-
York and the five New England States
of the State banks would be required to
substantially more than one-half"
become members.
STATE
"The enforced
membership of the 1,133 banks under the provision
of this
law will, in bne operation, more than double the number of State banks in
the system, increasing the number from 961 to 2,094.
"The committee cannot endorse the principle that mere size shall be the
yardstick for membership in the Federal Reserve System or that member¬
ship in the system shall be a condition to joining the Federal Deposit In¬
surance Corporation.
This whole question is one which should be carefully
watched during the next few years so that at some opportunejime. prior to
1941 an effort may be made to have the lawLamended."
Resolutions—Again Declares
Amend¬
Security
Act—Also Change in
Report of Committee
on
Favor of Dual
in
of
ment
Law
Banking System—Urges
Social
Governing FDIC
President
Brady:
We will
now
hear the report of the
Committee on
Resolutions.
Chicago, 111.):
Mr.
of this
committee, President Brady included the name of W. J. Rahill of Louis¬
ville, Ky.
Mr. Rahill is not at the convention.
He was unable to come.
Consequently, the members of the committee who sat in on the delibera¬
tions are:
Frank T. Hodgdon, Farmers & Merchants Bank & Trust Co.,
Hannibal, Mo.; H. W. Koeneke, the Security Bank of Ponca City, Ponca
City, Okla. and J. H. Penick, W. B. Worthen Co., Little Rock, Ark.,
H.
A.
Brinkman
President,
and your
Ladies
(Harris Trust &
Gentlemen:
and
In
Savings Bank,
announcing
criminates against the
themselves can receive little
would be taxed on their
but due to
employees
if any benefit from this tax.
w
banks with average deposits of
over
SI,000,000 in 1941 must become members of the Federal Reserve
System in 1942 in order to have their deposits insured by the Federal
Deposit Insurance Corporation. "Without questioning the merit of member¬
ship in the Federal Reserve System, we feel that such membership should
not be a requirement for eligibility in the FD1C.
The FDIC shouldjbe
open to all sound State banks regardless of membership in the System, and
we urge that steps be taken to amend the present law at an early date.
We recommend that the State Bankers Associations of the several States
continue their efforts to secure the elimination of the double liability
running against stockholders of State banks or in the event that this is not
possible to work for such legislation as will place definite limitations as to
of 1935 provides that all
The Banking Act
the duration of such double
liability.
We wish to commend in the
the personnel
highest terms the good
officers and committees during the past year
Deputy Manager, Frank
Division and its thousands of members.
help that
our
Committee
Harry
A.
Brinkman,
on
work done by our
and particularly the
efficient
W. Simmonds, has been to
Division:
Resolution State Bank
Vice-President, Harris Trust &
this
Savings Bank
Chicago, 111., Chairman.
Frank T.
following resolutions:
State banks in that they
payrolls under the unemployment insurance section of the Act
the stability of employment in the banking business, bank
Chairman.
This committee offers the
57
BANK DIVISION.
Hodgdon, Cashier, Farmers &
Merchants Bank & Trust Co.,
Hannibal, Mo
H.
Koeneke,
W.
Resolutions
President, the Security
Bank of Ponca City, Ponca
City, Okla.
For
many
declared itself
preservation of
While the attitude of
the State Bank Division has annually
years
unalterably in favor of the dual banking system and the
State autonomy
with respect to branch banking.
the State bankers of the Nation has undoubtedly
J. H. Penick,
stronger today than they have
are
Historically
ever.been.
State banks antedate the National
the
Banking System.
Numerically they outnumber the National banks almost two to one.
The
Co., Bankers, Little
Rock,
adoption of these resolutions.
[The motion was duly seconded.]
v.
You have heard the Report of the Resolutions
In the
destruction
Mr. President, I move the
Mr. Brinkman:
been an important factor1
preservation of these principles which we believe to be fundamental,
nevertheless it must be admitted that the forces working toward their
Vice-President, W. B. Worthen
Arkansas.
I*resident Brady:
Com¬
and amendment. Do I hear any one
regarding these resolutions as to amendment by striking out or adding to?
If not, as many as are in favor of the motion will make it known by saying
"aye;" opposed, "no."
It is so ordered.
It is now open for discussion
mittee.
the development of the business
Nation which has been of inestimable value and
8tate banks have performed a service in
and economic life of the
there is
serve
nothing in
the picture to indicate that they
their communities with economy, safety
intimate knowledge
Report of Committee on' Nominations
cannot continue to
and efficiency and with more
of local needs than is possible under distant
Federal
President Brady:
Furthermore,
For
the banking systems
of our 48 States have been and will
centralization of banking
continue to be the most effective check against the
power
a
in any one authority which we believe
country
interests.
so
extensive
Therefore
favor of the dual
we
and
with
wish
unwise, if not dangerous, in
such varied business and agricultural
again to assert ourselves unmistakably in
banking system
as
now
constituted in this country and
States their right to
control the business of banking within their boundaries.
%
The Federal
Social Security Act exempts from its operations service
performed in the employ of the United States Government or an instru¬
mentality of the United States, a political subdivision thereof, or an
instrumentality of one or more States or political subdivisions and the
Internal Revenue Department has ruled that National banks shall be
opposed to any legislation which would take from the
classified
as
Entirely
correcting
this
regardless
of the merits
discrimination.
As
or
the constitutionality
the law now stands,
it further dis¬
President—H.
Trust Co.,
the
Committee"*on
For
M.
Chamberlain, Vice-President, Walker
Vice-President—Robert
M.
Hanes, President, Wachovia Bank
Bryant, President, Parsons Commercial
and W. S. Elliott,
&
^
N. C.
For Members of the Executive Committee for a
Harry A.
Bank &
Salt Lake City, Utah.
Trust Co., Winston Salem,
Term of Three Years—
Bank, Parsons, Kan.,
Canton, Ga.
Vice-President and Cashier, Bank of Canton,
Respectfully submitted:
M.
H. Malott, President, Citizens
L. A
M.
Bank, Abilene, Kan., Chairman.
Andrew, Vice-President, First State
Bank, Mapleton, Iowa.
Kimball, Kimball, S. Dak.
the adoption of the report which, if carried, would
Plin Beebe, President, Bank of
Mr. Malott:
I
move
elect the names we have selected.
President Brady:
instrumentalities of the United States under this section of the
of the
Social Security Act, this ruling has the effect of placing State banks in a
disadvantageous position and we demand that legislation be enacted
Act.
We will now hear the report of
Nominations by Mr. Malott.
bureaucratic control.
Before this motion is seconded, are there any
tions other than those submitted
a
by the committee?
second to the motion which has been
[The motion was
installed.]
nomina¬
If not, I will entertain
made.
duly seconded and carried
and
the new
officers
TRUST
DIVISION
American Bankers Association
Fortieth
AnnualJVfeeting, Held at San Francisco, Calif., Sept. 22, 1936
Meeting for Elections Only
The Trust Division of the American Bankers Association
convened at
2:05
at
the St. Francis
President
be
that
Callaway: Will
have
addresses.
no
you
to
come
The business
the nomination and
of
the
the
of
report
order,
before
There
G.
We
by
Committee
to
N.
(Wachovia
C.):
Mr.
Bank
President
&
Mr.
Trust
and
report that
have made
we
a
not
sent
out
for
throughout
the
and
country
desire
make
to
Trust
Portland, Ore.
For
Robertson
Griswold,
Vice-President,
Trust Co., Baltimore, Md.
Roy M.
Tulsa,
Okla.;
I
Huff,
Maclin
trust
F.
officer,
Smith,
First
National
Vice-President,
Bank
&
Trust
this
In fact, he is going
.
I ought; to
.
very
he will know what
year so
say
that
very
the appointment of the committees
going to
am
announce
the fact that I will
Trustees
on
as
and
Chairman,
adding to the committee at the present time
was
ex-officio
an
member
Stockton:
That
Callaway:
If not, the nominations
names
were
is
the
Birmingham
unanimous
Trust
report
of
our
are
any
&
work
Mr.
to
closed and I will declare those
you
to
and
now
Coles, in welcoming you as
Association.
in the line of succession to these
to
years.
-
_
men we
have had all these
this year, it seems to me we
continue
to
can
without
interruption and without
at this time the most
me
Thank you very
be of service to you,
thing
tribute to
a
I have
more
our
important
been
much.
Past
I want to
I will be there.
and then I
am
through.
President,
Mr.
Is
*
a
say
1 would
I want
Callaway.
working together for great
He has certainly done
President-elect Cloes:
come
heretofore constituted.
ought to know that because I want that
seems
Griswold:
pay
as
Otherwise,
have before the Division.
Merrel and
I have great
President-elect Coles: I am honored. It is a distinguished
privilege to become President of this Division and to follow
we
that if I
our
other nominations?
presented duly elected.
As I look forward
thought
like to say one
Are there
particular pleasure, Mr.
the President of
active member, and Mr. Stockton.
break in what
committee, Mr. President.
years.
announce
am
an
committee
Co.,
Savings Co., Birmingham, Ala.; Sidney F. Taliaferro, Vice-President and
trust officer, Riggs National Bank,
Washington, D. C.
and
of
deal and I hope he will be
the committee will remain
Co., Los Angeles,
Calif.;
whose
of Vice-President
much practice this
Callaway who
becomes
Maryland
For Members of the Executive Committee for a term of three
years:
Carl W. Feninger, Vice-President, Provident Trust
Co., Philadelphia, Pa.;
A. L. Lathrop, Vice-President, Union Bank & Trust
President
and
I present
as
■
Vice-President:
Mr.
great deal.
nothing
But
Indentures, with Mr. Page to continue
that I
Mr.
Coles, Vice-President, First National Bank,
a
which I have jurisdiction.
save
Blaine B.
doing
directly reappoint the entire Committee
report:
For President:
by
expected to follow those traditions.
At this time I
this
very^busy
a
going to have
Griswold, I want to caution him that he id
be called upon a great
over
inquiry that Mr. Sargent
we
office
pin representing the office
shortly I will
am
I have tried to follow the traditions of
he is coming into next year.
Gentlemen:
qualified for the Executive Committee
men
year
vice-presidential
active and get
Co.,
careful study of all
very
an
and
year
I do, I
friends and associates in the East
Division to Mr.
Chairman of the Nominating Committee, I would like
suggestions made in response to
usual
this
will
to
Stockton
Winston-Salem,
As
on my
as
speaking only when I have been spoken to.
the meeting is
election of officers.
Nominating
the
please?
Stockton, Chairman.
Richard
rely
During the past
This is the Annual Meeting of the Trust Division.
will
to
.
interesting
a very
Coming from the Far West
year.
o'clock, Sept. 22, Merrel P. Callaway, President,
presiding.
going to have
are
Hotel, San Francisco, Calif.,-
many
wonderful job.
there any further business to
before the meeting?
Deputy Manager Sargent:
President-elect Coles:
adjourned.
There is
Then
,
we
no
further business.
will consider the
meeting
,
[The meeting thereupon adjourned at 2:15 o'clock.]
I
DIVISION
SAVINGS
American Bankers Association
Francisco, Calif., Sept. 21, 1936
Thirty-Fifth Annual Meeting, Held at San
INDEX TO SAVINGS
Institutional Investor, by Rudolph J.
Problems of the
DIVISION PROCEEDINGS
Eichler..Page 59
Modern Conditions, by
Adaptation of Mortgage Lending to
Harold Stone
61
— ---
Problems of the
By Rudolph J. Eichler,
of
those normal questions that
course
develop in
conditions, with the huge
the institution under present
of
amounts
will continue to
business, plus the one problem that over¬
others-—What shall be the investment policy
any
all
shadows
or
cash lying idle on its
shelves ?
discussion on investments
If we had 25
or 30 hours to discuss this question, I do not believe it could
be solved to the entire satisfaction of anyone. Here/1 believe,'
The many
ramifications of
covered in
cannot be
a
25
or
any
30 minute talk.
answerable, each
institution shaping its policy according to its best judgment,
and, in some eases, with views that vary widely.
have
we
a
problem that is not definitely
well-informed
Certain
that
are
we
the
on
verge
individuals
of
an
in
this
country feel
extremely drastic inflation,
high-grade, fixed interest
bearing securities a very hazardous undertaking.
On the
other hand, there are others, equally well informed, whose
making the purchase of long-term,
belief and faith in the
have not
integrity of
our
dollar is such that they
policy of investing only in those
command the highest rating, regardless of
be
must
paid
to
conditions with so
It
seems
these views
It is
a
the premium that
obtain such obligations under
much credit available.
present
we
will find the answer to the furture for invest¬
the best investment policy must be to some
compromise between these two fields of thought.
quite obvious to me that we must to some extent
overboard
a
great deal of historical
throw
background when we
the future in an endeavor to ascertain
going to do.
financial services recently pointed out that:
attempt to peer into
what bond
One of
prices
our
are
If the British experience in
any
England's trade recovery can be taken as
America, the probability is that, even as
broadens and prosperity widens, corporations in\the
criterion of what to expect in
business
activity
aggregate will require
little new capital in the form of security flotations or
remain low, that bond prices
will remain high, that business will continue to benefit from low interest
rates, and that stocks will tend to capitalize dividends and earnings at
implications are that interest rates will
multiples.
Although it would be difficult for anyone to
the statement that at present
would be today if our
its huge
debt increase by the same methods that were utilized during
the war. Where would money rates be if the Government had
attempted its financing by orthodox methods, rather than
by inflationary methods? Here we have the borrower who
has been constantly paying less interest as his borrowings
increased.
Is it not sufficient to say that our present low
rates are artificial and repercussions from this false condition
Government had raised
be felt
must
To what degree these con¬
contradict
there would seem to be little
large extent tied in with
Government.
feel that each increase in govern¬
financial policies of our
future
Is it not reasonable to
mental debt by
the present methods of Government
adds to the hazards of
we
to accomplish
money
later?
or
sooner
the
ditions will be felt is of course to a
financing
the high grade bond market?
Can
requirements will have
that the raising of reserve
feel
long as this condition
credit structure
anything but a momentary effect as
remains ? We hear much of the danger to our
caused by the large
amount of our Government
bonds held
I believe the figure is something
60% of the total debt, but, obviously, the amount is of
by banking institutions.
over
staggering proportions.
concerned.
borrowing must
maintain low interest
It is evident that so long as more
be done, every
effort will be made to
those bonds.
on
I personally cannot see how this
hazard insofar as the banks themselves are
constitutes any
The ability of our Government to
conditions at very low interest rates is
all of us, and the means availaole to maintain
borrow under present
well known to
Government bond
It may
it is of
y
activity should De laid
the inflationary trend, a
to some extent to
financial
prices is of course also familiar.
be that our present business
result of present
Should this assume serious proportions,
questionable whether anything could stem the
policies.
course
insatiable demand for credit
which would result in higher
A large portion of
interest rates
and lower bond prices.
institutional
holdings
of
Government
obligations
are,
which must be taken
also the ability of the institution to take
however, of a fairly short-term nature,
into consideration;
If there is
This article went on to say:
generous
66
—-
Co., Los Angeles, Calif.
Government bonds to the Reserve
bank loans for some time to come.
The
Nominations
yourself where our money rates
Ask
rates
reasonable to suppose that somewhere between
ments, and that
extent
orthodox
securities that
departed in the slightest degree from the
investment
Report of Committee on
Member Bateman, Eichler &
institutional investor are
greater today than ever before, at least in the memory of the
present generation, is a trite statement.
These problems
cover
Address of President
Institutional Investor
that the problems of the
To say
Page 63
65
Animal, by Dr. Ray Lyman Wilbur—
Philip A. Benson
•
Man: A Saving
unable
interest
to
an
meet
Bank, if necessary.
might be
the
goundless fear, as
implication that the Government
these obligations at maturity or pay
when due,
this
seems
to be a
providing for payment of principal and interest does not
seem to me to be a problem.
If we knew that the Govern¬
ment
debt
were
going to be stabilized at around present
hope for a demand that
figures, I think we could all agree
credit
that it could be easily
handled, but at any rate, even
credit
would utilize any large portion of the
available, it is also true that the position of the
structure in this country aSd in Great Britain are
widely different in character.
credit do not
countries with the weakest
usually default on internal obligations.
The
problem is simply
in what kind of money they will pay,
60
BANKERS'
and this is
not the
A
institutional,
or
investor
an
inherently
are
borrower feels that money rates
tageous he is likely to experience for
are
a
whether
in¬
in
underwriting
the
obligations.
and
the
at
years,
investment
organization
issue
securities
suf¬
ficiently attractive to make them
successful in
funds from the investing public.
At the present time, with
the
plethora of idle funds,
rower's
market, where in
bringing out
have unquestionably
we
highest credit have been able
to
bor¬
a
corporations with the
some cases,
practically dictate their
terms.
own
was
financing of the General Motors Acceptance
interesting to me, as this corporation borrowed
$100,000,000
on
its 10-15
them, I think, slightly
was
1
or
obligations, the
year
money
costing
3%.
over
borrowing at the banks
I believe this corporation
on a
short-term basis at 134%
y2%.
Although it is unquestionably true that the vast majority
financing has absorbed little new money and has
been
principally of
slight
such
tendency
refunding nature, there has been
a
toward
a
betterment
this
of
a
condition.
Bethlehem Steel Corp.'s new issue, in the amount of about
$55,000,000, I think allots
struction.
In
about $40,000,000 for
addition, the demand for
con¬
from institu¬
money
tions for commercial purposes, I believe we
new
feel is be¬
can
banks
and
by statutes, in
district
bonds
the
issue
does
appraised value.
been
never
th^ invest¬
legal in this State when the amount
are
exceed
not
certain
a
percentage of the
As you know, the appraisal of real estate
exact
an
science, and experience has taught
that many real estate issues that
us
were
opinion, with the idea that
my
the standpoint of
protecting
policy of the savings institution.
Real estate bonds
has
were
were
legality would make the sale of such securities easier,
ment
of
who
Certain district obli¬
reclamation
rather than from
rate in character
were
sold
on
definitely second-
were
legal basis.
a
Securities in
this State have been sold, both to institutions and
prefacing remark
being:
"These
individuals,
bonds
have
been
certified
as
State."
Obviously, the Superintendent of Banks certified
legal
them because
investments
for
savings
they complied with the
be other States that have had the
to
seems
that
me
banks
There must
statutes.
same
experience, and it
uniformity of restrictions, if
some
this
in
neces¬
with greater latitude would be beneficial.
sary,
of reoent
irrigation
made legal
the
The recent
Corp.
savings
legal for savings bank investment.
long period of
time
same
by
great degree by the fact that these bonds
gations,
issue of bonds must endeavor to satisfy
an
borrower
An
a
opposing forces.
naturally inclined to issue long-term securities.
At
point, the lender should probably be more interested
short-term
purchased
were
influenced to
the most advan¬
he is
this
bonds, district bonds, irrigation district bonds and other
obligations
borrowing corporation and
a
bank and
a
institution.
dividual
If
question that affects the depositor of
a
CONVENTION.
Further, it
to
seems
that restrictions governing the
me
investment policies of banking institutions
imply a lack of
ability
the part of such institutions
on
and that there is
some
set of
to
judge investments
printed rules, compiled by wiser
heads, that will soundly guide the destinies of bank invest¬
I cannot agree with this
ments.
rule follows
same
troller of the
theory.
I believe that this
concerning the recent ruling by the Comp¬
Currency's office, that members
of the Reserve
coming slightly better.
Loans and discounts reported by
system may not purchase
member
Reserve
predominantly speculative, when below that standard
the
of
Federal
upward trend this
year
System
have
shown
an
for the first time since the depression.
Some months ago a number of
prominent eastern financial
authorities,
will remember, had
you
some
discussion
to
as
whether interest rates had reached their low
point and would
turn
these terms
used in
are
bond that is "distinctly and
a
rating manuals."
that this is any step forward in
solving the investment prob¬
lems for
banks, although I have
services
and
believe
that
no
quarrel with the rating
can
they
be used to advantage
higher, the net result being a decided difference of
opinion.
From a psychological standpoint, the buyer of
when tempered by
securities
purchaser
both listed and unlisted,
corporate,
refunding
ment.
at
present rates has
and this attitude is not
been
decreasing to
reluctant
a
any extent as
at lower rates continues.
Now, I should like
problems which I feel
Is there not
of
a
know how many issues of securities there
I think that
to touch
briefly
on a
few
more
normal
important to the institution:
are
is
we can
well
a
figure of,
sitting at
a
desk with
Why
sideration what has happened
savings bank must be restricted
investments and
not
have the
probably
in the
to
If
we
banking field than
agree
almost
the limitations
superhuman
more
enjoyed by
intelligence
and
a
cannot
foresight
to
the
in¬
Events of the past
however, I believe, have pretty well demonstrated
changing conditions.
I
believe, for instance, that the New York State law
provided a few years ago that bonds of a railroad corporation
for
legal if that corporation paid dividends at
a
stated period
position of
amounts
of
the
these
rate, it
its
common
bank
stock.
that
bonds, when
paying dividends?
any
on
savings
was
obvious that such
a
continue to pay dividends to
certain rate
What
was
the
substantial
corporations
The law, I believe,
seems
a
purchased
the
be
satisfactory than those
the commercial institutions with less
exacting restrictions ?
I believe it is safe to say
that in California the laws regulating
investments by savings banks have limited the investment
a
number
of
years,
point that has been harmful.
within
my
investment service
of
can,
No
corporation's
a
with
slide rule, successfully, in
degree
any
opinion,
my
Rating services take into
con¬
in the past, and rightfully
defaulting.
"Baa"
knowledge, real estate
rating of
same
Erie refunding 5s
pay
number of such instances
I have felt for
ment
some
the
a
were
rated
this.
larger financial
fundamental weakness in the invest¬
satisfactorily in
This may be
overcome.
instances, but I believe
some
majority of institutions, the officer in charge of
investment
of any
as
time that, even in the
policy that is rather difficult to
that in the
mortgage
its interest throughout the depression.
institutions, there is
surmounted
the
time, did not prevent this issue from
There
any
in
1928, did not prevent them from
continuing to
are
bond
a
Chicago-Northwestern general
The fact that
the
at
the
forecast
rated "Aaa" in
institution.
Have the investment results of the
savings bank portfolios,
under these restrictions, been more
For
a
to
that
fact
were
changed; but at
corporation might
keep its bonds within the legal
a
The
bonds
investment
best served by cessation of such dividends.
policy of such institutions to
attempt
stopped
category, when the interests of the bondholders would
of
no
future.
that it is not possible to have statutes which will
not become
obsolete or impracticable due to
were
using
dictate investment policies.
apparent to those
necessary, we must attribute
dividuals who draw up such statutes.
few years,
types of
in the investment business.
one
are
latitude
same
commercial institution is
to certain
govern¬
100,000 to 200,000,
a copy
earning statement and balance sheet,
of accuracy,
a
I do not
in this country,
municipal and
say,
imagine that
Association concerning the various laws
regulating
investment by savings banks and
savings departments?
your
are
capable of correctly rating all of these securities.
young man,
great field for study by the Savings Division
the judgement of the investor.
Taking at random
as
I do not believe
portfolio has
committee
It is
his
the
or
actions reviewed
executive
committee
by
of
an
the
extremely difficult to guide the destinies
investment account without full
power
to act, unless
those individuals with whom you confer have a wide knowl¬
edge of
stitution,
securities.
purchasing
or
Edison 334s,
type.
In considering investments for his in¬
the investing officer
be
can
little^criticized for
submitting to his committee,
or
Illinois Bell 334s,
or
say,
Rated "Aaa" there is little possibility of
in this rating, nor in the
New York
other issues of this
ability of the
any
change
to satis¬
company
factorily service the bonds, under practically all conditions.
Such
obligations assuredly
high-grade investment
may
account.
well form
Of
;
course
a
part
the
of any
investing
SAVINGS
officer
probably realizes that under present conditions he is
paying
If you were
in his position,
rated "Aaa," but would
were
If the
purchase when they
within the past year or so
counter
I think that
having
one
iota upon the
any
banker, and,
as
one
a
more
many
a
exacting business,
very
will, and it is pretty difficult to
in your mind
to govern
portfolio,
seen
institutional
bentures,"
type
investors
or,
said,
will
a
ployed.
if they wish to keep their funds
markets, when the demand for
money
even
the
believe, however, that
factory and profitable to
many
institutions and
can
definitely
very
balanced
a
investment organiza¬
other business,
conditions
in
Many investment institu¬
this situation is likely to
with the consent of both
have,
clients, established
fees
or
be
must
profit to the organization
practice
a
paid when bonds
are
recom¬
purchased for the account of the buyer
are
organization making the recommenda¬
in
advisory
an
is dependent
course
The success of this
manner.
close cooperation with an
upon
able investment organization which will
of your
have full knowledge
portfolio and needs.
I commend this
I
bond account has been very satis¬
a
by them
account
plan of
This is
familiar to all of you, and the reason for it is obvious.
I
banking
tion, which compensates them, at last in part, for handling
in normal
increases.
to
suggestions.
normal
judgment,
without profit to the
em¬
elsewhere has in the
past found these bonds selling at lower prices,
their
mended
It is pretty obvious that the institution which buys
bonds when it cannot loan its money
under
whereby service charges
substantial purchasers of bonds in the future than they
have been in the past
have
upon some
individual and institutional
buyers
Some authorities feel that institutions must become
at best.
depend
tions in the country, realizing that
I have heard many
man
suggestion.
operated for profit, and it must naturally follow that
restrict
word about the bond account.
you must
making such recommendations.
"we will not buy thi3 type of security or that
of obligation."
Now,
trained
a
wish to purchase and a
you
securities that carry at least some
de¬
buy
not
exactly the security
recommendations
did not sound well and other
bankers criticize bonds and have found them reluctant
more
must be
securities turned down without any
name
"We
and
The investment business, as well as any
seem
have
a
a
great deal in the past few years.
a
tion for recommendations and
the opinion of banks regarding the desirability of
I have
in
institution, whose size will not permit the
investment department
pretty well conceived idea about building yourself
A
Often preconceived ideas regarding securities
examination because
should be built up
When you purchase bonds, unless you
factorily.
securities.
an
business, has learned
both fields satis¬
cover
price of bonds purchased.
reserves
believe that the investment business, as well as the
profession if
or
institutions
some
policy of using profits from
a
handle its portfolio, I should like to make a
$100,000 worth of bonds.
and practical experience.
of study
years
time when
For the smaller
formation of
as a
knowledge of investment securities is attained only
banker also has
the losses that the bond
provide in the future ? I think
recently adopting
ever was a
Are these
profits to current earnings.
bond account, it seems to me that now is that time.
to whether he
as
certain
provide
certainly
Many institutions have in the
bonds sold to write down the cost
is decidedly different
thousand dollars than
been
If there
interested in whether he should
should buy a certain block of
you
have
manage
He views credits
You should not
taken substantial profits from bond accounts
year or so
account may
friend of mine in the banking business
recently stated, he is
loan John Jones
cases,
point of view.
should
you
institutions going to moan over
ability of the banker, I believe it is fair
that his viewpoint, in most
and
in your account.
and credited these
Without reflecting
institution of size.
than the investment
after
past
emphasize the importance
trained along investment lines to
a man
portfolio of
A full
amortization;
salary would
your
bond account ? You should
than the going rate for money.
reserves
take these chances?
one
should not fail to
we
the
to say
the bargain
were on
definitely unsatisfactory might happen to
and why shmiW
you,
properly handled and given a
expect to get a higher rate of interest from your bond
account
continue, but if it did not turn out successfully,
very
if
expect to buy premium bonds without providing for their
and rated only "Ba?"
purchase turned out satisfactorily,
course
something
of
not
not be disinclined to attempt to induce your committee
to concur in their
institutions
most
What should you expect from a
would probably have had
you
mortgage 5s in 1928, when they
you
for
chance.
hestitancy in submitting New York Central refunding
no
of
so
premium for this credit.
a
61
DIVISION.
thought to
you, as
I really feel that money
spent for fees covering service charges cannot help but react
to the ultimate success of
be made
a
bank's
portfolio.
Adaptation of Mortgage Lending to Modern Conditions
By Harold Stone, President
In
Savings Banks Association of the State of New York, New York City
introducing Mr. Stone, President Benson said:
gages
It is my pleasure now to present to you a man whom I have counted a
personal friend for
He is the President of
many years.
Association in the State of New York.
our
Savings Bank
York,
of
our
Bank
In September, 1935,
we
made him, by unanimous choice, President
New York Association.
for
a
President.
number
He
came
of
years,
He has
as
to the bank
as
connected with the
been
trustee
and
as
He
as
was a
Director of Operations of the United States Employment Service in Wash¬
ington during the
war.
i
I
am
assuming in this talk to
you
about mortgage lending
that the problems in New York State do not differ
from
the
those of other States
same
and
fundamentally
very
widely
In the last few
years
much
We who
once
against
our
come
to be very little
lenders and property
thought of ourselves exclusively
will, become property
have had to interest ourselves
ment of property
more
owners.
as
owners.
lenders have
Therefore,
definitely in the
this is admittedly
utilize instalment
and in those matters which jointly affect
ownership and mortgage lending.
Outside of large bond issues, such
a
railroad mortgage
reasonably
attractive terms
merchandise;
very
possibly
be
to
our
perman¬
possible
are
might
we
H.
as
public.
citizen should be able to purchase
he buys
a vacuum
cleaner
or an
a
home
as
automobile,"
Brown, President of the Johns-Manville
Corp.,
speaking from the point of view of the construction industry
recently told the New York State Bankers Association.
One
of
considerations
the first
which
strikes
me
as
of
paramount importance is a trend in real estate which makes
a
vast difference to
will recall with
house
was
built to
us
as
me,
serve
lenders,
as
a
mortgages secured by income producing property, and mort¬
of
a
am sure
that most of
home not only for the present
generation but for generations to
location,
I
for instance, those days when a
bonds, the mortgage field is divided into two major parts—
a
proper
may
leaf from the book of modern merchandizers to bring
"The average
Lewis
government
as
home for cash, but
believe it
we
There is
more
this fact to the attention of the
you
as
impractical, and
than with shorter-lived
take
well
as
buying in this field, whatever
home, and
important
citizens and tends to
our
industry,
opinion of using it elsewhere.
we
manage¬
the morale of
and
more
The extent of home-ownership
whole.
I wish each family might buy a
conveniently
there has
distinction between mortgage
\
itself.
type of thinking is required in all sections of the
country if they are to be solved.
\
■
as a
commerce
ent value in a
Mr. Stone's address follows:
f
governs
stabilize
Savings
and finally
attorney
counsel in the practice of law.
country
largely
He is Mr. Harold Stone and his chief
job is that of President of the Onondaga Savings Bank of Syracuse, New
The latter is the
secured by homes.
to the
come.
There
was a
stability
willingness for generation after generation to
62
BANKERS' CONVENTION.
remain not only
in possession of the original property but
actual tenants of it
as
well.
disappear, at least in
We have
large number of people to
lives
entire
there
At the
away.
time, there
was on
the whole
formerly by
move
number of other considerations.
a
representation
tax limitation statute.
his
rule try to
acquire and maintain
place beyond
a
means.
final solution of
today from those earlier conditions. We have in this country
mobile population.
more
6,000,000 of
a
very
short time
automobile trailers.
Other estimates
higher.
are
any
rate, with the great increase in industrial employment as
changed and
jobs shift,
occupancy,
plant locations
of the population.
we see a mass movement
have in mind such effects upon communities as has
caused by the
are
I
been
shifting of cotton manufacturing from New
England to the South and of shoe manufacturing from the
East to the Middle West.
Such
hayp
moves
undeniable
an
this
real
on
^
the
has
reached
authorities
seems
to be
no
that property owners themselves
years
a
house
was
conveniences.
house and with the
a
But the plight of these property pwners has
become increasingly evident to mortgage lenders, not only
because they have had to acquire real estate due to unpaid
many
is
answer
a
situation to be faced.
believed
adoption of
open
plumbing there
done
many
years
struction.
Today, however, obsolescence is rapid.
so
so
have
found
ample
consideration of
improved heating systems, of insulation, of air-conditioning,
approach
have
seen
great deal of research in the field of prefabricated houses.
a
Obsolescence in any field is
and whereas
life of 50
that
or a
a
house in the old days was constructed for a"
properties not nearly of that
some
a
interested in these
are
find
ourselves
must
with
old
properties
on
hands
our
eventually be sold in competition with
more
of
which
modern
homes.
ations
which
future.
of the
What
will
govern
are
we
look for? Will mobility
Will rentals be
and
have
The
attractive
more
ownership ? Will the present rate of improvement
in construction be maintained, and will the
more
the consider¬
sound mortgage lending in the
developments must
population increase ?
than home
importance
more
conveniences?
public demand
If so, what effect will that
mortgage loans made for long periods of years?
on
tendency today
to
seems
be toward making 20-year
mortgage loans rather than mortgage loans for
period,
State,
or
a
as
has for
form of open mortgage, which has meant
manent" mortgage.
loans
a
on
It
may
well be proper to
a
"per¬
arrange new
basis of annual amortization which will at least
a
of
of
to need
These questions seem to me
the very careful study and
attention of mortgage
lenders.
I
some
figures which perhaps illustrate that the
"permanent" mortgage
not
was
total mortgage loans of
the
through 1930,
$58,000,000.
one
of
our
banks had
The net loss for those
$81,000—less than 1-200 of 1%
following five
years
out of
a
per year.
total investment of
$37,000,000 it has charged off $1,400,000.
However, it has been easier for
or
Assuming the
our
at least to start
have acquired collectively
great
a
been placed at the disposal
may
be in order.
a
These
few States
are
word
a
purely mutual
earnings
All
to the depositors in the form of interest
go
There
are
about six and
a
or
half million
depositors in the 135 institutions in New York State.- Then-
deposits equal about one-tenth of the bank deposits of the
country.
