Full text of Commercial and Financial Chronicle : October 12, 1940 : American Bankers Convention Section, Vol. 151, No. 3929

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BUS.

ADJJ*

Index
Three Sections-—Section Three

Page

Editorial Article—
The Bankers

Convention

General Session—
Addresses

Committee Reports.

National Bank Division—
28

Addresses
Committee Reports

„

AMERICAN
State Bank Division—
Addresses

BANKERS CONVENTION

Committee Reports

SECTION
Savings Division—
Addresses

Committee Reports

Trust Division—
Addresses

Committee

State Secretaries

Reports

Section—

■>

Addresses
Committee Reports

,—

GIVING PROCEEDINGS OF THE

CONVENTION OF

Round Table Conference—
60

Addresses

AMERICAN BANKERS ASSOCIATION
HELD AT ATLANTIC CITY,

For Index to

SEPTEMBER 22 TO SEPTEMBER 26, 1940

Advertisements

Page

PaQe

c
NEW

First National Bank..

YORK

CITY

21
Chase National Bank

(The)

Chemical Bank and Trust Co__

BOSTON, MASS.

Dime Savings Bank of Brooklyn

4
6

Fulton Trust Co

BROOKLYN, N. Y.
Savings Bank of Brooklyn

General Motors
■

—.

CHICAGO, ILL.
Pure Oil Co.

(The)

Accident

(The)

Outside Back Cover

United Fruit Co

DETROIT, MICH.

Co.

CITY, N. J.

Jersey.....

York

10
19

...

....Inside Front Cover

Corn Exchange National Bank

& Trust Co..

Tradesmen's National Bank & Trust Co
JERSEY

PHILADELPHIA, PA.
2

Commercial Trust Co. of New

5
New

United States Steel Corp

Chrysler Corporation

...

....

Insurance

....

(The)

National City Bank

Preferred

—

—.

Acceptance Corp

Home Insurance Co.

8
16

East River Savings Bank..

England Mutual Life Insurance Co.

Empire Trust Co

Dime

our

ATLANTA, GA.

New

7
6

WASHINGTON, D. C.
Riggs National Bank (The)

SESSIO

GENERAL

American Bankers Association
Sixty-Sixth Annual Convention, Held at Atlantic City, N. J., Sept. 22-26, 1940

INDEX TO
New Economic Conditions Faced,

CONVENTION PROCEEDINGS

GENERAL

by Dr. William A. Irwin

Page

Address of Clyde R. Hoey, Governor of North Carolina

Banking, by Frank Totten

Know Your Bank,

by Elbert S. Woosley

Testimonial to Carter Glass—Remarks of Senator Glass

Federal Reserve Act

Policy of FHA

Insured Loans

Those in

—

Council,
24

by Richard W. Hill

Report of Committee on Resolutions, by H. A. Bryant...

Bankers Association of Agricultural Com¬

Award to Georgia

mission

...

Ayers

Report of Official Acts and Proceedings of Executive

What of the Future? by J. LeRoy Dart

Page

by Leonard

Policy Commission,

Economic

Report

Introduction of Former Presidents of American Institute of

Plaque

Remarks of President-Elect P. D. Houston

Military

Service, by Stewart McDonald..

Presentation of Gift of Silver and Scroll of Honor to Retiring
26

President Robert M. Hanes

Survey of Bank Funds Available for Financing Plant Con¬
tracts, by Ronald Ransome

Support of Defense Program by Bankers—Warning Against
Deficit Spending, by Robert M. Hanes

.......

States
Nominations—Newly Elected

Greetings from Chamber of Commerce of United
Report of Committee on

Officers-

New Economic Conditions Faced
By Db. William A. Ibwin, Educational
Remarks of J. LeRoy Dart Introducing Dr. Irwin:

ager

Stonier, assumed the duties of Executive Man¬

the

American

Bankers

Association.

Under

Dr.

Stonier's wise, able and splendid leadership, the Institute's

curriculum grew to its present high excellence, and it was
small task to find

to carry

successor

his splendid

Among

the
of

ground

education

people,

for

prerequisites

knowledge

fully and

adult

this

The

and

position

problems,

find

broad

experience, the ability

back¬
work

of humor, undaunted courage,

and

that

personality

cooperation.

chosen for that most

the

Banking is in the right hands, and that the

addition

Institute's

man's

being

the

educational

duty to

active administrative

that our curriculum is kept abreast of

see

This gentleman has

hau

experience.

head

it is also this gentle¬

program,

current and changing thoughts—a

their

broad background of education

knows

Institute's

the

men

at this time

great deal of pleasure, and I

privilege to have the opportunity of introduc¬

years

ago

impracticable
even

pioneers

whose keen

existence

visionary.

profess1!onal

the

vision

That

educators,

conceived

belief

but

was

whose

and

organization which

the

was

by those

its

Presidents,
and

curriculum

have

Under

into

for

its

the

whom

the

wibe

are

lightly

this

nation-wide

platform

purpose

with

organization

its

without

haves

by all who

students spent

efficiency
institutions.

both

and

organization

and

exceedingly

all,
the

economic base.

four

You

World

War

of my life, was in many

years

ends.

competition

had

war

saw,

every

6aw,

nations that

industrial

young

economic

its limited

The

agricultural

Japan,

the

The

and

waged for

was

economic

resources

make

areas,

it—between

Italy,

Germany

its

with

are

rocky

when he lealizes that forty-six

one gasp

the

group

land of the

phase of it,

it.

one

resources

things.

its almost complete absence of coal and iron,

the agricultural

essentially,

three

has stated

Mussolini

trying to make a living
less silent partner in

are

than one-third
is

think

economic

living for sixty-six millions of people
It

base and

center,

contest—and

Apennines,

millions of people

seems

have-nots.

limited.

backbone of the

the

Axis,

tries

contest between the haves

get

having less

of islands

State of Iowa.

300

years,

enjoyed

know of its

a
as

work.

its

such

its

may

which

educational

sincerely

director.

well

contest

and

for

large

economic

and the

extent

For almost

power.

politically,

old

England

the

hegemony of Europe.
The attempt of Germany today
attempt to take that hegemony out of English hands.
Ger¬

might succeed.
for

Americans,

for you and for

you

native-born

it is

me,

also

and I,

contest

12-year-old-naturalized
philosophies.

economic

its

you or for me to be mentally neutral.
it has three fundamental bases, a contest between the haves and

say

the have-nots, a contest for the hegemony of

philosophies,
know

that

But

effects.
what

one

there

of which is
are

many

though they

The

fact

that,

say

that

they

Europe, and

contest between

ours.

in this country who say "This is not our
we

are

cannot possibly escape its economic

with

already.

Let

show

you

mean.

In the first

place,

have

lost—I say we have now lost important

now

markets:
Germany gone, Italy gone, Norway, Sweden, Denmark, Finland,
Esthonia, Latvia, Holland, Belgium, northern France, and to a large extent
the cockpit of
Europe, the Balkans, gone.
We cannot sell goods to
In

extracurricular

way

to make

favorably

classrooms

com¬

alone

last

proud

having

honor which I hope rests

appreciate,
Its

judgment, for

now.

foundations
on

serve
were

such
well

it is good to

and

behold.

the

second

place,

only

present time the volume of

enormous
our

war

orders

export trade.

are

keeping

at the

Look at the figures: scrap
automobiles, triicks, copper,

iron, steel and steel products, oil, gasoline,
planes—down the list they go, and they—and almost they exclusively—are
maintaining the volume of our export trade and keeping millions of
men

busy.
fact,

activity,
as

The superstructure that has been built

with

1940

has

today,

than

high privilege,

economically

blankly is
many

honor and

privilege

line

long

2,000,000 man-hours, fitting themselves
their jobs and the better to serve the customers

place, it

„

Its

peer.

courses

second

has

them

quality of personal development that has been

upon

truly laid.

leadership

Privately-chartered banking in America
sponsored such an educational undertaking.
It

that

conflict

first of

centers,

than 40,000 students.

blended

been

for greater
of your

work.
some

grown

67,000 members and

had

economic

ends.

present

war."

value

mented

have

wars

for

war

respects

many

The

the

the growth of

you,

economic

two

history and the experience of the Institute have amply demonstrated
were right.
Its thousands of graduates, many of whom
prominent today in American banking, are an irrefutable testimony

possible

practically all

generations the fields of that

challenging the economic leadership of old England,
challenge was met and temporarily smashed in the last war.

brought

Banking.

year the

and the

Venice

seriously

were

Institute

minds

American

The

activities

white for

made

bones have

essentially

that

uni¬

almost

shared

not

practical

call

now

shared

was

that those pioneers

developed

merchants of

great

It is a contest between the philosophies of totalitarianism and our phi¬
losophy, the philosophy of free enterprise, and because it is that kind of a
philosophy, that kind of a contest, it is utterly impossible, in my humble

Dart, Ladies and Gentlemen:

quite generally believed that adult education

was

and

versally

the

whose

say

ways

But

Dr. Irwin's Address:
Fresident Banes, President

elected

the

that

Number One, in which I spent almost

alien,

Forty

and

land.

Banking. Dr. William A. Irwin.

Its

know that

cause.

shipowners of Venice used those crusades as a means of building
personal fortunes by transporting to the battlefields of Palestine

eld

educational

ing the Educational Director of the American Institute of

economic

some

own

It gives

are

have

wars

have-nots.

consider it

all

base

economic

great

stupendous task in itself.

problems.

into

expect

butchery that took place, but I know that the so-called crusades also

one

important position is here,

Institute under his leadership can face the future unafraid.

both

confidently

and

very

be in the making—I say a new economic world may be in the

Practically

making.

the

sense

the possession of

confidence

man

Institute

and

hope

Institute

conscious—and

Beyond the din of the present war, ladies and gentlemen, a new economic

and I know that the educational program of the American

President, I

world may

had

educational

abiding

well,

commands

the

conscious, as I ought to be—of
the fact that any man or woman in this great audience knows that I am
on a spot, but I have seen enough of American bankers to know that their
innate sense of good sportsmanship will make allowance for that fact,
and so, on the spot, I go to work.
Mr.

knowledge of human nature, the ability to speak force¬

expand its usefulness in the days that lie ahead.

somebody in this audience might think immediately of one war in history
around which there has been thrown a halo in an attempt to sanctify

work.

with

together,

Working

About three years ago our former Educational Director,
Dr. Harold

Director, American Institute of Banking

our

have reached the stage where, from the viewpoint of business

need

material

today if

peace

That is how

we are

Important

standing in

sudden peace almost as much

billions

Imagine what it would mean
or war orders, were cancelled.

the coming
in

the

that and

of
war.

involved.

markets
a

fear

involvement

came

gone,

position where

only
a

enormous

war

orders

keeping us

busy,

sudden peace might bring at least tempo-

GENERAL
rarily

business, and facing the fact that the control
fall into the hands of people hostile to

serious decline in

essential

materials

raw

America—not

Not

war?

our

might

our

the

First,

picture.

have

only

recently become the

world's greatest

That may shock the pride of some of you men
thought differently.
Let me repeat it: We have only recently become

who

natkn.

When I came among you 19
agricultural products was greater than the
vaius or your manufactured products.
That is a simple statement of fact.
Today we are the world's greatest manufacturing nation.
By virtue of
that position, ladies and gentlemen, we are dependent as never before in
our history on the outside
world.
world's

tLe

years

let

Again,

value of your

materials

that

Nation.

You

manganese?
have

mean.
do

cannot

their

Almost

God

line

the

walls

that I

Many

you

mortgage on

little

drove to this

and

Indies—Banco.

Bilhton—two

pepper, and the list
which we are absolutely
dependent on the outside world, on account very largely of our new position
as
the greatest manufacturing country in the world.
But it is not merely for imports that we are dependent on the outside
world.
You men from the South know that; Bob Hanes and the rest of
you from the South.
We are dependent on the outside world for markets
for our manufactured commodities.
We need markets for steel and steel
products; we need markets for a couple of million automobiles—just a
couple of million automobiles; we need markets for hundreds of millions
of dollars' worth of machinery—shoe machinery and all kinds of machinery.
If you look at the record of our exports over the last few years, it
rubber,

tin,

coffee,

manganese,

nickel,

could go on

like that, essentially raw materials on

your

much we export from our manu¬
facturing capacity.
That, you see, is our situation, dependent on the
outside world for imports and for exports, as we have never been before.
Third, and apart altogether from the war situation, we face this fact:
Our export market for some commodities may now be permanently lost.
Let me repeat that.
I say our export market for some commodities may
will

astonish

some

you

to see how

be permanently

lost.
What about cotton, President Bob?
You men from New Orleans, didn't
I see mountains of it, like that, stacked on your docks at New Orleans?
And there is another crop coming along, about twelve million more bales

now

with

pounds to the bale.
Where will they sell it?
where you raise wheat by the

five hundred

You

from the Middle West,

men

million

hundred

It could'
We have

about.

Too lar-fetched?

so.

economic policy instead of an
United States alone, a hemispheric
Mexico, Central America and

policy that would take in Canada,

the so-called

Third,

for the

republics of the South.

it would mean

seven-ocean

continental

two-ocean—wait

It would mean a

minute 1

send your commerce as an imperialist,

Decause where you

navy,

must be willing to go and protect that commerce.

you

It would mean,
It

would

even

fourth,

would mean, sixth,

unparalleled

taxation,

and

economic

control

and

this

car.

the

mean,

possibility

of greater

known.

ever

in view of the things that have happened

over

came

than

with

schoolhouse

him

one

look

at this

you

hair iron gray and a beard that was
red, and with a broad Scutch accent.

his

mpans

called the

in to teach
see

day and could not be present.
The
the class.
He was a little, short man, shorter

took sick

can

a little boy, about nine years
Hamilton, Scotland, our teacher of

I was

when

morning that

Scottish

remember

have

now.

Miss Miller,

headmaster

which

mean,

greater economic control—maybe—that could happen here.

even

than

Think it

happening

are

man,

might

Imaginative?

lowered standard of living on account of that

distinctly

day we were studying what we then

that

moment—a short
typically Scottish,

history of the American Revolution, and old Malcolm Blair stood

before that desk and read

the story of the Boston tea party, where

George III tried to take liberty from your forefathers, and when the old
Scotchman finished he looked at us, laid down the book and then said

"Boys and girls, if

dying day:

this,

which I shall not forget until my

your

Government ever tries to do to you what George III tried to do to
rebel."

the American colonists,

times like these I wouldn't be a decent Amer¬

Ladies and gentlemen, in
ican

if I

myself

times

face

better

and

this
to

reared

with other

you,

whether

were

ours

situation
for

rebel, but I can't face an audience of men and women who

said

new

face

war

philosophy of

the

than

anxious

freedom and

And

eyes.

view

your

hearts and your own minds and ask yourselves

own

along the lines we have followed in the years gone by or
type of world of which I speak, ask yourselves if it isn't
it on the basic philosophy for which your fathers lived

fought, yes, ano

gave

the last full measure of devotion.

together resolve that in these trying days, you, you native-born
Americans, and humble men like me, to whom you have granted the
Let

privilege of citizenship in

great republic,

let us resolve to keep that

liberty that made us what we are.

President

Hanes:

show

you

the versatility

of Bill

Irwin, he was only given 15 minutes' notice that he would
speak in the time allotted for Governor Hoey.
short notice, he has

With this

produced for us this morning this mas¬

terful address.

[Governor Hoey's address, delivered at the Sept. 26 ses¬
sion, will also be found in this

issue.]

where will you sell the wheat?
from
the State of Texas, for example,

men

with your

apart

from the war situation; we are dependent as never before on the
in regard to imports and exports. We may permanently
lost—I hope not—the export market for certain important things we

outside world, both
have

economic stupidity, and we have become
where you as a banker and an institution are
suffering, where interest rates have reached the vanishing point, and where
the humblest man ur woman in the United States with a savings account,
a
life insurance policy ot a little annuity, is not willing to pay the cost
of economic stupidity.
They are not waiting to pay the cost—they are
largely as a result of

produce,

Banking Service
in

Washington, D. C.

The

Riggs National Bank

glutted by gold to the point

welcomes the opportunity to serve

Bankers, their clients and friends

paying it now!

and gentlemen, coming hack to the war:
The
may be forcing America into imperialism.
Have you thought of that?
It is easy to see this without stretching your
imagination, that the old national economic lines in Europe, if Germany
wins the hegemony of Europe, will be wiped out like that, and under the
leadership of a dorainent State, the whole continent will become a unit,
an
economic unit, for purposes of trade and commerce and production.
That is no figment of a
crazy man's imagination; that is looking at
the situation through clear, through unbiased eyes.
Say Germany, at the head of a unit, an economic unit called Europe;
Italy and Spain heading the continent of Africa, including Egypt; say
Russia and Siberia as a
third economic unit; say a greater Asia with
Finally,

results

this,

this

situation

the head of that, and that would give you four magnificent
regional economies.
One, Africa, needing development—we could help to
finance that.
All right!
Why not the United States of America at the
head of an economic region called the Western Hemisphere?
You see, business does not recognize national lines.
Ask any man from
the International Business Machines Corp. if they stop at national lines.
Ask General Motors if it stops at national lines.
Ask the National City
Bank or the Chase National Bank if they stop at national lines.
And it
Japan

might

Nation's Capital

Robert V,

Fleming

George O. Va«s

President and

Vice-President

Chairman of the Board

and Cashier

that

national economy is past and that
order of the day. Suppose that should happen.

Imaginative? Not at all 1
If that
should be the case, where would we stanu?
It would mean a new economic
orientation for the United States, not only in our thinking but in our
business practice as well, and possibly also, if that is possible, after all
let

Resources

over

Founded

$120,000,000
1836

the day for the old

regional economies are the
Now

in the

ladies

war

show you my picture.

these

I say to you, war

situation, with all the things I have tried to picture

begins and where hospitality is of
to

now.

taxation

burdens

unparalleled

fifth,

mean,

•

huge potential army, at least.

bushels,

where the West
the frontier type, what are you going
range cattle?
And you men from the Blue Stem Grass
of Kansas, where you fattened them for years on the flint hills, where
are you going
to sell that fat beef?
Our export market for some commodities may be permanently gone, and
Government policy helped to bring about that situation.
That is a fact.
Fourth—and I am speaking to bankers—we have recently—and I say
recently advisedly—become glutted by gold.
The unparalleled excess re¬
serves of our banking system, the unparalleled low interest rates,
the new
cost for insurance either in reduced dividends or higher premiums, the
higher premiums on annuities, and the lower returns on annuities—what
people are getting on their savings through no fault of yours, you are
not responsible—every one of those things is testimony to the fact that we
have reached a new economic position through being glutted by gold.
Again, I could multiply the list.
You're not dumb; you've got my wave
length already.
We have become the world's chief manufacturing nation
You

bring

might

thing

inter-American bank already.

economic

history,

wheels, I don't know which

policy

old,

depend on two little islands in the Dutch
little islands in the Dutch East
Indies, and the Malayan Peninsula for most of the tin we use.
I could stretch the list.
I taught Economic Geography for 16 years—

quantity of products, and
East

think

Well, thank

probably brushed your teeth this morning.
Your toothpaste was in
tin tube.
Similar collapsible tubes are used for an innumerable

You
a

government

Secondly, it would mean a hemispheric

naval shell without

Indies.

East

'he

don't

recall

such

what

step

economic

said

90% of the world's nickel.

■

rubber.

first

convention in your own
it was, but
you couldn't have come down on
those tires if the latex which is the
essential raw material of rubber had not been produced for you in the
British and Dutch East Indies; and Japan this morning has her eye on
need

automobiles

think,

the

produces

Canada

and

for

In some respects

steel

harden

You cannot put a good nose on a

We need nickel.

nickel,

we are a "have not"
of a battleship to
Where do we get our
exclusively from Brazil, and Hitler and Mussolini

have.

not

taken

Brazil.

eyes

dogmatically,
industry, raw

direction

the

cLange

bring paternalism for the United States, Doth North and South.

its engines, without manganese.

its vitals,

protect

specifically, emphatically if not
We need raw materials for our

show you

what

precisely

manufacturing nation.

greatest

the

ago

further

through,

policy.
This,

apart

manufacturing

been

have

war?

altogether from the war situation, we face important new
economic conditions.
Again, and in the same brief way, let me show you
But

SESSION

Member Federal Deposit Insurance

Corporation

BANKERS'

CONVENTION

Views America Will Achive

Mighty Purposes of Free People

By Clyde R. Hoey, Governor of the State of North Carolina.
Remarks

Ilanes

President

Governor

introducing

Hoey:
I

told

yesterday

you

Governor

could

not

with

deep

very

through

morning, and although

been

has

eight

fault

He is here this

shall not have the

which

kind

enough

North

years

State

our

to say

consent

Carolinians

has

operated

few words

proud

are

that

the

this

normal

time

functions

have

the

State,

but

proved and enlarged the- State's
all

during

this

period

four

which is

years,

have the great

statesman,

coming to

orator

ability,

beloved

the

close, has

by $26,600,000.

State

the

our

Nation, and, therefore,

right to

large

privilege to

this morning to say just
Of course I

friend

the

your

years,

most gracious

than
in

friend of the late

presenting him that I

James

Senator

few words to

highly indebted to

He was

me.

Senator

was

I count it a high

much kinder

James of Kentucky was

This friend

doubly contented.
blunt

plain,

very

for his

distinguished President,

presentation of

citizen has

North

believe that subversive elements have had too

play, and we have temporized with them too long

in the Nation,

that this is an American Government, and while

freedom

our

Personally,

President Hanes, Ladies and Gentlemen

Bankers Association:

come

believe that

believe

in free speech we do not believe in their right to undertake

of the American

assembly.

believe that genuine Amer-

divided allegiance in this hour.

owe

Carolina

to take

this great

icanism requires wholehearted and undivided allegiance to

We believe that Communists and Nazi bunds and these

Address of Governor Hoey
Governor Hoey:

In this hour

material

our

part of our life

other subversive elements ought to be made to understand

Carolina.

North

being.

our

it becomes

Christian

gentleman, His Excellency, the Hon. Clyde R. Hoey, Governor

and

by his people,

executive, but above all

it rises superior to

and

honor at this time to present to you

Governor greatly

thing of the spirit;

im-

decreased

self-reliance,

We believe in that genuine type of Americanism, that it

greatly

only this,

and

defense of the Government

possessions and conceptions;

Our Governor during his

now

independence

tribute to the independent citizen who does not

pays

the

Not

decreased the outstanding debt of the State

which pays tribute to economy and fru-

honors

all

have

constantly

State's outstanding indebtedness.
of

carried

services.

have

only

not

which

expect the Government to support him but who stands for

balanced

for

During

of the

We believe in that type of Americanism which recognizes
worth and merit,

gality,

budget.

term

for the preservation

rights of property.

his,

opportunity

morning.

past

to justice and

liberty and

address he would have delivered yesterday,

of hearing the

this

that

regret

because he made every effort to get here.

rights, and then to all of these, for the preservation of their

and

man,

from

away

to destroy it.

view is that Congress ought to out-

own

law the Communist party and the Nazi bund and
other subversive organization which

first

owes

every

allegiance

to a foreign government.

We ought to
slaves

say

Stalin,

to them if they want to be serfs and

they

ought

they want to adopt Hitler
to Germany.

back

Russia.

their leader, they ought to go

And if they want to

with

the

who

man

wants the loot in this conflict, they ought to join Musso-

lini.

But America ought to be shot through with

devo-

introducing the Senator he said:

"Ladies and gentlemen,

tion and consecration to the ideals of this Republic, to the

speech today, but I will

ends and purposes of

not

going to bore

with

you

not

going

make

the greetings from a great
had

speech,

but merely to bring

American State.

I have always

regard for the bankers, the bankers in my own State

those

and

likewise

acquaintance throughout the Nation.

have

revered

greatly

your

service which''you

have tendered to the public.
been

that

have
of

sort

have

adopted

fiscal

our

the

In North

attempting to conduct our affairs

State but of the Nation, because

our

sound financial basis and policy,

affairs,

that would meet the approval of the

way

bankers, not only of
we

organization

Carolina

mentioned

Mr.

Hanes,

and

are

splendid condition.
I

would

but

that,

would

familiar with bankers.

readily, being

hrough
But

the

somewhat

I have continued that

of the best patrons banks have had

one

these years.
to

came

bring

from North Carolina.
to

that

say

I began at 17 years of age my first

relationships on the borrowing end.
very

Nation

just greetings in

few words

You know, I believe the State owes

great obligation

together by the lasting bonds of

the

all

periods of crisis,

I bring

North Carolina that evidences
icanism.

our

There should not be any

The

term.

the Bill of

Constitution

State

you

must

furnish

action for a

then this spirit of

belief in

genuine Amer-

difficulty about defining

provides the definition and

Rights gives the interpretation.

We go to this great Constitution to find
ages

bound

broad and genuine Amer-

it furnishes the unity of

Nation to meet any crisis.

that

in periods of crisis the

inspiration

prized herit-

of these guarantees of the right to life, to liberty, to

pursuit of happiness, and to worship God according to

the

dictates

guarantees

high

but I

I believe

I do not know what is ahead of this Nation,

hoping that in this hour that America will have

that solidarity of

that unity of spirit, that concen-

purpose,

tration and devotion to the ideals of the fathers, that
and centuries from

now

and

men

women

years

look back

may

to 1940 and 1941 and thank God for the courage

and the

dedication and the consecration of the citizenship of this

land.

And

conflict

as we stand now,

and

power

there,

over

the rocks

our

means

own
a

consciences.

know

that

this

type and form of government which

to every citizen,

great

small,

rich

poor,

Jow, and to every corporation the right to life and

and

the

looking

realize

Gibraltar

Great

the

across

that

the

Britain

or even the defenses which she

seas

might
is

at the

and

not

the

merely

has, but it is the

tion for

thousand years.

Today I should like to
ness

men

women who have led the nations of the world in civiliza-

of her

matchless

world

strength,

the might

which

resources

America declaring in the full-

see

her

she has, that

in the

power,

sort of full-orbed

have peace

and again

come,

and

again

ideals of free democracy to abide in the earth.

know what is ahead;

do not know.

you

lina feel this way about it.
afraid.

are

We believe in
and

purposes,

defense
shall be

to invade

our

well

our

does
our

other nation.

We of North Caro-

facing the future

willing

sea

prepared that

borders

desire.

not
own

our

way,

full

un-

national

We
we

can

seek

say
no

indemnities

developing

our

own

over

dare

Less

than that

again

the

territory from any
to

we are

our

paid,

are

coveting the
own

civilization,

serving God and mankind in the best way that
people might visualize that purpose.

that

ever

rights.

our

security;

privilege of serving humanity, of leading
own

the

dictator shall

trespass upon

life that
wish

endorse

and in the air to the end

not asking for anything they have, but

our

the

country, in its destiny and in its fine

are

than that will not guarantee

fulness of

are

for

I do not

willing to travel the pathway of sacrifice,

land and

America
our

the

Constitution

in America.

sympathy and commanding support that shall enable this
you

You know this Nation is just a confederacy of States

icanism, and

and to the forward-

sturdiness of her people, the underlying character of

not, therefore, this morning take your time in

discussing

Government

our

ing of its manifest destiny in this hour of trial.

present to you a man who will."

lives in

and

a great

free

GENERAL SESSION

Over at Yorktown there is

magnifi-

cent monument dedicated to commemo¬

the

rate

country,"

tution,"
tiny."

inde¬

birthplace of American

pendence.

side is

one

word, "one

another side, "one Consti¬

011

the

"one

side,

other

des¬

Chemical

This mighty Nation moves for¬

ward

today

like to

votion

the end

might

be the

then

TRUST COMPANY

one

whose mighty

pro¬

citizen,

every

bank

that unity and de¬

consecration

and

part

I should

country.

one

all of the subversive forces

see

removed

and

'
•
,

Constitution
visions
safe

under

claim

our

secure

and

then

and

property,

rights and

they

though

move

sacrifice

triumph

■

Broadway, New York
Founded 1824

of
CONDENSED STATEMENT OF CONDITION

destiny which awaits this great people
as

•

165

mighty

great,

one

•

feel

possession

our

At the close

of business, September

30, 1940

even

ASSETS

attainment

to the

$493,877,983.09

Cash and Due from Banks

of that end.

U. S. Government

thinking, then, with

future

thinking
ment

awaits

that

about
in

not

of the

you

land.

our

Bankers' Acceptances and
State and

discourage¬

bear the burden.

118,623,503.15

Call Loans

Municipal Bonds

59,390,121.52

Banking Houses

We shall

71,297,434.92

—

Loans and Discounts

being

28,209,754.67

Other Bonds and Investments

dismay, not disheart¬

ened, but counting the cost and

willing to

Obligations,
Direct and Fully Guaranteed.

109,075,013.69

;

—:

1.00

5,262,450.49

Other Real Estate

forward

the

the accomplishment of

mighty purposes of

We cannot
the

any

Credits Granted

lay to our souls

Tattering unction that two

2,081,155.66

Mortgages.

free people.

2,514,905.90

Acceptances.

2,632,120.56

Other Assets

oceans

$892,964,444.65

shall protect us.
I

reminded

now

that

only

cently, when the neutrality fight
in course,

that

LIABILITIES

re¬

Surplus.

great Senator, declar¬

$20,000,000.00
50,000,000.00
7,637,757.25 $77,637,757.25

Capital Stock.

was

ing against America
at

all,

said

taking

ought

anv

Undivided Profits.

steps

Dividend

the

pursue

policy of Norway and Sweden and Den¬
mark and
that they

untouched

and

unmarred,

America entered
and

treasure

and

loss

(less

war

both

own acceptances

held in

whereas

suffered

2,790,751.55

$5,705,947.46

Acceptances Outstanding

Holland, pointed to the fact

passed through the other

900,000.00

Payable October 1, 1940

Reserves, Taxes, Interest, etc

373,201,12

Deposits (including Official and Certified
Checks Outstanding $18,531,727.90)

man-power.

808,542,554.00

And yet after his death, and before the

has

grass

had

time

to grow

these nations would

has

now

over

$892,964,444.65

his

V. S. Government .Obligations and other securities carried at
$10,392,753.17 in the foregoing statement are deposited to
secure public funds and for other purposes required by law.

the prophecy that he made that

grave,

already

remain untouched

failed, and

has been wrecked and

Holland

Norway has been

Charter Member New York Clearing House

raped, and Poland has been devastated
and all

that land has been

and, therefore,

2,720,180.73

2,985,766.73

portfolio)

Other Liabilities

Association

Member Federal Reserve System

Member Federal Deposit Insurance Corporation

subjugated,

cannot receive the

prophecies from the past like that that
let

would

safe and
as

and I

and

forward,
when

power

peace
comes,

leading

shall be

the

with force and power with

(n favor of answering the dictators

only language ;which
force

that

We shall be safe only

able to match force

are

power,

believe

secure.

they understand and that is unmatched
the conflict of the world.

shall

sometime

come

nations

of the

world

government among men, and

world,

along

the

and relieve

and

I should

of free

like for this great
to be

the wounds and minister to the suffering

the need

this conflict

when

I covet for us.

that,

dimly-lighted

purposes

mighty Republic, the greatest of all the world,

able to bind

than

this

I covet for Aanerica the high privilege of

pathway to the attainment of the exalted

and

in the

our

is over;

but

Nation, the moral and the

spiritual leadership of mankind under God to the building
of

great civilization.
fathers' God to

Author of
To

Thee

Tong
With

Protect

Governor

session

but

that day

Hoey
was

was

lurht.

by and more resnected by the
he was

scheduled

address the previous

delayed in arriving at the convention.

President Hanes said, in part:

O11

people of North Carolina than

I wanted, if he were

into office.

the day he came

particularly to tell you of the great leadership and

here,

when

showed

courage

ently were even being
statement which he

are

the

sit
go

strikes were

sit-down

rampant throughout the country,

this

approaching the end of his time of office more beloved

have

unique position in North Carolina

He occupies the

be here.

I would like to read you

encouraged.

made to the people of North Carolina

and will not be tolerated in North Carolina. '
and

in law and order,
charge of the property

people believing
right

down

into

in
a

running

and in some States appar¬

He said:

take

»vill of the owner,

adversely, against tl»*

King.

I am particularly sorry that he is not going to

morning.

have

this morning,

although

bring him here, we are unable to have him with us

land be bright

Governor Hoey,

convention

by every means, even to chartering a private plane,

Sit-down strikes are unlawful

by Thy might,

Great God, our

have addressed our

at that time.

Thee,

sing.

freedom's hold

distressed to announce to you that

was

tried

liberty,

may our

missed his connection at Washington, and

Our

I
who

mill

labor

and

refuse

union

hall

Men

to vacate

and

refuse

man

others

would

have

set

and

men

hold it
right

than an employer
to

let

the

would have
unionists hold a

meeting.

It is needless to say,
down

strikes in North

after that statement, we had no sit-

Carolina.

BANKERS'
•

■
.

■

•

■

CONVENTION
•

•

••
.

•

•i"

•

Introduction of Former Presidents of American Institute of Banking
By Frank Totten of Chase National Bank, New York, N. Y.
Mr.

Hanes:

On Tuesday

October 2d, in the

morning,

1900, the

year

American Bankers Association opened its 26th Annual Convention in the

City of Richmond, Va.
opening of

It is
with

a convention

should have considered

century spread out before it, the members

topic of such far-reaching importance

of these

banking

men

are

V'"'

Someone has said that life

40 years ago, so we are

American
section

Education.

complishment.

sented

the morning of October 2d,

Association establish

Educational

was

pre¬

with the recommendation that the

Institute and from the limited funds

of the Association set aside $10,000 for its operation for the first
year.

of the American

ment

Institute of Banking.

The Association has

While

education for

the

never

our

a greater

Institute

undertaken

was

people, it nevertheless had

own

pioneer effort in adult

profound influence

the development of adult education generally.

Several years ago in a book published by the American Association for

Adult Education, the following statement appears concerning the Ameri¬
Institute of Banking:

can

Today, there

there is

sense,

dustry in which the problem of educating the employees has been approached
greater thoroughness.
There is none in which a higher degree of
We

been

that

66th annual convention should pass without

our

all occasions possible to urge bankers everywhere to give still
further support to local Institute programs.
on

Each

Its progress is the result of planning, the intelligence

and the sacrif icial hard work of thousands of
the

past

have

years

Corrigan

given

their

and

men

time

and

who

women

effort

Institute

can

could not

Among them I
Institute.
of other

but

during

attend

this

our respects to

convention

them,

years to make the American Institute of

and

give

aur

All

guests.

through the

Totten, of the Chase Bank of New York,
us

in amazement when you

see

former

Presidential
this

Range.

of lofty and

Well,

towering peaks known

New Hampshire

has nothing

you

will peer up here

above the clouds,

you

will

see a

the

these, to be held up in this

tiques,

President

distinction his term as

for

run

are

introduce to you.

president,

third term.

reverse,

starting

with

the

The

was

and while

young,

Louis.

an¬

some

President in

Ilsley Bank

Henry J. Mergler, Vice-President of the

was

Company, Cincinnatti.

1924-25

1922-23

all-time low, as

Mark

you,

that

was

they

unlucky

were

in 1929.

Some folks

I did.

Williams, Vice-President of the bank

Edwin

was

Krick,

Vice-President

and

Carter E. Talman of the Reconstruction

was

Corporation of Washington.

President in

1918-19

was

Cameron J.

The President in 1917-18 was Rudolph S.
of The Hibernia National

Thomson, President of the

The President in

Hecht, Chairman of the Board

Bank, New Orleans.

1915-16

Robert

was

Bean,

Executive Director of

the American Acceptance Council, New York.

ster & Atlas National

Raymond V. Cox, President of the Web¬

Bank of Boston.

The President in 1909-10 was Newton D. Ailing of Brooklyn, New York.
our

first President who

chairman of the 1903 convention,

was

patriarch of this family, was noneother than Dr. Fred I. Kent of New York.

Now, these

together with 13 others who

men,

and 10 others who have passed on to their

long since and lost

Institute, and

were

unavoidably absent,

rewards, friends whom

had

while, constitute the roll of past national Presidents
as some

of the finest friendships that life has afforded

represented in this very group, I wish to give them in closing the

are

words of

old-time toast:

"Ah, friends, dear friends,
hands

Northwest Bank Corporation, Minneapolis.

New Jersey

"has beens,"

was

The President in 1919-20 was Gardner B. Perry of Boston.

the guests do go.

worthy father, who

Frank H. Hall, Assistant Cashier of the

was

1931-32
Trust

The President in

range.

publicly

way

pioneers in the days when America

about

brought in the depression.

the platform behind me,

presidential

It is particularly embarrassing to a
group of comparatively young men,
such

great

Cashier of the American Trust Co., of San Francisco.

of the

range

The President in 1927-28 was P. R.

The

And then

the choice collection of specimens which

morning, because if

way up

of America of Los Angeles.

Mr. Totten.

Up in the beautiful State of New Hampshire, in those glorious White
a

rare

son

1929, the Institute hit

have asked who

at this time

me.

Mountains, there is

worthy

The President in 1911-12 was

Mr. Totten:
Mr. Hanes, Ladies and Gentlemen:
For many years one
of my hobbies has been the collection of
antiques, so I have a special treat
in store for you this
morning.
In fact, some of you are going to literally

brought with

chronologically in

you

1932-33

Third Union

Then in

us.

Banking what it is today.

President of the American Institute of Banking, to address

I have

enough to have me as President.

also honor the thousands

and to present his fellow past Presidents to
you.

gasp

served with

men

The President in

Finance

delighted in having 15 of them with

are

Institute members who have teamed up with them

I have asked Frank

Presidents whom

Federal Reserve Bank of St.

Fifth

Obviously

glad to say we have the first National President of the

paying

and

courses,

This is

1933-1934, Albert S. Puelicher, President of the Marshall

have asked the former Presidents of the Ameri¬

Banking to

here,

ac¬

courses.

of Milwaukee.

advance

We should like to have all these workers here this
morning.

of 67,705 members.

not, not one of them dared to

The first one is the

its courses.

this is impossible

the

Originally

offer 30 such

who have in large part been responsible for this

men

of these

one

and believe it

The

Institute has developed into one of the most comprehensive under¬
takings of its kind to be found anywhere in the country.
However, it has

by itself.

of the high spots briefly.
Now

has

fact, they were lucky to have gotten through the first term unimpeached.
As I present these men to you, I am going to imitate "Wrong
Way"

Institute of Banking and as President of the Association, I have taken

not grown

what

great record of

these various educational

nationwide membership

these former national

For many years a bank officer,

I have observed the excellent work being done by the
chapters of the Ameri¬

advantage

some

And
a

385 local chapters and study groups scattered throughout

The president in

giving honor to the work of the Institute.

can

have

record, and the

attained."

feel

not

Well, it has had

We have 46,318 enrollments in

branch of in¬

with

has

I will name just

are

know, is the educational

you

juniors.

"Using the word industry in its broadest

success

the length and breadth of the country.

effort judging by what has occurred during
the past four decades which have followed that historic meeting in Rich¬
mond.

which,

offered only three educational courses.

"•/ ^r

Life did begin for the Institute

American Bankers Association.

great

our

Institute done in these 40 years?

Briefly, that is the story of the official records relating to the establish¬
given its support to

"./'"•''V'"

':r-

begins at 40.

here today celebrating the 40th Anniversary of the

of Banking,

Institute

education.
During the previous year, a Committee had been appointed to
give consideration to the Association's responsibility in the field of Banking
An elaborate report of the committee's conclusions

of mature years, still others are just mere kids like

men

myself.

interesting coincidence in time that at the

hands.

weak,

and heads get

as years go on

gray,

how fast

Touch hands, touch hands with those who stay, strong

old

hands

Around the festive

young.

board,

touch

The faults forget, the foe forgive, for every guest will go and
every

fire burn low and cabin
empty stand.

Forget, forgive, for who

that such

day will

ever

hosts

come to

guests again.

Touch

may say

hands!'.

What of the Future?
By

LeRoy

Dart,

President

American

the

Institute

Banking and

Vice-President

Florida

the

National

Bank, Jacksonville, Fla.
In

introducing Mr. Dart, President Ilanes

ciation
It

fitting

the

American

also,

Asso¬

the

that you

now

Institute

1911.

product.

should

Banking

now

hear

from

concerning

He began his
Vice-President

the

his

President

present

future

banking

of this

career

institution.

Mr. Dart's address follows:

such

man more than any
one

of the

universal

spiritual

and

concern

economic

by attempts to

endowed

with

question that has

one

well-being

it.

answer

foresee

physical,

every

Were

painful experiences coming to

but

connection

the

inherent

with

but not

Writli

pass.

progress.

Providence, in fashioning

placed in him instead

one

fore¬

one

unpleasant
the

future

man,

realization

that

chartered

banking,

Accordingly,

have built

the foundation

will,

With

of free

enterprise

his

future

and

confidence

made

also

by the exercise of their

concerned

powers

this,

because

the

knowledge

cause

that

of banking edu¬

and

perfected plans whereby it can better serve its

members, its associates and its public in the future of larger
opportunities and responsibilities.
of the

plans

the

Through the fulfillment

have perfected we are certain the members

Institute

forward to

Section
a

will

much

better

qualified to

successful conclusion its aims and objec¬

which, paralleling those of its parent organization, are

wel¬

educational.

over

bank's most valuable asset, we have set as a major objective

Realizing that
are

birthday, faces the future with confidence and

cation, and with courage because of the fact that it has

tives

observation

vital

it has in the past, face a

during its existence it has served the

over

Nation's prosperity and progress and to the economic

courage.

carry

powers

concern

Organizations, like individuals,

of insuring their future pros-

future replete with change, the American Institute of Bank¬

left this ability out

fare.

their future, and

full

human

and individual initiative,

lose much of his incentive

accomplish, to develop and to

imagination and

individual

any

contemplate the certainty of

man would

mental,

accurately, the ability

^in

would

all-wise

means

satisfying

are

its fortieth

correctly discernible,

the

the alert, planning, studying

ing Section of the American Bankers Association

be most welcome

they

because, the

seeing the pleasant things that lie ahead,
want

devising ways and

to our

are,

needs, constantly

why this question has been of

the power to

would

the

other is: "What of the Future?"

reasons

affected

imagination

perity and welfare.

system

Since the dawn of civilization
Probably

and

now

I first stated, the President of the American Institute of
Banking.
to you J. LeRoy Dart.

puzzled

and

Section.

messenger

present

tion

wants and

Institute

back

said:

of observa¬

the

task

enlightened and trained personnel is a

of extending the

influence of the Institute to an

GENERAL
ever-increasing number of bank

and women through¬

men

SESSION
Realizing that the task before

of preserving chartered

out the country,

having as our ultimate goal every banker,

man

interested and participating in some form

deserving of

not only

banking is not only worthy of our best efforts;

woman,

of educational

Being
and

worth

activity.

of the fact that education is a life journey

aware

objective to be attained within a certain time

not an

by the expending of a certain amount of effort, and that

thoughts and

economic life changes,

ideas change as our

shall continue to strive to keep our

curriculum abreast

changing conditions and of such a high caliber that

appeal to all who are interested in banking education,

will

whether

the

beginner in

occupies an administrative position.
Believing that we, as bankers, are the ones who should,
incidentally the only ones who should, because of our

and

knowledge of our business,

intimate
the

public regarding

ideas of our duties and

that

educa¬

ourselves to the cause of banking

education

By this we mean

of preparedness.

program

research

and

must be prepared to

fight with all the vigor at our command for the preservation
of those principles of free enterprise

and individual initia¬

tive that have made American banking what it is today.

Contrary to the thoughts and ideas of some, we in the
Institute

do
has

longer

that

passed,

the

that

believe

not

nor

day

opportunity

charac¬

to advantage the pioneering spirit which

use

terized those individuals who,

in this country can no

by their efforts and sacrifices

early history of America, laid the foundations for its

in the

It is true the physical frontiers and the

present greatness.

hardships they overcame no longer exist, but there is still

Through the efforts

responsibilities.

pioneering work to be done in the field of education and

Public Relations Committee and our Research Com¬

our

tion and to

and

ourselves with giving to the public our concept

concern

to enlighten

attempt

policies and practices, we shall

our

sacrifices we may be called upon to make, we

any

have rededicated

America

the one who

the bank or

best thought and attention; but also well

our

economic development.

worthwhile contributions to the

This, briefly, gentlemen, is the Institute's answer to the

enlarged program of education and research now being so

question "What of the Future?", and we are confident that

mittee

to make

hope

carried

successfully

out

the

Bankers Asso¬

American

by adhering to this program we can and will face it with
confidence and assurance.

ciation.

Know Your Bank
Trust Co., Louisville, Ky.

By Elbebt S. Woosley, Vice-President Louisville
We

here today representing

are

70 million depositors.

dollars belonging to some
world

shaking

civilized

Banking,

events.
faces

order,

our

of necessity be

may even

It is

in the midst of

are

other phase of our

every

Although

is a

ours

con¬

part of the front lines facing

banking

resources

alongside the physical

of young men who stand on guard and who perhaps

make the supreme sacrifice.
of satisfaction to all of us that

a source

any emergency

civilization meets the dangers of this trying time

shaU be called on to place our

and spiritual resources

along with

uncertain tomorrow.

servative business, we must
the common peril.

15,000 banks with deposits of 65 billion

we are

than ever before in our history.

We are liquid.

picture we are strong.

have 23 billion in cash, and

desirable position, because

better prepared to meet

banking, no

composite

our

Out of 65 billions of deposits, we
more

This is

than the Nation,

highly

can meet a

fighting world without being prepared.
It would be just as dangerous for
us to set out to meet turbulent economic conditions without being strong

would be for this Nation to challenge

and capable as it

some

foreign military

without being prepared to fight.
We must continue to lay up strength for the exigencies of the times.

power

must

by knowing our banks better.

prepare

further building up
come

We must

the reserves to absorb losses incurred in times

when

prepare

impregnable strength, for out of such strength only
our

can

risks

We must prepare by the conduct of

tices wherever they exist.

that the public may sense

and may approve our course

business

our

the unselfishness and honesty of

our purpose

of action.

Local hegemony in banking is as desirable and
local political hegemony.
If any local commercial concern

necessary

desires and needs outside banking services as they often do, the local banker

the transaction.

be the guiding factor in

should

sound local banking policies be

Only in this

way can

safeguarded.

While we are talking about local

hegemony, we might mention the trend

decentralization of deposits.

of national concerns toward

In the past such

sometimes imposed a costly burden on local banks by carrying

balances for their branches wholly

inadequate to support the work and risk

They are today for the most part disposed to leave larger deposits

involved.

in the communities

trend on the part

where their business originates.

This is

constructive

of national concerns and is conducive to their better

public relations.
If we know our bank, we

shall know our deposits—our stock in trade.

We shall know how stable, how loyal, and how profitable they are.

unsound practices.

in overhead or

Let

without

reiterate that we take these

deposits—a total ol 65 billion dollars—

cent's cost to those who own and control this money.

one

Certainly when we take this

money, we

whether it can be profitably used.

want to know

•

briefly of the second great function of banking, the operation
and intricate machinery for handling bank money. This money

I shall speak

is not

gold nor currency, but credits on the ledgers of our banks.

money

another1, and from one part of the country to another; and
Third, the lending and investing of money from which we hope to realize

bank to

sufficient income to permit us to perform the other two functions without
cost to the customer.

is fluid.

receiving and safeguarding

It costs a lot of money to do that.

our

We can't start

doing it without a building, vaults, equipment, personnel, and insurance.
Yet,

charge

one

person to

nothing for accepting

dollars left with us by the

Nation to any other part, or to any part

Quietly and quickly it flows through all the channels of trade, and

dollars.

daily millions of accounts are

public.

When

and
our

safeguarding the 65
deposits increase

billion

when

The wheels of industry simply

the expense

There will come imperceptible increases of personnel and other
expenses

become sub¬

stantial.
are as

different as items of merchandise

merchant's

After all we really are merchants buying and selling credit.

dollar we take on deposit has its cost price.

Some dollars cost

Every

than

get for them.

we can ever

low.

dollars of excess

reserves and interest rates

Certainly we do not need to borrow

is what we do when we accept time

deposits at interest.

generally

money, and that

Perhaps

a more

realistic way to regard time money is that when a bank accepts interest-

bearing deposits

it in reality sells an investment, guarantees

dividend, agrees to repurchase the investment on demand.
the least, is a

regular

That, to say

hazardous undertaking for a commercial bank

rates,

did not make enough to pay

of giving this service.

be that with the curtailment of income

because of low interest

shall have to give thought to revolutionary changes connected

account

Charges for services,

activity.

based largely

account

paid out in dividends last
banker's program may be with reference to such charges,

Approximately 20% of the cost of operating our banks is interest paid on
It was almost the same as the dividends paid by all the

banks last

year,

and was considerably more than the amount placed in

No doubt the public would have been better

by all the banks.

served had no interest on

deposits been paid, and

equivalent amount

placed in our reserve acoount.
Interest-bearing, deposits, however, do not constitute the only deposits
for which the cost may

raised

destructive

the

cost

be too high.

Competitive practices in

of obtaining and maintaining

competition

has

been remedied in

deposits.

many cases

Although

increasing number

pocalities by local clearing house associations, much remains to be done.

"Whatever a

year.

the alert banker will

and supervision

study his accounts with particular reference to activity

requirements.

Good merchandising makes every item of
Good banking will do the same for every

account.

third great function

The

existence in order that
expense

of a bank, that of lending money, came into

the bank might make sufficient profit to pay for the

of performing the other two functions we have already

and to give a fair return on

mentioned

capital funds. This function is a profit function

primarily and a public function secondarily.

Of course the fact that it is a
service. It is

profit function makes it no less a public function and a public
true

time deposits.

have

all, and over 1,200 banks last year

merchandise pay its own way.

serious question whether we should pay interest on time deposits

when we have 6 billion
at the all-time

reserves

In order

activity, contributed over 50% of the amount

Our deposits

It is

use

It may

with

gratuitous service banking renders to the

Few stop to consider how it is paid for.

for it, bankers use up most of the income from their earning assets.

proportionately, but certainly expenses will increase.
The first immediate
cost of new deposits will be l-12th of 1%, the cost of Federal Deposit
Then at certain stages these additional

couid not turn without this banking activity.

It is well to remember that this is a

community and Nation.

Some

bankers do not appreciate

which banking makes to the economic life of the Nation.

this contribution

to pay

shelf.

settled for the banks' customers without

Certainly the public, and quite likely most

large list of new accounts, we hope, through some alchemy of banking,
that our income will likewise increase.
Income may or may not increase

Insurance.

of the world for that matter. By
from one cent to one million

the stroke of the pen it assumes any amount

see a

expense.

This

It flows by the remarkable technique of bank clearings from

another, from one bank to another, and from one part of the

trouble, without hazard, and generally without cost to those customers.

Our most important function of course is

depositors' money.

The

look to us to take it, to safeguard it, and they reserve the right to

and ask for it at any time.

come

tions of banking into three parts:

First, the acceptance and safeguarding of our depositors' money;
Second, the operation of the vast and intricate machinery for transferring
billions of dollars of bank money from one customer to another, from one

shall know what our deposits are costing us, whether in interest, or whether

of the vast

thinking in this discussion, I am going to divide the func¬

To clarify our

condition that has

financial centers.

owners

loans throughout the country by banks of the

of commercial accounts and

great

are

We must prepare by the elimination of unsound banking prac¬

greater.

call your attention to

continued through the inertia of local bankers, and that is the solicitation

concerns

Looking at

20 billions in governments.

In this connection, I want to

that every legitimate and

while

any

profitable business renders a public service

business that is unprofitable, in the final analysis,

renders a

public disservice.
Taking our depositors' money and investing it so we can
money

to pay our way

of most
return

men.

and judgment and character beyond that

If we could take our depositors' money, put it away in a

the same money when called for,

and hazard, but as it is, we

depositors' money, and in order to pay the tremendous expense

involved in operating our banking system, we
return

vault,

and charge a service fee for our

trouble, there would still be substantial expense
accept our

make sufficient

and at the same time have it available when the

depositor calls for it, requires skill

being dependent on commodity,

must lend it and invest it, its

real estate

and security prices,

BANKERS'

integrity, and

general business conditions, management ability, personal

So much hazard is involved in doing

other factors beyond our control.

many

this that few of

would be

willing to undertake it except for the fact that

the haoits and customs of many years have

placed it in

laps and we are

our

Twenty percent of the two million commercial and in-

expected to do it.

of existence every year, and while

dustriai concerns in this country go out

20% go out, they make it hard for the remaining 80% to stay in.

the

fact, they make it so bard that another 20% go out the next year.
It

evident, from these facts, that the banker

In
The

life of the retailer is seven years.

average

has a difficult task in

It is enought to say here that the answers to a few

selecting his credit risks.

questions will build up a credit file on any prospective borrower that will
he repay

Can

Is he capable?

Is he honest ?

the risk.

rather scientifically appraise

Does the enterprise for which he seeks a loan have

the loan?

procedure is

The same

because bonds are generally

information is needed
in that

they

for bonds as loans.

as necessary

In fact, more

hazardous loans,

long-term capital loans which in most cases can only be

are

repaid out of profits or taxes or by refunding.