Of approximately six billions of
three and
a
there
are
resources
invested in mortgages
about
and real
in^the whole country
about 33H billions of mortgages, which if true,
shows the mutual
own
are
have heard it stated that
I
estate.
half billions
savings banks of New York State alone
nearly 10% of all mortgage-investments.
Among
our
information
govern
cooperative efforts I might mention specific
on
neighborhood and community trends, which
not only a bank's policy with reference to the sale of
acquired real estate but particularly the granting of
mortgages in such
one
recently witnessed, in
common
are
inexperienced and look
upon
Often
this field merely
in which to make
quick profits.
that
materials used, the inferior work¬
the type of
Frequently,
manship and the financial backing has been such
highly speculative loan for
a
with other
considerable amount of speculative building.
the builders
found
might best influence the type of building being
We have
areas, a
new
We have taken steps to consider
areas.
the property an unsound investment for any
In the 30 years, 1901
In
suitable in the earlier days, but
suitable today.
30 years was about
satisfaction that this method of
bankers, but rather should represent
we
additions to surplus.
as
have
own
institutions managed by trustees without compensation.
done.
but also from these
in
effort
tremendous force. It should not, however,
a
savings banks exist in only
explanation
how lenders
outside forces of obsolescence.
cooperative
banks.
our
As mu+ual
approximate the depreciation and reduction in value which
alone from normal usage,
for
mortgage and real estate problems, and
rolling, and
results
not
in the mutual savings bank field
deal of information which has
shorter
been customary in New York
years
have
have
cooperation of all institutional lenders if it is to reach its
of the
But perhaps of even greater
we
greatest effectiveness.
us
lenders and
we
the ball
many
as
we
savings banks alone to operate together,
equipment.
associates
clear that this
decades and which
many
have great
age now
developments because
be
can
our
be limited to savings
the
my
directly
our sorrow
public which has become conscious
desire for the most modern construction and
a
We
factor to be reckoned with,
100 years, I think we have found to
difficulty in attracting
of
a
us
nor
seems
ownership in which
opportunity
have proven to our
of electrical conveniences and
we
but it
and realize
Just what the
much to foster.
the development of the use of fireproof materials, of vastly
sanitation, and
great deal closer
years
neither I
say,
It affects
thoroughly for
In New York State
con¬
We have
prepared to
are
affects the entire fabirc of home
advances in heating methods and the
for
the present time
at
in New York
is
come a
borrowers during these trying
struggles which they have undergone.
some
were
an
high taxes.
exception of
relatively few major improvements in this type of
had, if they chose,
opportunity to make known at the polls their opposition to
the
During the early
the part
appalling advances.
themselves large property owners, and'I think their attitude
was
homes.
provement in home construction and home
real progress on
recently mortgage lenders took
active interest in the subject of taxation. They were not
to
and that is the tremendously rapid im¬
many
I cannot recall that up to
any
another is not conducive to the purchase and maintenance of
us,
point in
real estate has been
toward halting the
taxes, but also because they have
There is another phase of this same question which is of
The burden of
the
own
effect upon the values of real estate and upon home owner¬
ship generally, for the prospect of moving from One place to
importance to
a
general
no
It is not only that the present burden is
high, but that there
of
it, there is
particular problem.
estate
seriously curtailed.
some
At
As I understand
communities where the desire to
population will be living exclusively in
our
against farm
taxation
I believe Roger Babson, the
statistician, predicts that within
the part of many substantial citizens for
on
that limitation of tax rate statutes holds the
agreement
I think you will all agree that there is a substantial change
a
In New York
State during the past year we have had a very vigorous
a con¬
not
a
of
be traced to the factors
with the general effects of the depression.
We find ourselves today much more closely affected than
siderable modesty on the part of the home owner, who did
as
can
which I have mentioned, but their effect has been felt along
their homes and spend their
own
total loss, it is equivalent to about %
a
Not all of this loss
a year.
was
But it
though the children might
even
same
on
1%
the part of a very
part of the country.
our
followed in turn by a definite desire
charge-off to be
as
that day gradually
seen
any
institution.
as
we
have
to make
buyer and
Let
me
tell
a
you
little story.
Some 15 years ago
couple bought
a
in
one
of our up-State cities
a young
two-family house, expecting to rent the
lower floor and occupy the upper
themselves.
They knew
SAVINGS
about
much about
as
dividual.
It
One of their
There
to the basement.
to
only
play. The
single-handed
so-called
was
grand piano,
was a
one
the
a
far
so
public—I might
add
even
of the other
some
only to
public
against the purchase of improperly constructed properties,
protect mortgage lenders, but to protect the buying
We do not want in this country a class of
out of bitter
suitable
experience
marked effect upon
We have recently
a
home is not a
extend
interest should
Our
investment.
people who have
believe that
come to
homes and to all buildings
the construction of which will
neighborhoods and
had in New York City
a
number of workmen. Those apparently
under indictment.
in proper
But
surely
building have
ourselves in
our
mortgages,
ghastly illustration
some
we
who
responsible
are
are now
vitally interested
splendid opportunity to interest
a
constructive way
Par-
in this problem.
ticularly does the situation point the need of much more
and
painstaking inspection by lenders.
we now
have two substantial engineering
controlled by and
closely
very
structure is
available to
faulty in
any way
had
also
an
interesting experience in recent
selected
in which there
was
instrumentality
to the benefit of
have
we
of
two
more
public interest
combined weight through
corporation
wholly
owned by
are
probably
some
It does mean, however, that there
opportunities for constructive thinking in
order that large amounts of funds in the hands of the public
be made available for proper development.
may
realistic
scale
own
their
were
properties
In addition
eyes.
prices where
We believe
of those who
making
of
the
on
acquire
we
ship.
We have discovered
we may
one source
have
we
verge
of
additional
In this
way
helped to maintain the status of neighborhoods
which is all important to property values.
have given
of trouble, which I hope
I think that savings banks
avoid in the future.
contributed much to the development of our State by making
loans to help build
up
the communities served by them,
But there came a period when deposits in our banks
increased more rapidly than the local demand for mortgage
loans, and in
attempt to acquire earning assets they
an
beyond their immediate territories.
Loans
from home ground have proven much less satis-
reached out
made
away
factory than those made in areas whose conditions were
wholly familiar—I think we shall in the future be wary of
distant loans.
I might suggest
an
apparent anomaly in the general method
so.
Should mortgage interest rates
take into consideration the amount of equity which the
owner
run,
has invested, the length of time which the loan is to
the type of neighborhood, the type of construction, and
so on
? Might mortgage lenders more readily influence sound
construction, higher equities, larger amortizations, by giving
premiums therefor ? Admittedly
a
great deal more attention
knowlThat
increase in work might be considered wise provided the
not only a thorough knowledge of the property, but
edge of the credit position of the borrower as well.
additional safety is commensurate with it.
I have not told
have transferred
the property itself in good condition.
have also
I have no
definite recommendations to suggest, but this subject is
worthy of the serious attention of institutional lenders in the
interests of sound real estate development and owner-
perhaps has been paid in the past, which would presuppose
a
properties to individual ownership at fair prices and
have put
much about the real estate situation in
you
New York State. It is showing definite signs of improvement
there
as
elsewhere, but those signs of improvement in them-
selves impose a responsibility on lenders who are interested in
In order to do this
the safety and yield of their own investments and who are
much cooperative thought to the question of
interested also in the protection of the public against un-
rehabilitation and
would
in many other States, our
present owners and the entire community,
by
value in their
then
evidence of
our
highly uncertain before.
were
it
and
one
some
a
established
the courage
we
as
would have to be paid to the individual mortgage than
bolstered
we
State,
have stimulated the real estate market
we
losing
many
first
buying, and by using
savings banks,
prices
our
rate charged for the loan is affected by the risk. In mortgage
cooperative selling of real estate acquired by
and
In
the loan commitment is not
if
We
the
lending business.
of mortgage lending. In almost any other sort of lending the
and
months in the
the
other fields in which cooperative research
are many
lending that has not been
have
toward
There
the
construction,
institutions.
areas
to appropriate areas
is almost essential if we are to have a sound mortgage
savings banks to follow
our
under
properties
In New
departments,
fulfilled.
We
as
low cost housing.
beyond
improper building which resulted in the loss of life to a
York
mendations
research
such areas, and recomin which to establish
any one or to any group.
action of that sort among our
some
the verge of undertaking a movement not
are on
careful
to the proper and economic use of
as
guaranteed mortgage companies. It is neither my purpose
nor my function to attribute the blame for these failures to
requisite for a
savings banks which shall be State wide, and I believe that
of
perhaps owners, should
be able to bring to bear opinions backed by actual
piece of property in that city which does not qualify
We have considered
a
the provision of low cost
are
real estate situation has been complicated by the failure of
savings bank mortgage loan.
have
Certainly lenders, who
it is almost impossible
under the minimum standard of construction
we
stance, about slum clearance and
housing.
possible,
as
It took time and hard work to
lenders—but it has worked, and today
to sell
public reaction,
all those who liked
among
campaign to wipe out
a
fell through
savings bank in that city undertook,
"jerry-building."
educate
immediate
an
their friends but
among
fair
see
the ordinary in-
as
moved into the second floor and promptly
was
not
buying houses
wedding presents
63
DIVISION.
we
have urged it in those cases where it
produce additional income
economic investments and in the
proper
ment of their own communities.
improve salability.
or
The
and logical developmessage
I have to
'
If
of
one
lets his
cooperative action there
for research which will
It is
community.
this question
bring to you today is merely the suggestion that a thorough-
innumerable- opportunities
going knowledge of our problems, much of which can only
imagination wander
my
be
are
little
a
on
profitable to lenders and to the
observation that
larger cities
our
particularly afford splendid opportunities for highly
structive cooperative work.
We hear
a
con-
great deal, for in-
be acquired through cooperation, will do more than anything
else to put mortgage lending and the real estate investment of
hundreds of thousands of
Man: A Saving
By Dr. Ray Lyman Wilbur,
In
We
honored this afternoon to have
President of
is President
He is
a
one
of California's great
of Stanford University.
former
as
a
speaker
universities.
He
was
on
the
a
a
well-
He received his A. B. and A. M. degrees from Stanford
number of universities, including the University of California,
Duke, Princeton, New York and Yale.
Dr. Wilbur has been President of
Stanford University since 1916, except for that time when he was Secretary
of the Interior in the cabinet of President Herbert Hoover.
a
wholly satis-
Animal
President
Stanford University
on
Illiteracy.
He is
a trustee
of Rockfeller Foundation and of the General
Education Board.
born in the State of Iowa.
University, his M. D. at the Cooper Medical College, San Francisco, and
LL.D. from
on
Health and Protection and Chairman of the Natiopal Advisory Committee
our program
Dr. Hay Lyman Wilbur
Secretary of the Interior of the United States and is
known educator.
citizens
Dr. Wilbur was Chairman, also, of the White House Conference on Child
introducing Dr. Wilbur, President Benson stated:
are
our
factory basis.
Dr.
Wilbur:
President Benson,
In outlining certain
things about
Ladies and Gentlemen:
my
past, your chairman
forgot my qualification which makes it possible for me to
speak here today.
I
was
one
National bank for 8 to ,10 years.
of the directors of
I did not learn
a
small
very
much
about banking, but I did learn
farther away
the
CONVENTION.
BANKERS'
64
more
onejthing and that is, the
the corporation is to which
about it.
you worry
heard here today, that worry
I
lend
money,
by the talks I have
can see
still
you
a
that he has been able to conquer
think the Swedes
Where do you
the world.
the Norwegians or
or
the Finns would be
today if they had not been saving animals?
have
settled
the
would have
congregated around those quarters of the world
where conditions
of
are
they lived
on
in the
Marquesans
on
They had
one
cannibalism.
thing
was
the trees, and fish in the
They developed fine physiques and got along
sea.
of living.
way
balmy islands where there
ample supply of food, fruit
an
I think the
seasons.
of the most reliable setups
one
For centuries
well.
might object to, and that
you
very
was
They ate their old people in emergencies, and
their enemies when feasible.
This carried them
Instead of
eating
and
save
our
old people,
but in the vaults
get our citizens
of themselves in
care
It
if they
was as
they got only
The basis of
family; but there is danger
management of
of
groups
and
men
goes
superior
adequate control of
an
stability
will be
that those who
so
protected from
savings must
In the
Los
Angeles Museum there is
bones of animals and birds found in
collection of the
a
bitumen pit.
a
These
This all
group
social
of
that
We
found
are
roamed
years ago
over
the plains of the South¬
the
skulls
of the
of
California.
In
others died.
These gopher skulls
pocket-gophers.
variety that
same
Why?
other
we now
the
words,
were
find in
many
survived;
gophers
Because the gopher is
parts of
the
diseases
what
has
The human
and
it
possible for him to
go
through
family has its
and downs—its droughts
ups
If
savings
we may
sure
meet
that
we
develop methods
can
do
well
as
the pocket-gopher, but I
as
all smart
we are
enough to do
conditions better than
many
we
inevitable that
off their
own
just
young
scramble about for
as soon as
they
themselves; and each
with him the urge to save
They drive
carries
young one
and the fear of owls, skunks, and
hawks.
we
have built
up our
civilization, apd each
generation adds something that the next
chooses.
of
Thus
build
can
upon
if it
keep advancing and accumulating stores
we
food, buildings, bridges, roads, factories, and
progress
depends largely
upon a very
—and that is that the old bet
reward the old for the
use
on
Our
so on.
simple business method
the young, and the young
of their
savings by
some
form of
Governments must do
of the human family.
avoid
of them.
their immediate
by various procedures, and
that the losses
so
It
wars.
seems
Their after-effects
consequences.
are
we can
build
up
not too great.
suffi¬
But the
being has another quality which we call obstinancy.
our
starts into
once
Consequently
savings and mortgaged
our
we
a
conflict he does
have usually used
future before peace is
made.
In this country we are now
We and
war.
this
large debt for
long time to
a
individual management
long period of
in the midst of paying for
of
mass
years
come.
It will take good
by tens of millions of people
without
up
with the idea that the
the
individual
person
We
can
looking out for himself is
look back in history and see
how such civilizations have failed, time after time,
only
mass can
way a
made
over a
just to get the back costs paid.
people is big enough to take care of everybody
doomed to failure.
in the
a
children's children will be busy handling
our
up
People
make mistakes, and terrible mistakes.
The
satisfactory nation can be built up is to have it
with good self-management.
of units
In other
words, each must look out for himself and contribute to the
payment.
That is capitalism.
accumulated
The old have worked and worked and
something.
They
say
"Take
to the young,
this something and go to work with it with all your energy
and time and
up
as
Any civilization that is built
Through saving
periodically, is most
It destioys life and savings
us to
see more
The result is that when he
all
diseases, which is
mass
comes
We
as group
certain amount of insurance against these
up
big enough to
are
shall
we
carry a
reserves
human
act in groups,
be classified
can
of mankind.
costly and damaging
conflicts
largely with
various methods
our
we can
steady advance in the fortunes
can
goes
managed and led,
to avoid this disease of war if we are to have
am
They do not
do.
congregate into groups that destroy, as we do.
can
not know when to stop.
The gophers
so.
which
We call it "War."
our
of handling
that
Perhaps it is beyond hope for
cient
floods, its panics and booms, its periods of plenty and of
starvation.
not
made
droughts and survive.
so
damage to all of those who have been thrifty.
they
We
This
so
One of these
disorders.
It is the greatest enemy
a
I
entirely independent.
increase in numbers, and
our
or
does
are as
successive
Our rise and fall
terrible intensity and
of
as
destroyed,
question of management:
If the herd is not well
developed certain faults that
saving animal.
roots.
experience
Herd animals have advantages but
great risks.
developing civilization
He stores in the ground both seeds and leaves, and can eat
a
a
the individual members of it cannot be
destructive.
Among these bones of extinct creatures there
an
management through government and all forms
run
and
100,000
If they fear that their
desire to spend.
a
down, then, to
herd animals.
are
only remnants of the sabre-toothed tigers, the giant
a
feel that their savings
year to year.
agencies; and, second, individual management
Along with
of
one
The first
savings result from the handling of the affairs of persons.
the camels, and other animals and birds that 50,000
or
as
provide that security and that
save can
there develops
comes
the
west.
building and had left
the risk of having such
run
and in its place
cranes,
are
a
have just indicated, the spirit of saving is often
have
environment.
good, because
stable condition of society.
a
function of all society is to
that of the herd.
large numbers unless, along with it, there
few pieces of gold, a few
paper was no
going forward with these savings from
tion to the immature and the aged and
vast increase in size in the human
a
The
paper.
had burned down
step to the next is
they also
in
of wealth from these
sources
salvage only the distorted nails and pieces of metal.
This saving habit, combined with trans¬
a
They thought
they had destroyed all its value by the change in government.
portation, invention, and public health, has offered protec¬
has made possible
the Russian
over
the high figures those banks reported,
seen
jewels, and pieces of
First,
we try to
thereby be able to take
their later years.
When the Bolsheviks took
They had
&c.;
enterprises,
structure in civilization that is depend¬
on a
going to have great
were
banks.
food
over
shortage and prevented over-population.
to
they
the temperature mild and a supply
easy,
food available at all
have had
If not, the human race
to save.
ours
In fact, we
largely because of this
temperate zones
peculiar capacity of
depend
Empire they acquired ownership of the banks.
It is due to this quality of his
saving animal.
representing partial ownership of
but all
able and sound.
goes on.
Dr. Wilbur's address follows:
Man is
Savings have taken all sorts of forms—buildings, pieces of
paper
giye
me a return
something and
go
for its use.
ahead."
That is
Then
the
build
you
capitalistic
group;
then the
group can care
the weak, the old, and
We
the
can measure
of those who take
heart of such
a
quality of
care
for the immature, the sick,
the unfit.
a
civilization by the number
of themselves.
We
can measure
civilization by the numberlshat are
the
allowed
to ride on the rest
because they are too old, unoapable, or
newspaper or a business he will find that he must use the
unwilling to work.
Right
savings of
to carry a
eystem.
or
If
you
take
someone,
any young
either his
by "hiring the money"
as
fellow who wants to
own
by work
or
run a
inheritance
Calvin Coolidge used to
say.
some
hard times; but
Perhaps in these times he might get the Government to let
him have this something, for which they collect the
;
gophei*
"Go
of others through taxes.
savings
io
we
now
in this country
great burden of this kind.
trying
perhaps if we go back to the poeket-
shall be able to get the answer.
the ant,
we are
It is giving civilization
Instead of saying
thou sluggard" we can say, "Go to the
pocket-gopher, thou waster!"
At any rate, look the pocket-
SAVINGS
gopher
that
If
over.
we
imitate him there is
we can
good chance
a
hold together what we have and can keep
can
that
country—the dignity of not riding
is what has made
That
the rest.
on
America, and that is what
want to see
we
in the future.
There
in the fall should there be
his whole
harvest, relying
One
sells
or
consumes
else to
on someone
for him and to hold back
the seed
save
margins against drought and dis¬
The other always lays aside a
aster.
a
We have reached the stage now
rely
More and
of
more
people
many
care.
again think in terms of self-
must
us
when too
their protection and
the government for
upon
again
failure.
crop
add
management, so that each can do his share and each can
kinds of farmers.
two
are
that in the spring he can sow again—and even eat
so
dignity of personality that is important to the vitality of
any
65
DIVISION.
little
wheat
corn or
the power of
to
help.
There is
by which
no way
and have it.
those who need
the government to protect
survive.
harvest
we can consume our
Only by saving
kind of
our
can
country
a
_
Committee / Officers* Reports-Savings Division
Address of
President, Philip A. Benson, President Dime
Savings Bank of Brooklyn, Brooklyn, N. Y.
Outlook
deposited
Savings
1935,
indicate
ended
banks
tor Savings
amounted
June
30,
Thirty-four
deposits
a
years
amounted
increase
800%.
Savings depositors in
now
number
more
While
for
the
issued
of
existing
An
New
On
July
2.84%.
June 30,
all
of
in
all,
recent report
shows de¬
A
$10,020,013,775,, a
of bank, while
type
in the
the
rate
regardless
it
present time
of
of these
doubt
no
The
the
of
extent
its
to
be
must
emergencies
While
is
limited
are
could
some
pay
desires
that
is
better
on
the
protected
confidence
that
funds
positors'
bank
the
interest
the
excess
such
have
a
in
Insurance
of banks, such
bank
be
safely
rest
and
the
on
wisely
the
that
and
that
de¬
capital
contemplating the outlook for davings we are bound to consider the
record of progress made by life insurance companies.
In 1902 there were
about
17,500,000 life insurance policies outstanding, representing insur¬
of
latest
ing
in
$10,500,000,000
figures
in
1935
force
These
cies
of
policies
include
assets
not only
and
$2,092,000,000.
of
life insurance
force numbering
in
$100,000,000,000,
over
by
that the
of
assets
companies
124,000,000,
over
report¬
insurance
$23,000,000,000.
over
ordinary policies but
also
than
more
is
half
900%
over
in
the
of
total
34 years.
population
Thus,
social
of
industrial
the
security
poli¬
The
country.
is
not
new
in
country!
savings banks, working as trustees for the people's savings with¬
capital stock, rtarted in this country in 1816—120 years ago.
In the
of all right-thinking
leaders, the principle of social security is
minds
deeply rooted.
the
other
the habit
of
understand
has
tion
himself,
The principle that
fellow
thrift
and
saving
have adhered
we
himself";
inculcate in
to
that he would
so
to has been to
the
come
not
nor
has
such
methods
it
work
developed
for
him.
complete
latter
leading
conversely
The
annals
failures!
to
the
The
dry
through
of
every
human
former
to
shielding
men
from
man
of sentimentality,
rot
who
doing
delfshiness,
which
said:
so
A
must
that
id
facility-for doing
government,
in
of
the weak
"The
strong
recent
and
ulti¬
helping themselves,
and
our
life
to
independent,
strengthen
and
benefit
and economic policy,
thus
strengthening the
thrift
cradle
resources
of
the
popular
em¬
taxes
is
by
and
the
be
3%
in
independently
and to
which
bring
to
as
a
for
beyond
goes
strained
of
employer,
result
individual
so
his
in
of
the
thus
a
goes
whether
is
initial amount
study
should
we
the recent Federal Social Security
Figures
will
for
a
by
Act
invested
States
bonds
of
is that
reserve
is,
Senate
This
the
United
to be
are
therefore,
pocket will pay interest to the other pocket!
one
the
but to
$47,000,000,000.
in
in
are
expenditures,
obligations do not exist they
interest.
The government will,
3%
have
may
the Act
the United
of
reserve
be
that
under
current
used
be
must
result
the
contributions
provide
indeed,
its
the interest will make
character
true
the
plan
phrase—"self-sustaining!"
alluring
an
doubt about
any
subject is
It
is
the whole
that
at
It
once.
will
be
plan
of
a
dangerous.
fund
reserve
should
Furthermore,
careful
inconsistencies and injustices.
many
belief that there is nothing so good and whole¬
a
system of private savings and the habits of
as
foresight that will
system
a
and
unnecessary
my
country
lead
alone
paternalism
the
to
creation of one's
reserve.
own
strength and independence
comes
and
free¬
and
the grave.
these
expressing
have,
logically should
beliefs
some
pensation
small
possible.
There must, of
and
enough
The growth of
aged.
no
I
one,
am
banks
in
induce obtaining profitable
be
a
$6,500,000,000
in
000,000
upward.
and
work
provision for the
soon
as
as
the needy
care
of
that
see
we
com¬
this
is done,
quarrel with it.
there
is
large amount of savings not deposited
a
profitably
in
January,
employed.
all money
this year
I
refer
to
figures
outside the United
1933.
Since
total
showing
States
Treas¬
other
figures.
on
demand deposits
in
140
net
outside New
41.7
in
average
in
This
decline,
year
York
increased
centers
1927.
that
so
In
22.4.
to
the
New
again
to
$5,289,-
the
tendency has been
$5,882,000,000, and in June
was
York
are
more
The velocity
the annual rate of turnover based
accounts—to
however,
total of $6,241,000,000.
a
of money in circulation
with
dropped
It
then,
1935 the
of
it reached
The figures
February,
1934.
By the end
connection
the
member
Oity, indicate
February,
1935
significant when taken in
bank
of
deposits—that
relation of deposits
an
22.1,
It has
and
for
figure of 35
average
1929.
was
City the figures
is,
to Individual
banks, from the figures
since
in
shown
July
of
in
a
this
striking.
The high
an average of 71.5 for the years 1927 to 1932,
down to 24.5 for 1935 and 20.9 for July of this year.
are
more
March, 1929, 122.5, and
inclusive, has
It
have,
insurance with
1930
over
in
will
we
after deducting money held by Federal Reserve banks and agencies.
money in circulation averaged about $4,500,000,000.
It rose to
ury
of
that
social consciousness will
in circulation—that is,
money
add
must
course,
will
sure,
otherwise
or
I
system of unemployment
to
our
Statistics indicate that
would
-
as
A
that
the
an
whereas
there
was
less
viewpoint of the velocity
index
need for currency in
July,
of bank deposits, which can be
of business
activity, there was, nevertheless, a vastly
of currency in circulation.
The decrease in velocity of
is 84%; the increase in money in circulation is over 40%.
amount
number
amount
gone
seem
from
bank deposits
the individual to
demand, government has under¬
taken to provide social security through unemployment
compensation,, oldage assistance and contributory pensions.
Naturally, we muBt be sympa¬
to
and
This
such
to
In
1936,
citizens,
the
bureaucracy.
We are not ready in this
country to accept, nor do I believe we ever will, the theory of an allpowerful State, nor of the State that guards us and guides us from the
of
yielding
All
to
fund.
bear
to
the
from
taken
its
give
the
If sufficient
itself
a
and
dom
helping
itself!
years,
should
amazement
remember,
reiterate
me
for
increased
truly
which
security and
come.
there
1980
are
on
Through
giving them
so.
order
stimulate, by sound education
become
government
In
and
thor¬
the effects of folly is to fill the world
fools."
The principle that has governed our business and
objectives in carrying it on attaches a condition to the "strong
weak,"
some¬
have declared
utter
with
every
and
for
all
mind
time provide
capacity
we
tax not
a
reserve
in
will
correct
Let
some
mind
appreciate
history
yielding
oughly excited the indignation of Herbert Spencer,
mate result of
the
"'help
individual's
advantages of providing personal security.
Human civiliza¬
developed through the principle of every man looking after
else's
the
help
the
body
and
to
and
abandoned.
In
Mutual
out
that
with
to
theory behind
thought
The
contracts.
If we add figures for building and loan associawill find that the total savings are a sum in excess of $52,000,I have no doubt that those who have interests in these savings
represent
growth
protected
indicate
group
we
000,000.
this
and
figures
and
tiond
and
available
will
be included
my
while assumed
same
study of the Act indicates that it has
It
own
"taxpayer sustained," for the interest paid into the fund by the Treasury
Department must be
imposed as taxation on
the
people.
My own
banker
In
ance
the
be
true
but
to
in
production
point at
a
that
social
years
self-sustaining.
us
is
eventually
cost
this
up
(which,
at
Will
point
Government.
The
go
his
the government plan
source;
arises
cost of
the Mutual
guarantees.
knowledge
invested
you
States
edict
for
best thought.
that
reserve,
which
Corporation
as
no
such
on
indicate
Let
There
save.
vast
a
and
full and sufficient protection against losses.
a
are
dependent
and
the
from
of
9%
a
the
factor of
a
the
is
tax,
a
create
the
be ad-*
manufacturer represents what
able to give
of
contemplates
throughout
reality
be
in
considers
one
one
that
may
eventually
for
only 3%
at
the
question
living),
our
borrow
banks
the
of
most
Deposit
group
the
to
contribute
As
passage
12% when the entire tax is in force,
included
welfare?
capacity
created
margin of protection
deducted
which to
payroll,
of
the
take into consideration
the
in
accounts
Federal
confidence
been
cost
own
Act,
be
the hidden tax
It
Any outlook
outdide guarantee being for unusual
an
the
his
higher
indi¬
the
government
employee
provide
prescribes
Act
to
Hence
consists
and
rate
of dafety
the margin
growth
savings
by
in
surplus account
or
add
rates and
rate
At
more.
Banks Insurance Fund of the State of New York,
Savings
the
to
increased for the year to
was
mention
any
insurance fund created by
an
far
reliance
that
true
are
the
really be
his
interest
The
the Act, totaling
employees and is merely
pay,
his
only.
it
country
security.
in
price.
will
far
providing
further
the
Act,
involuntarily to
working man .will
his
have
surplus and undivided profits.
corresponding
a
the bank itself, any
by
I
in
reserves,
the
in
of
apprehension
an
security so
through
savings
Security
Social
contribution
his
final
is
social
security
due to the hurried
me,
laws,
in
individual
the
the
improve
family.
against
to
There
largest
100
from
to limit interest
proper
because
funds,
tax
the
of
of his payroll
ployees'
was
vary
growth and development of savings should
there
funds
average
and banks
that
fact
$42,000,000.
over
12%
social
involuntary
capacity
Through
of
such
made
that of his
or
up
establishing
if
affected
the
safely
will
What has concerned
have voluntarily
we
beyond
banks.
in
the
eventually this will lead to larger interest dividends.
surplus
capital
the
the
by law,
the
States
surplus of the mutual savings banks
additions
that
separate
is
legislation
security
that
move
family.
versely
section
is that of the
by the report
this year
the
the
any
his
distress?
of
controlled
is
of
northeastern
deposits
savings
and
partici¬
the figures
Banks
of
1936,
The mutual
for
1
Rates
earnings to surplus;
or
They
$7,000,000,000.
rate.
prescribed
in
is
banks
country,
Savings
Mutual
year.
40%
about
the
of
significant.
are
and these mostly
savings banks
over
was
States
for
years
2.58%.
A year
2% to 3%%;
York, the largest mutual savings bank State, paying 2%.
In many
it
ago
of
34
6,000,000.
National
and
deposits
interesting comparison shown
dividend
for
the
numbered about
of
on
the
States,
has
mutual
in
increase
companies
alone
banks
for
or
provided
Association
savings
country,
554
deposits of
The
1902
savings
bankd
savings
National
only 18
trust
total
$149,962,655
in
the
are
the
$600,000,000
over
42,000,000.
and
the
in mutual
posits
growth
of
in
mutual
by
than
banks
State
largely
of
$2,750,177,290.
to
over
pated
June 30,
on
The latest
the year
1936,
making an aggregate of over $23,200,000,000.
ago, when the Savings Division was organized,
savings
further
with
vidual
progress
$22,652,000,000
to
increase of $899,970,000 for the year ended that date.
an
figures
in
thetic
of
of
the
American
reasons
have
'circulating
currency
corporations have
been
medium.
has gon£
to
advanced
to
Probably
foreign
account
some
countries.
for
money
No
the
in
doubt
increased
the
form
business
a larger amount of "till" money.
A large part of over
$6,000,000,000 of cash, however, must be reposing in stockings, mattresses,
cupboards, office vaults, and other places.
There are, no doubt, reasons
BANKERS' CONVENTION.
66
why
not
have
people
have
been
the
restricted
amounts
interest, and
the
the
to
the
will
we
banks—they
safety
take.
as
Many people may still fear
interest.
no
have
learned
not
Perhaps
others
provisions made to
amount of government
the
of
large
a
retained
cash
and the
cashed
been
have
Perhaps banks
banks.
in
they once did.
We have
We have been paying low rates of
ardently
as
deposits.
of
and
farmers
deposit
from
deposits
demand deposits
on
of
safety
insure
checks
withheld money
soliciting
fact
however,
remains,
account
by
the
All of these are guesses.
The
$1,000,000,000 or more should be added to
that
deposit
illustrating these figures
prepared by the Standard Statistics Co.
An interesting fact shown by
these charts is that there has been a large increase in the number of
I
.
have
and
charts
interesting
some
will
be
always
good purpose where it operates in places already served by chartered
In these places it seems entirely unnecessary.
The question of
any
No
rate,
tion
small depositors has been removed by the FDIC.
There-, may
excuse
for taking postal savings deposits in places not accessible
for
the
banking facilities.
which
from
it
comes.
Through the Postal Savings System local money is
district for use elsewhere.
A full comprehension
Postal Savings System and its declining usefulness
locally.
money
of the
"syphoned" out
of
of
the
effect
to
the
event, we cannot forget thgt none of
any
Savings System goes back into the communities
The local bank, to a great extent, invests its
the Postal
of
money
In
the
country
doubt
no
may
eventually
about and lead
comie
value
and
better
simplest
is
be
shareholder
has
there
certificates
or
the
more
could
By
his money a bank
or
long-term non-liquid
a
to
the
use
stretch of the imagination can
no
depositor
a
and
account.
Of course,
investment.
for withdrawal of funds with limitations, but large
withdrawn quickly, nor is there any system of
would make
it possible
Building and Loan Associations
for
large amounts on demand.
In fact, the insurance available
Building and Loan Associations provides for deferring payment of a
to
any
pay
to
the shareholder's money for three years.
That the Building
have been useful in making mortgage money avail¬
large part of
Associations
Loan
and
able
competition
that
the
foresight
Our
are
be
the
of
made
the same category.
many other forms
of
slow asset, and real estate mortgages are in
a
however,
Mortgages,
pay
larger
a
than
return
and
in
what
For
example,
Associations
is
insurance
insured
higher rate of interest on deposits.
misleading.
by
entirely
almost
to retain
mortgages
character
their
as
that the shares in Building and
Federal Government is not true.
the
Loan
The
corporation owned by the Home Owners' Loan Corpora¬
even
a
statement that the funds invested are insured is
by
a
Moreover,
tion.
funds
a
statement
any
are
in
their
pay
up
and
The insurance only
undertakes to guarantee the return of the
principal amount.
It does not guarantee that the investor will be able to
get his money when he wants it.
The average savings and loan investor
is likely to believe from the use of the word "insurance" that in time of
need if the building and loan association cannot pay him his money the
investor
the
Loan
Owners'
Home
will.
Corporation
in such
gets
a
This,
except
case,
however,
is
laws
at
can
attitude
this
toward
and
time when it feels it
any
shares
without
would
cause
by
the
Loan
apparent that the small
to
wage
interest
the guaranty
and
not
Some
Federal
is
for
and
copy,
it
a
the
means
podsess for the
There
country,
is
a
and
another
signs
bank
on
offices,
competitor
purpose
everyone
shares
any
of
wants
a
a
to
attracting
place for
with
in
quite
arid in
to
arrange
to
put
a
forms
of the
of
is
it
a
aside should
that
have
possibility.
bonds
the
not
are
in
the
and meaning
use
that of
thrift and
than
of
demands
the
What
curriculum.
principle
grade and
well
life
of
avoid
will
abundance of funds
the highest
an
bonds to
such
of
prices
we
bonds
protected by ample
a
speculative
or
income of
of
earnings
savings in long-term bonds at present prices,
ridk of
only
not
means
loss
when
occur
consistently
even
low yield, but—
a
substantial market price
go up as eventually
through
interest
rates
their
market
bonds
good
been
some
because
short-term
advantage of
the
the
issue,
short.
part
of
The result
yields
on
will be
so,
against
of insurance
low
long this
as
remote
a
measure
a
favor
to
seem
only
purchased
and
have had
"straddled"
and
average
still
Although
lesd
desire
inure
government
your
is
guess
of
to
benefit
conditions,
in
as
should,
we
be
the
practically
put
is
return
was
diffi¬
very
There has, of
lower
borrowers,
interest
course,
they
do
While
rates.
create
not
an
from
trend
with
of
the
be
capitalized;
neighborhood,
able
they
and,
take
how¬
take
especial
of
some
appraisals
Our
have
unto
on,
now
avoid
to
should
of
of these im¬
and
accounts.
should
agreement
order,
mortgages from
mortgage
our
income
in
advantage
in
account
experience,
past
our
mortgage
every
doubt take
no
mortgage
In investing
net
on
tended to stabilize realty values,
building indueftry has furnished a demand
the
our
difficulties
based
sideration
interest
it
sav¬
investor to another, principally
secure
of
We will
mortgages.
previous
the
decline
of
business has
in
revival
mortgage loans.
new
bonds,
the
on
one
to
owners
the
recovery
substantial
ourselves
than
were
large proportion
a
savings.
new
general
proving
liquid
values
and
for
great number of good mortgages.
any
the
for
new
investment
the ideal
shifting of mortgages from
of
shifts
ever,
the
As to how
While rents
find
to
a
have
is
of long governments and part
on
still
are
deposits.
cult
outlet
shore
to
the former
banks
government bonds
price
mine!
as
ings
yield
present.
decline in
a
close
course,
other
Conditions
the
greater.
for
Of
Still
fair
a
loss.
for
Mortgages
and
only.
portfolio consisting
been
has
notes
income.
favored long-term
the risk of
Othersi have stayed
and
greater
into
con¬
importance,
provision
a
for
amortization.
Personal
of
many
making
loans and
other
banks.
We
our
loans
us
discharging
remember,
to
duty
a
our
on
prosperity and
goodwill
We
sure,
I
can,
There
is
desire
to
efforts.
are
am
ingrained
in
in
good
a
high plane
have
we
the
the
their
credit
we
outlook
affairs,
We
by
char¬
were
will continue to enjoy the honor,
people
a
achieve
for
employed by
communities
our
and useful service, and in
for savings
to
make
financial
in
standing.
necessary
better equipped than
attaining
funds will be
service
earned and possessed
American
own
characteristics
stronger and
them
of investing
render
of
perform
view
their
manage
These
ways
may
individuals
to
Report of "Committee
feeling
ever
and
to serve
the
much
years.
confidence.
independence,
of
success
thrift
through
with
through their
savings.
a
own
hanks
Our
the people and assist
objectives.
on
Nominations—Newly Elected
Officers
The report of the
sented
For President:
St.
Committee
by Austm*McLanahan,
Noble
on
Nominations
Chairman,
was
pre¬
follows:
as
,R. Jones, Savings Manager, First National Bank
Louis, Mo.
-
For Vice-President:
f
Henry S. Sherman, President, Society for Savings,
Cleveland, O.
For
member
Miller,
Executive
President,
Committee,
Bloomfield
for
Savings
term
expiring
Institution,
1939:
Bloomfield,
W.
W.
N.
J.;
Robert W. Sparks, Vice-President, Bowery Savings Bank, New York, N. Y.
Alva G.
Atlanta,
Stuart
Maxwell, Vice-President, The Citizens & Southern National Bank,
Ga.
For member Executive Committee for term expiring 1938:
Frazier, Vice-President, Washington Mutual Savings Bank, Seattle,
Committee
on
Nominations,
CHARLES
bank.
not
W,
public.
have
civilization
Wash.
does
investment
the
in
impression
an
school
for
that
their communities
meet
the highest
raised
serious—the
adver¬
newspaper
create
character
patronage
does
Corporation
interest return.
place of business
number of
money
investment certificates,
or
definite
assume
the
California, prohibit
Insurance
manner
that the
or
as
to
in
school
every
to
citizens
Naturally,
invest
bankers
Some
investment that cannot be
such
type of institution to
advertising,
proper
an
Savings and Loan
on
therefore
is
be out of work
may
States,
fixed rate of interest
the
id unfair
It
This
a
misleading.
guaranty that the shareholder will get
tising
that
of
certainly
is
It
A further statement indicating a guaranteed
immediately turned into cash.
of
the
who is accumulating these shares to
earner
most need of these fund* will find himself with
rate
or
effective.
during times of stress when he
protect him
association
refuse to redeem its
any situation which
so
default
any
become
give
youth
of
have
investments, feeling that
the
under
Moreover,
Associations,
to do
necessary
doing creating
so
insurance
investment.
of
form
Federal Savings
governing
and
problems have not become simpler during the past year.
depreciation, which will
bearing debentures having maturities of one and three years.
The average
investor does not know this, and if. he did he might have an entirely
•different
opportunity
All
true.
not
in cash, is non-interest
10%
for
have
they must.
concerning them be stated clearly.
tie
earn
however, be liquid enough
of
part
future
fitting
years.
To
more
tered, let
would
not,
of
bonds
of
many
is
they
They
banks.
To be able to pay their depositors
in full and on demand requires a
great degree of liquidity, and with lower earnings only a moderate Tate
of interest to depositors is possible;
Fairness, it seems to me, on the
part of all agencies that compete with banks requires that the facts
could
banks
doubt
and in
deposits
total
mankind,
to
Instruction
years.
banks
though they are of excellent quality,
our
If
in
and those
sfhould
no
country.
the
in
them
of
be
should
savings
investment
investment.
would
the
offered,
thrift
of
habit-forming
education
debtor.
banks
and
nature
is
of
*
nature
the
A
the
realize
former
without
complete
be
would
School savings
increase in the total number of schools in
one-tenth
money
investment
levels
such
Associations
Loan
and
the
with
fair,
only
seems
an
Savings"
System
savings
importance
can
scarcity
wish to
however, where
who
making and understand that such investments are not
the equivalent of demand deposits.
Real estate is
they
cannot
always
It
so.
those
why
Teason
no
Building
business
do
is
do
not
between
exists
who
those
investment
and
should
them
in
invest'
There
denied.
be
cannot
for
armed?
be
not
that
insurance
of
nature
provisions
are
amounts
considered
instalment basis
an
on
Loan Association
Building and
the
of
to make mortgage loans.
money
the
It
shared
sell
to
function
the
terms,
of
service
aiding
the
to
being restricted or abolished.
Building and Loan Associations and Savings and Loan Associations are
not
banks.
Nevertheless, they are competitors for savings.
Reduced to
system
its
show
to
for
Savings
Despite this increase, however, out of 30,000,000 school
the
country during
safety
other
banks
have a
and to choose
made
deposit
or
they
sure
are the products of thrift, it is strange that so little atengiven to inculcating this habit in the minds of the youth of the
is
The
to
"Outlook
about
only
Realizing
seeking
some
to be
6aver
savings.
banks.
be
the
savings.
children,
the
bid savings
would
savings I
investment
every
School
opportunity
net
for
and urge
thoroughly familiar.
the
banking continues
total
outlook
However, let him guard against the lure of a high
him to make an investment with the nature of
leading
on
of
of
best.
is not
paper
mention
the
competition,
,and culture
^
competition for savings.
We still have the
Postal Savings System as a competitor of banks.
Large increases in the
deposits of the Postal Savings System in the years ending June 30, 1932,
and
June
30, 1933, amounted to over $400,000,000 for each of these
years.
This sudden and phenomenal growth undoubtedly reflected lack of
confidence in banks.
However, gains of the system since 1933 have not
been substantial.
It does not seem that the Postal Savings System serves
There
of
understanding
which he
$1,000
$10,000 bills outstanding and a substantial increase in the $5,000,
and $500 bills.
consider
fear
which suits him
which
cash.
tables
surplus
of
clear
I
As
no
interest
in
personal possession of the recipients.
bank
choice.
have
R.
H.
DEPPE
MOREHOUSE,
AUSTIN
McLANAHAN
this
freedom
of
[The report
was
duly adopted and the new officers inducted into office. 1
CLEARING HOUSE ROUND TABLE CONFERENCE
(UNDER AUSPICES OF BANK MANAGEMENT COMMISSION)
American Bankers' Association
Meeting Held at San Francisco, Calif., Sept. 21, 1936
INDEX
Practical Bank
CLEARING HOUSE ROUND TABLE CONFERENCE
TO
Operation, by P. D. Houston
—
Security Policies, by J. Harvie Wilkinson Jr
Loan Policies and Personal Income Loans, by
Sorensen
M.
70
„
During
the last
few
witnessed many changes in the
conditions under which we
have
we
years,
business in which we are engaged and in the
thought and more constructive effort directed toward meeting
and toward
other
intelligent
But during these same years we have also seen more
operate.
such changes
»*tlt has
been said that adverse conditions both require and encourage
thinking, so perhaps our sincere desire and our increased efforts to
clear
improve our banking system have been prompted in
Yet
of economic conditions.
become evident
had
partly the necessities
know that this desire and that this effort
we
before the approach of less favorable
even
business
Solutions of the problems
sought
We may grant that all such legislative effort has
intended and may have been
well
been
The result
and regulations have become a part of
that many new statutes
daily operations.
our
with which we have been confronted, have been
well by many who were not engaged in banking.
as
has been
even
good in its effect, but the
positive fact remains that the real solution must come from within rather
without the ranks of our profession.
than from
The real intelligent and
experiences has been that criticism either
the
at
same
profitable banking system, then
developed
time
a
sound
be fairly concluded that internal management is the answer
question that today may exist as to our position in relation to our
i
depositors,
And
it
is
stockholders and to the public at large.
this subject of management that bankers, individually and
borrowers,
our
to
our
collectively, today are giving their best thought and effort as never before—
toward the development of good management is. an analysis
The first step
of one's own operations in order to
-
and
our
management
with
institution,
deal
Banks
price.
full knowledge of
our costs
any
are
profit¬
needed corrections may be more
If we know our costs, we may more easily establish a
easily provided.
selling
in
commodities—credits
two
and
service—
and these like all other commodities involve a cost and must be sold at
a
price to include not only cost, but a fair margin of profit as well, if the
to render satisfactory service and it is to
selling institution is
used
the
as a
are
conducting
extensive
such
of
programs
of research
directors may have with the public.
and
employees
which
bank renders, and this in itself will increase to a surprising degree
a
people, even now, do not fully realize the service
their
banks,
and
but
So perhaps the question of public education and public relations
be a greater factor in Practical Bank Operations than we have heretofore
possible for
It is entirely
our
us to
and may become too
machine-like—thus losing the warmth of human rela¬
Then, too, we may over-economize in the matter
by the purpose served.
To gain a few dollars today by cost reduction may
of operating costs.
the
loss of many more
dollars of profits in the future, so in con¬
questions we should not only plan according
of these
sideration
to
present and past conditions, but we should give some consideration to
conditions in so far as we may be able to forecast them.
In
discussions
our
operations
the numerous phases of practical bank
here today,
reduced
to
our
future
two
major
classifications—Income and
These, of course, are inclusive of many other minor phases.
which the figures of these two accounts presents will reflect
The picture
very
be
may
Expense.
largely the type of management enjoyed or suffered
by a banking
institution.
The most frequently
and
it is
cooperating
are
with each other for their common good by
just
as
we
industry
expressed complaint of today is the lack of oppor¬
as
compared with the amount of funds invested in securities
better
The
own
idle talk to say that
mere
securities
shall do here today
Such willingness on the part of bankers to aid each
for
be improved in service to the public
stockholders is one of the finest by-products of all
better
rightful place in
within its
This spirit, with proper deter¬
and in maintaining for banking
management.
own
the economic life of this Nation,
cannot
be justly demanded or required.
may
the value of this exchange of our experience and
be too much emphasized,
enter
because banking
ranks the necesssary ability to provide to the public
banking service as
efficient
The importance and
and it is hoped that here today
the
whole-heartedly into
discussions
giving and receiving such information that each may
instead
of
extending
way
will it
on
,
safe
loans
a
prime function of a bank is to extend credit to the commerce of its
It manufactures such credit by bringing together the wealth
section.
and sound
The increase in the proportion of bank funds invested
basis.
in securities
has
be available for the development of business
community, if the development can be done on a safe
not resulted
as
a
matter of preference,
funds has been resorted to by banks as their only
idle funds.
but such
use
of
alternative against holding
In addition to the difference in yields, a bank would much
prefer to extend credit to commerce because such credit generates further
new
It
business in which the whole community .and the
can
scarcely be expected during
a
bank will participate.
period of rising deposits that the demand
Business and industry will not borrow
because in
with
H
have or may desire
Bankers in their loan
deposits.
while it yet has cash on hand.
policies must not become too conservative.
conservatism should be tempered with some liberality.
Our
It is likely that the
experiences of recent years may have caused us to be somewhat over-con¬
conference affords.
No bank is any better than its
management, nor will our whole banking
composite management, so there should be
conduct a well-managed institution.
the double incentive for each of us to
that our own bank may be successful,
First, for the somewhat selfish reason
and second for the broader reason, that our success may
of the whole banking system,
add to the reputa¬
which in turn again will add to the
prestige of each, including our own.
credit
yield.
that are to follow,
be possibile to realize the full benefits that such a
system be any better than its
banks prefer to place funds in low-yield
commercial
for commercial credit would increase in the same proportion as our
connection with the subjects that appear on our program,
tion
than can be justified
extended to the point of being wasteful, costing more
On the other hand, banks are even accused of refusing
program
other
Organization may be over¬
tionship which is so essential to our business.
Such criticism is, of course, not founded on facts, and
mination, will succeed certainly in obtaining
no
over-organize our management with the
operations may be unduly burdened with unnecessary detail,
and industry in that
in
available to them from
may become vaulable
dependable analysis of individual
Conference.
shall
they
considered.
and in returns for our
we
informed
properly
when
of its community that it may
views
It is not too much to say that many
the public's use of our institutions.
other than the whole profession may
has
A greater under¬
standing by the public will result in a greater appreciation of the service
extend credit.
exchanging the results of their findings,
such
effort
greater
low-yield rate.
Individually, bankers are not only carefully analyzing their own opera¬
its
too,
to
operations.
this
Then,
functions.
the public with such functions and methods.
of
whole, and this will point the way to a
in this
performance
best be done, it seems, through the contacts which our officers,
can
providing much helpful information on the banking situation
are
tions,
directors. should be fully
tunity for the employment of our funds in the usual channels of commerce
bankers
Collectively,
which
employees and as
officers,
as
the true functions of a bank and as to the b&t methods
to
as
in
This
continue
business.
in
But we do know that it is important that those connected
banks
our
informed
With this information available to the
unprofitable.
of each
a
which departments of our banks
income, and to determine
able and which are
obtain
unjust, which has been
banks, and no one has yet been able to give us a blue-print of such
specifications.
mean
and not without successful results.
or
by each as a part of the whole,
required of the official personnel responsible for the management
be
our
result that
Thus it may
to any
72
if not impossible, to set out the necessary qualifications
It is difficult,
of
and safe banking
system.
71
whole system.
may
have
Operating
in
regard to the innocence or guilt of the component units of the
and without
patrons.
shall
just
directed toward banking has had to be borne
understanding effort necessary to bring about a sounder and more profitable
we
Factor
Operation
banking must be directed by those experienced in our business, and if we
succeed in developing and maintaining a
a
Buying Supplies, by William C. Tompkins.
should be made to acquaint
conditions.
as
American National Bank, Nashville, Tenn.
to
equal period in the history of our profession.
Equipment
Efficiency and Economy, by Darrel G. Ensign
Economies in
development of a sounder banking system than during any
a
Mechanical
Modern
Practical Bank
By P. D. Houston, Chairman of Board,
Page 70
Interest, by E. V, Krick
Analysis and Rates for Banking Services, by
Account
J,
Page 67
68
69
E. A. Mattison__
One unfortunate feature of recent
servative, and if such should be the case, it is but a natural consequence.
We should be interested in making productive loans,
purposes
and, therefore, the
for which a loan is sought should be given consideration along
with the security that is offered.
A loan may be well and fully secured and
yet not necessarily be a desirable loan for our bank.
We may be able to improve somewhat our
for the
use
of
our
funds.
position by seeking new fields
Much has been said of the competition from
68
BANKEBS' CONVENTION,
Government
lending
would withdraw its
and
agencies.
The
activities in
Government
this field when
willing to extend such credits.
At least
has
indicated
and if banks
of this
some
that
credit
it
ready
were
can
be
for their funds.
pay
There must be
selling price, and if
to variation
supplied by
relation between
some
then the rate of interest
so,
buying and
our
deposits must be subject
on
along with supply and demand.
our banks, just as is already being done by many banks after
having made the necessary study and investigations from which they have
internal operation of our banks have enabled
many banks to effect economies
been able to convince the borrower that the bank
and
and
service in just
satisfactory
as
Government agencies.
provide this credit
can
and at less cost than that of
a manner
Perhaps much of this credit is not such
proper for a commercial bank to
would be
as
provide,, but in the whole of these Govern¬
ment agencies there must be much business that could and should be
properly
provided by our banks.
Banks
are
now
considering personal and instalment loans, thus entering
the field of retailing this consumer credit in which heretofore they have
played the part of the wholesaler, extending the credit to a middle concern
which
has in turn retailed the credit at rates
much
profitable
more
than
those obtained by the commercial bank.
Many banks have developed
cerns
individuals
or
created
first,
employment for
already customers of the
profits for the customer,
new
bank,
and
thereby
and incidentally,
of the bank's otherwise idle funds.
some
con¬
have
profitable
In my opinion,
bank may well afford to make such study of its local community because
any
to improve
the proper
efficiency.
to
effect
methods for
new
The purchasing of supplies, and particularly
and control
care
opportunities
supplies after purchased, afford further
over
appreciable savings
both for large banks and for
smaller banks in proportion.
In my opinion, the greatest progress made
by banks in their endeavor to
improve earnings has been in the field of cost analysis.
Most of us know
well enough how to price a product if we have the cost
figures,
not known very
which is
"We
long just what it has cost
indispensable to
so
present
our
had permitted ourselves
to
with
agree
the
as
ourselves just
customer
the customer
know.
To
the cost involved,
our
matter of course,
a
but
have
we
bank to provide that service
a
system of trade and commerce.
valuable service without cost and
loan business by cooperation with
new
Inauguration of modern equipment and the adoption of
who
accepted a
and not knowing
could not
be
expected to
surprise we have learned rather recenlty that the cost of
much of the business that
passed through
banks
our
being borne by the
was
business of profitable customers—or perhaps in the final
analysis it was being
borne by our stockholders.
It is most important that we know our costs
it may find considerable business that could thus be created to the mutual
of operations in every
advantage of its customer and the bank, and, incidentally, for the resulting
than
benefit of the community.
partment should be placed on a profitable basis, either by reduction of our
demand
does
for
come
This condition of
and the lack of
easy money
will in time adjust itself, and when this adjustment
money
should, out of the experience of present conditions, be better
we
prepared to profit thereby.
close control
over our
the extent of
but
expenses,
cannot afford to reduce expenses to
we
impairing the efficiency of
Formerly
operations
our
the heaivest drains
one of
costs
the services
or
earnings
on our gross
yet remains the question of whether or not the present cost of time
we
the
was
deposits
great in proportion to the income derived therefrom as were the higher
as
interest rates in relation to the former income received.
If deposits cannot
be used profitably, then the interest rate may be high in any case.
bearing deposits
worth to
are
which they may be sold.
be
to
seems
been made in
no
why
reason
bank
a
little
very
Interest
In determining the rate of interest to be paid
on
matter
of cost
banks of this country
It is
have
more
important today
been determined,
department of
any
have
analysis,
probability
by such study and analysis of their
There
are so
the
provided.
are
bank should
a
be
While great progress has
yet
large percentage of the
a
not yet become informed
are
de¬
every
to their own costs
as
be most greatly benefited
ones to
operations.
own
other phases of bank operations that relate to the vital
many
subject of bank earnings that it is difficult to refrain from extending these
remarks, but in these few minites I have undertaken to refer only in general
terms
to some of the
major factors that constitute the theme
the
of
dis¬
cussions that will follow.
than the profit for
more
the
and these banks in all
interest paid on time deposits, and while this has been much reduced, there
is
bank.
our
costs
our
by establishing proper rates for the services which
or
There
department of
And when
operated at the expense of some other department.
In the effort to improve our net earnings, it is very necessary to exercise
render.
before.
ever
In closing
I would emphasize two thoughts.
the reputation of our whole
First, let's remember that
banking system in the minds of
time deposits it would seem that we
should be governed by our ability to
the opinion which they hold as to one bank
only.
lend
will cover
some
may
be
ment and
such funds at such
rate that
a
of deposit plus a fair
cost
profit to the bank.
In the investment of our funds we have
long since learned that the selling
price of money is subject to much fluctuation, but we have been slow
to
admit that this may have application with reference to the price banks should
So individual improve¬
cooperation toward collective improvement should be the purpose
and goal of each.
Now as we come to the discussions in more detail of the
various
phases of bank operations, let's be prepared to participate in the
discussions at the close of the meeting so that the
greatest good may be
derived from this Conference which I believe is to be a most
helpful
one.
Security Policies
By J. Harvie Wilkinson Jr., Vice-President State-Planters Bank & Trust Co., Richmond, Va.
The primary interest of each of
in
the
outlook
nowhere will
for
change in
a
that change be
lies in the question of interest rates,
us
the
trend,
and
under
existing conditions
definitely reflected than in
more
security
our
account.
I
to
it
wishful
be
to
the
on
normal mind I
caught crystal
fall
of
quite
am
in
gazing
practical banker would be
future
trend
is
certainly
are
interested
be,
we
weakness
than
of
the
background,
the
next
the
are
—But
current
I rush
6% time
in
then,
my'
in
credit
nature
of
merits
each
First,
than
filds
is
for
the
with
utilities—which
causes
over
its dry
shedding
tainties
does
that
you
on
interest
Board
50%
which
5%
not mean
I
be
short
some
a
break¬
In
short,
higher levels
to
for
not
them
for
I
present
Court
of
be
improvement
second,
I
Finance
reveal,
requirements
have been
to
me
first
with
Whether
path
but that
the
in
our
be accorded real
the
most
the
influence
Board,
in
something which
is
realization
all
eventuality
banking
weight in
interesting
not,
you
believe
and
have
only the
a
in
as
such
Supreme
than
policies
Court
it
future.
American
of
has
To
on
the
account
me
this
in
the
will
next
by
I
the
for
it
the
first
of
variation
the
yield
Reference
from
page
the
of
on
to
a
I
exactly
the
banks
the
Federal
generally,
results
it
as
bear
have
in
the
what
we
am
I
now
affect
may
the
relation¬
institution's
reference
I
and
not
of the
the
to
profits.
capital
loans
and
cushion
a
to
preferred
sure
will
you
country is buying
do.
You can then
structure
discounts
to
line
will
an
y2 of 1%,
a
bond
it
may
as
clean
into
of
banks
our
well
as
observe
outline
for
other
the
schedule
a
to be
it is
in
1%, and
bring
estate
the
net
the
to
a
capital
security account.
of
filled
struc¬
essential
the state¬
to
real
bond
maturities
showing
a
variation
and
at
the
effect
of
1%%
to the
setup in the schedules.
bank to compute its own
quoted market values which would
enable
in
portfolio,
be termed
can
variation of
will
account,
sup¬
the
as
be shown in
reduce
the cushion
bonds maturing according
book
loan
the
and
the residual
deemed
is
the
for
account,
done,
you
yield
a
and,
the
before figuring the amount of the capital
is
page
is
that
the
as
be
in
cer¬
must be
funds
of
produce
'
rates
bank
every
determine the variation
the variations
any
change in
in
about
by changes
as
cushion
a
by
should
structure
that
necessary
can
not
are
omit.]
premises
this
this
for
is the consideration
and undivided
the capital
and
would
to know well and accurately^ the amount and
[Speaker here explained two tables distributed
we
and
estate
When
bottom
a
which
to
difficulties
therein
Governors
might
account
that
is
remembered
amount
and
account,
On
of
interest
of
capital
say
love
possibility
demand
expanded
factors which
security
available
building
value.
the
such
who
the
inherent
business
thinking people
money
of
between
wild
the rates for money.
on
Board
discussion
accordingly,
is
result
I
any
financing might
a
days
five-year
some
potential
being
surplus
when
against
Finance
is
and
margin,
and,
which
position, to
must,
wishes
to
the difference
cognizant
dangers
less significance
no
stock,
real
charge
fair
in
the
of
future
increase, but nevertheless an increase, in
Then take into consideration the observable
is
some
bank's
be
to
themselves
been
finance
the
meeting,
is
bank
1%%
am
the
of
slow
credit
this
Of
shocked
the
ports
I
the
the
of
quality of the margin.
It
court
a
the
realize how necessitous
of
continue
ended
common
be
securities
Supreme
a
will
policies,
future
appraising the
up
policies
against the
these
many
believe that
still
growth
have
structure,
stock,
not
so
and
say
and
factors
add
will
ship which
action,
considered
be
which
power
future
this
By
can
itself
increased
lias
me
all,
for.
We
ment,
I
and
go
immediate
to convince straight
attempted judgment
any
bond account.
and
factor
I
are
1%%
let
but
consumer
you
looked
at
will
long-term government
believed, control of
be hard
procedure,
preceding
that
to
decade.
What
fact
ture
is realized.
demand
System
the Board
structure
development
the
setting
its
of
in
there
reporting member bank loans.
the
wishes
in the
that, after
in
the
for
when
Again
known,
the
them
money
pay
between
functional
begun
determining
hanks.
member
wise,
step in
to
suggested
System
uncer¬
just
factors,
"Reserve
the
to
demand
the
of
variety
a
weight
political
be
with which
of
very
toddling
the
a
Reserve
by
lines
the
of
three
Federal
conditions
have
to
seems
well
may
ramifications
from
tremendous
aware
these
of
the
am
resi¬
volume of
transmission
up
Three
Of prime
governmental
pent
field
equipment
phase
of
the
centipedic
if
add
discussed
less
supply.
excess
in
its
considerably
aspects
Governors
in
been
24 months:
equipment and
antiquity.
certain
reserve
to
have.
nearer
think,
of
enormous
years-^-should
the railroad
taken the
along that
will
been
have
to
they
it should not
catastrophic.
To
any
can
reasons
discussion
a
and
not considering
am
deficits.
wish
I
me
means
heavy
governmental
of
the
seems
having
would
has
be
such
figure
higher
slightly
in the next
degree to which and the speed
The
by
the
that
the
that
for
five
skin
affecting
believe
the
last
third,
momentum;
the
structure;
demand
public
of
all
business
the
the
of
2%%
difference
matter
a
the
believe
persuading
price
particularly
tiie
capital
to
seems
existence
continuation
a
our
favorable
funds
cheap
a
Also,
brought about by
must
so
point,
supporting
of
and
money
considered
be towards
in
2Vfc%
know
I
somewhat
budgetary
there
to offer possibilities
construction
throughout
are
has
appear
importance
dential
demand
the
recently
broad
as
be
endless
But
an
extent
possible
would
whereas
the
that
the speaker may
against
Department
but it is possible that by their future actions and by the
have already demonstrated they will act, they may be able
undue business expansion, to
mollify the Treasury Department
tainly well
of this discussion
will
curb
to
thought
the
a
statement
trend
to
be
go
not
degree,
splurge,
to weigh in your own scales.
you
in
a
money.
which
and
why
to
do
I
the Treasury
that they
fact
then, for the extreme
Allowing,
from
the
I
expected
policies of
motivated
am
sleep.
to
you
average
above
purposes
suffering.
are
this
of
the
wonder
that I
say
unqualified
advance
will
the
rates
that
is
guess
now
we
debate
interest
government
statement
to put
shall
I
years
that
and for
money,
down
than
and
control.
however
quotations for
to add
on
increase
two
me
if
for
me.
constantly centered.
are
within
rates
that
minds
our
not
and
rates,
causes
rates,
must
you
daring, and I must
so
giddiness
which
interest
listen with riveted attention to those discussing
often
which
interest
of
Surely
public.
duty to try
my
in
certain
a
I would not have allowed myself
sure
entirely by courtesy to those who follow
It
madness,
is it simply "the gypsy in me"
or
comment
any
in my
combination
a
thinking,
venture
were
be
must
be
can
marked
think
and
System
Treasury Department.
in
money rates of any given amount, and to compare
quoted price of its portfolio which would be brought
in interest rates to the amount which it has available
the
his
capital
account.
The
answers
should
be
most
illuminating.
would
will
the
say,
existence
that
the
of
a
Board
body of
of
such
Governors
stature
of
the
mpan?
Federal
Reserve
The
Surely
to
a
correspondent
high
degfee of
bank
relationship
perfection
along
in
this
many
country has been
lines,
but
in
developed
making
use
of
CLEARING
our
correspondents
to
seems
background,
security accounts
banks'
banks
took
bias
prehensible
to
were
to
which
like
and
that treating
of
a
on
its
"Dear
loans
a
to
World
a
easy
Com¬
continued
as
the
in
and
most
was
important,
and
was,
shrinking
is,
then,
bankers'
small volume,
a
such
to
all
at
bank
unusual
degree
a
and
is
consulted
picture.
which
Such
highly
discussion ;,on
the
reserves
or
diately
he
register
The
in
of
mind
to
know
know
to
mind,
utter
and
Are
of
no
basis
the
of that
is,
they
of
to
resultant
weakness in
the
Once
correspondent
bank
bank has bought
a
obligation, of the purchasing bank to follow the securities
officer
with
write
form
letter
with
him,
asking that
held
still
it
is
obligation,
correspondent
it
in
his
banks.
investments
a
conversation
a
the
numerous
handling the
secretary
of
is
and
The correspondent must not and cannot
consulting
the change of opinion
of
he
It
still
have
to
at
in
the
must
When
makes
for
bond
today,
and
never
fit into
can
the
rate^ is
account.
the
secondary
Never
it
was
bond
more
invest¬
account.
reserve
banking system is being inflated
the
first,
with
a
the
issue which
an
banks
would
would be foolish,
function
of
the
of
deposits,
last-mentioned
it
secondary
the
or
do
we
qualify
but
appreciable sacrifice in
an
withdrawals
holding in
the
to
not
at
is
reserve
price when
increases
oncoming
hope
for,
to
relationship
question
of
the
of
but
we
the
in
Those
are
technical
if
values
in the
functions
the best
bonds
is
be
into
is,
it
as
there
years,
qualify for
admirable for the
tendency
points—the
in
banking
our
bonds
money
and
standards
but
if
matter
the
to
relationship,
and
the
for
one
need
bonds,
of
each,
purchase
the
were
structure,
the
for
not attempted to
credit
qualities
interest
of
capital
and
I have
reserve.
the merits
any
of
best
the
I
bonds.
any
judge
very
have
nor
of
bond
I still
believe a knowledge of policies, principles and
background without which the purchase of even
essential
an
great
two
primary
flow
necessarily
may
account
bank
secondary
matters,
world,
is
four
security
between
judging
bond,
They
pernicious
only
the
the
forth
not
they
as
steadily for
do
securities,
the
structure.
touch
of
rising
a
account
for yield
pressure
bonds
correspondent
difference
set
is
to replenish
too many bonds and too many long-term bonds
of
realizing the function
difference
the
of
maturity
or
go
reserve
account.
reserve
capital
endeavored
the
sale
course,
primary
such
there
if
the
of
been
that
it is to hold
proportion
have
that
having
forget
but
they,
but with
secondary
a
system today,
I
of
bonds
to
account,
rates,
out
indicated,
money
by
reserve,
available,
and
tendency
the
by
policy
a
that
The
secondary
funds
channels
in
required
Such
loans,
specific
he
interest
and utterly irrecoiicflable
the
the
quickly without
money
these
reserve
is
of
always be prepared for.
vast
for
commercial
why
recall
to
to
and
and
is
it
for
pressure
the real
fit into
never
our
reserve.
undertaken
reasons
great
over
reserve
than
high liquidity
essential
result
the
will
catastrophic conditions.
his
or
the
demand
discuss
for the sale.
or
in
ex¬
officers
is needed either because of seasonal fluctuation in deposits,
money
the
for
the
security which
a
reasons
the
as
a
were
own
duty where
the bond
what
its
clerk
some
purchased
if not,
remain
feasible
when,
thought well of
and.
must
that
seem
correspondent,
might have
if he
always
assume
would
bank
a
his
to
portfolio,
own
imme¬
actual
on
investment
that every security in the bank should mature within
maximum maturity of a secondary reserve account—and
secondary
supply
and
relationship has
the
before
pension
It
to
deposits?
bond the security
reviewed, and generally
expensive.
is
expects
a
eligible for
a
is
bond
pension
it
the
looking
on
oftentimes
is
of
questions
feeling
is
hopelessness.
follow-up.
have
times
secondary
they
other
on
and
to slur
vital
of
many
years—the
the
secure
such,
as
are
the
is not to say
the
relation¬
idea
banker
are
the
It
preceding
very
some
function the
what
the
in
have
to
consults
rendered.
out
something
multitude
a
be
the
portfolio.