The location of the enterprise
usually far away and the management unknown.
I cannot say too emphatically that we should get the facts before lending

depositors' money.

our

It is

axiom that it is easier to make money than to keep it.

of the easiest

one

Certainly

banks is to cut losses.

to strengthen our

ways

It is a

startling truth that, taking our banxs as a wnole, losses on loans and seduring the past six years have exceeded

curitiee

net operating earnings.

Apparently it has been only because of profits on sales of securities and
Of course, the

recoveries on loans that our curias have shown a net profit.
true

performance should

operating

be appraised by

During the

past six years we wrote off three dollars for every two dollars of gain.

result for the period was a loss

of about $1,200,000.000.

The

$200,000,000

This was only 10% under the amount paid out in dividends.

year.

shall

is shifted

Complete safety is represented by cash.

always have losses.

cash

into an earning

asset,

operation more equitable policies of employee compensation, group insurance, and pensions.
Theie still remains much to be done along these

lines.

Directors of banks usually represent substantial means and great influence in the community. Their contacts are many and important. Most
of them are anxious and able to promote the interest of the bank to which
they have lent their name and influence. An asset of incalculable value
a well chosen, wisely directed Board of Directors who are sold on the
bank and banking in general and who loyally and enthusiastically defend,

recommend, and boost it. They can have much to do with cooperation
among banks in each community which is necessary to support sound
policies of management involving interest rates and service charges. Properly led and directed they may oe a source of much profitable new business,
Our stockholders are the owners of our bank.

using the difference

between losses and gains in the effect on net operating income.

net

I believe American bankers know rather well the technical
banking, but I believe generally speaking, we
know comparatively little about the art of leadership of the personal forces
within our sphere of action and influences.
Although we are putting 40% of the cost of running our banks into
pay roll, I wonder how much time and thought we are putting into the
hiring, training, and leadership of our employees so that they may t,e an
enthusiastic, efficient, and loyal organization
To most of our depositors,
the teller, or the bookkeeper or the telephone girl is the bank. Their feelings
about the bank and belief in the bank and attitude toward banking as a
whole is very largely a result of these contacts. And we might as w ell face
the fact that we cannot get the most of our employees by holding pep
meetings from time to time. Loyalty and good work must have a dollar and
cents reward and there must be a promise of security for the future. It is
these groups.

aspect of the daily routine of

heartening that bankers over the country are studying and putting into

You must be sure, however, that you have the answers.

merit?

CONVENTION

risk immediately becomes

have made

where they express what is perfectly natural for ownership to express, a real
interest, and determination to cooperate, in making their bank a sound and

profitable institution.
The thousands of ledger sheets in our files do not represent only credit
In them are

When
factor.

How many of

them conscious of that ownership and have cultivated them to the point

and debit balances, but personalities with human emotions.

of modern credit practice built on complete information will

represented all the hopes, ambitions, and loyalties, influence, and capacities,

greatly mitigate risk and cut losses and contribute substantially to sound

which under wise cultivation and direction may increase profits, bring in

banking.

new

But the

use

In connection with loans, many

have

Vve

cost.

been

12,000 of

the philosophy

of,

each

the
pro-

with

little pain

possible to the debtor.

But with

banks in localities having a population of 5,000 and less, and

our

10,000 of our banks with deposits of $1,000,000 or under,

with

and

uf course ona of the policies of the

throughout the world, has been to beat down

community can largely control its interest rates on loans.

I believe

It is necessary

than anything else. As far

are

loan*.

urn on

also

Otherwise they ranmt one-ate profitably

Banking should seek, and I believe Is seeking, to adjust itself to the changes

be waited

commercial credit and

many

times

is twice

profitable.

have sound banks, we must be alert merchandisers of the

can

clearly, and who makes the customer feel that it has been

express himself

They like

who, they feel, knows what he is talking about,

a person,

privilege and

They like to

cheerfully, courteously, and with some deference.

upon

re-

The other calls for

courteous, sympathetic, and intelligent customer relations
to talk with

pleasure to talx to him.

relations, customers

such

atmosphere created by

readily

When the bank is right, it is doubly so, if its customers

and loans.

agree

ilcht

tuat it

which have taken place and are continuing to take place in the use of credit.

great In volume as

One calls for sound banking.

lations with the bank.

accept the banks policies with reference to service charges, interest ra es,

charged with the responsibility of finding new credit fields.

We have witnessed the growth of consumer credit until now it

their bank is concerned their interest is satisfied

in two ways, first their ability to get their money back when they want it,
and, second, in being treated as persons of some Importance in their

for the continued strength of this vast majority of our banks to obtain an

adequate ret

business, and create better public relations.

Primarily and naturally our customers are interested in themselves more

product, credit, below

Because present day economy glorifies debt, debt

the unlucky.

be supported

must

our

The thrifty have been penalized for the benefit of the prof-

Interest rates.

ligate

selling

influenced

unduly

publicity about, low interest rates
letarian economy, so popular

us are

Thousands of persons every day sit across desks from bankers and discuss

with them their most intimate problems;
may be compared in its intimacy

professional relationship that

with the relationship which exists between

principal

the lawyer and his client or the doctor and his patient. It is a sort of business
are discussed and dissolved, where courses are

In connection with the apparent inaollity of many banks to show operating

charted for businesses and individuals, and where millions are influenced in

are to

thing

have to sell, credit.

income adequate for sound

confessional where problems

banking, we naturally attribute much of the

difficulty to low Interest rates, various regulations, and taxes.

weighty factors but not Imponderable to good management.
us

may

be like the Inebriate who

was seeu

One

of his

friends

came

with you.
was

crippled I"

complaining

Perhaps

time deposits

"Thank God. 1

selves, must have the

peed to change our mental attitude and stop

That

s our

Job.

elimination

the

If It

means

of interest

lower Interest

entirely,

courage to

take these

we,

our-

profitable, and is

contributing to the economic stability of the community, and fulfilling its
wider obligations to society, and has the respect and regard of the communlty

then

every

bank in the country can be that kind of

fine that human excellence, wherever it may be found, sets
is

attainable.

Not

one

today is how

bank.

It is

standard which

bank, but thousands have shown such excellence in

management that the standard mentioned has been reached.
for

may

habits of thrift, work, simple living, and self-control.

The question

all approach that standard of excellence in

banking.
Where is the solution of

source

of sound and progressive banking.

A few weeks

hard working, thrifty man, whom

ago a

some small way sometime

favor to ask of

account for $25,000.

had

comunity.

thanxed

simply looking

was

would be kept safely and returned to

money

This

was a

one man or

problems ?

our

What makes

being trite let

any

me say

institution

that the personal

Each of our banks is but the lengthened shadow of

group

of men.

it back that
are

We have been

many of us

busy lending money and trying

banks, with whom

daily routine work and which

tivation and utilization.

some

have forgotten these personal factors.

four groups within our own

contact In our

was

his accumulated savings, and he

I do not hesitate to tell you that the officers of our

I wonder if

deeper feeling of what

feel strongly that our institution is good?

That it builds?

bank means to

That it serves?

And that it adds definitely to the welfare and happiness

of the people?

Perhaps

close to banking that

we are so

do not fully

appreciate its economic and social contribution to the community.
own

morale and faith in

our

For

our

institution and in ourselves, it is well to re-

and reappraise the

are

made to order for

In the banks of this country there

are

come
our

cul-

266,000

In conclusion, let

young.

tangible assets in our ledgers,

me say

that banking offers

means

have

This country is young.

a vast

limits

the

field of unexplored

of accomplishmnet

Our economic order is young.

of fear, of hopelessness, of cynicism, of futility that has swept over the
world and has left its blight upon the thinking of this generation,
The innate strength of the country will reassert itself.

again that

man cannot and will not live

again that what

000,000 depositors.

These groups represent over half our population, and
for the most part are substantial and intelligent people. No bank has any

lized world is stabilized thinking.

greater asset, actual or potential, than these four groups.
The American Bankers Association can tell you of

obtained in the improvement of public relations, in the increase of
profits,
and in the growth of banks, by intelligent cultivation and utilization of

and opportunity.

by bread alone.

We shall learn
We shall learn

faith, confidence, and courage.

astounding results

Testimonial

President Hanes: I have the great honor at this time to

Now Mrs. Rixie Smith and Pixie Smith,
Secretary to

will

disordered minds.

need in order to have stabilized economy and a stabi-

We need to think right.

Tomorrow need not be
initiate, to find

No sort of material order can come out of

Out of healthful thinking come
*

day of mysterious peril, but a day of challenge

The capacity of man to fight, to endure, to overcome, to

a way,

is infinite and

never

dies.

been

the

scene

of momentous events in

tions of the past.

Yesterday

our

annual conven¬

celebrated the fortieth an¬

striking manner, the proceedings of this
reveal

that

the

City

con¬

Richmond, Va., has

niversary

Banking.

Carter-Glass.
most

Carter Glass—Remarks of Senator Glass
Federal Reserve Act

present to you the Honorable Carter Glass and Mrs. Carter

been

Banking is

Only the robustness of youth could have survived the philosophy

off.cers and employees, 125,000 directors, 1,600.000 stockholders, and 70,-

Here

refreshing experience.

grateful that an institution existed where, without

was

banic received from that experience

opportunities.

checking

any community.

reached.

vention

take care of.

us to

He opened

appreciation of the services a bank renders to the people

for the favor.

he wanted

He wasn't looking for interest.

him when he should call for it.
a man who

some money

should be glad to favor him.

for a place where he felt his

had favored in

previous, came into the bank and said he had

He said he had

us.

We naturahy told him

the only solution.

Glass.

other

appraise our place in the community, from time to time, just as we appraise

business successfulAt the risk of

There

The most should be made of it, because there is the crater and

customer.

factors which exist ready at hand within the four walls of our banks offer

to get

There is

relationship quite like the relationship which exists between banker and

expense or trouble to him, he could leave

steps.

bank in this country that Is sound and

one

The

matter

was afraid I

adequate service charges, or mergers of unprofitable banks, then
If there is

why we can't make money and try out the methods used

as to

those who do make money.

rates

matter

The friend said, "I know what's the

The inebriate said.

you're drunk."

the other in the gutter.

"What's the

and asked.

along

are

many

walking along the street bobbing

up and down with one foot on rhe pavement and

drunkard said. "I don't know."

These

Too

It took place at the Richmond convention in 1900.

October,

the

1914,

American Bankers

founding

the

fortieth

Association

the

American

annual
was

Institute

convention

held in Richmond.

the
An

GENERAL
outstanding feature

that

convention

address

the

was

SESSION

made

by the then Chairman of the House Banking and Cur¬

rency

Committee, the Hon. Carter Glass of Virginia.

the year

previous Carter Glass had written

During

bill and suc¬

ceeded in having it passed establishing the Federal Reserve

System.

address

that

outlined

years

plained of
immobile
of

For over

students

Because

reserves.

this

the

condition

looked for

bring about

such

For

number

of the House of

with

afraid

Glass

of years

our

few

During that time he had

Representatives.

anyone

plan

money

the

was

great care the perplexing questions confront¬

You know that Senator Glass is

nor

problem

any

which

would

it his

if he feels

So he set about to

duty to meet the challenge presented.
devise

Virginia

Carter Glass had been

Banking and Currency Committee

ing our currency system.
not

seemed

one

The country had long

change.

Carter

man.

member of the powerful

studied

growth

at once the intelligance to outline a remedy and

the power to

answer.

com¬

being retarded by periodical money panics.

was

While many recognized these shortcomings, no
to possess

had

banking

antiquated system with its inelasticity and

our

industry

1912

and

structure

the

operating methods of the Federal Reserve banks.

the

remedy

shortcomings

Wilson

and banking system.
after

days

the

election

Woodrow

President of the United States Carter Glass wrote him and
asked

for

conference

discuss

The

reforms.

currency

newly-elected President invited Mr. Glass to meet with him

took

place

26, 1912.

This eventful meeting

N. J.

few miles from this spot at Princeton,

Wilson's

Mr.

of Dec.

afternoon

the

home

that

afternoon,

Christmas

during

week, Carter Glass spent several hours outlining his ideas
which
bill

would eventually

be crystallized into the form of a

providing for the Federal Reserve System.

There

remarkable agreement between these two Vir¬

was

ginians

general outline of the system, and the

the

newly-elected President charged Carter Glass to
The

ideas.

his

with

task

required

and their

relationship to finance, since they would be vitally

After

intense

which

course

rare

comprehensive grasp of commerce and industry

affected by any such legislation.
tests.

Carter Glass met all these

legislative

himself

proved

struggle,
a

during

the

Federal

the

and

law

Reserve

System

was

estab¬

lished.

the

years

have come in contact with

have found

members

many

helpful and stimulating.

been

of this

Senator Glass.

him fair and fearless.

American Flag liners intro¬

friendly, informal, healthful cruise on the

sparkling waters of the Caribbean.

Aboard

your

modern

ship—specially designed for tropic travel—you'll find the

As
a

delightful relaxation

pleasant companionships

and

that have made these cruises

soothing rest

famous.

Through

duce you to a

our

master of financial

problems, as well as of legislative strategy, the bill finally
became

Let

It also

sort, for it dealt with complex financial questions.
demanded

ahead

intelligence of

...

Sports deck,

outdoor pool,

orchestra,

unex¬

Association
an

opponent

friend, he has

While the Federal Reserve

celled

cuisine, all outside staterooms

And ashore

throughout!

...

first class—

in colorful ports

you'll be welcomed to the gay pastimes and novel diver¬

System stands as a monument to his contribution to bank¬

permit me to review his active legis¬

ing law, time does not
lative

career,

sions with the extra

reserved

which is well knowm to all.

for

the

hospitality that

visitors

seems

to be specially

from the Great White Fleet.

During the past decade Senator Glass has found it neces¬
sary

his

His pronouncements

party.

own

the structure of our

concerning

should pursue, the traditions it

should observe, the character of statesmanship it is entitled
to

require, have found ready and sympathetic response from

We honor him today,

in the history of our times.

Senator

Glass, representing the American Bankers Asso¬

ciation, I have the
We

and in so doing we honor ourselves.

to our national welfare will live on for¬

His contributions

cherish

privilege of presenting to you this scroll.

written

have

the

hope

parchment

our

express

measure

that

in the years to come it

and that your public

May I read to you now
of

times

Nation

with

based upon

when

which

may

love and affection

We
be a

have

service has been an inspiration

all.

to us

sentiments

deep debt of gratitude to you.

constant reminder of the great
for you

war

and

the wording of the scroll?

days

of peace, he has served his State and

high courage, intelligence and integrity.

His statesmanship,
constitutional government, serves as a bulwark
under law is everywhere imperiled.
A member of the State

the principles of

liberty

WEST INDIES and CARIBBEAN

15 Days...

$168 up.

Every Saturday.

Alternately to Panama Canal

Zone, Costa Rica, Guatemala, Havana; or to Havana (2 calls),
Panama Canal Zone, Guatemala.
15

Days..

B.W.I,

Association.

the members of this

ever

the

representative form of government, the

of fiscal policies it

type

Cruises from New York to

occasion in public interest to disagree with even

some

$168 up.

Every Wednesday.

To Kingston, Jamaica,

(2 calls), Barranquilla and Cartagena, Colombia, S.A.

and Panama Canal Zone.
25

Days all expenses... $233 up.
Alternate Saturdays
(2 weeks in highlands) with call at Havana.

Apply
Fruit
or

632

any

Authorized Travel Agent

United

Company, Pier 3, N.R., WHitehall 4-1700,
Fifth

Avenue,

Circle 7-1034, New

York.

Guatemala

BANKERS'

20
Legislature of
in

the

later

Virginia,
of

House

servant of the people as

Representatives,

Secretary of the

time

one

the United States, and for many years a

Congressman
Treasury of

leader in the United States Senate.

His public service,

extending over a period of more than 40 years, has been
distinguished by fearless devotion to our common welfare.
Throughout his
he has been

career

government.

in public life in his day and generation has been a

greater student of banking.
contributions
Act

1913

resisted

banking

and

his

has surpassed him in his constructive

one

As author of the Federal Reserve
principles of central banking, he has

legislation.
of sound

attempt to

every

bankers

admire

defender

System which he fought
The

the fiscal affairs of

exponent of economic sanity in

man

weaken

structure

the

was

judgment,

his

respect

given

never

to meddle with

power

book.

other things not

provided by the law, and every time it has undertaken to
do

that, it has done wrong, and it ought to be held literally

the statute,

and if it will do that, the Federal Reserve

System, as in the past, will in the

future*

prove to

be of

importance and advantage to the banking community.

vast

Reserve

Yes, I have had occasion to criticize the law's administra¬
tion, to criticize a great many other thangs that have been

hard to establish over 25 years ago.

America

On their behalf the American Bankers Association is

ability.

administer the law as it appears upon the statute

honor his courage and

Federal

CONVENTION

agreeable

been

not

has

done.

Naturally,

me.

any

delighted to extend him this testimonial of their high regard.
of

man

Senator

Glass:

American

Bankers

expected that
words

find

that will

ever

Association:

has

that

to me,

come

Surely

of
not

could

the

come

in my life, none

will be more highly prized than

of the greatest bodies of business

one

the

speakers

is to emphasize the importance

emphasized

has

My advice to

portance of knowing your bank.

im¬

the

bankers

you

Bankers

Association

proposal.

I have

Association

militant opposition

expressed

felt that the American

never

really opposed

was

whole opposition at that

to the

Bankers

reform.

currency

time was psychological.

The

The adver¬

scheme was drafted and presented by a great banker

and

accomplished statesman, whereas the Federal Re¬

bill

serve

was

Congress

presented

from

country

inexperienced

member

whose most important

district,

be charged on a note contracted.

Therefore, auto¬

matically, the American Bankers Association preferred the
measure

man,

presented by the great banker and the great states¬

and the countryman had extreme difficulty after an

But, my friends, you know, as I have often seen, that no

for

before his people and profess a desire and a

to go

unalterable to be regular, but I am an irregular.

purpose

personal conse¬

politician, it would be pleasant and maybe profitable

one

of your

one

speakers has been kind enough to say,

opposition I feel that

I have always been fair to the

and

community,

banking

determination

that

the

Congress of the United States shall be fair to the banking

community, I do not hesitate to accept their views when I
I

can.

not one of those who has a distaste for bankers

for business men

bank

banker

don't

generally, and I don't care how big the

is,

ought to be treated right;

it is necessary to

stand up for him.

Now I have said much more than I intended to say.
not

be presented in the

suggestions that may

the

enacted

future.

I simply wanted to

the details of banking legislation already

going into

and

and I

how little he is, he ought to be stood up for when

care

indicate to you, Mr. President,

associates of the Association again, that no

your

and that I shall ever

prize.

President Hanes: Senator Glass, you and Mrs.

properly administered, and the Federal Reserve Board was

honored

charged with the authority, and with only the authority, to

to you

quality, but it is common sense to do

one's self.

quence to

which it is printed unless it is

Policy of FHA

honor has ever come to me that has so deeply touched me,

unexampled fight to get his ideas embodied in the Act.

law is worth the paper upon

call it courage, if you will, and in a sense I

right and to think right regardless of the

association with banks was to determine what discount he
was

prefer

from them.

may

I have that

hope

of knowing your customers.

When the Federal Reserve bill was presented the American

sary

You

today

would

along the right track, I am just foolish enough

do not go

to go away

the face of the earth.

One

integrity

along with those in authority, but when those in authority

appreciation of this honor.

ever

Members

and

emotional nature could hope

express

this testimonial from
men

person

No distinction

Hanes

President

and

sense

common

Glass have

by your presence, and we are deeply indebted

for coming with us here today.

to Insured Loans to

Those in Military Service

By Stewabt McDonald, Federal Housing Administrator
President Hanes:
that

been

has

done

Mr.

Federal

th/is

Housing Administration.

Hanes

and

Stewart McDonald!

Gentlemen

the

American

military service, I wired Mr.

Hanes the other day and he asked me to present

the matter to you in

person.

As you know, legislation has recently been enacted by Congress to pro¬

the interest of those called under the National Guard and Conscrip¬

tect

Further legislation,

Acts.

tion

Relief Bill

of 1940, is now

known

the Soldiers' and

pending before Congress.

is almost identical with the law of the

same name

Sailors' Civil

All this legislation

passed in 1918, and most

of you are doubtless familiar with that law.

meet

their obligations

of military service.

reason

less

to say,

service,

closure

you

must institute foreclosure proceedings, but in the

that you may, if you so desire, delay the commencement of fore¬

proceedings for

a year

after default plus the period of service.

On the other hand, suppose a man

is called to military service and during

that service and because of the defaults on his mortgage payments, you can

then institute proceedings as you would customarily do immediately upon
default.

However, the court

may stay

completion of the foreclosure pro¬

ceedings until three months after the end of the mortgagor's military serv¬
ice.

Nevertheless,

your

insurance rights are protected in that the date

of the Issuance of debentures,

FHA, will be

should the property be turned over to the

of the date upon which foreclosure proceedings were com¬

that

date.

However, it is

Under it, legal

feeling, and I believe you will agree with me, that

was

guaranteed such debtors before the Civil Courts, and

this question is not so large as at first it might seem.

marked out by which these courts might relieve debtors

ticed in yesterday's paper that the National Retail Dry Goods Association

from their obligations during the period of their military service.

serve

under Section 203, present regulations provide a period of one

within which

regulations this one-year period is in addition to the period of military

were

representation
wide channels

new

menced by you and your interest payments on the debentures will commence

Briefly, that law set up safeguards for the protection of debtors unable
to

program

Because of many inquiries concerning FHA's policy

to insured loans made to citizens called to

are

morning the Federal Housing Administrator j

President

McDonald:

Bankers Association:

year

delighted to hear from at this time.

we are

Under Title I, small homes program and the home mortgage insurance

quite sure that we all glory in the excellent job

the

honored to have with
whom

the FHA will follow

Need¬

administrative policy which will pre¬

the rights of the lending institutions under the FHA insurance con¬

For instance, I no¬

estimates that less than 1% of the total number of instalment contracts in
in the

department store field would be affected by this legislation.

over, as I understand the Selective

Service Act, the

men

More¬

to be called for

tracts, and at the same time will enable them to extend to those called to

military training would rarely come within the groups who are receiving

military service the protection to which they

the benefits of the National Housing

Our regulations, therefore, are

are

being amended

these expressed wishes of Congress.

rightly entitled.
so as to carry

For example, under

our

into effect
moderniza¬

tion and repair program known as Title I, present regulations require
on

monthly instalment note claims must be filed within

after
new

default.

For

borrowers

called

military service,

seven

that

months

however,

be filed within

seven

months plus the

period of service without losing your rights under your insurance contracts,
or

if your

not

claims are filed within the

attempt

seven

months' period, the FHA will

collect from these borrowers without due regard to the

period of their military service.

taken

family and, therefore,

upon

Act, for mostly they

are young men

themselves the responsibility of a home and

neither buyers of homes under Title II of the

are

National Housing Act nor do they possess homes undergoing repairs under
Title I.

these

regulations will permit their period of military service in addition.

In other words, your claims may

who haven't yet

matter of

we can

now

fact,

have made

some

preliminary surveys and as far

determine, the percentage of borrowers subject to the con¬

scription law protected by insured loans is indeed very small.
I make this statement to you,
want

stand

shoulder to

tration to protect and promote
of America who

are

however, knowing the bankers of America

shoulder with the

Federal

Housing Adminis¬

the safety and security of the home owners

the bulwarks of

our

democracy.

GENERAL

Survey of Bank Funds

Available for Financing Plant Contracts

By Ronald Ransome, Vice-Governor
President

Governors

the" Federal

would

had hoped that

you.

I shall read you the

would have been.

telegram I have just received:
We

have

Commission

visory

Reserve banks
which

branches

banks

these

facility contracts.

located, to ascertain in round

are

think

quick survey for the National

for

available

now

The results

financing

figures funds
plant

emergency

being released by the National Defense

are

preliminary

The

Hanes:

announced

figures

show something

like $3,000,000,000 that the banks in those

few cities report

available.]

The

been

has

response

sentiment illustrates the

demands that will

cross-section of banking

This

ability and willingness of banks to respond to the

result from plant

would

place

disposal of

the

this type of

branch
commit

simply
if

district

your

yourself to
means

that

any

you

Bank or

You do not

loan; this is not a pool loan.

that

have a certain amount of funds

presented to you which was

loan in your district were

good and you would like to make it, you

would;

of funds you have available,

but by mentioning the amount
you

possible?

soon

in no way obligate your bank to lend these

funds.

simply means, as I say, that if good, sound loans are pre¬

gratifying.

most

that

May 'I ask, please, that each of you who have funds
you

sound and

[President

As it has been possible to contact

the banks that may be interested

Commission Thursday morning..

Advisory

of the banks and banking

been most helpful.

financing make it known to the Federal Reserve

Defense Ad¬
banking sentiment in the cities in which Federal

just completed

associations in this matter has
only a small portion
in financing such plant expansion in
their own
sections of
the country, it
is hoped that all other banks
interested in the matter will communicate with their Federal Reserve
banks or nearest branch and obtain information about this type of loan.

The cooperation

Except for important duties

Ronald would be here with us.
in Washington, he

of the Board of

System at Washington,

Reserve

read

of Board of Governors of Federal Reserve System

morning a tele¬

this

received

have

from Ronald Ransome, Vice-Governor

gram

that

Hanes:

SESSION

expansion due to the defense program.

sented, you have a certain amount of money that you
like to put in these

would

sound loans.

Support of Defense Program by Bankers—Warning Against
Deficit Spending
By the President

Robert M. IIanes, President Wachovia Bank & Trust Co., Winston-Salem,

B. A.,

of the A.

The American Bankers Association came into

being before the American

had celebrated its first centennial.

Commonwealth

Sixty-six years is a

long span for any institution, and with ours it represents a lifetime of sig¬

This organization has survived

nificant experience.
social crisis:

wars,

Most of

under widely

We, too, have had

our

"highs" and "lows."

assembly which convened during

held

world-wide emergency

political, economic and social institution faced its maximum

and strain.

bid

you

welcome.

are met

obligations which these critical
prospect of the entertainment

judgments

Moment by moment we

which

are

of confidence.

and convincing comparison

job.

with the totals loaned by all the agencies

of the

It is interesting to speculate as to

Government in the same period.

55% of the banks in the mem¬

their lending activity.

Similar factual surveys are

bership reported

under way.

now

questionnaires come to your banks,
which they deserve. They are
Is the best time you
time which will be helpful in protecting you from certain legis¬

May I here ask you, when these

please give them the time and attention
can

important.

spend,

We know they take time, but that

lation which is being

proposed in the Congress.

The facts and figures

concerning the services which

rendering have been assembled and
and radio by our

News Bureau.

chartered banking is

released to the newspapers, magazines

More editorial and news space has

They will offer an abundance of talent and ability, but the

discussions, designed especially
I have concentrated on two

major objectives: first, that the facilities and the personnel of the American
Bankers Association

should be of greater service to its members; second,

that the American public

should be informed as to the role which chartered

banking has played and is playing in the conduct
can

It is with

business.

There was a need, instant, urgent and complex.

material progress.

types

and development of Ameri¬

deep satisfaction that I report substantial and

New

of competition had appeared, old forms of competition had been
There was a call for a thoroughgoing review of the field of

intensified.

There was the neces¬
of limited means, whose earning
power had to be supplemented with sound credit.
There was a lack of
reliable data in the field of agriculture, where the demand for private bank¬
ing accommodation was rapidly increasing.
The whole subject of public
relations and personnel relations indicated that study and experiment
were imperative.
There was the long-unfilled want for economic counsel,
intensified by the rapid changes in the social scene.
There was a response,
whole-hearted, generous and nation-wide, from the membership.
Two
mortgage

lending, particularly that of home owners.

sity of providing funds for men and women

hundred and six banks were asked to
One

hundred

provide the funds for this

and ninety-six banks responded,

new

effort.

old September

friendship it

14, 1940, appreciates the

enjoyed from leading bankers and
business men all over the
country
has

for three quarters

Call

on us

when

the rich and

almost immediately, in a

and heartened everyone engaged in the under¬
from positions
where they had established their reputations and proven their abilities.
The program is well under way and is gathering a momentum which already
exceeds expectations.
Most significant of all, there has been a demon¬
stration of unity, both as regards purpose and participation, which fore¬
shadows a new day in the Association's usefulness.
We are accomplishing
the delicate and difficult task of changing and adapting our services to meet

oldest and largest

The Southeast's first,

national bank, 75 years

century—

we can serve

you

growing South

spirit which has quickened

Men qualified for the new departments were called

taking.

the changing

FIRST

financial needs of the times.

Under the slogan,

The response brought out
of
banking, both as regards operations and policies: public relations, employee
relations, governmental relations; methods,
practices, costs, charges,
equipment; loans, their nature, the necessity of making them, the new
a

comprehensive

facing.

catalogue of the current problems in every branch

hazards involved, the criteria
and involved issues

for judging their safety and worth; the new

which a socialized economy has created for trust de¬

Founded 1865—75th Year

Capital Surplus and Profits $10,000,000

competition of the Government in agriculture, housing and
many other fields; the opportunities and dangers in consumer credit; and
finally, the nature and extent of the impact of a world war and a social

Resources over

partments; the

revolution on banking structures.
Under the slogan,

"Banking's Part in Business Development," we have

No amount of theorizing
the case.
Therefore, we determined to assem¬
Careful analysis disclosed that 45% of the commercial banks

moved forward towards
on

such

the second objective.

theme would prove

ble the facts.

NATIONAL BANK
ATLANTA

"Know Your Bank," we invited you to presentthe

perplexing questions which you were

been

than any other set of banking figures.
Members of Congress and the officials of Federal and State banking agencies
have been supplied with reliable information in workable form.
given to these data, State by State,

personal participation.

Since I came into the Presidency a year ago,

what

totals would have been had the remaining

proving ground for ideas.

evi¬

These figures make a brilliant

We need your experience, your judg¬

of the program will be the round-table

for your

Here was concrete and indisputable

The general sessions have been designed to be informative and

stimulating.
core

1939.

dence that the banks were doing their

this is to be the character and purpose of our

It is already evident that

meeting.

being made.

year

N. C.

than 40 billion

With your help this convention is going

clearing house of observations and

hourly

listen to the rehearsal of the tragic events trans-

ica, with new and baffling problems.
ment, your sense

daily and

The repercussions of the war present us, here in Amer¬

spiring in Europe.

Once more there is the

and fellowship which we have always enjoyed,

decisions

and

times impose.

prepared in grave recognition of the import of

but the program has been
the

in the full understanding of the

membership had made 25 million loans, totaling more

dollars, during the

most

Nevertheless, I count it a privilege formally to open this meeting today
and to

our

varying circumstances, but Atlantic City, 1940, will long be

as an

in which every
stress

known type of

here today have attended many banking conventions,

remembered

every

depressions, financial panics, speculative booms, political

and economic upheavals.

member

federal deposit

$140,000,000
insurance corporation

CONVENTION

BANKERS'

22
results

The

There

banking agencies with credit granting powers.

contention that small businessmen were not get-

the persistent

was

Fifteen months ago there were proposals

impressive.

are

to establish further Federal

entitled, and that in conse-

ting the accommodation to which they were

handicapped and unemployment persisted.
The
Just reviewed clearly demonstrated that these contensions had no

business

quence

statistics

was

basis in fact.

personal reward—the bankers

undertaken by the 67 councils,

actually perform the arduous tasks

who

Association, and its Divisions.

commissions and committees of the

Nor would I omit the contribution of those in the

Bankers Association.

careful and prompt attention to the many question-

banks who have given

which

naires

our

in a definite sense, the American

They are,

deliberations.

They

other cities for their

have assembled in New York, Washington and many

important

Let me mention

desire to give credit where it is due.

It is my earnest

the work of the volunteers who serve without

has had to request.

program

speak of the work of the personnel in the New York and

Then I want to

Washington offices, who conduct the various surveys, distribute data, and
administer the

policies which issue from your committees.

In addition to the duties of their respec-

effort which is now under review.

of the staff have given more than 350 addresses and

tive offices, members

bankers'

before

lectures

From the oldest

this staff has swung into line in the great

trouper to the newest recruit,

conferences

conventions,

and

study

groups

virtually every State in the Union.
1 wish there were time to tell of the work of every
ual engaged in
few

unit and

Obviously, this is impossible.

it.

highlights which

There

all glad to recognize.

are

every

individ-

however, a

are.

The Committee on

Federal Legislation has been almost continuously in session, analyzing the

legisiation bearing on banking which has been proposed in Congress.
has

appeared before the various departments of the Government and the

committees

to give information

of Congress

and

testimony.

It has not

only supplied factual and reliable data to these agencies, but it has outlined
the practical

effect or the probable consequences of the proposed measures.

people have been persuaded to surrender more and more of their lndepen
dence to the direction and control of government.
This is an evil which
feeds upon itself. Typical among the teachings of the "new economics,"
is a form of defeatism which is utterly foreign to the American spirit. It
is the idea that about a decade ago America reached economic maturity;
that the independent enterprise which had characterized American business
could no longer support the economy; that the possibility for investment

has shriveled to virtually nothing; in short, that our economy has run down,
This is a pure assumption which ignores many of the major factors in the
depression and exploits one idea as the sole explanation of our difficulties,
But the most subtle feature of the entire argument is the conclusion, namely,

Governthe motivating force in business and industrial en-

that since our economy had matured, we should now depend on

ment spending to be
deavor.

The immense excess reserves in the American banking system are in considerable part the creature of the Government's monetary policy.
It is
an error to say that these funds have been withheld by the savers, the investors or the banks.
In the last analysis bank deposits represent principally the people's money in custodianship.
These funds, in whatever
form they appear, will be freely employed not only in the defense of the
country but in the development of business in all its branches, when it is
certain that deficit-financxng and rising debt structures no longer threaten
inflation or repudiation.
At all events, the American people are not likely
to accept the thesis that if they do not wish to invest their money the Government should be allowed to do it for them,
The doctrine of the "mature economy" is an ancient heresy, loudly proclaimed early in the 19th Century, and frequently refuted by the subsequent economic history of the United States.
Ninety years ago the Commissioner of Patents declared that with 3,327 patents issued by the office,
further progress was impossible. Since that utterance more than 2,000,000
patents have been issued.
Today, 14 industries which had never been
dreamed of 70 years ago employ one out of every four persons engaged in
manufacturing.

Committee and its constant attempt to protect the

The integrity of this

Government

Spending

public interest has accorded it consideration and brought it respect.
admirable

In three years it has been able to secure reductions in the cost of

record.
bond

Protective Committee has also made

Insurance and

The

coverage

the banks of four million dollars

aggregating savings to

annually—I mean a continuing annual saving of this amount.

distinction of presenting to

The Membership "Committee has the

66th year, an all-time high record,

our

banks

now

This rep-

eight times the total annual membership dues.

resents a sum which is

us.

which shows 83% of the nation's

enrolled in the A. B. A., with 95% of the total banking resources

under the custodianship of

m^rnber banks.
It is true that other committees
the staff, both volunteer and employed, have con-

and many members of

tributed to this success; but to the Membership Committee goes the credit
of the actual enrollment which enables me to announce this
We have

but

fession,

also intimately and deeply concerned with the crisis

are

the democratic

has overtaken

which

have entered upon
extensive

gratifying total.

properly focused our attention on the techniques of our pro-

heretofore

any

of life.

way

The American

of national defense,

program

undertaken.

It is

people

comprehensive and

estimated

that

may

presently spend 10 billions of dollars in the construction of defense equipand the training

ment

of personnel.

completely confident that I

speak for American banking as a whole when I say that we are supporting
this effort and will continue to support it to the utmost of our

How

this Nation defend itself?

can

Basically, It

the people and the industries which compose it.
tern with every

of his

bank

ability.

be no stronger than

can

A chartered banking

sys-

This emergency of defense may well have within it the stern realities which
will help the American people soberly to appraise some of the policies which
have been blindly following.

what is it that

mechanism

the

spend 10 billions for defense,

we are to

wish to defend?

directed?

insistent fact remains that the deficits and the borrowings call for larger
and larger levies of taxation, which can come only from private enterprise,
projects are tax-exempt. American industry and agriculture—privately owned, privately financed and privately
operated—gives employment to the workers and the savers on whom taxation must ultimately rest.
The misrepresentation, neglect or abuse of that
enterprise or any fundamental threat to its solvency is as much a barrier
to national defense as is the philosophy of the totalitarian state,
We are in favor of such governmental agencies as have helped our citizens
to help themselves.
We fully understand and sympathize with expenditures
for the relief of human suffering.
We do not believe that any American
Government would have allowed any portion of its people to starve.
But
it is one thing to levy taxes for the relief of those in distress, and it is another
to employ those taxes in wholesale and wasteful experiments at a time when

since the Government's capital

there is the utmost need for economy.

Against what will this vast defense

last

is it not against concen-

analysis,

There is

deeper issue in the whole problem of Government

ing of credit to private individuals or with the distribution of

which

are not

It is contrary to every known pattern of human behaviour that such powers
can

be exercised by government Without using them for political advantage,

Whatever

may

have been the origins of the pump-priming theory, it eventu-

namely, that it is possible to generate wealth by spending money,

arbitrary

government?

American

than that which is necessary to decent and orderly social relations.

The detailed regulation of our economic life, a

and

employees,

the

excessive

concentration

bureaucracy with
of

power

the

million

executive

branches of the Government, are all foreign to our proven traditions.
It is a matter of grave concern that we have come to accept deficit

fiscal policy.

as a permanent

We not only proceed from

of the

Federal debt to

year to year

entire

economy.

huge total which threatens the solvency of the

Such proceedings forecast certain critical

options:

A book recently published by a leading exponent of the theories
ernment spending holds that the liberal use

For months there has been un unsuccessful attempt

The

to show that the small businessman has been

neglected by pri vate finance
fundamental question;

When the deficits which make Government spending possible have risen to
a

point where private enterprise can no longer pay the bill through

menters do not attempt to answer this question because

defense unless it is
resources

inflation.

country

economically prepared.

can

provided it pursues fiscal policies which

are

and

dictatorships

strengthen

peace

achieve

military

This country is rich enough in

and manpower to build adequate defenses against military attack,

solvency.

Two

of the

designed to

encourage

which

occurred in Germany and Italy.

the

pattern

power was

of dictatorship

was

being shaped.

every

The seizure of political

quickly followed by the seizure of economic

sive regulation and control of business

when

power.

The exces-

activity is a familiar phenomenon

arbitrary government which exists today.

We have

never

accepted

the limitations

which

government

that unless

have

enjoy political liberty.

large

measure

insurance, everyone who

earns

living through

has

have indicated

our

But

unless

daily toil, everyone who

come

ernmental

borrowing,

solvency is
system.

the

will

time-bomb

Happily, there is

end

to the end of that

these ideas

are

mighty rivers.
^

Government

Na-

process

there is no

deficit-financing,

surely take the road to dictatorship.

which

can

eventually

destroy

the

In-

American

at this moment a reassertion of the American

gaining momentum.

They are as truly American
our

to the nature and extent of gov-

principles of hard work, sacrifice and cooperation.

as our

In this great emergency

In the past they have never failed us.

great mountains, our wide valleys and

;

competition in business and finance is also un-American.

The word "control'

is the direct opposite of the word "liberty."

By subtle
propaganda, special pleading, and similar devious devices, the American

Again

the rights to create, employ and conserve wealth.

Among these are

The exercise of these

present

very reason

freeall free

signal for the reassertion of human

that she is defending the basic rights of

peoples, it is certain that she will succeed.

Nation
machine,
and best equipped of all time.
Pre-

Let us have preparedness with all of the vast resources which this
possesses.
even

though it be the most modern

paredness
of

But preparedness must be far more than a military

our

means

the reassertion of

responsibility

our

independence, and

individual American citizens.

consequently

No more convincing

willingfinance,
The banks and the investors of America will respond to that call.
Labor
will respond to it, with its skilled and willing manpower.
Industry will
respond to it, with its vast capacity for management, trained and disciplined by experience.
Our people will respond, yes, even under the irritating and disturbing influence of the draft.
I see no disposition on the part
of any group or any institution to block or hinder the defense program, but
as Americans we have the right to insist that this program be accomplished

proof could be given of the good faith of our Government than the

Against this

put

proiligate spending and to indifference

and again their rights have been defined and defended.

which

The people of the British Empire

in all its parts have for decades enjoyed constitutional government.

For the

readiness to pay for the larger part of the national

by increased taxation.

protest.

American

that when

I sense and share the deep feeling in this country

dom.

We are willing to take the road of sacrifice and of hard work.
tion

had to impose on

period with all of their liberties radically curtailed.

defense program

truth

England in her extremity.

England's heroic stand is

banks, every holder of life

accomplish financial preparedness, they will

significant

More and
goes out to

trial.

lives on savings or pension, must realize that if the decade of the 40's does
not

hard

For 150 years we

by birth, training and experi-

our

The

known.

enthroned.

of economic freedom, we cannot

Every depositor in

answer

prerogatives has been a sustaining force of immense value in her

asked for complete economic freedom.

human selfishness, but as a people we know

they do not want

business
it
will pass to the control of the Government.
Small business will then be
destroyed, democracy will disappear, and the totalitarian State will be
the

has been bankrupted by the unrestrained expenditures of Government,

Waste, extravagance, inflation, disregard

of the rights of both workers and savers, were all practiced in the days

ence

thrift

menace

of the world today developed from the internal bankruptcy which

taxation,

A good many theorists and experi-

where will the revenue come from?

taxation,

printing-press

The

and that he should now be the recipient of Government benefits.
attempt serves to bring into bold relief the following

repudiation of the debt, the further devaluation of the dollar, confiscatory
or

of Gov-

of the Government's purse is
The argument is re¬

essential to the maintenance of private product.on.

plete with sophistry.

financ-

unbalanced Federal budget, but we have permitted the compounding

on an

have

premise,

ally degenerated into a political device resting on a false economic

ment

subsidies

absolutely necessary for the immediate relief of those in want,

squarely on the principle that we should not have any more govern-

rests

the

spending,

particularly where heavy borrowing is involved.
It is against both logic
and reason that a political government should be entrusted with the grant-

democracy

and

centralized

trated,

ing

tion and inuendo, but most of all by

possible and every banker keenly aware

as strong as

responsibility to his depositors and to the country's real welfare is

absolutely essential to the Nation's defense plan.

statistics, by suggesthe omission of pertinent facts, the
evangelists of the new social order are undermining the confidence of the
American people in political and economic freedom.
Most powerful
among their allies are an unbalanced budget and a vast pyramid of debt.
The apologists for these procedures invite attention to the statement that
much of the Government spending goes into capital goods, such as dams,
bridges and highways.
With proper limitations, this is true.
But the
By spurious argument, by partial interpretation of

ness to arm as

far

in the American
As

possible through private industry and private

way.

contemplate the tragedy of Europe today; as we

dwell on the slavery

which Hitler and his associates have imposed upon 66 million Germans,

as wep ^ on

peoples of Austria, Czechoslovakia, Poland,

Rumania,

Norway, Denmark, Holland, Belgium and France, there comes to
essay

Mill:

mind an

democratic government published 80 years ago by John Stuart

GENERAL
r "A people may prefer a free government, but if from indolence or care¬
lessness or cowardice or want of public spirit they are unequal to the exer¬

will not fight for it when it is directly
attacked; if they can be deluded by the artifices used to cheat them out of
if; if, by momentary discouragement, or temporary panic, or a fit of en¬
thusiasm for an individual, they can toe induced to lay their lioerties at the
feet even of a great man, or trust him with powers which enable him to
subvert their institutions, in all these cases they are more or less unfit for

tions necessary for preserving it; ir they

SESSION
liberty; and though it may be for their good to
time, they are unlikely long to enjoy it. '
The truth of this

have had it even for a short

profound observation is in no way

It is more poignant, more compelling, more

the day it was

Committee and Officers* Reports-General
Report of Economic Policy Commission by the Chairman, Leonard P. Ayers, Vice-President of Cleveland
■

nr»

Oh"

O*' v^ieveiana, Umo

rust

~The

first year of the Second

... . -

World War has brought to this country only

threatens

result

During this first
in

great advances in the volume

and large additions to our excess

and credit resources have been mainly

business activity.

our

passed through irregular
the general trends of

activity have been upward.

about

value

exports

our

There have been ho im-

during

the past

has been

year

imports have increased by less than half as much.
These figures showing large
trate the

that

our

increases in our foreign trade strikingly illus-

They appear

foreign commerce is in flourishing condition, whereas

countries that have long been good customers of ours are now con-

Numerous products which we have always sold abroad

quered provinces.

large quantities have largely lost their overseas outlets, and are accumu-

lating in

warehouses,

our

Rearmament
Of

course our most

important business development, as well as the most

portentous change of

time in our national policy, is the fact that we

our

have determined to become

strongly armed nation on the land, at sea

We have belatedly realized that we live in a world of angry

and in the air.

and hungry nations,

and that several of the most powerful of those nations

are

the mortal enemies of

are

our

ideals, our institutions and our way of life.

hurriedly arming ourselves, and the making of munitions has sud-

denly become

our most

important, and our most urgent industry.

Economic conditions prevailing in this country at the present

such
a

time

are

facilitate the carrying foward of a program of preparedness with

as to

minimum of disturbance of

tions is not in reality as

our

normal ways of life

Probably this situa-

advantageous as it might appear to be, for it tends

to make the national emergency seem

Under

less serious than it really is.

present conditions it is hard for the ordinary private citizen to feel that

is individually much

that he

concerned with our problems of national defense,

bears any real

responsibility for helping to accelerate

our

efforts

for preparedness.

When nations wage war, or
for military preparedness,

when they hurriedly engage in great programs

they resort to some combination of three chief

methods for arming and supplying their
is increased production.

civilian
tures

making

of munitions.

these three

Finance

money are

The first of these

ojf new capital expendi-

from peace-time projects, and into those contributing to the

away

from

military forces.

The second is restriction of consumption by the

The third is the diversion

population

The real

funds of nations

war

come

principally

the real

essence

of military preparedness.

only the outward signs of the inner realities.

Outlays of

The true

of the ability of a country to wage war, or to prepare to wage it,
gree to

which it

purposes,

can

is the de-

common

absorption that is selfish to

was

best form of national

free

service that is social.

President Wilson

people."

efficiency is the spontaneous cooperation of a

Our Real War Fund
Our first and most important source
to increase the

production of war materials.

depends

war

fund is

our

capacity

The magnitude of these

re-

the amount of idle labor, and of unused productive

terials, or so employ in civilian production as to release other workers and
factories for direct contributions to military preparedness.
In this country

very

these available resources of labor and productive capacity

large, and because of this we shall not need, for some time to come,

impose many or important restrictions on civilian consumption, or to

divert

new

many

capital expenditures away from peace-time projects in

order to direct them into those contributing to the making of munitions.
As

long

these conditions last our program of rearmament may for a

while result in

real improvement in the standards of living of the people

whole, despite the fact that the actual implements of war are in no

sense

intend

become a

prevent

economic.

actual

The

intend to defend the American way of political life that

It is

way

That way of life is not only political,

of making a living that is based on free private

enterprise in a capitalistic economy, as opposed to the totalitarian economies
Cf state socialism under a dictator.
Qur present national

policies have two main objectives, but we are di-

recting our chief efforts to only one of them.
invasion, and to safeguard our

up our

Our objectives are to prevent

economic and political system.
It is only
should be chiefly preoccupied with building

military strength, for that task comes first, and we have seen with

-vivid, dismay the fates that

have befallen nations that were not adequately

prepared to fight in their own defense.
Probably it is natural enough for us to assume that if we become so strong
in
us

mu tary way that no foe, or

combination of enemies, will dare threaten
safeguarded our economic and po-

with invasion, we shall thereby have

litical way

of life.

That assumption calls for challenge,

and it will not

stand up under close analysis.
Our republican institutions, and our system
' l of free enterprise, have served us so well for so long a time that we have
come to think of them as being self-sustaining.
They were self-sustaining
for a long series of decades, but that was in a different world from the one
iu which we now live, and of which we must continue to be a part in the
coming decades.
When this war ends, all, or nearly all, of the nations that have been engaged in it will be lean and hungry and angry lands in which such liberal

political and economic principles as prevailed in pro-war days will be subordinated to the stark necessities of making a living.
Then most the important question in every country will be whether the totalitarian princlPies of state socialism, or the republican principles of free enterprise, will
appear to the peoples of those countries to promise the better method of
making a living.
Already the disruption of international trade is greater than at any previous time, greater even than during the First World War.
No one can
clearly forsee what the pattern of international trade after the war is likely
to be.
If Germany controls Europe it may well be that she will make it
largely a closed economy, shutting out the products of the United States,
and through barter and clearing arrangements compelling the countries
from which Europe buys its foodstuffs and raw materials to spend the proceed& for manufactured goods produced in Europe by forced labor,

As we view such prospects we must remember that the problem of maintaining our own standards of living against foreign competition is not new,
but is one that we have always faced.
What is new is that the conditions
under which we must meet that foreign competition are changing with

have been doing little or nothing to adapt our
the new changes.
In the past we have competed in the
while paying our labor the highest real
wages in the world.
Our present problem is how to prepare for continued
success in the new competition that is coming,
economy to meet

markets of international trade

incomeproducing.

In addition to our large

available resources of manpower and industrial

plant, we have in our national credit a great asset of defense that is not

possessed in comparable degree by any other nation.

Under the present

perilous conditions prevailing throughout the world we should be conserving that national

credit asset by every device of prudent fiscal policy, and

rigid economy

end

in the civil

alone, as
institutions, and a free enterprise method of
maintaining our political institutions and our economic methods will depend on our ability to apply
our capital and labor to our great resources so as to produce more abundantly and more cheaply than can the regimented economies which now exist,
or may t^en exist.
In the long run the defense of democracy will cfepend
jn the post-war

expenditures of government.

that

should be financing our defense efforts to as great an extent as

world this country will stand alone, or nearly

major power with republican

making a living.

of our real

capacity, which we can either put directly at the tasks of making war ma-

are

that

More Efficient Production
For

fundamentally and essentially right when he stated that, "The highest

and

sources

war.

depends on the degree to which coopera-

task can be made general throughout the nation.

each individual such cooperation in a common effort involves turning from
an

hurriedly preparing to

are

and the rapidity with which it can divert the major energies of

The progress of preparedness

tion in

measure

enlarge and redirect its productive capacity for military

people from the pursuits of peace to preparations for

its

first

The

great rapidity, and so far we

sources.

not

why

reasons

generally describe as democracy.

reality we have lost, at least for the present, most of our foreign markets.

many

natural that for the present we

deceptive character of war-time business statistics.

to indicate

two

are

military nation.

second is that

bonds, or in those of

the preceding 12 months, and our

billion dollars greater than in

There

strong

Production and trade have

of fluctuation during this past year, and

waves

portant changes in the market prices of stocks and
The

-**Stional^Economic Policies^

;

physical invasion of this country, and conquest by a foreign power.

They have not been accompanied by correspondingly

origin.

important increases in

commodities.

of our bank deposits,

bank reserves.

These additions to our monetary
of foreign

will make necessary.

ness program

of the struggle overseas we have had hugh increases

year

stock of gold,

our

trained personnel. and the intimate knowledge of their own communities, which will
enable them, along with the investment markets, to handle major portions
of the new financing which the carrying through of our national prepared-

of incomparable gravity and consequence.

in changes

Session

are well equipped to do this, for they have the resources, the

the war

moderately important economic changes, but in the longer run

diminished by the

convincing than it was
written.
Even in this dark hour I am convinced that the
American people are fit for liberty and that they are determined not to lose
it, either through attacks from without or through deceit within.

years.

Our degree of success in

efficient abundant production.

past 10 years in this country show all too
the challenge which confronts us
because of the momentous world events that are under way.
For the first
time in our history the production of American industry has made no net
gains for a full decade.
Industrial output has stagnated. Much of our
factory equipment, and that of our transportation system, has become
obsolete or obsolescent.
For the first time our national standard of living
has declined. Our defense of democracy depends on changing these conOur business records of the

clearly that we are ill prepared to meet

ditions.

There is a theory that has had wide acceptance in high
Washington to the effect that ours is a mature economy which

quarters at
has become
so static that it is no longer able to provide investment opportunities for
the savings of our people.
If that were true then our task of domonstrating the superiority of free enterprise over the totalitarian economies would
indeed offer little hope.
Fortunately for us, and for the world, the theroy
that ours is a matured economy is not valid.
Our economic system now
suffers from an accumulation of illnesses, but premature oid-age is not one
of them.
If our system of free enterprise is to rise triumphant in a largely totall¬
tarian world it must do so through its own efforts, and by means oi its own
inherent strength, it must demonstrate that it offers a better method of
earning a living than is made available by autocracy and regimentation,

It can do that if it functions effectively, which is only possible in a political
of encouragement for all the factors which constitute our

possible through the direct use of bank credit, and private investment funds,
as to restrict as far as we can the inevitable increases in our Federal

atmospnere

indebtedness.

economy.

We should not

only restrict as far as possible the increases in our

national

indebtedness by making a more

general use of bank credit in the financing

defense program, but we

should also pay for a larger proportion of

our

it out of current
nance a

taxation, than has as yet been officially proposed, and

smaller part of it by debt which

The banks of this country are eager
of all defense

to finance, or to aid in the financing

projects, contracts and sub-contracts in their localities.

fi-

will have to be paid in future years.

Tney

All will agree th^t in our program of preparedness we need all the
ductivity, efficiency, economy and rapidity that American industry

procan

marshall, In order to speed up our effort for rearmament the Government
should simplify procedures, remove obstacles and avoid burecauratic interferences. If these should be the helpful attitudes of government in
trying to create national armed strength it is of equal importance that
government should adopt similar attitudes in helping industry to prepare

BANKERS'

24
for

the

and world-wide struggle that Is coming

post-war

between totali¬

tarian production and that of free enterprise.

of encouraging private enterprise and capital to exert ingenuity and

that

We have in

the

the past

cooperative

productive plant.

our

been the most efficient productive nation, and with

encouragement of government

efficient.

most

the rebuilding and expansion

Rearmament may

avail

the

physical security,

our

methods of free enterprise in the post-war world.

our

every

bomb dropped by England

and dropped

That

by those enemies

true before the war

was

the industrial centers of England.

Our

first task is to adapt important parts of that capacity to the production

of munitions of

war.

So far in 1940 we have not been getting on with that task of rearmament

rapidly

as our potential

The

how much.

disturbing fact is that with respect to the progress of

effort

have not been moving forward

nearly

our

military

rapidly in 1940

as we

did back in 1917.
When

the relative progress of

compare

preparedness efforts in

our

1940 with the progress we made in 1917 the records of actual expenditures

President, Bank of Kimball, Kimball, S. D.

President, Third National Bank in Nashville, Nashville,,

Tenn.

Chairman of Board, Bank of America NT &

P. Giannini,

SA, San

Francisco, Calif.

Richard S. Hawes, Vice-President, First National Bank, St. Louis, Mo.

Vice-President, Chemical Bank & Tr. Co. New York,

Harold H. Helm,

N. Y.
William M.

Vice-President, Fort Worth National Bank,

Massie,

Fort

Worth, Texas-

acutely the problem of how soon.

even more

by regimentation

N. Y.

F. M. Farris,

productive capacities should have made possi¬

Our immediate problem with respect to the production of munitions

ble.

is not merely

of livelihood, and more of

be supplied

Lindsay Bradford, President, City Bank Farmers Trust Co., New York,

potential capacity to produce industrial goods is enormous, and at present
our

means

can

Ayres, Vice-President, Cleveland Trust Co., Cleveland,

M. Plin Beebe,

the industrial centers of her enemies,

than

Ohio, Chairman.

began,

favor each day, and with

our

better

Members of the Economic Policy Commission submitting report:
Col. Leonard P.

New York,

of Germany, greater than that of Europe, probably greater even than that of

tipping steadily further in

of life,

dictators.

Winthrop W. Aldrich, Chairman of the Board, the Chase National Bank ♦

Our capacity for industrial production is this country is greater than that

and the balance is

satisfactions

durable

How Much and How Soon

all the rest of the world combined.

and free enterprise provide

under totalitarian

but only more efficient production can protect our -republican institutions

and

democracy is by demonstrating that republican institu¬

be made safe for

tions

again become the

can

ensure

The only method by which the post-war world

portation and agriculture.
can

Our most pressing economic problem, other than that of rearmament, is

resourcefulness

CONVENTION

Harry B. McDowell, President, McDowell National Bank, Sharon, Pa.

President, First National Bank, Salt Lake City, Utah-

Charles L. Smith,

Jr., President, First National Bank, Boston, Mass*

Charles E. Spencer,

Gurden Edwards, American Bankers Association, Secretary.

much better guides than are the reports of appropriations made, or of

are

contracts

placed.

Such

comparison shows that

efforts towards pre¬

our

paredness in 1940 have been decidedly liesurely as compared with those of
1917, and this is especially true with respect to army expenditures.
If

consider the average

monthly expenditures of the

during the

army

Report of Official Acts and Proceedings of Executive
Council, Presented by Richard W. Hill, Secretary
of A. B. A.

first quarter of 1917, and in the first quarter of 1940, as being in each case

equal to 100,

made

we can

tabular comparison showing how the two ef¬

forts

gathered increasing momentum in the two periods.

follows:

The comparison

1940

1917

1940

1st quarter

100

June

690

108

April

190

103

687

132

May

231

July
August

1,559

153

112

official acts and proceedings of the Executive Council since last we met.
Mr. Hill!

1917

The Secretary of the Association will now report on

President Hanes:

Since the adjournment of the convention at

Hill:

Secretary

Seattle,

Wash., the Executive Council has held meetings at Seattle, Sept. 28, 1939,
at Hot

Springs, Va., April 23, 24, 1940, and at Atlantic City, N. J., Sept.

23, 1940.
These figures mean
effort in

that

first five months

the

preparedness

our

1917 the acceleration in army expenditures was 28 times

it has been in the corresponding months of 1940.

fast

The average monthly

expenditure in the first quarter of this year is taken as being equal to 100,
and by August it had advanced to 153, which is an increase or an accelera¬

tion, of 53%.

In 1917 the

acceleration
There is

increase of 1,459%, or 28 times as rapid

that of 1940.

conclusion

one

being equal to 100, and by August it had

advanced to 1,559, which was
an

monthly expenditure in the first quar¬

average

of the year is also taken

ter

those who have been giving

At the Seattle meeting, B. Murray Peyton was elected Treasurer.

committee,
Hanes

commission

and

approved.

were

other

Budget report

Chairman of the Finance Committee

testimony at Washington with respect to
long and slow

and perhaps thay have been over-emphasized.
us not to

be accomplished until

realize how

It is

typically American

rapidly great and difficult tasks

have devoted

can

them our full energies, and have

tried all the possible expedients for cutting corners and
saving time.
It did not take us anything like as
long in 1917 and 1918 to make muni¬
tions

two

be taking now,

seems to

quantities that
those

discussing

we are

ordered then.

periods is that then

and except in the

of airplanes the

case

now seem small indeed as

actually at

were

compared with

of the great differences between the

course one

while

war,

now

are

en¬

gaged in the unfamiliar undertaking of trying to create and equip a power¬
ful army, and great additions to our
navy, in time of peace.
Nevertheless,
the

discrepancies in the time elements

Prior to the First
years to

build

the hull

was on

and

Financial

are

disturbing.

taken

was

destroyer for the navy, and during 11 months of that time

Chronicle"

shipyard.
that

report

The old files of the "Commercial
in

1918

the

Ward

destroyer

was

launched with her hull 84% complete just 17
days after her keel was laid,
and

was

completed and accepted in 30 days.

instances of speeds that had
and

are

There

days, and completed and delivered in 10

the Ford

Company

long,

was

built and launched

days.

building Eagle boats at Detroit,

At that time

They

were

200

and 25 feet in the beam, and had oil-burning steam turbines.

The assembly line

each day.

was

mile long,

and

one

In that period the need for ships

of the vessels

was so great

yards were brought into existence and equipped in
Four inch trench morters

and within

cago,

other similar

were many

previously been considered utterly impossible,

now.

May of 1918 the 5,500 ton collier Tuckahoe

in 27

feet

considered

were

month it

one

was

that 74

launched
new

the following matters:

the appointment of State Vice-Presidents by the President of the Associa¬

As amended, the sections affected will read as follows:
President

ship¬

year.

of Chi¬

producing them, and sending them to

firing.

The Consolidated Gas Company

of New York constructed
aj new granule plant, installed heavy equipment,
and began making deliveries within 30

days of breaking ground.

was

In 1918

estimated that it would take from 12 to 18 months to
produce slid¬

ing railway mounts for heavy guns, but under
operation,

the first

three of these

85 days after the order for them

great

was

war pressure,

and through co¬

rolling structures

were

delivered

placed.

Similar

No
our

rapidity

effort

discusses

should

for

accomplishment

their

preparedness.

possibility.

could

multiplied

one

expects them,

And yet if there

are

good

and

one

why

reasons

undertake this defense program as an essential
part of our

now

national

policy, there are completely convincing reasons why we should be
pushing it forward to accomplishment just as rapidly as our
military, naval
and industrial
Modern
Economic

resources

will permit.

wars are won or

lost in the periods of preparation for them.

program

for preparedness is to avoid and

wage

war

escape

later

on.

holds

true

avert the

purpose

our

the present

Your

present

possibility of our having

also that the likelihood of our

actual participation in

being able

world conflict may well de¬

pend

on the vigor and efficiency of our present
preparations.
Your Commission is also of
opinion that the preservation and safeguard¬

ing of our national
demand

that

our

productive and

policies of republican institutions and free enterprise

Government

competitive

should

powers

State

extend

Vice-Presidents.

A State Vice-President shall be appointed in each State and in
Bankers

in the District of Columbia from the members of the American

Association in that State.

It shall be this duty to preside at meetings of
respective States or at the time of the annual conven¬
to enforce the rules and regulations of this
Association as to such membership, and he shall be specifically charged with
the duty of maintaining and increasing the membership of this Association
in his State under the supervision of the Membership Committee.
In the
absence of the State Vice-President from any duly called meeting, a chair¬
man elected at the
meeting shall preside.
State Vice-Presidents shall hold
office from appointment until the close of the first ensuing annual session
the members in their

of this

tion

Association and

of the General Convention.
State Vice-Presidents shall have the same
qualifications as delegates to the General Convention and shall forfeit office
by removal from the State from which appointed or by the loss of any
qualification required of a delegate.

Amendment

Association's

members of the Committee

Adoption of

By-laws

providing

for

appointment of

State Legislation from the membership of

from the general membership of the Association.

resolution requesting Congress to take up the

question of

interstate trade ban iers and provide legislation that will result in

rescinding

trade barriers already in existence and in preventing the raising of further
interstate trade barriers.

At
was

meeting at Atlantic City, N. Y. Sept. 23, 1940, favorable action

taken

excess

the transfer of $25,000 from the general fund, arising from

of income

over

expenditures during the past year, to the special fund

for the publication of material originating with the Association.
revised escrow

national Detective

agreement

between the Association and the Bankers

every

of American

aid

industry,

restoring

trade,

the

trans¬

Agency,

was

approved.

A proposed set of By-laws
governing the

Correspondence Chapter of the

American Institute of Banking was approved.
The Committee acted favorably upon the proposals of the Insurance

Protective Committee which will
more

serve

and

bring about broader coverage and

equitable rates in bank insurance.

President Hanes:

Gentlemen, that is only

one

item in this report read

by the Secretary which requires action by the Convention—the Constitu¬
tion

Policy Commission holds that the

He shaU make to the General Convention at its annual session

Trust Co. covering the deposit and securities and cash, as security for the

accounts of our participation in the First World War.
impressive records of industrial achievement are being made in

present

even
we

examples

Committee.

a formal report summarizing the general condition of the Association and
shall make report of his activities at each meeting of the Executive Council
and of the Administrative Committee.
^

personal guarantee clause in the contract with the William J. Burns Inter¬

times from the

such

special sessions of the General Convention.
He shall be a member ex officio
of the Executive Council and shall preside at its meetings and at meetings
of the Administrative Committee.
He shall have power to appoint com¬
mittees on any special subject from the membership of the Association and
to authorize such committees to incur expenses not exceeding in the aggre¬
gate a sum of $5,000.
He shall appoint State Vice-Presidents and fill
vacancies in all committees and commissions, not otherwise expressly
provided for, subject to the approval of the Administrative Committee.
He shall perform such duties as may be imposed upon him by the Consti¬
tutions, by the By-laws of the Association, by resolution of the General
Convention and by direction of the Executive Council or Administrative

Then and Now

many

The President of the Association shall preside at all annual

Sec.

the Executive Council

ordered from the Crane Company

was

the Rock Island Arsenal for proof

the

Amendment to the Association's Constitution and By-laws providing for

Sec.

World War, as in recent years, it took us about two

the ways in the

re¬

These phases of

process.

preparedness program have been discussed repeatedly and in detail,

characteristic for

presented

approved.

was

tion instead of their election at conventions of State bankers' associations.

which there has been general agreement among

making munitions is in itself

our

1939-1940

for

The

President

At the meeting at Hot Springs, Va., on April 23 and 24, favorable action

armament, and that is that the creation of the industrial capacities requisite
for

appointments presented

of the

Association

Secretary has read

can

only be amended by the

Convention.

The

proposed amendment that has been approved by the

Executive Council and is recommended for adoption by that body.
Are you

ready to vote

the amendment, or do you wish to have it

read

again ?

Dunlap C. Clark (Kalamazoo, Mich.):

Mr. President, I believe we all

understand that proposal and its purport, and as Chairman of

ship Committee, sir, I should like to
President
Is there

Hanes:

Mr.

Clark

move

moves

the

adoption of the amendment.

second?

[The motion

was

seconded, put to

a vote

the Member¬

its adoption.

and carried.]

GENERAL
Committee on Resolutions, by Chairman
Bryant—Urges Defense Financing Be Effect¬
ed Through
Bank Credit—Would
Restrict In¬
creases in Federal Indebtedness—Stand on Branch
of

Report

H. A.

We
of

prevent

shall now

report of the

Harry A. Bryant of Parsons,

Kan.,

to make

be asked

will

Committee,

the

have the

principle.

the

Mr. Bryant:

Gentlemen of the

Mr. President, Ladies and

be in the usual resolution

Convention: This report will not

of the com¬

It will be more in the form of a report

form.

section

read

shall

mittee.

section for your con¬

admiration

dent

Hanes

work

activity has been increasing in this country

corresponding months of last year.

activities

During the past year there has been a huge increase of about four and
dollars in our stocks of gold, a somewhat larger advance

bank investments and bank loans that
have together amounted to not much more than one-half of the increases
in gold stocks.
As a natural result of the great increases in gold holdings,
and the relatively small advances in bank loans and investments, there has
been a large additional increase in excess bank reserves, amounting to
bank

the

of
we

to the

various

express

both

and loyally supported them in their

excess

bank

by the high order of its addresses and

has been marked

meetings.

general sessions and specialized

its

desire

also

the New

and

comfort of

sincerely the

most

the convention
beautiful

this

citizens

thank

To the
thanks

City
convenience

bankers of Atlantic

Jersey Bankers Association who provided for the

and

proceedings, the hotels, the press, and the

city for

and

their exceedingly cordial attitude

helpfulness throughout this meeting.

Respectfully submitted,
Gurden Edwards,

Secretary.

Chairman, President Parsons Commercial

Bryant,

Harry A.
Kan.

Leonard

Vice-President

Ayres,

Armitt

town,

Secretary

Coate,

New

The Cleveland Trust Co.,
Jersey

Bankers

Cleveland,

J
Association, Moores-

N. J.
R.

Kenton

Vice President

Cravens,

The Cleveland Trust Co., Cleveland,

ft ''
Philadelphia, Pa.
National Bank, Washing¬

'■•'•"'..x;

Ohio.

Fenninger, Vice-President Provident Trust Co.,

Carl W.

Fleming,

President

Riggs

The

ton,

Bank, Par¬

;■;

Ohio.

Gifford, President First National Bank,

quotations, that has formerly been associated with important additions
It seems instead to have operated to sustain bond prices

Hibbard, President Union Bank & Trust Co.,

effect

the

had

not

lifting

security

prices,

bank reserves.

than

lift them.

yo''

Defense Financing

•

from

should
of

this

loans.

accompanied

been

have

bank

critical

increase in the
national life our

only a minor
in

our

debt in our history.

credit, and to restrict as far as

we can

Under these circumstances

the inevitable increases in

smaller

proportion of it out of

Withers, President Lincoln National

Carl K.

the increases in national
financing of our defense

Mr.
the

proposed, and finance a

it by debt which will have to be paid in future years.
credit is a potent asset of defense not possessed in equal

Wash.

Robinson, President First National

Co., Richmond, Va.

restrict as far as possible
debt by a more general use of bank credit in the
program, but we should also pay for a larger
current taxation than has as yet been officially
should

Not only

Bank, Neenah, Wis.

President National Bank of Commerce, Seattle,

Bank, Atlanta, Ga.
Otis A. Thompson, President National Bank & Trust Co., Norwich, N. Y.
A. L. M. Wiggins, President Bank of Hartsville, Hartsville, S. C.
J. Harvie Wilkinson Jr.,
Vice-President State-Planters Bank & Trust
James D.

consideration of prudent fiscal policy should lead us to finance our
efforts to as great an extent as possible through the direct use of

bank

Pickard, President National Manufacturers

Andrew Price,

defense

Federal indebtedness,

Samuel N.

is undertaking a great and immensely expensive ■ program for
military and naval preparedness, at a time when we are already burdened
every

York, N.

country

with the greatest national

President Monterey
V'-V'..
Kent, Director Bankers Trust Co., New York, N. Y.

Hughes,
Calif.

Fred

period

Louisville, Ky.
Helena, Mont.
County Trust & Savings Bank,

Roy R. Marquardt, Vice-President First National Bank, Chicago, 111.
George
T.
Newell,
Vice-President
Manufacturers
Trust Co., New

regretted, from the viewpoint of the public interest, as well
that of the banks, that the increasing business activity of recent

volume

Salinas,

is to

months

Our

who have ably

rather

appreciation for their spirit of teamwork and
to them.
Our thanks are also due to the

our

appreciation.

Robert

this great additional increase

that

those who have carried on the
councils, commissions and com¬

duties assigned

the staff

and

subdivisions,

and especially

has

reserves

and

dollars.

billion

one-halt

and

two

noteworthy

thereby enhanced

speakers who have contributed to this result we express our earnest

deposits, and additions to

than

In a period

and

period,

oncoming

mittees,

sons,

one-third billion

here expressing its affection

the past Association year and will carry forward its

through

the

papers,

bond

takes pleasure in

endeavors.

since last
April, and so far only a small part of the advance has resulted from the
production of munitions of war either for export or for ourselves.
It now
seems
probable that the advancing trends of industrial activity will con¬
tinue for a number of months to come, with the two main factors in the
increase being the growing production of the munitions industries, includ¬
ing the machine tool, aircraft, shipbuilding and heavy industries, and the
large programs of output now planned by the automotive industries.
So
far in 1940 industrial production, rail freight transportation, and agri¬
cultural income have been running about 10% ahead of their records for
business

the above

ability to play their destined part in the Nation's life.
all of our continuing national officers, who have worked with Presi¬

their

The Business Situation

contrary

Acknowledgments

and

retiring President, Robert M. Hanes.

difficulties

national

rising

This convention

General

committees
Resolution,

perplexing banking problems he has
given
to
our
profession a clear-visioned
and stimulating leadership.
Through his courageous efforts an enlarged program of Association services
has been initiated, which have immeasurably promoted public understand¬

members

of tbe Resolutions Committee follows:

The report

its

for

devotion

V':

sideration.

banking

Boston

ing of banking and the public-mindedness of bankers and

report.

the

Appreciation
and

scope

extension

further

any

the

the officers and

discretion

the

within

and

Association

The American Association

Hanes:

Resolutions Committee.
Chairman

action

such

favor

the

will

Banking
President

SESSION

Hanes, I

President

Bryant:

Bank, Newark, N. J.
move

the adoption of

report

[The motion

was

seconded, put to a vote, and carried

part

national

degree

other nation,

and under present circumstances that asset

should

be conserved by every

unanimously.]

device of prudent fiscal policy, and by rigid

any

Award to Georgia Bankers

in the civil expenditures of government.

economy

Association of Agricultural

Commission Plaque '
Defense Program Bank Loans
The banks of

this country are eager to finance, or to

participate in the

They have the resources,
the trained personnel, and the knowledge of their own communities, which
equip them, along with the investment markets, to handle major portions
of the new financing which our national preparedness program will make
necessary.
We ufge all banks to solicit actively and energetically every
sound loan in their localities that has anything to do with our program of
financing of all defense projects in their localities.

defense.

national

banks

are

■

large that local
finance them in their entirety, they should neverthe¬

unable to

which

instances

those

defense

projects are

participate in the financing to the extent that
with the larger banking institutions of the region.
less

which the lending agencies

they can in cooperation
In those instances in

of the Federal Government must be called upon,

participate with those agencies in doing

the banks should

the financing.

President Hanes: A this time,

1930,

We regret

Corporate Capital Issues

the bankers of

of the American

through the
Such a decrease would be unfor¬
rather than expansion
in our industrial plant, but it is especially undesirable under present con¬
ditions.
As part of the American system of free enterprise we should be
financing our defense program by private investment funds and particu¬
decrease in

sale

the amount of new capital raised by corporations

securities

tunate

normal

private

times,

investois.

for it reflects contraction

effort is still in its early stages.
We cannot reasonably
hope that if we finance that national effort largely through the use of
public funds in its early stages, we shall be able later on in a time of
greater need to transfer its financing back to greater reliance on private
larly while this

resources.

,;v

...

National Defense Program
We

that

and urge

commend
defense.

national

being

accepted

the

are

vigorous and adequate preparation for
mindful of the patriotic and unselfish service

prompt,

rendered to our Nation by the men and

call to duty as members of the National
the armed forces, and in other defense

women

who have

Defense Advisory

activities of the
Nation.
We pledge every support and aid in our power in the efforts
of all agencies and services of Government in speeding up the defense'
Commission,

program.

reaffirm

the

Branch

action

of the

Banking

convention at Boston

1937, and of

wherein the position of the Association was stated
regard to the dual system of banking, branch banking, and the
autonomy of the laws of the separate States with respect to banking and
opposing any proposal or device looking to the establishment of branch
banking privileges across State lines, directly or indirectly.
subsequent conventions,
with

Georgia reached and have maintained for ten
goal set by the Agricultural Commission
As far back as the early 1920's,

the

Bankers Association.

Agricultural Committee of the Georgia Bankers Association pioneered
help change the farming of the State from a one-crop cotton

in an effort to

production to a reasonable diversified farm program adapted to the
hhd climate.
To this end various contests were inaugurated, one of

soil
the

where one of the leading
banks of the State offered $1,000 annually in prizes for the five years.
Cooperating farmers produced from 20 to 25% more corn than the State
most

outstanding being the five-year corn contest

Georgia bankers

that during the past four years there has been a progressive

of the

consecutive years the 1,000-point

average.

New

I wish to present to you a member

Agricultural Commission of the American Bankers Association, Otis A.
Thompson, President of the National Bank and Trust Co. of Norwich, N. Y.
Mr. Thompson: President Hanes, Quests, Ladies and Gentlemen: Starting

program
of their

pioneered in what has been called a "directed

credit"

whereby borrowing farmers agreed to produce as much as possible
food and feed requirement on their farms.
After giving ample

notice, the banks

conditioned farm loans upon this practice.
coordinate all forces into an effective working

In order to help

unit, the

Agricultural Committee of the Georgia Bankers Association has joined
hands with the Extension Service of the College of Agriculture, the Georgia
press

and other business interests in giving publicity to a program
of the need for a diversified farm program.

made the State conscious
efforts

are

resulting in placing Georgia

which
These

agriculture on a more profitable

believes such effective
and long-continued efforts are worthy of special recognition.
It is my pleasure at this time, President Hanes, to present J. P. Culpepper,
Chairman of the Agricultural Committee of the Georgia Bankers' Asso¬
ciation, with some of his predecessors, to the convention.
President Hanes: Gentlemen, in recognition of the outstanding achieve¬
ments and with the endorsement and recommendation of the Agricultural
Commission, the American Bankers Association takes particular pride in
presenting to the Georgia Bankers' Association a token of our appreciation.
In doing this, we realize that your accomplishments have bad a wholesome
and stimulating effect on bankers' agricultural activity over the entire
country.
When Georgia made its first 1,000-point record, It was the second
State in the whole Union to attain this honor.
Stimulated by such examples
as yours, there was in the past year a total of 24 States which attained the
goal and others are now well on the way.
We are aware that your activities have resulted In better and closer re¬
lations with your College of Agriculture and with both State and county
representatives of agricultural extension service.
You have led in teaming
effectively with other business groups.
You have established constructive
customer relations with the farmers of your State.
You have developed a
and satisfying

basis.

The Agricultural Commission

basis for

BACKERS'

making? sound farm loans which is benefiting both farmers and

CONVENTION
largest percentage of the banks

bankers.

In recognition of those remarkable achievements, this plaque is presented
to the Georgia Bankers* Association as a symbol of our
appreciation of the

more to

splendid

work

Association.

for

agricultural

We shall continue

improvement
to look to

the

members

your

Georgia for stimulating leader¬

plaque last year in Seattle.

resting on her
Mr.
indeed

happy in

ganization
each

of Association work, the

scope

men

in their various fields, and I shall depend on them

for help during the year.
to you

or¬

over

service from these

who formed this

men

allotted certain functions to sections and divisions,
a President.
I know you will have outstanding

ago

years

presided

I am glad of the opportunity of presenting them

tonight.

The incoming President of the Division having to do with the work of

National Banks—President of the National Bank of Commerce, Seattle,

privilege to be permitted to appear

this award,

Wash.—Andrew Price.

and the Georgia Bankers' Association is honored, too, in

have been the medium

behalf of the Georgia Bankers' Association to receive from the
made in recognition of Georgia's 10 years' farmer

B. A.

face the job ahead.

President and for the two years following.

year as

this Convention: It is

us new courage to

this

bank activities,

that

It is encouraging to note that Oregon is not
but has made the goal for the 11th consecutive year.

distinct honor and

platform
A.

oars

Culpepper: President Hanes and Members

had,

ever

His intelligent, enthusiastic, and inspiring

before.

ever

the thought that he will be on the Administrative Committee
during my

Realizing the

Now may I just announce this to the audience, with
Georgia there are
two States that have attained a 10-year record.
Oregon was awarded

now

its membership roll that it has

that because of Bob's administration the Association has

say

offer than

leadership has given

ship.

glad to

through which Georgia has achieved the

The

who will preside over the destinies of the

man

Savings Division—

Roy R, Marquardt, Vice-President of the First National Bank of Chicago,
111.
v.
7

distinction, being the second State in the Nation to attain this award
Foi more than 50 years following the Civil War, Georgia's
principal crop
was cotton, and like all other States who maintain a
one-crop system, we

our members are

found ourselves headed towards the economic rocks of
disaster,

dent of the Parsons Commercial Bank, Parsons, Kan.

1914,

year of

bankers and the businessmen of

our

scious of the need of

our

but in the

■

The conduct of the work of the State Bank

The chief officer of the Trust Division will be Carl W.

State became con¬

diversified agricultural activity.

Fenninger, Vice-

President of the Provident Trust Co., Philadelphia, Pa.

In the year

1914, the Georgia Bankers' Association appointed its first
Committee.
We have maintained
continuously an Agri¬

Agricultural

Division, with which many of
associated, will be entrusted to Harry A. Bryant, Presi¬

The head of

educational section, the American Institute of Banking,

our

during the coming

will be J. L. Dart, Vice-President of the Florida

year

cultural Committee from that year to this good
day, but it was only in the
1920's that they began to step out and really do

National Bank, Jacksonville, Fla.

speaking,

President will be Armitt H. Coate, Secretary of the New
Jersey Bankers
Association.

The

things, argiculturally

1,000-point

Georgia.

In the year 1930-1931, Georgia made her first
and since that day, through the leadership of some seven

score,

eight of Georgia's leading bankers, myself the most unworthy of them
we have reached this hour this morning,
culminating in the honor
conferred here today.
or

all,

And at this point, I think it would be fair, and
only fair, that we should
tribute to a member of the Agricultural Commission of the A. B. A.—

pay

Dean Otis.

activity.

He has been largely the guiding spirit who has been behind

It has been

failures, his prodding

largely through

his

into action when

constructive

criticism

our

of our

needed action, his approving

With the close of this convention, the Association enters the 66th
year of
It has lived on through wars, panics, days of prosperity,

and through times of deep pessimism.

during its lifetime it has
perish.

Therefore,

advancement
on

who

But we have

during these

will but follow his leadership.

not

years.

cotton should no

been

motivated

Instead,

longer be king and reign

speak of

Association

our

what

forward

supreme in

the

score

day when

Georgia agriculture,

while and

institution, but

as an

the

has gone

Association's

before.

welfare.

Each

administration

On this platform tonight

are

builds

group

men

Presidents in former years have each contributed their share to the

advancement of the Association's prestige.

altogether by the 1,000-point

have looked

hundreds of others live for

seen many

we may

10 oldest of the

On the other hand,

unlike many institutions, it is not the shadow of any one man.
Through
the years hundreds of men have given of their time and
energy to the

say

Georgia if

It is among the

2,500 organizations of its kind in existence today.

and commending our worthwhile efforts, his attendance
upon our meetings,

for

its

its existence.

his inspiration as a

whole, that Georgia has made her progress, and I dare
that Dean Otis would gladly do for any other State what he has done

gentleman who will represent the State Secretaries Section

deeply grateful to

the opportunity this position affords me to give all I have to the

for

you

cause

chartered banking through the work of the organization.
The American Bankers Association is a great organization in
point

but should form only a

size of its membership and because of the nationwide
scope of its efforts.

program.

Within

connecting link in a highly diversified agricultural
We think that we have to a very large degree attained that
goal.
The Georgia delegation is
proud of Georgia, for Georgia, whether you

know it

not, is a great State.

She Is growing industrially.

great commercially, she is great agriculturally,
succeeded in

and though we have not

dethroning King Cotton in dollar value

made much progress in other
crops,
States of the Nation in her cotton

She is already

in Georgia, we have

Georgia still ranks fourth

among

the

production: she ranks fourth among the
States in her tobacco production; she ranks first in
peanuts: she ranks first

watermelons; she ranks first in

sweet potatoes;

she ranks first in peaches;

and first in naval stores.

These
value of

missions, and Councils.

national

crops alone during the year 1939 had a combined dollar
than 95 millions of dollars, and there are
many others, many

Georgia sweet potato, you've missed much of life's

experience.

aries, out of the coastal plain area, each year, trainloads and truckloads of
tomato plants,
cabbage plants, to all of the agricultural sections of our Nation
where vegetables are grown
commercially for immediate table consumption
and for canning.
We have pecan crops, hundreds of acres in orchards and

orchards, and

many of our people derive their season's supply
backyard shade tree that grows to shade the house.

Some

20 or 25 years ago, the
pride of Georgia's crops was Sea Island
but with the advent of the boll weevil, we discontinued our Sea
Island activity.
However, in the last four or five years. Sea Island also

cotton,

was

never have before.
During the year ahead I am confident that there
will be many problems confronting us which will
require the most effective

cooperation

can

muster to meet them.

The

second major effort of the year will
"The Bank and Community Development."

and

business.

economic

communities.

rolling Piedmont hills and
the verdant coastal plains onto the
wind-swept shores of the Atlantic,
iculture is practiced in Georgia.
Now, I have not forgotten about the cow and the
hog either.
We have
been doing something about
that, too, because Dean Otis has been preach¬
ing to us for 10 years on what they were
doing in Wisconsin.
Each year,
cattle and hogs are
growing in Importance.
We have within our State,
five of the larger
packers, many independent, smaller packing industries,
agi

the combined investment of
which

supply

runs

into the millions.

And Georgia is

completely the entire needs of all of

those packing concerns.

banking

years,

we have made much progress

but, friends, there is still much

to be done.

Agricultural College in the entire South, an institution
teaching the boys and girls of our State the more worthwhile
things of farm
life, not from theory, not from textbooks, but
by putting them out on a
1,800 or 2,000-acre farm and
allowing them to get a taste of real farm
life and what it is all about.

It is my earnest
hope and prayer that Georgia shall continue her militant
fight for better farm conditions, better educational
advantages for her

farm boys and girls, for
greater reforestation work, for soil conservation.
To that end, I charge
my successors, as Chairmen of the
Agricultural Com¬
mittee of Georgia, that they shall not lose
the progress that has been made
To that end, I also

challenge Georgia's agriculture,
as

From

this idea.

example to all other

Remarks of President Elect P. D.
Houston, Chairman
of the Board, American
National Bank, Nashville,

Tenn,—Outlines Policy for Coming Year

added

new

Building

membership.

to play in our social

strong

community

life

Just

has been the result of the kind of

speaking today of decentralization

are

military point
or

not you

|of view alone, there is

of in¬

much to commend

believe in decentralization, you are going

during the next 10

than you have in the past.

years

something to the banking fraternity.
Among other things the
bankers must study their communities as
they never have before—the
people, the industries, their needs and possibilities.
Beyond that, we must
analyze the savings and spending habits of those who constitute the

banking functions

are

largely in proportion to

Through
serve

carried

our

will outline

on.

area

Our banks will be effective

ability to relate them to local needs.

regional conferences and

our

departments,

as a

result of the work of

activities in which banks

our various

can

still further

the place for an extended address.

However,

new

community development.

This is neither the time

nor

I cannot complete these
inaugural remarks without reminding you that I
am

fully

aware of the

live.

menacing times which lie ahead in the world in which

I shall need your help.

to serve.

From the past I know of your willingness
Whatever tomorrow may bring, it will find the banks of America

stronger and safer position than they have
serve

ever

been and the bankers

whenever duty may call.

Presentation of Gift of Silver and Scroll of Honor

he has

Today with the

Retiring President Robert M. Hanes
President-Elect P. D. Houston:
tion

always brings

a pang

The final session of

of regret

our

annual conven¬

the retirement from the

as we witness

presidency of the Association of the

man who has carried the burden of the
office for the year
preceding.
All the men on this platform who have borne
the responsibilities of this office will atimit that their load was made easier

by the loyalty,
who

women

patience,

President's wife.

through the

years

form of silver for

gift to you,

and

understanding of that

splendid group

each, in turn, has met the responsibilities placed

upon

of
the

token of its appreciation to them, the Association

has offered the retiring President

use

enduring gift in the

in his home.

And so, Mr. Hanes, while we offer this

mean it for

Mrs. Hanes, your helpmate through the

really

years.

ask

Hanes, I know the delegates would like to greet
you

to stand

I could speak

ago what I

one

of Bob's

However,
inscribed

the years.

thought of his work

Further praise

richly deserves, would only be
is

tonight.

May

length of the fine contributidns Bob Hanes has

made to the work of the Association
through

few minutes

you

moment?

at some

could have done more.

job done during the

on the foundation of the past,

services to the Association for its

their part

hand,

This means

say a

President of the American Bankers Associa-

tion will be spoken in appreciation of
the magnificent

past year by Bob Hanes.

Whether

to hear more about it

Mrs.

am to say as

have

other

welfare.

system we have had.

dustry.

The first words I

We realize the

a better eductional
advantage for all of the
farm boys and girls of our
State, and we have located at Tifton, I think,
the most unique

by their predecessors.

work

in the last 10

fact, not the least of which is

that she may stand evermore
and henceforth
southern States.

our

I am, of course,

The striking development of community life in an economic

Many industrial leaders

willing to

modesty, that

the

national

in America in the
past 150 years

sense

very

across

This portion of

as
good communities are
built around good homes, a nation's real
strength lies in the strength of its

where our

guarded by the Chattahoochee, from the

the north, over the

Such institutions

welfare.

absolutely essential

majestic mountain peaks

be built around the phrase,

to our customers and their friends.

believer in the work of national organizations both in the Government

staging a comeback, and last year there were serveral hundred bales
of Sea Island cotton
grown in the coastal plane are of Georgia.
From the borders of the
west,

year to

Banking Service through Effective Co¬

a job to do, but if we are to be
effective in any lasting way, we must work together in mutual
understanding

and in

We have another crop that is
rapidly growing in importance in our State.
(They told me I couldn't talk more than five minutes, but I am
going to
say it.)
That crop is the plant industry.
Georgia ships out of her bound¬

I say, with all

number

This phrase will be our platform for the banking
fraternity.

striving year by

are a

One effort of my administra¬

I feel that each organization in the field has

yam, which we call the

of nuts from the

Outside the Association

organizations in specialized fields of banking functions.

tion will be devoted to "Improved

operation."

Sections, Committees, Com¬

In addition, it carries on one of the largest educa¬

In addition, there are 49 State Associations.

hope will be of interest

many smaller

Divisions,

many

tional activities in the United States.
of other

other crops, commercially grown in our
State, notably the Georgia canta¬
loupe, and if you have not enjoyed the delectable flavor of the
Georgia
watermelon, the Georgia peach, the Georgia cantaloupe and the Georgia
richest

are

as we

seven

framework

its

a source

from

You heard me

President.

No man

this time,

which he

of embarrassment to him.

Modesty

distinguishing characteristics.

on your

behalf, the executive officers of the Association have

parchment

and bound in leather

single sentence which

GENERAL SESSIONS
designed to give expression to our high
remind him through the years
The wording

our

of the parchment is

{("Brilliant leadership
during the year

regardjand which

hope will

President of the American Bankers Association
193£-1940 has earned for Robert M. Hanes this testimonial
as

admiration for his vision, his

and his profound wisdom in the direction of Association

energy,

&On behalf of the Association I
to transfer to your permenent

asked to offer you this parchment and

possession this gavel as the symbol of author¬

President of the American Bankers Association for the year 1939-1940.

Vice-President Henry

Second

Vice-President

Commerce Bank & Trust Co.,
President Hanes:
tion with this report

Unless there is

ers

Greetings from Chamber of Commerce of United States
President Hanes:

Dick Hill, the Secretary of the Association,

has some

Secretary Hill:
reading

Mr. President,

I have

follows:

Association,

communication addressed to

A';-':;.,.

"On the occasion of the Sixty-sixth

the

a-:"A Aaa^a^A',

annual convention of the American

I wish to extend to you and the members of your

organization the cordial greetings of the Chamber of Commerce of

United

"We

States.

wish

Hemingway,

Mercantile

President

St. Louis, Mo.

Gentlemen, perhaps the method to adopt in connec¬
is to receive it and proceed with the election of officers.

objection to this, it will be

ordered.

for

President

'A.'-'A

record

our

a ' a.y;,-

appreciation of the cordial

cooperation upon

We desire to be of all possible help to the Association and ask that

it do not

every

good wish for its success, and warmest personal regards,

' A:

closed

Are there any other nominations ?

and that

the

was

voted that the nomina¬

Secretary cast

one

ballot for

President.]

Hanes:

;'i The Secretary has now cast the ballot.

office of President of the American Bankers
year.

: A
W.

Koeneke has

been nominated

the association for the ensuing year.

Association

for

the

Are there

First

for

I have a

•

coming

"'A'

Vice-President

other

any

the

nominations?

[Upon motion of E. Gum, regularly made and seconded, it was voted
that the nominations be closed and that the Secretary be instructed to cast
one

ballot for Mr. Koeneke

President

Hanes:

I have

First Vice-President.]

Bankers Association for the

ballot bearing the name of Mr.

Koeneke,

Mr.

coming year.

Hemingway has been nominated for Second Vice-President of the

Association for the ensuing year.

Are there any other nominations?

I Upon motion of Mr. Wait, regularly made and seconded it was voted

hesitate to call upon us.

I am,

and I declare him elected to the office of First Vice-President of the American

important questions of interest to the businessmen of the country generally.

"With

ballot bearing the name of Mr. Houston, and I declare him elected to the

announcements which I shall ask him to make at this time.

great

[Upon motion duly made and seconded, it
tions

President

Bankers

President\The Security

Koeneke,

Association for the ensuing year.

Mr. Houston as

you,

City, Okla.

P. D. Houston has been nominated for President of the American Bank¬

affairs."

ity

For First

Bank of Ponca City, Ponca

For

follows:

from the membership as an expression of its

dynamic

debt to him for his leadership.

f.''/•'■■ .AAA.-'

a'':

"AA1

"James

v-A"

'v"aA

that the nominations be closed and that the Secretary cast one ballot

for

Mr. Hemingway as Second Vice-President.]

-;aA- ;

President Hanes:

Kemper, President,

Chamber of Commerce of the United States."

I have in my hand a ballot bearing the name of Mr.

Hemingway, and I declare him elected to the office of Second Vice-President
of the Association for the ensuing year.

The newly elected officers have agreed to serve in the offices to which

Report of Committee

■'-aAvAaava
President
Committee.

Bank,
report.

Fort

Hanes:
R.

Mr. Harding:

We shall

now

have

the

report

of the

Ellison Harding, President of the Fort

Worth,

A''{A:\Aa';.

Nominations —Newly' Elected
Officers
A....

■

Tex., Chairman of that

;A:; .AA A:a aAA.A, a'AA-'A

•

Nominating

Worth National

Committee, will make the

,aA-A.;a' AyA'i

A\...A

Mr. President, at a meeting held pursuant to the Consti¬

tution, the Nominating Committee begs to unanimously offer the following
as

For President P. D. Houston, Chairman of the Board, American National

AV;A

AAA/AA':A!AA!aA

■

The Constitution requires

that they be installed at the close of the last day's session.

inauguration will take place in this
with the provisions of the

room

tonight.

Their formal

However, to comply

Constitution, I hereby declare the newly elected

officers duly installed in office, and as evidence of that fact I now hand the

symbol

of authority,

the gavel,

your

newly elected President,

Mr.

Houston, who will adjourn this session of the convention.

[Mr. Houston was not present.]
President Hanes handed the gavel to
Mr.

nominees for officers of this Association:

Bank, Nashville, Tenn.

they have been elected for the ensuing year.

Koeneke:

this is indeed

the

First

unexpected honor.

ing adjourned at 12:35 o'clock.

Mr. Koeneke.

Vice-President

of this

great

The meeting is adjourned.

Association,

The meet¬

NATIONAL

Bankers

American

DIVISION

BANK

Association

Eighteenth Annual Meeting, Held at Atlantic City, N. J., Sept. 23, 1940

INDEX
The^War and Its Effects
Nadler

Address of President Melvin Rouff

American Banking, by Dr. Marcus

.....

Page

...

Page

—

...

PROCEEDINGS.

BANK DIVISION

NATIONAL

Newly Elected Of icers

Financing the National Defense Program, by W. Randolph

........

....

-----

Burgess

The War and Its Effects

American Banking

■

■.:■

■;

"...

-v.;

.:/•■/

.....

University, New;¥ork City

By Db. Marcus Nadler, Professor of Finar.ce, New York
Effects:

Pre-War
had

profound

have

left

Political
on

marks

deep

developments

banking

the

Europe

economic conditions

effect

since

the United

situation

this

1934

and

The

country.

frequent political disturbances which have occurred since the coming into
of

power

National

the

Socialist

Germany

party

have

brought

price structure

trade.

international trade but have also tended to reduce the function

our

of banks in

financing the international movement of commodities.
which

dark outlook

The

which sound international trade is based and have
These developments have not
only adversely

bilateral

fostered

has

prevailed in Europe since 1934 has caused

flight of capital from many lands and has forced many American corpo¬
rations and individual investors to liquidate their European holdings.
In
a

activities

Their

these

All

combined

factors

have

brought about

the United States, which is to
balances

unprecedented

flow

large extent responsible for the

the

and

low

money rates which have
prevailed in this country during the past several years.
It is an erroneous belief that the existing low money rates are the direct
result of the Government's fiscal policies.
To be sure, in the early stages
of

excess

New

the

reserve

Deal

Administration

the

and the increase of the

the

vitally

was

interested

making

The devaluation of the dollar

rates low in order to aid business.

money

price of gold caused a sharp rise in the production

yellow metal and thus contributed to the magnitude of the inflow

gold.
Since 1935, however, aside from the temporary support given
by the Reserve banks to the Government bond market, nothing has been
done

by the Administration to influence

done by the huge inflow of

money

This job has been

rates.

to prevent credit inflation through the sale of large amounts of
bonds to the banks.
To achieve the first aim, the Bank of

(2)

not

relation

with

operate

adopted

by the inflow of gold have had a decided effect on the earn¬
ings of banks.
The difficulty of making sufficient earnings to meet expen¬
ditures, to pay dividends, and to accumulate surpluses today constitutes

problem is to
Effects
exerted

of the

While

important influence

pre-war

pounds in December of that year and to 384,000,000 pounds in June, 1940.
The increase in cash and in bills discounted is primarily responsible for
the

increase

business psychology and business acitvity

particularly on the banking situation, the effects
in September, 1939, were even more drastic.

a little more than a year ago, has
already radically changed to economic and political structure of Europe.
About a dozen European nations have lost their independence, and the
heavy heel of foreign dictator powers is on the necks of nations which
formerly were outstanding examples of free government and democracy.
Several countries have been violently mutilated and their territories ma¬
terially reduced.
Private enterprise, in the sense that it is understood in

which from

June,

1939,

increased by about 240,000,000 pounds.

Great Britain.
The

general belief that the huge deficit of the Government would bring
increase in the holdings of long-term Government securities and
big expansion in the volume of business activity, accompanied by a
sharp rise in commodity prices, would bring about an increase in the
about
that

volume

advances

The

and

loans

end

the

has

advances
of

June, 1940,

following table shows

British

not
were

materialized.

briefly

fact,

loans

and

smaller than in June, 1939, and

only

minor change.

the changes that have occurred in the

banking system during the war:
LONDON

CLEARING BANKS

(11 BANKS)

(Weekly Average in £ Millions)

Bills

bound

arise

war,

new

economic and political

July
September
October

November

December

particularly that of the United States, is as yet difficult to
state.
This will depend entirely on the extent to which we in this
country are willing to support, and not merely render lip service to, the
American way of life.
Before

analyzing the effects which war has thus far had on the banks
of the United States, it may be advisable first to
study briefly its effects
on the European banks.
f
Effects of the War

European Banks:

The

has destroyed the last
vestige of independence of the banks in the totalitarian countries, Germany
and

Italy.

the

Government.

In both countries the banks do the bidding of their masters,
Their

finance the

banks

are

available

shadows

war

needs

operating
here.

their

dictates of the

initiative
of

the

safe

former

the

restricted

Government.

and

their

Information

chief
as

function
how

the

countries

selves

say,

and

occupied by Germany is not yet
however, that all of them are mere
that

they

are

the mercy

the

German Government.

Of greater importance to American banks, how¬
is the question: What has happened to the banks in Great Britain?

analysis of banking conditions in Great Britain will, at least to some
extent, enable us to visualize how the present rearmament program in the
this

our

actual

country.

involvement in the

169

250

966

635

235

150

249

987

600

235

war

may

affect the banks

155

278

233

147

279

985

599

267

146

236

1,011

603

255

159

289

1,013

605

245

142

353

995

611

274

174

334

1,002

609

242

154

388

997

610

247

149

353

1,000

609

249

141

336

1,006

254

153

338

983

618

257

144

409

964

633

270

2,410
2,366
2,363
2,354
2,413
2,469

January

April

May
June
*

166

384

963

636

982

597

611

Current deposits and other accounts.

relative

The

ments"
loans

requires

stability of the items "loans and advances" and "invest¬
some explanation.
The reason for the failure of bank
is twofold:
On the one hand, the joint stock banks

increase

reduced-their accommodations
work.

integrated

enterprises not engaged in essential war

industries in Great Britain are strong and well
and had sufficient cash at their disposal, making unnecessary

Secondly, the

war

further bank credit to finance their increased operations.

any

The reason

the holdings of Government securities,

which constitute about 90% of the

total

not

investments

the

banks, /did

increase

is the fact that the

British Government is endeavoring, as far as possible, to sell its war
obligations to the ultimate investors.
The taking over by the Government
of the foreign

holdings of its nationals and the payment therefor in pounds

sterling has increased the ability of British
obligations.

investors to buy Government

Whether the war, as it broadens, will leave the banking conditions of
Great Britain unaffected is difficult to say.
As the deficit of the Govern¬
ment mounts,

point may

longer be in

soon

Banking
for

developments
the

be reached where individual investors may

position to absorb

in which case the latter may

Banking in England:

United States

243

1940—

not

the world, and

ments

2,219
2,240
2,245
2,278
2,327
2,345
2,441

August

Europe—an order whose specific form we do
yet definitely know, but whose shadows we can perceive; an order,
moreover, which is opposed to the traditions of American economic and
political life.
How this new order will affect the banking structure of

Invest¬

1939—
June

March

and

Advances

2,254

December

February

Irrespective of the outcome of the

Dis¬
counted

Cash

1938—

stands

country, and the democratic form of government, with all that it
for, have practically disappeared today all over Europe.
The NaziFascist-Communist philosophy, inherently opposed to our way of life, is
triumphant from the Atlantic to the Pacific.

Loans

Call

Money

this

deposits,

volume of

total

the

These are the most
important recent changes that have taken place in the banking situation of
1940,

June,

conditions in Europe already had

although it broke out only

war,

ever,

have

of Treasury bills.
Their holdings of Treasury bills
increased from 249,000,000 pounds sterling in June, 1939, to 334,000,000

*Deposits

War:

in the United States, and

they

of short-term bills, which under present condttions

their holdings

banks of the United States. This
large extent the result of the European situation since the

of the outbreak of hostilities

tradition

primarily

early part of 1934.

order

and

balances,

the great problems confronting the

one of

The

reserve

excess

policy of maintaining a certain percentage of short-term assets
to their deposits.
The increase in their cash enabled them to

the holdings of Government securities have undergone

gold.

The increase in deposits and excess reserve balances and the low money
rates caused

in order to

Government

increase

tremendous

England and the Exchange Equalization Fund adopted measures to broaden
the cash basis of the banks.
The British joint stock banks, as a rule, do

consist

of gold to

banks

huge deficit of the Government at as low a cost as possible;

finance the
and

To maintain low money rates,

(1)

important, policies:

two

short-term

the

hostilities the British monetary authorities adopted

the outbreak of

addition, the uncertain situation has prevented the flow of long-term and
capital from the United States to other nations.

are

Act,

Defense

part of the controlled economy of the country.
directed as to enable them to render the most

become

efficient assistance to the Government in carrying on the war.

about

great changes in the methods of international trade.
They have brought
in their wake clearing and compensation agreements violating the principles

affected

Great Britain have

Emergency Power

the

with

accordance

have

States

United

new

obligations of the Government,

be forced to have recourse to the banks.
Great Britain provide an interesting lesson

States.

They

indicate that

the

rearmament

pro¬

by a
sharp rise in business activity and perhaps by firming of commodity prices,
may not have as drastic an effect on the banks of the country as is generally
believed.
It is not likely to lead to the sharp increase in the volume of
gram,

accompanied

it is, and will be even more so in the future,

NATIONAL
commercial

loans

which

banks

many

hope

will

for.

bonds is determined

alter

not

materially the interest rate structure in the United States.
will

from

seen

the

neither have the war, the

following figures,

terially changed the

money

not

funds

known

demand
IN GREAT BRITAIN

INTEREST RATES

Aug. 10, 1939

Aug. 10, 1940

17-32

1 1-32

4 months

17-32—9-16

17-32

greatest change has occurred

lias

in short-term rates, while the yields

long-term Government bonds have remained practically unchanged.

removed

far

impression

battlefields

the

from

This

Europe,

the

war

made

has

the

For

Britain

time

being

France, Holland and Belgium.

has

expenditures for national defense will increase at an acceler¬

Government

the

needed

itself,

way

one

Since

another, is financing the expansion

rearmament, it is probable that the banks will continue to

for

than lending
institutions.
As far as one can visualize conditions today, the demand
for commercial loans, even under the best of circumstances, is bound to
the

future,

the

rather limited.

remain

with

sum

country
banks

feel

they can

interest

time

future

amounted
discount

$2,730,000,000,

to
rate

against

Federal

the

Reserve

mere

Bank

$5,000,000
York

New

the

then

will

and

A comparison

member

the

forces

banks

that

repetition

what

7%.

money

were

to become

panicky and endeavored to liquidate all their holdings of Government
securities, the Reserve banks and the Treasury are in a position today to
support the Government bond market and to maintain prices of Government
bonds

at almost any

ernment

With the deficit of the Gov¬

level they may desire.

about $10,000,000,000 of Government
securities coming due in the next five years, and with over $3,008,000,000
(at current redemption value) of United States savings bonds (baby bonds),
which are practically demand obligations, in the hands of the public, it is
steadily

mounting,

with

definitely not to the interest of the Government to permit a sharp break
in its securities.
And the monetary authorities have the powers to prevent
a

repetition of what occurred during 1932 is also out of the question.

depositors, blinded by fear, endeavored to convert their

Of necessity, banks

deposits into cash.
their

the

investments

order

were

realize

forced to liquidate

the

cash.

necessary

portion

Insurance

too, were confronted with an unusual demand for cash.

companies,

With

selling and the demand for securities limited, a
break in high-grade bonds was Inevitable.
The banking structure of the
principal

investors

country today, on the other hand,
its

bank

there

and

history,

is,

these

Under

panic.

is perhaps stronger than ever before in
no chance of a repetition of a

opinion,

case

the
be

must

circumstances,

therefore,

obvious

that

and

that

sharp

break such

occurred

again in 1932 is not likely to happen again, they will be in

1920

position

realistic investment policy with respect to Government
than is the ease today.
To be sure, Govern¬
ment bonds and other high-grade bonds are bound to fluctuate for a
number of reasons, among which psychological factors caused by the war
to

adopt

and

are

mere

high-grade bonds

other

the most

market

important.

But the fact should not be overlooked that the

gradually becoming hardened to psychological

September,

when

the

war

was

declared.

influences.

Government bonds

dropped

Last
very

For example, the 2%s of 1960-65 were 9 7/32 points lower
than their peak of June 5.
In May of this year, when Germany wantonly
attacked Holland and Belgium, this same obligation dropped 3%, points.

sharply.