This
all
sides
absolutely
perform—that
and
both
both
see
can
point
deposits,
investments?
These
of
great
lack
to
we
gives
opinions
or
the
of
bond
the
on
feel
we
mentioned
account, to
has
is that
second
been the
account,
between
results.
us
that
realize
to
for
institution
own
endeavored
structure,
seasonal?
letter
a
that
as
have
they
our
accordingly,
nature
loan
are
deposits
such
is
the
instance
18 months
year or
secondary reserve account of
today should be higher than they have been in their history.
to
What do you suggest?
suggestions
I
as
the
of
securities
Are
and,
capital
know
to
condition
this
letter
a
essential,
ship,
in
worthwhile
any
ment
a
than
procedure
a
the XYZ 5s now?" when
firm conviction, based
my
secondary
more
deposit structure
bank
a
difference
essential
of
the
is
consultation
yields
many
between
there
relationship
for
the
was
letter
satisfactory
more
the banker involved
see
and it
frequent
low
cause
difference
should
remember
securities
a
current
likely to
far
"What do you think of
productive of real
The
correspondent receiving the
certainly
have changed
that
is
69
his opinion or sold the bonds six
The obligation, to repeat, is always on the purchasing bank to
own
and
"Very truly yours,"
Please
is
perience,
two
$50,000 to invest.
ask,
may
The
correspondent:
have
him
come
Blank:
"We
follow its
the
to
and
correspondent to
have
parcel
has
and
part
was
correspondent
not
trouble
correspondent
months ago.
we
much
too
long,
so
such
to
is,
integral part of the bank
an
background,
weakness
was,
their
the
less
assumed,
the
banks
has endured
money
far
later and
did not give the attention
we
account
is
CONFERENCE
generally
than for
the
in
which
bank
a
been
have dwindled
paper
This
It
have
to
cne
security
the bond account
matters.
of
This
is
the
War
factor
a
TABLE
it
have
merchandiser.
any
ability
field, and
new
The
necessity.
of
trait
the
to
as
seems
have
outstanding
very
security
write
this
commercial
through
not
correspondent impartially.
a
wheel, but recently
commercial
about
the
to
dominant
as
have,
we
do
we
Then, subsequent to the World War
natural
existed
merited.
and
acceptances
prior
not
were
today.
the
advise
and
it
fifth
a
is
large extent in
a
which
it
banks
are
portfolios
Historically,
that
ROUND
engaged in the selling of securities, and they immediately
skepticism
addition,
security
our
is
reason
our
they
selling securities to
In
on
weaknesses.
the
of
as
were
the
on
service
and
operations
many
for
lamentable
me,
long
HOUSE
futile.
Loan Policies and Personal Income Loans
By E. A. Mattison, Vice-President Bank of
The statement
That
is
that banks
lending
new
debated
by
fields
need
are
Those
is
not
provide
to
necessary
bankers.
some
loans
more
who
apt to be challenged.
these
question
the
additional
the
not
to
as
preclude
fields
of
that
I
safe
demand
a
considered
lending
and
activities
Many
be
must
credit
leaders
the
in
say
developed.
volume
"Yes,"
It
is
have
But,
and
from
extent
an
that
of
than
questions
to
credit
from
contracts
credit.
is
I
the
dealers.
available
refer
these
individual,
The
this
pertaining to
in
subject
morning;
dealer
to
not
of
remarks
the
dealer
new-
that
I
the
in
the
to
view-
purchase
direct,
instalment
of
financing will require
however,
financing
only
shall be glad
to
discussion
open
more
answer
which
is
follow.
Much
in
the
some
has
been
the
written
of
recently
consumer
reasons
why
credit.
the subject
on
I
will,
credit
of
banks
therefore,
should
be
review
participating
only briefly
departmental
be
not
required
be
recognized
Local
larly
competition
Compete
and
Second,
a
consumer credit is safe.
The record of properly managed finance com
panies which have been extending this type of credit for nearly 20 years is without
equal in the history of financial institutions.
Experience has shown that the
average individual respects his obligations.
He will pay if he can, providing the
terms of repayment are suited to his income.
Third,
consumer credit is
profitable.
Even at rates greatly reduced from those
charged by finance and loan companies, the business can be profitable.
Using the
Federal Housing Administration Title i rates of 5%
discount, the business yields
9.7% on the money employed. After proper allowance for collection and detailed
handling expense, an attractive yield can be shown on the investment.
Fourth, this business is available In volume.
The
public wants bank credit.
Where it has been made available, Mr. Average Citizen has
promptly availed him¬
self of it because of the advantages over the ordinary avenues of
personal credit.
With
such
establish?
or
profit.
in
a
background, what kind
of
a
lending policy should
a
bank
policy must be broad in its scope of activity and should
include
(1) loans to finance the purchase of automobiles, (2) personal
loans, and (3) loans to finance home improvements.
The
because
policy
the
must
public
be
has
aggressive
to
be
and
educated
must
to
the
be
advertised
fact
that
extensively,
bank
credit
is
readily
obtainable.
A spirit, of friendly helpfulness must be instilled in
loaning officers.
The public is not accustomed to borrow from banks.
They do not think In terms of borrowing, but rather of buying on time.
the
They have secured credit from sales-minded credit
men,
anxious
to
extend
banks
among
is
to
far
By
means
of
this
volume
A
particu¬
thing there should be is
for
terms
Potential
business.
of your policy,
The last
establish.
bank..
excellent
an
secure
part
govern
and
rates
terms.
difficult
of your
Local insurance agents should
enlisted to
necessity
on
service—not
on
Strange
the
it
as
amount
paying.
charge
type
business.
of
naturally affects rate,
of 6% discount per
may
his
of
This brings
the
seem,
monthly
person
is
he
average
payment
in
than
is
interested
more
the
he
rate
is
to perhaps the mo6t important part of the
lending
number of months
that
loans
will
be
extended for, and the amount of the down
payment required.
and
The
the
type
there
has
lengthen
been
much
In
the
the
has been
of instalment financing
shorter
The
of
to
by
this,
banks
from
I
than
think,
loan
or
available.
now
degree
and'
household
a
three
Such
years
automobiles
on
terms
of
are,
not
course,
against
as
the
and
to
appli¬
instal¬
on
household
old
standard
be considered
to
any
clear.
retailers
or
radios and
steady increasing of the time available
Five-year terms are now not uncommon on
months.
is
companies,
manufacturers
automobiles,
primarily
was
are
greater
a
for
reason
solely
pressure
case
than
terms
tendency
loan.
extended
sales
no
terms.
history
of
resisted
been
purchases.
18
loss
instalment
have
appliances,
of
credit
have
of
there
ances,
us
it—terms—the
extension
loans
loans
ment
that
successful
upon
Such
by
banks
financing instalment purchases.
In
event,
any
their
the
rightful
present
it
seems
place
trend
of
of
important
more
leadership
terms
in
in
your customer relationship you
buyer who is interested in what he
want
order
from
reduce
to
chasers
30%
and
for
ever
bring about
financing.
will
banks
By
a
your
to
to
50%
to
in
the
the sound, conservative
carrying charges, who does
of
cost
his
merchandise
monthly payments to a minimum figure.
thoroughly satisfactory borrowers for banks, and
history that has proved beyond
will
protect
their
a
doubt
equity
in
of
advertising
attract
pays
added
assume
reversal
his
are
borrowers
than
credit
instalment
and
not
The
of
not.
are
their cooperation
must
depositor
a
and it provides
is recommended except, where
large volume is available.
Centralized
decentalized operations will also affect the rate
necessity to reflect a
other
consequence
and
standard
a
Personal
as
be
event,
any
annum
which
10 billion.
Depositors' funds Invested in loans and discounts
dropped from 68% to 41% at the end of last year.
in
it pertains to rates and terms.
built
First, there Is the definite need for more loans, more income.
From 1931 to 1935
bank deposits increased over 3 billion—loans decreased in the same
period over
Francisco, Calif.
must
borrower
the
be
conditions
as
banks
attractive
San
be
flexibility in your plans, and a
of specialists trained to handle the business.
It should
that
will
A.,
attracting the accounts of those who
to
consumer
a
S.
There
group
the majority
whole, and endeavor to outline certain fundamentals of policy
experience would indicate to be desirable:
as
&
accommodation.
policy,
extension
of
the
was
that
this morning one new field that has
already proved itself
sound, with great profit possibilities, and that is personal income
extension
to
commercial
a
discuss
loans—consumer
time
for
normal?
new
return to
borrowing needs of business enterprises changed to such
heretofore
for
necessity
activities generally base their opinion on the
assumption that a
normal demand for commercial credit will solve the
problem.
loans
America N. T.
the safety
the
of such
merchandise
Such
it
is
credits.
in
even
in
pur¬
their
These
times
of
stress.
So
I
conform
sound
as
credit.
properly
any
say
that
bank's lending policy
closely as possible to the
a
With
supervised
bank,
large
or
such
a
and
administered
small.
policy,
a
on
personal
proven,
income
established
department to extend
should
be
a
loans
should
standards
consumer
profitable
of
credit
adjunct
to
BANKERS'
70
Account
Analysis and Rates for Banking Services
By J. M. Sobensen,
This is
a
very
and
interested,
I
Vice-President Stephens National Bank, Fremont, Nejb.
important question, and one in which all
trust that our discussion this morning
of us should' be
will be helpful
working out a plan that will lead to uniformity and one in
us
will be able to cooperate.
Our banking institutions are
in
of
service
stations
which
must
the
which all
primarily
the public at a price
to the customers and
producing services, which we sell to
be
and
satisfactory
bank.
equitable
both
-,
decide if practices which have been
followed in the past should be continued, or if experiences of recent years
have proven that new methods should be adopted in order that banking
may become safer andi more useful in everyday business.
It is regrettable,
but nevertheless a fact, that only a few bankers have paid any attention
to matters such as cost-finding.
We spend millions of dollars each year
on
credit and investment analysis, finding out about other people's business, but we spend practically nothing analyzing our own.
Uniformity of
practices and charges are absolutely necessary but, in order to agree upon
such uniformity, we must first realize that certain groups of institutions
are on a common ground.
We know of no better way of determining this
than through a cost analysis in each of our institutions.
Such an analysis
would automatically classify our banks into three
different groups, the
small country bank, the middle-sized, and the large city institution.
Each
of these groups, after determining their cost, should then without difficulty
be able to agree upon a uniform schedule of practices and charges.
Cost-finding would also assist banks by showing whether or not they
were
being efficiently operated as compared with other institutions and,
in addition, it would give the banks a basis upon which to sell their
services.
It is hard to conceive of any salesman effectively selling his
merchandise wben he has no idea of its cost.
The experience of bankers
who have had their institutions analyzed and costs established has been
that it is a great deal easier to explain these charges when they know
exactly what it cost to produce them.
It is, of course, understood that investment in bank stock is made for
the same purpose that money is invested in any other businesses.
Banks
are
organized for profit which is entirely legitimate.
With this understanding, it is only fair that we, as bankers, should recognize the fact
that we have a great responsibility not only to our own investment but
also to the public who entrust their funds to us.
Banks must be profitable
in order to be sound.
They are the heart of the community and, unless
we
wish our community to suffer, we must keep our institutions sound.
In the beginning of banking, safekeeping of funds was practically the
only service performed, but as the business developed a great many others
were
added.
Activity and1 demand for services have increased many,
considering this question we must
In
times.
many
the bank are large and
carried at a loss and services to them
should be furnished free of charge.
In the clothing business, when a suit
of clothes is sold at a profit the merchant does not feel duty bound to
give a pair of shoes to someone else.
If a profit is made on one transaction it is understood that it properly belongs to the business.
That is
the purpose for which it is conducted.
In exchanging banking services
for balances carried in a checking account, we have been slow to recognize
the fact that this exchange should be done in a business-like manner.
The
value of the account should be accurately determined, and if the cost of
activity in the account plus a legitimate profit exceeds the earnings
accrued on the amount of funds on deposit, a proper charge should be
made against the customer.
The principle involved is exactly the same
as
that found in the grocery store where produce is brought to the store
to be used in exchange for goods.
As an example, let us suppose that a
farmer brings to the store 12 dozen eggs worth 12c. per dozen, or $1.44,
that because a few accounts in
People believe
profitable, other accounts should be
and
orders
a
sack of flour
exchange.
even
in banking, and people should understand
paid in one business just as well as it
business principles are the same no matter where
should
difference
the
in
should
pay
should be recognized
principle
that
another,
as
be
they are found" or in what kind of a
At
The farmer does not except an
the difference, viz.: 56c.
This same
worth $2.00.
He expects to
business institution they occur.
- —
"Why does this
point I can hear someone saying to himself:
this
work both ways and, if the earnings on an account are
greater than the cost of service rendered, why should the bank not be
expected to pay the difference to the customer?"
This is a legitimate
question and is easily answered.
When a customer brings money to the
bank for deposit he merely asks that the funds be placed in safekeeping
and that the bank stand steady to return
them to him whenever and
wherever he requires,
and it must be admitted that this is a complete
service in itself and all that can be expected by any depositor.
If the
bank is able to make a small earning on the funds and it chooses to
principle
not
reasonable amount of activity against
bank cannot be
expected and should not be asked to furnish more.
I sincerely believe
that the practice of furnishing these extra services in the past has been
responsible for the grief we expecierenced during the past few years.
Bankers believed that they were duty bound to furnish all of these services
regardless of what they cost, to offset the use of funds of their depositors.
permit the
the
individual to
earnihgs, that
CONVENTION
offset a
is the depositor's good) fortune, but the
This practice made it necessary for banks to overwork their investments
and losses resulted therefrom. A dollar is a good deal like a horse. It
cannot stand to be overworked. If it is overworked it will lie down and
die, and the same thing is true with a dollar.
As a class, we bankers can undoubtedly learn a great deal from concerns such as the American Telephone & Telegraph Co.
Past experience
bas proven that investment in stock of their company has been most
desirable. In 1874 the commercial telephone began in a very small way
but bit by bit the business grew until today it is like the banking business: a great industry.
Demand for its services have increased and, in
order to successfully cope with this growth, scientific practices were
employed. This company has been most efficient in its operation. Every
cost, an item of expense, has been determined and is accurately distributed
to its users and) is charged for in proportion to the amount of services
used. Banking service should be disposed of in the same manner. The
system of account analysis , should be as simple as possible, but it must
be borne in mind that short cuts are liable to be expensive and inefficient,
and in many cases unfair to both customer and bank,
Bankers who in the past few years have applied service charges have
met with certain criticisms, the most common being: "I have never been
charged before," or "the bank across the street (or in a neighboring
town) does not make such a charge and I'll go there." These criticisms
cannot be avoided until the public understands the fairness of the
charges and, when they are based upon uniform costs, they will be
accepted more readily by the customer and it will eliminate forever the
practice of people shopping from bank to bank, seeking a place where
free services can be obtained.
Many bankers have a horror of account analysis.
This fear is unfounded
practice can be installed with little expense to the bank
most of the work during spare moments and in between
waiting on customers. The figures are accumulated by a very simple
method, and distributed to the analysis sheet of the customer,
It seems as though every banker has in mind some certain charge which
he feels is impossible to enforce, but all of them are not afraid of the
same charge. In our State one of our bankers was converted to the service
charge idea because of this very fact. He attended a meeting of nearly
100 bankers and very soon discoverd this peculiarity, but he also saw that
every time a fear was expressed by one banker another one would get up
and state that he had had absolutely no trouble with that specific charge.
This convinced our banker friend of the fact that one charge could be
applied just as easily as any other, and that these fears had no foundation,
He is now a strong advocate of a complete service charge schedule,
It must be admitted that there are as many ideas of service charges
and account analysis and methods of applying them as there are bankers,
and every one of them insists on following his own idea. This is our
main stumbling block, as lack of uniformity causes more dissatisfied
customers than any other one thing.
as a very simple
as employees do
Our recommendation and that of the Bank Management Commission is
that cost finding is the first step toward uniformity. This does not need
to scare you, as it does not require the services of an expensive expert,
If, when you go home, you will locate Commercial Bank Management
Booklet No. 15, "Manual for Determining Per Item Cost," issued by the
Bank Management Commission of the American Bankers Association and
proceed at once to determine the various costs in your institution, and
then locate "Bulletin No. 69, Survey of Account Analysis," you will have
laid the foundation for joining this program as far as your own institution
is concerned. The next step will be to agree with other bankers in your
class on a uniform schedule. The two booklets mentioned, costing 35c. to
members of the Association, is the only expense necessary for finding your
costs and determining into which class you belong, and if you are
efficiently managing your institution as compared with other banks in
your classification. I assure you that if you will make this cost analysis,
following Booklet No. 15, you will receive many surprises, and it will
be one of the most interesting experiences you have ever had and you
will understand your bank as you never have before.. _
.
After your costs have been determined and you have aligned yourself
with other banks of your size (within the group to which you belong)
and a uniform schedule is established and the larger andi more active
accounts analyzed, you will have the satisfaction of feeling that your
bank is cooperating with the most constructive movement for the good of
banking that has been establishtd since the business of banking began,
You and your customer may then have confidence because both of you
will know that banking is in step with progress and that banking services
will be dispensed in the same manner that you buy a pair of shoes, a
suit of clothes or a box of candy. This is as it should be, because banking
services are just as real, just as definite, and just as necessary as any
piece of merchandise which can be purchased, the only difference being
that you can see and feel the shoes or the clothes and! taste the candy,
whereas banking services cannot be seen or felt or eaten,
It is up to us to furnish to the customer the service he wants and
needs, but like the clothing store- or the candy shop we must show a
profit sufficient to maintain this service.
Interest
By E. V. Keick, Vice-President
American Trust €o., San Francisco, Calif.
In the face
demand de¬
posits, as an expense item, it still holds second place.
Our interest here in
this subject is to give it our consideration for the purpose of improving the
^The importance of this item in expense control is
of drastic rate
obvious.
reductions and the elimination of interest on
paid on borrowed
The presentation of this sub¬
ject will, therefore, deal only with interest paid on time open accounts,
certificates of deposit and savings'accounts.
Control of interest paid can
At this
particular time in our banklnghistory, Interest
be left out of our consideration.
be maintained in three ways;
may
be disposed of briefly.
problem with each
namely:
In setting rates.
2.
In
3.
quoting rates.
In computing and crediting interest.
perhaps"the]major consideration but
The
vary
1.
by
a
The control in quoting rates is an internal
a'character
as to
call for discretion the authority
such rates rests usually with designated senior officials.
methods used
On
somewhat.
various
in
to have
However, items two and three
bank.
It is general practice, after rates have once
members of the staff with copy of the rate schedule.
If the rates set are of such
to quote
use one or
1.
setting rates is
been set, to furnish
control, if possible.
money may
The question of
complete control all three must be utilized.
cities.
more
in
the
control in computing and
crediting interest
this^point, inquiry
The information
was made of a number of banks
obtained indicates that these banks
of the following methods;
each deoosit and withdrawal daily and checked
second indivudal or by a representative of the auditing department.
Interest is figured on
CLEARING
In
instances'^, control of interest figures is kept and at the end of the
some
period the amount credited may be proved against the calculation of interest
as shown by the interest control figure.
2.
Semi-annual payments of $100
addition to the regular checking.
or
more
are
checked by auditors in
3.
Outside firms
4.
engaged to figure and check interest calculations.
are
Run of old balances, interest, new balances on proof
and filed with auditing department for checking purposes.
6.
customer.
Periodically
■
It will be observed that
*
•
some
Three, demahd deposits have increased much
and investments.
rapidly than time deposits (See Table II).
From the foregoing it is
evident that as" a country our banking systems
organized in such a manner as to make it impossilbe to obtain all the
are
statistical information necessary to
establish
intelligent control of interest
an
Table III is a very good example of the incompleteness of available
paid.
-
While the information is valuable as far as it goes, it is not
information.
absolute
One,
Two, all funds representing time deposits are not employed
II).
in loans
of the methods used do not give an
Three factors
real estate have not declined as rapidly as commercial loans. vSee
on
more
check is made covering rates, calculations and
a
credits.
been twice as much as the reduction of interest paid.
particularly should be kept in mind when considering these figures:
loans
sheets is made
On time open accounts and certificates of deposit, the auditing depart¬
is furnished with a card giving the interest arrangements with the
ment
This analysis reflects that the reduction in income from time deposits
has
Table
Audit department spot checks, calculations and credits.
5.
71
CONFERENCE
TABLE
ROUND
HOUSE
Statistical information giving:
sufficiently complete.
proof of the correctness of the interest figures while one method is quite exact.
1.
If the
2.
Amount of time funds invested in loans;
Income therefrom;
3.
Amount of time funds invested in securities;
received represent a true average of all banks,
answers
that the
majority of banks
then it appears
satisfied, as to control, with a reasonable
are
While control is necessary in quoting rates and in computing
interest,
as
and crediting
stated, the major control is exercised in setting rates.
This is
where sagacious management is given its
Basically
we must
that interest
paid
on
and loan
declines, interest paid must also decline but
deposits must harmonize with investment
As rates rise, the same procedure
be experienced except that rates paid are apt to respond rather slowly.
We
are
all quite aware of the fact
rates have been
The accom¬
panying tables relate to all member banks of the Federal Reserve System
and represent a comparison
increased during the three year period.
The trend of the two appears to
of the situation does not support
average
4.16%, or
return
An analysis
be reasonably satisfactory.
the foregoing conclusion:
loans
on
A breakdown indicates a decline
while interest paid decreased $79,000,000.
in interest received of $65,000,000
and
(See Table II)*
declined from 4.68%
discounts
to
.52 of 1%.
The average return on
.77 of 1%.
investments declined from 3.53%
to 2.76%, or
combined loans and investments declined from
4.13% to 3.34%. or .79 of 1%.
The average return
on
a
a
drop in rates and
It may
"can't
in
A slight offset occurred because of a small percentage
employed funds.
The change in the investment situation
(bonds).
increase in investments
is^evidenced by the following:
Percent of loans and investments to deposits dropped
from 93.3 to 81.0
minus 12.3%.
to 47.4 or plus
2.3%.
There
period the average rate of interest paid on time deposits
declined from 2.55%
it you
a
can't pay it."
any
been
have
you
If it is desirable to control interest paid
bring about the desired results.
factors
are
the replies
to
be considered other than mathematical
siders all savings accounts in
and
deposits
none on
the
One bank
the category of short time funds
Another
accordingly.
interest
pays
bank
Many other banks place
new.
carries
who
the
maximum
very
a maximuih on the amount
Still other banks question the fairness of penalizing
customer
a
the old
on
accepted and either refuse additional deposits or reduce the rate
deposits.
con¬
demand
or
draws
old deposits and new—paying interest
distinct line between
and
In
ones.
received to the questionnaire sent out, the information indicated
wide range of thought regarding savings or thrift funds.
balance
and
wishes
on excess
old time
an
to
deposit
an
additional amount at reduced rate on the additional deposit and yet accepts
depositor at the regular rate the same amount accepted from
new
a
old depositor at tne penalized rate.
the fairness of
reducing the rate
on
Tnere
are
those also who question
all savings accounts because the normal
deposit line has been diluted with new funds to the point that the
investment return has been materially reduced.
If any lasting value
These
to 1.93% or minus .62 of 1%.
At the foot of Table
is to attach to
a
are
average
of the
some
discussion of this kind, then
constructive ideas
should result.
As
and hope that the
discussion
result in developing
First of all,
plan.
same
Rates generally
problems that are evident when fixing the rate.
Percent of investments to deposits increased from 45.1
During this
made.
be argued that these two factors are sufficient for after all if
earn
out that would
Percent of loans to deposits dropped from 48.2 to 33.6 or minus 14.6%*
or
been
comprehensive manner then I believe some program should be laid
a
a
percentage decrease of
having
survey
*1. Net profits were not sufficient to maintain higher rates.
2. New funds could not be employed at current rates to justify maintain¬
ing a higher interest paid rate.
an
by
With, I
have been set without
reduced after considering two main factors:
from
by
This last substantial decline was occasioned
reduction of loans and was further increased
actual control has not been developed.
an
exceptions, interest rates
rare
very
comprehensive
Gross income in three years
However, this figure includes other income which
decreased $30,000,000.
The
Table No. 1 on the
between 1933 and 1935.
favorable answer.
face of it seems to give a
believe,
that during the past few years interest
How well has our control worked?
declining.
long way in aiding the establishment of a proper control.
,
as^a rule the latter is retarded somewhat.
will
Income therefrom;
Cost of handling time funds,
would go a
The result is that
opportunity.
all agree, and the thinking public will be in accord,
As interest income
income.
4.
5.
depending on a check as against actual proof.
approximation
may
suggestion,
a
financial program must be set
a
some
I offer the following
real constructive
a
up; that
is, determine
the percent of deposits that should be carried in the various classifica¬
upon
With this done, the following factors must be given con¬
tions of assets.
sideration:
II it will be noted that
1.
Total deposits increased
Time deposits increased
8,900 millions
1,100 millions
-
Return from sound conversion of deposit funds.
2.
Operating expense (cost of handling deposits and conversion of funds).
Desired profit on deposits before losses.
Rate of interest to be paid (1—[2 +3]^=4).
3.
4.
The difference between the two being an increase
of demand
7,800 millions
deposits of
Table IV illustrates the plan.
The rates and figures
are
arbitrary
ones.
A careful study of this whole question, I believe, will result in the conclusion
For the purpose
were
in
of this analysis, it is assumed that loans and investments
proportion to the deposit lines
(time and demand).
gives the investment rates per $100 deposits in
1935
as
Table III
$2.71.
Table I
gives interest income in 1935 as $965,636,000 representing a drop of $65,-
The increase in demand deposits amounting to 7,800
000,000 from 1933.
millions therefore contributed in 1935
(7,800 millions at $2.71) $211,300,000.
Had it not been for this contribution, the decrease of interest income would
have
been
$211,000,000
plus
$65,000,000
reduction in interest paid of $79,000,000.
or
$276,000,000
as
against
a
This latter figure includes the
reduction of interest on demand and bank deposits amounting to $44,000,-
000.
(See Table I.)
The analysis may be set forth in
tion of loans and investments in
P
In
another way assuming again
a
distribu-"
proportion to the deposit lines.
$352,032,000.
In 1935 time deposits of 10,181
millions at $2.71 (See Table III) earned
$275,905,000.
A decrease of
then interest-bearing
$231,765,000
on
facts resulting from experience
accounts together with related assets must be dealt
I suggest
further than each state association undertake
to determine rate or rates of
various types
the
on
consideration
the
tion should be
time trend
a survey or
study
interest that banks would be justified in paying
of funds.
This study would necessarily take into
question of financial
operations, and the desired profit.
programs
for
banks,
the
cost
of
In addition to these things, considera¬
given to practical phases of customer relationship, the long
of money rates, long time
deposits of
a
permanent
nature as
against short time; genuine thrift accounts as against investment accounts.
In
trying out such
two
would
a
plan some states might find
sufficient while
be
or .more
others
would
one survey
find it
for the entire
necessary
make
to
studies depending upon trade areas, investment possibilities,
local interest rates on loans, loss experience or local conditions.
Many of the state associations have recently appointed research
com¬
It would seem quite logical, that if an intelligent control of interest
mittees.
paid is to be developed, the machinery now available cduld be used.
196,490,000
$35,275,000
Modern Mechanical
control is to be established based
a
with by themselves.
state
1932f time deposits of 9,073 millions at $3.88 (See Table III) earned
A decrease of interest earnings amounting to $76,127,000.
Interest paid on time deposits amounted to: 1933
1935
that if
Equipment as
[Note—*A11 tables referred to above
a
are
omitted.—Ed.]
Factor in Operating Efficiency
and Economy
By Dabrel G. Ensign, Assistant Cashier
It
isTnot
my purpose
this morning to attempt to tell you something new,
but I do hope to call to your
There
are
many
Utah State National Bank, Salt Lake City, Utah
current thinking a few things you already know.
in this country who believe that modern machinery is
responsible for many of
our
fromj'ajjrecent editorial in
ills.
one
As to this I shall only take time to read
of the Salt Lake Oity newspapers:
[* "We all know that machinery is
management.
We
the
owe
anniversary this year of the installation of the first linotype
a time when the world is agitated over the displacement
of men
by mechanical processes.
this machine spelled their doom
Doleful prophecies made by printers that
have not been fulfilled.
The involuntary
expansion of printing, brought about by this invention, has even protected
the handsetters of type.
'
the linotype machine has tolled the knell of handset type
in the newspaper and large publishing houses, the lowering of prices in
books and the immense expansion of newspaper material has put many
more thousands to work than
were formerly employed.
The invention
"Although
caused
temporary displacement of some
increase
"The
labor, but its net effect was to
employment.
same
thing is true in respect to other inventions in this modern
world."
our
friend of labor,
public in general to decrease costs of banking
"With income
so
well
as to
accrue to
capital and
labor.
as
much
as
possible, and in
drastically reduced in recent
banks are forced to reduce operating costs.
our more
as
stockholders, depositors, officers and employees, and
keeping with sound principles.
years,
"The 50th
machine comes at
a
The greatest value has been proved to
it to
Let
us
be like many of
progressive depositors who are continually reviewing their account¬
ing procedures for the purpose of making still further economies.
process
plays
may
a
very
important part.
We know that modern machine methods
be applied to bank routine with the same
such methods have produced in the factory.
bank
In this
of reducing costs we all know that modern mechanical equipment
A
measure
person
of success that
in charge of internal
operations today must, in order to be most valuable to his bank, be
fairly well acquainted with what industry has to offer in the form of
ma¬
chines and equipment.
The
maximum
division of labor.
value
of
mechanical
equipment is realized
through
a
This simply means that each employee should have his
BANKERS'
72
work program so
outlined that his efforts are concentrated on as few
CONVENTION.
"neck of
tasks
ment
possible—in other words, he should not be required to turn from one
task to another too often during the day.
This simplification of an em¬
as
ployee's work program to a few tasks results
in
a
In
high degree of skill because
so it naturally follows
lags, and the rhythm which is so essential to speed and accuracy suffers.
It is relatively easy to
thing for the large banks to group work for machine
are
do not want to make mere machines of their employees.
ments
that these small banks cannot group work
mean
not
a
soon as the incoming clearings
sufficient number of employees from various depart¬
It is desirable to have employees conscious of the
fact that when the clearings arrive they must
doing to take care of them.
are
possible, but for the sake of educating the employees, and for
much as
the
are
assigned to this task.
bottle" will be widened.
for machine performance,
To the medium sized and small banks I say, group your work
they can.
as
I do
incoming clearings
It will be found that by shifting help at the
right time much good will result in the flow of work—the "neck of the
It is the small
have the real problem in applying this principle.
be expanded by the
may
be applied to advantage—as
can
received, have
carrying the division of labor to as fine a point as they could, because they
banks which
The "neck"
otherwise, but it must be made larger.
or
number of banks I have noticed that the
a
principle
It is easy to believe that the largest banks refrain from
performance.
be expanded if the personnel and equip¬
effectively.
"neck of a bottle."
It is normal in Clearing House cities that the
incoming
clearings must be sorted and proved quickly, that bookkeeping and other
departments may have time to perform their function before the go-back
hour for returning checks.
This is a condition to which the shifting-crew
from one task to another much time is lost, concentration
that in turning
function
to
sbifting-crew principle
Employees are human beings,
repetition.
of constant
bottle"—which must
a
are
immediately stop what they
Let them know the
auditing purposes, it is well to periodically transfer employees from one
will
It is this practice which permits, in addition to normal
will
defer
reason
why and they
cooperate, otherwise it will be found that
position to another.
a
point without injury to the employees in any way.
fine
to group
to
In attempting
It is
to the
to functions.
With the purpose in mind of eliminating too much switching of tasks
each employee, and with the sheet of each employee before you, list
opposite each function (procedure 2) the names of employees who should
serve in
that function.
Of course, in so matching employees with the
.
his
he
that
work
Remember, that
one
a
completes
one
■
so arrange
operation before commencing another.
machine performance to advantage by installing
posting.
With tnis system, posting machine use
posting
against
the
banks report
time here to explain it. but I might add that this
provides sufficient check against posting
system
many
You are too well acquainted with this
considerable savings in salaries.
system for me to take the
reduced, and
amount,
wrong
to the wrong account,
and against picking-up the wrong
balance.
As important
as
is mechanical equipment as a factor in operating effi¬
I am firmly convinced that this factor is in large
planning and coordinating of operations.
lost without intelligent
measure
In other works, the
effectiveness of machine operation is dependent upon
You cannot any more obtain efficiency and
internal bank management.
in operations just by installing a machine that you can otherwise
economy
My observations tell me that the
banks by just passing a law.
have good
greatest single need in
internal bank operation today is some one in each
activities—some one whose responsibility
bank whose duty it is to coordinate
It is to
the whole picture, in contrast to tne
see
department head who
sees
I think Mr. H. N. Stronck must have had this
only his part of the whole.
in mind when he asked in his book
a
evidenced in an uneven flow of work. If B's
started until A completes
nature that he cannot get
a
B is retarded in his work if A keeps him
I like to think of such an interruption in the flow of work as the
waiting.
The "neck" must be made larger, whether it be by changing
machinery, shifting help as between depart¬
system, improving the
These simple
mon
to find
illustrations, which attempt to demonstrate
an uneven
where it is com¬
flow of work, only typify like conditions which
may
be found in other departments throughout the bank.
chinery
are
Employees and ma¬
dependent upon an even flow of work in order to perform to
their maximum capacity.
The lack of coordination is evidenced in many
ways.