In
and

June,
it

when

looked

the
as

great French Empire
the war would be

collapsed
over

within

house of cards

few

weeks,

with

Germany dictating the terms of peace, the bonds remained stable, a clear
indication that gradually the banks and other institutional investors were

beginning

realize that,

in the

long run, the movement of high-grade

though an
No material

even

be expected.

some

created

the end

The assumption, of course, is that this
involved in the conflict.
Should this prove not
however, it is almost certain that the power of the
business in general, and over the financial institutions in

all

and

In the event of war, private considerations must
of the Nation must be directed toward

efforts

Where this is not the case, and where private interests

the end

prevent any of the European ideologies, either to the right
in the United States.
Also plans
now by the Government and by business for meeting
in business activity that is bound to take place when the

left, from finding expression

decline

the

outside the conflict, the

remain

will

to an end.

country will be those created
the

Assuming that the United States
greatest effects of the war on this

the Rearmament Program:

rearmament

program

by the rearmament program. The effects of
be considered from three different angles:
^

may

(1) Effcts on business activity while the rearmament program is being
actively carried out, and afterwards; (2) effects on the relations between
Government and business and between business and labor, and (3) effects
of the financing

of the rearmament program.

While rearmament lasts business
be great. Armaments is a rela¬
industry and, therefore, affects the national economy of the
a whole.
The rearmament program has hardly started, and will
accelerated in the future.
The peak, in all probability, will

(1) Effect#

Business

Activity:

activity in the United States is bound to
tively

new

sharply
reached until

not be

realize

banks

the

Jbanks of the
probability, the

British

country as

the question.

all

be visualized at present, although

can

rearmament program comes

market, such as occurred in 1932, when the
obligations of 1951-55 dropped to 82 3/32, is out of

rates

Government obligations,

formulated

United

States

invest

endeavoring to analyze the after-effects of the war on the banking
in
the United
States, it is necessary to consider first the

break in the Government bond

When

over

Effects of

At that time many

case,

necessary to

sharp break.
A

believed.

generally

of the rearmament program.
order in Europe is gone.
victory, one may expect the establishment in most
countries of Europe of a mild socialistic form of government, with the
maintenance of a
fair degree of democracy.
Should Germany win, a
radical Nazified Europe will emerge.
In case of utter chaos, Communism
will prevail all over Europe.
It is also fairly certain that the economic reconstruction of Europe will
be much more difficult than was the case after the last war.
In the first
place, the damage done to property will be greater.
Secondly, American
investors are hardly likely to be willing to place billions of dollars at
the disposal of the European nations, as they did after the last war.
The
standard of living all over Europe is bound to be lower, and Europe as a
whole will not be in a position to purchase commodities in this country to
the same extent as before the war.
Europe is also likely to be a much
keener competitor in the world's markets than was previously the case.
What effect all this will have on the economy of the United States
is
difficult to foretell.
Since this Nation is more economically selfsufficient than any other major country of the world, the developments in
Europe, Asia and Africa need not materially affect our mode of life nor
our
economic and political foundations.
To insure this, however, it is

in the

occurred

market in 1920 is now all but impossible.
Even if the large institutional investors of the country

money

he studies the balance sheets and con¬

Irrespective of the outcome of the war, the old

of these conditions with those that prevail today,
have excess reserve balances of $6,540,000,000,

conclusion

the

one

placed above those of the Nation, as was the case in France,

the Treasury did not have a nest egg of over $20,000,000,000 in gold
tremendous amount of silver against which silver certificates could

when

bank has carried out such a

Since high-grade bonds fluctuate

situation

be issued.

once

European situation and then the implications

At that time, how¬

monetary authorities have today.

the

not

subordinated

highly inflated and were at a level substantially
higher than one can now visualize even for the remote future.
The powers
of the Government over the money market were distinctly limited compared
ever,

that

the banker must of necessity study

is bound to be disastrous.

were

with those which the

mean

holocaust.

present

are

The

today.

was

conditions,

present

by the developments in Europe, great as they are, will

winning the war.

1920 the Second 4*4 Liberty Bonds
a
decline, however, is not likely.

Commodity prices

under

probability be overshadowed by those which will arise at

all

borrowers.

particular, will increase.

far different from those prevailing 20 years ago.

are

difference,

firming of short-term rates may be expected.
Problems:
The banking problems thus far

the United States

In the first
place, in 1920 the indebtedness of the member banks to the Reserve banks
today

little

After-the-War

1920 and 1932 will not take
dropped to 81.
A
Conditions existing

that what happened

sure

of such

carefully

continue

will

change in

fast

annuity purchased from the United States Govern¬

rates,

money

materially

Government

recurrence

them

the rearmament program may not affect the

up,

securities (direct and guaranteed), the im¬
portance of this question becomes apparent.
Before analyzing this question, however, it is necessary to dispel several
notions widely current
among bankers:
(1) Many banking executives
frankly state that they are reconciled to a prolonged period of low money
rates.
They are willing to buy more Government securities, as long as
place again.

amortize

increase in the volume of commercial loans is to

Government

weakness,

consider the holdings of Government securities

everything is lost.

individual

ditions

regard to Government bonds?
When it is considered that 42.21% of the
total earning assets of all the member banks of the Federal Reserve System
comprised

longer-term high-grade bonds in

and Government obligations.

money

market conditions

these

bear

its other assets, it can safely buy

entirely forget its portfolio.

can

unison

country

periods

there

essence,

paper

policy it

policies should banks adopt with

What

If bankers

bank, after careful analysis of its own position,

This, however, does not

of Banks:

Policies

Investment

rather

investing

primarily

past,

of control.

measure

certain amount of

during

but

lost their value then

of gold

Both rest on the good
and credit of the United States, and ii Government obligations have

faith

and with this increase the Government deficit will mount.
The
commercial banks of the country already hold approximately $15,-

901,000,000 of Government obligations, direct as well as guaranteed.

and then

par,

between

ated pace,

insured

case,

obligations

ment.

and how it will be financed, are discussed by Dr. Randolph
Burgess, who, perhaps more than any other man, is qualified to speak
authoritatively on this aspect of the situation.
As a result of the increased national defense expenditures, the public
debt limit of the United States has been raised to $49,000,000,000.
It is

the distribution

foresee.

can

particular,

that

great

to hold

not as bonds

of national

thrift

time deposits or

they must reach the conclusion that money rates, at least

being the

possible to

defense of a scope unheard of in peace-time in our
country.
What effects this great national defense program will have on
the national economy of the United States in general and on the banks in

obvious

paid

being—how long nobody knows—are bound to remain low,
bonds will fluctuate because of forces which at

determined

these

adopt a

developments in Europe have forced the United States to

War

program

their

interest

relation to its deposits or in relation to

the huge exports of war materials to Great
have counteracted the effects of the loss of such vital markets as

banks.

demand deposits.
This has reduced
operations; (2) banks cannot

cost

the rate of

factors:

high-grade

no one

This

great

following

(4) the call money market has lost its influence on money
(5) money is one commodity over the price of which

time

that

present

part of western Europe by Germany have greatly reduced the
outlets for American products and thus narrowed the activity of American
of

investment policy for banks
(1) The banks, today,

carefully planned

general, and

the

but

in all

permanently changed status

Government

for

deep

has been effected without
The volume of new
probability will con¬

consumption,

the

item

factors in mind,

The British blockade and the occupation

its economic life.

(3)

occurred;

the

development, too, should be of great interest to American banks.
Effects of the War on the United States:
Even though this country is

account

increase

accounts;

a,.-'',

v.'1

into

important

very

rates in

The

anybody else.

so.

Changes:

take

voluntarily

♦3.47

3.85

'i:'A

♦July, 1940.

well

fact which is
On the other hand, the

United States is great, a

activity, today, is high, but the sharp, in¬

prohibited from paying interest

are

1—1 1-32
1—1 1-32

H—21-32

3.34

2X% Consols

should

ix—IX

H—17-32

3 months

remain

Permanent

1 1-16—1 X

1—1H

9-16

6 months...

Treasury bills—2 months
Yield

the

the market is limited and

offered in

tinue

1 1-32

21-32

17-32

than

Business

production,

securities

Discount rates—Bank bills:

material increase in the volume of bank credit.

any

60 days
3 months

crease

Aug. 12, 1938

market trend.
The fundamentals of the
demand and supply.
The supply of

money

bankers

limited.

market forces, and that psychological factors

money

determined

seeking investment

better

rate picture of Great Britain:

are

basic

the

alter

market

money

business activity, and the substantial rise in prices ma¬

sharp increase in

DIVISION

BANK

some

time in 1941 or 1942.

complete victory of Great Britain or a negotiated peace between
the belligerents which would remove the danger of future wars could bring
the rearmament program to a sudden end.
On the other hand, a German
Only

victory

merely patched-up truce would tend to

Once

the rearmament program comes

business activity in
of

the

amount

decline
of

will

make rearmament a

life.

permanent part of our economic

to an end, however, the

effect on

this country will be decidedly unfavorable.
The degree
depend upon the price and wage levels, upon the

over-expansion

and

dislocation

in the various industries,

and

the political situation.
Since rearmament may come to a sudden
end, and since in any event it will some day be materially slowed down,
it
is
highly desirable that business leaders, and particularly banking
executives, as well as the Government, should give close attention to the

upon

business decline can be counteracted. In
loans to industry which may mature during a period
banks should take account of this contingency.
When

question of how the inevitable
making

long-term

of extreme deflation,

purchasing

securities other than

Governments, the banks should inquire

BANKERS'

carefully as to low

CONVENTION

material decline in business activity might affect
The possibility of a decline with the ending
be
studied
particularly in connection with the
the holding of bonds other than those considered as money
should

rearmament

acquisition

well, and it operated satisfactorily u> long

the earnings of the obligors.
of

and

situation

political

by the Government

It is

generally feared that the rearmament program may ultimately lower
the standard of living of the people in the United States and may cause a

Government,

sharp rise in commodity prices, often termed price inflation.
necessarily have to follow.
Increased rearmament means

the utilization of

whole
the

works

materials and of man-power.

raw

harder

for

and

hours, and

longer

facilities

more fully utilized, the increase in the national income
be greater than the cost of rearmament.
To be sure, certain classes
will be affected by the increased cost of government and the increased

country are

taxes,

and their standard

whole,

if the rearmament program is accompanied by harder
As long as rearmament is accompanied
in the productivity of labor and of equipment, there will
need of curtailing the production of consumers'
goods, as wag the

living may be decreased.

The Nation

however,

The

influence
such

personally,

(2)

Relation

and Labor:

Between

rearmament

the

and

Business

Of perhaps greater importance than

business activity are
and business, on the one

Business

the effects of rearmament

is already of necessity

the

over

Between

on the relationship between Government
hand, and between business and labor on the other.

program

Government

and

its effects

The

Government

economic

life

the

increasing the

Nation.

power

number

the

effect

the

6ee

that

fully under

certain

over

way.

deliveries may

will give the Government the

during

the

period

while

the

have given their full support to the Government,
they will continue to do so in the future.
However, in
the interest of the Nation as a whole, and even though it may be against
their own interests, the banks should advocate that national defense obliga¬
and

sure

tions be sold

primarily to ultimate investors and not to the banks.

securities in

general

the banks buy

corporate

securities—and it makes

whether

based

the

purchase

established in

employer.
an

heavy

the

gresses

materials

goods

bound

are

Already, labor in

increase

industries
draw

engaged in armament work.
industry will, therefore,
general increase

soon

relationship between

industries

some

the

has

rearmament

engaged

skilled

labor

the

from

demanded

program

Sooner

occurs,

much

difficult

the

formulation

investment

and

loan

policies.
number

problems particularly affecting the banks.
Upon the solution of
these problems will depend not only the welfare «f the Nation but also
the

status

economic

our

and

political system.

problems, the banks should play
Conclusion:
banks

under

first efforts

solution

tied

with

suggestions

important role.

the

the banks should

problem of huge

excess

the gold problem.

directed toward finding a

balances, which

reserve

The gold standard has

closely

served the world

very

for

little

however, the task
be '

considerable extent upon the financial and
the impoverished and exhausted European countries
to

the United States.
believe

highly advisable for business and banking leaders

enable the United States to most effectively help
are willing to adhere to our

those countries that

Finally, the great task before the American people at large is to main¬
their

tain

precious heritage of the pa^t.

The flag of democracy and of
countries, and the flag of
been raised.
The American way
of life and the political and economic foundations upon
which it rests
have contributed materially to the rapid
development of this country
during the past century and have raised its standard of living to a point
enterprise has been

private

lowered

some

autocracy and of government-control has

States

believed

It is up to the people of the United
that democracy and private enterprise can not only

unattainable.

demonstrate

function

the people who

but can give

successfully,

live under it a much

higher standard of living and much greater economic and political security
than

other

any

come

future

the

for,

endeavor

will

has

that

government

evolved

been

people.

days and those that

the present troublesome

during

stands

form

the

mind.

human

policy can be made to the
In the first place, It would seem to

over,

and,

Europe

there

international Trade.

ir.

regards

present circumstances?

that the

What

the solution of all these

lasts,

are

of life and, if the need should arise, to combat totalitarian methods

way

formerly

will bring in its wake

program

depend

the reconstruction

other

impoverished
war

position

begin, and the type of economic system that will be

which

aid

from

therefore

While the

Once hostilities

Europe and the methods of international trade that will

will

economic
obtain

do.

This factor, too,

Financing of the rearmament
of

of reconstruction will

developed

reconstruction
world.

can

not

a period of rapid expansion, it will be
readjust the cost of production than has been the
needs the careful attention of bankers

banks

industries

is usually the case after

in the past.

case

the entire

to formulate plans now to

later, such a develop¬
In this connection the fact

prices of manufactured goods.

the post-war

matter,

war

that the cost of labor
today in the United States
rigid than before, and that when the decline in business activity

help

that

production
those

should not be overlooked
is

pro¬

Any increase in wages paid by the armament
spread to other industries, thereby causing a

the cost of production.

ment will affect

wages.

The

A further increase in the volume of deposits
obligations is not only undesirable but also

If the rearmament program should cause a material increase in com¬
modity prices, then, in all probability, the Government will seek and obtain
powers to regulate prices in order to prevent inflation.

received

they

deposits.

new

deposits of the country are already too large for the volume of business
and for the commodity prices prevailing at present or for those which may

that American

employee and

maintain

will have set
emulate.

our

American

and

heritage

example which all nations

This

the

principal

task

are

bound

all

that

to
it

later
American

sooner or

the

This is the principal task of the American banks.

Financing the National Defense Program
By W. Randolph Burgess, Vice-Chairman of the Board of The National City Bank of New York
A number of years ago

mists

were

seriously

Government

predictions
inflation.

was

bankers, business

worried

because

failing to balance its budget.
breakdown

That

was

Government

only order its production properly it can fight a war almost

There

credit

were

and

seemed to show pretty clearly

that the wages of financial sin is death.

Yet for nine years

the budget of this Government has been
seriously out

now

of balance.

the

current

the future.
tion
six

perfectly reasonable belief, for the

history of Government finance

United

econo¬

States

and

men,

the

or
or

looking forward to

are

fiscal year and as far

still larger deficit

But people are less worried
today

can

see

other serious financial
consequences than they were
seven

years

ago.

Government

bonds

are

selling at

approximately the lowest yields of all time, and it would
now

appear

very

low interest

that the Government

How shall

account for

our

in these unusual circumstances?
we

"wolf" have

It is

wrong

to the effect that the old

inflationary
necessary,

consequence

but

was

the

is that

rather than

seriously

would only think

of money, we no longer need

about

the old shibboleths of monetary

budgetary

deficits and

To any who have

science.

studied financial

history it sounds a little like saying that

the wages of sin

is not death but life everlasting.

In
tion

judging the truth of this somewhat startling sugges¬
ought to note that the last chapter of the German

experiment has not yet been written.

It is worth recalling

that the historic German inflation did not take place

during the last war, but after its close.
of

war

there had been little

end of the
as

at its

will

mainly

After the first year

price advance, and even at the

prices in Germany were only twice as high

war

The current experiment is not finished,

beginning.

be.

experience

unbalanced

budgets

to the

was

not

remains

The lesson of

longer trust

due to archaic economic processes which

answer,

suggestion

men

ourselves

concern

Those who have cried

be superseded today.

discovered

The

terms of

to inflation.
the

War

has

been

which is that

war

Germany
a

matter

seen

what

final

the

those

respect.

consequences

history is pretty clear, that major wars lead

was

true in this country

in the Revolution,

1812, the Civil War, and the World War.

true

other

war3

other

countries;

between war and inflation appears to have

unbroken.

A number of recent writers have
suggested that

Las

and

often that

and that if a nation will

money,

indefinitely without involving itself in serious financial dif¬

doubt partly that

Also there has been
growing up a considerable school

of thought

may

been

it is likely to need.

extraordinary complacency

have become accustomed to them.

them.

borrow easily and at

can

rates all the money

production and not of

ficulties.

into

about infla¬

the other hand,

difference

Government obligations—it leads to

When

bought by ultimate investors, it merely leads to

are

change in the ownership of already existing deposits.

could be further increased.

and

While I,

rearmament

dangerous.
Fourth, the United States is the only country in the world in

The rearmament program is also bound to affect the

had
over-

considerable

direct

power to
production into certain channels desired by it.
The powers of the
Government over the money market are already
practically unlimited.
No
further legislation is needed; in fact, it is hard to see how these
powers

banks

the

emergency

prevail in the near future.

develops, priorities

essence,

lead

not

their

has

further increases to be expected as the program gets more

all

capital investments be postponed for the day when the rearma¬
ment program comes to an end.
Third, the banks of the country have always shown by their actions
that they put national interests before private interests.
In this present

are

which,

should

using

already

is expanding, non-essential work be delayed and that

when

established,

activity,

which

are now to a considerable extent working on orders
the Federal Government.
Legislation providing for the taking over
industry by the Government whenever considered necessary has been
passed.
Rearmament has also already caused an increase in taxes, with

that

Government

heavy goods industries

As the rearmament program

program,

not foresee

of
of

rearmament

business

any inflation in the near future, I believe it
for the banks, for industry in general, and for the

belligerent countries.
On the other hand, if the supply of con¬
keeps pace with the increase in purchasing power, the danger
automatically disappear.

after the war, and the problem

arise

absolutely essential

of inflation will

that may

expansion, ultimately bringing about commodity price inflation.

program

all

that

order

decided

volume

One of the major tasks of the banks of

to sound currency conditions.
second task that confronts the banks

case

banking.

over

circumstances

various

sumers' goods

financial

returning

work, need not be adversely affected.
increase

the international

less normal.

therefore, is to study, preferably in cooperation with the
the most feasible means of solving the gold problem under

country,

the

may

the

does

increase

As the Nation

the plant

This
an

Complete abandonment
of the gold standard could only mean absolute Government control over
all international financial transactions, which would mean increased control

bonds.

not

was

It is
who

been practically

record which places the burden

suggest that

new

era

the link

of proof

has arrived in this

NATIONAL

BANK

Yet the subject is too vital to be dismissed with general
statements

undertaking

One

Army

examine

us to

There is

fully the economics of the

considerable literature on the subject.

briefest

the

essential

The size of the financial

facing this and other countries makes it

now

essential for

problem.

historical analogies.

and

complete statements of the

most

principles is to be found in

War

College

1922

address before the

Benjamin

former

Strong,

Governor of the Federal Reserve Bank of New York.

DIVISION

There

are

other examples arising constantly in recent dls-

missions of legislation before Congress, such

the proposal

to take over plants for the defense program by force rather

than establishing conditions for and
Certain compulsions

spirit of cooperation,

beyond those of peace-time are un-

questionably required in time of
how far must they go?

and emergency, but

war

alternative to

there another

complete regimentation of the lives of the people?

I believe

there is, and that it is to be found in the capacity of a

recently, they have been discussed by the English economist,

democracy for analyzing its problems and for subjecting

J. Maynard Keynes, and by Jerome Frank, Chairman

itself voluntarily to the disciplines required by the situation.

Securities Exchange
these

three

In their broad outlines

Commission.

discussions

the

problem

The heart of the

increase

without infla-

problem is the relation between the

the volume and

in the

crease

agreement.

are

It is theoretically possible to conduct a war
tion.

of the

activity of money and the in-

production of goods.

as a consequence

It is our democratic faith that

will win

from

wars

It is worth recalling that
in this general

of self-restraint.

Now

theoretically it ought to
a

be possible for a country

huge defense

war or

increases In money and in

Keep

down

There are four areas for

prices

action in seeking to accomplish
1.

without excessive

program

Collect

Divert the people's savings to meet war costs.

Control

large taxes.

and

effects

increased

buying

down

hours of work.

from

war

and

Its wTar costs

requiring long

and

wages

It forces business

buy Government securities and

diverts

It prevents added purchasing power

uses.

raising prices

control

low

Tt collects large taxes.

and individuals to

savings to

paying

competing for goods by rigid price

Even

rationing most articles of consumption.

so,

it appears from the available figures that Germany is

not

avoiding

substantial increase in

some

ernment is borrowing from the

circulation

money

control of prices and

there has been
leads

Germany

But

for

the

fact that

very

whether

long

even

with

controls

her

wholly escape

run

the

normal

finance.

war

the

But the

consumption.

doubt

some

consequences

effects

usual

yet, partly through the direct

increase in credit and in the Government

can

The

increasing.

are

prices have been avoided

debt

Tlie Gov-

money.

Central Bank and from the

Both the volume of bank credit and paper

private banks.

significant part of this analysis is the

complete and detailed governmental control of the economic !
life

the

required

country

have in

the past

easiest way

this

sort of program for

The analysis makes it clear why wars

avoiding inflation.

The

practically always meant inflation.

Few countries have been pre-

is to borrow.

pared to subject themselves to the stringent and thoroughgoing control implied in the formula suggested above, and

the face of these facts

arises

how

democracy

State

totalitarian

is at

war

How

can

control

the

discover
of

sort

States.
some

form

sense

the

that

how

solution

America

Government would

are

present

ourselves in
over

was

willing to

problems

given

adopt

of the

that

United

the hope possibly that

example of exactly

this plan died

and

The proposed cartel plan for South
this sort.

was

authoritarian control over

production and marketing of goods.

conference,

It is appalling

might be able to revert to

proposal to establish complete

that

copy

that we surrender in advance, and adopt that

government

It was fortunate

of its own weight before the Havana

that

enterprises

requiring

credit.

One

the

money
_

was

that

the
,'

Government
,

...

did
•

not

borrow

directly from the central bank, although the newly-created
System

was

available

facility which

might have been abused,
0n looking back at the war experience we can now see
that tllere were a number of other steps which might have
been taken which "would in retrospect have limited the inflaHon. The most important lapse, perhaps, was that we were
I10^ sufficiently conscious of the price problem; and busiuess, labor, and government did not resist sufficiently the
"upward spiral of costs and prices. We are today fortunately
much more conscious of that problem, and there has already
heen definite voluntary resistance to upward price movements. We are, moreover, starting this defense program
a level
tax rates in effect far higher than was true
al
beginning of the last war; so that in any period of
expansion we should be likely to collect taxes more rapidly,
more important difference still between the present
position and that of the "World War is that we start this
period of national defense with substantial unemployment,
with lar®e excess supplies of food and raw materials, and
with' the volume of industrial production far under the
country's reasonable capacity. That is a distinction which
should greatly affect the policies to be adopted. For if we
revert to our formula, which was that inflation took place
when purchasing power increased more rapidly than production, this country has today the facilities by which a
further increase in purchasing power may, with wisdom,
*)e paralleled by largely increased production. Hence infla-

should be easier to avoid. In theory at least there is
inherent reason why a $5,000,000,000-a-year defense
program should not be added to our present national production without substantial decreases in the total of production for other purposes. We have the labor, we have
money in superabundance, and we have the engineering

conference, under the leadership of

Secretary Hull, adopted

110

and business ability.

order to combat Nazism as a form of government

propose

the

democracy once more,.

the

become ourselves a socialistic

people

many

for

when the conflict is

with

these ele-

One is to

absolute control over the life of the people.
to

war

all

meet this situation?

which we might travel.

the authoritarian methods, to
State

compete

huge defense program like ours there are

directions in

two

can

able

inevitably

great disadvantage compared with the

authoritarian State.
In

which

the question which

Certainly it would appear on the surface that any

men ts.

democracy

out of

ion

practiced in Germanv.
In

We limited the expansion of bank credit

considerable part of war costs was met

Federal Reserve

■

Germany has been active in all four fields.
kept

which

by controlling prices

power

consumption.

are

by deliberate forms

some measure,

savings rather than bank credit, and second by voluntary

try's

the

free people."

special restraints which applied particularly to the coun-

fought and won the last war

in two ways: first, by the Liberty Loan compaigns, through

curtailment,

this feat:

Government spending.

limited, at least in

that the inflation in this country

way, and

with than there

to finance

people so disciplining itself

efficiency is the spontaneous cooperation of

was

things to be bought, prices tend to rise.

people enslaved by its Government.

Woodrow Wilson stated it: "The highest and best form of

Government spending people have more money to buy things
are

wiser and more liberal proposals.

Our industrial position is quite different from that of
countries are working
at approximately maximum capacity, and they can only produce additional war materials by reducing their production
and consumption in other directions. What they need is a
Germany or England, for those two

What we need is a
While England
and Germany may require methods which will cut down the
nation's consumption in one direction to make available
man-power and capacity for the defense program, we do
not need as yet to cut down our national consumption, but
rather to increase it. We have been suffering from understimulation, and that is still our problem. Our need is for
initiative, enterprise, hard work, increased production. We
face a problem in addition rather than subtraction,
Two qualifications, however, must be made. The first is
that, while as a whole we have excess production potentialities, there are many areas in which the defense program
redistribution of their national effort.

stimulation of our total national effort.

BANKERS'

32
will require diversion of skilled men and

and

defense

We face
at

situation

influence

and

usual."

though we were actually

world

the

probably

depend

prompt

Our defense program is laggard, held back by red

arming.

technicalities,

tape,

critical

for our avoidance of war and our future position

war,

failure

things

Concentration

Nothing must now stand in its way.

first.
this

readjustments by business, labor and gov¬

means

program

first

put

ernment, some of them painful and laborious.
to be seen whether we can make these

What

Where

machines.

peacetime programs clash defense must come

Our guiding principle cannot be "business as

first.

CONVENTION *

It remains

readjustments rapidly

the essential steps of public policy which must

are

make progress in these directions?

be taken to

but it certainly includes the need

technical

and

rulings

laws.

Act to give

Relations

Labor

vigorous and active

less hampered by stringent controls and

security market,

need

revision- of the

the employer

task is to increase efficiency

wage-hour law with respect to reduction of working hours
and

payment of overtime, which tend to raise costs and

to the general public.

We need railroad legislation to help clear up

in other directions.

insolvencies.

second

which could

stimulation

defense

our

Our present bank credit

debt, and our surplus of bank funds

ludicrously swollen figures.

are

Our defense spending is piled

top of a huge annual budgetary deficit.

of control are impaired.

habits and

people we have not

suffered the usual consequences of these abortions and have

believe

come

will—a

never

highly dangerous frame

of mind.

Thus

present problem is not simple but complex.

our

need second

begin to get under control

loose fiscal and monetary

policies and

But

of our

some

which

courses

now

in which action is desirable.

beginning

defense

burden.

would become

program

almost unbearable

If that program can be carried, through only by a

decrease of other
a

drag on the whole

In this situation and without substantial recovery

country.
the

economic

further

production and other consumption it means
in

decrease

standard

the

living,

which might be socially dangerous at a time of

decrease

large unem¬

ployment and sub-standard consumption in many population
groups.

This is not the moral atmosphere for

energetic

defense

effort.

the

clusion of
A
If

This
with

war

gloomy

outlook

continue

business enterprise,

but

indeed,

leave

would

course

greatly weakened
not

consumption

public policies which discourage

and if in a zeal to avoid inflation and
on

production

find ourselves, after some tempo¬

we may

second

The

alternative

the defense program we

work;

that,

under

stimulus

the

might again put the whole Nation

that the defense program is added to and not

subtracted from

our

present output.

thus lift the total

national income there will be large increases in Government
tax

receipts, and decreases in unemployment which should

make
thus

cal

possible large reductions in relief expenditures
bring the budget

causes

for inflation.

But

and

to balance and lessen techni¬

nearer

at work without the drag of

important still,

unemployment is

nation

a more

effec¬

tive nation both for defense and for progress.

The
to

pursuit of this second

the

have

active

use

of money

real danger and not

alert

but only when it

be prepared

see

its

just

already created, might
a

bugaboo.

We should

approach and try to avoid it,

really threatened.

The machinery should

advance.

Clearly the second

is the only sane choice.

prefer it we must seek it consciously and intelligently.
means

two sorts of action:

prise and production, and

That

(1) the encouragement of enter¬

(2)

preliminary steps in getting

under control the potential factors

of inflation.

defense

the

activity that

Likewise this is

with the

time to be

Federal Government

supplies.

legislation

President to issue $3,000,000,000 green¬

and instruction to buy huge additional amounts

to silver and the power

The repeal

trols

to devalue the dollar still further.

of these powers will concentrate monetary con¬
fully in the Federal Reserve System, where they

The Federal Reserve legislation itself needs review

belong.

the

In similar position are

solely at his own discretion.

the power

continue on the statute

and disturbing to confidence to

backs

in the

The mechanisms of mone¬

In particular it is unnecessarily danger¬

book power for the

independence of politics

System's real

and the

adequacy of its power of control.

begin to watch more carefully the movement

We need to

Theoretically

prices.

somewhat

should

recovery

Practically

upward move¬

difficult to control once it gets under way,
whole

dislocations of the

that

argument may be made for a

higher price level.

ment is so

probably

cost structure

our

and

disturbing,

do better to rely on volume for
But nowhere is it more

rather than higher prices.

keep

are

within

processes

the

democratic

framework, for price-fixing is a highly dangerous process.
We

certainly review those acts of Congress which

should

machinery of monopoly

have created in several spheres the
to

raise

prices deliberately.

inflation is to

financing the defense program needs

collect more

If inflation really threatens we need to

study.

taxes, sell bonds to savers
now

The best way to avoid price

produce abundantly.

The mechanism

finance

defense

rather than banks.

industries

far

We ought

possible pri¬

vately rather than with Government funds.
here,

For

trouble.

the

our

case

two

taxes

objectives

especially, we

are

requires high rates.
it appears,

for

some

control of inflation

of the present rates are so high that

the operation taxed to a

thereby reduced.
in

inflation

favor

into

Stimu¬

Actually the contradiction is less than

they pass the point of diminishing returns.

resolved

run

contradictory.

lation requires lowering some tax rates,

returns

course

outside

business

place added burdens on the tax¬

will

compete

overhauling.

But

might indeed lead us

course

point where over-expansion and inflation, resulting

from the
become

and

important. to

lift, in continued depression.

rary

one.

tary control greaity distorted by the depression

impossible

eliminate profits we place premature checks
and

recovery

any

launching forth on costly long-term State, county, and city

con¬

economy.

several ave¬

We surely must get the

expenditures

cutting

With

program.

ous

well

Here

Government budget under better control, and should make
a

nearly 10 years, with continued large unemployment as a
social

inflation.

and

suggest somewhat dogmatically

cussion

need

and

must begin to

of the picture we

by over-expansion

be followed

payer

have been going; that

careful revision of tax laws

in order against the time when expansion

markets for labor and

The first is to continue the way be

again all that can be done within the compass of this dis¬

is, to continue in the depression which has now lasted for

moral

other side

the

put our house
may

and not discourage enterprise.

to encourage

But

We need

laws.

other

and

undertakings which

country.

finance,

intelligent and sympathetic administration of these

two

to be open to

appear

for the utilities

the way

open

this

find ourselves is to attempt to visualize

alternative

should not be too difficult.

powers.

One way of picturing to ourselves this confusing situation
in

need

nues

need first and foremost stimulation—increased output.
we

Act

pany

the debris of

We need revision of the Utility Holding Com¬

through the open market, additions and improvements.

We have been

wild governmental spending spree and our

powers

objective

under conditions

program

become inflationary.

national

and

qualification

launch

the

and production, we would do

ing our conomic machinery as to impair productive power

that

of mandatory provisions of the

well to consider the effects

prices both to the Government and

The

well

At a time when the all-important

employee a square deal.

enough to meet the emergency, and do it without so damag¬

As to the

encouragement of enterprise the story is long and familiar,

They penalize

point where it is avoided and tax
At present any conflict should be

of stimulation

rather than control.

danger is latent, not immediate.

The

It must be pre¬

pared for, but it is too early to put repressive controls into
effect.
earn

some

taxation, for example, we do well to let
money

before we take it away.

people

NATIONAL
<

BANK

Up to this point we have been talking largely about what

other people ought to do.

What responsibilities have we as

serious

First

comes

our

Let

responsibility as leaders of opinion.

about these matters than most

know

other

people; and the time has come when me may speak

out

should know

Second,

have a direct responsibility in

defense program.

It will

and

the

come

financing the

to our desk in two forms:

directly business working on defense

to finance

the chance

chance

The direct financing is

subscribe to

Government bonds.

complicated and difficult to arrange

safely; taking Government securities is easy.

But for our

good and the good of the country the more we

own

directly and correspondingly the less Government
the

buy

better.

Reconstruction

ernment

agencies,

banking business

Finance

Corporation or other

encourage

business

and increase the Government

over

the

banking

debt

and

the danger of inflation.

Admittedly, there are

COMMITTEE / OFFICERS'
President Houston

The National Bank Division

National Bank Division of the American
We are here as representatives
of a banking system with resources above 36 billions of dollars.
This is an
increase of three billion dollars during the past year and is the highest total
in the history of the national banking system.
It bespeaks a great organi¬
zation.
It implies a mighty force, and each of us has a definite respon¬
and guests of the

Members

Bankers

Association, I bid you welcome.

directing this force.
task of keeping these vast resources safe and employing

sibility in
The

them use¬

profitably is intensified by the chaos abroad In most of the world
today.
Geographically, we are outside the orbit of these disturbances; in
reality we are definitely affected. The conflicts abroad, with their current
strictures upon trade and commerce and the ominous specter of even more
fully and

dislocations hereafter, exert a sinister Influence felt throughout
Under these conditions, our own economy has suffered ma¬
terially.
Avoidance of further disorganization is Imperative; It is essential
to the reestablishment of any economic advancement.
The force of the changes which have come into banking drastically alter¬
oppressive

bank earnings and expenses published
earlier in the year.
Careful management has improved the situation during
the past few years; still, the question of earnings continues to baffle solution.
The problem is intensified by the lack of flexibility in our expenses.
Low
earnings emphasize again that resumption of the use of the natural facilities
offered by banking has not developed sufficiently for a sound prosperity.
is shown by the figures on

stable volume of business.
>
The reestablishment of business and industry on the plane best suited to
serve the public fully and to preserve American ideals and institutions
calls for an enlightened and forward-looking program, buttressed by a
courageous determination.
The requirement of a practicable correlation
of all our energies Is imperative and has the hearty and active endorsement
of bankers everywhere.
The recent years have produced a banking struc¬
ture stronger than ever before, offering a greater diversity of services. It
is available everywhere, and the contribution banking is ready to make is
the proper employment of the full measure of its resources in whatever
ways will serve our country best.
Actual conformance to this program of cooperation rests with individual
banks.
The first obligation Is the proper management of our separate in¬
stitutions.
To the end that it may be done satisfactorily, it is necessary
that there be maintained a laboratory for national banking research and a
forum where studies and views may be made known and discussed.
The National Bank Division is such a laboratory.
It has always devoted
its energies to a consideration of the factors appearing within the realm of
national banking, and to a development of practices upon which members
We still hope

may

for a more

rely in the

communities.

prosecution of their plans for adequate services to their

Through its schedule of activities, the Division's effort is a

integrated program of the American Bankers Association and
enjoys the support and cooperation of all member banks.
The Division is engaged in the work of revising its Manual of Laws
Relating to Loans and Investments by National Banks.
This booklet was
published in 1936.
It affords a ouick reference to the laws, regulations and
rulings which guide lending officers and investment officials of national
banks.
The new edition will be ready for distribution soon.
It Is my recommendation that annual supplements to this book, showing
changes, be furnished each National bank member hereafter.
Another booklet prepared and distributed by the Division to National
banks and many others is the Bank Survey Handbook.
It is a guide for
banks in studying their earnings and in checking the effectiveness of their
part of the

operations.

of efficiency essential to the conduct of the modern bank
performance and coordination of Its many functions. The
Division prepared a series of questions covering the work of each department
of a bank, and added many pages upon other features of administration.
Such a schedule in the hands of a person seeking to avoid unsound practices
and wasteful
methods should prove helpful. The reception given the
handbook confirms the forecast of its usefulness.
The position of members of this Division on Federal Legislation remain
unchanged throughout the year.
No bills of importance affecting National
banks alone were Introduced or enacted into law.
Several bills, however, bearing indirectly upon banks or affecting all
classes of banks were pending and given some consideration, but they were
not exclusively National bank measures and, therefore, they need not be
The high degree

requires proper

Many

leader, but

after

some

work,

Can

For

the
we

the wheels of

get

industry

Here is a

new

sort

this

our

income up.

must

place

results and

get
as

Nation

must

the

and

of life is in the balance.

our way

rise

which the Nation can again unite

efficiently.

into
could

desert

only

defense program—a tragic

all know

preservation of

the

that

cf bickering and disunity and looking for

years

scapegoats.
operate

one

out
felt

have

unemployed to

Have

challenge?

the

energy,

initiative, and national unity for the speed of output
Can

have?

must

forward

carry

this

new

sanely

and reasonably

activity

without

wheels

the

start

And

can

turning

the framework

do this within

too

the
fast

control?

of democracy?

problems.

our

are

disrupting

the wisdom and courage to keep it under

These

act

machine?

economic
have

Mention of one of them which was carried over from last

reported here.

It is the Brown Bill which would transfer the examin¬

might be made.

year

ing functions of the Comptroller's office and of the Federal Reserve System
to the Federal Deposit Insurance Corporation and ultimately abolish the
Comptroller's office.

lengthy consideration, partially because of the

bill was not given

The

refrain from making far-reaching changes in

apparent desire of Congress to

governing banking prior to the time when it may have the benefit
results of the banking Inquiry, authorized by the Senate Committee

the laws

of the

This hearing has not been started and the

Banking and Currency.

date for its opening has not
The Senate Committee's

been set.

proposed inquiry, known as the Wagner hearing,

consideration of some of the proposals carried In the
felt there may be an Inquiry Into the present Federal

will likely include a

It is

Brown bill.

policy of bank supervision,

tAat

of
It

including the allocation of the various features
Division welcomes such a study, but

The National Bank

work.

^approves

the suggestion that if any faults should be found they could
satisfactorily by applying the principles of the Brown bill.

be remedied

our country.

ing its style,

lead

land.

industry in the form of
a

are

another approach

by suggesting still

stirring, and get the national

they

We have been looking for a new industry,

automobiles,

our

but

defense,

for

lending

REPORTS-NATIONAL BANK DIVISION

President Melvin Rouff, Senior ViceNational Bank, Houston, Texas

Address

Gov¬

the Government in taking

summarize

promised

securities

To the extent we turn the business over

private hands.
the

finance

finance directly we shall put

good business on our books, and keep the
in

should seek to surmount.

to this situation.

get

freely.

orders

difficulties

bankers in these matters?

DIVISION

National banks believe that the present

supervision has developed no con¬

ditions which call for such changes.

has given and is giving this subject serious

The National Bank Division

prepared

and

consideration

Vic^-President, First National Bank
done excellent work In
no

offer suggestions.

Carl Allendoerfer,

of Kansas City, and his committee have
National banking has requested

this connection.

It feels that the Comptroller's office is capably equipped to
It.
The contention that changes proposed

changes.

meet all demands made upon

would continue operations and
Is

supervision as satisfactory as they are now

for supporting such a plan.

no reason

reason

for overturning a proven

The National Bank

Mere change Is not a sufficient

method.

Division believes no improvement In banking would

result from changing the

office of the Comptroller of the Currency from Its

practically independent agency in the Treasury Depart¬
ment.
The Division feels its members are working in complete harmony
with the Comptroller's office, that its administration Is efficient and pro¬
ductive of the desired results, and that to destroy that relationship would
be an act of impairment wholly unwarranted.
The Division disapproves
attempts to shear National banks of the advantage of a supf r vising agency,
devoted to the interests of National banks alone.
The National Bank
Division desires to preserve the office of the Comptroller of the Currency
present status as a

in its present form.
The
was

8eventy-seventh Annual Report of the

Issued a short time ago in new

gives facts

Comptroller of the Currency
Throughout, it

and interesting form.

and figures attesting the splendid equipment of the Comp¬
indicating the strength it draws from more than 75

troller's organization,
years

the interest of one type of bank. Bankers
high type of supervision the National Banking
They recognize the brand of cooperation which is a

of concentrated work in

generally are aware of the
System

receives.

tradition in the Comptroller's

office.

of this organization, I have had
I have been shown every
courtesy and consideration, and a wholesome desire on their part to co¬
operate has been apparent on all occasions.
National bankers appreciate
the understanding and sympathetic attitude displayed in
an unusual
degree by the Hon. Preston Delano, Comptroller of the Currency. Cyril
Upham, Gus Folger, A. J. Mulroney. E. H. Gough, and the many capable
associates with whom they have surrounded themselves.
Government competition in the banking field through operations of the
Postal Savings System continues unabated.
It was hoped that when
insurance of deposits through the Federal Deposit Insurance Corporation
became a reality, the Congress would promptly recognize that there no
longer existed an excuse
for this competition and would take prompt
steps to discontinue the system or at least eliminate or reduce to a nominal
figure the 2% interest paid on these deposits.
No relief is in sight, and deposits during this year reached an all time
In

numerous

official capacity as President
contacts with

officials in that office.

high.

Bankers Association reveals that with
where the deposits are negligible,
served by insured
banks.
Operation of the system, therefore, cannot "be justified by any
claim of need for its facilities.
The rate paid on Postal 8avings deposits
is out of line with current rates, and the system operates in direct competi¬
tion to chartered banks.
Efforts to get some relief should not be relaxed,
I have always been impressed with the Importance of gathering adequate
credit information and having it at hand for easy reference.
It is basic
A survey

made by the American

few small communities

the exception

communities

having

Postal Savings facilities also are

■I

that credit files properly built and maintained will
assurance

credit

strength.

and

These files

bring to

furnish an element of

the business of extending

be relied on to hold losses

degree of certainty that may

minimum.

loss figures

ended in 1937.

An Inquiry directed to bankers of the United States con¬

belief that

many

banks are not equipped with proper credit

information.

One of the most important and

worthwhile undertakings of the National

Bank Division is to show bankers the necessity for

adequate credit files and

that the Jnstalation and maintenance of them is neither difficult

expensive.

The slogan, "More profits through less losses by use of

adequate credit files," was adopted by the Division.

Several conferences

held with the Comptroller's office and this program was given hearty

were

matter is

permit such assignment of contracts.

having the close attention of the American

This

Bankers Association's

Committee on Federal Legislation.
We have had a great

end Is found in the

for all members of the Federal Reserve System for the six years

firmed my

to show

at a

law will be amended so as to

Proof of the desirability of making every effort to this

nor

CONVENTION

BANKERS'

34:

leader this year in the person of Robert Hanes who

12 months to serving banking.

has devoted so much of the past

The en¬

will be productive of dividends to all of
us in the years to come.
In his worthwhile efforts he had the complete
support of able and capable associates headed by Dr. Harold Stonier.
It is a pleasure to express my appreciation to our Secretary, Mr. MountJoy.
Not alone has he been diplomatic, but his grasp of banking operation
and problems make him more valuable to our Division each year.
I
larged program which he initiated

commend him for his labor and loyalty
Whether

not banking

in your behalf.

will remain in private hands will depend on the

wisdom of the men who are today

If unsound loans are made we

managing the banks of the country.

If we refuse to make

shall get into trouble.

approval and full cooperation by the Department.
Examiners were fur¬
nished with a set of statement blanks, six in each set.
These forms were

good loans, we shall get into trouble.
the banker must tread it.

adopted after two years of intensive research by the Bank Management
Commission of the American Bankers Association.
There are six of these—

There is the happy middle path and

its full cooperation

corporation, partnership,

individual, stockman, farmer and small loan—

The National Bank Division of

individual and as

the American Bankers Association tenders

in whatever ways will serve our country best.
As an
President of the National Bank Division, I want to en¬

the worthwhile and timely statement of Preston Delano,

prepared in a question and answer form, which makes it easier for the

dorse heartily

borrower to fill out and give

Comptroller of the Currency:

complete facts regarding his assets and liabilities.

Examiners were instructed to explain the use of these blanks

lacking credit file facilities.

institutions

nominal

price

American

Bankers

to those

These forms are available at a

Association

headquarters

New

Correspondence and requests from banks throughout the Nation for

York.

copies of these forms indicate the interest aroused and foretell a practical [

discrimination between desirable and undesirable credit risks.

aid to proper

equally important that officers be trained in the handling of the invest¬

It Is

ment

portfolio and that each security owned

be supported by adequate

credit information and an efficient system of continuous review.
The contention that the ratio of capital

funds to deposits must be uniform

In ill banks fails to find much support in fact, and even in theory it would
be difficult to

Contrasted with the fixed ratio idea is the immediate

uphold.

reaction that the sufficiency of assets should be Judged by their character
more

than by their volume.

Assets quickly and conveniently convertible

into cash, in spite of any theories that may be held, are more valuable than

less liquid ones to a bank attempting to meet withdrawal

demands.

The soundest bank is not necessarily the one with the lowest

it is certainly the one with the safest loans and investments.
based on quality.

Figures alone do not provide protection,

nor are

they

informative until properly analyzed.

fixed

uniform

ratio.

special committee to make

study.

discriminating

attitude

seems

developing, and there is a tendency to view capital in relation to loss ex¬
posure

rather than to
that it

that reliance upon

variable factor that it

the management and the

of them for a job well done.

of complete harmony and unity.

of inspiration to all of your officers.

It has

This has been a constant

closing, may I be permitted to express a sincere and grateful apprecia¬

tion to this Division who honored me in my election as President.

I shall

always carry with me a deep affection for the organization and its future
welfare.

May the National Bank Division grow in strength and useful¬

in its service to the Nation.

ness

Newly Elected Officers

for loans, making impossible in many instances the

have

the contractors'

checks sent

the

year ago

is even greater today

when the Division's Executive Committee studied

Government supervisory authorities recognize the handicap.

This has been given some thought and study by members of Congress, and
there seems to be a possibility that before this session of Congress closes the

23.

Mr. Price was advanced

Bowman, President of the First National Bank, Montgomery,

Ala., was advanced from Chairman of the Executive Committee to VicePresident of the Division.

S. A. Phillips, Vice-President, First National

Bank, Louisville, Ky., was

elected Chairman of the Executive Committee of the Division.
Four bankers were elected to membership in the

Division's Executive

Committee:
W. C. Wolfe, President, First National Bank,

banks, though in many cases this is unsatisfactory.
The desirability of an amendment to the statute

annual meeting of the Division, on Sept.
from the position of Vice-President.
W.

of banks to obtain assignments of proceeds of Government

the Government

this matter.

been a year
source

Wash., was duly elected President of the National Bank Division at the

It should be left

Apparently, the most that can be done at the present time is to file instruc¬

and everlasting thanks are due each

be determined only through expert consideration

can

granting of loans which under other circumstances would be highly desirable.

than it was

We are deeply indebted to

gentlemen and the various committees who have so whole¬

Andrew Price, President of the National Bank of Commerce, Seattle,

President Earl Cook, in his annual report last year, called attention to

with

of those

satisfactorily or dependably.

business and the character of assets involved.

tions

all

bare formula is

supervisory authorities who can form judgments on the basis of the type of

contracts as security

policy to take no action on matters affecting your inter¬

consultation with the entire Executive Committee and other

interested, sound-thinking national bankers.

adequacy of capital protection for deposits is such a

of the individual institution.

the inability

It has been my
ests without

Ignores the most dependable and pertinent factors;

that no uniform ratio can be applied

It appears that the

honor."

tot^l deposits.

The special committee concluded

unsound and

of the 5,200

of the American

The National Bank Division created a

may say

heartedly cooperated in the administration of your affairs, and our deep

ratio, but

Protection is

The inquiry disclosed that apparently there is a lessening of this agitation
for

that the men who are responsible for the destinies
National banks appreciate the importance of the preservation
way of life and for their part are ready to take up the
challenge.
The National Banking System has never been stronger.
The
resources of its banks now total more than $36,000,000,000.
Its assets
are in the best condition in its history and there is liquidity to meet any
emergency or to provide for any necessary expansion.
The last ten years
have tested the mettle of bank management, largely eliminating the unfit,
and left us a veteran and seasoned personnel capable of meeting anv crisis.
There may be a grave trial ahead of us.
There may be suffering and
distress, but I feel certain that the bankers of the United States are ready,
as once before In a dark hour their forefathers were ready, to pledge to
the service of this Republic their lives, their fortunes and their scared
"I think I

Towanada, Pa.

Clark Will, President, Third National Bank, Circleville, Ohio.
R.

Clyde Williams, Executive Vice-President, First National Bank, At¬

lanta, Ga., and
R. Otis McClintock, President,

Tulsa, Okla.

First National Bank and Trust Company,

STATE BANK

DIVISION

American Bankers Association
Twenty-Fourth Annual Meeting, Held at Atlantic

Our Part In

The

System of Free Enterprise, by Dr. William A. Irwin

Our Part in

knew

is
one

changed world from

greatly

when

ago

year

met

A lot of

We have

history has been crammed into those 12 months.
been and

passing through a swiftly moving epoch,

now

are

ride

Horsemen

for

the

September,

Four

again—this

time

wings,

Finland,;■ a

Denmark, a Norway, a Holland, a Belgium, a

Luxemburg,

1939,

there

was

Poland,

France; there was a Latvia, an Esthonia, and a

and a

uania.

Today these countries

shadows of nations

free.

once

say,

What other names may be

foretell, for as aviators

Of all of the proud democracies of

the ceiling is low.

Europe

12 months ago only three remain un-

knew

conquered: Sweden and Switzerland, both virtually
and

Lith-

exist in name only, tragic

added to this long roster none can

helpless

and England, who fights

existing only by sufferance;

grimly for her life against tremendous odds.
And

although

tunate

thus far

our

country has been for-

own

being drawn into this consuming

enough to escape

maelstrom of destruction, nevertheless we

It is

pact.
us

12 months we have been rudely

For during these

too.

awakened

from

that

dream

resources

have felt its im-

changed world, not only for Europe, but for

sweet

are

oceans

our

too great,

of security and

dream

wide,

too

our

peace—a

strength

and

and our people too brave for it ever to

happen here.
We know now that all of this

was

but

illusion, and

that it was not so much our own

strength or the width of

that protected us, but

rather the might of our

our

oceans

with

faced

possible destruction, wre awaken

long dream with

peace we

from that

shock and face the grim fact that it

Gone is the dream that to have

happen here, too.

could

And now that that friend

and friendly neighbor.

strong

need only desire it; gone the dream that there is

strength in isolation; gone the dream that
virtue and that moral forces

disarmament is a

unarmed have any value among

nations.

History teaches that nations pass

through cycles of life

just as mankind does; they are born,

the

fullness

nations

die.

they

Babylonia,

antiquity:

Spain and France.

soon,

then

mutable.

Our

country,

Mace-

too,

is going through

that cycle,

passed through one phase of national life

States have come of age.
have arrived at

For in this year 1940 the United
We are no longer a "kid" nation;

maturity, and whether we wish it or

not, we must assume

the responsibilities of that maturity,

responsibilities are many, but the greatest is that

of carrying the

turned

Persia,

So it is proving to be

So it will be with England; if not

and have entered another.

These

Assyria,

later, for the law of the cycle of life is im-

and we have just

they grow old and feeble,

So it was with all the great

Egypt, Greece, and Rome.

donia,
with

maturity,

of their

eventually

and

they grow vigorous

youth, they achieve great strength and wisdom in

in their

into a

torch of democracy in what has suddenly
pirate

world.

For

Changed World

that which we

Seattle.

Page 37

Vice-President of The Commercial National Bank, Little Rock, Ark.

By William A. McDonnell, Executive
This

Address of President William S. Elliott
Newly Elected Officers—

.Page 35

McDonnell

Changed World, by William A.

DIVISION PROCEEDINGS.

TO STATE BANK

INDEX

City, N. J., Sept. 23, 1940

Whether, in the death

struggle now going on across the water, England is crushed
or staggers through to an ultimate victory, as we most earnestly hope and pray, it is certain that in either event younger
and stronger hands must hereafter guard the flame of
freedom.
Yes, the world for us has suddenly changed, and the hand
of destiny has placed on America the responsibility of world
leadership. Has this fact any greater significance for bankers than for those in other pursuits? Yes, very definitely
so.
For while in the new responsibilities which lie ahead
for our country, each citizen, no matter what his station
in life, must have some part. The bankers of America will
have a very special part to perform. The Nation's responsibility in this new era is to preserve democracy in government as an example to the world. Our part of that responsibility is to preserve democracy in banking, to preserve our
independent credit system, without which there can be no
democracy in government.
How shall we go about performing this part? Will it be a
spectacular program? Not at all. It will consist mainly
of doing better than we have ever done before a lot of
little things.
In comparison with the momentous world
events of the hour, the tasks ahead for each of us may seem
trivial. And yet. even in these days of streamer headlines,
the commonplace things of life must go on.
I have a friend in Little Rock named Merrick Moore, a
brilliant lawyer and the son of one. Merrick is of a serious
temperament, and is a man of few but well-chosen words,
Some years ago Mrs. McDonnell and I were spending a
vacation in Denver, during which we ran into Merrick and
his wife, Rebecca. One day the four of us decided upon an
automobile trip to Estes Park. Merrick drove, I sat beside
him, and the two wives, Rebecca and Carolyn, were on the
back seat. Going up the valley of the Big Thompson, a few
miles out of Estes Park, Rebecca leaned over and said;
"Merrick, as soon as we get to Estes Park Carolyn and I
want to stop at the first store." In the course of the next
few miles she repeated the request several times, and as
we came up out of the valley and the majestic snow-capped
mountains suddenly loomed up before us, she said; "Merrick, don't forget we want to stop at the first store." Merrick, who hadn't said anything before, and who was getting
a little irritated, half turned and said: "What is it that
you girls are so anxious to get at a store?" Rebecca said:
"Carolyn and I are hungry. We want to buy some crackerjack." With that Merrick stopped the car, pointed at the
mountains and exploded: "My God! Here we are in the
very shadow of the Great Continental Divide, and you speak
to me of

cracker-jack!"

No matter what the course

of world events, life continues

to be made up largely of cracker-jack, and even though
empires may be rising and falling, our duty as bankers consists principally of doing well the little things which make
up our business.

The preservation of the

American system of banking can

accomplished only by (1) improving it from

(2)

CONVENTION

BANKERS'

within, and

If we are to improve our

protecting it from without.

must know our
banking system is not,

system from within from year to year, we
We must recognize that our

banks.

permitted to become, a fixed or

and cannot be

it Is

dynamic system.
research attitude

present form, a growing, evolving,
We

approach our work with the

must

that attitude involved in

of mind;

said

when

nition,

that the only
is that it will be different

tomorrow

thing certain about
from today, and

The very nature of the

from without.

banking business

to reach and

maintain such a

approach to our problems.

We must acquire

for

difficult

flexible mental

voluntarily improve our
such improvements will be forced upon

that if we do not

business from within,

longer keep on doing

It is the attitude that the best

been doing.

is not good enough for today;

of yesterday

makes

is the
want to know what

into when you

going to do when you can no

what you have

C. F. Kettering's defi¬

substance that research

frame of mind you get
you are

of which

be if it is to retain its

part, this system is, and must

static thing;

American form of government

that Just like the

such an attitude, however,

if we are to do our part in this

changing world.
With this research

attitude of mind, we must continually

and analytical examination

subject to critical

recognize that public relations
We must know our

relations.
our

machinery, our costs.

credit

must know our

business
are

These things about our

know

intimately and thoroughly if we

relations,

fellow-banker

banking system from within.

it from without, we must know our

to protect

are

responsibilities.

improve the American

responsibilities.

public, and as a corollary

must

We must know our credits, our

customers and our

that, our civic

begin at home with personnel
accounting and bookkeeping,

and our credit

opportunities

because

protection

that

can

which

without.

slaughts from
fact
we

achieved

have

the more highly

Through them
cooperation what is attained under

centralized banking systems of other coun¬

by executive order or

tries only

legislative act.

Through

have successfully resisted, in a

major part at least,

repeated attempts to destroy or weaken

the independence of

them

our

credit system.

can

Through them, and through them alone,

hope to perform faithfully our part

Attacks
renewed

:*Y .V: -

4;:.

world.

upon

the

in this changing

'"Y''Y-

American system

of banking will be

ahead.

We may expect to

the years that lie

hear the same

criticisms that have been hurled in the past:

it is a
vestigal remainder from the horse and buggy days; it pre¬
vents adequate credit control and can no longer finance an
economy as vast and diversified as that of the United States.
the system

is too complex and loosely connected;

Think how much better
had

but

one

States, with

it would be, say these critics, if we

bank in this country, a

branches.

failures, uniformity

Bank of the United

Think of the advantages; no bank

in interest rates, service charges, open¬

it is an independent banking

itself is necessarily

control?

The 1930's

An obstacle

complex.

Yes, it was designed to be

constituted a tempestuous

bankers and the

decade for American

American banking system.

We had about

the catalog of
would
be justified in boasting that we had met and solved every¬
thing there was to be encountered in the way of banking
problems.
That may be true, and yet from the way in
which the new decade has started out, there are indications
that the "Dizzy Thirties" were but a testing period, a sur¬
vival of the fittest period, in preparation for the responsi¬
trial and test that there is in

type of

every

In reviewing those years we

banking experiences.

bilities

the

Forties.

If that should prove
turn out to
are

ready.

are

problems ahead should

difficult than those behind,
have been toughened by what

Certainly we

seasoned; we have
have learned the
and absolute necessity of association strength as we
knew it before.
We are united, we are strong, we
through; we have become

learned how to roll
value

to be so, if the

be greater and more

have been

with the punches; we

confident, we are
is well

now

American banking system.

part of the

be delegated to it by the people,
checks and balances designed
government from falling to pieces, you
anything simple. Democracy is a complex

evolutionary processes.

them alone that we

against on¬
These associations of ours are in

based on the promise

and that the State has

just that—an
obstacle to that control which would lead to socialization
of credit.
Our forefathers planned it that way. The Amer¬
ican system of banking is no more perfect than the Amer¬
ican system of government.
Both are growing, changing
systems, with imperfections which correct themselves by

to credit

best make these improve¬

independence of our system

the

protect

can

system, which

within, and it is through

from

is supreme

and at the heart of

thing,

never

Bankers Association that we can
ments

set up a government

do not arrive at

Association, can no longer be considered

Associations and the American

endeavor to provide

keep such

American Bankers

For it is through our State

which we shall hear again.

only such powers as may
and you

sound his judgment or how

you

individual

the

that

good banker, no matter how

have heard and

Whenever

affairs of his State Association and the

liigh his integrity.

simple 1

how

should be? Just this; Yes,
such a system would be simple, as simple as a totalitarian
State, which is the simplest form of government ever con¬
ceived by man.
If you are looking for simplicity in govern¬
ment or in banking, don't expect to find it in a democracy.

wolf," who does not take an active and coopera¬

and

know what our answer

you

tive interest in the

the "lone

efficient

greater economy of supervision.
So runs the argument

towns;

bankless

How

The banker who would play

gained only by united effort.

yet

fact, in everything; all bad com¬

eliminated; no over-banked conditions and

petitive practices

everything

We must know our personnel and

pertaining to our banks.

ing and closing hours—in

facing its most

mocracy

ready.

that we are,

successfully

can

government is
whether de¬
either economic or

for our form of

crucial test; the test of
wage

war,

totalitarianism without destroying itself.
test we have entered upon a vast program

military, upon

of
industrial
genius are being brought together and focused on the speedy
building of guns, machinery, ships, and airplanes.
But if
we are successful in preserving our independence and our
way of life, it will take more than simply a rearmament
of our material resources; there must be a marshalling of
spiritual forces, a revitalizing of our democratic concepts,
revival of our democratic faith.
We must build a citadel
of freedom so strong that no tyrant or combination of
tyrants will dare question our right to enjoy it or our
meet

that

The wealth of

rearmament.

the Nation and its

ability to defend it.
One of the

foundation-stones of that

stronghold must be

To preserve
constantly to the end
that it may adequately serve the needs of our country, to
drive home to the American people and keep before them
the simple truth that without such an independent system
there can be no lasting freedom—these are our responsibities.
They constitute our part in this changed world.

independent credit

that system

and banking system.

militantl.v, to improve it

STATE BANK DIVISION.

The System

of Free Enterprise

Excerpts from Address by Dr. William A. Irwin, National Educational Director,
tion, American Bankers Association
.

When we speak of the system of free'enterprise we mean

in
universally practiced; in which

business activity instead of upon direction
which

is almost

freedom of competition

freedom of contract is the rule

that economic

the development of

system in which we rely upon individual initiative for

by agencies of government;

between employer and employee;

in which

If monopoly does tend to grow under

sarily

itself

of economic wellbeing unparalleled in history.
Indeed, the system itself came into being
very largely as the result of a revolt against the regulations and restrictions
which characterized the so-called mercantilistlc system which preceded it,

them for the

and against which the

Scottish economist, Adam Smith, wrote his monu¬

are many present

going

into

not

are

Every student of
necessarily high prices.

indications in this country that Gov¬

of government in recent years regarding prices has

So far

been an attempt to

attacks against free enterprise has come

in a country in which it has wit¬

in which government

Communist and Nazi, bargaining

The "economic planners" have taken care

longer exists.

When the criticism is made that free enterprise in

of history that one of the greatest

raise

he would be exceedingly innocent

has taken control of the economy, Fascist,
power no

further, it

almost every act

producer and in turn for the consumer.

the working man is concerned,

if he failed to recognize the fact that in every country

mental treatise.

It will likely be one of the enigmas

And still

practices.

monopoly

be written in letters of red all over America that

should

Under this system the world has seen a development

monopoly prices

that

Furthermore, there
ernment

free enterprise, that does not neces¬

high prices and the gouging of the consumer.

mean

monopoly knows

respected and protected by
law, and in which the right of bequest is also acknowledged and protected.
the rights and privileges of private property are

American Institute of Banking Sec¬

of that.

America has exploited

myself who has seen another economy at work
and who has worked under it can do little but smile.
Look at the parking
the worker, any man like

in which
of
people have so abundantly enjoyed the fruits of its working. It will likely
also be one of the enigmas of history that the spearhead of this attack has
come, not from communists, anarchists, socialists or so-called "reds," but
from men whose personal fortunes were buUt under the very system they
profess to condemn, and whose present comforts and luxuries are being

spaces around our steel mills

enjoyed out of profits gained under the operation of free enterprise.

it has been

What

achievements. For there is probably no country

universally practiced, nor one in which the great mass

are some

Notice the hun¬

to concentrate wealth in the hands

of the few instead of spreading it equit¬

These arguments and criticisms were originally

ably among the many.

by Marxians and men of similar type; they are being repeated

today

country as this, a country built by

There is

as ours.

free enterprise,

country with a political

difference between putting power in the

hands of practical business men and putting
without any

business experience.

it in the hands of bureaucrats

One knows that if he does a poor job

place
The
totally

profits will dwindle and he will lose his enterprise, the other can

the

of his

losses

inefficiency somehow on the backs of taxpayers.

merely changes hands, but the costs of inefficiency fall on

power

different shoulders.

condition exists, won't some one

The homes of millions of

of the critics

workingmen throughout America con¬

in any

tain comforts and luxuries unknown in the homes of similar workers

And

finally, when the charge is made that wealth is badly

concentrated

found in the fact that there

billions
million
insurance policies in force, each representating not only protection but also
savings; that more homes are owned in America than in any other country
in the world; that there is an automobile for about every four people in
America; that radios are owned by the millions; that vacuum cleaners, wash¬
ing machines, and other types of household equipment are to be found also
literally, and not figuratively, millions of savings accounts for

are

Free enterprise has produced all these forms

plainly, bluntly and in few

fact that they are being made in such a

words, especially in view of the

history such

it ?

consider the

If there is another country

that there are over 60

in millions of homes.

who deny any such connection.

The answers to these criticisms can be stated

his

that—and

and complete condemnation—it tends

this is supposed to be its ultimate

men

"poor exploited slaves."

of dollars belonging to people all over America;

ployer and the worker; that it "exploits" the working man; and

condition of these

in the world where such
name

Industrial establish

by workers while they do their day's work, and then

inequality in bargaining power as between the em¬

develop monopolies which exploit consumers

stated

ments

under the free enterprise, the answer is to be

enterprise?

into the hands of selfish and greedy men; that it

creates and maintains

our

dreds and thousands of automobiles parked around our

That it
tends to
through high prices; that it

of the criticisms leveled against free

tends to put power

or around

coal mines.

country in the world.

nessed its greatest

The evil, if any evil exists, is not

thereby cured.

them

of wealth and has

distributed

widely, at low prices, than has been done under any other type

organization that now exists or has ever existed in the

of economic

of the world.

Ask the critics of free enterprise to

Instead of apologizing for free enterprise,

They can't.

history

refute this, if they can.

instead of criticizing
life today should

It, instead of condemning it, Americans of every station in
be

telling all the world the truth about its accomplishments and

world back from economic
standards

today.

that

are

despotism to the

way

leading the

of life that has given us

unparalleled in history and unmatched in the

world

Committee and Officers' Reports-State Bank Division
Address of the

President, William S. Elliott, President
Canton, Canton, Ga.

of the Bank of

The State Bank Division

after the outbreak of the war in Europe.

Seattle last year soon

During the 12 intervening months

render service

general letters to the member¬

the Statement
and the other
The reaction from the membership was all that could
to our Divisional Vice-Presidents in every State evoked

Principles adopted by the Executive Committee at Seattle;

Aug. 22, 1940.
Letters

be desired.

Through the
substantial
of the membership campaign of the Committee on
Division.

has been carried on with ever-increasing fury, a number of great

war

whole hearted

support for the objectives of the

the German juggernaut, Italy entered the war

work of these

loyal men and others we have contributed in a

nations have fallen prey to

and Great Britain alone has been left to face the conquerors.

Repercussions

Persistent evil effects of depression which have not
and expensive treatment

yieldeu to continued

during eight long years have been complicated by
warfare,

of destructive

results

way

the success

Membership during the year.

naturally have been great in our own country.

the

which your officers and committees have tried to

ship, the first on Nov. 29, 1939 which was accompanied by
of

The previous meeting of the Division was held at

the

the ways in

The President of the Division sent out two

and their impact

upon

domestic

our

The

fourth five year survey

at the end of 1939

of State bank supervision was completed
This compilation

and issued under date of Jan. 3, 1940.

of valuable data, current

and comparative, relating to the structure,

orgain-

departments in the various

economy

has been intensified and long-existing uncertainty has been in¬

zation, personnel and methods of State banking

creased.

In recent months we have begun to prepare for national defense

close co¬
operation with our Committee on State Banking Departments.
It was
made possible by the cordial assistance given by the State supervisors in
the several States.
This report, for obvious reasons, was not given public
distribution but copies were sent to A. B. A. officers and committeemen
and to State bank supervisors for their confidential use.
The comparative
figures presented in this report show steady progress in those essentials
necessary to efficient supervision of banking, and clearly Indicate the way
to further improvement which we have reason to hope will reward future
effort in that direction.
It may be said that the reaction of those who

involve expenditures far

will

which

initially made.

Where the

beyond the modest official estimates

new program

will lead

us no one can

but we trust and pray it will not lead us into war.

say,

assuredly

Peace is, indeed,

the hope of all true Americans.

Association year

At the beginning of the

tion, (3) State Banking Departments,

Supervisory Agencies,

careful study

was

made of the

(1) Federal Legislation, (2) State Legisla¬

These committees are;

upon.

Division and personnel of seven committees agreed

committee set-up of the

(6)

(3) State Bank Research, (5)

Federal

Agencies in Competition with Banks and (7)
At the outset I want to thank the chair¬

the American System of Banking.

and members of these committees for the painstaking and effective

man

service

they have performed throughout the year.

Whatever good the

Division, under existing leadership, has been able to accomplish has been
due to large measure to the constant
times by these men
officers

loyalty and support evidenced at all

and we make this acknowledgemnt on behalf of ail the

Personally, I am deeply Indebted also to Secretary Simmonds and Vice-

Bryant for their unfailing assistance at all times.

The Division

with the general officers and other agencies

has worked in closest harmony

of the Association and contributed as far as possible toward the unparalleled

record of achievement made under the superb leadership of President Hanes.
The keen interest

manifested in the work of the Association, particularly In

that of the State Bank
ever

Division, by State bankers has been greater than

before and has been a source of great satisfaction to the officers of the

Division.

For your support

State Bank

and for your presence here

thank you.

I may mention that 564 new members were added to the

Incidentally,

Division during the Association year which closed on Aug. 31,

1940, of which 557 were

active members and seven were associate members.
and bank closures 62 members leaving a new gain

We lost through mergers,
for

the year

of 502 members.

The total membership of the State Bank
7,602 of which 7,077 were active and

Division at the close of the year was

525 were associate members.
There have been few

during the past year, but
officers and

generally.
other

happenings along legislative and regulatory lines

threats have been numerous and ominous and the

committees of the Divison have done what seemed necessary

and proper from

T*as

prepared by the staff of the State Bank Division in

received this report was most favorable.
The Committee on State Bank

time to time in the interest of State banks and banking

Close cooperation with the general officers, committees and
constantly keeping in touch with the

agencies of the Association,

and the banking situation In the several States;
and the carrying on of all possible research in connection with banking and
economic subjects coming under our jurisdiction—these have been some of

supervisors of State banks,

Research issued its annual report on

the

weeks
earlier than usual this year.
This valuable series of studies, begun with
the year 1931, shows by means of statistical tables, charts, graphs and
explanatory text, a fascinating story of State banks—their progress and
liabilities,

resources,

development

of the Divison.

President

States,

during

earnings and expenses of State banks some

1939, with comparative figures for previous years,

giving data on a nation-wide basis at

once

has

been

cooperation

Cordial

authorities of the 48
was

sent to all members

Through

our

this

work

interesting and informative.
received from the banking
This report

States and the District of Columbia.
of the Division.

committees

legislation we have kept in touch

with

which affected, or threatened
to affect, State banks.
We have worked In close cooperation with the
Committee on Federal Legislation of the Association and with the Commit¬
tee of State
Legislation, in their respective spheres of action.
In the
national theatre few banking proposals have reached the state of passage,
due, perhaps, to the interest necessarily maintained in foreign affairs and
the related subjects of appropriations and national defense.
Pending
measures in Congress at the time this report was written include (1) the
Steagall bill to reduce the assessment rate and increase deposit insurance
coverage and the Byrnes bill to exclude inter-bank deposits in calculating
the assessment base; (2) the Mead bills for loans to small businesses; (3) the
Wheeler-Jones bills to revamp the Farm Credit Administration, and (4) the
legislative activities both State and national

Wage and Hours Act.
The

Wagner Committee for study

prepared
Bankers

Our Committee on Federal Legislation

has

and our Committee on the American

joined in rendering every assistance possible to
special Association committee headed by Col. Leonard P. Ayres which
general charge of preparing data for this inquiry.
Our Committee on

System of Banking have
the

of Banking and Monetary policies

questionnaire, copy of which was submitted to the American
Association along with other interested officials and agencies.
a

BANKERS'

CONVENTION

State Legislation has been keenly alert in doing all that has been possible

State supervision,

in connection with State legislation, although in only nine States have the

be attained when all State banking departments

legislatures held sessions since the Association year began.

efficiency and the burden of examination and supervision would be lifted
from the FDIC and the Board of Governors.
Each of these two agencies

noted in the State systems have been

due in part,

Steady progress

doubt, to the unceasing

activity and fine spirit of cooperation manifested by

committees along

our

with other agencies of the Association.

particularly

in regions devoted to agriculture, has been set forth in reports prepared
by
Committee oh Agencies in Competition with Banks.

Federal

Supervisory Agencies has made

operation

and

interrelation

the

The Committee

State banks.

The Committee

work

connection

valuable study of the powers,

Federal

several

the

Wagner

inquiry

has

torical

and

statistical

of the dual

factual

nature,

under Federal control,

system

and

explanatory,

and for the

purpose

banking In line with the well-known position

been

already

have

branch

member

great insurance corporation,

while the Federal

would divest itself of tedious minutiae and move
tion

monetary authority, our bank of

our supreme

nearer to

not of the banker's making

failure in coordination and loss of efficiency.

have

of conditions incident to the

been

well-intentioned and,

were

made, under government

The facts that such actions

large extent, abortive, do not make the

results upon the national economic fabric, including banks,
any less severe.
Dislocations in the business field, however caused, have definite and certain

repercussions in

banking structure which by its very nature is the

our

center of ail economic

nerve

activity.

private capitalization and operation has been threatened

never

before.

Keen observers of these developments can see the next
step in the abolish¬
ment of State banks and the transfer of

ing all banks to Washington.
taken up in regular order.

the preservation of the

chartering, regulating and supervis¬

When and if this shall be accomplished other

banking and economic structure may be

our

Thus, bankers, economists and others who favor

essential

in America during the last

principles of banking economy developed

150 years, realize that the dual system is the

first line of defense.

which

runs

scores

of cooperative

shared

banking represents in the financial field

principle

through the American constitution and is recognized today in
movements in

which

duality of effort and cost

principle;

also

Our political set-up itself involves the dual

it in the administration of justice by State and Federal

see

functional

reorganization

Reserve Board
its logical posi¬

issue and

reserves,

Washington

And it might be that, in the

light of larger tasks, the Federal Reserve Board would turn back to regular
chartered

the business of collecting checks,

banking institutions

have been saddled upon the Reserve system.

the casual student of history and world affairs it is evident that

even

over-centralization in Government involves

definite threat to democracy.

condition that would facilitate the taking over of our financial machinery

by the Government should a future hostile administration desire to do

Widespread branch banking which is persisted in by

banking institutions, also is clearly in violation of the principle of that
division of powers

which runs through

our governmental and economic set¬

designed to preserve vital liberties

people.

our

State Bank

The

Division has consistently opposed the extension of branch banking and will

We stand firmly by the A. B. A. position

continue to oppose it.

expressed

in the resolutions adopted at Boston in 1937 and reaffirmed by every annual
convention since that time.

Furthermore,

feel that definite steps should

be taken, under authority of the Association, to secure legislative enactments

further extension of branch banking

directly or indrectly.

This

across

State lines

believe is the earnest desire of the vast

majority of A. I. A. membership.
The lending spending program of the past seven years hailed originally
the primrose path to recovery, has not only piled up the greatest national

debt

have

ever

known but the resulting competition from Government

Government-sponsored

and

agencies

has

seriously

affected

that

us to

some

It is

capable.

we are

upon

the integrity of

Their dignity and authority haven been reduced

lines, the vanishing point almost has been reached

practical proposition.

The

checks

banking set-up

and

may,

balances

long maintained

indeed, be destroyed if the existing

trend

continues.
President Hanes, at the Eastern Regional Conference
early this year, touched the heart of this dangerous situation when

held

he said:

system of

banking."
the

annual

respect

Seattle

last year the

American Bankers

Today, examinations by the Comptroller of the Currency or the Federal
Insurance Corporation

are

accepted

as a

rule by the Federal Deposit

so examined.
Bankers often ask the question as to why examinations
by State banking departments do not ordinarily have the same force in
justifying insurance as that of the Comptroller and the Board of Governors.

I would not for

the

banking

However,

ments must

moment

business

disparage the fine work by the FDIC in stabilizing

and

building confidence

among

inevitably result in the impairment

Therefore, I ask this question:
as an

its certificate

have

authority

recognition

some

this

State

bank

State banking

maintaining deposit insurance

State departments that are
respect.

Such

departments

No person will
efficient

should

have

any

equal

that accorded Federal examining and supervising agencies.

Duplication of supervisory work could thus be
to

examining and supervising agency, why should

be of equal virtue in

the certificate of the Federal officials I have mentioned?

other

depositors.

destruction of State

systems themselves.

deny that

bank

steady loss of authority and prestige by State banking depart¬

department is efficient
not

banking institutions and

some

Yet

general nature, relating to the chartering, examination aqd supervision
banks, both members and non-members of the Federal Reserve

State

System, and fix the standards of organization, equipment, personnel and
operation of State banking departments, such a manual to be approved
by the FDIC and the Board of Governors of the Federal Reserve System.
Where any State banking department met these
requirements as to con¬
stitution and

efficiency, the FDIC and the Board of Governors would

examine State banks in such

jurisdiction except in

cases

not

where for special

it might be deemed necessary.
Examinations of banks would continue in other States unless and until
their State banking departments were certified as

reasons

ments.

had

Associations

June 30,

having met the require¬
Banking departments would naturally want to be certified, and

backbone

total

normally covered

the

salutary check

business

outstanding

1940, and present

excessive borrowing,

State-chartered

than

banks.

Federal

at the end of May,

standing aggregating $1,376,000,000.
which

years

loans

S200.000.000

These

are

Savings and

Government-sponsored

this

organizations

Division

cannot

Federal

that

permitted to expand into

be held strictly in

Loan

only two of many agencies

with chartered

compete

field

1940 and had loans out¬

will be the result of constantly enlarging activity in the

members

Credit

Production

structure.

growing problem of competition in

Associations numbered 1,421

foretold.

Savings and

What

banks.

lending fields by

Loan

That

It is felt by
Associations

"third banking system," but should

line as thrift and home-building loan agencies as con¬

templated in the original legislation authorizing their creation.

Radical

changes in

opposed

the

Farm

Credit

Administration

which

have

been

successfully by the American Bankers Association should continue to be

actively opposed unless
whole

our

ready to surrender vital principles underlying

we are

banking and business economy.

Banking in its State of uncertainty is no different from other lines of
business in these troublous times.
cumstance is greater,

the very

Bankers

are

out limit.

America

nature

perhaps,

of things,

The pressure of rapidly

same

time

should

plunge

our

country with¬

shall insist, as a matter of duty, in keeping

The threat of

institutions in their fundamental character;

our

banks,

the safe road which she has traveled for 150 years to the heights

of greatest achievement the world has known.

change

changing cir¬

financial institutions inasmuch

form the arch of the economic structure.

patriotic citizens and will support and defend

At the

come,

must

not

be permitted to

into totalitarianism. ' But

and devotion of normal times if

change

even

war

should not

actual

war,

Government

our

nor

must redouble alike the vigilance

would preserve untarnished our heritage

in these dark hours of world wide stress.

am sure

that State bankers will

join with all other bankers—yes, with all loyal Americans—in performing
the tasks of the future however great those tasks may

be.

Newly Elected Officers

chronic objectors to economic

and with failing to offer constructive sugges¬

FDIC, accord proper recognition to State banking departments and lessen
the hardships of multiple supervision on State
banks; The/National Asso¬
ciation of Supervisors of State Banks could formulate rules ifcd
regulations,
a

the

cut out and much trouble

really constructive plan like the
following might be worked out to reduce the burden of detail now on the

form

irritation eliminated.

Bankers have been classed, generally,
and administrative changes,

tions respecting questions at issue.

that

basis for continuing deposit insurance for any

bank

the

The idea

for every

panacea

protects against credit inflation and insures a just return on investments

should not be

governmental supervision of banking in the public
interest, we believe this is wholly in keeping with the broad principale that
the success and strength of democracy in America is
largely due to the sound
safeguards afforded by the wisely conceived checks and balances which
pervade our composite governmental system."
to

Reserve Board of Governors

affects adversely our banking institutions is freely admitted.

convention

Association unanimously adopted the following declaration:
"With

low interest rate—is

business and personal ill incident to depression, has been proved fallacious.

established in recent

"The future of chartered banking depends in a
great degree on the con¬
tinuation of the checks and balances represented in the dual
At

cheap money—that is,

A reasonable rate of interest exerts a

steady encroachment has been made

State banking systems.

essential part of

solid ground, constitutionally speak¬

maintain it; it devolves upon us to fight for it.

worth the best defense of which

until, along

so.

small minority of

earning power of all banks including State chartered institutions.

Duality in banking stands

It is up to

drafts.,

&c., which they performed prior to 1914 and which, in my opinion, should
never

things.

In recent years

con¬

performed by the

now

courts; in road building, educational programs, health promotion and other

ing.

Federal

United 8tates Treasury Department, thus avoiding conflict of jurisdiction,

equal footing by the Federal Government along with the govern¬

of the several States.

ments

finally,

and,

which will prevent

The dual system of

the

It follows that branch banking, particularly along broad lines, promotes a

By reason of important trends in recent years, expressed in a new and
rapidly growing social and governmental philosophy involving for its full
fruition a long step toward centralized processes, chartered
banking under

steps toward socialization of

time in which to perform important and ever-increasing func¬

tions

American Bankers

was

Thus, we would have uniformity without unification, the FDIC would

the

of combating

bank

Reserve System.

one

looking

if the subject

of Governors

Board

discount

grown out

forms

the State banking departments and to the FDIC in all cases, and to the

tinues, take over some of the monetary functions

but have

Identical
on

it affects

The fact that grave problems confront the banking business
today is dis¬
cernible even to the uninitiated.
These problems, for the most part, are

sponsorship, to bring about economic recovery.

if needed.

including examiners' reports, made out

of all reports,

copies

Association.

great depression and to efforts that

"trouble

and

granting insurance and

in connection with granting banking credit, &c.

appear necessary

the

examiners—classed

investigations when

to their

the Federal Reserve banks would be free to make such inquiries as would

unification into

system of banking, and against

make special

The FDIC would still follow present procedure in

referred to, has been engaged in the compilation of information of a his¬

defense

of trained

group

certified

approved by the Federal agencies, would be submitted simultaneously to

the American System of Banking, whose

with

small

The ideal set-up would
were

agencies

supervisory

having particular reference to the duplication of supervision

helpful

retain

shooters"—who would

The competition of certain Government agencies with banks,

our

would

if deficient, would improve.

Harry A. Bryant, President of the Parsons Commercial Bank at Parsons,
Kansas,

was

elected President of the State Bank Division of the American

Bankers Association at its annual meeting on Sept. 23.
served

Vice-President

the

Division last

Mr. Bryant, who

succeeds William

year,

Elliott, President of the Bank of Canton, Canton. Ga.
A. L. M. Wiggins, President of the Bank of Hartsville, Hartsville, S.

advanced from Chairman of the Executive Committee to Vice-Presi¬

was

dent of the Division.
on

C.,

Federal

Mr. Wiggins is Chairman of the A. B. A. Committee

Legislation.

James H. Penick, Executive Vice-President of the W. B. Worthen Co.,

Bankers, Little Rock, Ark., was elected Chairman of the Division's Execu¬
Committee.
In addition four bankers were elected to membership

tive

in the Executive Committee:

J. N. Kehoe, President, Bank of Maysville, Maysville, Ky.

Street,

Cashier,

Richfield Commercial &

Savings Bank,

Rich¬

field, Utah.
W. E. Carter, President, Bank of Carthage, Carthage, Mo.
J. Truman Holland, President, The Commercial Bank,

Thomasville, Ga.

DIVISION

SAVINGS

American Bankers Association
Twenty-Ninth Annual Meeting, Held at

INDEX
The Function of

Saving in

TO SAVINGS

Dynamic Society, by Dr.

DIVISION PROCEEDINGS.
Address of President George A.

Paul F.
39

Page

Cadman

Atlantic City, N. J., Sept. 23, 1940

It is increasingly evident that the

erty must be respected if

degree

of political liberty

affairs

with

minimum

rights of private prop¬

to maintain a

we are

and conducting

their economic

sonable assurance that it will not be confiscated

ited

Nor is

decree.

the term private

household

the

sidered essential to the American

by Govern¬

property to be lim¬

chattels

and

goods

which

are

standard of living.

right to unrestricted ownership in real estate,

term

intangible,

and

true

life.

tion

all

to the

The dictum is, if possible,

forms, but notably on

point of confiscation.

enjoy

contrary,

have

been and

great average

are

relation to the total population.
people of moderate means, the

of which enjoys a standard

stantially higher than that of the
Many

propounded:

neighbors;

not

But

have

with natural resources;
equitable climate; peopled by a virile race,
endowed

interbreeding of many
would
build the greatest wealth-producing

stems in part from the

powerful as these forces are, they

sufficed

facilities in the world had we not

during

America have

It is a vast area threatened by no war¬

richly

blessed with an
whose vigor

of living sub¬

world at large.

explanations for the prosperity of

been

races.

inherited

70% in the
But notwithstanding the popular opinion
the number of wealthy people in this coun¬

try has never been large in
We

shall possess

than a certain amount of income or

higher brackets.

century and

This in the last

been able to accumulate,

one-half, a vast store of capital.

analysis is neither money, nor stocks, nor

bonds, nor any similar

device, but real wealth in terms of

factories, tools, railroads,
highways, harbors, buildings of all types, and the stores of
consumers' goods such as food and clothing which are in
the constant process of being produced and consumed.
The development of the United States really began with,
and has ever since paralleled the Industrial Revolution, the
era of the rapid development of machinery and power in all
utilizable forms.
The immense accumulation of real capi¬
tal is due, furthermore, in a certain measure to the corpo¬
rate form of industry and to large-scale production.
There
are three types of saving which have contributed, each in
its own way, to the great reservoir of capital which quickens
improved

and

developed land,

historically
and in present-day significance, are the savings of indi¬
viduals.
To be sure the total of this type may now be the

our

whole economic life.

tribution of government, less
to

First in importance,

recent in origin,

which appear in

The third Is the con¬

forms too numerous to be reviewed.

tangible and far more subject

the protection which government

controversy:

individuals, to enterprise and to private property

gives to

through

the courts, and other similar agencies; the

the police,

fur¬

inherent in public education, public health,

ther protection

and finally the actual

form

communications—postal, highways, airports, rivers and

harbors, and other similar assets which
of the working

emphasis

will lay the principal

others of these three

the

But the judgment of history will

saving.
each

one

constitute a part

Partisanship, preju¬

capital of the country.

dice, and even natural enthusiasms

which

significant

highly

in the

place

types of

probably accord
social edifice

call American civilization.

Unhappily the time allotted to this brief

income and inheritance,

The levies now run to more than

property.

to the

of taxa¬

By a long series of legislative

enactments it has been decreed that no person
or

it was at the time it was uttered.

century has witnessed the progress

The twentieth

The

definite connotation in the

destroy.

today than

The second,

savings of corporate enterprise,

physical facilities provided by the Government in the

Long ago Chief Justice Marshall said that the power
tax was the power to

the

public safety and similar devices;

values,

private property as employed in modern American

smallest of the three.
are

con¬

improved and

unimproved; in stocks, bonds, mortgages and other

tangible

must

and all forms with rea¬

be able to possess property in any

ment

democratic

Government interference

Economist American Bankers Association

A free people exercising a maximum

form of government.

Dynamic Society

The Function of Savings in a
By Db. Paul F. Cadman,

Page

Gilman

Newly Elected Officers

review does not

of more than one phase
which has made possible the building of

permit the intimate development
of

the

saving

capital equipment theoretically

estimated to be worth sub¬
As bankers we are
of saving, for we purchase

stantially more than $200,000,000,000.
concerned with all three types

governmental units which partially finance

the bonds of

enterprise and

rate

in excess of

some
our

lend for short periods something

$50,000,000,000 annually for the working

needs of business,

contact

large and small.

4,000,000 of whom have actual
and more than

institutions,
least

one

realizable

life

cash

savings accounts in

60,000,000 of whom have

insurance policy

in which they have a

If we were able to compute

equity.

insurance holders and all

extraordinarily vivid picture of the extent

have an

the

savings
contributed to the store of capital, we should

grand total which all life

depositors have

capital

But our most intimate

side is with the individual saver,

human

the

We also buy the bonds of corpo¬

Government's activities.

of indi¬

vidual saving.
At

risk

the

some

chronological distortion it will be

helpful to ask why more

than one-half of our

people have

other since the earliest
white settlement was founded.
It would be easy to become
involved in an ancient and ponderous discussion of the
cause of saving.
There is a fine-spun philosophical theory
which holds that men deferred present satisfactions in
order to have more and larger satisfactions at some future
time.
The abstinence
theory pictures men sacrificing

practised saving in some form or

future satisfactions which may be
There is a considerable
speculation as to what influences have stimulated

present enjoyments for
more

important or more intense.

volume of

saving.

It will not be

useful to pause long over these psyco-

logical inquiries.
One or two

notable facts stand out in

tory of

bold relief above

speech of schools:

No people in the his¬

mankind who have consumed

all they produced have

all of the sinuous

BANKERS' CONVENTION

progressed very far beyond a primitive economy.

ever

The

practice of saving has had a profound effect both on the

the

was

sense

part.

self-reliance

and

inde¬

sold

their

the

have

Men

illusion

the nature and character of his community.

provide for all

A society of

The word moral has been

enterprising and creative.

misused and abused that one hesitates to employ it, but

there was an attribute of sound character in the exercise of

enabled

saving which early

the reliable and the

to differentiate between

men

the conservers and the wasters,

the builders and the spend¬

unreliable.

Needless to say,

saving as a virtue was sometimes perverted as have been
in

virtues

other

human

The

character.

miser

all

personalities—shall
that

State

the

their

say

god who will

this devastating perver¬

The organization of discontent, the marshaling of the

sion.

unfortunates

and

the appeaTto

the

ineffective into pressure groups,

and

the defeated and the hopeless has brought a

large number of our American citizens under the spell

very

Some fraction, perhaps a third, a fourth,

of State socialism.

By all

fifth, is on or near the margin of subsistence.

of their needs.

In America we have not escaped

self-reliant, independent individuals has always been vigor¬

all

who have

The promise of

security has lured men from the initiative, self-reliance, and

individual

thrifts,

State for support.

the

independence which have given society its finest qualities.

he is

souls?—for

The

the society of which

pendence which revealed itself positively and effectively in

ous,

the dependence of people

and second,
to look

contribution which it made to the character

individual and

fundamental
of

control;
learned

of the subtleties
them

abundant

two-thirds,

the

State promises

of political persuasion the
life.

Happily for them there are

three-fourth,

four-fifths

work

degrees, from simple niggardliness to the abject obsession,

still

presents as pitiful a perversion as the saint who mortifies

producing wealth: and what is equally important, saving

It is

his body with whips.

peculiar fact that

physical

mental activity of man has escaped excess in some indi¬

but as far as saving is concerned they are, and

viduals,

have always

birth

the

With

been, a negligible number of distortions.
and

only source of the bounty which the Government so lavishly

bestows.

laid

tricks

devious

and

its many forms,

there has been a steady exploitation of the

hard-working individual,

organization should exist and flourish for

created

well

that the

benefit of all;

Marx

Karl

men

Nearly 100 years ago,

when

formulating his theory of so-called

scien¬

basis.

equalitarian

tific

the protector, and that the Government should

dispenser of bounty on something always approach¬

be the

ing

State should be the provider

wras

socialism, as opposed
were

do what

to the utopianism of his day,

of inspired
had to do

social evangelists were evolving gospels which

principally with the distribution of wealth.

Amos, Hosea, Plato, Jesus, Augustine,

Bacon, Sir Thomas More, Fourier,
Considerant,
had

tects

Man's

commonwealth antedated Marx by cen¬

search for an ideal
turies.

Scores

Proudhon

and

Campenella,

Babeuf, St. Simon, Cabet,

countless other

social

archi¬

dreamed of a perfect world in which everybody

would have not only the fruits of

his own labor but would

produced by the more skilled, the more

share in the wealth

and the more intelligent.

able,

contempt, foresaw the crude and

which it

but

could not

is not yet

wealth which

decades to produce.

take

may

survive,

Yet

could its bureau¬

nor

dependable citizens who prefer to

it not for the backlog of

provide for their own security by their own efforts, present
sacrifices, and the frugality which in part makes them the

producers and conservers which they are.
In

mechanisms

modern

the

economic

our

life

is disturbing to many, namely:

observe a phenomenon which

the steady decline in the interest

Once again an old

rate.

question is being asked: will the return on capital fall so
There is considerable evi¬

low that men will cease to save?

that

dence

without

will save

men

ceivable that

will

some

save

It is

return.

any

con¬

Some would pay a

loss.

premium to have a certain sum surely available for their
needs.

future

Saving

may

be influenced

of an experimental decade may glut the

monetary policy

ful
a

by the interest

The unreasoned

rate, but it will not be determined by it.

money

visionaries, and least of all Karl Marx,

Not one of these

who held most of them in

has

crats batten on the luxuries of the functionaire class were

dreaming of a world in which everybody would

they could, and would have all they needed.

and

Government

that

unbalanced

Government

the

levy not only on the savings of every provident and

idea that social
the

devices,

borrowing,

stupendous

and

budgets

all of

development of socialism in

This working, saving citizenry is the sole and

of it.

same

market; the public debt may rise through the fanci¬

pursuit of visionary progress to a point which indicates

fret, fume and mock at

future insolvency; little men may

socialism would actually take when it

the

did finally arrive.

But we have lived to see all of conti¬

steadily filling the reservoirs of capital on which our entire

nental Europe and

Russia living under that theory of gov¬

brutal

form which

the principle that the State is a

ernment

which rests

supreme

end in itself and the individual only an

that

The key word

end.

earliest origins of the

freedom.

For

in socialism,

from the very

It is the antithesis

idea, is control.

100 years

incident

social reformers and

social-scientists have been exploiting the

pseudo

theories of social-

Almost stealthily
terrifying persistence the rights of individuals have

standard

of living

depends.

little

dictators

and

its

all

manages

the law of solvency

tunately for

and

the

powers

of government have been

In the process the State,

always performing the

by little assumed
it deprives the indi¬

legitimate functions of protector, has little
the role of director.

vidual of bis property
his

More and

by the ever-increasing regulation of

personal affairs, and finally it robs him of his inde¬

pendence by assuming to give the security
hitherto been
The

which he has

obliged to provide for himself.

socialism of Stalin, Hitler and

Mussolini present a

destroyed.
work

and

will

porting

traits of

sound

is they

their

character

encourage,

are

the social

theorists did not anticipate: first, the arbitrary

hope

liberty.

life.

For¬

not

are

easily

the

and

stuff

continue

In the long run they

interferes

weary

with

of sup¬

and con¬

restricts their rights, and destroys

The

opportunities.

which

custodians of capital

phase of private finance have a
to

that

This is

who give character, substance

democracy.

Independence, they will

fiscates their property,
their

The overwhelming majority of our people still
save.

the bureaucracy

They

us,

and

over

inherent in nature itself, inevitable in

species of plant and animal

every

reassert

demonstration of two logical conclusions which

exercises the powers of

owns

whip

the

population, it will still be true that

and reality to American

wholesale

character of any governmeht which

cracks

portion of that which is created must be saved.

but with

curtailed

State with

directors

wealth cannot be distributed unless it is created, and
a

man

exalted.

provident who are

When the future
uniformed

its

when

industry,

servile and dependent

Ism, slowly but surely winning converts.

been

and savers; but it is the

conservers

believe

and

in—the

both

every

of America.

savers

substance of a free

enjoy

solemn duty to care for,

economic

people who

and

political

SAVINGS DIVISION.

Committee1/ Officers* Reports-Savings Division
i

Maiden
The
the

annual

meeting

membership to receive

Division

the

for

past

furnishes

Association

tnis

attempt

any

year.

predict

divisional

opportunity for

Maine

report covering the activities of the Savings

the

policy

any

future activities to

undertook

Now to

money.
I he

program

ing

mixed

competitive

banks

with

agencies

Under the

Utah

direction of

sevings

business

costs.

Bank,

Lake

Salt

City,

study

was

mixed

Banks

deposits from

were

divided

into

replied

replied in
affirmative

the

vote

the second

In
was

the

In the third category,

other is the problem

address last May, Gwilym Price told of a $150,000 insurance

which,

of ad¬

and advantageously

largely dependent upon finding a way of handling small accounts

One

of the small estate itself.

trusts.

development of sound public relations for

The

estate.

In this

to themselves

to their customers and beneficiaries.

profitably and of making trust service available and economical to people
of small

exhaust every possibility of finding ways

these accounts profitably

ministering

of handling small trusts

one

Graduate

another phase of

The subjects of these theses are

"Economies
Econo¬
Trusts and

Returns and Reports," "Trust-Department,

Costs

Administration

Estates," and "Economies in Personal Trust

Personal

Operations.

Another student

the Large Trust Insti¬
towards suggesting the
solution of the problem of the costliness of the small account.
It is too early yet to say what the solution will be.
This much, how¬
ever, can be said:
No immediate or specific cure will be found.
The
utlimate and general cure will be found in a series of little economies, each
reducing the costs a little and each thereby adding a little to the profit¬
is writing a

tution.""

thesis on vThe Small Trust Account in

These theses also should be a long step

ableness of administering small accounts.
The following are
may

five of the directions from which these

little economies

be expected to come:

Saving in investment-servicing, bookkeeping and accounting
the collective investment of trust funds;
2. Saving in administration and operation through regular and
1.

quent payments of income;
3. Saving in operation through
to courts and beneficiaries;

less fre¬

regular and less frequent accountings

Saving in administration and operation
procedure; and

4.
of

through

through more standardization

46
5

BANKERS' CONVENTION

Saving In personal-servicing (which is the most expensive feature of
of small accounts) through the establishment in the
department of special divisions or units or organizations to handle

To find effective ways to handle small trusts

the administration
trust

small accounts.

and economically,

^Economies along each of these lines already
remains

institutions

trust

one

being effected by one

are

sections

the

country.

institutions

themselves

apply rigidly all

the first and biggest job ahead for trust service.

upon

the finding of these ways—and that reasonably

This

soon—

depends, in a large measure, the continued usefulness and popularity and,
stemming from these, depends also the future prosperity and

the economies that

have been tried and found to be effective.

because

only for students to ascertain all the possible economies and

now

for trust

profitably and economically

and to make trust service available to people of small estate is, socially

success

the trust business of this country.

♦

Job Ahead for Trust Service
The
By Samuel C. Waugh, Executive Vice-President and Trust Officer, The First Trust Co., Lincoln, Neb.
The vital need in

our

country today is for

fearless and unselfish leadership.

tive,

of the public

leadership—honest, construc¬

From all

of life—through

walks

the daily press and numerous trade publications, and over the radio—we
have

fundamental principles of

very

"There

have witnessed labor organized

and dominated in instances by un¬

cannot

upon labor as a class.

fact

our own

business

individually and collectively know of

thought they would

major findings in

boast about

that

widely regarded,

were

this statement, especially when

Survey was conducted only among the middle and upper

this

income levels.

cases

large ones, is apt to be turned over to the supervision of

has endured for

junior clerk.

indeed

over a

century.

We certainly

keep in mind the

where men, motivated in most instances by personal
greed, have violated
the accepted cardinal and fundamental principles
t

interviewed

half of those

Over

which this business

upon

little to

of this survey, stated,

summary

indications that trust institutions

were

was

by this group at least, as performing a social disservice."

scrupulous aliens—men of the type which has cast unfortunate reflections
And in

as some

speaking very frankly—there

could point with pride.

The first of the

city, State

our

On the other hand—and

which

and national governments.
We

discouraging

The results were not as
be.

statesmen, humanitarians and public

benefactors in performances that tend to shake the faith of many of our

well-meaning people in the

income levels of the

upper

Survey.

have witnessed both national and municipal

Because of limited funds the

confined to the middle and

was

Most of us are now familiar with this Elmo Roper Public Opinion

public.

proof of the necessity and the demand.

During the past decade

I>oliticians of the baser type posing

thought about trust service.

investigation

Fifty

cent

per

not sure

were

but that

not sure that

were

trust, except

inexperienced

don't

companies

trust

extremely healthy sign that the American people are
awakening to the fact that in many cases they have been misinformed and

make

profits on trust accounts other than the regular fees.

every

four were not sure that trust institutions have stringent legal safe¬

misled, and that the false promises they have received

guards thrown around their trust property and operations.

further consideration.

worthy of

not

are

The trend away from the froth

and toward solid

were sure

fundamentals of business and social conduct is decidedly encouraging.
On the assumption the

foregoing statements and observations

it is proper that we as trust men, gathered
vast

here from all

country, should thoughtfully consider and discuss

are

These are but a few of the

"The Job Ahead

for Trust Service."

thoughtful

business, and what do they think about
over

American

our

true

have many

speakers have told you.

daily.
is

to this question

will have drawn into sharp focus

our

problems in

Trust

men

But taking the long-range view,

have known

in terms of conditions today
business,

our

grappling with

my own

the preceding

these problems

thought is that

problem

own personal hope is that you are
cast across the

are

right, but

every

time

was

newspaper

friend of mine

sent

This short dispatch was

published in American papers

indictment of

effectiveness in

our

Perchance

have been too busy in our efforts to do a

is a reasonable explanation.

And I honestly

The time has

come,

in my

opinion, that the telling about our services simply, completely and frankly,
is just about as important as doing the job well.

clipping from

Berlin Associated Press dispatch dated March 5,

this conclusion amounts to

that this

think

Atlantic I shudder in the belief that many of us have

short time ago

Public Opinion Survey:

good job to take the time to tell our story to the public.

thoughts

underestimated the importance and the influence of public opinion.
his file.

income brackets.

Some of you may feel the importance of public opinion is being
exaggerated.

impressive paragraph is being quoted from Mr. Roper's

telling the full story about our services to the people in the middle and upper

importance than that of achieving favorable public opinion.

quality of our service rendered.

"Although the general conclusion may be drawn that trust institutions
are far from being
in disrepute with the people in the upper income levels—
there are certainly majorities who are more favorably disposed toward trust
institutions than otherwise—there is a comparatively large per cent of people
who display a lack of interest in and Information about trust Institutions
which would amount almost to apathy.
It is felt that this retards trust
business right at the place where trust business could most logically be
expected."

biggest job ahead.

are

survey.

trust

of free enter¬

way
as

our

findings in this nation-wide

gratification that these findings cast but minimum reflections

some

major findings of the National

genuine

150 years?"

If you have the answer
you

men

simply this: "What do American citizens think about

prise in business and democracy in government such
them for

the

The following

The job ahead—and the job today—which gives
concern

feel

are

wiped out.

can

our

Only 63%

that, if a trust institution fails, the individual trust accounts

not

sound
of

corners

One out of

Almost 20 years ago

1933.

was

over seven years ago:

when the

no w

fashionable phase of "Public Relations"

still in its swaddling clothes, the elder J. P. Morgan made a farsighted

prediction on the importance of public opinion.

"Berlin, March 5, 1933—The German Institute of Politics,
opening its
spring course in propaganda today, stressed words as equally important
with weapons in winning wars.
"
'If our World War propaganda had been as
good as our Army.* its
director declared, 'there never would have been
any Versailles Treaty.' "

Rainsford's

autobiography, Mr.

As recorded in W.

Morgan made the significant statement

that "the day is soon coming in America when business must be done in
glass

pockets."

This

In the light of conditions today, do you think that the German Institute

forecast

was

has arrived when

of Politics in 1933 overestimated the importance of
public opinion?
We might like to draw a sharp division line between public

made many years ago.

we must

opinion as
it concerns trust service and public opinion on
economic, social and political

methods of operation ?

affairs.

believe the day

not

you

conduct all business in glass pockets, and further

still, are we not obligated to direct public attention to

business and

our

the good of all.

But

possible.

national and international

The future of

our

trust

conditions

business

When this has been accomplished perhaps, Govern¬

ment also will follow the lead and conduct its affairs in

today make this im¬

is too closely interwoven with

The

trust

men

"glass pockets" for

throughout the land, the leaders who have been given

these broader tides of events which affect each and
every one of us.
One year ago the Trust Division launched a project to determine more

and face calmly the problem of keeping the public properly

accurately than we had

the trust

ever

known before what

positions of responsibility in their respective communities, will recognize

representative segment

business.

The challenge has

Informed

as to

been offered and will be met.

Committee / Officers* Reports—Trust Companies
Address of President Roland E.
National

Bank of

Clark, Vice-President

Unauthorized Practice of the Law, and two of whom should be members

of the Section

Commerce, Portland, Me.

Real Estate, Probate and Trust Law, of the American Bar

Association, and five officers of members of the Trust Division of the Ameri¬
Bankers Association who

familiar with banking practices

Just before the annual convention at Seattle last
September I delivered a
brief address at the 17th Regional Trust Conference of the Pacific Coast

can

and

mittee of the Trust Division at the Spring Meeting approved this joint report

Rocky Mountain States held

assigned the title,

"Our Next

Los

Year's

Angeles.

To that address was

Work," and in it

made to discuss the probable activities of the Trust
year

which has just ended.

ing to find that the

realize

This

pleas¬

will

reason

year

same period.
Indeed it
of successful activity within the Trust Division and for that

it is with particular pleasure that I offer to
you my report

and

one

held two meetings, one in New

in Philadelphia

Sept.

10 during the

similar conference groups in various States and localities.
be

purely advisory, will act

complaints, and will endeavor

for the

1939-40.

to aid in

Due
exceptionally fine cooperative work, some years ago, by the com¬
mittees representing the American Bar Association and the
Trust Division
to the

of the American Bankers Association, most of

Lawyers

our

misunderstandings have

the whole recognize the place of the corporate

fiduciary in the business world and bankers

and trust institutions recognize
necessity of the employment of attorneys in matters requiring legal services.
Both groups agree that banks cannot
properly engage in the practice of law.
This principle is given specific
recognition in the Statement of Principles of

The group

clearing house for suggestions and
establishing

a country

wide recogni¬

tion of the principles of cooperation between the Bar and trust

Our relations with the Bar continue
along very satisfactory lines.

been disposed of.

16,

It Is contemplated that this National Conference Group will aid in setting

has been

year

and who

happy to state that the Executive Com¬

Annual Convention of the American Bar Association.

time it was amazing

how many vital tasks and problems not then
anticipated had

presented themselves for consideration during the
a

National Conference Group has

York City on June

important tasks therein enumerated have been
same

are

of the American Bar Association took similar action.

Division during the
was

practicing lawyers.

and recommendation, and that a few weeks later the Board of Governors

an attempt was

Rereading that address recently, It

given serious attention during the year, and at the
to

are not

institutions.