At times
we see
banks adding new departments or employing additional workmen to handle
a
service,
new
&c.
type of work caused by new laws, service charges,
or a new
A coordinator will very often find it possible to merge these additional
requirements into the present set-up with less running
up
necessary,
be
the first thought
impossible
describe their items, so
to handle service
charges
was
to
set
up
a
distinct operation
The securing of the "float" for each business
almost
an
expense than if set
For instance, when the problem of service charges became
separately.
are not
task,
charges.
made
especially
extra
an
since
employee
or
but
for
this
account seemed to
few
deposit
tickets
of employees are hired
set
The point is—if the operations involving service
a part
of the natural flow of work the cost of securing
the needed information is expensive, and to a
large extent offsets the objec¬
In other words, it is important in
tive you are working for—net profits.
such
a
case
as
this to have
in the bank fit this function in with
someone
the present set-up as far as is possible.
here
Time will not permit
me
to outline
system for securing the "float" with the regular routine, but I have
a
outlined
a
procedure for distribution to any who wish to
this meeting has
after
secure a copy
adjourned.
constantly increasing skill has worked them together to produce marvelous
results, and at unbelievably low costs.
In every bank within my experience
that has high pperating costs, I find the trouble not to be
of proper
work is of such
In other words, this
the other departments*
We know that management has taken the agents of
production, and with
factor?"
certain phase of the process, then
consideration
ments, or otherwise.
"Bank Management":
"Why do some banks still use the fixed-position plan of employees in
departmental operations, with a resultant low time-utilization factor, as
contrasted with the "shifting-crew" principle with a high time-utilization
The lack of coordination is
proper
or
not"permit
purpose.
ciency and economy,
thing to find banks who do not give
a common
handling of "proof"
of producing.
tremendous waste follows the continuous changing from
Quite a number of banks have grouped their book¬
than cut in half, paper costs are
more
stoppage will
larger bookkeeping force
a
department.
the
what we all know as single
is
a
personnel and equipment to produce what they would otherwise be capable
task to another.
keeping operations for
be taken
must
or
receipt of the items, and the
after they are received from the proof
_
far as is practicable
work, which will necessitate
interruption in the flow of work does
functions, due consideration must be given to such as the adaptability
of the employee for that particular work, &c.
4
From this latter list a work program can be set up for each employee.
planning each employee's routine, as
Care
"batch" department peak periods which occur
daily.
Items are held altogether too long in this department, with the result
that more persons are required to handle the clearings, on us,
transits, &c.,
3
(Do not make the mistake of thinking you know your organization so well
that it is not necessary for you to write it down on paper.)
'
>
1
t
in ii ii
—^a"Vd....£Sr" jkbbsbsb*3F'- '
certain time.
a
handled expeditiously
are
go-back hour.
for
In
clearings
because of the lessened time between actual
head of a sheet of paper, using
a separate sheet for each person.
List under the name of each employee
the things he does in the order he does them, as well as the approximate
length of time each task takes.
2. Make a list of all the operations of the bank—not as to operators, but
as
these
that
see
result in the flow of
work I recommend the following procedure:
your
List the name of each employee at the
1.
some employees at times
while they finish work for which no one is
depending on them completing by
promotions, the large banks to carry tne division of labor to
turnover and
this clearing work
ment.
a
Management then is the key to the proper
it
upon
equipment, not incompetent labor, but
internal
also
depends
bank
the
amount
management
will
of
production
reflect
itself
in
much
so
deficiency in
use
a
lack
manage¬
of machinery, and
per
employee.
proper
Good
co-ordinating of
activities.
Economies in Buying Supplies
By William C. Tompkins, Auditor
"What constitutes economy" in the purchase of supplies
different from that in almost any
The question
and services for a bank is considerably
other business
The reason for this lies in the fact that banks
with almost every kind of business.
Conse¬
institutiqn.
business relationships
have
be
quently, to define what in itself constitutes a real economy one must
able
analyze the whole situation
to
it concerns his particular bank,
as
&c.
complexity of this problem is directly proportionate to the size of
taking into consideration balances, goodwill,
The
As
the bank.
and
a
result, in the purchase of supplies and services in a bank,
especially in the larger bank, there are involved many questions of
policy which prevent a mere dollar
What may
when viewed from the standpoint of
mere
and cents approach to the problem.
superficially appear as an economy may be rank extravagance
bank policy and bank relations.
The
saving of a few dollars in the pin-chase of an individual item may not
in itself be an
economy
when all related factors are properly considered.
Because of this situation, purchases in a
vision of
a
sideration
bank should be under the super¬
the many and varied
an
delicate questions of policy that are
purchases supplies in such
institution
advisable to designate some
policy is involved.
function
officer whenever the question of bank
primarily from
the standpoint of detail and operation.
have some one employee for this purpose it is
usually advisable to place the responsibility on some
than one officer,
are
junior officer who
can
the purchase of new equipment should rest with
preferably two, and such officers should be those
familiar with the entire internal I operation of the institution, and
in most cases
responsible for such operation.
In handling a
subject
as
such
It must also be
surrounding each individual
There is
one
case must
be
principle, however, which is funda¬
securing economy in purchases and this is that supplies be pur¬
chased by the institution rather than be sold to it.
In making such a
statement it is not intended to infer that salesmen or
saleswomen are not
to be given a courteous hearing.
In this connection there
often exist other
factors that present difficulties.
directors of
an
retail stores
or
In many instances there
institution who have
an
handling supplies of
use
are
officers and
outside interest in
manufacturing
the institution.
This interest
to
should be given only a proper influence in the
placing of orders, and should
never
be permitted to work to the disadvantage of the
institution itself
merely because of
an inside track.
There may, of course, be occasional
exceptions to this situation and they should be handled with
proper regard
to sound bank policy in the
light of circumstances existing in each particular
case.
In the purchase of
most
insurance, which is one of the largest items bought by
institutions, and probably the most difficult to handle, the policies
be arranged for most advantageous coverage at the
least possible
cost to be consistent with the
of
our
larger banks have
on
practical economies of the institution.
Many
their books balances from insurances
companies,
insurance brokers, agents and employees of insurance
companies, running
into many millions of dollars.
While it is impossible to divide the limited
amount of insurance that
a
bank has to give among all of those
balances with it, it is essential that as far
i.
as
maintaining
possible reciprocity be practiced,
to the extent that insurance is placed with those
carrying balances
rather than with particular friends or relatives of officers
of the institution.
e.,
time
an
example—an officer in
a
Middle Western bank spent considerable
period of approximately two years listening to and
conferring
with representatives of various organizations who had
impressed him with
over
a
the idea that they could, by the selection of preferred
risks, carry a portion
of the insurance of the institution at a great saving.
Definite
figures'after
that assigned to the speaker, it must be borne
in mind that in talking before a group
conditions
mental in
As
purchasing of necessary supplies.
The responsibility for
more
is
This employee should not be the final authority but
Where it is impractical to
attend to the
quantities that it
problem from the standpoint of bank rela¬
tions and discuss it with the senior
who
borne in mind that
taken into consideration.
should
employee to handle details in this connection v
he should be trained to view the
should
lay down hard and fast rules that will apply to all alike.
senior executive officer who is in a position to give proper con¬
to
frequently involved in the pin-chase of bank supplies and services.
Where
First National Bank, St. Louis, Mo.
as
is here today, one cannot
an
exhaustive analysis disclosed that the saving would amount to
approxi¬
a year.
For an institution spending each year
mately $1,275
many times
CLEARING
ROUND
HOUSE
TABLE
73
CONFERENCE
i
of said
the amount
readily be
saving for
companies,
surance
the purpose of
creating
goodwill, it can
that the institution, having on its books balances from in¬
seen
brokers,
agents,
&c.,
amounting to several
million
dollars, could ill afford to place its insurance with the companies having no
forms
pended for the
several times the amount of the saving
as
purpose of creating
goodwill
was
ex¬
and further the income from
balances maintained by other companies far exceeded the saving suggested.
Frequently
directors
services.
purpose
of influence
men
various
of
in
companies,
Ordinarily
this
various
communities
receiving
procedure,
of influencing business.
it
be
can
Interests
are
compensating
a
fee
readily seen,
be given
of this kind should
consideration, but should not be permitted to work to the disad¬
proper
checks and similar items.
The
purchase of legal services calls for
of
insurance, in that such
Also in the
toward relatives,
be secured
without bias
ownership or directorship in the institution.
In recent
banks have of necessity required highly competent legal advice to an
years
unusual degree, and under such circumstances it is consistent with economy
that these services be reasonable
competence and lack of bias.
as
to
price, from the standpoint of both
Nothing is
expensive as poor legal advice.
so
case
of such forms
of the size and shapes of
need to be filed
as
valuable in such instances.
for reference his knowledge
files is helpful.
Due to the many changes that are taking place in
somewhat similar approach to
a
services should
purchase supplies in too large quantities.
one
institution where the
purchasing of supplies was handled by an
several occasions with the result that they had on
be in
six or
no way
influenced by the known desires
opinion.
There
on
the part of a bank's offi¬
are many
Many institutions feel that it is economical to go into the printing business
instances of attorneys
have had their opinions in¬
and this
may
accounts
of
Obviously
burger stand adjacent
every
institution desires
an open
and unprejudiced opinion care¬
fully considered from an unbiased legal standpoint.
Only legal services of
this kind result in ultimate economy.
not
imply that purchases should be made from
deposit with the institution
a
any one
receipt of an order.
on
be correct where the individual institution does not have
A sign in front of a counter in a ham¬
printing companies.
to a
bank is
a
good example of the policy of
balances
this does
who agrees to place
The policy in this
and the hamburger stand was to refrain from
conceivably be the
very
printing function.
An
proper
from selling hamburgers
cashing checks.
attitude for the bank to adopt
actual
of the
analysis
cost
stances the cost is
A good plan for cases of this kind is to let it be definitely known that the
bank—not only did the supplies actually cost more
institution always tries to reciprocate in making its purchases with those
outside, but
who maintain balances with it, and that if the company in
would
to open an account
and maintain
a
balance it will be given due consideration
than when purchased
the reciprocal relations with firms in the printing
have
added
to
exceptions to this rule
the
we
profit
account
In the larger institutions
realize.
limited amount of equipment, to take care only of forms
purposes,
merely to secure
general rule it is
a new
mistake to purchase supplies
a grave
bank account.
of
Purchases made at any time from friends or customers of the institution
should be made at the then prevailing prices and not at a premium.
When
a
institution being trained in the institution and familiar
operation thereof, particularly as to the use of various forms
sity of the maintenance of them for records.
premium may be tacked on by
once
because of being a customer.
There
that
is
no
are
are a
on
cheaper paper at
a
and the neces¬
limited period.
considerable saving.
period of many
there
are
volumes have been written on this subject there
years
and the one making purchases, realizing this need, should purchase
as
It is just
as
essential to
see
that
a
various records that should be maintained for a
quality of
paper
In many cases losses have
that fits the situation.
supplies are not wasted, after being purchased, as it is to endeavor to pur¬
incurred through inability to produce proper records, due to
chase to the best advantage.
and such losses could have been avoided if such forms
and
records
Proper storage facilities for supplies should be
kept
deliveries
of
From time to time there should be
to see that certain ones
are
not
a
to
the
a
period of
to
departments.
or
and departments them¬
These records should be maintained for
machine purchased.
years so
that at the time of reorder it
can
readily be ascertained
quantities previously purchased, length of time in which they were
consumed and costs at the time the purchases were made.
One
making purchases should, of course,
operation of the bank and have
supplies ordered
so
on a
a
better quality of paper.
economy in
over-ordering from the supply room, and
Records (preferably on cards) should be maintained covering each
form, item
as
various
check among the various departments
that supplies are not being wasted in tellers' cages
selves,
to conform to the
from the
be familiar with the routine
real knowledge of the necessity of the
frequently been made by officers in smaller banks tnat
they cannot waste their time in saving $1.00 to $2.00 in the purchase of
useful pursuits.
can
employ this time to better advantage in more
This is quite true, but continual saving in the course of
year's time really amounts to something,
and the best interests
a
of the
institution must always be borne in mind.
Frequently supplies
discount.
may
Those shaping the policies should
give questions of this kind consideration so that the supplies used for the
purpose
stated will, in their opinion, be such as to properly represent the
Frequently purchasing agents
which
are
does
not
mean
that
a
great
many
particular form should be ordered, but it may be possible that two
of
or
are
called
upon
by representatives of firms
making special drives disposing of certain stocks on hand, &c.
and the purchaser is
requested to order immediately to profit by the special
There is danger here that the purchaser will be stampeded.
a
period of
years
will
no
Every purchaser whether he be
an
cases
out of ten is "No."
officer or employee of the institution
should be willing to listen to salesmen or saleswomen who pay
honor of
a
visit.
Expe¬
doubt show that the best answer to
"hurry up" requests of this kind in nine
them the
By listing to people who call on you with the desire to
make sales, one may
ances
be purchased in quantities that will bring
This
Practicing too strict economy
cheap paper is often poor economy
institution.
that forms of which only a limited number are used
they
dignity of the institution.
on too
prices.
as
readily be seen that the small apparent
standpoint of public relations.
rience over
deposit tickets
can
the original purchase in reality was no economy.
purchasing forms and stationery
daily will not be bought in large quantities, and those used in large quanti¬
The remark has
It
been
deterioration,
had been prepared
Stationery that reaches the hands of the public should be of such quality
as
ties be bought on a hand-to-mouth basis.
considerable
These may
On the other hand,
great many details in connection with the purchase of supplies
essential, but
need for repetition at this time."
maintained
the
Certain forms are used only
and their retention as records is only for a
be made
hands
with the interior
making such purchases from customers the one in charge must be alert to
dealer who considers himself at advantage
a
good arrangement.
again stress the importance of the one making purchases in
we
the existing market and should obtain competitive quotations so that no
a
probably
for confidential
&c., when it is preferred that these forms not be in the
outsiders, is
May
business
There are
of the institution.
being made.
a
in¬
really greater to operate a printing establishment in the
in the general course of business whenever future purchases in its line are
As
This might
toward the
of home printing as
compared with the cost if purchased outside has shown that in many
connection must be tempered with sound judgment from all points of view.
question wishes
sound
stand had a
It stated that the bank and the hamburger
reciprocation.
mutual agreement whereby the bank was to refrain
While it is true that bank policy should take into consideration
of customers in the making of purchases of supplies or services,
hand obsolete forms of
eight different lots in large quantities.
fluenced by the known desires of the officials in charge of the institution.
who, in their desire to please management,
the banking business it
This is
day.
In
officer
who had only a limited time to attend to the purchases, and who in reality
only ordered as requested by employees, it was found that one particular
form of which only one was used each business day had been purchased
in quantities of 5,000.
Due to changes the form had been reordered on
does not appear wise to
particularly true of the forms of which only a few are used each
It is especially important in this connection that the advice of the attorney
cials with respect to his
experience in
the
be made use of, as his knowledge of
may
different kinds, makes and sizes of paper is very
vantage of any bank in dealing with said companies.
that
When new forms are
making the purchases should be consulted so that his
working out the size of form
the
purchasing counter
under consideration the
This is particularly true in
one
for
work
be prepared whenever practical in such size as to
that forms may
out with the least waste.
their
for
is
making purchases should have knowledge of the sizes of paper
one
local
made
wh^n such opportunities
offered.
The
so
This requires a careful
potential requirements
and
time, thereby
check and
by the printer at the same
run
quantity discount.
a
analysis of actual
are
business relations with it for the purpose of saving the paltry amount men¬
tioned, particularly so
be ordered to be
can
making possible
acquire knowledge of
new
forms, systems and appli¬
which is invaluable to the institution which he represents.
a
In closing may we say that if it were possible to chart the activities of
one
purchasing agents our idea is that the best showing would be made in such
three
cases
where the savings line
paralleled the reciprocity line most closely.
CONSTRUCTIVE CUSTOMER RELATIONS CLINIC
American Bankers' Association
Annual Meeting, Held at San
INDEX
CONSTRUCTIVE
TO
Francisco, Calif., Sept. 21, 1936
CUSTOMER
Knowing the Facts, by Harry R. Smith
Page 74
Women Customer., by Helen Kavaneugh.
H
RELATIONS CLINIC PROCEEDINGS.
Customer Relations Inside and Outside the Bank, by Dunlap
Page
75
Op^^^R^a^s of
RudoVph
77
Knowing the Facts
By Harry II. Smith, Assistant Vice-President of the
whatever
From
banking,
it
angle
approach
you
becomes apparent
soon
problem of
the
that
of
one
the
public
relations
vital
most
in
forces in
Bank of America N. T. & S. A.,
the
demands,
molding public opinion is the personal contact between the banker himself
current
and the
studies
public.
of
rooms
clubs,
Nation
the
locker
These contacts
ing
and
and
rooms
In every one
smoking
of these contacts
public opinion
on
but in
telephone,
cars.
that
of
sions
banking from their contact with junior officers, tellers and other
employees because there are / more of them, and because the customers
them
contact
Gradually
haughty and disdainful, because
are
all
treat
men
with
customers
bankers
senior
have
begun
to
the
of
that bankers
impression
have been, insisting that
we
and
courtesy
consideration,
of
the barriers which
remove
discoraged personal contact with the general
it
problem still remains, however, that of disabusing the minds of the public
hazy or erroneous ideas they have regarding the nature and function
banking.
to be the
simple
Before
to
we
that
sure
knows
informed
the
discuss
to
about
the
The
clerks
senior
the bank.
for
How
Many of
still
you
education
to
know
at
and
the
extent
of
the
junior
banking, at least
bank
employees
sufficiently
7 :
take advantage of
may
which
the
how
of
its
arise
both
and
facts
answer
to
that
and
outside
employees
our
its
over
first, the functions and mechanics of
institutions
other
This is
credit unions.
has
section,
such
the present
The Institute,
well
39,000 were enrolled in its
Now
of
some
of
scope
its
through its 220
members,
50,000
over
The study
courses.
building
and
loan
associations
work
approach
and
and
to this
important
a
and
new
subject.
practical
more
The study
of
money
excellent background in the theory of banking and
by which banking has developed to its present form
an
credit
teaches
These
subjects
is
in
not
officers
courses
trust business.
officer and
the American
the
however,
operate
of
and
Nation
Banking he
merely' to
principles
banking
the
in
train
laws
the
and
these
facts.
employees
and
banking.
regulations
undergoing constant change.
are
study
know the
would
and practice of
the
would
junior
The
under
con¬
which
The Institute provides
Women
but
facts
and
men
equal
almost
of
others.
to
a
its
debat¬
the facts
of
to present
women
im¬
Through
program
Bankers have
manner.
to
women
education
story to tell,
a
the message of banking
carry
the radio, as
over
the
of
program
business
of
our
Bankers
American
Rutgers
are
School
Graduate
University.
charged
now
Beyond the work
Banking, now
knowing the facts.
Institute is the
at
Last June
the
from
weeks
these
eminent
to
Union
of
Designed
to
executive
with
responsibility," the
give
intensive
assembled at
Rico.
This
Vice-Presidents,
bank
Cashiers
administration,
and
economics
banking
these students
sessions
bankers.
as
will
for
do
of
to
the
future
Such
these
who
be
can
of
Institute
develop
in
this
called
Banking
country
the
destiny of
opinions.
private
Men
whose
in
banking;
the
as
of
American
Banking
We
time.
the American
this
American
Institute
of
entail
necessarily
appreciate
Bankers
more
there
is
is
considerable
greatly
Association
evidence
you
participation
I
the
a
Banking
thousands of
and
high
your
to
the
in
the
interest
of
the work
our
you
the
of
task would
of
the
generous
know
the
facts
and
to
increase
the
Nation.
and
staff.
your
A
the
promote
most
or
Institute
your
to
task would be
our
support
the
possible,
if
the
of
more
is lacking
moral
and,
work
than
without which
fine
bankers
senior
progress
offer
the
word
of
these
financial
of
interest
personal
of
I
personal
your
personal
training
offer
genuine
Therefore,
en¬
young
aid
if
the
is unexpressed.
personal interest, therefore, will
sound
of
support
bankers who
The fact that
for
Without this financial aid
to
continue
will
women
will
regard
the
and
outlay
financial
generous
the
and of
of support,
refer
by
educational
couragement
of
Banking.
another type
displayed
to
in
the litera¬
difficult.
impossible.
interest
the
aid
Institute of
much
the
with
heeded
and in
give financial aid to the 220 chapters of the Institute.
continue
be
can
with
men
men
will
words
the press
group
who
Men
professional.
the
and
larger
a
economics.
School
and
Your
rigorous
a
■
-
American
in the public forum,
undertakings
Graduate
personal
of
In addition
authority of training and experience;
regarding
express
the
so,
the combined
opinions
ture of fiscal
bank
For two
faculty
a
following
!
■
Banking will
legislative halls,
men
other
and
administration,
under
are
included
banks.
trust
law
40
from
body
practical bankers and government officers.
resident
School
bankers
the
Rutgers
student
of extension work which will equip them to discharge more wisely
speak with
of
studied
advanced
anything
sound
Puerto
country banks and the largest metropolitan
public trust
If
from
Presidents,
students
attending the
of
bank officers
400
and
bank
professors,
program
in
employee
Institute
time-tested
surrounding
banks must
officers
appeal
The
enough,
in
ditions
of
But
and
the
the
who
men
exaininere,
almost
bank
every
analysis
and
courses
investments and
If
the
and
operating statements
and
men
the
year
Banking.
but from the management rather than the operating view¬
are followed by studies in corporation
finance and
operation,
point.
accounting
second
States
interpretation
department.
bank
of
bank
practical work of a
in bank management covers all phases of
and
sheets
either as
graduate school might well be called the capstone of the American Institute
be
Institute
prac¬
moment from the main stream
a
and through its
contests,
public
to
chapters of
money
being expanded and!
opinion,
my
important,
transmit those
convincing
Institute work,
consultant.
a
colleges, the civic clubs and
the
to
training to
the
a
magnitude.
balance
It
is
being given
is
various steps
The
of
economics
banking gives
the
in
in
its
and
principles of commercial law and
is
e.g.,
problems and
monetary
of
in
officers,
training in public speaking and debate that has made
the
return
to
the
ability
covers,
study of the law of negotiable instruments.
The
of
their
banking and the differences between
as
followed by the
schools,
Graduate
and
B.,
as
occasion
the
as
bank
Association.
be found in the educa¬
1.
and
phase
support,
training bank
Institute
investments,
the countless
inside
see
may
realize
many
activties.
correspondence
and
year
and
in
man
our
time, students in the A.
one
But I wondter
are.
chapters
banks
expect that
functions
large part of the
were,
and
last
contact
first be
must
we
of the American Institute of Banking.
you
curriculum
however,
every
cannot
that they
so
we
A
appears
junior officers should be well informed regarding
public
facts?
know the
tional program
what
giving out misinformation.
and
are
by
offering,
they have for the most art been silent.
years
the
contribution
in
main
major problems of banking, but they should!
routine
banking and economics
opportunities
the
in
single employee from the President
every
we
the
that
and
means
Naturally
avoid the mistake of
to
facts;
and that
messenger.
should be able
be
solved
give the facts to the public,
know
we
be
can
of giving the public the facts.
process
can
the facts;
the
problem
This
is
facts
to
and
courses
Institute
the
years
The large
the
possible for Institute
of the
of
for
It is
into
former
in
of depositors.
run
because
know
clear, concise and
a
but
his
least
at
by
graduates
To this
owes
or
know how
public speaking
the
problems, current
should like to digress for
To
is to
the
officer
San Francisco, Calif.
the times
of
for
courses
instructor
an
as
thought.
ing,
abreast
Banking Acts.
bank
every
portance
contact
our
and
recent
At this point I
in
frequently.
more
the public is being disabused
additional
in
tically
mold¬
The impression
bank customers get their impres¬
Most
us.
bankers.
keeping
legislative and banking
student,
,
often perhaps unknowingly,
are,
we
life, luncheon
social
-
regarding banking and
give naturally depends
we
the
over
continually, not only in the banking
occur
of
means
and
thus
relationship with the
.
that the employees of yuor
assure
contribute
toward
public toward
which
the
we
development
are
of
striving.
Customers
By Helen Kavanaugh, Wells Fargo Bank & Union Trust Co., San Francisco, Calif.
For
they
centuries
were,
due
privileges of
and
the
to
the
his
ruling
what
change
But
a
Figures
fact
trained
leader—the
develop.
considered
were
that
on
mental
power
in
inferior
they
Man monopolized
men.
with
then
women
and
has
takes
at
a
least
woman
a
the
four-year
years
and
And1,
men.
the
of
course,
and
advantages
and
athletic
super-strength,
fields,
became
in the world.
picture
file at the Mayo
10
to
denied
educational
equipment
since
is
longer period
longer
to
educational
will
the
women
have
been
allowed
divulge the fact that
now
the stronger of
of life—despite
reach
the
age
of
the
to
woman,
the two,
fact
forty.
In
that
an
only
this
last
than
she has not only crept up
him.
In
the
male.
If
have
a
many
This
men.
decade
the
female
they
monopoly
of
the
continue
our
own
species
to
on
improving
man
are
but
but indicates that she
more
women
students
University of California.
has gained 500,000
increase
education,
been
on
there
universities
is true of
at
will
this
also
rate
in
In
number
they will not
control
the
vote
of
country.
While
she
way
surpass
enrolled
over
Clinic
through her greater resistance to disease,
it
were
the
has
economic
woman
also
has
been
condition,
physically
flourishing financially.
the financial
power
and
advancing mentally,
Due to various
of the
women
of
changes in
America
is
our
daily
more
contained
in
and
the
have
spending
85%
of
earned
the
of
this
of
income
They own the
companies, too numer¬
ous
to
mention, which gives them, in the final analysis, control of
practically three-quarters of America's wealth.
The women themselves
by
64% of
and
men,
left by other
estates
women.
if
certainly the
especially bankers,
men,
are
surrounded
the
growth
death by her fellow men
At the present time there are
23
exception, every bank in San
Francisco.
These girls are ready with a reasonable amount of notice to
go out and address club groups on banking services.
Several are already
doing this very thing.
The girl can either prepare her own paper and
submit it to her bank for approval, or the bank can supply her with the
material.
By contacting clubs and letting them know that speakers are
available, it would be a very easy matter to arouse and awaken women
to the realization
that a bank has many different types of services to
offer.
A woman is well qualified to do this type of banking missionary
work, because in place of the technical and academic language of her
brother banker,
she talks plainly and simply; therefore, she does not
confuse or perplex.
A. girl with charm and personality who has had faith
and confidence enough in her organization to remain with it for a period
of years
would naturally have her spirit so imbued with the policy,
background and ideals of it that she would be able to engender in her
listeners
the
faith and confidence
that she herself has for her bank.
for thousands of years,
of man
that
brought to the realization that woman is to be seriously con¬
financially and,
if she continues
to prosper and! increase in
as she
has in the last decade, is it not possible that in time to
number
far
they have,
as
their
overlooked the importance of
never
a
woman
definitely concentrated upon her as
The figures of one of the largest companies in the
have
They
indicate.
in the last five
disclose the fact that
withheld by request)
(name
their annuity business has increased 535%, and 73% of this business
years
of
have
prospect.
records
world
with
was
that women in the space of 100 years would travel as
and gather unto themselves three-quarters of the wealth
companies
business
a
That may sound
revenue?
of
source
rich, fertile country of ours?
Insurance
as
only
impossible, but who would have been bold enough 150 years
prophesy
to
ago
of this
the bankers'
be
will
she
far-fetched and
business?
women's
value
of
few
a
receive such
company
By spending
time
educate
to
Personnel
large percentage
them regarding the
a
bankers
exceptions,
as
regarding
women
wealth.
of her
fear
will
about—and
nothing
able to
be
Few
help them
women
They do not know that
unload,
or
the
mystifying
baffled
bank has nothing
a
they know
educating
they
that
in
through
have
the services
to
access
bank.
a
Bankers
are
of
their
in
There
their
are
many
which
in
ways
'
handled:
units
as
service
or
this
in
and in
fellow
citizens,
desire of
every
educational
and
could
her
By the proper type of advertising.
Because street
car
woman
see
can
or
woman
women
in
see
woman
a
be
would
man
intangible, why women
many
doesn't mean
This
clients.
women
be able to
who would
department,
every
vanity
for women who may dislike asking a
she is reluctant to display
such that
is
especially before
ignorance,
help
average
a
questions
answer
Woman's
the
separate banking department, but
in a conspicuous place in the bank,
have
two
one
advice.
will
intuition
that
tangible,
deal with
to
should
one
explain and
man's
be
suited
be
of
power
conditions
reasons,i some
they
that
should
a
man.
to colof.
Even
white walls and furniture
warm,
restful colors, because of the beneficial effect that
color has on tire patients.
Banks as a rule are cold-looking edifices of
marble
(and a client endeavoring to borrow money often feels the same
A
1.
One
their fellow men.
if they were perceivable to him.
even
of
scores
better still,
serve,
-
with,
better
are
there
or,
an
banker.
program
are
necessarily
doing
so
This
and
circumstances
to cope
cleiks
wouldn't
great civic
a
should, because no woman is ever
They all use the same type of
It
woman.
intrigue
lives.
children's
There
welfare,
Why
be
groups,
their
to
the
on
community.
for women
the ultimate
business,
own
their
of
this either
things—a
two
pride' themselves
group,
banking services
better?
to
just as easily as
another
through
of
unable
standing
on
could do
accomplish
increase
minded
education
Banks
service?
would
civic
a
intellectual
and
program
which
the average wife sees through that old
story about working late at the office.
Women have greater vision and are more sensitive to situations than
men; more adaptable, better fitted to understand another woman's problems
and requirements; quicker to
recognize vulnerable spots and be guided
accordingly.
All women as potential mothers have the tremendous "power
of intuition," a gift bestowed upon them by God', to aid them in guiding
nothing to sell
syndicate,
qualities of women be a distinct handicap to
If so, wouldn't a woman-to-woman business
out
work
with
are
her?
with
mystified by another
or
through
that you
women
of investing
lack
and
manner
dealing
artifice
this feeling.
advantages
in
arrangement
Security Analysis Department.
happiness
a
do
nor
by
only
is
it
overcome
of the
aware
are
the women
baffling; they are unable to
admit that they do not understand their own
of understanding on their part regarding the
they even
this
Wouldn't
them
That is why they are suspicions.
It is only human nature
and be suspicious of that which we do not understand—that which
know
we
doubt this type of woman is
no
men;
admit that women
readily
men
wives.
"'for the
executive,
one
found.
deal with
prefer to
understand them ;
mystery."
to
the words of
use
Most
the trust department has always been enveloped in a cloud
average woman
of
To
be
to
determine, because there aire no
Of course there will always be some
difficult to
is
already doing all her business with the bank.
But what about
who are not?
With whom would they prefer to do business?
They either do not know about
the
complex and
a
trust account or investment
department services, or they are bewildered by them.
During these interviews I heard many adjectives applied to my sex; no
superlatives, just powerful,
descriptive adjectives, such as women are
temperamental to do business with, taciturn about their affairs, evasive,
inconsistent, and most of all suspicious—very 6Uuspicious.
For instance,
a woman
may wish to create, a trust, a living trust, and when she finds
that she is required to assign and convey her property and assets over
to the bank, she suspects that the bank is resorting to subterfuge to gain
checking accounts.
intricate functions of
possession
who
women
it
On what grounds they
another woman.
than with
them
with
assumption
statistics
authentic
savings and
only the
their
base
banking
various
the
business
do
whole have never tried to educate
a
services.
Upon inter¬
viewing a number of bank executives and men whose duty it is to solicit
new
business, the fact was brought out that many women made use of
inform
or
with the proper
girls who
to employ
should endeavor
directors
training would be eligible for promotion to various departmental positions.
Men seem to believe—in fact, definitely say—that women would rather
investment.
annuity as an
an
With
this
How did
women.
is
they thought she knew too much.
active members representing, with one
stances
come
have
club
because
you
are
club with qualified speakers ready to do this work.
In
have two clubs, one for the men and one for the
the women's club that I would like to tell you.
called the Hypatians, after the brilliant woman scholar
philosopher of Alexandria, who was stoned to
and
they were they would pay more attention to
sidered
education of women regarding banking
chapter in the United States there is a
is about
It
The
not aware of it, • because
them.
When you take into consideration that it has been only a period of
about a hundred years, perhaps, since woman has been out of her enforced
seclusion, and compare that hundred years with all the favorable circum¬
and
large
every
Francisco Chapter we
San
women.
important stake that they hold in the financial set-up,
not aware of the
are
speakers for the
almost
In
speaking
public
the slightest change in
in the field of adult
whether for the clerk, the senior banker, for whom they con¬
School of Banking, or the uninformed public, is pre¬
supply
to
services.
greater percentage of stock in many of the largest
exponent
outstanding
an
Graduate
the
duct
pared
and
world,
financial
education,
of
beneficiaries
Institute of Banking, sensitive to
American
The
our
country.
cent, of the savings accounts are in their names; they are
80% of life insurance outstanding; receive 70% of estates
Sixty-five per
left
have speakers address them.
eager to
the
other
several
clubs are usually
belongs to some club or society, and these
Almost every woman
important.
At the present time, according to figures
magazine "Nation's Business" for September, 1935, and
financial magazines, they legally own 60% of the dollars
becoming
75
CLINIC
RELATIONS
CUSTOMER
CONSTRUCTIVE
advertising is forced
deal
great
vision, it carries more of an appeal and is read by many more people than
any other form of printed matter.
However, the type used at present regarding
trusts, carries only an appeal to married men with responsibilities.
There will be a
picture of a distracted widow clutching her children to her, with the words alongside
the picture—A trust fund will prevent this, or something similar.
If unaware of the
functions of a trust, a woman would be led to believe that in order to benefit from a
trust, one must be a widow with little children.
2. Then there is the radio.
People will listen when they are too indolent to read,
too thoughtless to Inquire.