The group will not have power in any manner to bind either the
*

Bar Association

the Trust

Division,

the name of either association

nor

to what in

constitute unauthorized practice of the law.
presume

in any way to override

American

will it be authorized to speak In
its opinion may or may not

This conference group canot

substitute itself for local bar associations

and local groups of trust institutions, but will be constituted for the purpose
of acting in an advisory and cooperative capacity
for

and

as a

clearing house

suggestions and complaints.

It will

use

its best efforts to eliminate misunderstandings and causes

for

Trust Institutions.

complaints either by the Bar against the trust institutions or by the trust

A new milestone in this cooperative effort
between the two groups was
attained this year.
Last April, the Committee on the

institutions against the Bar in relation to any practices which appear to

Unauthorized

Practice of Law of the American Bar Association and

our

Committee

Relations with the Bar made a joint report and
recommendation to the
Board of Governors of the American Bar Association and to
the Executive

Committee of the Trust Division that

National Conference Group should

be created to be composed of five members of the
American Bar Association,
three of whom should be appointed from the

membership of the Committee

against public interests.
Co-Chairman

Raymond

Trott,

representing

the

Trust

Division,

struck the keynote of the project when he said:
"The underlying theme of our work will be keeping the interests of the
public uppermost in our efforts to strengthen the harmonious relationships
existing between the Bar and trust institutions.
We expect to supple¬
ment, not to displace, the present activities of local groups on mutual
problems."

TRUST DIVISION

sentatives

else¬

principles which we believe will be approved for use in New York and
where as well as the various points peculiar to fiduciaries which we have
discussed in previous meetings with your committee.
As soon as a pre¬
liminary draft is completed you will be advised so that your committee
can pick up work on this new approach where we left off on the schedule
api. roach."

the most forward
official relations with repre¬

National Conference Group is

I believe the work of the

taken since we began our
of the American Bar Association.

step that we have

in two projects of
The first is a movement
looking towards the improvement, on a national scale, of our State fiduciary
laws.
This movement was first advocated by Prof. George G. Bogert of the
The Committee on Fiduciary

Legislation is engaged

far-reaching importance to all trust

institutions.

the Mid-Continent

University of Chicago in an address before

Progress is being made by the
draft of the proposed Statement
Business.

Trust Con¬

study the trust laws of each

make it possible to

prevent the passage

cooperatively by such national
agencies as the American Law Institute, the National Conference of Com¬
missioners on Uniform State Laws, the American Bar Association, and the
these efforts may be made

hoped that

It is anticipated
be conducted only by local groups, but with these groups
respective national associations for guidance and assist¬

Division of the American

Trust

that the work will
tied in with their

■

ance.
even more

mittee

Bankers Association.

important nation-wide task is

Fiduciary Legislation in its efforts to

by the respective States of statutes

being directed by the Com¬
bring about the enactment

which will totally exempt

from State

decedents.
1932, in the
case of the First National Bank of Boston vs. Maine, we supported what was
then known as reciprocal legislation, with a view toward obtaining, so far as
possible, exemption from inheritance taxation on the intangibles of non¬

inheritance tax the transfer of

intangibles of non-resident

Prior to the decision of the United States

Since

decedents.

resident

the decisions

Supreme Court in

United States Supreme

of the

of multiple inheritance
taxation, it has seemed wise to attempt to procure enactment of a totally
exempting statute rather than the old form of a reciprocal statute which has
proved ambiguous and unsatisfactory in many respects.
The form of the
statute suggested by our committee, and which has been approved in¬
formally by many representatives of other national organizations, is as
Court

last

spring again make possible this type

Committee on Trust Policies on the final
of Policies for the Acceptance of Trust
was presented to the Executive

of policies

statement

then laid on the table for
meeting during this annual con¬

spring meeting last April and

Committee at the

cooperative efforts may
of the States and also to
of ill-advised legislation on fiduciary matters.
It is
He has in mind that

fall.

ference in Chicago last

This

further revision and consideration at its

It is expected that the statement

vention.

will be adopted by the

Executive

Committee at this time.
The Committee on Trust Policies

has presented a study on

compensation being received by trust

of trust

the amount

institutions throughout the

of trust accounts.
It is the third phase of
general assignment to try to find ways and means of putting trust

country for the various types
its

business

It is possible that when the results

paying basis.

study have been further analyzed and more

by the Division.

be published in some form

March the Division published a new

Fees

with

Cost Accounting

Recommended

under the direction of the Committee on

of this

clearly summarized, it may
.

edition of the Guide to Trust
System, which was prepared

The principal

Costs and Charges.

changes in the Guide consist of—

A new scale of recommended fees for trustees acting under corporrt*
Indenture Act of 1939, to provide for the
and also
(2) A cost system for determining the cost of a personal trust account.

(1)

trust indentures under the Trust

trustees' Increased duties and liabilities,

first edition in 1932

Since the publication of the

the Guide has had

and the second in 19361

Over 800 copies of the new

wide distribution.

edition

sold

during the past year.
The committee believes that the fees proposed for services

were

under qualified

under exempted issues

indentures should likewise apply to services

of less

exempted indentures will carry
will not give
of whatever protection the Trust Indenture Act

it is probable that

than SI,000,000, because

with them most of the liabilities of

follows:

the trustee the advantage

"Nothing in this Act shall be construed as imposing a tax upon any
as defined in this Act, of intangibles, however used or held, whether
in trust or otherwise, by a person, or by reason of the death of a person,
who was not domiciled in this State at the time of his death."

qualified indentures but

affords.
The committee is

transfer

of the first States to
Supreme Court decisions, has enacted
which is virtually in the form suggested by the

State, Louisiana, which was one

So far only one

consider this problem since the recent
a

totally exempting statute

Trust Division.

inheritance tax
taxing
resident decedents and the real estate and tangi¬
ble personal property within the State of non-resident decedents.
No tax
is Imposed on the Intangibles of non-residents.
This type of statute has
another statute of the Massachusetts type,

much to commend it in certain States.

One of the most important

projects of the Trust Division in recent years

I refer to the national public

brought to completion this spring.

conducted under the direction of Elmo

made possible by subscriptions
the complete 88-page report

Roper.

opinion

This project was

of 187 Trust Division members who

received

of the survey.

that in many
favorable than had been antici¬

of the Committee on Trust Information

It is the opinion

respects the results of the survey were more

time for self-com¬
Roper report points out many things which our trust in¬
bear in mind at all times in the operation of their business

The committee, however, feels that this is no

pated.

placency,

the

stitutions should

and in their public relations.

Executive Committee, on June 26,
of each trust institution in the
circulated for the three-fold purpose of:

Acting under the instructions of the

1940, I addressed a letter to the President
country.

That letter was

Pointing out complaints of the public as revealed in the survey.
Emphasizing the Statement of Principles of Trust Institutions.
3) Urging a close adherence by every trust institution to policies of
internal management of so sound a character as to remove possible cause
of public criticism.
1)
2)

Enclosed

were

of the National Public
of Principles of Trust Insti¬
expressed the earnest hope that real consideration

reprint of the major findings

Opinion Survey and a copy of the Statement
In the letter I

tutions.

be given to

that

the significant facts disclosed In these

major findings, to the end
of the public will be

misunderstandings and criticisms on the part

institution in the country
conformity with adminis¬
trative and management policies which are responsive not only to the letter
but also the spirit of the Statement of Principles.
At the request of the Committee on Trust Information the Advertising
Department of the American Bankers Association is preparing a series of
educational advertising messages, with the results of the Roper survey as a
minimized.
to be

I then vigorously urged every trust

ever-mindful to conduct its trust business in

guide, for the use of Trust Division
A further

members.

outgrowth of this survey is the study now

committee to consider the

being made by the

preparation of a manual which would give em¬

ployees of trust institutions a better

understanding of trust service In its

relation to the public.
At the present

time, 16 life insurance and trust

councils have been or¬

ganized in different parts of the country.
In seven additional cities from
councils are in the process of organization.
In order

coast to coast new

that further progress along

Committee on Relations
into seven territorial

that Committee.

this line may be based on sound

efforts, the

with Life Underwriters has divided the country

districts, each of which is in charge of a member

A sub-committeeman

section where a life insurance

has been appointed In each city or

and trust council now exists, or where it is

Under
to organize
These sub¬
committee members report in detail to the Trust Division Committee, which
is efficiently acting as a clearing house for the exchange of ideas.
For the past few years the Committee on Liability Insurance for Fiduci¬
aries has been working towards a more satisfactory fiduciary liability policy.
Many conferences have held with representatives of the National Bureau

felt that there is

reasonably good ground for the organization of one.

guidance of the committee, aggressive work is being done
new councils and to maintain the activity of present councils.

the

of Casualty and Surety

Underwriters.

status of this highly

"When this work

began a schedule liability policy was

contemplated.

This policy would set forth in detail each of the separate single covers
available, the insured having the election of the covers desired.
Since
that work was begun, the trend in the development of insurance policies
has been toward what is now called 'comprehensive liability insurance.'
The term

'comprehensive liability insurance embraces the types of

pol cy which integrate all of the various separate
single cover policy which insures against all of

liability

covers in one fully automatic

the hazards not specifically

excluded.

with your committee at the meeting
changing the approach so as to prepare with your com¬
mittee a Fiduciary Liability
Policy on the comprehensive basis. We
are now working on a preliminary draft of such a policy incorporating the
"As

study of cost analysis

'■

report by the

Special
That
operating methods and

Committee on Trust Policies, a new

Trust Departments has been appointed.

committee will make a study

of trust department

of preparing a standard

will consider the advisability

result of our discussions

Sept. 4 we are

Another

special committee is that on

new

Nomenclature which will study and
to the titles of trust

manual of operations

Trust Department

make recommendations

Personnel

with reference

department officials.

At the Spring Meeting

of the Executive Committee

the appointment was

Examinations
and of the assignment to that Committee of the duty of discussing with the
Federal supervisory authorities the form and scope of their examinations of
trust departments.
It is evident that this special committee is answering
a real need, as it has enabled the supervisory authorities to consider these
questions with a responsible group representing the Trust Division.
The
committee has today reported satisfactory progress as the result of its
announced

special Committee on

Trust Department

conferences.

Many

Division

Trust

members

were

Department of the United States last

disturbed when the Treasury

spring handed down its regulations

by fiduciaries.
the regulation
was announced.
The Trust Division officers consulted with the General
Counsel of the American Bankers Association at that time, and have been
in touch with him ever since.
We have taken no affirmative action, because
we have been advised that it would be useless to approach the Treasury
Department at this time for a retraction of its ruling. The matter is on our
agenda for attention when the proper opportunity is presented.

prohibiting further purchase of
Remonstrances came in from

United States Savings bonds

all over the country as soon as

continues to serve
of the Trust Division, and the
channel of communication between the Trust Division and its membership.
Its average monthly circulation is now about 3,800.
One free copy is sent
to each member trust institution.
In addition, during the past year, there
have been 831 subscriptions to the Bulletin.
Many of these represent
multiple subscriptions by banks for copies to be sent to officers and directors
and members.of their trust department staffs.
The Bulletin is not intended to be a newsy fiduciary monthly magazine,
full of personal Items of entertaining but transitory interest, but rather is
set up to be an organ making available the results of Trust Division studies
and surveys, committee reports, addresses at the trust conferences, new
Government regulations which are of prime importance, and other informa¬
tion of vital current and permanent Interest to trust institutions.
Care¬
fully edited and attractively printed, it presents these items in such a way
as to retain the keen interest of trust men.
Certainly it is serving a very
The Trust Bulletin, first

real purpose on

Over 450

issued in September, 1935,

the official publication

useful purpose in our

field.

copies of the 100-page

Directory of Trust

Institutions, Trust

published by the Trust Division in
September 1939, have been sold during the past year.
This is the only
directory which lists trust institutions and trust department personnel in
one group, by States and cities, and it has proved most useful.
The Eighteenth Regional Trust Conference of the Pacific Coast and Rocky
Mountain States was held in Salt Lake City, Utah, on Aug. 15, 16 and 17,
1940, under the auspices of the Trust Division and the Trust Division of the
Men and Trust

Associations, which was

successful
unusually
large amount of front-page space given by the three local newspapers to
pictures of the presiding officers and speakers and to their addresses.
The Twenty-first Mid-Winter Trust Conference, held in New York City
on Feb. 13,
14 and 15, has been commented upon by many attending as
being one of our most successful Mid-Winter Trust Conferences.
The total
registration was 913.
The average attendance at each session was unusually
high.
A large majority of the addresses was delivered by those who had
Utah Bankers Association.
ever

This conference was one of the most
An outstanding feature was the

held in the Western States.

never

before spoken at these

conferences.

held in Chicago on
of the Trust Division and the Cor¬
porate Fiduciaries' Association of Chicago, with a registered attendance of
758.
This conference was a success from every viewpoint.
It is apparent
that the resumption of the Mid-Continent Trust Conferences in the preced¬
ing year was a wise step on the part of the Trust Division and that the con¬
ference may now become a fixture.
The Eleventh Mid-Continent Trust
Conference will be held in Chicago on Nov. 7, and 8, 1940.
The officers of the Division appreciate with real sincerity the loyal support
and assistance readily made available by the staff of the American Bnakere
Association and the staff of the Trust Division.
To Robert M. Hanes,
President of the American Bankers Association, whom we have been proud

The

Tenth

Oct. 26 and

technical project is summed up in the
following excerpts from a letter written to the Committee on Sept. 9 by
E. W. Sawyer, Attorney for the National Bureau:
The present

result of

Committee on Operations for

suggestion is made to repeal any existing

An alternative

the transfer of property of

was

for small and medium-sized trust departments.

statute and to reenact

survey

giving its attention to a

now

of individual accounts.

to
on

Mid-Continent Trust Conference was

27,1939, under the auspices

recognize as our leader this past year, we

offer our cordial congratulations

administration and our hearty thanks for his human
consideration of the problems of the Trust Division.

his aggressive

standing and

under¬

BANKERS'

This is my final report as President of the Trust Division.
progress may

have been attained in the past

efforts of the officers of the Division
men

of the Division all

over

year

to the

the country.

is not due

Whatever
much to the

energetic help received from

To the members of the standing

CONVENTION
Richard G. Stockton, Vice-President
Bank and

Louis

and special committees and to those of the Division to whom special tasks

Minn.,

have been delegated and of whom unexpected requests for advice have been

Five

made, are now offered

our

appreciative thanks for their fine cooperation.

The cohesive and unselfish spirit thus
sion

displayed has made the Trust Divi¬

outstandingly successful organization of institutions devoted to the

administration

of trust services.

Trust

to succeed Mr.

They

Co.,

and'Trust Officer

Winston-Salem, N. C.,

was

of the Wachovia

elected Vice-President

Fenninger.

Headley,

was elected
men were

Vice-President of the First Trust Co. of St. Paul,

Chairman of the Division's Executive Committee.

elected to the Executive Committee of the Trust Division.

were:

Frederick A. Carroll, Vice-President and Trust Officer of the National
Shawmut Bank of Boston, Boston, Mass.;
H.

Dougals Davis,

Vice-President, of the Plainfield Trust Co., Plain-

field, N. J.;
Arthur T. Leonard, Vice-President of the City National Bank and Trust

Newly Elected Officers

Co. of

Carl W. Fenninger,

Vice-President of the Provident Trust Co., Phila¬
delphia, Pa., was elected President of the Trust Division at the Annual meet¬

ing of the

Division held

Sept.

23.

Mr.

Fenninger

President of the Trust Division during the past year.

served

Vice-

Chicago, Chicago, 111.;

James

McGuigan, Vice-President and Trust Officer of the Bank of

America N. T. & S. A., Los Angeles, Calif.; and
John M. Wallace, Vice-President, Walker Bank & Trust Co., Salt Lake

City, Utah.

SECTION

STATE SECRETARIES

American Bankers Association
Annual Meeting,

Held at Atlantic City, N. J., Sept. 23, 1940

STATE SECRETARIES SECTION

INDEX TO

Operating Problems of State Associations, by J. C. Rogers Page

Savings, by Paul W. Albright.

Interest Rates

My Individual Responsibility, by Claude L. Stout

Report

Committee

Forms,

Standard

by Chairman

Lauder Hodges
Report of Committee

State Bankers Association Manage¬

by Chairman George

ment and Regional Clearinghouses,
M. Starring

Explanation of New York State Bankers Retirement System,—
by Sigourney B. Roraaine.

Address of President C. C. Wattam

Report of Committee on State Legislation, by Chairman

Resolution of Regret at

Newly Elected Officers

Report of Committee on Banking Education
Relations, by James C. Scarboro
Report

Committee

Insurance

and

W. G.

Protection,

Eugene P. Gum

and Public

Coate

Armitt H.

Resignations of C. W. Beerbower

and

Brown

59
-

Operating Problems of State Associations
J.

It is with

Rogers,

Carlisle

Florida

Secretary of the

Bankers Association, First National Bank, Leesburg, Fla.

While nearly 18 summers and winters have come

has been assigned to me.

I entered the field of banking, only one and one-half years
endeavored to serve my State association in the

have passed since I have

I don't want you to feel that

of "Banking," who

asked him, "Well, Johnnie, how do you

Rather, I appreciate the fact that so many of you have

Banking

Let's briefly talk

Ground for the Vehicle Known as Your

facing a challenge on

lems and pitfalls that lie in wait
*

General Motors,

every

the prob¬

for the swivel chair banker.

showing up, through constant wear and tear, bad

Your

association needs the same careful planning and designing you would expect

For years the

Florida Bankers Association operated under an out-moded

constitution and by-laws. > However, when these were

they were suited to the times.

originally adopted,

A Constitution and By-laws Committee was

appointed last year. The set-ups of other associations were carefully

studied

Palm Beach, in April of this year, the new Constitution and

By-laws were adopted and put into effect.
Let

me say

that it is imperative that each association have a steamlined,
I will call this the foundation or chassis

workable constitution and by-laws.

This chassis should be clothed with an organization capable

of your vehicle.
of fuctioning

with as little lost motion as possible, and equipped to handle

efficiently the work at hand.
The motor that goes intoyour

is truly a human

vehicle is the Secretary.

dynamo-^-because

Praise Allah if he

then, and only then, will the old bus

I suggest that we equip this vehicle with a four-wheel drive:
Contact with State and Federal legislators: qualified and enthusiastic com¬

really catch air.

understanding

thorough

mittees;

contact with key bankers or
After your

banking, and

of the problems facing

minute men throughout the State.

vehicle has been assembled, you should have on file a blue¬

print for ready reference in time of

need, explaining its design and operation.
print of the

You have found on your chairs an envelope containing a blue
Florida Bankers Association known as our' 'Activity

chart, together with a copy of our constitution
were

Activity Guide, Florida Bankeis Association."

for

Guide,"

organization

and by-laws.

These guides
"1940-41

forwarded to all member banks in a manila folder lettered

to file all bulletins

Member banks were urged

received from the Secretary during the year in this folder,

be checked

unless you

carefully on

Do
have a destination or goal.
Your journey should
the road map of opportunity of your State.
its journey over the highway of banking.

By Paul W. Albright, General

Questionnaries: Please answer them, in order

to secure lists from

Savings."

Paul W. Albright will discuss

Mr. President, Ladies and Gentlemen:

Albright:

Mr.

Rates

Mr. Albright!

matter.

I want to assure

that I did not seek this assignment, because, first of all, as Secretary
the Mutual Savings Banks Association, it is more or less in a specialized

you
of

State Secretary, I would be

second, as a

field;

discussing

question of

managerial policy, and as the gentleman from Texas said: "These are the
fellows we work for"; and third, I am from New York, which is another
I

reason,

relations

to keep my mouth shut; and fourth, 'with the public
formed downstairs with Scotty Irwin and the others, it

suppose,

group

pretty good

makes

short

time,

competition; but lastly, I have been with you for only
I have been 16 years in my work in New York

although

Wages and hours: Pass on
current

rulings,

that

enough to tell you
opportunity of being with you

connection I would like to digress just long

how

much

&c.

have appreciated the

Association secretaries.
information to member banks

Secure a speaker qualified to

Public relations: I was very glad to see
have Public Relations on our program.

committee, because it is important,

pertaining to

handle subject for

in cellophane, tied with a

fit to
standing
be wrapped

that our President had seen

I urge you to make this a

in these times, that banking

beautiful ribbon, and merchandised in the

best

possible manner.

1,500 mile swing around Florida, or¬
Association. All of our officers made the
trip, under the capable leadership of our President, Linton Allen.
Steve
Fifield, Chairman of the Public Relations Committee, who is also President
of the Financial Advertisers Association, presented at each of the meetings
Lew Gordon, of the Citizens & Southern National Bank, Atlanta, and Lew
truly rang the bell with a rousing talk on Public Relations.
We had, in
this 1,500-mile swing in five diffefent cities, the executive officers of the
banks.
These men sat through a one-hour discussion on Public Relations.
When they got through, numbers of them came up to Lew and the officers
and said they wished they could sit through another hour because they were
giving them something they really wanted and needed.
There are other problems confronting our associations, and I hope they
will be brought up and discussed, along the ones already mentioned, in the
Round Table period which will follow immediately.
The American Bankers Association is the best filling station I have
found.
Its service men and officers are on their toes, cheerfully giving use¬
ful information and materially assisting in getting your association on the
right road.
It's good advice to bring the old bus in from time to time and
let their experts check it, because they truly operate a "one stop" Service
We

have

recently completed a

Station.

important one connected with the whole
behind the wheel"—or the President of the Associa¬
tion
As motors, if you please, I know that our bosses will drive a safe race,
through new frontiers of service and opportunity, if we see that the vehicle
is properly lubricated with that indispensable product known as "elbow
I

just about forgot the most

thing—that is, the "nut
.

grease."
it is up to us to assist

in fashioning a vehicle worthy

equipped that we will win the
approval and commendation of an exacting public, and at the same time,
receive acceptance from our member banks.
Thank you.
the glorious

traditions of the past, and so

Savings
of the State of New Ycrk, New

York, N. Y,

I certainly enjoyed the spring conference and the
meeting this morning, and I hope to know more of you.
.
One other thing before I take up my subject tonight, and that is, I

and working

with you.

Banking last Sunday, and I realize
But I would like to put in a
pretty good plug for the Graduate School of Banking, with the assumption
that you have nothing else to do.
I am quite sure that Wall Coapman of
Wisconsin and Marshall of New York will confirm what I have to say.
This is not going to be a speech tonight.
In fact, I have written just a
few notes on the subject.
I would like to make a few general comments
and then, if possible, if there are any questions, I would like to try to
just finished at the Graduate School of
that the State Secretary has plenty to

answer

was

our

with

do.

them.

question of uniformity in interest
there is no such thing. In
in the State of New York,
depositors and $5,675,000,000 in deposits, I find that there

originally asked to speak on the

rules and regulations.
But, of course,
Association, with its 134 savings banks

rates,

State.

fellows

that fact-finding bodies can

facts for our common good.
Let's appoint a committee
each association of outstanding speakers, and compile

these, passing them on to all

Secretary Savings Banks Association

The next number on our program this evening is a

"Interest

discussion
this

well-placed shot from the

assimilate, digest and pass on pertinent

Interest Rates
President Wattam:

only to be touched off by a

Secretary of an Association.

Men of banking,

quick reference.

Your car is now ready for
not start out

ganizing the five Groups of our

product of a master builder.

and finally, at

bonanza ore, waiting

President

large,1

have long recognized the necessity

weather and other conditions, structural weakness and faulty design.

in the

dictatorship.
I sincerely believe the
members provide a very mine of

school conferences or convention programs.

of research
and proving grounds for the testing of their various products,

and for the purpose of

dynamics of a democracy are more power¬

latent initiative and ideas of committee

hand, and your

Ford, Chrysler, United States Steel, and other

organizations

laboratories

It has been said that the latent

ful than the driven dynamics of a

pushed back the

association should be geared up to a pitch where it can point out

successful

each, and
Association.

Conventions—School Conference Speakers:

about "Your State—The Proving

Association."

it."

and have opened up new fields of service and infor¬

be bold enough to express this in another way.

who has

member banks.

mation to your

Let

Upon returning

don't like it at all," said the boy, "I'm sorry I learned

horizons of banking

of the State and the

(committees) will turn up.
The Secretary
enthusiastic and active committees is truly richly endowed with

Trouble with your second wheel

like the youth referred to in the June

got a humble job in a bank.

home after his first day, his mother

like banking"I

for the advancement

cooperation

the common interests of

this world's treasure.

capacity of Secretary.

issue

Be non-partisan, dwell on

attention.
on

and gone since

banking will quickly arrest your

The detour of branch banking and unit

which

certain amount of trepidation I enter upon the task

6,000,000

BANKERS'

are

methods

concerned,
and

120

crediting

find

interest.

far

of the banks paying

the

rate of

1}&%, two with

interest

CONVENTION.

the

that.

above

problem.

The

bank pays 2% up to $5,000 and 1%%

one

We have another bank

rate

and applies
the law,

suburban

specified

State,

our

down

set

to all State chartered institutions.

by the Banking Code

The National banks, under

comply with that regulation.

Here

New Jersey,

where

you

this

brief

talk which I am to give you tonight I will, of course,
types of institutions, both commercial and savings banks, for
find that 40%—we were told that this afternoon—of the 15,000 banks

include
we

all

this country are

members of the Savings Division and interested in the

question of savings.
In

the

the dividend

by Mr. Ford, that it is better to have
few large accounts, decided to enter
them

interest

from

has

rate

been

hit-and-miss

lot of small accounts than just a

business.

the

into

The

State

using the word "savings," and they called it

law

"special

account."

that

interest

time

been

has

also

rate

made

not

suggested and is being tried in the two
In both of the institutions they report that it

desirable

practical.

It is really too early to reach
possibility of split rates is

to whether the
But I believe that

decision

definite

any

great material difference.

with

all

those

savings banks

paying 4%,

were

basis.

result

and
that

within

the

sound of my

voice, should keep an open mind.
it is too much trouble.
Well, how about the competition
giving you trouble?
For, indeed, the last, and one of the greatest
involved, is that of restricting or refusing new money.
The easiest

Yon say that
that

factors

is, of course, to place restrictions on the amount you will receive.
some
banks that decline to take more than $250 from the

have

depositor in any three months' period.
Is that a solution to the problem?
Of course it is the easiest way out.
But if we decline this money, we find
in

cursedves
raise

We find

peculiar position.

rather

difficult

for

objections to any other type of competition in the banking field,
dollars that we will accept

our

long as we pick and choose among the
the individuals whom we will serve.

in this room, I had the pleasure of listening to Dr. Paul

This afternoon,

give a very stirring and eloquent address dealing with the question

of savings.
sacrifices

He concluded that by stating that these savers who have made
and who look to us to safeguard those savings look to us to
and

them,

save

with

to that address I still

less

toward

down

"liberalization,

job because,

our

are worthy of being saved.
responsibility.

with

liberalization

less

Therefore, that

they

certain

I listened

that
I

lees

felt that

does

6ee

imply

not

that

trying

are

were computing
competition, the

DISCUSSION FOLLOWING

ME.

which
falling

are

the problem in going toward

see

competition,

carries

this trend,

goal of

penalise

not

depositors, but rather we are trying to reward the true saver.

the

semi-anmiai

has

Cadman

past the question

proposition, with competition largely determining what the rate should be.
In
our
State, prior to 1918, no commercial bank was interested in
accepting small amounts, so-called savings accounts.
But one of the
banks, realizing that possibly there was some truth in the idea started

barred

split

banks to which I referred.

are

1% maximum rate.

forget all the figures, just remember this, that the average saving
9% per bank; 9% of their dividend rate was saved.

was

way out

holding your convention, the Bank
with authority given to him by the Legislature, provided

Commissioner,
a

that
A

community which found
itself offered considerable new money and tried to solve the problem
by
providing that money there less than three years draws 1% interest and
money there more than three years gets 2%.
The 2% rate, which is the
maximum

2%.

The split-rate ones are experiments which I think may bring forth some
solution

If you

split rate,

Thank you!

ALBRIGHT'S ADDRESS

commercial

banks decided to—and I am not taking any
exception to
into the business, because I think the competition was really a
good thing, to put us on our toes—the commercial bank decided it would

President Wattam:

their going

pay

that

monthly basis.

and

Then

the

would pay interest from

bank decided it would match

savings

the date of deposit if left to the end of

Paul, that you
action

the quarter.
The

Mr.

bank

commercial

back and said:

came

"We will

4% from the

pay

date of deposit to date of withdrawal."
The savings bank advanced—that
is, that particular savings bank in that territory—its rate to 4%%.
This is something that now haunts us.
The depositors did not ask for
any of this.
In tact, it was rather amazing, the other, day, to find one of

banks

our

started

this

calling our office and asking who
question of interest from date of

the

Dickens

deposit

who

was

date

with¬

which frankly ought to

the

banking difficulties

the question of safety

depositor.

the

with

came

banking holiday,

from then

uppermost

was

I still share that view.
in

Then

of course,

New

York, from the banking holiday
banks paid

President

convenience

location

factor,

principal

which

experts, we have
in

amies

this

for

Mr.

call

attention to

your

business when

and

opportunity to find out just what this

President

Mr.

the

the fact

that there

was

efficiency
that

money

that makes

course,

Wattam:

On the

the

work with respect to
had

not

and

committee

possibilities

and

equitable

basis

Bussing,

who

benefits

Savings

taken
a

Division

most

active

with

made

this?

the

investigate
of

other

methods

Then

our

economist,

Bank

Savings

practicability

some

payments.

our

the

Trust

Co.,

Dr.

started

American
this

Bankers

and

have

Association

picked it

has

certainly

and

doing

are

mighty fine job.
As

result

reached.

Some

ideas

they

the

committee,

certain

are

be
at

but

least

conclusions

which

ideas and

personal

them

pass

have

been

may

some

for

you

the

what

high-degree

must

their

worth.

activity

two

and

that

they

are

half

and

prevalent
that

times

in.

that

minimum

the

others.

relative

which

all

inactivity

depends

checking account

being

arc

called

upon

are

The next item
we

ways

are

factor,

handle

perhaps

that when

will say

2%, how much is that rate?

figuring, it

ranges

deal.

great

the

different

believe that those banks

are

the

country there

tendency toward the adoption
of a minimum baiance, paying
semi-annually, and in many instances com¬
puting quarterly, which provides for less labor, in these days when wages
and

hours

are

other work.
less

prevalent factor.

and

wear

seems

It frees employees to allow them

certainly makes fewer entries

tear

to do

the ledger cards and makes

machines.

our

are

est,
he

the

ones

but

when,

the

machine operator punches

for

wear

for

tear

suppose

the

that, although she

great
The

and

many

that

machine.
seems

does

take

Certainly

much

time

that

and

that

and

years

does

youngster

interested

inter¬

provide

does
item

not
than

people I know.

grown

amazing

might call

in red, which show

her book has been not presented for three

after

bangs out 12 items, I

ask
a

that

thing is that it

that

by changing

from what

prevalent method of crediting interest, namely, interest from
if left to the end of the quarter, and changing to the basis

that I just referred to, namely, that of semi-annual
saved

find

this

business

days of

order

relieve

that

from

restrictive

grace

the

20%

method,

the

which

the start of each

lobby congestion.

basis, with

dividend

allows,
the

costs

the

semi-annual

minimum
have

been

way,

periods

10
in

figuring

it,

but

the

the same account.

have been connected with

you

research

when

1929,

the

Savings

Bank

activity, the results would have

The

We subjected these 52 methods to the
of
these
accounts
had some
activity,
come

cut

and

It seemed practically a hopeless task

since

yet

time

that

been

have

to try

working

has

been

Governors

the

Federal

the

suggestion

recurrent

has

Reserve

that
set

the

much

the

rate,

the

maximum

prescribe a method, and if that is true,
wouldn't it be much better if the banks should choose the proper method
day

may

they

when

come

rather than have
some

thesp

they

such

Y'ou

seem.

has

picked

been

for us?

which

you
are

trying

are

have right in

may

decided

one

methods,

unfair, and yet when

Now, the fact of the matter is that

not

are

Mr.

all

were

could

Frazier

Brundage:

the

Committee

and

methods.

Stuart

have

there

four.

have

you

recommended

why

reasons

State

and the

thought that

possibly

would appiy to all different
even among those four

pretty close to

came

sort of an

some

method

one

above

others

all

and

should have adopted that one method.
it did not

along with this split-rate idea, and

the

in two different ways;

game

same

the activity

going to penalize

are

basic methods

four

But

variation

great

was

be practicing

wise to

saver, you

these

were

the part of the Savings Division, and I think even

given very good

v/ords, if

think that last year

would

Then New York
seem

there

think

variations

agreement, at least

that time

remember the variation, there

Sixty-four methods.

(Washington):

Well,

yet

Division,

Savings Development, which

Stuart Frazier found at

down to four methods, which

get

situations,

in New York State with a split rate.

now

Chairman of

four methods—

Stuart C.

first to

front of me the Vice-President of the Savings

this subject in 1938 again.

liberal, seem

very

analyze the subject they are really not as unfair
actually doing the 6ame thing through a method

that there were four basic methods, and as I
were

in other

reward the consistent

should not do it both by a method of computation and also by a

split rate.
in the Savings Division now,

analysis which is
whom

Paul

will

way

bank

have

conducting a savings account

Before

are

Dr. Irvin Bussing, of

position to make any definite

think

about

that

light

are

want

hundred

survey

with

banks,

have banks that

this

those

field

that

very

Dr.

Bussing

have savings accounts all

banks.

believe

some

we are

extension of the work done by

carefully.
has
the
from 200 up to 600,000 accounts, and they range from the smallest
to
the
largest, about half mutual savings banks and about half

suggestions,
We

has spoken.

already completed, and

date of deposit

balance,

Board

also

commercial

found

approximately the same.
But in these 52 methods, the actual
on these four accounts ranged
from nothing at all, over a

period, to $130.

And so,

I grant you that my young
daughter, when I take her book with whatever
deposit she has to make, perhaps the items that give her the greatest thrill

Well,

Each

accounts.

uniformity,

others

With all

paid

There

bank claims it is paying a certain rate of

Savings Bank Division toward that hope.

accounts

trying to maintain their present rate, but if they find difficulty in
maintaining that present rate, then there seems to be a decided tendency
to adjust the method of crediting interest and not the rate.
I know in our
section

for

who

location

six-month

which, frankly, they do their utmost to get rid of.
interest,

interest

becoming

are

different

same

large

the

upon

receive

adapted

not

time when service charges

balances

banks

policy

institutions whose activities

our

Furthermore, at

many

and

aeounts

funds

new

dividend

present

small

We have certain of

accounts.

that

convinced

The

ways

found 52 different methods at that time.

survey,

paying 4% generally.

were

four

all,

prove

find

there

this

these may

worth.

are

First
must

of
of

who

one

anything to say about the

you

I know quite

(Michigan)

Brundage:

banks

joined by other banks in other States, and

was

interest

depositors

dividend

affiliated

investigation in which
the

authorized

was

you the
33 different

account?

same

Have

the

factors—I

number of the boys here have
opportunity to attend the discussion in that department.

Division

method

the

Ray [Mr. Brundage],

Savings Bank Division.

naturally; if there had been

convention,

this question

Yes.

offered to you.

York Savings Bank Association, at their 1939

when all

ago,

weren't
were

paid varied from zero to $34

today we call them liabilities.
There are two problems:
'Ihe question of the depositor who has been
with you for some time, and the question of the new
money which
is
In the New

year

important

are

Starring],

remember

don't

Starring:

Mr.

the banking

time in

used to call deposits assets;

Starring:

President Wattam;

auditors

and

accountants

costs, and knowing what it costs us, of
determining factor in what the rate should be.

the

heyday

[Mr.

George

come to

quite
the record.

course,

questionnaire and found that there

amount of interest

eliminates

figuring the interest at the same rate?

question of competing for the funds.

To^ay,

out

Wattam:

until about

But then when

charge-offs,

wish that this statement would not be

Today, with most of the banks being insured under the Federal Deposit
Insurance Corporation or various other plans, it really leaves the question
of

2%, uniformly.

carge-offs—and

the minds of these

savers.

earning the

are not

sent

the mind of

reduce their rate because they

and our experience has been that those banks can reduce their
change their method without suffering.
Of course it would be
ideal thing.
There was a time for a long stretch in the State of

rates

tlian

was

organization tries for uni¬

money,

drawal, and I had to inform the inquirer that it was his bank.
Even prior to the banking holiday, I had
gone about the State and had
expressed the opinion rather strongly that I thought the rate of interest
paid on savings accounts was more a bugaboo in the mind of the banker
it

Well, naturally, Charlie,

Albright:

formity and, of course, it is a very desirable thing.
But you are aware,
of course, that no two banks are alike, and there are certain institutions

our

when

Is there anyone who has any questions he would like
reference to this matter?
I assume from your remarks,
do not figure that there might be a possibility of some
along the line of uniform methods of figuring interest?
with

ask Pul

that
on

within

the

three

this interest subject that

going to be in

months

are

going

have

do not have now, and I think

much better position to see the future and what

ought to
been carrying the
burden on this, and I may have left most of the things out.
President Wattam:
I think this subject is of interest to the bankers
out in our territory, and I believe it would be to you.
I would be glad
we

ought to recommend

have

word

say

now,

our

member

will,

banks.

because he

think Stuart

has

STATE SECRETARIES SECTION
hear

Stuart.

from

Have

discussion, Mr.

anything to add to this

you

totally unprepared to
make any remarks.
However, 1 will say that the Savings Division last
year oompleted a very extensive survey on methods of computing interest
and found a very astonishing variance in the different methods used.
I
corrected Bay when he was speaking by saying that we found 64 basic
methods in use, with variations from those 64 methods caused by days of
grace and penalties for excess withdrawals.
But to complement that study,
and
before the Savings
Division has any definite recommendations to
make, we are conducting our current analysis of deposit activity in savings
accounts, and at the conclusion of that, and with the survey completed
last year, the Savings Division hopes it can recommend with soundness
some plan of uniformity with respect to computation and paying of interest
Mr.

Frazier:

Well, I

here to listen and

came

President Wattam:
line

work

that

along that

glad that you have taken steps

are

I know it

out, because

interest to all the banks.

is of

listen,
Springs

However, with reference to your remark that you came here just to
it,

reminds

who

got

putt

the

into

golf

Georgia

trom

last

at Hot

year

and said: "Don't watch; just listen."
Every
all you had to do was listen for it.
In this

made went down

do not want you to sit and listen. Anybody who
anything to offer in these discussions, we want you to come forward

meeting here tonight
has

Secretary

game

light

Mr.

savings?

this out,
get some
Wo also hope to have

wondering how far the A. B. A. will work

I know that you are trying to

the problem.

something for
the

information to cooperate

actual

suggestion on

anybody else who has a question or any

Coapman:

throw

there

subject of interest

Mr.

deposits.

it.

with
this

Fraxier?

in this movement.

you.

Brundage:

there is considerable work to be done

Wall,

Well,

They have to make out a punch-card
the IBM machine, and the banks that are now in it have been given
banks

filling out the cards.

it is not a great job
have each bank ranked
analyzed, but I imagine
the subject of interpretation will go on for some time.
However, we
will begin the interpreting, whatever it is, in about three months.
President Wattam:
I am sure that both the A. B. A. and Mr. Albright's
Nov.

until
to

have

according

get these

that

being

are

this, and if any Secretaries are

with such material.
will accomplish much by continuing this discussion

you
we

long

the next three

that

the A. B. A. is going to have something on this

four

months,

time which will

the

enable

probably will have

thank you,

Paul, for

information

some

Secretaries and

different

Associations to reach some conclusion with respect to their
I

interested
them

the subject in their respective States, if you write

think

not

tonight;

going

are

phases

lot of material

ttey will furnish
here

and

various

that phase of

From then

cards in.

tabulated,

the

office have
in

them

the different

problems.

discussion.

your

My Individual Responsibility
Cashier of The Poudre Valley National Bank, Fort Collins, Colo,

By Claude L. Stout, Executive Vice-President and
The privilege of addressing this group on the subject

of "My Individual

proud.

If it may be said

Responsibility" is
that I have

honor of which I

hobby, such

am very

doctors and psychiatrists prescribe for the

tired businessman, it would be the collection of human

edge of the

in¬

widening ripple of influence that emanates from each

ever

dividual contact, particularly

in key positions,

those contacts with people like you who are

the possibllties of which are almost

For the lack of

ending.

beings—the knowl¬

unlimited and never

descriptive term, I like to call this "the

a more

responsibility of good citizenship," and claim

as my

avocation the building

that

vocabulary, the intellect, the oratorical ability

had the

and intuitive insight to paint an accurate picture
exist today.

of the dangers as they

But I would remind you that in the past 25 years, 23 nations
people have lost the right to speak what they think, the

and 500 million

right to go where they will, to choose their own occupation, the right to

enjoy the fruits of their

labors, the right to have and to hold and to

own

And so this is truly a great country.

worship their Creator in freedom.
I

thankful

that I

able

"America is my home."

to say:

wonderful privilege just to say "I am an American citizen,"

things

valuable than

are more

any amount

It's a

because these

If these things are to be retained and passed on to the next

be preserved—we

American

freedom,

kind

dividual in

his

must

of its institutions,

of its

the protection which surrounds the in¬

right of initiative—create respect for our flag and all it
good,

old-fashioned

valuable than all the wealth

thing just to be ab

e to say

that America is

that you

your

could accumulate,

are an

things

are

I don't care how

It is really worth some¬

American citizen, just to be able

But I believe we are remembering that.

home.

Let's go back and be just good,

Those

Americanism.

successful you might be. in half a dozen lifetimes.

to say

generation,

minds an affection for the

democracy—an appreciation

create

represents,
more

must create in the citizens'

appreciation of all

old-fashioned American citizens.

These

will

basic in good citizenship, are necessary before the people

things

are

govern

themselves unselfishly.

People will not preserve things they do not

There

are

who

many

the farmer,

the executive, the business and professional

say

in fact

any

representative leader of

community,

the

But in the study of civil

should not openly discuss the issues of the day.

government in that country school back in Missouri, I was taught that
great Constitution of these United States guarantees to the
pauper,

the businessman,

the farmer—in fact guarantees to

citizen—the right to speak what he thinks.

every

But when one speaks what he

thinks, he should at all times be honest, friendly, sincere and studious in
the prjsentation of bis views.

fact denying any

Denying the leaders of your community, in

citizen the right to speak what he thinks,

individual freedom and civil liberties
leaders have been indirectly

longer exist.

intention

who

those

d.sfranchised by criticism of the public.
conceived

our

great

that

It means that these

not believe it was the intention of the founders of this great

the

means

I do

government—

Constitutional form

government—that the people of your kind and my kind should be dis¬
franchised from assuming our rightful role in the discharge of the
a

of government

at all times take an

firmly believed and intended that you and I should

active, friendly interest in every question affecting our

business, our home, our community, our State and our Nation.
the slightest

duties of

On the contrary, the founders of our constitutional

free American citizen.

form

I have not

doubt but that they intended that we should align ourselves

with that political party which in our opinion most nearly represents our

have

virile

two strong,

And

age

The solution

held by the man

the street.

The balance

For this reason I firmJy

believe the most constructive thing the members of the

State Secretaries

Section could possibly achieve is the creation of organizations

within their

States having as their fundamental objective the building of

better citizens.

This belief is based upon the simple fact that good citizens

dangerous citizens—and are not mentally or physically

antagonistic

constitutional form of government, nor to the capitalistic system.

These are the invisible values
There are many ways in

sound

public

relations program.

which the banker may explain that the purpose

of banking is not only to conserve

the people

and protect the wealth accumulated by

of this Nation, but to protect and preserve the right of thrifty

The word
often maligned, twisted and misdefined by so-called leaders—

people to retain

capital is so

leaders who are

any

amount of capital honestly acquired.

unscrupulously willing to sacrifice any principle of con¬

science in order to

realize temporary selfish gains.

relief is endangering

Let's remind the public that banks are the nerve centers and

capital.

capital is the blood stream in this
live and maintain
know that.

intricate^ system by which we Americans
Let the man on the street

high standard of living.

our

The fellow

WPA today is getting far more and

faring better

fared in most of the European countries.

It is

merely a matter of speaking the language of the man on the street.

The

than the middle class

ever

population,

rural citizens number about 55 million out of a 130 million of our
and

reach that group of citizens.

can

We still recognize the principle that all men are

ability

created with equal rights,

regretable fact that all men are not created with equal mentality,
intelligence.

and

becoming

and more

obvious that

and thrifty

greater and greater numbers of ordinarily ambitious, industrious

people do not understand industry, business and finance.
their vote is just as influential as yours or
man

matters.

Street.

way

interested in how

national

This

problem.

national banking

standing on Main

lack of understanding has

very

for professional preachers of discontent providing them with

that is conducted for profit.
a

It is my problem just as much as if I were

the opportunity of creating in

makes

mine.

in Maine, Washington and California votes on

opened the

They have the

hazy conception of the vast mechanism of our economic system, yet

most

the

profit is dishonest,

millions of minds

We have

come

I also fear that

distrust of everything

to believe that any man
we

of them believe, that the American way of life, the way in which you

that has too little value and is really not

We have headlined democracy as a cheaper and cheaper

worth saving.

product until the public believes, at least too many believe, that the
can way

With

the

Exception

been foisted upon

with

Ameri¬

of life Is something of little value.

of conservatism, within

the last

10 years nearly

crack-pot scheme and "ism" e\er conceived or devised by

every
as

who

have headlined democracy

cheaper and cheaper product until the public believes, or at least too

many

recent years

mankind

unsuspecting public—and has swept this country

and rapidity of wild-fire.

the strength

Vast numbers of people in

have lost their desire and determination to earn a

their desire and determination to think and do for

living—and
They are

themselves.

determined to live from the productive efforts of their neighbors.

If the

debauchery
of those who never expect or intend to work again, if we desire to check
the growth of ideas that will wreck the future of every farmer, every business¬
man, every banker, the future of every individual and his children, we must
exercise intelligent interest in affairs outside of our profession or calling.
We must renew and live again our allegiance to the responsibilties of good
citizenship; not as a temporary, fleeting impulse, but over and over again
responsible citizens of this country sincerely desire to check the

until it bec3mes a daily habit.

There is

of freedom,

method—in fact,

how to
meaning

absorbing or challenging question today than

make Americans conscious of

liberty—and conscious of the true

live and enjoy it.

And may I repeat, that the best

the only method—by which

people may be depended

affairs
in con¬
May I remind this audience that the

bankers are not holding meetings

It is so simple to explain

tonight in Russia, Italy, Germany, Spain,

Denmark, Norway, Finland, Austria, Poland,
Czechoslovakia, Rumania and many other continental European countries.
Franco, Belgium, Holland,

The citizens of many of these nations,
We

industries, institutions and

private enterprise, lies in the hands of the ordinary citizens.
of power today is

successfully to build

clothing and shelter for his family when he condemns

of his food,

tinually yielding to selfish Impulses.

against any

in that solid substance of good citizenship.

The future of America, the future of all her

to our

source

man on

is to arouse in them a sense of the dangers that lie

problem, the things we hope to accomplish, must find secure anchor¬

are not

the

used

Even the

strong nation.

as a

of government,

I would empasize to every person here assembled, that our problem

respective

He is condemning the very tools his ancestors

his own occupation.

political parties, because when we have just one

much deeper than mere platitudes or placards for or

our

small, is a

engaged in productive enterprise who condemns

man

constructive, conservative action or participation in

particular statute, group program or movement of citizens.
of

Every

the capitalistic system, is condemning the very tools of

upon to assume

They intended that

political party that is the simple definition of dictatorship.

goes

capitalist.

should at all times

ideas of government.

honest

Every person who owns a

wealth today and tomorrow.

new

store, farm or home or any type of business regardless of how

the

banker, to the

in an

person's stock in trade; it is that part of

every

and I like to live, is something

appreciate.

man,

production of

but it is

trusteeship is concluded—and this is a trusteeship which

our

invested in business,

the sum invested

homes and professions,

yesterday's production conserved by thrifty Individuals to be used in the

of material wealth which can

possibly be accumulated or acquired in half a dozen life-times.
when

and equipment,

education, that capital is

and maintain this

of better citizens.

Would

that every person is a capitalist, that capital is the sum

farms,

who

are

likewise demand the more abundant life.

engaged in private enterprise,

who have so much to

the average citizen that only govern¬
ment, with its ability to pay losses from taxes, can long operate any In¬
dustry at a loss, or lend money at rates of interest that would be suicidal
to private business.
In appealing to the citizenship of our people, we have
found one topic of unfailing interest—and that is the bearing our present
economic and financial situation will have upon the future of our children.
protect, must constantly impress upon

Every father and mother in this
happen to their sons and
them

in simple

land is intensely interested in what may

daughters, if we can but place this problem before

language.

standing here tonight at this meeting here, without asking anyone's

subject may be. I repeat
people a sense of the dangers that lie

permission or having anybody tell me what my
that the best method is to arouse in
in continually
of many

yielding to their own selfish personal desires.

The citizens

of the nations that I mentioned also demanded the more

life for a quite a while, before

abundant

they passed into oblivion.

The unfortunate member of society—at least he

believes himself to be

unfortunate—who stands on the street corner of every town or

city in this

BANKERS'

CONVENTION

country, uttering opinions subversive to banking, is a potential threat to

bank,

every

potential threat to the Job of every banker, and of every

bank employee.
banker in

This

man

banking, and

potential threat to the investment of every

threat to the industry as a whole.

private enterprise, of the profit system—the
better

seating capacity at the public trough,

school districts, city,
who stands

man

An enemy of

who clamors for bigger and

man

State and national government—is the

county.

ciations with programs which will be effective in perpetuating the ideals by

same

You may be asked, "How does this affect banking?

which we live.
what way

bigger and better deficits in

the street corner of every town or city in the United

already done so, may be instrumental in setting in motion

you have not

this movement to build better citizens—by supplying your respective asso¬

wi}I bankers receive any benefit from such a program?"

After all, a friendly banking system such as we have in this country can

only exist and subsist among people who understand and appreciate the
functions

banking, and their relationship to the plain

and

business

States and clamors for bigger and better distribution of wealth through the

ordinary business of making and sustaining a reasonable standard of living.

agencies of the county,

The Comptroller's report in

State and national

he had no part in creating.

wealth

government—distribution

Gentlemen, I defy

these demands of the man-in-the-street

that

not

are

any man to prove

now

being placed in

partial effect by the duly selected representatives of the people.
We have powerful groups who do not yet realize that you cannot divide
the

productivity of

energetic, thrifty citizen

any

divide his honest accumulations without
and ambition—and without

New wealth in the form of income

late.

divided,

but capital

working tools of
We must

only

can

be divided

for energy

for wanting to

reasons
can

accumu¬

You

once.

divide

cannot

individual

Each

assembled

here

were

less

There is

record.

should

heed

the

admonition

that

Melvin A. Traylor, who said:

eminent banker, the late

The need is for leadership, sympathetic in its
its viewpoint, but dynamic in its courage.
answer it with vision, faith and hard work.

based

the profit system,

Ours is

the

educate the citizens of this country that they will make

intelligent choice between private enterprise

such

understanding, tolerant in

This is the challenge.

Let's

annually and repeatedly be

man's occupation, without putting him out of business.

any

1935 will show that depositors' losses

7% in the United States in the period from 1933 to 1934.

other industry which can show

and that—you cannot

destroying his incentive

destroying his

than

tremendous responsibility reaching far beyond the confines of

country and for that reason we must not fail.

our own

this freedom we have boasted about

now

know that

long is extremely fragile and perish¬

Without the unselfish devotion of every citizen to the interests of his

able.

hope of gain—or should we say the profit and loss system !—and the
drastic European ideas of state regulation and the fear of
personal punish¬
ment.
We may cling to the one, or supplant it with the

community at large, this democracy, like all others, will end in dictatorship.

have both at the

I realized that it is five weeks this morning since probably the most im¬

the

other, but

who are interested in

and that

There is Out

preserving America,
first of

upon the

the last stronghold of freedom,

of which is the formulation of

continuous program of

importance,

fundamental duties, the very foundation

our

Preceding his prepared address, Mr. Stout had the following to say:

building responsible

Wattam and Members of this Section:

President

we cannot

to pursue for those of

one course

is the sweeping aside of all objectives of lesser

course

concentrating

time.

same

the world that the

This document
have placed such

English Magna Charta

House of Parliament

Council of the Colorado Bankers Association:

document

Speakers Bureau provides approved, competent speakers for
and all occasions, selecting men who have the ability to meet their

any

audiences,

who

men

discuss

can

current

We cannot influence these people

salesman

topics

unless

in simple friendly

we are

friendly.

goes out to the

never

prospect and says, "I'm against you; I hate
you and I wish I could wipe you off the face of the earth; but I want
you to

buy this auto."
An

F/iendship is the

effective

and

practical

has

program

been

boards

stitutions.

and

educators

A plan has

connected

with

State

our

educational

been formulated for supplementing the

in¬

course

study in local schools.
An

advertising
banker in

every

privately owned banking
capitalism

has placed materials and

State, for

our

plays

in the hands of

mats

in educating the puolic to the value of

use

it exists in America today—and the vital
part
preserving our independence in a world where de¬

mocracies have become almost extinct.