A program arranged in the form of a duologue. A
duologue is a relief from the monotony of a single voice and enables the advertiser to
put into the mouths of the performers, the questions the audience would be likely
in
banker
the
and
personality
chill.
red
Figures
to
raise, much in the manner of informal conversation.
If the lines are cleverly
written, and expertly handled by competent performers, the duologue can retain
himself).
admit
Bankers
once
and
of
warmth
woman's
a
that
of
in this respect.
It is
possess
women
the
that
bankers are the first to say that
the greater portion of the wealth.
(and
conclusively
Institute
American
brightness
The
tape.
prove
figures do not lie)
much of the Impulsiveness and spontaneity of informal conversation.
3. The third way, and unquestionably the best, because the direct spoken word
is the most powerful of all, is by personal contact and lecturing to them in groups.
glaring
could do a great deal to remove some of the
said that what banking needed was more ruffles
costume
Dorothy Dix
lees
and
reactions
the
upon
the regultion
of
favor
about
laid
is
stress
discarded
hospitals have
upon one's
of
education.
speakers to
The
majority of women need banking
Banking
ready
is
qualified
with
serve
to the bankers to do the rest.
up
•
r
-
•
•
Customer Relations Inside and Outside the Bank
By Dunlap C. Clark,
Public
relations
and
management,
time.
present
three
Savings,
which
safe
the
the
confidence
to
and
other
their
communities
is
recognized
understand
to
many
by
Commission,
of Dr.
is
at
the
still
places,
in
much
and
in
the
headed
one
important plans.
Harold
Association
by
more
than
past
our
the
They
American
are
our
of
banks
Rudolf
S.
of
both
and
in
their
an
this
summer.
There
relations
is
as
-
has
direction
relations
much
misunderstanding regarding
In large banks
as
in
v
.
the
smaller institutions.
importance
the
of public
True, the former have
customers
departments
seniors,
part
of
the
of
their
sallies
would-be
from
this
extending
for
cooperation.
Since
large
cultivating
primarily
the
proper
bankers
amount of
lazy?"
the
speak
until
the attitude
this
of
with
years
such
of
relations
institutions,
officers.
can
actually
by and large,
we
are.
afford
contract
large
many
present
banks
the
I
in
assisted
Kalamazoo.
size,
how
I
of
the
rather
hearsay but
when
they
where
but
from
the largest
ago,
Bank
Most bankers,
activities,
thought and" effort?
I think,
their
field,
they are
against
department
not
of
one
three
that
guard
must
business
new
of
plants
between ■ credit
particularly
banks,
most
they
But even
and
offices
antipathy
take
which
of
because
public
active
of
They
I
the
of
the American National
the smaller
the
desirability
into
is to contact
customers.
the officers, especially
getting
natural
connected
years
institutions,
in
than
on
13
and
a
funds,
depredations
some
in
departments
men.
bank's
organization of
"specialists"
the
full
credit
experience, having been
country
the
in
and
desks
seems
business
new
prospective
as
difficulty
their
there
And
well
as
have
from
away
and
"watchdogs"
on
than
important subject of discussion in the Graduate School of Banking
was
these
their' friends.
Hecht,
public
the
departments whose prime responsibility it
bank
departments
in the American Bankers
Banking,
extension
the
Postal
able President, Robert V.
The Public Educa¬
well carried out under the
Institute
outside
money
program.
President,
Stonier, Educational Director,
and
importance
Bank of Kalamazoo, Kalamazoo, Mich.
business
there
markedly
in which they can be of real service.
ways
no
the
Fleming, who consistently stresses it in his
projected
there
bank
in
institutions
returned
hiding
fields
rightfully belongs in the banks.
This, however, is only
public relations problem.
It is the duty of banks to
daily lives, and the
tion
neglected
financial
has
holiday,
banking
vaults
President American N ational
most
important
more
general
deposit
of
one
of the
phase
This
is
none
following
years
in
help
perhaps
While
hoarded
one
is
or
a
do
work
small,
direct
to
challenge
staff
of
far| more
must
rest
agree
them
"Are
to
a
we
76
BANKERS'
Perhaps,
the
old
realize
though
modity is
is
instances,
I
or
am
desirable
basis,
attempt
not
are
In
the
book,
do
to
so
on
difficult type
most
another
price
a
to
not,
several
tellers
this
com¬
than
compete
reference
tainly
complain,
this
increased
in
perhaps
of
loans
1936.
two
rare
rates.
sound
other
once
a
be
cannot
part of
ears
not
no
contact.
Cer¬
all
justly
may
In
bank
our
29,
we
soliciting
the
our
credits.
banks
in
Kalamazoo
showed
increase
the
We
proves
From
would
seem
Outside
the
be
to
Bank."
the
Logically,
determination
of
the
first
policy
a
step
with
in
bank
any
respect
public
to
relations.
Let
entirely
new
the
severely
involved
of
"Spokane
Plan,"
we
so-called
deposits and
other
State
its deposits available
is it
It is
admitted
much
fact
capitalized
Policy."
therefore, from
Kalamazoo,
then
70
old,
years
had
few
months after
is
a
been
the
on
articles
our
part
in
to
the
make
entitled
complete
succeeding
is
perhaps
half
to
as
less
concerning
from
by
growth
two
have
we
mittedly the
no
modern
and
Outside
the
two,
Bank."
The
of
battle.
what
it
day in and day out,
So
in
banks,
is
to
after
years
latter
is
been
school
Acknowledged
success
the brunt of
daily
that
fact
or
it
failure determines
or
tion
the latest
of
presents
ordinarily
have
The
is
the
customer contacts
falls
being
well
the
as
house
builders
and
maintained
understanding of the bank's policies and condition is of utmost importance.
Since our inception frequent
meetings of the staff have been held.
Our
cashier and I, the only officers at the
start, came to Kalamazoo from
advertising
outside,
bank
and
in
had
the
personnel
whose quarters
the
"defeatist"
almost
was
operate.
we
attitude
entirely recruited
All
strangers
were
from
to
the
closed'
and
us
corrected
as
changing.
matter of sound
a
Errors
encouraged
to
refer
These
Board
as
it
that
them
the
to
would
be
ours
and I
any
think
officers
"case
for
lack
or
While
has
presided
over
to the
booklet,
seniors
with
of
of
discussion
general
a.
for
women,
around
the
the
rather
staff.
At
detracts
sure,
staff
of
of
of
28
approach officers
by
held,
were
to
are
on
per¬
our
since
our
a
week,
usually
our
one
With
doors
opening
customarily held at
the
rotating
meetings,
the
the
"case
constructive
or
the
Banking
and
far
as
method"
criticism
9:00
among
continues
to
that,
the
activities
social contacts.
of
and
business
discussed
the
having
in
no
them.
their
They
intimately—far
"official
are
after
approval.
in general terms,
family"
"secrets"
he
the
he
Bank,"
of
Rotarians.
from
the
test
Mr.
In
Beaty
"white
officers,
making
the business
encouraged
banking
on
hours,
in
their
them
day
a
friends
having
better
and in
new
able
their
business
in
checked
While the staff does not discuss
their
stores
the
to
own
frame
and
names
credit,
save
it is patently unwise to make approaches without reason¬
probability of willingness to loan.
Ihe tellers were especially helpful at the start in introducing friends
of the old bank to the new officials.
This policy is assiduously pursued,
able
bank,
Service,"
to
As
the local
as
We
wares.
subsequently
in
which
discuss home
of
the result,
our
newspaper
have
we
five
building
created
Kalamazoo
consistent
a
schools,
through
in
the
on
an
to
in
the
among
the
two
senior
Insurance,"
100
entries,
The
distribution
and
FDIO
the
in
the winning
of
we
and.
comments
winners.
booklets for
ask
and
men
their
Deposit
over
Washington
Kalamazoo
in
"Federal
were
opera¬
to
stressed,
through
of
groups
business
contest
essay
There
supplying
submission
is
future
parents
divided
were
this,
into
50
observing
discussion,
communities
subject
students.
than
After
informal
an
their
of
bank.
the
ideas
correct
publicity "drive."
less
no
essays.
contact work was our sponsoring
John Y. Beaty, editor, Rand
of
the
questions
notice,
the
answered.
were
questions
same
The
From
with
Publicity,"
Our
space"
over
advertisements
advertisements
is usually
our
observation
logotype
and
run
week,
the
to
in
or
"tailpiece,"
inquiry,
feel
we
local
newspapers
Sunday.
The policy
thought tersely expressed,
that "he who runs may read."
one
that
lengthy
copy,
are
less impressive.
Our standard
size
our
called
is
or
requires
additional
statement
published,
is
instances
attitude
reflected.
specialized
papers
newspaper
In
board
the
is
new
ads,
overburdened
2-column
5
inches,
particular
some
feature
space.
While
admittedly it is difficult to trace returns
voluntary comments make us feel that our presentations
few
might first
regularly each
followed, with
when
save
our
following
submitted
were
elsewhere.
"General
of
we
as
our
preliminary grades averaged 37%, and on the subsequent
80%!
Query—Are eductional talks needed and are they well received?
followed this plan before other groups locally to
good advantage, as
discussed.
customers,
concentrated
Their
be
intimately,
projects,
builders,
covering fundamental points of banking.
After collecting
talk, "What You Are Entitled to Know About Your
previous
we
institutions.
"Federal
and
we
to the
their
in
ramification of group
which
successfully
more
many
and
FHA
the
his
gave
in
without
local
which
$50
appearance
and
topics
"Bankers
had prepared
them
has
of
unusual
policies
popular
Monthly."
He
spent
two
days,
addressing two
luncheon
clubs,
one
high school class,
the entire body of the local
leading business college, and our own employees, over 400 persons in all.
Before speaking at the Rotary Club he circulated questionnaires which
We
This accentuates their pride in
voluntarily make calls
houses
officer for
most
personal
on
conducted
we
requesting
talks,
our
week each
made
chance,
the
in
Other
Policies"
Advisory
banks in their
city
interest
and
McNally's
errors,
on
participation
in
the tuition to those who
public both in
personal,
many
A
the
This supple¬
possible.
as
educational
leadership
Chapter,
half
are
with
even
confidence
bank
schools
the
ago
surrounding towns.
banking
carpenters
expense
a
the
interest
the
in
discuss
painters,
subject.
before
of
before
Talks
and
by the six qualified
50% of the Title II loans—an unusual example
conducted
totaling
real
presented
bank
the
than
understands
institution
an
a
courses.
affairs
smaller
week
a
reduced
provided,
from
desire to go even further with
with
prizes
took
group
year
found
poular that it has been
so
some
"Loan
displayed
the
been
associations
During this period the bulk
inculcating
in
talks
cash
imposition
no
A
schools
following
presented
were
harmonious
junior officer.
the latter submerged
through reimbursing
mind,
been
a
other
encourage
"sell"
been
meetings
achievement
on
in
than
complete the
home.
high
has
banking matters.
FHA, setting up in our lobby a model
dislayed types of equipment then qualified
loans
over
the
sur¬
commercial
fostering closer rela¬
at the start of
"Architects'
to
I
talks
gain
banks
II."
afternoon
an
given
are
who,
relations
us.
work
afterward.
without
profitable return
to
been
beside
we
on
were
large.
The place
that,
views, and I believe
hesitates to
the meetings
material
Institute
The
came
"boss"—our
common
Every other week the American Bankers Association
Relations," is used as the textbook, with discussions
commendation
am
a
own
genuinely
staff
our
or
m.,
American
I
for
general policies
course,
there has
have
by the cashier
with personalities
The
together
more
three
these
grown,
"Customer
of
ments
a
this,
or
they
feel
respectful attitude.
two
and
have
of
was
an
Title
well
addition
the
15 minutes.
centering
specific
In
tions,
spirit of false dignity within the institution,
no
of
public at 10:00
for about
find
to
spite
originally
business
addition, of
member
no
In
of
students
and
method,"
friendly attitude, and the staff
working
encouraged to present his
We have
that
matter.
sonnel
In
was
difficult
now.
cordial,
a
all
are
of Directors.
Everyone
in
up
we
well.
than
institutions and
questions.
in
at
and
Insurance,"
gladly
devoted
was
comes
customers
public
desirable
trade
to
welcomed
months
bank
of the
clubs
Supplementing
This
donated
public
75%
over
at
taken
were
realize
the
*■'
the benefit of all.
to
architects
and
discussed
the
local
practice, but their veTy psychology required
noted
were
in
by
obtain
business
new
as
on
has proven
questions
groups
merchants
with
many
engendered
by the few years prior to the
Not only did they have many slipshod methods which had to be
holiday.
staff
term
we
of
clubs.
financing.
bodies
opportunity
front, behind which
FHA
excel¬
an
us
correspondent
contact
clubs,
Titles I and
before
several
to
be
can
found
our
sponsor
well
as
Chicago
incoming accounts
are
our
or
high
subject, "How to Analyze a Bank State¬
talk, using an enlarged exact reproduc¬
luncheon
Deposit
service
for
of
through
men,
written
as
glad to help
attracting
help,
service
particularly
presented
activities
for
was
the
contacted
York,
are
nearly
new
are
smaller
group
statement,
Administration,
last
New
As
solicitation
in
various
The
series
a
from
companies
new
letters
the
90%
20
our
their
visits,
unusual
"Federal
but
When
promptly
in
reach.
progress
resulted
the
called
fosters
been
or
themselves.
the local
an
usually
of
of
are
Personal
direct
or
40-minute
a
been
$5,000
customers
present customers
our
and
addressing
in
companies
without reservation
college classes.
presented
either
have
of
contacts.
our
learn
to
80%
over
upon
before
ment,"
the operating personnel, particularly the tellers.
At
least 90% of such contacts are theirs.
It is their province to provide the
"service" upon which banks pride themselves.
Obviously, therefore, their
upon
is,
made
and
columns
some
have
banks
from
in the main,
individual
beneficial—that
ad¬
developing present accounts
an
whose
the
lines
opened.
and,
towns, with
these
This
we
business through
military operations, but
infantry,
trend
Besides
That
nothing
and one-half
their
only
that
can
made
Kalamazoo
given before all
personal calls.
This might be compared
cavalry sallies in earlier warfare or the activities of the air force
in
the
Inside
spectacular of the
more
new
the
regularly
Housing
Relations
to
Calls
they
not
mentioned
The
Further,
condition
know that
rounding
have
received
estimated
our
officers
have
we
business.
loans
real novelty in Kalamazoo and have
a
conveniently
recommendation
condition
our
from
we
Relations
borrowers.
our
a
than
But
"Public
our
public understand that
demand
in
publications.
is
nutshell
a
indicated
$5,000,000
of
banking
information
we
best
mystery in the banking
bankers.
This
seems
an
opening.
attracting
policy,
com¬
too much
in
it—that
are
"Public
the
with
with
as
our
through
familiar
new
is
of
well.
as
headquarters,
business
new
It
accounts.
tionship
on
over
no
have
we
of
source
review
the
of
progress
senior
more
which
correspondents.
cannot
organization.
our
lent
to present our true picture to the community—
problem of any sound bank?
operations
resources
with
determined,
since
least
at
keep in touch with the real estate
we
news
at
up
periodic
a
developed attractive
or
to
accounts
angle,
our
we
upon
the
upon
customers
of officers to get out and call is overcome, the
satisfaction to them, as they see present
Kalamazdo.
through
individuals
in
and
total
"scratch"
the
Detroit,
One
friends
and the
locally and followed
those
based
frequency
our
real
new
entering
business
tried
it
Michigan,
under
or
business
company
inception.
many
definitely
We have
in
set-up
defunct institution.
a
half deferred,
aloofness
from
"secrets"—that
from
capitalized,
were
and
a
was
truth the
too
literally
in
premise that there has
our
business,
and
patently,
not in
We
holiday,
Declining
operations immediately after the holiday.
A
reopened under the "Michigan Plan,'' i.e., with
bank
Our problem,
started
bank
own
banking
State.
pay-off from
a
National
unrestricted
mercial
the
any
earning assets.
no
only
resumed
as
following
independent of
problem in this regard.
of the few banks in the country
our
1, 1933, one
organized
most
sketch
moment to
a
We opened for business Nov.
The
power
those
rather
into personal contact
fair
of
most
have
comments,
our
with
regarding the
concerns
of
source
new
individuals
or
deviate for
me
money,
the
all
whom
increased
a
data
conversations
the part
on
a
is
practice of calling
to
inertia
work
with
favorable
many
non-customers
initial
also
be divided
made
upon
smaller situations
many
found the
received
and
names
among our
officers, who write
following their contacts.
Acquaintance in
what institutions, if any, the business is
subsequently.
or
in
officers,
institutional
of
of
file
pertainent
the plants of
and
over,
credit
these
cases
through
the
feeling
a
may
are
activity
assignment
the
noted,
time
balances
an
is
bank
Calls
latter
and
for
and any
many
1935,
directly traceable to
then
bank
at
banking,
between June
was
and
open
divided,
merely represent our share in a general
be observed that in the same period one
it may
commercial
181%,
the
every
In
of
we
overlooked.
this
does
which
of
paper
excellent
in
be
the
larger accounts and
The
cards
of
and
our
year.
balance
25%, and the other, actually a small decrease.
The specific subject assigned to me in this clinic is "Public Relations
Inside
outside
publicity.
of
all
meet
inculcating
contact.
general
and
customers
new
them,
serve
relations
officials
in
that
customer
small
improvement in demand,
the
through
or
and
eyes
Evidencing that this
survey
loans
$1,013,258.25,
No
keeping
in
should
up-to-date
desirable
angle
compiled
incidentally,
and
increasing
important
30,
of
to
relations
which,
complete
a
dearth
local
our
June
policy
the
public
on
Banking,"
as
made
was
with
work
have
to
will
individual
Public
Our money
cannot
made
who
memoranda
papers
Day
library
effort
must
undercutting
is,
with
We
As
We
save
basis, that
inculcated
us.
to sell.
bank's.
should
and
deeply
too
come
commodity—Credit.
a
than
therefore,
should
overlooked.
"Present
educational
of
of
have
we
business
naturally assuming in this statement that the fundamentals
credit
and
otherwise,
that
merchandisers
more
quality
a
complex,"
are
intangible, it is the
an
better
no
on
we
profess
we
"pedestal
that
CONVENTION.
customers
Except
(one
for
building lobbv,
maintained
periodic
published
advertisements
that
claim
to
in
the
they
Dutch
daily
to
came
publishing
the
one
from
are
us
of
our
because
in
which
is
inserted
weekly
a
the
in
restrict
we
Kalamazoo.
just outside the entrance to the bank,
into
in
of
statements
language),
paper
advertising,
read, and
an
a
bulletin
informal
letter
dealing with current topics of interest in the banking field.
Illuminated
from behind, the letter is easily read, and attracts
gratifying attention,
CONSTRUCTIVE
reaching
those
the
enter
tained
bank.
at
In
who
This
negligible
headed
"Trend
charted
since
by
declines
At
the
ment
the
the
operation
Deposits.''
bank
of
they
two years
over
do
Here
It is
only
and is main*
a
interesting to
follow
our
are
we
each
circulate not
item
is
but
matters
no
"condensed
a
explained.
It
of
fly-leaf
but from
seasonal
Our
supple¬
in which
for
dis¬
interest
of
know
understand
we
to
our
that
them
manner
in which
we
expressed policy of public education—of making
want
we
and
to
deal
with
they understand
us,
them
frankly—that
unless
fill
proper
cannot
we
our
place in the
community.
If they progress with us step by step in these
increasing deposits and1 good earnings, is it not likely that they
will have
greater- confidence in us and be more appreciative of
our
problems when conditions again reverse themselves—as
they are bound
times
of
to?
Is
for
this
know
loss
Mr.
your
a
times
this,
of
would
"banking
preparing
peace
it
not
go
holiday,"
far
to
which
we
by the bankers but by the public because of
not the most
lasting benefit from constructive
in
present
well
be
can
this
clinic
adapted
recompensed.
Beaty's
return
privilege to
will
drop
a
email city banker to
few
elsewhere,
It will be
questionnaire
you
discuss
a
or
me
this
thoughts.
oppor¬
If
our
the
effort in preparing this paper
pleasure to share with you copies
other material mentioned, if upon
a
any
a
all-too-rambling
have
line.
You
attention, but if there
are
have
any
been
most
points which
further, I shall gladly attempt to do
indulgent
you
would
so.
Education
Commission
Board Hibernia National
pay
my
personal
masterful manner, has taken hold of this man-size
and
ability and
effort in advancing so worthy a cause.
Banking for
more than
third of
a
a
century
has been
training and educating thousands of bank employees in the funda¬
banking and economics, and thus has made them better-equipped
interpreters of the banking business to our customers and to the general
mentals of
public.
And now, within the last two
years,
the Institute has inaugurated
the Graduate School, which in
cooperation with
ing higher banking education for
the#benefit of
Rutgers College is provid¬
~4
bank officials.
The Publicity Department of the Association is
supplying more than
city and country daily and weekly
tative articles
the
on
Association
a
improving banking and business
total
reading
Department is also furnishing
more
than
a
public in
6,000
with' accurate and authori¬
banking, and the constructive activities
for
reach
newspapers
newspapers
excess
of bankers and
conditions.
of
These
25,000,000.
The
intelligently prepared advertising service to
thousand member banks, who in turn are spreading this ma¬
throughout
their
an
respective
communities
by
means
advertisements, posters and direct-by-mail pamphlets.
of newspaper
Tne value to the
banks and to the community of
the"quiet and effectively efficient
this Department cannot be over-estimated.
Our magazine,
"Banking," which has developed into
one
work^of
|e»i
of the great
periodicals of the country, and which commands the best editorial talent
in the field of economics,
than
banking and. business, has a circulation of more
30,000, most of whom are business, banking and industrial executives,
who naturally are the leaders of
Opening Remarks of Rudolph S. Hecht, Chairman of
In opening this
a
who personally has given a tremendous amount of his time and
The
Public
himself,
altruistic standpoint for the general good of the community, v*
fortunate that we have as our leader a man like Robert V.
Fleming, who
heart and soul is back of this significant
campaign of public education, and
terial
rare
with your time and
like to
this
"in
do
recent
relations?
to
be
Is
would'
the
as
of
way
generally
precipitated
been
experiences
will
intelligent
debacle
confidence?
has
tunity
an
banks
such
not
was
of
It
If
another
customer
of
not
war?"
divert
an
Association, in
job of preaching the gospel of business and banking relationships, and it is
to
utilized'
other matters
or
selfish standpoint for the purpose of comfort and
profit for
a
watched
concern.
is
and social life of the people.
The public does not know these
Obviously, it is the banker's job to correct this situation, not only
facts.
from
is
statement"
observed, I believe, the consistent
follow out
77
practice of banking, and the constructive part that banking plays in the
The American Institute of
be readily
can
friends
our
CLINIC
Now the banker, of course, knows
Intimately all about the purpose and
that
learn
elaborated type,
an
The
important trends in the figures
how thia
see
growth
customers.
attempt to
RELATIONS
not
large board is exhibited,
the deposits at each month-end are
be expected and
to
date
of
though
even
lobby
prescribed official form, but rather
content
cussion
in
building,
CUSTOMER
business
in
who not
call
been
inception.
our
only
are
each
place
of
friends,
our
has
the
expense.
prominent
a
into
come
Chairman
of
Bank, New Orleans, La.
year's Clinic I sbpuld like to take the
opportunity to
tribute to the Association's
comprehensive program of
public education.
It is unfortunate that the
50,000,000 bank customers in America
are
al¬
more
thought and accomplishment.
= ^
Foundation for Education in Economics, whose fund amounts to
than
$600,000,
"was created to establish scholarships in economics
and
promote economic research for developing a sound public understand¬
ing of the business questions which underlie and vitally affect our material
welfare and prosperity."
This Foundation has assisted worthy students to
the
number of 415 in obtaining college educations in accordance with its
purpose, and more than 300 of these
are now
actively engaged in
business.)
It will be unnecessary for me to
say very much about the work of the
Public Education Commission, as this Clinic will afford a
practical demon
stration
of
most totally uninformed as to the essential
functions which the bank per¬
forms in the business and economic and
financial community.
This lack
of knowledge of basic facts
concerning the banking business is largely re¬
sponsible for the prevalent atmosphere of
popular antagonism, which
remains more or lees dormant
during good times, but exhibits itself in
a major feature of the Commission's
program.
Suffice it to
that, building on the sure foundation "established by John Puelicber, the
Commission is going forward with a deliberate but
continuously definite
program, which has for its objective a comprehensive public
understanding
most
ure
a
for
militant
during bad times,
another, become strained.
manner
one reason or
or
whenever banking relations,
say
of the bank and its functions and which will make for the
maximum meas¬
of genuine benefit to the
general.
banker, his customer and the community in
*
STATE SECRETARIES SECTION
Association
American Bankers
Annual Meeting, Held at
TOJSTATEJSECRETARIES SECTION
INDEX
Summary: Study of Government Lending Agencies,
Netherland
San Francisco, Calif., Sept. 21, 1936
(Page
by Wood
81
Address of President David M. Auch
Report of Committee
William
man
Insurance and Protection, by Chair-
on
Duncan,
Report of Committee on State
ment,
78
-
^
...
—
Legislation, by C. C. Wattam__
Association's Fidelity Bond and Blanket Bond,
Changes in
7
Jr
Bankers Association Manage
by W. Gordon Brown
Report of Committee on State
by W. F. Keyser
81
Page
82
83
84
84
-
-----
Report of Committee on Nominations
Summary: Study of Government Lending Agencies
& Trust Co., St. Louis, Mo.
By Wood Netherland, Vice-President Mercantile-Commerce Bank
In introducing Mr. Netherland,
is Chairman of a subcommittee of
the Banking Studies Committee of the American Bankers Association.
That committee has made a very complete study and tabulation of the
setup and the activities of all of the various Government agencies which
are in the lending business.
A good many of you, I believe, have had the
privilege of seeing and studying the very complete report of this committee.
The various State associations of the country have been asked to
committees
on
Government lending to cooperate in
appoint
the program which
Mr. Netherlands committee is sponsoring, and as I understand it, I believe
44 State associations now have appointed such committees which are ready
to work and therefore we have asked Mr. Netherland to come here before
this
explanation to that which he made,
what the committee has in mind and
he believes that our State associations, through these committees,
play in this very important piece of work."
meeting to give an additional
I believe, at our spring meeting, of
what part
can
in effect, is lending to
over
a
period of some eight or nine
must cover
course,
condense it, but
a
form
^months—-and which
as a
matter of
broad phases—it has been rather difficult to
many
I have tried to do so, and I will give it to you in as brief
possible.
as
good many of the members, or a large portion of the
fraternity, feel very deeply with respect to the threat of
agencies in the lending field.
So
we
members of our
the Government
have endeavored to make a study, a
determine, if possible, in the course of time to
factual study, in order to
just what extent, if any, the Government is competing, and I hope to be
able to give you a
I
am
M,To do that, I think we
to review
this work.
must have the right attitude.
I think we have
on
something of the nature of the banking business with respect, or
and in the end, it resylts in inflation
that in too many instances the
sorry to say
been abused by the private
privilege or franchise has
individuals who had it.
giving you this background which I
am
think is necessary as we approach
folks become
background.
We find
lending business
except because of some major crisis or because of some abuse on the
part of those who had charge of it.
Prior to the Civil War, when the State
banks were in existence, the State banks loaned three or four hundred times
their deposits, they issued State bank notes hoping (most of them) that the
people wouldn't call for this money.
We know what happened.
They
got into trouble and the Government taxed the notes out of circulation
the study of these
bitter
so
to
as
Government lending agencies, as some of our
competition that we must know the
in this country that the
and destroyed
The
tentative outline of a program this afternoon of what it
isjproposed that the State committees shall do
they are forced
follow the line of
and chaos.
Notwith¬
standing this well proven premise that most older nations have discovered,
we asked ourselves the question—at least I did the other night—well, how
is it then, that central governments for the most part have taken over the
banking business ?
When you look over the world as exemplified by the
recent nationalization of the Bank of France, you find that practically all
the Governments in Continental Europe have taken over the banking
business.
There are two reasons for it, or a number of reasons, but one is
the desire to finance themselves for extravagance, wari and the other is,
least resistance,
I
extended
Chairman, Ladies and Gentlemen,—In a study which has
conclusion,' the Government
the voters, and as a matter of course,
by the people, particularly in a democracy such as ours, to
Mr. Netherlands address follows:
Mr.
Following this out to its logical
machinery.
President Auch said:
"Mr. Netherland, as I understand it,
same
Government has seldom entered the
that circulative privilege.
is true of the
had inelastic currency.
fraternity,
in relation to Government.
In 1907 we
banking
Reserve Act in
national or economic
National Banking Act.
We hadn't provided any proper system as a
the Government came in with the Federal
so
All of those things have arisen out of some
1914.
id Since the time the goldsmiths first began to act as custodians of the
wealth of the community, in the form of precious metals, principally gold,
Both to finance the Civil
Banking Act of 1863.
War and to correct abuses, we had the
crisis.
happened since the World War and since the
has
What
and began to lend it out when
1929 is contemporary history and I am not
for it at the same
the
they found that all the people did not call
time—began to lend it out and charge rent or what we
term interest—there has
constantly been waged a controversy between two
schools of thought, one of which
and operate the
has felt that the Government should own
credit machinery, and the other which feels that it should
credit system
Government entered the lending field with its emergency
I
might say here, as we approach this question and
Government retire from the field, in many
be left to unrestricted private enterprise.
we
find it competitive, we must bear in
^Throughout subsequent history, banking in practically every country
has represented a compromise between these views, or a sort of concilation
of those two views.
Any student of banking history, I think, would be
at
our
inclined to suggest that either system would
were
work.
If the credit machinery
operated by mere automatons who were not influenced by the desire
for profit
and exploitation which too often accompanies the direction of the
credit machinery
by private individuals that would be one thing.
out all of these centuries of trial and error,
Through¬
however, and notwithstanding
the abuse that creeps into the banking business when
operated by private
individuals, central governments have, for the-most part, long since
out
found
the best way to run the banking and credit machinery was
that
privately chartered institution with strict
of society there are two
by
They
scare
a
As
and
men
a
in practically at our invitation,
As
a
that
we
we
find
now
to
Government
in
consequence,
would
all the schemes of economic planners, all the
and supplied an elasticity
the
natural consequence, the banks got over
want
this
extend their loans.
procedure they probably took some
like to have. /
bear in mind, as a
about the Government
from that bank
ago to "hurry up and make these loans so that we can get them
loan portfolio."
So when we come into a court of equity we must
However, in putting forward our program, we must
background, that the minute some bank protests
come
in with clean hands.
loan that is
On the other hand, no
Many bankers claim they do not want to handle the type of
doubt there
are
agencies.
certain sections of the country where the
actually compete with the private bank.
appropriation, capital stock contributions, free use of
unsound
proposals constitute the majority, it isn't any problem, or it does not take
any effort for the banker to become the most unpopular person in the
sort of
those he does not consider economically sound, and as
reasons
have
if
nothing else,
sidestepped the lending business and have been
popular with the people, that it should be operated by private
It is obvious,
matter how
no
subsidy in that sense, and that is wherein our
Some of these agencies are typical
quite willing, in order to retain their own power and not to
become un¬
individuals.
of course, that there isn't any political administration, no
good their intentions
straints and restrictions that are
may
be, that is able to exercise the re¬
absolutely necessary for any sound credit
the mails and that
thing, these Government agencies can quote a lower interest rate,
who must pay their own operating expenses,
and commercial institutions
community.
History shows that for centuries past older Governments have, for political
Government does
Obviously through Congressional
political schemes of government, and the banker is obliged to put the veto
power on
It is perfectly
agencies somewhat in competition.
handled by many of these Government
farseeing businessmen,
and
taking away loans, you probably will find on file a request
out of our
in the banks are spread out all the plans of ambitious men
seek now to have the
where
of its activities, at least
mind that they came in practically
the invitation of the banking fraternity,
depression and
natural
loans that
two years
regulative force.
Before the
of the
reasonable
regulative forces, and by the very nature of banking, its fiduciary character,
it is
came
to our credit structure.
In practically every form
kinds of forces, that is, the dynamic forces and the
that is,
then the
lending agencies.
mustn't forget that.
we
Governmental supervision and
Well, the reasons for this are obvious.
control.
invitation,
depression of
going to review that, but because
broke down and we had no elasticity to it,
in older countries for two or three
our
up
our
minds to the fact that they are going to
to insist that
are
existence
hundred years, and we may as well make
be in existence here, that
job is to insist that they stand on their own feet, the same as we
Bankers have
to
job lies.
of agencies that have been in
the field
no
right, people who own
they should have the field.
of credit and
subjected to the
do.
commercial banks have no right
They haven't any divine right
in
banking so long as other groups that come
same type
of supervision, are
obliged to pay the same
STATE
taxes, and otherwise stand
mercial
the
on
level
same
SECRETARIES
this group operating com¬
as
SECTION
banks.
to set up
associations, all
the figure is,
to
possible with all agencies.
but I should
assume 85% of them, particularly the banks
deposits, insist that banks should not be in the
could cover
we
the amount of Government contribution
was
In the matter of Federal Credit unions,
direct subsidy there,
no
not
was
For instance, in the Federal Savings and Loan
the capital stock structure.
there is
farm mortgage field.
attempted
these agencies in a uniform manner, but obviously that
Take, for instance, the field of farm mortgage credit, in this work that
we have been doing in the last
eight or nine months.
I don't know what
that handle only demand
79
In getting up this manual which most of you received, we have
except promotional expense of $50,000,
We all know well that these farm mortgages were
totally unliquid, and real estate mortgage people have for 50 years tried to
which
establish
what your problem is with respect to Government competition, and then
the New
on
exchanges
York
Stock Exchange,
or
the
place
some
ready market for farm mortgages.
As represented by a Federal Land Bank
system,
But what
the curb
on
a
only medium that
commercial
a
bank
with
want to do is to find out within the
we
and place our case before them.
to
States, by county setups,
expect to sit down with the boys at Washington who have this in charge
we
I know that is
so far as
demand deposits has
advanced by the Government.
was
our
responsibility.
Having done that,
And, instead of bankers just in
will have discharged
we
blanket way condem¬
a
participate In the farm mortgage business and do it safely, with the reason¬
able degree of irks, of course, as to market fluctuations as there is on
any
ning every Government operation,
we
to be
banking system, and
bond—I
to
by buying Federal Land Bank bonds, until and unless we
private chartered institutions erect some other machinery in order to
as
take
mean
of that type of credit.
care
We do have
reasonably low interest rates.
supervise
keep those institutions properly managed, out of politics, free from sub¬
I believe it represents the first complete handbook on the
question.
Several
other
agencies, including the Brookings Institution, the United States
Chamber of Commerce, and I think the Government agencies themselves,
have such
The people in Washington have said that
sense.
feel
through: This is the first
complete survey of Government agencies that has been made by any group.
particularly true in the short term credit
field—one type of agency like the Federal
Deposit Insurance Corporation
and through that agency
guaranteeing jits deposits.
And then, across the
street, put a lending agency that might put it out of business
It just doesn't make
we
best efforts
use our
I should like to say this and then I shall be
It is perfect folly for the Government to
or sponsor—and this is
our
sidy.
right to protest against un¬
a
helpful, that supplement
should seek to find those that
that if
we
a
book
in preparation.
now
But at all events it
to
seems
me
will study the work that has been done down at Washington by
they do not want these permanent agencies to compete with private banking,
they want to supplement the private banking business institution or char¬
then apply that actually to our field experience,
certainly we ought to have
tered banking institution.
a
Well, then, it is
they are to have that information and to
inclined to think that if
am
we can
job, wherever
our
that
see
we
our
feel that
they do not compete.
them, that
we
will find
farm mortgage
There
debt and the
same
ment
are
is through the Federal Home Loan Bank
get to issue bonds
commercial bank with demand
a
business and have
that exists if you
make
them
System.
we
deposits to participate in the mortgage
under
the
FHA.
There
must watch these fields of
that
we
must have if we are
have
you
a
alone, just bodily take
President Auch:
going to have earning banks.
I
I say to Mr.
when
am
certain that
I bespeak the sentiment of all of
Netherland that he had made
instructive address here.
study put out by
In the
deposits,
banks
some of them.
down
went
deposits.
For
until
a
After the crack-up, now
we
But the significant thing about that is that in
no
about
was
have about 40%
instance,
70%
over any
of you,
to offer
by way of
a
T. P. Cramer Jr.
question, suggestion
and
us
interesting and
very
some
things
some
on
If so, I have Mr. Netherland's
views, and he will do his best to give you the
of
of our deposits.
or
questions
or
submit your
Who has something
answers.
comment?
(Oregon): I should like to ask if the committee expects
these county study committees to be handled under the
sponsorship com¬
extended
period of time,
was the loan level improved.
During the last hundred
the total outstanding loans of commercial banks has constantly gone
years,
some
a
believe he has said
permission to tell you that you may ask your
of their
hundred years practically, the total loans of
just before the depression it
challenging to
I
of it
course
which you might desire further information.
the banks loaned from 300 to 400%
And
the emotions that
as
Discussion Following Mr. Netherlands Address
rediscount preference.
things that may seem
Civil War,
that
find the Government retiring from many of its credit fields and
may
think about.
the
They
been published
never
the banking business.
over
Young & Ottley, entitled, "Merchants of Debt," and this is something to
Prior to
spirit in this work.
leaving the direction of private banking to private enterprise.
credit, I mean, the field for investment
I don't know how many of you have seen that recent
very cooperative
a
have tried to respect
I don't believe that it is too much to predict
quoted security, without taking the risk of non-liquidity
have the direct type of mortgage, unless, of course, you
we
problem is, and
our
say—that the Govern¬
have been engendered by the depression somewhat fade into the
background,
a
And
we
who would, if left
If they should
the Federal Land Bank System is doing, that enables
as
Needham, and
their confidence.
And the fact that
the American Bankers Association committee has undertaken this
survey,
I think ,lhas had a wholesome effect on those individuals in the Government
thing is true on the
about 18 billion dollars of urban mortgages of the type that
might
be handled under the Federal
Housing Administration.
One of the better
ways
agencies have shown
me to
have given us much confidential information that has
before and
thing applies to the urban mortgage debt.
same
sufficiently well rounded program to know what
I might say—I think it is no more than fair for
sympathetic hearing in the country.
a
Another thing we have to bear in mind: the
of Mr.
then the courage to meet the problem that confronts us.
I
present our case intelligently and insist
it, and let the people of the country know what the subsidy is costing
on
Committee, by Mr. Huff, under the direction
mittees that have been set up in
Mr. Netherland:
down.
the different States
now.
Yes, the procedure will be not to do it in
a
blanket way.
We will communicate with each Secretary and ask him what the
problems
Now then,
the question
as
to how far the Government
competition with the commercial banks has been
has
are
gone into
in his State, what his idea is as to how this
survey, for instance, should
be
and debate with the bankers' associations and
particularly with the A. B. A.
conducted In his State, how his committee feels about
it, and we will
largely be guided by the views of the committee in that State.
There are
for the last
some
they
year
18 months.
appointed
agencies and
see
So at the spring
this
committee
to
a
question for discussion
Executive Council meeting last
the Government lending
study
all,
what they were doing and how they were
competing, and
for the first time, we have prepared a manual—most of
you have seen it—
loose-leaf manual, in which
a
we
have studied 25
of these
States, for instance, where
so
obviously there would be
that doesn't operate
our
office
of that.
agencies, the
to
as
In other words,
what
of their funds, the rates they
wants to make the survey, to
where
we
This is purely a
loans.
in your State?
"Well, they
I sat
who said,
We go into
some
taking all of
are
across
our
States and
we
good loans."
the table from the President of
"We do not want those loans.
this State
they competing
find the bankers there
say,
are
association
a
few days ago
We need that type of credit in
Bankers Association represents
a
instances
just
can
com¬
got the approval of the Banking Studies Committee this
morning—
for
a
survey
submit
to work out with each State
of the Government lending agencies in each
the agencies that are
will suit for
a program or
one
particularly active in those States.
take up with you the plan for this survey.
you—to each
a
Mr.
program
State, that is,
we
ask
The A. B. A. office will
They will, likely, submit to
Secretary, and his committee, and the President—a list of
State and ask which ones you want
the various agencies operating in your
us
to make a survey of
you
can
in
State.
your
cite where they are
how
we can
We will ask for individual instances
Where they have put down
competing.
ridiculously low rate of interest
we
will ask what
are
your
a
suggestions, and
cooperate in curing that situation.
the minds of the other members of the committee—there will be
additional
moves
to further lower
the interest rates,
questions
present our
the two
or
case to
must have the machinery to
Congress, to the Banking and Currency Committees of
Houses, and endeavor to show to them how they
are
some way or
we
can.
and there are
other.
are some
some
types of credit that the banks should not handle
types that the Government should not meddle with, so
where is the dividing line.
It
together
And
on
that situation.
bankers show
a
seems
impossible to
certainly,
in
my
me
that
we
judgment,
can't get
unless
the
disposition to do that sort of thing, and the Government
people likewise show the
same
disposition, we
may
look for
change in the banking and credit machinery of this country.
have
on
most
want
you
as to
a
identical
an
results,
or is it
just
a
sort
of
blanket
You want definite
made, don't you, along particular
survey
some
major
as
uniform
possible, of
as
them and ask you to select out of those 40
applicable to
your
Mr.
State, those that
Netherland,
course.
I
or
50 questions
committee thinks
your
some time ago
in talking with you, I
some
particular
agency
being in competition in
not in
another district?
Mr. Netherland:
we
It
had
an
was a
particular district of the State, and perhaps
Perhaps you can make that clear.
a
Yes, I think that, too, would be desirable.
For instance
instance quite recently of a cooperative which had
good cooperative, financially sound, and the
man
a
Government agencies came along and took it at 2
recall the exact figure, 2)4
rate in his country,
same
bank may
That is
a
probably.
and I think it is.
be furnishing the
typical
case,
There is
money
a
of the
was a fair
concrete case where that
with which to compete with itself.
we
That isn't applicable probably
any¬
want to work out, if we can.
Has anyone else a question or suggestion?
opportunity, you officers of State associations, to get
this thing in advance.
Mr. Netherland:
one
2)^, I think—I don't
Anyway, he thought 4%
Mr. President.
That is what
President Auch:
or
good loan.
told me, I believe,
that they were making a 4% rate at this
cooperative, and that
Mr. President, we have
some more
an
This is your
understanding of
members of my com¬
mittee here that have shouldered this work—Mr.
Mylander and Mr. Zim¬
merman.
I shall be glad to hear from them,
myself.
President Auch:
driving private
chartered banking out of the field, and try to get together, if
Certainly there
you
President Auch:
I
am
sure
we
will,
too, Mr.
Netherland, if they have
anything to offer.
It is simply unbelievable to me that business and Government
cannot get
together in
State doesn't want to
got the notion that perhaps you wanted data from various sections of
of the States.
In other words, have you in mind the value of a
to further increase Government
we
(Wisconsin): Would
States, to make comparisons
Netherland: Yes, we want it
where else.
Furthermore, bear this in mind: TJiat in the next session of Congress—
there is no question of this in my mind and I don't think there is
any in
subsidies, and through this organization
If the
But if they want to make the
assistance in doing it along the lines you want it done.
should be undertaken in your State.
Obviously, what
State will not suit for another and therefore what
do is to go back home with this thought:
you to
State committee, if it
That is up to the State, of course.
so.
will say, we will send out probably a couple of sheets with
maybe 40 or 50
those
quite remarkable that the States have appointed 44
Some of them
have begun some work on their own account, but
following this Convention
propose to
Coapman
information when
mittees since the spring meeting to cooperate in this work.
we
we want is for each
do
invitation to make any kind of a survey they want?
composite picture, all
be cited, we propose to do our best to correct them.
—we
G.
We haven't developed all
lines?
the bankers of the country, and so we propose to find out in each
State
how much these agencies are
competing and where individual
I think it is
W.
our
a survey of some agency
will have that information from
co-operative proposition.
will lend
survey in the
an
We want the Government agencies to continue."
The American
survey, we
agencies hardly operate at
making
we
make the survey, that is all right with us.
I
Having assembled that, the question is how much
And
w;hat agencies do operate there.
source
charge, their profit and loss statements
could get them, and the nature of their
operations, the type of
some of these
no sense in
in the State.
C.
F.
Zimmerman
(Pennsylvania): Mr.
Chairman,
I think
one
phase
of this whole investigation which is bound to command attention
among
bankers is with regard to their own feelings that loans have
dried up in
their sections, without really knowing the reasons
why.
I am sure that is
the case pretty much all through the rural sections of
Pennsylvania, and
I
have
the thought
loans that have been
that when the local bankers find
placed in their
and the rapidity with
own counties
which those loan£
are
out
the volume of
by Government agencies
being placed,
we may
get a
background of public sentiment which will finally be felt at Washington.
BANKERS' CONVENTION.
80
Mr.
Netherland has made
It is not
committee.
a
At the
say?—political trends on the
time, when we see the—shall I
same
part of certain folks at "Washington toward lowering
that
so
who have read the proceedings
of you
mittee realize that
always had
must
basis of
a
2% even,
banking structure
2h,
know that they aren't talking the language of private bank¬
we
ing in Pennsylvania.
So I feel that
apply this whole research program over the
we
as
United
will be able to make
States and find out just what the local situation is, we
the problems
suggestions that will be very helpful by way of getting
some
President Auch:
We have heard from one State Secretary,
Thank you.
Mr. Zimmerman, who acts in that capacity, among
hear
from
now
Mr.
being made have been with
sudden
us
which complaint is now
long, long time, and for a long time
us for a
Then all of
bother the chartered banks very much.
seem to
banks
chartered
the
Let
other things.
add anything to what Wood
can
Some of these agencies of
and Charlie have said.
a
the lending
of
out
went
picture.
The
Now, when we
are ready to go back in again we are howling about competition.
It seems to me that it is going to be the job of organized banking to
took up the slack.
Government agencies stepped up and
that these long established and permanent Govern¬
to see to it
attempt
lending agencies—I don't like to call them Governmental lending
mental
agencies, because they are not, that is, the permanent organizations are
not—practically every one of these that we think of as permanent Govern¬
mental lending agencies are not owned or
same
pointed
as
certain
the private
to
and
privileges
the Government
the
on
and place it in competition with an agency
which is taxed by both State and
seems to me
mental
we
it is going to
Nation.
be our job to get the facts and point them out
I don't fear very much the result if
both the so-called Govern¬
lending agencies and the chartered banks are on an equal footing.
can't
individual bankers be smarter and more on our toes and more
as
active and
the problems of our communities than the
familiar with
more
civil servant of the
Government bureaucracy,
we
ought to be put out of
business.
President Auch:
Mr.
Netherland
Thank you,
strike
didn't
Charlie.
I am a little bit surprised that
here with
fire
his statement in regard to
chartered banks.
mortgages, farm mortgages on the part of our
know his mind, but I surmise that he may
difference
I don't
wonder that there has been no
Does anyone wish to offer anything in that connection—
comment on that.
a
of opinion,
agreement,
or
Are there any
anything at all?
(Connecticut): I should like to ask if the committee contem¬
plates corralling figures relative to banking practices in the States, to com¬
those practices of rates and volume with the volume and activity of
pare
the Government loaning agencies, along with
(At this point,
by putting
this survey.
Mr. Netherland made a statement not for publication.]
had
cattle loan, and had
a
•aid he
Western
had it
A gentleman from Oklahoma said he
for years, for quite a sizeable sum.
getting about 7 or 8%
was
for it, which
Oklahoma, and he said the
is a reasonable
He
cattle—and loaned that fellow that money at 4
rate in
He said, "I
5%.
or
He
I followed it through."
got to thinking about that.
$100,000
"I
said,
rates, so long as they are
on
other mortgages up there at
Wichita and issued 3% debentures, and sold
them to that bank at New York where I had my money."
are
I said, "What
He said, "I don't know yet, but I feel like
going to do about it?"
you
writing the New York bank, asking them if they bought those debentures
with
my
It looks to me," he said, "like the Government is in
money.
competition with me, making loans to my customers, in my own town,
and with
my
money,
own
at rates that I cannot compete with "
would be the method of straightening out a
Netherland:
Mr.
Well,
I
sure
am
you
What
situation of that kind?
don't want to hear me make
speech but, in the first place, if that were checked through the
another
chances
are
that man, the customer,
such
getting
Another
could be convinced that he was not
"break" on the interest rate as he thinks he is getting.
a
thing is that the law
of supply and demand, of course, in the
investment field determines the ease with which the Intermediate Credit
Bank markets debentures, and the rate.
And the demand is so great, the
truth of the matter is, I don't know, but I imagine the
outstanding deben¬
Well, it doesn't make much difference whether the bank takes them or
every
Gum.
time
an
There are plenty of people who will take them because
us
to get
And then,
don't think the banks should take the attitude that
That is the surest way for
going to buy securities of that type.
put out of the banking business—by declining to buy securities
Don't think for
from the Government, or its agencies.
a
minute that that
isn't true—that that is the surest way for us to get put out of the
banking
business.
Mr. Gum:
This
man
wasn't
so
much concerned about the New York end
of it, but he said, "How can I hold that cattle
Mr. Netherland:
Gum:
Mr.
Netherland:
and the
man
loan?"
The banker, you mean?
Yes.
Mr.
who
He will have to
borrows from
make
him
some
would
concession
prefer
to
on
the loan,
borrow from him
than from the other agency, even at some additional cost.
with the subsidy, and
the people of the country to help us do away
paying the bill we will have plenty of
assistance.
Crandall: I know in my own individual
Mr.
the competition
as many
employees as they want, and all the help they can go
solicit, whereas I have to stay at home,
just
a
and it would just be immediate
If you say that we have to do it
death for us if we tried to compete.
and it is
matter of theory that we can't, you
a
just try that theory in
Utah and see how long you will last.
wasn't theory, it was just simply suicide.
country bank in
out it
They have
out and
We are taxed heavily.
They have no taxes to pay.
exist.
just
to'meet
could! not
if we tried
case
and at the rates given by the Government we
You would find
the State com¬
and put thdm in
the hands of the central committee, if you want to call it that, orlthe
A.i B. C. committee.
In other words, we want that sort of illustration for
ammunition in our fight to keep as much subsidy out of these agencies^ as
we can.
That is exactly the thing we want these State committees to
Those are the very situations we want
Netherland:
Mr.
mittees
develop, to actually investigate those cases,
to
before a
know that you cannot
just generalize.
You must show them concrete things.
You have to show
them the proposition you have in mind.
Otherwise, they won't give!you
If you have ever had any experience
develop—individual cases.
Banking and Currency Committee, you must
Senate
a
hearing.
Crandall:
Mr.
Do
the com¬
take it then that you, as Chairman of
we
banks in the country can compete with
lending agencies—that we have to come to that?
Is
Government
the
that it?
I think that we are
I don't think that at all.
Netherland: No.
Mr.
certainly competing with them now, or they are
competing with us.
Mr. Crandall: You have to meet that competition.
the field.
complaint,
just as you are doing now, and show those people in Congress how they are
able to underbid us on rates and how their rates are not justified, and
show them what they are doing to our earnings, and tell them it is question¬
able whether we are going to be able to stay in the FDIC if our earnings
keep on going down.
And we have to build up our case, because that is
What we want to do is get them out of
Mr. Netherland: Yes.
There
are
several ways of doing
the only way we are ever
Crandall:
Mr.
One way is to register our
that.
going to get anywhere on it.
But I can tell you right now that
I understand that.
cannot run a bank and run it on
know
It can't be done—I
those rates.
that.
I do
But
Netherland: No.
Mr.
question about it—that we must be
think this—I
there isn't any
know
You know
they
reasonable on those rates.
There are some sections of the country where
by that.
have charged, particularly on
these small loans, 20, 30 and 40%.
I know
where those situations have existed.
Crandall:
Mr.
We can't make any rate
which has ever done
I don't think there is a bank in our State
anything like that.
ever
State is limited on that.
Our
I don't know of any bank in our State
like that.
which has
40%.
other types of credit besides the banks—
followed the practice of charging 30 or
Netherland: There are
Mr.
merchants' credit and stuff like that.
credit
else.
This is all bound up in the whole
problem.
Crandall: This is a bank meeting—I
Mr.
Well, I
Mr.
am
wasn't referring to anything
glad to get your views
Zimmerman:
I offer
May
a
Chairman? In the
this whole
will never be able to meet
suggestion, Mr.
hearings at Washington, there was a very significant phase of
marks
matter which
an
inconsistency that we
except by attacking it, namely, that
places
when
he
agency
when the Government lending agency
lien against a farmer's property,
a
has
no
crop,
and he happens to have a year
he feels that because it is a Government
lending
his rate lowered,
is apt to respond to that, because the
the last thing in the world they wish
he can put the pressure on in Washington and have
and the Government lending agency
foreclosure of the debtor's affairs is
to have
political phase, and that is
Private banking is
When our creditor can no longer navigate,*
It works just exactly the opposite way in
That is why it takes on the
happen.
very
clearly marked in the hearings at Washington.
in
entirely different position.
an
we
have to
see
if we can collect.
Washington—if he
no
can
rate or an extension of his
longer navigate, they try to give
amortization program and thereby
him a lower
tide him over.
That gap must be bridged in some way.
President Auch:
We
can
allot a few more minutes to
■*
this subject.
have anything further to offer or any further questions,
them promptly.
If
please put
Has anyone else anything?
with your
subject and
everybody else backed off. That is a serious problem with us. The produc¬
tion credit associations are rapidly reaching a point where they are lending
more heavily on commodities and things like that than the banks,
Mr. Netherland: The production credit agencies at the prsent time
have about $120,000,000 supplied by the United States Government, for
which they do not pay anything, and to the extent of the subsidy on that
capital stock, it is unfair competition and should not be permitted. It is
our job to place that before the Congress of this country and see, that it
isn't done.
Moreover, unless we watch it, unless organizations such^as
Haynes McFadden
(Georgia): What are you going to
do
production credit agencies?
Eugene Gum touched on that
these
issue comes out it is considerable oversubscribed.
for political reasons, I
we are not
subsidized.
I think when the taxpayers get to
you
tures is around 150 million now.
not, Mr.
And you cannot compete with them
Our problem, I think, is to try
in private agencies.
ment agencies or
it, and I found that they jumbled my market together with a lot of
on
actuarial
premiums.
They are based on
losses, and a certain degree of profit, and I don't believe that one'group of
men can do it much cheaper than another, whether they are in the Govern¬
had
deposit in a New York bank. They weren't paying me any interest
on
pitched on the idea of
experience, just like your like insurance
Government came along with their
credit association—their association that makes these loans out of Wichita
on
We cannot in our State.
Bates, after all, are a question of
doing away with the subsidy.
has a solution for it,
concrete case before him, and see if he
a
if his committee would have one.
just wondering if you
was
lending agencies' rate.
Netherland: You can—if your program is
Mr.
M
them the unfairness of it.
(Utah): Mr. Netherland, I
Crandall
B.
meet the Government
what I mean
Eugene Gum (Oklahoma): I would like to ask Mr. Netherland a question,
or
H.
you
other questions, then?
Mr. Welch
line and talk to our people and show
can
have to pay.
is getting a
man
mittee, have the idea that all the
Congress, in order that some of this unfair competition may be
the
eliminated.
If
Manifestly, it is unfair for
all taxation.
hand to charter and sponsor a lending agency
one
which pays no taxes whatever
It
things which are not given
certain
One of the largest of those privileges
banking institution.
is the complete exemption from
to
But they have been given, as Wood
of our banks are.
many
out,
capitalized by the Government,
They are privately chartered institutions,
except as an emergency measure.
the
that
"ex," Charlie Mylander—my predecessor, by the way.
an
Mylander: I don't know that I
they didn't
point out to
To be sure,
cheaper rate from the Government agency, but how
much are his-taxes going to be increased because of the rate he pays?
There is, of course, in this country one great school of thought that want
all business in
Government, and we simply have to go out on.the firing
them what share of the subsidy they are going to
to get
straightened out.
be
than from the Government
if you will talk to them and tell them the situation,
agency
going rate for rural banks of about 6%.
a
discuss mortgages and loans to farmers at
And when they begin to
or
We in Pennsylvania
I believe a lot of your people can
convinced that it is better to borrow from you
That doesn't mean that all borrowers
the legal rate, but it doesn't mean that our
pay
has been set up on
,
before the Senate Com¬
notions as to how
able to get his funds at.
legal rate of 6%.
a
politics.
Senators have very extravagant
some
low the borrower ought to be
have
is going to be very
banks may not compete at all, it
established
difficult to keep this whole question, finally, out of
Those
the rates of interest
though.
and meet the Government rate,
go out
Not necessarily.
Mr. Netherland:
The application
practically in every State in the Union.
of any rule is bound to be qualified
He has to
Gum:
Mr.
interpretation of the aims of the
very fine
simple undertaking by any means.
a
will appropriate more money upon the same
are
on
their toes, they
basis.
The present trend of
supporting basis.
the production credit agencies is to get on a
self-
Another -year like this year, and they will not be very
SECRETARIES SECTION
STATE
Ijthink,]this
Now then,
from it.
is a fair position—that whever they
are
self-supporting basis, without,subsidy,<of any kind, with the same type
on a
have to undergo in the banking business, and paying
of supervision that we
the same taxes, we cannot ask them
Mr. McFadden:
It
reasonable to me that you
seam3
this—they will lend a man money to produce
could ask them to do
of cotton, and when he
a crop
The program is
banks and
it on, which
was not the original purpose of the
associations at all—
production credit
Mr.
McFadden:
They have?
Netherland:
Our banks there in ths
lend
to pro¬
man
a
an
But the purpose of the Production credit associations
Essentially, that
If he could have gotten money
it.
was
from the bank there wouldn't have been any use for the production
credit
He gets his crop produced and in marketable condition, and
anybody will lend him money
it, and yet the production credit associa¬
on
tions say whether they have the right to do it or not, they are
Netherland:
Mr.
They
do it.
can
They
Mr. McFadden:
going to do it.
it
Is
else
this subject, gentlemen?
on
If
the future procedure of this sub¬
Netherland?
That is right.
In other words, if we differ with some of the things that
Chairman,
I have to
other
worthwhile
a
to
State Association
Are
willing to
you
Do
own
think that
you
ahead, get your com¬
go
work, develop the information, and work along the lines that
Mr. Zimmerman:
I
program
seconded?
Mr.
Zimmerman has moved that the Section approve
outlined and extend its full cooperation.
as
Is the motion
[The motion was seconded by W. F. Keyser (Missouri),
.
.
.
President
that the Section express its approval of the
move you
pledge its full cooperation to it.
President Auch:
and carried.]
Auch:
Is
.
there
.
.
else,
anything
Netherland,
Mr.
from
your
standpoint?
Mr. Netherland:
about this
here feel
officers
how
know
to
project?
to
us
our
on
desired by this committee?
are
to another meeting but
go
before I leave I want to say that our committee would like
and
What is your feeling on this, gentlemen?
put to a vote,
not, let me thank you, Mr. Netherland.
Netherland: Mr.
is
the
if they want them.
our country,
there anything
me,
by the various State associations is going to have
showing through research and the obtaining of data
a
mittees
Well, that is hurting worse than all the farm mortgages.
President Auch:
Secretaries
make
situation.
program and
They are welcome to them, in
the
to
seems
have been said here, if we have the opinion that the situation in our own
make housing loans, for
can
that matter, if they want to.
Mr.
It
State is different perhaps from that presented here, then it is up to
Mr. McFadden:
is_
Secre"
Presidents and Vice"
that it is worthwhile?
Is that not true, Mr.
Netherland:
President Auch:
I wouldn't say th it—that he couldn't get the money
from the bank.
associations.
considerable detail
Mr.
I don't think it
that the information which is developed in
important and governing effect on
committee.
who couldn't get money from a bank to produce his
After he gets that—
Netherland:
Mr.
All right—What is your pleasure?
if I may offer this comment,
some
crop.
Do you feel it is a worth¬
formal resolution without asking
a
be formal about it, but is it the feeling of not only you
necessary to
will lend him money to hold his cotton
McFadden:
give them
move we
for it.
duce his cotton and if he produces it and wants to hold it for awhile, they
to enable a man
I
Mr. McFadden:
Presidents of State associations,
field
same
that
how
to
as
that this program is
taries here but of the other State association officers,
Mr.
Mr.
anything like that.
or
lot of different views
a
Now then, do the Secretaries feel
be done.
President Auch:
lend on commodities,
a pa feet right to
he same as a bank h is
was
going to have
worthwhile and do they want to go on with it?
,
[_jMr. Nethe -land: Yes, they have
formal resolution
any
wholly set up to protect the lending field for commercial
are
we
while program ?
gets it produced and ginned and baled, they will lend him the money to
carry
We don't want
program.
should
to withdraw from the field.
81
No.
you]very
Thank
much.
Committee / Officers* Reports—State Secretaries Section
Address
President
of
The
David
M.
Auch, Secretary Ohio
Association, Columbus, Ohio
the State Secretaries Section this
of
that
based
the
belief that it could serve most effectively as a connecting link
only between the various State associations, but between these organ¬
on
not
program
izations and
the American
the
of
Some
dropped,
has
year
been
Bankers Association.
functions
number
the
formerly
of
operation
by
committee
Section
the
been
has
been
have
reduced
avoid
to
directly
the
upon
possibility
of
coordinating
the
neither
is
course,
of
unification
Complete
the
efforts
practicable
of
various
interests of all bankers'
similar
to
organizations
permit a joining of
have
In
of
organizations,
Problems
with
vary
concerned
to
adopt unified programs
this
be
cainnot
a
in as many fields
these
various
is
it
that
concerned!.
all
tendency
this
that
this
in
the
of
one
portends
of
lending
government
Studies.
Association
has
the
made
a
State
in
which
they
were
such
functions
necessary
The
has
committee
associations.
they
as
advanced.
This
is
Association
by
Committee
the
of
various
national
which
in
organizations
public education.
drastic
of
that
perform
The
close
the
was
and
are
various
taken
of
Much
recently
the
our
efforts
be
of
Federal
the
this
of
special
on
the
the part
and
banks.
of State
desires of
are
immediate
the
the
importance
Federal
future
and favorable
President
of
State and
legislation and
holds
but let
the
us
no
threat
not
forget
State
associa¬
Banking Act of 1935
effect upon
the
final
legislation.
which
has
has
been
carried
the
in
on
there
has
appeared
banking.
a
nation-wide
of
public
during the past several
With
tendency to
This, of
program
years.
This
the betterment of conditions
slacken
is
our
efforts
to
inform
most
unfortunate, for public
education certainly is not an emergency proposition.
If it is to bring
results it must be a continuous process during good times and
bad, for
it is only when the situation
is normal that the public mind can be
prepared for the unusual conditions which arise from time to time.
At
the
on
spring meeting, at
lation
submitted!
sisted
of
the
for
your
assembling
Hot
course,
Springs,
approval
of
a
of
the
to
me
been
have
be
of
additional
and
South.
the
they
but
by
they
exist
has
the
opera¬
been
this
have
that
in
some
action.
definite
of
of
conferences
no
province
organizations,
where
either
program
have been
There
subject,
within
a
the
that considera¬
regional
organizations
this
on
of
are
completed
of the
as
consideration.
recommended
was
co¬
and
Section
to
them¬
proved
recommendation
appreciation
express
of
the splended
coopera¬
received
come
Section
Chairman
are
from
during the past year.
Such accomplish¬
traceable to the valuable aid received by the
all
concerned.
our
Committee
State
Legis¬
rather ambitious project.
This con¬
detailed information on legis¬
certain rather
Duncan
Association, Minneapolis, Minn.
Chairman and Gentlemen—This Committee
At the time that the Committee
sponsibilities
situation.
Since the
have reduced
ticular
I
was
their
Committee
before
of
the
the A.
consequently there
Secretaries
was
Section].
That possibly
this insurance controversy
many
briefly to give
on
B.
A.
Insurance
little for
this par¬
applies
I discover many
suggestions
how
to
as
He
to
made
you my own
reference
governmental
to
lending
the part of commercial banks, but
on
an
than
more
schools
two
apparently
situation that has existed in the rate structure should
want
report.
unknown
an
Netherlands talk [given in this issue among the
State
thought.
thought, with
appointed,
was
on
change of forms and policies, and the companies
So
agencies and competitive interference
in
written
no
do.
to
Interested in Mr.
schools
a
rates.
Committee
addresses
has
selected by the President, certain re¬
was
delegated to the Committee predicated
were
Committee has formulated
two
Insurance and Protection, by
Jr., Secretary Minne¬
on
William
Bankers
sota
Mr.
be adjusted.
personal opinion, and in
of
unsatisfactory
I just
suggestions
anv
that I may make I am not speaking in behalf of the entire Committee.
I think that in settling upon any definite program,
affecting a readjust¬
ment of rates,
on
in
an
attempt to create or bring about a cooperative action
the part of the various States, we have to take into consideration exist¬
ing conditions in those respective States,
as
to
whether
not
or
not
facts
have
an
influence
on
the
attitude
of secretaries
in
the
States
secretaries
agents for companies writing that sort of coverage, and whether
or not
are
those
becoming more
enthusiastic in criticizing interference on the part of certain
companies.
I think that there can still be an adjustment of rates found in
many
and I appreciate that in many States the rates
very
satisfactory.
I have
my
about this great reduction.
the
existed
has
may
should
the
full
However,
least, still
at
us,
of
report
forthcoming,
themselves operate insurance departments, whether or
developed between
major
at
part of both
Bankers Association when the
a
sections
not
active
your
Midwest
regional
Report of Committee
sur¬
committees
by
advanced
banking statutes,
materially to its effectiveness.
public
the
on
success,
that the
Federal
understanding which
uniformity
education
has lent
may
of
consideration had
this
Bankers
over
types
the program
essential to
are
the American
under
form
Banking
results
of the activities
of
part
coordinated
It
revision
tions and
the
on
agencies
regional conferences on banking at which
State association cooperation was made entirely clear.
fields
in
American
the
field.
lies
during the session and I should like to urge
to the merits of the suggestions
a
as
the
started.
was
the
offer of aid in the development of such conferences.
an
closing, permit
officers
many
consideration
project
in
was
of
these
officially
such
sponsor
which
tion
be
and
in
through adoption
or
of
correspondence
not
valuable
so
In
>
Fleming's
Other
the
is of the belief that competition
its survey can only be eliminated when
explanation
full
give
everyone
of
effective joining of forces
an
associations
requested action of
complete
will be made later
committee
that
A
solution
a
respect, have been placed in the hands of
State
of the government agencies listed in
or
in
years
and
may
Two
that
associations.
revealed
committee
the
this to
organization
officers.
repeated with
and
year,
Banking Studies
on
is
believe
to
the
requested to appoint.
Committee
The
of
of
Bankers
the
witnessed
reason
future.
committee
of
have
ample
the
the
the lending
every
officers
Secretaries,
this
survey
which is complete in
vey,
in
in
met
is
developments
sponsored
of
reasonable
requires
months
12
There
American
program
which operate
Government
past
cooperation
subcommittee
A
The
significant
must be
and
associations
State
organizations
of the best opportunities for
one
selves
the
to
many
it
organize
ground and
The value of
of
program
Some
At
produce valuable data
State
display of the spirit of give-and-take
a
direction.
most
increased
banking problems which
Probably
possible.
as
that
complete.
I commend
given
conversation
ments
between
of
part
growing
sufficiently
or
common
doubted.