Another

vitally

important

phase

the value of his

public

relations

work

the

This requires "selling" the
merchandise, which is often much

difficult than selling the average customer

compensation for all services rendered.

This is

the

necessity of adequate

vast field for

the State

Secretary, not necessarily to work for the establishment of hard and fast
rules, but

to work toward the end that all banks in the State
cooperate in

standardizing their services and the
The services of

State

our own

long

have to accomplish

our

public relations program.

we are

Public

trying to accomplish,

vital to the future of this country and our very existence.

are

It had protected man in

his advancement from the Dark Ages, from the

12th century to the present day of enlightment and high standards of living.
This

document

great

human

beings in the past 1,000

years, and I

again live in the hearts of

once

vital

truly the greatest of all formulated by living

was

importance for every person in this

to remind you

hope that it will be resurrected

and all of mankind, because it is of

man

tonight, and I would like

room

gentlemen that they are not holding public relations meetings

tonight in Russia, Germany, Austria, Belgium, Holland, Denmark, Poland
Czechoslovakia

Hungary and

other

many

European countries.

understand that those meetings have been postponed indefinitely.

of the

department for promoting uniform practices.
individual banker

I don't know how

I hope we have more time than I believe is available at the moment.

relations, at least the kind of public relations

and

program

This

The Magna Charta served a long and useful purpose throughout its life.

into actual

put

practice, by the bankers in cooperation with their State Secretary, local
school

It died where it should have been protected.

724 years, 11 months and 3 days old, and when documents

was

happen in this country.

basis of influence.

very

school

It had died in the

protecting the liberty of men did after they have lived that long, it can

terms.

An automobile

dead.

was

May 22, 1940, and I would remind you

given to the English-speaking people in the reign of

was

House of Parliament.

our

eve

King John, in June, 1215, and it died of neglect, of anemic inertia, in the

program in effect and
I shall give a brief summary of the accomplishments of the
Puolic Relations

First,

the

that it died among friends.

citizens.
In the State of Colorado

As 1 sat here this evening,

portant event in history came over the wires and through the air, telling

cost

interested in keeping public relations and interested in

That is

concerned.

of the Public Relations Council of the State
Secretaries

Section,

member

well

member of the Public Relations Council of the
American Bankers Asso¬
ciation, has been invaluable in putting into practice each
phase of our
public relations program.
For this reason I am convinced each of
you, if

important than anything that

keeping this country

happen in

can

ing at this Convention.
House of Parliament
do

important to

eve

May 22, 1940, five weeks ago last night.

whatever that might be, to

can,

preserve

this

While I do not hold any particular brief for big business, it

that the 341 top-flight executives, 258 of them came from

the country and never had a college education.
the world where you can do that.
own

happen¬

are

I think the most important event happened in the
the

everything 1

country as it is.
is

far

I do not believe the most important events have happened on

Europe's battlefields in the past few years; I do not believe they

I want
a

I
am

that it will give my sons the opportunity which it gave to me.

thereof.

Secretary, J. C. Scarboro, who is

This is the only country in

That is what I want to preserve for my

family.

Explanation of New York State Bankers Retirement System
By Sigourney B. Romaine, Manager,New York State Bankers
Retirement System, New York, N. Y.
President
and

others, it
a

Wattam :.*The

will

lie

may not.

retirement

plan

and

have

attempts along this line.
Up in North Dakota

bank

group
in

are

State

There

the State to form

one

sort

believe that

that

does

not

have

the

number

the

Other

have

one

because

attempted

which

organization

interest
here.

failed

their

embrace

and

opportunity

two

the

larger banks.
They
have their own private

they

for the

For that

own.

have

rest

they

reason

bankers

the

are

interested in

seem

bankers

States

suit

them.

For

that

reason

have

asked

Mr.

Manager of the New York State Retirement Plan, which I
understand is organized under the insurance
laws of the State of New York,
here

come

ether

and

explain

States, which

the

methods

do not have

plan in operation in New York.
Mr.
and
us

Romaine:

Mr.

will

feel

that

in this

Mr.

room

for

which

plan,

Romaine!

President_, Ladies and

if I go into much detail

will retire

retirement

banks
may

comfortable

think

that

Bankers

Secretary

late

now,

pension funds and retirement systems all of

than

number of

Retirement

sure

the

chairs

which

you

are

respective beds

your
you

are

sitting and

favorable if I

System, and I

it,

understand

that

This,
its

New

York

probably will recall,
Social Security program.
you

measures

national

remedy

State
was

six

undesirable

think

situation

that

home

before

the

entire

social

esti¬

from leading insurance
companies during the first three years of
preliminary study, and this committee finally reached the conclusion that
it would be wiser to institute a
private trust than to sign a contract with

insurance

cost;

basic

the

company.
reasons

other

was

material

mittee
This
the

desires
the

of the insurance companies

disability

clause.

Our

committee

called

the

for

was superseded

which

the

Board

elected

are

Trustees

who

death in
of 65,

age

the

hopes of

supplied

use

com¬

amount

vast

questionnaires,

which,

The Pension Com¬

cast.

was

substantially
to

its

present

its

administer

relieved of

was

the

form.

fund.

When

preliminary work and

by the present governing and administrative body,

Trustees,

composed of

members.

the participating banks

of the New York

groups

the

plan

and

well.

1937 the die

Pension Committee

study, it

aims

Lanks

through

present

Board

the

the aims of the committee reflected

the member

committee

recommended

form

Of course,

answered quite

were

original

Eight of these

the eight geographical

State Bankers

Association, while three are chosen
by the Council of Administration of the New York State Bankers Associa¬

tion.
Terms of office are for three years, but as the
original terms were
staggered, the Board membership changes only partially each year now.
The year 1938 was given over
entirely to promoting participation in the

meetings.

before

their appointed

individual

Our

boards

actuary

number of these

agents

traveled all

directors

played

New York

over

banks,

important

part

county and

appearing

Added to this personal contact with

gatherings.

member

banks, a barrage of letters went out monthly urging bankers to
bring the matter to the attention of their respective boards.
In spite of
this activity, however, only 38 banks had agreed to join by November,

all

load

The

board held

men

extra

augment

cur

meeting and decided to employ five extra

small

staff

two

persons—my

secretary

and

myself.
We

had

hit

the

upon

August,

system

and

plan
the

Victor record explaining the
men
literally went through the

making

live

extra

State, extolling and urging participation, speaking informally to directors,
officers, employees—even carrying portable phonographs to show the man¬
how

agement
their

own

the

found

Board

The

hesitated to

axe

useful

vehicle

the

record

would

tell

the

story

directors.

was

to be fulfilled.
and

figured

heavily in this major decision: .One
disability clause in the desired contract.

11% to 15%
administered by a

plan

no one

contract

one

Toward the close of the year

take

mates

Two

wishes

1938.

started

operating

underwrite

group

months ago.

security program became the law of the land.
Our original Pension
Committee solicited and received all kinds

were

the

covered

Trustees and

on our plan early in
1935.
before the Federal Government launched

mittee

speak

began work

all

Brown,

Gordon

the three major hazards of
unemployment, namely,
service, disability in active service, and retirement at the

should

willing to

was

cost

Furthermore,

that

State

the

Ihe bankers

estimated

system.

precisely how much ground Mr. Brown covered

the

York

already familiar with the New

New "Vork State Bankers
Association, spoke informally
should say about the changes We were
making, last spring
when he spoke to you at this Section of
the A. B. A. in Hot Springs.
If I
become repetitious, therefore, I beg your
indulgence, for I do not know

about

contacted

active

trustees

opinion of pension funds in general will be
restrict myself to a very few remarks
tonight.
State

the

your

throughout

participate in this

Gentlemen:

the night, and I'm

than

private Board of Trustees.

put up such a plan, but

Romaine,
to

insurance companies' estimated costs of
operation varied from

higher

incidentally,

number of insurance
companies

program

number of States have tried to establish

not

there,

of their

plan.

to
a

felt

their

retirement, plan.
some

number

succeeded.

organizations

the

last

interest

I know that

that

the

average

Directors and tell

grind;
go

they

to the

bank management
them

the story,

felt they had
board and

say:

was

something

"Gimme,

unwilling to

because they felt they had

this

gimme!"

plan,

and they

STATE
These

efforts

served

crystallize

issue

the

SECRETARIES SECTION

sharply—either

would

Eligibility rules have been modified recently to

operations on Jan. 1, 1939, or we would have to admit defeat.
closing days of November and early December had all the earmarks

commence

The
of

late

road

autumn

with

that

football

But

game.

story—"Either

when
the

start

you

these

system

now

Originally, 75% of
of

the

went out on

men

was
amazing to see what happened.
By armistice Day we had secured only 49 resolutions to join, and the
board had definitely set Dec. 20 as the deadline.
We needed 60 banks as a
very minimum, and things looked dark.
Just what took place in the ensuing

accurately recall.

might have been

nightmare turned out to be the rainbow's end.

found

Suffice it to

staff

however, that what

say,

the

Dec. 20

over

gained six

these
Act

the end of the year owing to

all

banks.

banks about
seemed

think
and

you

that

all

are

think

found

there

plan like this.

think

but lost

participating banks during 1939,

new

For these
A

three of

question

some

familiar

with

was

minds

the

will

you

members
1940.

shown,

they could get out of the plan if they had to do
recall,

National

all

the Federal

Deserve

spite of the fact that
been

have

able

banks

System

and

had been

well

within

number

appeal

the

service credits.

past

They

If you

Then you

into

run

and very

expensive

are

the younger members

can get

infinitely better plan.

the rules and regulations were changed.
desires to join may now join in three different

ways:

premium

the

start

and

ensures

adequate

Most

have quite

decisive

with

now

that is given

any

taken

are

rotating system

bound to wind up 25 years from

I think

pension

people

going

into

complete par¬

publicity, it is going

effect.

be quick to

see that it has its drawbacks if you start
putting a
bank personnel in the plan, leaving out the other part.
You
have troubles.
On the other hand, I think
people today are
little bit differently from the way they did some years

part of your

well

may

be-

can

margin

small

our

join while the older members do.

the

Board of Directors.

ticipation in the plan.

were

Jan.

exempt before

appreciable gain in membership

operate

of
a

which

You will

which

obvious

reasons

bank which

so.

banks

State

The

participant who joins the plan while young.
banks when they are
young, and you get a

you

that

bank

annual

probably all know that if you have to, you can let a
policy lapse.
I think that in spite of the fact that three banks actually
did resign, and though the reasons therefor are well known throughout the
State, and so forth, I think it helped our cause considerably that bankers
realized

hardship.

it must enroll 75% of all employees under age 65
; B, it must enroll
90% of all employees 40 yeafs of age or under, or C, it must
agree to
enroll each new
employee as he or she is hired.
Method C, as you can
see, is the most painless method of all.
It necessitates only a small yearly

of getting out.
Well, I
policies and contracts,

way

insurance

most

worked

the extension of the Social Security

was

there

want

interested, it is

You would be surprised at how many people

in,

once

do not

difficulties

hard to sell

62 participating banks signed on the famous dotted line—
$1,200 of our original appropriation of $15,000 left!
A
pretty close shave, indeed I

and

participation.

encourage

given bank's staff had to join the plan.

rule

25% of a bank's total staff, some¬
times blocked
participation on the part of the rest of the personnel.
Occa¬
sionally it works the other way around and the younger members of the

with

just

this

who has dependents and yet,
strangely enough, the benefits are smallest
to that man
because, as you know, it takes time to accumulate a reserve.
Older people, representing more than

it"—it

six weeks I do not

instances

man

forget

you

thinking

for

and

ago,

don't

see

why,

time,

administration expense, and if we were in business for a profit, our operat¬

cannot

ing statement would have been in the black for both 1939 and 1940.

will

be recognized

not

that

bank

jeopardize the people who

savings

thus effected

tingencies.

Any

venture

the

fund

time,

and

difficulties

same

better

feel

which

established

beset

routine,
able

any

talk

Act

though

practically every banker
adequate pension system in his
for

it.

business.

new

committees

our

intelligently

have

about

found

retirement

and
in

systems

the

members

other

amendment

has

now

tions

Board's
came

rules

and

regulations

Associations

State

the

participating banks
The

which will interest you most of all is the

message

original

approval of

both

the New

the

broaden

result

the

Board of

The

participating

only

insurance

possible

number

strict

very

and

in the New
obstacle

laws, but

the

This

system.
and

Trustees

the

membership to other State associa¬

inquiries

from

regarding the
associations.
Now that

possible participation by the member banks of your
everything is in order, it is my pleasure to extend

lege of

York

amend¬

permit

now

York

the New York

vigilant,

State

might

State

inclined

Bankers

found

all

you

System.
State

respective

Department of Insurance is
doubt

whether

story about
a

talk I promised

to be brief.

taciturn Vermont farmer.

the

is,

If you have questions,

Those

keeping you?

adjourns

that

going to retire at age 65,

are

I
so

interested

bore

you

Wattam:

the meeting
be

question: What's

President

thing

passing motorist drew his

will

banks

who

I thank

Mr.

you

Romaine

those bankers

I leave you with

the

stay here with

those

after

who

Secretaries

may

study of this plan to see if it might be some¬
find useful, can get further information.

might

not

are

ask

that

in the further

their

car

"I'm

going to Rutland."
replied: "Wal, what's keeping you?"

farmer

Gentlemen,
same

hailed the farmer and shouted:

stop,

which

serious

any

reason

we are going to have time to
give them voice immediately follow¬
ing the meeting.
Vermontcrs are noted for their brevity, and if Clark E.
Brigham is present and will bear with me, I'd like to close with a famous

questions will arise.

good

any

I believe

the privi¬

Retirement

your

rates do a
very good job with Social Security, and it
to the individual bank to decide just how far it can
go.

course, up

you

there

now,

modified

join

will

themselves.

decision

which

force

the

At the outset of this

Perhaps the

full

those
banks
that
cannot
pay
the full amount.
We
original plan,
contemplating 4%
contribution
by the
employee and about 5% by the participating bank.
We believe that will
ensure
an
adequate pension at age 65.
On the other hand, the reduced

general.
ment

rates

recommend

smoothly,

the

are coming in as young people today.
something about the Social Security Act.
The Social Security
right along hand-in-hand with this plan of ours.
We have

goes

reduced

the

however,

now,

functioning

are

with

You know

con¬

■'

requires

recognizes the value and great need for an
bank, he is often reluctant to "go to bat"
have

The

future

against

reserve

v"/:

new

stay

interested

it,

don't

want

keep

you

with listening to these questions.

you

Committee / Officers* Reports—State Secretaries Section
Address of
North
The

State

carrying

President C.

Dakota

Secretaries

Wattam, Secretary of the
Association, Fargo, N. D.

Section, pledged

the splendid

out

Bankers

program

usual to full cooperation in

of Association

activities

outlined

."Second, to present for discussion to the other secretaries
operating
problems within his own association, and thus obtain from them
helpful
as to how similar problems have been handled in
such other

information
States.

Heretofore, during the few

I have been attending these meetings,

years

President Hanes and the various other officers and staff
members, has from
the information which has come to me, lived
up to

the meeting of the Secretaries Section has occupied but

tributed

reports of committeees made only by the Chairman, the reading of which
could well be dispensed with, unless such report presents a matter of
sufficient

expectations, and

however,
be

materially to the

estimated

when

the

of this work.
Scattered
as they are,
Union, the results of their efforts can only

success

one to each State in the

summarized

con¬

situation

whole

throughout the country is
and the accomplishments

by the head office in New York,

generally over the fiscal

year

StaffheadswithwhomI have been in contact indicate general satisfaction
with cooperation of the secretaries in the
many and varied lines of activity,

including membership,

public relations,

insurance,

consumer

credit, and

A general letter which I sent to all associations

calling specific attention

President Hanes* request for cooperation in loans for defense
purposes
with an immediate response, and the letters received from a

met

majority

of State Association Secretaries and Presidents,

indicated

whole hearted

It should be borne in mind,

and

fall

meetings,

however, that with the Secretaries scattered
a portion of

complete cooperation

not

them attending the spring

only in

American

Bankers

Association work, but even among our own committee
members, is some¬
what difficult.
Secretaries

who

thoroughly sold

attend

these

Scattered

meetings spring and fall,

sure

are

the idea that the officers and members of the staff of the

Secretaries

leads

me to

State Association members

from the Section.

To begin

are

obtaining full and complete cooperation

with, it should be noted that

number of Secretaries do not attend either meeting.
are

very considerable

True, these absentees

for the most part from the States with a small number of

whose association finances

are

banks, and

somewhat limited; but on the other hand, it

is possible that a more intensive program for the Secretaries Section

might

the

same

attempting tp outline

program

for this meeting,

I wrote to each

Secretary asking for suggestions, thinking in this way to build
both instructive and interesting, and one which
attendance
the

fact

programs

that

possible.
among

of the past few

The purpose of a

program

large an
These letters produced results and developed also
the Secretaries themselves there is a feeling that
years

have not been

of information and cooperative ideas as it

to me,

would induce

profitable

nor as

productive

might be possible to make them

Secretary in attending these meetings, it would

seem

is or should be:

are

always mimeographed and

no intention of

criticising

our

one end of the

Assoiation, required

While it is

true that

may

to attend

practically

fully covered in these
keep in mind that many of these are held at

one cannot

attend them all.

little opportunity, if

any,

Th ey are also of considerable

is presented to ask questions.

is therefore much information of value which escapes even a

There

diligent Secre¬

tary who attends all the meetings which the limited time will permit.
With the idea of increasing the efficiency of the Secretaries

Section,

ducing

higher

Association

degree

and the

Section

Secretaries
financial

of cooperation

StatcAssociations,
of

such

cannot

resources

nature

afford

between

that

the

even

have* their

the

American

pro¬

Bankers

and making the programs of the
States

Secretaries

with

miss

limited

them, let

present this suggestion for your consideration.

It is suggested that programs of this section in the future be divided into

periods,

one

of which shall be devoted to

discussion of the

activities of the American Bankers Association, led
by staff members from
the different
taries

departments, emphasizing ways and means by which Secre¬
might utilize for the benefit of their members the services of the'

American

Bankers Association and methods of
promoting better coopera¬

tion among the individual bankers.
also

develop

considerable

Experience of various Secretaries might

information

value

connection

with

such

discussions.

The second part of the program then might be devoted to a-round table

of operating

problems within the State Association, and the
this portion of the program should be chosen from
among the
members of the Secretaries Section.
leaders for

A program

of this kind

in the nature of

with the information which they are

do-es, should

be much

a Secretaries Clinic, so to
speak,
seeking administered in concentrated

beneficial

and

productive

of desired results

both from the standpoint of American Bankers Association and the State
Association than the present method requiring the. Secretaries to rush
from

meeting to meeting gathering
the gaps
one

"First, to ascertain what work the American Bankers Association is
doing which may oe of benefit to the banks of his State, and ways and
means of cooperating with the officers and staff of this Association to the
end that the best results possible may be obtained."

they

therefore, in order to obtain the information they

time and

discussion

make the benefits such that they could ill afford to miss them.

from

all of the American Bankers Association activities
qre

two or more

President of the Section during the past year, however,
inquire as to whether either the American Bankers Association

are

various sectional meetings,

field throughout the country.
as

that I have

are

the larger sectional or divisional meetings.

My experience

say

they

activities of the American Bankers

American Bankers Association have the welfare of banks,
large and small,
at heart and are doing all in their power to better conditions in the

banking

including

size and very

desire to render all assistance possible.

throughout the country, and only

And here let

small portion of

matters

country to the other,
opportunity to get together except at these meetings, how can they
be expected to function efficiently?

with

desire

other fields.

importance for immediate discussion,
distributed.
committees.

ascertained.

day out of the four, and has dealt largely aith routine

one

from

little here and

little there, and filling in

of conversation picked up between meetings from
with whom they may come in contact.
scraps

These ideas

have

part

I still believe there is considerable
trust

that

the

matter

may

any¬

been carried out in arranging this program.
room

receive

for

some

improvement however, and I

consideration

here

that

our

whom devolves the duty of arranging the program, may

have the

benefit of your views with respect to the matter.

appreciation to the officers of the American
to Frank Simmonds, our genial

In closing, let me express

particularly

and

Association

Bankers

cooperation and assistance extended to us. We desire—
best efforts to the end that this program of
activities which you all have so carefully and painstakingly worked out
Secretary, for the

all of us—to pledge again our

the full measure of benefits now anti¬

bear all the fruit and produce

may

cipated and expected of it.

for places in which his valuable
benefit of your association. Likewise, in¬
clude the bankers who have almost unlimited ability but lack the initiative of
a self-starter, of which we all have a few examples represented in our asso¬
perienced, and constantly be on the alert
be developed for the

asset may

and then concentrate on doing a little pushing at the right

them started,
moment.

Another tab in our index

all heard the saying

Committee on Banking Education and
by James C. Scarboro, Secretary

bankers will accept tactful suggestions without assum¬

thinking American citizen a new sense
the world changes so

of responsibility; an amazement at

rapidly taking place which were until recently believed

impossible; a new realization that these United States are now
recently we failed to grasp the significance of

and even more recently when these prosperous times gave way

prosperous,
to

but the very

and
foundation of our country—

Nation

built—was threatened with

depression, we failed to realize that not only business, professions

industry were being submerged,
freedom

the

which

upon

this

was

extinction.

just experienced a series of the most startling world-wide events.

which democracies have passed into history

We are aware of instances in

breath-taking space of less than 72 hours.

Right in our own front

from our good graces
the spirit if not the words of the Constitution of the United States.
This
Constitution guarantees to every man the right to speak, act and think
as he desires, so long as he recognizes the rights of others.
It offers to every
citizen an opportunity to enter business or industry, and prosper according
to his ability.
We now know that these precious, intangible values are at
stake, yet we do nothing about it.
Too many of us are satisfied with con¬
fining our worrying to our own particular business; too busy, if you please,
into politics as a private citizen, exercising

his democratic franchise

place able and courageous men in high governmental posi¬

in an effort to

which would direct

tions; tco blind to read the handwriting on the wall,
in our efforts of self preservation.

Many of us in the State Secretaries Section permit ourselves to become so

engrossed in other projects that we become Indifferent to banking education
individual

the

whom you would
material and make suggestions concerning their

type of address, and segregate the one

delivery.

Secretaries, study your bankers, catalogue each and every
prepared to launch upon a public relations pro¬

So, fellow

member, and you are then

We are inclined to leave that sort of thing
Our attitude is directly comparable to the

bankers.

lethargic State of a large portion of our citizens—we are still living in

the

which will be a much more powerful factor than memy patting

gram

public on the back to gain its good will.
In Colorado, necessity has forced the development of a practical public

And I speak of Colorado because I know why we are

relations program.

A good many other States have launched upon worthwhile,

doing it.

good many States have not gone into public relations.

the same virtue,
They have con¬

centrated on some newspaper advertising to sell a bank or a group

of banks

service standpoint, but that is not public relations.
We have to get into the funda¬

the public from a

much further than that.

We have to go

mentals upon which our country

is based and upon which the entire pro¬

and development of our country has been made possible.
We have
re-instill those fundamentals into the people.
When we do that, we are

gress
to

accomplishing the aims of true public relations.
In

and other selfish

State, certain pressure groups, political blocs

our

capitalized on the lethargy of the average American citizen

interests have

supporting larger

until we have the dubious honor of paying higher taxes,

relief and old-age pension rolls, and heading more

sucker lists than almost

Our job, as you can see, was a tailor-made job,

State in the Union.

any

Gradually the Public Relations Council is developing

all cut out for us.
a

and public relations programs.
to

of your bankers you can call upon at a moment's notice

to deliver the proper

prefer to supervise their

yards we have endless movements designed to remove

to enter

merely be antagonized by similar treatment.

practical, fundamental public relations programs, but by

We have

in the

trying to tell him how to run his business,
susceptible to a little discreet flattery,

which of your members are

know

the last and

the one remaining land of freedom. Until
these facts. When times were

only stronghold of democracy,

ing the attitude that you are

Know which

12 months have awakened in the mind of every

of the past

force to the Association Secretary.

club," and this applies with special

and which will

Bankers Association

Colorado
Events

You've

"Bankers' Weaknesses."

should read:

that, "More can be accomplished with candy than with

Know which of your

Public Relatiorfs,

catalog those bankers who need pushing to get

In other words,

ciations.

Report

this card index the men who are willing but inex¬

Be sure to include in

staff members,

American Bankers Association

officers of the section and
upon

CONVENTION

BANKERS'

whereby the Government of the State will be returned to the
instead of being monopolized by small, ctosely knit, well-organized

process

citizens

minorities who prey upon the thrifty, justifying themselves upon

the premise

"government owes them a living."

that

Our program

has been proved to a large extent, yet is still in the process

of development and

It consists of several distinct parts,
developing an army

improvement.

"glorious past" when the road stretched smoothly ahead and we were not

all directed toward the same end—that of arousing and

compelled to worry over the other fellow's future in orer to perpetuate our

of well-informed, able citizens

own.

that constitute a threat to the American way of life.

Borrowing the theme of our able President, R. M. Hanes, I have adapted
it

the application of nanking education and

Secretary's

State

been

Having

of view.

point

public relations from a

with

closely associated

public relations leaders for the past four years, and having acted as Secre¬

Relations Council in my own Colorado

tary of a truly outstanding Public

Bankers Association. I have come to the conclusion that out title phrase,
as

Secretaries, should be "Know Your Bankers."

the members of his association in order that he might
some

retaining this banker's friendship and association dues.

Perhaps this is a slight

social lions.
the

Not all Secretaries are basically

exaggeration.

But there is not

bit of exaggeration in the thought that

one

problems confronting the State Secretary today are vastly different

from those we knew during more prosperous,
many

There

is true.

less dangerous times.

There

of you who have proved your ability to serve your association

under widely diversified conditions,
are

and you know that what I'm saying

others of us who are comparative newcomers to

this

each striving to conduct his office in a manner that will reflect

group,

credit upon

the Association.

All of

old or new, must recognize the

us,

out the country

could be unified to one end.

The various steps we use to

The public relations
developing a mar-

council of the American Bankers Association has been

supply of the necessary materials with which to accomplish these aims

veious

I have here, and each of you have on your seat there some
literature on

building business for your bank.

place, this new

That booklet, that has been

complete

prepared and came off the press last Saturday night, is the most

employee training that has ever been pro¬

and the most thorough guide to

duced.

Every State bankers association and public relations committee or

council could well afford to take upon themselves the

duty of seeing that

bank in their State is acquainted with this particular work and have

every

sufficient number for every employee.
The

Bankers

American

Association

likewise

has

speakers'

bureau.

Every State Secretary, working through its public relations council, could
make adequate use of the splendid speakers available through the American
Bankers Association.
effort that we must

free enterprise.

coordination of

of State bankers associations through¬

the

perish with the American system of

Section and through the Secretaries,

that all public relations endeavors

the

State Secretaries Section would like to see accomplished
effort through the State Secretaries
so

obvious fact that we shall survive or perish wjth the banking business, and

banking business wail survive

There is no need for

What we
education-public relations committee of the

must do and what the bank

diplomatically prevent

serious-minded banker from mentioning business at the convention,

at the same time

are

requisite

State Secretary was the ability to maintain social relationships between

who will militantly oppose subservive forces

State Association to follow the plan we have in Colorado.

accomplish these purposes are more or less immaterial.

All of us can look back a few years ago to the time when the prime
of

any

That is the type of cooperation or

coordination of
they are

have, and it is up to the Secretaries because

key men in the State bankers associations to see that this job Is done.

glowing addresses airing the splendid accomplishments of the First National

practical
American
citizens with all that the American banking system means to free enterprise.
Because we catalogued our bankers, we chose H. N. Bales, Assistant
Cashier of The Poudre Valley National Bank, Fort Collins, to lead in this

Bank of Poodoo.

Division.

existence that

we can no

vital bearing upon

longer be content with good institutional

advertising, employee training in fundamental banking principles, or some

must

is faced today,

Public Relations must go much deeper than that.
nationwide

thinking, fearless
ability.

persons,

backed and fostered

movement,

who realize the dangers with which

thinking,

assurance

careful

our country

rebirth of love of freedom,

renaissance of

revival of individual

initiative and demand for the rights of individual ability.
the

and who can and will give unselfishly of their time and

If it is to be worthwhile, it must bring about

fundamental

It must

convey

that there is absolutely nothing we can take from dictator¬

ships, or foreign "isms" that will better

our

American

way,

unless it is the

realization that we in America may search the ends of the earth and find

body politic that

in the Constitution

with the blessings of liberty as embodied

compares

of the

United

States.

A good leader listens
program

to that

sacrificing fundamental objectives. It is the individual banker

who must make possible the type and kind of public relations program

should ultimately be

put into operation in every

And here is where the State

that

State in this country.

Secretary enters the picture, if—and this is

big "if'—if he "knows his bankers."

The

Secretaries

who know

their

bankers can put into operation the soundest, surest and most practical
public relations program imaginable, because their membership represents a
wealth of material when properly classified and directed.
Know your bankers, fellow

patriotism to

The

our

schools, and briefly, to acquaint the future

Results have amply

justified our selection.

Employees' Training Division

clerks, bookkeepers,
bank employees to

they want to be and not because

operation of
To reach

conduct an advertising department.

"big

newspapers,

business"

&c., a glimpse behind the scenes

maintains payrolls and subscribes to civic improvements

corner

of the State.

paign for

a more

have cataloqued the capable, energetic

New speakers are constantly
many

and varied.

attention to the fact that speakers are
very

short notice and

are

available for any and all occasions on

who accept

which makes it possible for them to voice

sigh of "Thank

God, that job's done."

Classify

your

are

develop new

men

raw

to step into the breach and take

your association loses

causes.

willing and capable

Develop that intuitive ability to

recognize latent capabilities and talent, and from this
when

vulnerable.

wide discrepancies in practice

It is often

old stand-by through

material be able

tend to make our system

slow and discouraging process

in establishing any

degree of uniformity; however, the work is invaluable in warding off possible
Radicals who, dissatisfied with that

the minds of people who are too lazy to

bankers according to the time they

of devoting to matters outside their bank.

problems as service

charges, banking hours, interest rates, methods of payment, and similar

punches "below the belt."

•

job will be well done.

sought by directing State-wide

variety of topics.

of the right man for each and every job, and elimination of committeemen
a

Here

speakers who may be called into

being developed, and the subjects they discuss

New outlets

matters in which

air of satisfaction and

that of a speakers bureau.

action on brief notice, with the assurance that the

are

In every

Reasonable and readable facts are used in this cam¬

enlightened public.

One of our most effective departments is
we

but "little business"—the kind that pays

peculiarities, their ability to work with others, their capacity to adopt new
ideas. Catalog each and every banker in your Association as to his ability
to do certain jobs, because this knowledge will make possible the selection
an

It brings to the American public

pattern of "safety, security and service."

through the medium of

Ma¬

with the old familiar

terial originating in this department Is not stamped

business—not

aid

Hitler tells them they must assist in the

The Division of Uniform Practices deals with such

Secretaries, know their personalities, their

the appointment with

designed not to make better bank

government bank.

wider group, we

was

tellers, &c., but to make better, citizens and to

realize that here in America they are bank clerks because

taxes,

The banker is the natural leader in his community.

carefully to the voice of public opinion, and adapts his
trend without

developed a school program, designed to return a little

We have

Banking Education and Public Relations have such
our very

to think the worst of

think for themselves.

They prefer

banking because it represents capitalism.

We do not advocate the

adoption of

our

particular program by every

State association, but we do charge every Secretary

with the responsibility

successfully eradicate

over

responsibilities

of leading his members into fields of activity which will

any

of the various

the seeds of distrust and disrespect of the banking business now
the public mind.

freedom

their dissatisfaction, are poisoning

planted in

STATE
Report of Committee
Armitt

Insurance and Protection, by

Coate,

SECRETARIES SECTION

Secretary

the

the adoption of this

proposed form will require legislative action, since the

fire policy now in use is invariably prescribed
by statute.
If bankers throughout the country are to

Jersey

New

Bankers Association
tribute to the Secretary of the Committee on Insurance

and Protection, are as inseparable as New Jersey and a Convention.

frankly,

cause,

legislation to make the

Bo-

look

guidance and tireless efforts of Secretary James E.

Baum.

From his conning-tower in the New York headquarters of the A. B. A.

different

severe

Committee, Secretary Baum keeps in close touch with the surety companies'

rating and drafting organizatio

being done by his committee.

Committee

the interest of member banks through State

Secretaries.

8tate Association

broad program.

It imposes

member banks aware of

Secretaries

Another item

steps to

raised

checks.

Nearly

State places

every

portant

always to remember that low insurance

rates are

thought and real hard work that

past three years, the annual cost of insurance to banks has been cat

tection

against

than four million dollars—nearly eight times the annual dues paid to the
what

Insurance Protective department of the A. B. A. have saved them.

example,
on

one small

bank, paying dues of $75

its insurance premiums.

premiums.

as a

is saving $549

Another, paying $50 in dues,

These reductions do not include

and they are not isolated

by banks

a year,

They

cases.

the

For

very

low

insurance

losses

considerable

was

lower rates.

insurance

the part

records.

Your committee

was

eager

for

the return

of any

axes

rate for

burglary and robbery insurance, written

excess

over

Early in September,
not

lower rates

new

premium reductions for many banks.

Savings

depending

time, robbery rate

location.

the

same

range

Remember, low insurance rates
the

are

cause

of this substantial

We all pay dearly for the mistakes and

single banks.

here has

Insurance will

It must be based

never

would be incomplete without

and in

serve.

brief bow

"golden egg"

loss experience,

equal opportunity to observe and

will want to join

one

inspiration of

These

from 1214% to 30%,

your own banks

Minimum bank losses

something for nothing.

Every

bankers'

They provide

My report

lems with the
his

While they do

provide uniformity, they are a step in the right direction.

retiring

our

A. B. A. President.

announced.

were

instead

chance to repeat the old slogan, t'All for one and one for
line of endeavor is this theme more important than to bankers.

that every one

uniform

negotiations have borne their first fruits.

insurance

misadventures

armed with loss experience figures and with the in¬

blanket bonds for banks in cities with less than 100,000 population.

miss

never

all."

than they

upon

No single factor can increase the cost of insurance
protection faster than

condition.

vigorous attempt has been made to negotiate

depend

saving.

individual banking carelessness.

formation that sales commissions paid to the companies'
agents and brokers
on
bank burglary and robbery insurance were higher than losses to the

companies.

embezzlement, swindle and fire.
to

Almost every bank loss is preventable through care¬
bank procedure and personnel management.
I

only the effect.

annual

Naturally,

such

individual banks

poured into the pro¬

further cooperation of local law enforcement groups to

urge you to enlist

of insurance companies to

in losses, commissions and

more money

They were not

are

study of individual

are

Some companies have been through a painful period where

they were paying out
received.

shown

reluctance

mistake

impossible without

upon

It requires a certain amount of skepticism and even mistrust

provide for the safety of

direct result of A. B. A. efforts.

painstaking job, balancing the high potential insurance risk with the

actual

there

banditry,

fundamental

modern bank.

every

ful

The work of the A. B. A. Insurance and Protective Committee has been
a

Losses, in turn, reflect directly

to discover weaknesses in the armor of
protection which should surround

typical of the savings enjoyed

are

banks

vigilance.

a year

of March

would

the

$205 in

saves

decreases

time

of its just praise, It's Im¬

any

A. Insurance

show

some

the banks' liability for forged or altered
checks, but the recom¬

upon the care and

bank records

for ten

only three States.

There they will find that through, series of rate reductions obtained in the

Individual

such

This

the A. B. A. program which should appear on the "must"

low insurance losses.

Bankers Association.

penalty reaches serious proportions.

the A. B. A. program of State legislation

and Protective Committee, they have only to glance at the balance sheet.

American

the dishonesty of a

We have seen amazing insurance
progress in recent years, but I want to
take just a minute to point out the
fallacy of any gloating over the record
to date.
Without robbing the A. B. A. of

raise the standards of insurance protection and maintain equitable premium

schedules.
If any one has ever challenged the importance of the A. B

the

point is the

mended statute is necessary to safeguard the interests of
banks in about
15 States in which it has not been enacted.

changes and Improvements in the equipment and
necessary

altered

limitation

twofold obligation, first, to keep individual

training which make banks safer, and second, to take

An example in

legislation for the protective of banks is the recommended act fixing the
liability of a bank or rtust company to its depositor for the payment of
.forged,

assist in carrying out its

Legislation.

Payee Act," which Is urgently necessary to relieve banks of

years, yet it has been enacted in

As in other matters of State legislation and regulation, the A. B. A. Com¬

mittee lookB to

should not over¬

legislation recommended

penalties simply because they honor checks bearing genuine signa¬

model statute has been

limitation.

State

and in some instances the

cases

Obviously, the duty of the Secretaries Section of this Committee is to
arouse

of protective

types

against banks

During

augment the work of the A. B. A. Insurance and Protective Committee,
Committee's work is limited to support—if this is

Steps must be taken toward

but made payable to fictitious payees
through
customer's employee.
Decisions continue to be held

Many of you are currently well aware

to act.

fire policy effective in their respective States.

tures

the past year you have received very complete and encouraging reports.

and

the

"Fictitious

of the magnificent work which is

new

In any program of protection for our member
banks,

hardly be worth the time to read it if it

my report would

not for the shrewd

were

the benefits of the new

reap

form, it behooves State Associations
My report, and

great national body.

we set out on a new

Houston, let's pull
it will insure

Let

Robert M. Haness

resolve to face

our

local prob¬

confidence and resolution which he has manifested in

same

dealings with the Association.

when I point to

year,

the

guided by the broad experience of President

oars

together.

do that

wholeheartedly,

better day for bankers of tomorrow.

territories have

been reduced from four to three.

result cf the persistence of your committee, surety companies have

reduced rates for bankers' blanket bonds.
effective

March

1940,

Here, in highlight form,

save

These

banks nearly

reductions, which became
million

dollars

annually.

Report of Committee
Lauder
Hodges,

Standard Forms, by Chairman
Executive Manager,
California
Bankers Association, San Francisco

the results of this reduction:

are

1. The heaviest reductions apply to Form 8, Revised: 21% to 29% for
banks having 25 or less employees, and 21% for the larger banks.
2. Form 8, Revised, may now be written without misplacement cover¬

when

the

premium is further reduced 13.3%.
Also misplacement
coverage may be included in the No. 8 Revised Bond, for an amount less
than the bond penalty.
3. The charge for misplacement coverage under Form 2 is reduced 35%
to 86% to banks having 25 or less employees, and to
larger banks the
reduction is 50%.
The reduction on Form 2, however, applies only when
misplacement coverage is included.
4. Retroactive reinstatement coverage, as contained in Form No. 8
Revised, is granted without additional premium charge to assured banks
carrying Form 2 primary or excess bonds for a total coverage not exceeding
$100,000.
5. Changes under the foregoing paragraphs apply to all banks having
25 or less employees, and to those banks having more than 25 employees,
whose incurred loss ratio for the last five premium years has exceed 45%,
provision is made for submitting their loss experience to the Towner Rating
Bureau for determination of the rate to be charged and the amount of the
retroactive reinstatement coverage which may be given without additional
premium charge.
This plan, which applies only to the larger banks, is a
further step toward merit rating on the basis of loss experience.
age

Even

recently

reduction has been announced in

a new

scale-down

of premiums charged for blanket bond coverage of small branches
operated

by banks.

This reduction

companies'

was

bureau.

rating

the result of negotiations with the surety

Your

Insurance

and

Protective

Committee

Mr. Hodges—preceding his prepared address said:
Mr. President, Members oj the State Secretaries Section, Ladies and Gentle¬

These remarks this morning are based

men:

all

The report, gentlemen, reviews the basic factors of form,

American

Bankers

Association

An original adjustment was made which scaled down

its and withdrawals.

and

the

State

Secretaries.

The

material is based upon a questionnaire of which you all received
I

con¬

by the
factual

and

a copy

happy to say all but one State Secretary responded generously and

adequately.

To give you an idea of what the questionnaire showed, let

summarize statistically.
Seventeen

Secretaries and the American Bankers Association reported

either considerable present activity or else a form service based

activity

along that

Four Secretaries reported that they

line.

past

were

in¬

terested and considering adopting a definite program but that so far noth¬

ing had been accomplished in their States.
Twenty-six reported generally that there
expressed in tangible form.

was no

Two Secretaries

interest in their State

were unable to furnish

any

definite report, one due to a change in administration on account of the
death of Paul Brown and one not being able to respond at all.

"We

operations are restricted largely to the handling of depos¬

design and

the forms field and outlines the principal accomplishments so far

The address of Mr.

to offices whose

the assumption that you

trol, summarizes the main benefits to be derived from systemic work in

branch.
or

have mimeographed copies of the report.

criticized the blanket bond premium loading of $250,000 annually for each
In practice, this cost was excessive when applied to small branches

are

Hodges follows:

often amused and provoked by the lack of knowledge displayed

by the public when it comes to banking matters

the handling of their

financial affairs, but I think if we would stop to remember the great num¬

this flat rate for banks whose entire personnel, including head offices and

ber

branches, consisted of 15

practices, even in banks situated in the same town, we would think that

now

was

less employees.

small number of banks.

schedule

scale down to

low

Obviously, this relieved only

result of further negotiations

made effective July 29

lower cost

Annual premiums for branch offices

$100 per

It is safe to

year.

assume

that this

most recent revision in insurance costs will save the banks of this country
many

thousands of dollars.

capitalizing on the difference in

Blanket Bonds Form 8, revised, and Form 2.

It is

ing to characterize these two standard forms

In seeking

cost

some

States

of the Bankers'

erroneous

and mislead¬

giving similar coverage.

protection for individual banks it is important to remember the

old truism:

Better to be safe than sorry.

in the Form 2

bond,

even

though they

Because of the restrictive

may seem

terms

unimportant to the smaller

banks, the Insurance Committee has not approved it for primary coverage,
while it has approved the Bond Form 8, revised.

of coverage

for adoption in all States.

Over the years extensions

have been granted without additional cost.

able only by endorsement.

I quote

from the Report of the Committee

Standardized Bank Forms,

"The forms problem," says a recent report of the New York State Bankers

operations, convey their message clearly and pleasingly to customers and
others, and afford adequate legal protection to all concerned."
Work in this field has. of course, been carried on for many years but most
of it has been on
on a

They

were

avail¬

These endorsements added nothing to the

pre-

small scale and at sporadic intervals.

A fresh approach

national basis is being undertaken by the American Bankers Associa¬

tion through a

subcommittee of its Bank Management Commission.

Associations.

appointing the Committee on Standard Forms, State Secretaties Sec¬

tion, American Bankers Association, no instructions of
were

limiting nature

imposed and the Committee was left free to explore the field and

survey

the work done both in the past and currently, with the tacit under¬

standing that

would

make some

recommendations,

warranted,

mium, but they did add considerable responsibility, because if they were

guide posts for constructive action by the State associations.

overlooked the result might have been an uninsured loss, or at least

will therefore deal with the

dis¬

In the proposed revision

reported at Houston in the fall of 1938,

these extensions of coverage were

many

incorporated in the policy itself.

The

proposed policy was approved by the National Association of Insurance
This new standard form of fire insurance policy will benefit by comparison

States. In almost

The Committee lays

outlining the principal
no

every

State

accom¬

claim to originality—the

report is primarily a compilation of results to date.
At the outset it would be well to recognize the

Commissioners at their meeting in San Francisco last June.

with existing forms in all but two or three

summarizing the main benefits to be

derived from systemic work in this field, and

plishments thus far.

This report

subject broadly, reviewing the basic factors in¬

volved in form design and control,

puted claim.

Im¬

portant contributions have also been made recently by several State Bankers

Most of you are familiar with the need for a revised standard form of
fire insurance policy

the public was not altogether to blame for their lack of understanding."

California Bankers Association, May 25, 1921.

Association, "Involves the development of forms which promote efficient

It has been brought to this committee's attention that in
insurance agents are

of different forms, the utter lack of uniformity in our methods and

underlying

activity in this old and somewhat uninspired subject.
behind

the bankers'

fresh

interest is the need for

reason

for

new

The driving force

additional revenue,

BANKERS'

56
direct result of the problem

reduce

of decreasing income and mounting expense.

attacking this problem is through finding ways and means to

One way of

formjof

making the

size representingJanJeven^cutXfrom standard mill

mind, jf

stock should be borne in

through increasing operating efficiency and

especially

expenses,

CONVENTION

indicated, the weight of the paper used is dependent to
upon the mechanical equipment employed in completing the

bankers to simplify
These banks report
the accomplishment of substantial savings.
Bankers familiar with this
subject say that systematic forms work on a broad scale offers a great

record for five to ten years or more.

opportunity.

which

effecting operating economies, and this has led many

some

and standardize their forms as an economy measure.

form.

will suggest many ways In which a

A little reflection about the matter
bank can benefit through

light of the large part

daily routine and the cumulative volume over an

which forms play in the

extended

apparent include the

Economies which seem clearly

period.

following:

and utilizing others

completely.
Saving in Paper Costs:
Substantial reductions in paper costs can be
made through choice of stock on a more scientific basis, purchase in larger
.....

quantities, and more effective utilization.

reduction in the

Forms should be designed to meet the requirements
of standard filing equipment, thus facilitating the use of the regular files
for forms and eliminating the need for special equipment.
Filing Economies:

Operating efficiency can be Increased through simplified

in the interest of efficiency and sim¬

cooperative action, such as through the State associations
This kind of work is

Association.

Bankers

American

the

frequently require the assistance of experts in

services which can be made available through all

forms and procedures,
banks through

important in view of the trend toward
available

Re¬

replacing less efficient forms.

eliminating duplication and

finements of this character

forms for use in transaction where

More important, there is a large field

currently employed.

for improvement of existing forms

There are oppor¬

they are essential to efficiency in operations.

tunities in some banks for the creation of
forms are not

standard forms.

related to efficient operating practices;

Good forms are, of course, closely

especially

making banking facilities readily

people in the lower income

by way of consumer

brackets,

similar services.

finance, personal loans, pay-as-you-go checking plans, and
Still another benefit is the assurance of adequate

legal protection, both

The element of
Records which are to be

early and complete attention from the legal standpoint.
safety is also involved in the paper stock used.
retained

tent is

permanently require a stock with

Proper care in

long life.

life span.

selecting the paper will assure a form having an adequate

black ink

Finally, there is the effect which forms have on relations with customers
be

designed

Forms for use by customers or the public generally
to please by their

meaning, and attractive appearance.

should

convenient arrangement, clarity of
Such planning requires discrimina¬

style and size
of type, proportion of printed matter to white space, arrangement of the
printed material, etc.
In the opinion of bankers who have been engaged
in this work, the slight added expense sometimes involved is more than
offset by good will.
Looking at it from the negative side, the use of well
designed customer forms helps to prevent excuse for the hostile attitude
ting judgement with respect to quality and color of paper,

sometimes assumed by customers when

seems

called upon to use a form which is

While the matter is somewhat intangible,

confusing or poorly laid out.

probable that the use of simplified forms consistently, coupled with

bank.

illuminatingly in the following passage from the report of the

cussed

York

State

Bankers

Subcommittee

Association

New

Standardization

Forms, June 1, 1940:
"The creation of
use

the form to

answer

printed form begins with a clear understanding of the
This will enable the person considering

such pertinent questions as:

ard envelope sizes, etc.?

lines of light face

Experience has in¬

the volume of transactions involved does not

Caslon
"To

form used for

other purpose, or

some

similar purpose in another department will serve the purpose of

proposed for adoption.

Perhaps

some

The maintenance of

ing all forms currently in use in a bank greatly
of forms

minimum

for

the form

small alteration in arrangement or

the addition of another part may be necessary but this can

with little increase in expense.

new

often be done

display board show¬

facilitates

by disclosing existing

forms for purposes

keeping the

duplications and

which can

served

by existing forms.
"The

answer

question three, i.e., whether

by customers, will have
our

desire to make

form

the form will be seen

or not

distinct bearing on the set up of the form.
serve

internal requirements

adequately,

adds dignity to appearance and
matter.

we may

sometimes lose sight of the effect of its appearance upon customers.

plicity of design and typography, and

Sim¬

balanced proportion of white space,

gives

emphasis to the necessary printed

The message to the customer should be set up in

such order that

he will not be obliged to skip all over the form to glean its meaning.

typewriter,

spacings

both

spaces

be filled

in should

horizontally and vertically.

should be in the

same

conform

with

lowest

If feasible, the required spaces

sequence as the material from which the information

printing

commensurate

Substantial

cost.

Committee sent

supplied by the Committee Chairman, who furnishes

was

Management

Bank

the

naturally must be large enough to accomodate its content

Commission

the

American

Bankers

This survey offers the following picture:

Forms.

.Sixteen secretaries of the A. B. A. reported either substantial present
activity or a forms service based on past activity.
Four additional secretaries reported interest but little accomplishment.
Twenty-two secretaries reported no activity and no interest expressed
in tangible form.
One association was unable to furnish information on account of the
death of its secretary.
Six secretaries did not reply.
The work carried on by

the American Bankers Association will be de¬

Two branches of the Association have been especially con¬

scribed first.

cerned, the Bank Management Commission and the Legal Department.

Early efforts

directed to the standardization of bank checks,

were

being adopted in

Department of Commerce, and other interested

placed

broader basis last

on a

The work

groups.

with appointment of

year

Simplified Operating Forms, of which

definite

1925, with the support of the United States

Planters Bank & Trust Co., Richmond,

L. W. Bishop,

Cashier, State-

Virginia, is chairman.

The Sub¬

committee undertook the project of developing a set of simplified operating
forms for
of

the

by banks generally throughout the country.

use

Bankers

American

Association

membership

Since the bulk

consists

of small

banks of this type, having

$5,00j,000

less in deposits.

tee also decided to confine this work to forms in

cial
be

banks.

Forms employed

considered.

The Subcommit¬

common

use

commer¬

primarily in the larger institutions will not

Legal forms will be included only when the laws of the

various States provide a proper basis for use generally.

Forms work in California

Committee

committee

banks
in

were

was

Standardized

printed

encouraged

1920 with the appointment of
The forms

Forms.

drafted

by the

the Association's magazine and the member

started in

Bank

make their own arrangements for printing forms

However, from the outset, the committee felt obligated to

quantity.

to obtain

forms supplies at the lowest cost and, accordingly,

the type used for the magazine was kept standing and banks were invited
to

place orders with the secretary.

different

items.

For ten years or more the association
time included 86

one

the committee recommended that the sale

1931

of orders.

ber

Reduced volume of sales

was

attributed to consolidation of

banks, changes in banking practices, legislative changes, prices out of line
with those quoted by commercial printers, and a preference of some banks
to

give their forms printing business to their own customers.

supplying forms in quantity, it
specimens.

was suggested

The recommendations

In lieu of

that the committee furnish

adopted and

were

the

sale of forms

terminated.

During the next
of the forms

year

issued

sales experience.

and

half the committee made

by the association, eliminating

a complete

some

revision

30 having poor

In 1933 the association decided to make forms available

quantity lots again and entered into a

new arrangement

by which one

printing house printed and stocked all C. B. A. forms, pricing them
to

give the member banks the benefit of quantity runs.

continued up to the present year when it
the

entire

reconsider

as a

veniently into the machine by which it will be prepared.
tion of legible copies.

a copy or

copies

it must fit available filing equipment.
be of

are to

If it is

multiple

Banking Practice, undertook the review and revision of existing forms,

supplementing the list where needed.
that

were

would

safe to

from

use

conform to

The objective

was

"to furnish forms

practical, legal and auditing standpoint and

general pattern of standardization."

As a re¬

sult of this survey many forms were eliminated because of their specialized
nature, all the remaining old ones were brought up to date,
added to round out the list.

ones were

and

few new

The recommended list now includes

forms, including both legal forms in general use and operating forms

for certain

banking routines.

plete specimen set.

Orders

committee's task is

the member banks

Each bank has been furnished with a com¬

placed directly with the printer.

are

continuing

a
or

one, as

have

advisory service

tions.

Some

their forms problems.

the history of this project in Cali¬

fully than with respect to any other State, because we

approached the subject from
a

The new

it plans to keep the list up to date,

eliminations from the list, as required and to render

have taken the liberty of tracing

fornia rather

number of different angles and are,

position to place our experience before other State Associa¬
of the experience

in California has been definitely unsatis¬

be retained by the bank,

Wherever possible, the form should

faiding.

From the standpoint of economy in paper cost, the possibility of

Some of the recommendations

which

our

Committee makes in

home

State.
Forms work in the District of Columbia has

permit of the produc¬

size to permit enclosure in a standard sized window envelop i without

subcommittee of the Committee

this report are based on the lack of a satisfactory experience in my

part form, the weight of its parts must be such

so as

This plan was

necessary to

subject again because of slack sales and declining interest.

committee, originally appointed

new

became

factory.

be of such size and thickness to fit

forms be discontinued, mainly because of a substantial decline in the num¬

con¬

course,

moderate sized banks, the Subcommittee's forms are primarily designed for

con¬

was

Subcommittee

and purpose, determination of its size must also take other factors into
must,

ac¬

direct

through service on its Subcommitte on Simplified Operating

Association

sideration.

var¬

questionnaire to each State

about the American Bankers Association's

Information

Secretary.

with

costs or improved

together information about forms work carried on by the

To bring

ious State associations, your

tivities

can

customers."

with

relations

costs

Conversely, it is de¬

in' operating

ysis shows that this will result in savings

tie

printing

profitable to incur printing costs to create new forms when anal¬

therefore, in

form

accomplished by

are

the most suitable form for the purpose from the stand¬

by avoiding or eliminating unnecessary forms.

sirable and

typewriter

is to be taken.