Cooperation
the
either identical
are
obligation to seek this
adaptation of projects and Ideas and
on
be
for
While
be
State Secretaries
of
not
the
will
previous report to this section it
a
tion
geo¬
The writer holds the opinion
forces.
definite
all
that
is
another agency.
tion
graphical location of membership and regional or local conditions.
Opiniona
on many
issues are widely divergent.
But there does exist a zone in which
the
data
As
Legislation, tliis work
the part
on
State association
these
desirable.
nor
State
various
project should
through continuance of its efforts
all
of
efforts
organizations operating in the banking field.
the
of
undertaken.
be
on
the
opinion
performed
standing
should
it
result
methods
and
present agreed that the
Committee
duplication of work done by other agencies, and attention has been turned
more
activities
lative
time all
Bankers
same
as
any
ment, we
was
were
such that
a
It is
other business,
have been striving for many
personal
own
now
States,
applying should be
as
to
what
brought
quite human for insurance companies,
watch competition, and although we
to
years
to get consideration
always combated
with
readjustment
not
was
as
opinion
the suggestion
on
rate
readjust¬
that the loss ratio
justified.
This may be of some interest to you: that State Secretaries had
consid¬
erable to do with
placing National banks, when the law
under the protection of the G-Men, and
Including FDIC banks when that law
known.
But I know who the individual
lation and exactly how it was accepted
ington.
All of those things have made
point of companies, and have had
a
was
first
they had considerable
was
amended.
was
passed,
to do with
That is not generally
who proposed
the first legis¬
by the Attorney General in Wash¬
a
better situation from the stand¬
great tendency from a physological
point of view, at least, to reduce daylight holdups.
,
BANKERS' CONVENTION.
82
We have had
a
good experience in loss ratio, and although we are
very
experiencing low rates,
show
we want to
justification of that situation by
a
Agencies
Studies
cooperation in keeping our counter cash down, in inaugurating protective
devices, approved protective devices, and then following the instruction
of the manufacturer who puts in
those devices and showing in every possible
that the banking fraternity will do its part in eliminating this hazard.
way
The filing of rates by certain companies in this country in certain States
had
influence
an
and there
this reduction, whether the companies did or
on
three
are
States today enjoying a lower rate
or four
did not,
than the con¬
ference company rates under certain forms of policy, to the extent
my own
State in 20 months
and in two other
that in
have saved the banks $90,000 in premiums,
we
States they have saved in like proportion,
according to
the number of banks.
Bates
filed in other States by the companies that are offering these
were
rates, and undoubtedly it had
said
be
influence on the rate readjustment.
an
,
As I
before, I feel that there still should be further reduction, and it should
brought about by intelligent action and cooperation
on
the part of the
not convinced in my own
am
had
mind—basing that on
number of years ago—that the way to do that
a
business and
one
that I think
It is
specialized
a
keep out of.
bankers should
we as
experience we
some
trick is the organiza¬
tion of mutual companies by the bankers themselves.
We had
program of consumers'
If you are fully convinced that the entire
be established as competitors
cooperators should
with private business in your own communities, then from the standpoint
of the
banking fraternity that would be
your
first contribution to
a
con¬
cooperative.
I want to pay tribute to the work that the committee of the
I want to make
A. I. B. has
suggestion, however, that I think would be very
one
much appreciated: that the various forms or information as to
changes of
the policies should be sent to the Secretaries so that they could post their
member banks.
and
If it has been done, I have never received any information,
number of Secretaries
a
have talked to
I believe that there is
about it.
me
That is just a
Frank, if you think it is the thing to do.
suggestion for your committee.
possibility of further reduction in rates by handling
a
this program intelligently, and I think as time goes on, if you are insisting
banks cooperating with the companies in exercising the caution
upon your
subcommittee of
a
Bankers
are
Committee
the
on
Banking
Association.
reported
as
follows:
Arkansas has appointed a Committee on Bank Budgeting.
California has added a Committee on Mortgage loans, "due to the obvious desitabillty of standard practices in this field, one of the largest loaning outlets in
California.
The oommittee is studying the standardization of fees and routine
operations, standardization of legal instruments, appraisal practices, real estate
and improvement valuations, their stabilization within reasonable bounds, the study
of existing mortgage loan situations, the maximum and minimum rates per square
foot
on
and
dissemination of soil
buildings and per acre
on
and
farm lands loaned thereunder, the accumulation
water-table
information, the education of bankers
along the proper use-value of lands and buildings, in connection with the amount
which may be loaned thereon, and last but not least, studies looking toward the de¬
vising of new methods of loaning which will enable chartered banks to compete to
better advantage with government mortgage loan enterprises."
"-4
California has also added a State Bar Committee to deal with a question raised by
attorneys as to whether banks are practicing law in the usual conduct of their busi¬
ness; also an Insurance Committee to study various types of insurance carried by
banks, such as fidelity bonds, public liability and fire Insurance; also a Committee
Bank Credits, appointed to develop uniform credit information and to unify
bank requirements of borrowing customers respecting oredit Information; also a
State Income Tax Committee to work with the State authorities respecting
State income tax.
Georgia has appointed a Committee
Idaho has appointed a Committee
on A.
the new
I. B. Extension Work.
Old Age Pensions, and a Committee on
on
Illinois has appointed a Committee on Trust Functions.
Mr. Graettinger re¬
ports that "This committee has charge of ail matters pertaining to fiduciary rela¬
tions and activities of the trust departments of banks.
It was thought advisable to
add this committee because of the development of this specialized business, and Its
Importance in the field of bank activities.
This will probably develop into a trust
division of the Association fashioned somewhat along the lines of the similar division
of the A. B. A."
Indiana reports that it has added a Committee on
some
done.
with
American
committees
Public Relations.
experience in our State with a mutual a number of years ago
an
that cost us plenty of money.
sumers'
the
new
on
secretaries.
I
cooperate
to
of
Other
years
Agriculture, which was dropped
ago.
Iowa has
appointed
Postal Savings Committee to Investigate Postal Savings
competition and work with similar committees of other State Associations and the
A. B. A., looking toward getting remedial amendments to the Postal Savings Law.
Massachusetts reports that an Insurance Committee has been appointed to study
matters of insurance and endeavor to obtain better coverage at lower rates; a Social
Security Act Committee to study all matters pertaining to both Federal and State
Security Acts and pass along information to members, and a Personal Loan Commis¬
sion, which is a separate organization sponsored by the Bankers Association to point
out pitfalls and undesriable and dangerous practices in connection with the making
a
of small loans.
Missouri has appointed a Committee on the Sutdy of Adequacy of Banking Serv¬
that they should, that you will have ample ground, based upon loss experi¬
ice, the object
ence, to ask for that reduction.
facilities in Missouri
concerned, that the last
are
I think, as far as protective departments
in the States
one
year—the State of Wisconsin.
been the salme
as
dispensed with this last
was
I think that their experience possibly has
that of the other States: that they are an antiquated part
of the banking association, that the work that should be delegated to the
associations
can
done
be
just
intelligently
as
and
economically
more
through the Secretary's office.
eration.
ml
New York reports a
New York also created
1936.
competitive agencies, My President, who operates
country bank in Minnesota—a bank of $500,000
successfully, and I
But he
to
came
made the suggestion
was in
a very
successful
deposits;—has set up a
that has worked
hopes that he would enter into the discus¬
after that part of
me
that he would be
very
the program was closed and
glad if
of you men are in¬
any
terested in his scheme to go into the matter in detail after this meeting.
He will be in the back of the
on
v
-
Pensions which has filed its report, as a result
proceed with the development of a
a new
Committee
on
Activities at the Convention
in'June.
The committee consists of six members with staggered terms of office.*The
of this
committee is to initiate research projects in the interests of
members, to coordinate the work of other committees of the Association interested
primarily in new studies of developments in banking and to keep abreast of^other
research projects in the field of banking.
Ohio has added a Committee on Cooperation with the A. I. B.
The work of this
committee consists of interesting the senior officials in member banks in the organ¬
ization of new A. I. B. Chapters and study groups.
Mi
I
Oregon appointed a Pension Committee resulting in the installation of a pension
purpose
sion.
Committee
of which a Board of Trustees has been created to
I want to make that is not in
piece of machinery to compete with governmental agencies
very
Montana has appointed a Committee on Public Relations.
New Jersey since our last report has added a Pension Committee which recently
completed the organization of a Pension Fund now before its members for consid¬
pension plan.
There is just one other suggestion that
connection with this insurance talk: During the discussion of these govern¬
mental
of which is to study the question of whether the existing banking
are adequate and if found inadequate, to recommend the way
in which additional facilities should be provided.
new
and retirement plan for officers and employees of member banks.
The plan went
into effect Jan. 1, 1936 and is working out staisfactorily.
South Carolina reports that the duties of the Bank Management Committee have
been enlarged to include work on public relations.
room.
Vermont added a committee to consider the list of bonds now legal investments for
Report of Committee on State Bankers Association
Management, by W. Gordojti Brown,
Executive
Manager, New York State Bankers Association,
New York, N. Y.
On
Aug.
ment
sent
what
new
since
the
the
fall
1936, the Committee
19,
letter to
a
all
activities have
1934.
of
summarize the
asking them to advise the committee
been undertaken by the various State
last
committee
State Bankers Association Manage¬
on
Secretaries
reported
the
at
convention
Replies have been received
information
they sent to
associations
Washington
in
first
and
the
asked in
State
one
is
groups and assist bankers
of interest to the public.
The
take
of
Aug.
Five States have
19
was
in.the preparation of timely articles and talks
in
increased! their
studying the matter.
answers
States
of
the
work,
have
some
to
your
of
six States
taken
the
comments
no
States
are
now
1935,
The increase was accepted with
Their rates, however, are still lower than
practically no unfavorable comment.
many
other State associations.
for
which
have
which
one
1935, due to
a
decline in number of members
and need for larger income to take care of increasing.activity.
The Increases were
only nominal for the smaller banks but the percentage of Increase for the larger banks
was considerable;
the net result being the revenue from membership dues now
$45,000 per year,
as
against $34,000, or
increase of about 30%.
an
No serious objection was raised by members and the loss of members amounted to
less than 1%.
Michigan has a special committee working on a revision of their schedule which,
in the
opinion of some members, requires
further breakdown into
a
a
larger number
of classes.
Mississippi raised dues in 1935.
With a few exceptions members understood the
ecesslty for higher dues per bank because of the/reduction in number of banks.
Oklahoma raised dues In 1935, shifting from total resources to capital funds as a
base.
Let me read Mr. Gum's comment:
Bankers Association last
"We raised dues in the Oklahoma
year
pretty sharply.
One hundred and twenty-one of our banks decided it was too much and didn't pay.
That
represented a little more than one-fourth of our banks.
I called on those
banks
and told them why they should pay it, and practically all gave me
a draft.
This year we did not have much trouble when we made our drafts.
Such
radical changes always need a little explanation.
"Under the old plan, we raised about $6,000.
Under the new plan we raised
.
.
.
about
$20,000, which you will see is some raise."
Tennessee raised dues at their convention in May,
1936.
The increase
was neces¬
sitated by the decline In income over a period of years, due to the reduction in num¬
ber of members.
The new schedule was accepted without any serious question,
only about six banks falling to pay their dues.
Prior to the increase dues of this
association were extremely low, and after the increase the average is about $20 per
bank as
The
are
compared with
nation wide average of $30 per bank.
experience of the above five associations indicates that where dues
low and
income
a
have not been raised
where
explained and)
the
need
sold
to members.
can
be
mittees
replied
second
had
that
question
been
your
added and,
they
had
for
some
shown
it is possible to increase
years,
and
the
new
schedule
a survey
have
regard to
or
reason
are
or
undertaken
considering it,
another.
surveys
not, are more
are
research
The
and 13
comments
interesting, and
so.
Conditions and Trends has under¬
This survey is being conducted
of banking in the State of Arkansas.
by Dr. Kenneth H. Hunter of the State College of Agriculture, assisted by members
Department, Federal Reserve
System and Comptroller of the Currency."
Georgia's program includes (1) tabulation of rates of Interest paid on time deposits,
seeking to prove the advantage of a minimum lower than specified in regulations of
the Federal Reserve Board and the Federal Deposit Insurance Corporation; (2) a
study of bank portfolios with a breakdown of earning assets as complete as the source
records make possible; (3) a study of the rates, recoveries and net Incomes from
each class of earning assets embraced in the above, and (4) an analysis of profits,
dividends and service charges over a 12-year period.
Kansas says: "We are continuing our usual annual research survey in regard to
bank earnings and operating costs conducted In connection with the facilities of the
Federal Reserve Bank of Kansas City and the State Banking Department of Kansas;
some additional researoh work may be entered Into, Including causes for bank fail¬
ures in Kansas and limited banking facilities for non-banking points."
This would seem to Indicate that in Kansas this work has been carried on for some
so,
appointed
for what purpose.
committees
years
past.
Minnesota reports: "We have appointed a Reserach Committee and will have the
cooperation of the School of Business of the University of Minnesota in making the
survey."
Missouri reports that a Committee on the Study of Banking Developments was
appointed "to make a thorough Investigation of the banking structure of the State
with a view to being in a position to recommend intelligent action as to Improvements
in banking
methods.
The committee will cooperate with the Association of Reserve
City. Bankers In its similar work of national scope."
New York at its convention In June, 1934 adopted a resolution calling for the crea¬
tion of a Commission for Study of the Banking Structure to undertake a continuing
research Into the banking needs of the people of the State.
Shortly thereafter, a
statistician was added to the staff and he began the assembling of the balance sheet
figures and earnings of New York State banks for the years 1923 to 1935.
The re¬
port of the commission was published In December, 1935.
North Carolina reports that: "We have added a Bank Research Committee In
order to be in line with the other associations throughout the country and at the
request of the Association of Reserve City Bankers.
"The Bank Research Committee consisting of a Chairman and three members
has begun making plans for their work after conference in
Professor F. Cyril James was the speaker.
They have secured
Comlmittees
committee asked was whether
if
properly
'
New
The
taken
in
of the committee and officials of the State Banking
New York increased dues in January,
amounts to about
subjects
have committees organized to under¬
planning to,
action
of several
third question
committee's
indicate that 24 States
this
Arkansas says: "The Committee on Banking
New Jersey raised their dues in August,
on
Research Programs
programs
committee's letter
changes in schedules of dues.
regard to
dues
question
schedulelof
intensive training classes for bank officers, directors and employees, will cultivate
better relations with the press, promote a program of talks before schools and adult
43 States, and I shall
from
us.
a
West Virginia is endeavoring to develop more A. I. B. Chapters and promote group
activities.
Wisconsin has added a Director of Public Relations to Its staff.
He will organize
in
Dues
The
State banks and a committee to study service sharges and submit
charges applicable to Vermont banks.
Virginia has added a Pension Plan Committee.
on
To
any
new
com¬
this, 29 States
Government
Lending
a meeting at which
the cooperation of the
Department of Economics and Finance at the University of North Carolina and the
State Banking Department has agreed to furnish a man for research work for as
long
as
penses
six months without cost to the Association, since the
of the Banking Department are paid by the banks."
entire operating ex¬
.
STATE
SECRETARIES SECTION
What is being done In Arkansas and North Carolina may suggest a solution of the
problem of several associations which have Indicated a desire to undertake this work
but have been unable to do
of
Tennessee has appointed a Bank Research Committee.
work will be
The first phase of their
study of bank Income and expenses and most of the work Is now being
a
done by the Secretary who is gathering statistics.
outside assistance will be engaged for statistical
After
addition
the
to
plan to make
a
made
York
in
The
New
of
survey
comments
research
above
all
New
banks
England
in
those
several
are
the
of
States
States
working
are
similar
which
States
to
on
the
have
study
to the bottom, It is readily discovered that the maximum permissible contract rate has
or nothing to do with the actual current discount or Interest rates which
are
always prevailingly below the lawful maximum, and which for obvious reasons are
regulated by local conditions and customs and not by statute.
Were there no statu¬
little
undertaken
not
tory limitations at all, current contract rates would regulate themselves or be con¬
trolled by the natural laws which govern the prices of all commodities.
The pre¬
vailing contract rate on the entire volume of loans and discounts in Kansas banks Is
thing.
I listened to Professor James's plea for a research department for Oklahoma
and I thought I could see branch banking in the wood pile.
I am often wrong.
I
hope when the chip Is lifted they will find an independent bug under it."
Pennsylvania—Mr. Zimmerman reports: "No 'research' in Pennsylvania.
Our
Council of Administration threw this New York City banker's (note singular, mean¬
known to be well below 10% or 9% or 8%, and It Is believed would not exceed and
possibly not equal even 7%.
The cases where 10% or a higher rate per cent has
been applied represents for the most part small advances for short time when the
Interest yield at less than 10% would show a loss or at best a mere stand-off to the
bank.
It has not been difficult to convince the committees of the two
legislative
bodies that the actual prevailing rate is a most
acceptable rate both to the borrower
ing Guy Emerson) Idea out of the window at the July meeting.
Other States will
follow suit as soon as they get the low-down.
It's a branch banking move
and will die
The
to
answers
departments,
and only
ytars,
In
be
and lender.
"(2)
Protective
as
conclusion,
expanding,
such,
the
fields
in
1.
3.
Public
have
States
to have reduced the contract rate from
10% to 8% at this time would have Inter¬
fered with the operations of the Federal Housing Administration in
making amortized
in recent
which
State
activities
association
relative
loans, the rate
usurious.
to
seem
These
the
are:
"(3) Furthermore, other Commonwealths, many of them much older than Kan¬
sas, seem not to have been over-much excited in this matter.
In six States, viz.,
value
of
from
Maine, Massachusetts, New Hampshire, Rhode Island, Colorado and California,
In five States, viz., Connecticut,
Nevada, New
Mexico, Utah and Washington, 12% Is the lawful contract rate.
Thirteen States,
Including Kansas, have a 10% maximum; one State, North Dakota, 9%; 10 States*
8%; two States, Illinois and Michigan, 7%; seven States 6%, and four States
6%,
plans.
any rate contracted for is lawful.
relations.
increasing activities
varied
services
to
They
activities
indicative
are
rendered
membership.
social
member
mark
toward
the growing importance
of
banks
the
trend
activities
of
and
of
the
hence
State
associations
serious
more
of
increasing
and
with certain modifications.
away
"It Is Interesting to note the status In the various States with
respect to the legal
rate
distinguished from the maximum contract rate.
Four States, Alabama,
Colorado, Florida and Montana, stipulate a legal rate of 8%.
Nine States stipu¬
late 9%, including California, Idaho,
Georgia, Nebraska, Nevada, South Carolina,
South Dakota, Wyoming and Utah.
Thirty-two States, including Kansas, stipu¬
late 6%, and three States, Illinois, Louisiana and Michigan, 5%."
practical
value.
Respectfully
W.
submitted,
GORDON
BROWN,
Chairman.
.
as
Obviously
Committee
Wattam,
ciation, Fargo,
In
Chairman, Ladies
who
do
report covers
not
Dakota
by C.
Bankers
tion, and
tary,
Mr. Wattam said:
in
benefit
perhaps understand this report,
which
sent
was
out
those
of
I might say
all
to
of
the
people
that the
Since
the
the
last
meeting
spring
legislative
State
every
of
some
arisen
of
the
States
To
the
and
instead
of
which
date
matters
arguments
replies there seemed to be
and
Secretaries
Section
at
the
only
38
forth
set
either
the
to
Secretaries
in
way
out
the
were
Secretaries
have
replied.
questionnaire
available.
not
In
arguments
pro
and
only
con,
were
shown.
For
the purpose
reference
you
to
form
marizing
value
to
to
quote
tion
to
the
warrant
you
as
indicating what
opinion
some
information
a
asked
as
to
these
on
continuance
your
for
in
our
for the elimination
of
had
in
mind
is
of
gathering and
worthwhile
efforts
double
andi
of
along this line,
on
the
does
liability
the
be
we
on
replies
of the necessary legislative resolution was accomplished
through the
cooperation of this office, the State Banking Department and State bankers
through¬
out Ohio, who acquainted their legislators with the facts.
use
on
Deposit insurance protects fully 99% of all bank accounts In Ohio.
"2.
The Ohio Bankers Aasociatlon has agreed to enactment oi
a law
putting 10%
capital, betore paying dividends (identical
with Fed¬
This would actually be more valuable to depositors than double
liability.
more or less a snare and a delusion.
While its col¬
Double liability has been
hardship on numerous people, actual figures show that
than 5% In increased dividends from closed State banks In
Ohio.
are
relieved of
double liability
same
by Federal law, as of
treatment.
"5. Increased capital works for the protection of
depositors.
With double lia¬
bility existing, It Is impossible f6r State banks in Ohio to sell stock and Increase
their
capital.
"6. With largely increased deposits In prospect, It would be
necessary for many
State banks to obtain additional capital, If they want to continue in
business.
If
so as State banks, they doubtless will seek national
charters and the
State banking system eventually would be destroyed.
they cannot do
"7.
An additional
reason
tion of demand for loans.
capital, and If State banks
for Increase in capital
The amount
are
not
be restricted besides.
"8. Twenty-two other States
shares of State banks.
"9.
a
bank
(now impossible) Is the satisfac¬
csn loan
no
of course is based upon Its
requirement lor double liability
on
the
Our campaign for favorable votes
on the constitutional amendment will be a
Our plan Is to work through officers, directors, employees and stock¬
holders of State banks, with some cooperation from national banks.
We plan
through a series of local meetings, to acquaint officers of State banks with what must
quiet
one.
be done and place on them the responsibility of saying that all connected
with their
Institutions work In this campaign.
Every person connected with the banks Is to
be given printed matter listing the arguments for elimination of double
liability and
he will be expected to work.
"Periodical reports from various banks are expected to reveal the amount of
the
I
might
that
contemplates no publicity until a late date.
no good and tend to stir
up opposition.
do
at
once
or
it
act
the
that
the
such
as
distribution
and
by
on
where
is possible
to
this
of
approval
be carried
Association
induced
summarizing
it
is
the
desire
yet relied to
as
all
to
a
the
of
of
the
committee
and
such
association offices
such
associa¬
at
once,
so
as
information
that
so
the questionnaire do
is
available
prior to the time when
the
that
can
various
convene.
conclusion
C.
WATTAM,
S.
P.
Chairman,
CRAMER JR.,
GWINN,
GRADY
HUDDLESTON,
B.
that
POWER.
as
The campaign
Opinion Is that such publicity would
(More details on this If desired.)'
soon
State
President
could,
this
the
as
I
which
through
were
the arguments which
compile
State
various
and
It
and
with
State
bank
useful
for
other
of
they
agency—that
to
the
would
States,
methods
used
legislation
know
to
me
by
all
of
deficiency
on
imminent
were
actual
or
what
had
you
been
done
handling
these,
and
in
so
on,
and
aid
to
the
in
combating
summary of the
instance, in con¬
if
or
glad to have
very
a
for
men,
State,
my
we
legislation.
judgments,
in
if
being
Committees
unfavorable
was
banking
that
valuable
a
this
It
agency
forth
so
offer
and
of
manner
and
Legislative
this
see
about
adverse
central
as
and
the
certainly
the
issue
it
of
a
would
be
efforts
successful
of
States.
But
perhaps the
our
think
answer is—or
at least it might seem so on
the basis
having received only 18 replies—that it is not of interest to you.
that
lies with
while
opinion
In
as
other
to
succeed
and
words,
if
Committees
which
have
been
taking
us
this
we
is
can
the
in
time
to
of the work which
think
it?
it,
that
Shall
is
the
we
hand
in
have
it
procedure
here,
in
it would
sort
some
of
an
this
be
direction
interesting
expression
of
continuing.
the
send
of
office
have
States,
you
further
to you
of
continue
answer,
in
worth
other
summary
of
to
summaries
used
of
now
desirable
whether
lative
your
determination
those who
instructive
want
types
many
to me from my own standpoint I would be
hands, for the suggestive value they might offer,
nection
of
further
of
or
this
Committee.
seemed
arguments
and
word
a
number
a
their
summarize
Legislative
used against them,
and
to
say
this
to
in
it.
were
forestalling the enactment of
in my
I
by
information
properly,
Secretaries
all
of
might
we
there
office
were
them
is
copy
common
central
a
a
that
idea
committee—obtain
then
information
believe
undertaken
was
the
on
Wattam
of about 10
questions—including moratorium legis¬
interest, personal instalment loans, and matters of
a reply frocn each of the Secretaries,
and it is our
Secretary has
Auch:
which
conceived
Mr.
list
a
kind—asking for
program
his
for the benefit of the people present other than Secretaries,
say,
contract rate of
each
of
prepared report,
following extemporaneous remarks:
sent out
we
lation,
work
done and to give opportunity for stimulation of those who
may lag.
and
be
H.
put Into position to Increase capital, loans will
have
either
work,
GEORGE
of
now
Secre¬
the
THEODORE
legislation
lection has worked untold
banks
might
C.
Adoption
Since national
gathering,
the
Bankers
JOHN
intention
"1.
State the
Respectfully submitted,
made the
continue to be
legisla¬
of
Stock
"The following arguments were used on legislators and will
the public in an effort to obtain votes for the amendment.
list of
a
antagonistic
any
with
to yer,
year
be summarized
may
Legislatures will
that
July 1, 1937, State banks must be accorded the
from
Association
desire
double liability on State banks and building and loan associations.
(Building and
receive deposits in Ohio.)
This question will be on the November ballot.
"4.
the
the
American
legisla¬
capital fetock
and
in
Secretaries,
meet
facilitate
to
the
change
of
in
meantime,
forwarded
loans
It has meant less
of
sum¬
"Double liability in Ohio is constitutional.
Therefore, It requires a vote of the
people to produce a change.
Constitutional amendments may be submitted to vote
either by resolution of the Legislature or by a petition filed
by sufficient votersThe Ohio Legislature last spring voted to submit the
question of elimination of
"3.
not
have not
as
At
"Double Liability on Bank
eral law).
section
work
sufficient
question of
adverse
proposed
State
this
should, in order
house
the
tions
follows:
to surplus until surplus equals
various
of
with
idea
is
questionnaire, and to enable
the
whether
subjects
of
committee
the
the reply of the Ohio Association
providing
banks
of
information
In
not
other
the results
provoke
information.
In
have
it
department
clearing
of
misunderstanding of the information required
a
giving the
sent
was
legal
to
the
to
continuance
permanent
personnel
Executive
the activities of this committee have been confined
association.
the
State
relayed
the
organization
some
questionnaire,
recently
be
Should
The report follows:
central clearing house with
some
such legislation
request.
upon
Secretaries
'subsequent to the spring meeting, covering State legislative matters.
Council
favor
could
that when
Legislative Committee handling the matter of presenting the
side, might forward to such central clearing house the arguments
of
and
against such measures, and this information, in turn,
or
bankers'
For the
and
Secretary might be furnished by
the various subjects which may
C.
Asso¬
D.
and Gentlemen:-
questionnaire
a
Legislation,
North
N.
presenting his report,
Mr.
present
State
on
Secretary
worthwhile information along this line is available from
it occurs to the members of this committee that each
some
States,
many
Report of
which to the borrower would in the end exceed 8% and thus become
reasons may also have entered In to govern the committee's con¬
on
Other
clusions.
importance,
Research.
Pension
regard to Protective
discontinued them
Bill was before the Kansas Legislature of 1935 to reduce the contract rate
The K. B. A. Legislative Committee, this time, deemed it advisa¬
10% to 8%.
ble not to oppose the bill.
The House Committee on State Afiairs, to which the bill
had been referred, originally recommended Its
passage, but later in same session
reversed theii recommendation and reported adversely, when It was discovered that
to be in favor of them.
seetn
their
in
value show that 35
three States having
in the order of
2.
their
to
as
few Secretaries
a
from
Departments
committee's final question
your
Departments and your opinion
no
.
aborning."
*
It Is significant that the
Legislature In Its biennial sessions in good times and bad times and all kinds of times
has never seemed to regard the mere reduction of the maximum contract rate as a
matter of very great public concern. When the thing Is thought all through and sifted
Oklahoma—Mr. Gum reports: "We have not organized a research department and
we will.
The proper kind properly operated would be a grand
.
of Interest
session of the Legislature, but has not prevailed.
every
a
do not know that
.
Rate
"(1) The legal rate of Interest in Kansas is 6%.
The maximum contract rate Is
10%.
The proposal to reduce the rate on one or both has been advanced at almost
follows:
as
interest.
Contract
compilation Is completed,
work and analysis.
State.
of
activities
the
herewith the reply of the Kansas Association on the
legislation looking to the reduction of contract rate
give you
of proposed
a
Wisconsin has added a Committee on Bank Management which will make a study
of Service Charges, Investments and Present Loaning Policies and Rates.
In
also
We
question
because of the cost.
so
83
or
course.
State Secretaries and
successful
would
a
rather
done
shall
arguments
it be of
on
value to
complete
this
we
it?
Legis¬
methods
the extent
explanation
thing?
drop
your
and
What
If
you
do
and
you
do not
T.
P.
Cramer Jr.
Paul P.
Robert
of
CONVENTION.
BANKERS'
84
Brown
E.
(Oregon):
I, for
(Noith Carolina);
Wait
(Arkansas):
If
would like to see it continued.
one,
could
we
get the results
by the first
Auch:
are
first
not
have
going to
the
I
speaking collectively,
am
not individually.
If you
thing by the first of January,
the questionnaires, and they are
results from this
in.
W.
thing
President
has
Brown
is
to
answers
Mr.
(New York):
matters
Auch:
Wattam:
Yes;
not
had
not
Why didn't the 30 States reply?
Is
Have
any
a
you
talked
to
anyone
who
the
of
in
States
President
shortly.
if it
is
Auch:
I
number of apologies here from sev¬
and they promised to get the
answered,
might
say
that
so
far as
possible to get them in.
wish that someone here—if
I
be
there
contrary
a
How
many,
proper
have
considerable
section
this
are
believes
this
in
show of hands-*
interested enough to see that proper information
from t.heir State comes in ?
Can
majority raised their hands.]
Auch:
I
imagine that a good
we
have a
great
President
sented
then,
form
[The
who
opinion,
were
stated;
were
stated in that report and the anticipated changes
member of the American
of those here repre¬
already sent in their information.
There seems to be very
interest, and
I imagine that those who are in charge of
as officers next year will welcome that.
Bankers Association was supplied
many
Fidelity" Bond and 'Blanket
Bond
W. P.
all
that
Keyser (Missouri):
of
Association
to the
as
the
Secretaries
have
changes
been
July
issue
"Banking,"
of
the Journal
of the
American Bankers
Association, contained an article written by Jim Baum, as Secretary
the secretaries and
information that is quite complete
that'have been made in the American Bankers Associa¬
Bond and in the Number 8 Blanket Bond.
tion copyrighted Fidelity
f
At the time of the spring
can
an
was
meeting of the Executive Council of the Ameri¬
Bankers Association last April the new
accomplished fact
practically
upon
an
copyrighted Fidelity Bond was
At that time the Number 8 Revised Blanket Bond
accomplished fact.
All of the changes had been agreed
and it was simply a matter of adopting the new form of
surety companies.
I
I
of the
So all of
^11 of the members of the American Bankers Association
that information very specifically and very fully.
The report of the committee to
refer to this report as containing
ence
the Executive Council this evening will
There is no material differ¬
k contained in
the changes.
in the final drafts of those two instruments from what
Those anticipated changes in the copyrighted burglary
this report.
have not
become^effective yet*
policy
l...
ReportJof|Committee7on Nominations- -Newly Elected
Officers
Now for the report
McFadden:
Mr.
As to the
President and the
elected before
I
was
ever
of the Nominating Committee:
First Vice-President, they were as good as
appointed to the Nominating Committee so.
incoming President, Theodore
"incoming First Vice-President, Gordon
instead of nominating them, I present your
P. Cramer Jr. of Oregon, and your
Brown, Executive Manager of the New York
I had to put one
so
Association.
of my own Southern buddies on as Second
bond by the
And. of course,
Vice-President,
of C. W. Beerbower, of Virginia, for Second ViceOn the Board of Control:
The officers already named, plus the
I present the pame
The nominations were presented as
For
I believe I should call attention to the fact
and all members of the American Bankers
supplied with
with a copy
of that report in this form.
President.
in Association's
8 Revised
in the burglary
Every Secretary and every
retiring President, Mr. Auch, and also William Duncan,
Changes
the
the anticipated
such—who
would not be worth anything
substantial, would express it, because if it is not, it is certainly useless
to impose a considerable burden of work such as this on Charlie Wattam
and his committee.
Does anyone feel that this would not be of substantial
value to him ?
I
would like to have you express yourself if you do.
has
Bond
have been supplied with
indication as to why?
this questionnaire is
concerned, we intend to send out a summary to the Secretaries prior to
the first
of
January, whether we get replies from all the Secretaries
or
not, but we would appreciate having a full set of replies in from all
information
Fidelity
committee, which contained all the changes in those contracts.
interest to them?
know.
have
have
I
have
of
not
Have you
who
Secretaries
are
do
I
answered?
not
eral
need
copyrighted
and robbery policy were stated in that report.
The
Gordon
because these
it
any
we
the
in
changes, which proved to be the actual changes, in the Number
Bond
January—
President
committee which was delivered at that time,
In the report of the
changes
So would I.
President:
Theodore
P.
of Minnesota.
follows:
Cramer
Jr.,
Secretary,
Oregon Bankers
Association.
For First Vice-President:
W. Gordon Brown, Executive Manager, New
York State Bankers Association.
For
Second
Vice-President:
O.
W.
Beerbower,
Secretary,
Virginia
Bankers Association.
David M. Auch, Secretary, Ohio Bankers
Board of Control:
Theodore P. Cramer Jr., Secretary, Oregon
Brown,
Executive
Manager,
William Duncan Jr.,
Association;
Bankers Association; W. Gordon
Association, and
Association.
New York State Bankers
Secretary, Minnesota Bankers
[The report was duly adopted and the officers
installed.]
@FedFRASER