"While

substantial amount

collateral notes, resolutions, etc.,

the objectives of form development

up,

make additions to

"The method by which the form is to be filled in will influence its layout.
If by

forms embracing

such

point of clarity, appearance, protection, cost of operation and filing at the

saved

that

preventing introduction of

For

matter,

similar style type seems preferable.

sum

the production of

form.

"It also has been found that

number

reading

of continuous

need for the form,

naturally will render the other questions unnecessary.

ledger

filled in, the simple

spaces to be

Gothic type give a desirable mild contrast to the informa¬

subsequently filled in.

tion

was

"A negative answer to the first question, as to the

justify the printing of

and those with ruled

sheets, statements

of prefer¬

a matter

For forms such

printed and sold standard forms, the list of which at

Perhaps, for example the volume of trans¬
are insufficient to warrant a printed form.
2. Could any other form currently in use serve the purpose?
If not
entirely, could another form be revised slightly to cover both its present
and intended purposes?
3. Is it to be an internal or external form, i.e., will customers receive or
sign any part of it, or will it be used exclusively for internal purposes?
4. Will it be completed by hand, typewriter or some other machine?
5. Of what size, quality, weight and color of paper must it be to conform
with requirements of manual handling, machine equipment, filing, stand¬
1. Is the form necessary?
actions which it would cover

dicated that in many cases

of type to be used is largely

However, two suggestions are offered.

help the banks

to which the form is to be put.

In the case of multi-part forms, it has been found

form.

for each part.

"The selection of the style
ence.

and control are dis¬

The fundamental considerations in form designing

and type to be used, it is quite generally agreed that

desirable, in some cases, for convenience of handling to vary the color of

increase confidence in the

other evidences of sound management, tends to

white paper usually makes the most economical, readable and

best appearing

program

and the public.

For records requiring long retention,

preferable.

"As to color of paper

More careful forms planning facilitates

to the bank and to its customers.

Such paper will permit preservation of the

subjected to frequent usage, paper with some degree of rag con¬

are

Savings in Printing Costs:
Savings can be effected through printing
larger quantities,, printing on "gang" presses, stocking larger inventories
of fewer items, eliminating losses caused by quick obsolescence of little used
forms, and filling purchase orders more quickly and at lower costs.
Lower Costs in Maintaining Supplies of Forms:
The cost of stocking,
handling and ordering forms can be lowered through a
number of different items and better classification.

majority of forms a good grade of 16 lb. of 20 lb. substance

For the

sulphite paper will suffice.

There are opportunities for reducing

Reduction in Number of Forms:
more

plicity,

extent

paper or type

the number of forms by eliminating unnecessary ones

in fact,

systematic forms work, some of them trivial in

themselves, but significant when considered in the

*«§ «f

"As previously

years

through

Committee

covering a wide range of forms
continued
are

now

the work

available.

that

was

been carried on for about

Standardized Bank Forms.
completed in 1928.

up-to-date forms,

A report

Later committees

both legal and operating

Member banks have been furnished a specimen set in

STATE SECRETARIES SECTION
a

binder, with instructions regarding the use

Orders for

of the forms.

through the Association.
The recomended
and there is a fair degree of uniformity.

quantity lots may be placed
forms

are

used extensively

accomplished excellent work
within a relatively short time.
The project started four years ago and is
carried on by the Subcommittee on Standardization of Forms of the Bank
Management Commission.
The forms recommended by the committee
have been printed on sheets punched for a three-hole binder with appro¬
priate comments regarding size, grades of paper, color of stock, etc.
The
work to date includes forms used in connection with checking accounts,
both internal and for customers, collections, loans and a limited number of
forms for a legal character.
The work is to be continued so as to embrace
a complete study of forms in common use.
The committee also of fers to
assist banks in making arrangements for cooperative buying.
Massachusetts banks also have the benefit of two valuable forms studies.
One of these is the report on The More Important Authorizations CoverThe Massachusetts Bankers

Association has

Proper
of the
legal relationship created by the different types of contracts covering the
rental of safe deposit boxes and their consequences, and certain forms of
contracts, resolutions, receipts, etc.
The other study is a report on Proper
Authorizations, Commercial Department, prepared by the Proper Authori¬
Safe Deposit Boxes, prepared under the auspices of the
Author.zations Committee.
This consists of a concise discussion

i ng Access to

tains

statement of the rules and

for authorizations are based, a

Commission.

principles upon which the

complete set of

volving usual banking relationships, an

outline of signature

and authoriza¬
in opening

and suggestions for precautionary measures

tion requirements,
new

This con¬
requirements
forms for authorizations in¬

Subcommittee of the Bank Management

zations

accounts.

New York affords another notable

contribution.

The work

accomplished

of Forms,
1940.
Although the subcommittee has only been engaged in the work for one year,
the booklet includes a concise discussion of the factors to be considered in
preparing forms and the objectives of form development, reproduces
specimens of forms for selected banking transactions, and sets forth help¬
ful comments about the forms and their use.
It is intended as the first
step in a complete study of the forms in general use in commercial banks.
The outstanding accomplishment among recent work in this field is the
manual of Standard Forms and Systems, issued by the Virginia Bankers
Association in 1939.
This material, reproduced by the multilithic process
in loose leaf form, makes an attractive volume of 177 pages, embracing
106 pages of text and 102 separate illustrations relative to 14 departments
of the bank.
It constitutes a manual of the procedure followed in banking
operations with a collection of specimen forms.
The outline form used for

is set forth in the report of the
Committee

Subcommittee on Standardization

Standardization, published in

printed form June 1,

sheets, and the
make this by far the most practical
Topics covered include the general
ledger, checking account forms, paying and receiving tellers, proof and
transit bookkeeping, account analysis, savings department, loans and dis¬
counts, credit department, investments, 6afe deposit, collections, filing and
excellent arrangement under tab separator

the comments,

comprehensive nature of the work
and

useful

compilation of its kind.

auditing.

which constructive work has been done

Other States in

include the fol¬

lowing;

ld/torBil

Georgia:
In 1927 the general counsel of the association prepared a port¬
folio of bank forms which was published in a printed booklet distributed
to the member banks.
The list of forms includes checks, notes, deposit
slips, trust receipts, stock power, mortgages, deeds, guaranties, financial
statements.
There is no standing committee and no changes or additions
have been made since the booklet was published.
Indiana:
Association oifers 12 different forms for sale through secre¬
tary 's office.
Forms are kept up to date by standing committee on standard
forms.
Service is used extensively as probably half of the banks in State
use recommended forms.
Iowa:
This association does not have a standing committee on forms
but special committees are named when needed.
Legal department and
special committees have prepared a considerable list of forms, mainly of a
legal nature, including forms for safe deposit rentals, mortgages, notes,
checks, certificates of deposit, various authorizations, conditional sale con¬
tracts, guaranties, etc.
Specimens are printed in Association's magazine
and quantity lots are purchased from certain printers.
Michigan:
Bank Management Commission is making plans for a forms
program to be carried on by a subcommittee.
Minnesota:
Association offers one form, conditional sale contract. How¬
ever, Association's counsel has passed on many forms sold by local printers
and extensively used by country banks.
.
Mississippi:
This association does not have a standing committee, forms
service being handled by the secretary.
Association offers forms for certain
banking transactions including financial statements, loan information,
notes, deeds of trust, employees' time card, etc.
Orders are filled by the
secretary.
This is a continuing program and forms are added when needed.
Missouri:
For a number of years past forms work has been carried on

the association's counsel.
Recomended froms in¬
escrow receipt, safe deposit box rentals, analysis
sheets, certificates of deposit, and purchase orders for securities.
Speci¬
mens are furnished by the secretary's office and forms are purchased through
by the secretary and

clude notes, mortgages,

local printers.
New Jersey:

This association plans to appoint a

committee to work

in this field.

Several years ago the secretary prepared certain legal
forms to which have been added forms of instalment notes and conditional
sale contract.
Association furnishes specimens and forms are purchased
from local printers.
There is no standing forms committee.
Ohio:
This association has maintained a forms service for more than 25
North Dakota:

Forms originate with the Bank Management Committee and the
The recommended list includes note forms, safe de¬

association's counsel.

posit forms, and forms used in connection with service charges.
Orders
are placed with the secretary and filled by the official printer.
The service
is used extensively by small and moderate sized banks.
Pennsylvania:
About a year ago the Committee on Bank Management
Problems commenced studying and drafting forms.
"When the work is
completed the committee plans to furnish member banks with specimens
of recommended forms.
Wisconsin:

Some ten years ago the Educational Committee
in certain banking operations.
These are stocked

drafted

by the
of recommended forms
forms used in connec¬
tion with checking accounts, safe deposit forms, financial statements, guar¬
anties, mortgages, account analysis forms, conditional sales contracts, etc.
As a result of the analysis form activity furnished by the questionaire,

forms

for

use

official printer and may be ordered directly.
List
includes notes, authorizations, checks and internal

your

Build work around an

combination of

work narrowly to

forms.

5. Keep forms up to date and add new ones as needed, or let forms as
originally recomended stand without change.
6. Work through forms committee, or regard forms service as
trative job for secretary and cbunsel.
7. Maintain advisory service on forms problems.
8. Assist banks in cooperating printing and purchasing.
9. Make forms work an active, continuous project, stimulating Interest

adminis¬

standardization, or adopt a passive

in uniformity and

,„r :

attitude.

directed mainly at the

II. The work now carried on is

small and medium

sized banks.

the quality

less, depending in
covered in the forms
date, and the extent and continuity of

forms are used more or

Association recommended

III.

the main

of the forms offered, the range

list, whether forms are kept up to
forms activity.
IV.

Some

businesses

other

systematic forms work much
include a comparative study,
in other lines indicates what could be ac¬

have carried

This report does not

farther than banking.

experience

but the satisfactory

complished by banks.

for uniformity and

great opportunity

few States,
standardization. Al¬

work accomplished in a

V. Notwithstanding the excellent
there is still

and procedures will probably persist,
considering the size of the country and the number of units in the banking
field and their disparity in size and character, there is much room for con¬
though considerable variety in forms

No doubt we must expect a

structive work.

form situation in a country
kinds of banks

considerable variation in the

large as this and

with as many different

but it is obvious to your

there are in this country,

mittee that there is immense roon

for standardization

Com¬

and for uniformity.

tangible benefits through increasing
measurable savings, not to mention

Systematic forms work offers

VI.

efficiency

operating

and effecting

other advantages.
VII.

There are no

effective work in

unsurmountable obstacles to more

barriers—apathy and indifference of association
officers and the settled habits of bankers—can be overcome.
VIII. This is a logical field for activity by State bankers associations.
Your Committee on Standard Forms makes the following recommendaThe principal

this field.

tions:

Each

establish a definite agency,

State Association should

committee, secretary, or

whether

constructively with the forms

otherwise, to deal

problem.
work that the American

In view of the

Bankers Association is doing

afford not to have some
definite agency or committee established in his State doing preliminary
work looking toward the final product of the American Bankers Associa¬
tion's Committee.
I should feel that a State Secretary woud be very much
on the spot if he permitted another year or so to go by without taking this
subject up with his State officers and making definite provision for a forms
committee because when the forms manual of the American Bankers Asso¬
ciation is published, probably in the course of the next year, I believe it
will be an outstanding job in which every bank can find something of great
value, and unless each State Association is prepared to deal with that man¬
ual and utilize it when it is issued, the State Association will be very defi¬

this field, it seems to me no

State Secretary can

Committee came to certain conclusions

which I should like to briefly

2. Each association

It is apparent

various State

from the foregoing study that the forms

associations is being carried on in a number

There is no standard pattern.
1.

Specimens of forms, or

A limited line to meet

line of forms.

work of the

of different ways.

Important variations include the following:

the sale of forms in quantity.
special situations, or a more or less

complete

acquaint its members with new

should take steps to

field, preparing them for the American Bankers
Association forms manual.
Educational work should be carried on through
articles in bulletins and magazines, talks at conventions, group meetings,
educational conferences, and regional clearing house meetings, and through

developments in the forms

committee work.

making

That involves

tion work to determine

country, it is

careful analysis of the

its adaptability to

Committee is making an

Manual

While the A. B. A.

job fit the needs of the entire
that there will be variations in different

recognized, of course,
in some States not all of the

material in the American Bank¬

without modification or revision or
Now there is a job which each State Secretary through the
his State must undertake, perhaps even going to the extent

will be suitable for use

amendment.

committee for

publishing a supplement or a

American Bankers Asso-

ytaur State.

effort to make its

States and that
ers

explaining the points

A. B. A. Manual
can't be used and why,

commentary upon the

of difference, what forms

substitutes suitable for use in your own particular State.
Another thing the State Association should maintain is educational

and offering

work

This can be accomplished by a variety of ways
familiar to all of you/.
Many of the State Associations have magazines
which could appropriately carry articles about the work of the A. B. A. in
this field and about the subject generally.
Some of you have group meet¬
ings and educational conferences at which the subject could be discussed.
In other instances, it may be possible to bring it up before a convention.
All of these means should be utilized to familiarize the members of your
associations with this important activity.
3. The State Secretary should maintain a constructive and sympathic
interest in the work being carried on by the American Bankers Association
Subcommittee on Simplified Operating Forms.
I haven't been in the work of the State Associations as long as a good
along the lines of

forms.

today, but I have been

in the field long

possible with the program

suggested by the

of the men in this group

many

fair idea of the degree of cooperation which exists
between the American Bankers Association and the State Associations.
I know that some of the work of the American Bankers Association must
necessarily be done on a basis separate and apart from the State Associa¬
tions.
In other instances, the American Bankers Association has under¬
taken to do part of a job and then pass the utilization of it or the rest of it
on to the State Associations, ■
But in this forms field, there is a liltte dif¬
ferent situation: it must necessarily be a joint operation.
It calls for active
and continuous cooperation.
So when you begin to receive further informa¬
tion about what the A. B. A.'s Committee is doing, take that as your cue
for familiarizing yourself fully with it, for telling your members about it,
enough now to have a

and for
A.

cooperating as far as

A.'s Committee.

should continue its work in this field
next year by the appointment of a committe^ on this subject to coordinate
the work of the State Associations and the American Bankers Associations,
stimulate interest in forms work, and cooperate with the American Bankers
Association in utilization of its forms manual.
4.

The State

Secretaries Section

Report of Committee on State
Management
and Regional
Chairman George M. Starring,

summarize from the report.
I.

legal forms, or a

operating manual, or confine

nitely at a disavantage.

Committee on Standard Forms first appointed two years ago
prepared a financial statement and cattle mortgage form.
Committee
plans to offer other forms and work toward standardization.
Colorado;
Public Relations Council and Agricultural Committee are
studying forms and plan to make recommended forms available by printing
specimens in official magazine.
This work has been going on for only one
year.
Association hopes to cover entire field along lines of Virginia manual.
Connecticut:
This association does not have a standing committee on
forms but special committees have been appointed to work out forms for
particular situations, such as a form for pledging savings accounts as colAlabama:

has

years.

Line confined to operating forms or

both.

urer

of the

South Dakota

Bankers Association
Clearinghouses, by

Secretary and Treas¬
Bankers Association

with an apology because instead of de¬
Association Management and Regional Clear¬
inghouses, it will discuss a problem which should more properly come under
the heading of bank management, although it is closely related.
This report

voting itself to

will have to begin

State Bankers

58
in

BACKERS'

our

pressed

being

report

the

opinion

placed

the State Secretaries
that

throughout

uniform

charge idea originated

service

are

Section

the

not

certain

Hot

country

charges.

but

.banking organizations have argued for it and

the

we ex¬

that

result

Report of Committee on^State Legislation, by Chair¬
man Eugene P.
Gum, Secretary, Oklahoma Bankers

emphasisis

uniform

know
a

Springs,

much

too

Where

CONVENTION

service

large

Association

non-

bankers

many

We hope to bring to your attention in this report, some of the
accom¬
plishments in the way of State legislation proposed or enacted
during 1939

have been led to believe that their charges for services should be the
same,
in

spite of known differences in operating costs.

organizations

were not so

We suspect that these

much interested in uniformity as they were in

ceiving the service in all communities at the

same

and

re¬

developed schedules of charges which
adoption.

In many

cases

were sent

and

as a

were

the ideal

standard and

Some banks,
of course, were able to operate considerably cheaper than others
and for
them the charges were adequate. The wide
publicity given to the move

uniformity resulted in the public playing one bank against another
and charges were decreased to a point where
they would not cover expenses.
The last A. B. A. pamphlet on earnings and expenses of all
insured com¬

many

the need

price of

adoption of

profit, and that

product.
Although the cost of the gasoline, the
gasoline, may vary five cents in 100 miles, each filling station
opera¬
may be asking a fair price.

isn't the important thing.
price is determined is the most important.

profit

the service.

The method by which the

The introduction of

They also might recommend
a

simple

possible since the

fact may not show up in the earnings statement
or

departments

Many

are

banks

natural for
seek the

as some

other

loss.

of Governmental competition,

good many instances if the banks

were

receiving

checking account, transit and miscellaneous

services they could reduce their rates

ficates of deposit and meet all rate

loans and raise their rates

certi¬

competition.

As it is now the borrowD. customer is paying part of the cost of
the checking account

in and C.

customer.

Some banks have been finding it difficult to
pay dividends to their stock¬
holders the last few years, and yet,
they have been paying dividends right
along to the checking account customer in the form of services sold
below
cost.

If the present policy of the
government continues, proper remuneration
for services rendered will become
increasingly important to banks.
The
problem is certainly worthy of study.
A bank in a sound, healthy, finan¬
cial condition is able to render better service
than a

poorly-managed losing

institution and better able to stand
up under governmental competition.
The American Bankers Association Bank
Management Commission has

recently issued

a booklet entitled, "Regional
Clearing House Association—
Organization Manual" which gives the extent of
organization in the various

States and outlines the procedure for
organizing such associations and the
conduct of the meetings.
It is a

splendid publication and

its

use

by States

recommend

now

unorganized or only partly organized.
It should be
aid to secretaries, in
developing regional clearinghouse activities in their
respective States.
Regional clearinghouses are a splendid
supplement to
State conventions and
group meetings and give an even better
opportunity
for the invididuai banker to

the year

1939.

stifle

the

another

bankers

present

express himself.
Regional clearinghouse Asso¬
oportunity to get acquainted and will tend to

practice

bank

Customers

playing

one

bank

against

rates.

Many banks follow

drafter to

was

ledgers,

but they
As

the plan

use

case

not all in

are

consequence.

escheat statute

advertising dormant
What the future

The A. B. A.

where the dangerous

emergency

es¬

A review in the variation in the laws
governing 48

State systems and a
National system, brings one to the conclusion that
uniformity in the laws
and practices are of inestimable value.

the independent system of banking is to survive in this
day of pater¬
nalistic aggression, wemust recognize the challenge that
confronts it.
If
State rights are to survive and the government
absorption of our institu¬
tions be interrupted, we must clean our house and
put It in order by divorc¬

ing the State Banking Departments from political influence, and
by sur¬
our State institutions with legal safeguards against the unsound
aie sure to drive us into nationalization or
complete govern¬

rounding

practices that
ment control.

will

necessary to

provide for

the

encourage the

appointment

adoption of uniform

of proper' supervisory

personnel of banking departments.

Many people

statutes

authorities

and

the

of the opinion that

are

the commissioner of banks should be elected
by the people and subject to
recall; however, if he is to be appointed instead of elected

every possible
safeguard should be used to bring about the soundest possible
appointment.
It is our purpose to follow as closely as possible the
measures being pre¬
pared by the State Legislative Committee of the A. B. A.
They are re¬
vising their last report and it will be available for the guidance of Secretaries

within 60 days.

The Commissioner should have

at least five years' bank¬

ing experience and all financial institutions in the State, except National
Banks, should come under his supervision.
He should be appointed by
the Governor from

Council

of the

three should

list of 10 names submitted to him

State

ciations offer

their

cheat bill had been proposed.

only

borrower to seek the lowest rate and the
savings depositor to

highest.

proper remuneration for their

legislation on this subject will be is in the lap of the gods.

This

department

yet,

balances carried

balances in the hope that the owner might reclaim them.

carrying the load.

complain

to dormant

adopt

Bill
a

reference to

ence

♦

Too many banks are now
operating some departments at

else with

anyone

accord that these balances should escheat to the State.
New Jersey is the only State that attempted to

involved they are the less chance
they will

have for adoption.

another evil.
Bankers
They absorb the expense of custodianship, includ¬
ing several forms of insurance, and assume additional liabilities with refer¬

uniform method

developed should be

And while we share their
opinion
cooperation between State and Federal

evils, the adoption of which would dispense with

of account analysis should be
developed by which a bank may apply the
to the customer's account.
The methods

costs

were

statute

perform many duties.

satisfactory

28
a

escheat statute did not meet with broad
coopera¬
Selecting an escheat statute is like choosing between two or

tion.

After this has been done

Committee of

measures recom¬

the chartering of national banks.

the charge on those costs,
plus a reasonable
State associations should study this problem and work out
a uni¬

form method of figuring costs.

dire need for

willing to delegate such responsibilities

furnishing the service and base

rate of

69 A. B. A.

could be

The banker should approach service
charges from the same angle as the
filling station operator.
He should determine what costs are involved in

profit.

consideration

chartering authorities in order that competitive bidding for such charters
eliminated, we realize that the Comptroller of the
Currency is not

is the price he asks for his

you see.

Withers, Chairman,

model safe deposit code.

that there is

same

Price,

legislative

Our Committee heartily recommends the introduction
of the uniform
mortgage Act, recommended by the A. B. A. State Legislative Committee.
We also would like to cooperate with them in their effort
to secure the

gasoline is not uniform.
The filling station operator knows what
the gasoline cost him, what he had to pay for
freight and taxes and knows
his operating costs.
He adds these costs

tor

Carl

for

carried foward to the next year.

trip of any length knows that the

introduced

governing the appointment of bank supervisory authorities and the
per¬
sonnel of their departments, but as most of the
Legislatures had adjourned
for that year its further pressure for introduction and
adoption was to be

Have you ever seen a uniform schedule of fees for
lawyers?

together, plus

coming from

1939,
This committee adopted principles and provided for

adopted.

uniformity in charges.
Prices for groceries, clothing, fuel, lawyer's
fees, abstractor's fees, and the fees of city officials vary from
city to city.
an automobile

introduced.

measures were

and

mended

for

Anyone who has taken

other

Information

State Legislation A. B. A., shows that out

good showing by charging non-par exchange, but this type of
charge is
difficult to defend and no doubt will some day be against the law.
In that
event these State banks will be in the market for a
more complete and
equitable system of charges.
on

Com¬

personnel; uniform fiduciary act; uniform stock transfer Act; uniform trust
and model bank employee's bonding statute.
Of course

mercial banks reveals that bank service charge income is
considerably be¬
The State banks in some states are making a rather

be sold

our

Associations,

receipts Act,

low other expenses.

seems to

officers of State

other

including

to secure

is about the only business which

that will

1911.

Associa¬
tions that received major consideration were—civil
service for employees
operating in behalf of the public; sound methods for the operation of bank¬
ing departments and the selection of supervisory authorities,

result many banks sold their services at less than cost.

Bank ng

convene

including their legislative com¬
mittees, who have worked long and faithfully to assist in
providing for

supposed to be

certain'legislation

their banks the needed legislation or protection against the
passage of meas¬
ures that would halt or maim the successful operation of
these institutions.
We find in our survey that a number of measuies have been
proposed
that affect the interest of our banks.
Those proposed by State

out to member banks for

the recommended charges

call your attention to

as to

Secretaries

uniformity seemed plaus¬

ible to everyone, including the State Secretaries, and immediate
steps were
taken to secure uniformity.
Bankers Ass ciations committees met and

minimum, but naturally the banks took them

well

When I say accomplished, I do not mean to give this credit
to
mittee but to the A. B. A. Legislative Committee and to the

it was purchased in some localities.

The arguments of those who were in favor of

1940,

be proposed and presented to Legislatures that will

bargain rate for which

Bankers

be selected

the consent of the Senate.

six years,

with the right

the

Governor

two

years

Out

by the Executive

the

remaining nine,

Banking Board—always with

The Commissioner's term of office should
be

to succeed himself for six

four

serves

Association.

members of the

years,

the Commissioner's

into the term of the next Governor.

Where

years.

term

would

extend

At the end of the Com¬

missioner's term the Governor could re-appoint him

appoint

a new com¬

missioner.
The Commissioner should not

DISCUSSION FOLLOWING ADDRESS OF MR.
STARRING

own

any stock in, or be connected in any

bank under his supervision.
His salary should not be less than
$7,500, which would be sufficiently attractive to secure the
type of talent
necessary for this important position.
While the Governor should have

way with a

President Wattam:
agree

There is

one

with, George, and that is

have been associating with

poiht in the report that I do not quite
that service charge.

I think he

must

a couple of our
Congressmen up in North Da¬
For years, they have asked for a
farm program which would involve
cost of production to the
farmer, but they were never able to figure out
ways and means of
determining what was a fair cost.
I think that same
thing applies to the service charge here.
The bank which is being operated
efficiently can operate at a profit with a lower
service charge than one
which is being operated
uneconomically and wastefully.
They have got
to have a higher profit.

kota.

started at

Perhaps in approaching this problem, we have
the wrong end.
Instead of trying to get a uniform
charge, we

should try to educate the bankers
to operate
efficiently.
Mr. Starring:
Well, as I see it, the first thing is to
^develop a uniform
method of figuring costs, and then if
we could have some
comparison of
operations afterwards, I think we would
approach uniformity; that is,
those banks that are
were

too

operating inefficiently would
high and they could then approach this

see

that

it, of survey or investigation that
might be made.
President Wattam:
Well, the subject is too
broad

discussion of it here and
out with you,

their

one

into

are too

traffic would bear.

Starring:

That is, they are

But they

doing it

President Wattam:

are

doing it from the wrong end, aren't they?
exchange.

on the

That's right, but we do have
the trouble with these
corporations, country-side, who have accounts in
Chicago, Minneapolis and
Fargo and further west.

case

committee

recommendations
sioner for

the

incompetency

office, the Commissioner should have

before the three members of the
Banking Board,

of investigation,
Governor.
or

who could thereafter make their

Upon the removal of the Commis¬

unloyalty, the Assistant Commissioner should

automatically become Commissioner until the
at which time the Senate could confirm or

The appointment

Assistant

Legislature

convenes,

reject his reappointment.

Commissioner

should

be left

the

Commissioner and all should be subject to civil
service.
The Commis¬
sioner should be allowed to
discharge his assistant only on consent and

approval of the banking board.

Further personnel also should be selected

by the Commissioner and he should have the right to
discharge them.
Legislatures of 40-odd States will be in session in 1941.
We are informed
that

Legislative Committees of the

tween now and

I would like to have
the time to argue it

now.

George.

the first of

State Associations plan

January to outline and suggest

be¬

meet

a program

that

should be followed.

Our idea up in North Dakota is
that there
many of them charging all the
freight they think the
Mr.

costs

average or whatever you

want to call

the right to remove him for
neglect of

the right to present his

sitting

is important that

important that

better Banking
service.

Only

appointed
Lord
a

the standard of banking be

employ such methods that

Department.
one

State

civil

Macaulay 70

limited way in

now

service

years ago.

1883.

may

In this connection

provides
basis.

that

Civil

raised.

build

the

Bank

Service

was

Commissioner
first

has

grown

adopted by

The United States commenced

Since then it

is doubly

stronger and

recommend the civil

use

it in

favor until the early

formation of the new deal with its
many bureaus caused its supporters to
leave the civil service basis for a
while, but

they

are

rapidly getting back

STATE SECRETARIES SECTION

of the banking

departments, which should be operated

in order that this supervision may

for Alabama,

session

January ushered
Louisiana, Mississippi,

legislation in 1940.

California,

Kentucky,

Nebraska, New Jersey, New York, Rhode Island,

him upon his distinguished service
for further happiness and success.

California, Louisiana,
Maine and Pennsylvania.
The boys who didn't mind, from Maine and
Ohio, dug in in June.
Missouri and Vermont tackled the job in July.
The State Legislative Committee of the Secretaries Section should work
in close harmony with the State Legislative
Committee of the American
Bankers Association, and when possible the Chairman of the Committee
in the Section should meet with the Committee for the A. B. A. in order to
secure the greatest possible coordination.
As the master of any machine
lays his finger on the switch in order to turn the power into the mechanism
that puts the whole thing in motion, so the chairman of the Legislative
committee of the A. B. A. should be able to put his finger on the Secretary

in the

State Association to put in motion a legislative program

of any

In this way a standardization

assemblies of the 48 States.

of laws govern¬

the near future that would
governmental control which confronts

fit

opinion that a comprehensive list of

It is our

three, or perhaps three or four measures

esential to a healthy business
furnishing them; that we have the money and

living up to them; that sound banks are

are

structure and that we are

demands of business,
including a program of preparedness, without any assistance from Govern¬
mental agencies.
But here I go, off the subject and rambling on some other
fellow's reservation.
''"'V

....

friend,

made my speech for me.

Beerbower,

Mr.

your

departure, the same as the

been

Secretaries do Mr. Beerbower's.

pleasure to work with you as an officer and a

am sure

that the other Secretaries

sorry to see you go,

although we will be glad to have the

of us to ex¬
for a resolution similar to 1 he

regarding Charlie Beerbower, pertaining to
it seems to me

sense

Gordon Brown's resignation,

appropriate that we should go on record as

of regret at Gordon

sing our recognition of his valuable

May I. therefore, suggest that an
that this meeting go on

services and cooperation at all times.

appropriate resolution be drafted and

record in favor of such a resolution.

[The motion was seconded, was put to a vote
Mr.

Beerbower:

May I have just a

present my successor
select

Mr.

full -time

man.

word?

and carried.]
I am unable to name or

because the committee meets on
I don't know who he is now.

Mr. President, I wish to offer the

Hodges:

Regret at Resignation of C. W.
Secretary of Virginia Bankers Asso¬

Resolution Expressing
as

Brown

Secretary of

Resignation of W. G.

New

York State Bankers

Association'
C.

Beerbower:

Mr.

Chairman, may I have just a

October 26th to

following resolution with

Brown from service as Secretary of

::'7'

State Secretaries Section.
"Mr. Brown has served with great

word, please?

Secretary here.

I believe there was not one year during that time in
other at some time or

other, and they have always

responded.

Second, I want to say to Frank Simmonds and
associates in the New York Office that

great help,

Melvin Miller and his
of

likewise they have been a source

encouragement and inspiration.

In fact, without these two

distinction as Secretary and Executive

of the New York Association for more than ten years.
His
outstanding contribution in that capacity has been the organization and
development of a pension and retirement system for employees of member
banks.
He has taken a prominent part in the activities of the State
Secretaries Section, serving as the first Chairman of the Committee on
State Bankers Association Management, as member of the
Board of
Control, and, successively, as Second Vice-President, First Vice-President,
and President of the Section.
"Now, Therefore, Be It Resolved,
That we hereby express our keen
regret that it is necessary for him to resign from the State Secretaries
Section, our sincere appreciation of the constructive work which he has
accomplished, and our hearty good wishes for his continued success and
Manager

the majority of the Secretaries present

which I didn't call on somebody for something or

RESOLUTION

Secretary of the New York State Bankers Asso¬
ciation, and a member of the State Secretaries Section, American Bankers
Association, has tendered his resignation as Secretary of the New York
Association and has informed us of his intention to withdraw from the

every

the

"W. Gordon Brown,

know that the first of the
year I am retiring as Secretary of the Virginia Bankers Association to de¬
vote my entire time to my bank.
I think probably this will be the only
opportunity I have to say to you here for the Virginia Bankers Association,
first, that I greatly appreciate the fine cooperation that I received during
my, I think, 10-year term of office as Secretary of the Association from
I guess

having a

Brown's resignation from the Section and expres¬

New York State Bankers Association:

Beerbower

cooperation of

Mr. President, it would be difficult for any

temporaneously deliver or suggest a wording

but

It has

fellow Secretary here.
We

all feel the same way about it.

Marshall in this work, too.

Mr. Hodges

one

that we will regret

Well, I am sure, Mr. Brown,

respect to the retirement of Mr.

ciation—Similar Action

resignation as Secretary of the New

President Wattam:

personnel and the desire to finance the legitimate

the

Our

Brown:

time.

needed legislation should

special emphasis should be placed on
that are needed to
meet the changing condit ons in which our banking institutions are in¬
volved
While proper laws are necessary for sound supervision, that should
be augmented by proper customer and public relations, bringing to the
attention of the uninformed the fact that the laws are sound and that banks
two or

York State Bank¬
ers
Association and introduce my successor, Howard Marshall, who is
right here.
May I also tell you fellows how much I have enjoyed working
with you through these ten years.
I hope to see all of you from time to

Mr.

be sent to each secretary and that

adopted.
that the resolution be

May I have a minute?

want to announce my

are

some

...

Yes. sir.

President Wattam:

Mr.

regularly moved, seconded and carried

was

W. Gordon Brown;

eliminate much of the

dangers of

motion that the resolution be

adopted.]

at this time.

all good wishes

resolution be spread upon

this

Will somebody make a

ing State institutions could be worked out in

That

South Carolina and Vir¬

The balmy day of May opened the doors for

ginia.

and to extend to him

the minutes of this
meeting and that certified copies thereof be sent to Mr. Beerbower, to the
American Bankers Association, and to the bank with which he is affiliated.
Resolved,

be par excellent.

Banks received a satisfactory lull in
in

supervision
under civil service °

depends largely upon the

The future of State banking

to it.

prosperity."
Mr. Chairman, I move

iThe motion

was

the adoption of this resolution.

seconded by Mr. Brundage of

I feel I couldn't have carried on.
I hope to meet with you from time to time and I shall never get the many
inspirations and happy memories that the Association of Secretaries will
always carry in my mind.

would probably

Michigan, put to a vote

and carried unanimously.]

sources

of inspiration and information,

President Wattam:

In view of Mr. Beerbower's

say

that I have a resolution here which

the

Secretaries who have

announcement, I might

has been handed to me by some of
Beerbower, which I

been associated with Mr.

intended to bring up this evening,

but I think it is a good time to

I will read it.
Mr. Beerbower:
Mr. Chairman, I am sorry, I didn't know

bring it

right now.

about that.

'-1;- .y',

anything

'y'.'vV"
RESOLUTION

During a period of ten years C. W. Beerbower,
First National Exchange Bank, Ronaoke, Va.,
actively associated with the State Secretaries Section of the
American Bankers Association.
Mr, Beerbower served as a member of
numerous committees of the Section, as well as taking an interested part
in other American Bankers Association activities.
He served as a member
of the Public Education Committee and the Bank Management Committee.
In 1937 the members of the State Secretaries Section, in recognition of
President Wattam:

Assistant
has

Cashier of the

been

splendid service Mr. Beerbower has rendered, and being cognizant
ability as a banker and a leader, uanimously elected him to the
of Second Vice-President.
In 1938 he was elected First VicePresident, and in 1939 was elected President of this Section—the highest
honor which can be conferred upon a member of this group.
Although Mr. Beerbower contributed much of his time, knowledge,
and efforts for the benefit of the State Secretaries Section and the American
Bankers Association through so many years, it was during his adminis¬
tration as President that his colleagues were impressed with his able and
intelligent leadership, sound judgment, and his sense of duty and re¬
sponsibility.
The outstanding work which he accomplished while President
of this Section will remain as a monument to his ability to command the
confidence, respect, and cooperation of his friends and associates.
_ _
;
Mr. Beerbower's unfailing courtesy, poise, fairness, and other high

informally mention another matter?
attention that Mr. Graettinger
Secretaries Section before another
meeting of the Section, and the suggestion was therefore made, I don't
know whether from the Chair or through another source, that a resolution
be offered of similar character with respect to him.
I will confess that my
research department has not been able to obtain certain salient information
regarding lenght of years of service and different positions in the Section
served by Mr. Graettinger, and I therefore have prepared a resolution
merely in skeleton form, the details of which will have to be filled in.
President Wattam:
I might say, Mr. Hodges, in reference to that, that
I think it would be well to wait until Mr. Graettinger retires from the Sec¬
tion before we start passing any resolution for him.
Mr. Hodges:
I thoroughly agree with you. Mr. President.
President Wattam:
He has been with us here in the Section for a long
time, and I am sure that we will regret his going, too.
Is there any other
business to come before us?
If not, we stand adjourned.
Mr. Hodges:

Mr. President, may I

the same time,

it was called to may

withdraw from the State

the

of his

Newly Elected Officers

office

personal qualities made for him innumerable friends in his own Association
as well as the American Bankers Association.
The members of the State Secretaries Section desire to express their
sincere regret over the forthcoming resignation of Mr. Beerbower as Secre¬
tary of the Virginia Bankers Association.
It is the sense of the members
that a great loss will be sustained, not only to them personally but to the
Section and to the National organization.
The members wish to commend

Armitt H. Coate, Secretary

advanced to the Presidency

of the New Jersey Bankers

Association, was

of the State Secretaries Section at

the annual

Section on Sept. 23. Mr. Coate succeeds C. C. Wattam,
Secretary of the North Dakota Bankers Association, who has held the office
of President during the last year.
Elected to fill the office of First Vice-President was William Duncan Jr.,
meeting of the

Bankers Association,

Minneapolis, Minn.;

Vice-President, Fred M. Bowman, Secretary

of the Kansas Bankers

Secretary
Second

of the Minnesota

Association, Topeka, Kansas.
Two new

members were elected to the

Kathleen Snyder, Secretary,
The other

Board of Control.

They are:

District of Columbia Bankers Association;
Wyoming Bankers Association.
members of the Board of Control are the officers of the Section.

Donald W. Larson, Secretary,

V
\

American Bankers Association
Meeting Held at Atlantic City, N. J., Sept. 23-26, 1940

INDEX TO ROUND TABLE CONFERENCE
Productive Work

Planning, by Ernest S. Woolley.
__Page 60
Research, Analysis and Budgetary Control as an Aid to
Bank Management, by Maurice L. Breidenthal
61
Better Earnings and Greater Efficiency
Through Simplification of Bank Operating Forms, by Louis W.
Bishop
63
Real Estate Mortgages, by Joseph M. Dodge
66
....

How to Survey Your Trade Area,-by C. W. Bailey
Consumers

Council

Credit

and

Objectives,

Walter

French

Consumers' Credit, by Kenton R. Cravens
The Need for

—

Mortgage Loans in the Bank Portfolio, by Ernest M. Fisher._

Page 68

Liquidity of Loans to Farmers, by C. C. Neumann.,

Action—Accomplishments and Aims of Public
by Samuel N. Pickard

Relations Council,

OPERATING PROBLEMS

Productive Work Planning
By Ernest S. Woolley, Bank Consultant and Analyst of New York, N. Y.
Mr. Chairman, Mr. Simmonds, Gentlemen:
The

planning for productive work is

cal.

It is something that we are faced

cline

working

that

means

40 hours

hours to

followed by such things as the margin requirements.

longer something that is theoreti¬

with that

must do.

into effect

goes

October

1st.

plicated things
lent out

This

bank with 50 employees is going to have 5,000 less produc¬

well, perhaps this decline in working hours
effect, that the draft will make the difference and the pro¬

who

serious problem than a

You will be forced to substitute inefficient

bly recall this.
In many cases.
if they

girls

schools

which

they

a couple of months and take an option on their
should require them. It might pay them large dividends.

But any talk for production, any talk for planning of any kind must
with the executives; it must start with the top heads.

think, in the past, and

what

of some

executives

side their
you

own

are

very

often today I find when I

banks

the

This

I will not elaborate

manual.

If we

are

There

to make money.

"I don't

me,

be largely

know

even

due to conditions.

If they

One is to increase income and

improvements

leave that to the junior clerks, they

It must interest the senior

of fact, they won't.

a matter

ment.
not

start

one

going to be made.

are

are not

going to get very far.

executives; they must become interested.

ficiency of operation, like loyalty, is like water; it will not
must

run up

hill.

Ef¬

at the top.

ing of an operating manual.
portant things.

the subject of

fact that I have been in

some

are

bank

businesses.

particular

forms.

business—and, gentlemen, I want to

as a

call bankers professional men,

can

objection to it, but the banks

are corpora¬

functions,

the

bank

function, the lending function,

all other functions of the bank.

care of

lending function and

got to separate those if
a

one

and operations of each depart¬

can¬

There

are

service function, and certainly

going to be able to control them, and

we are

from the statements that you as executive officers

comes

99% of the decisions

you make as managers

interpretation of figures.

of banks

If the information that

are

based upon

you receive

correct or does not tell you the complete
story, you are

is not

only handicapping

yourselves and, after all, if anything goes wrong with the
banks, you are
the

ones

not

being fair to yourselves if

the public look to,

the

you are

those statements unless the

you

ones

that

records down

below

blamed.

are

handicap yourself.
are

You

are

You cannot get up

susceptible to their

preparation.

the best way—that I know for them to control operations is
by the build¬

it; but it is

They must recognize that

control in

Now with the larger institutions, the best way—not the only way but

necessarily mean

run a

automatically take

get.

Until management realizes the impor¬

tance of their internal operations, no

costs

that and do not consider the regular routine operations which

are two ways

one, with the forms and

They must learn to distinguished the

we have

is to control and reduce expenses.

have

problems, opeiating problems in¬

may

of themselves.

well

be conducted along profitable lines.

lending policies and the investigating of funds and they spend all

care

well controlled and

to hear from Mr. Bishop

are unnecessary

like, and I have

is the

They

going to

emphasize that banks
if

two main

they think will take

tions organized for profits and must

Bankers have thought that there is only one function to banking and that

their time

talking with the

institutions, I have had them tell

talking about."

can

possibly put them

start

Too frequently, I

they

banks of only medium size where they have
enough forms to do the United
States Steel Corp. and all its subsidiaries.
You couldn't

pay

business, keep them for

senior

forms,

minimum wage so that they can learn something about the banking

services if they

money

that anybody can follow them.

I know that you are going

recognize the probability—not only the possibility but the proba¬

bility—of that happening and start training

way that

explanation of those forms

good idea

keepers, through to the collateral teller, if

for efficient help

In fact, the larger banks will find, I think, it is

much

part of the policies

the vice-president, or whoever has charge of the loan, whoever has
charge
of the discounts, then through to the note
teller, through to the book¬

decline in working hours, and those of

present during the last war in executive capacities will proba¬

were

There is

are

as actually writing them down and having a look at them and
giving them into the hands of those responsible.
Then they should be
followed by the actual duties of every person in loans and discounts from

If that is true, I think that the bankers of this country will be faced with

you

bank has

All those

planned for

duction will need to be stepped up instead of declined.

even a more

bank has much

stock issues, bonds or other things, for any such
complicated

of banks.

Some bankers have told me,

other things, for any such com¬

the margin requirements, if

things as lending on life insurance policies.

tive hours next year than they have this year.

won't go into

lent out on stock issues, bonds

money

The de¬

refer to

Many times bankers tell me, "Well, if
it will be

By an operating manual, however, I do not
a

manual that is composed of

lot

of unim¬

To be practical, it must fit the individual institution.

The

best way that

The

bank that had

system in effect for many years.

general ledger, paying

to work and do all that work,

tremendous job.
We will never get through with it."
funny thing is, exactly the opposite is true.
Not so long

was in a
on

we go

him $175

a month.

ago,

They had

a man

They were keeping de¬

I know to prepare a manual is to recognize the different
departments of the bank; start off with the functions of that department

partmental distribution between 10 different departments.
that general ledger

and then put everybody's duties down, just what they are
supposed to do.
In going through banks, one trouble I frequently find is that this is

something that is somebody else's problem; he is supposed to do that.
If
we will take every person in the bank, list what
duties they are supposed
to do, not only is management able to control the affairs
but it will be a

cumulative totals.

surprise to them the tremendous amount of duplication of work they can
avoid.
Duplication of work is one way that banks can increase operating
efficiency—avoid duplicating work,—one
and at the

same

way

they

can

increase efficiency

time time get the results they want.

A lot of this duplication, I believe, has come about because the
average
has thought that if they could <io the same work

have

twice, they will

good internal check.

have

one

tion

of work

good record in
does

not

one

That is not true, positively not true.

place,

we never need it

provide internal

check.

anywhere else.
The

purpose

Duplica¬

of internal

check is that all transactions should, as far as possible
go through two hands
but that does not mean doing the same work
twice, and banks have been
very prone

in the past to duplicate work.

Another great advantage of the proper
building of a manual is that the
various

employees not only know their duties but anyone else
stepping

into the bank

can

be told what his duties

randum of what those duties should be.

are

and has

In certain

should go down, for example, the time to cut off for

complete

places,

even

memo¬

the time

clearings, the time to

cut off

collection, to actually be inserted by the date.
Also, there should be a clear description of the policies

department.

Too frequently

have the

answer

to the

your

are

right when they attempt to balance by

balance by the day and that
general ledger bookkeeper now starts his work
at 3:30 in the afternoon and

he is completely balanced at 5 o'clock in the

evening.

The rest of the work is done by an $80-a-month girl on a machine
only the general ledger and the day's statement and the departmental

distribution out

that

one

ledger and the records of
Certainly it does

machine she is

enabled to keep the liability

two other departments.

not pay

to use expensive men to do woik that can be
better done by cheaper
people or by machines. * This is the day of machines.

We have electricity and all these other machines that
the Chairman referred

to, and banks

can

just

well do

tremendous amount of work

machines rather than doing it by old
pen and ink.
you that it does not pay to have idle machine hours
idle
it

man

can

hours, but if

very easily be

machine is bought

adapted to take

for

their

Now I will agree with
any more

one

than to have

particular operation,

tremendous amount of the work of

the bank out of other
people's hands.
The difficulty is, 1

believe,

executive of

bank believes

left to to someone else.

question,

their

the

I don't want

sonally fully convinced that
country, there will be

are

not within his sphere.

just

well

If independent banking is to remain in this country,

going to remain because
responsibility.

I said at the start, that the average chief

that those things

he thinks there is something that can be

applying to that
What

banks

By cumulative totals I mean the bank as a whole.
You have only got the day's work to
balance, and why not balance merely
by the day?
That is what we did in this particular bank.
We used a

He is not interested

investment and loaning policies, by a lot of generalities.
So in
loans and discounts, using that as an example of a manual, it should
be preceded by the rules and regulations for
making loans and should be
are

night to get the bank balanced.
I do not think that

—not

bank

It was taking

bookkeeper from 7 o'clock in.the morning 'till 7 o'clock

no more

present

managers

to appear as a

of banks

recognize

pessimist, but I am per¬

have another

independent banks.

1930 in

banking in this

HOUND TABLE CONFEKENCE
worthy of your attention,
You make a loan, it is oper¬

Operations does not mean something that is not
as

You buy a bond, it is operations.

ations.
the

fact, everything is operations.

matter of

If you take care of the

give you one little history back in

I want to

operations,

1929 that will tell you exactly

of operations will do. This particular bank
the South Side of Chicago. On Jan. 1, 1929, it had $9,400,-

what operations and the care

located

was

it had $1,700,000, a
skrinkage of 89%. And yet, as a member of the Federal Reserve System,
it opened up immediately after the banking holiday.
If that bank could
do it, all banks can do it, and if the banks of the country can do anything
like taking care of 89% of their deposits, there would be no trouble with
000 in

On the banking holiday in 1933,

deposits.

American finance, there would be no

You might say,
collected

trouble with banks.

How did they do this?

fall of 1929, that we were

They did it by planning. True
but that alone would

We knew, in the summer

of 1929. or the

going to have some difficulty, so we

took a long

headed it with the different amounts of excess
might be called upon to pay. We went to the Federal Reserve

sheet, and in that sheet, we
money

that we

all the notes in to meet the requirements of the Federal
Reserve Bank at that time, we took all our bonds, everything that we had,

Bank

and

got

asset in that bank, and we earmarked them and put them into the
different columns that were required to meet the different amounts, like
and every

$255,000,

million,

million-five, separately.

Then when the run

caught unaware. We were able to pick up

we were

not

that

started,

those particular assets

needed and meet them.

also is
Too

bank, on the other hand, felt that

planning.

will find salaries all out
the value of the services, because bankers have too long

frequently, you will go into a bank and you

of proportion to

Nobody pays any person anything.
Banks pay for having work performed.
Therefore, the only modern
approach is to take up the minimum and maximum salary for every position
in the bank, and to pay the present incumbents somewhere between that
minimum and maximum in accordance with the efficiency with which they

forgotten that they do not pay people.

are

performing their duties—not as so

That

has

planning.

often happens, in accordance

with

time they have been with the bank.

the length of

nothing whatever to do with it.

It has nothing to do with

in one position
prima facie evidence to me that

The mere fact that a person stays

for a long

he was not
banks and we will
find the one person is getting considerably less than another person who is
performing the same duties, merely because the first one has been there for
three or four years, while the other one has been there for 10 or 15 years.
time, for many years, would be

And yet, many times we go into

worthy of going up.

and it is not fair.

That is not planning,
There is no part in

problem.
said to

the bank, that is not
Much of the things new in

the bank, there is no operation in

worthy of your attention as senior

executives.

manufacturers with
believe

As a matter of fact (and I

machinery companies will bear me out

in this), a large percentage
themselves and not

being invented by the bankers

are

had a
machinery man in," and they have
problem; how are you going to help us

In other words, the bankers have

by the machinery companies.

They have said, "Call the
"Well, here is our

him,

solve it?" and have put him to

work.

1 have in mind two distinct machines, one

made by one company and the

that were in use in two small banks of less
One machine does every bit of work in that bank,

other made by another company,
than

million

dollar^.

everything goes
another manufacturer takes

including the proof, transit, general ledger, statements;
that.

Another machine manufactured by

of the

care

commercial deposits, savings deposits, loans,

general ledger,

discounts, practically everything except

the proof.

banks started those two machines, interested
them, that they solved their problems of operation.
It is

It is only because those two
themselves in
not

going to start down below; it is going to start

with you, gentlemen.

executives, and if, in these few
disposal, I have been able to arouse some thought in your
inclination, to tackle these problems, they will not have been

going to start only with the senior

It is

minutes at my

mind,

some

wasted.

You will need them.

unfair, to try to
and
to get more interest rates and higher interest rates, when we
what the cost of handling those items is.
It is true that I am a

I think, personally, that

it is wrong, I think that it is

have everything come from the one source,
say we want
do not know

those wrongs and troubles
and everything else were always going to go to the other fellow but they
weren't going to go to them.
So they were caught on the run. What did
they do? They grabbed their governments, their A. T. & T. and the other
high-grade bonds, and sold them, leaving the rest below to take care of the
other depositors.
That all comes under planning.
It is all planning, and
there is no radical difference between the principle that kept that bank
open and the principle of paying the right kind of salaries in a bank.
That
The average

the larger

lot irom the so-called service charges,

not have solved the problem.

of machines.

the creation and invention

of those machines

balance sheet will take care of itself.

We credit the machinery

banks must come from you.

little frightened of the

to yell about interest rates

continual growth of the consumer credit in some banks
is going to come.
I wouldn't be surprised if,

not that I don't know that it

financing was the only form of financing.
said that I

in 10 years from now, consumer
I know that if I had stood on

could

see

this platform 10 years ago and

banks of New York advertising for small

the large metropolitan

loans, you would have said,

However,

as a

"Woolley, you're crazy!"

matter of fact,

banks in the past have been financing to a

and a half to three times.
Bank
principally to the re¬
for repayment;.
Bank "B" has been doing the

large extent the same merchandise two
"A"

has been lending to

ceivables and inventory

the manufacturer, looking

thing with the wholesaler, and

same

the same old merchandise

bank "C" with the re ader.

But it is

that left the manufacturer.

financially if business at¬
tended to business, and banks took credit and financing?
I was struck by
the only available figures that I have been able to find, that the open ac¬
counts carried on the books of manufactureis, wholesalers and retailers
are 63 billion dollars.
Bank deposits at that peak are 71 million dollars.
But, as I said, I am a little frightened of this consumer credit in some
banks, because they will not take the trouble to know what costs are,
and the costs to them are from $3.50 to $7 in the majority of cases to put
a loan on the books.
They only way, therefore, that a bank can know that
it is doing a profitaDle business on that end is to know its costs, is to know
its operating problems, is to bring those operating problems into line with
present-day methods.
Certainly, you cannot pass on to customers costs
accruing from inefficient operations, and nothing is going to increase ef¬
ficiency until you gentlemen, as executive heads, take this problem ser¬
Wouldn't this country

iously.

be on a sounder basis

I thank you!

Research, Analysis and Budgetary Control
as an Aid to Bank Management
By Maurice L. Breidenthal, President

of the Security National

assigned to me must necessarily be general
in nature.
It would be much better if we could take a specific case and
show just how research, analysis and budgetary control has been used to
aid in the successful and profitable operation of an individual bank. This is
not possible in a meeting of this character. I would like to restate the subject
to read—Research, Analysis and Budgetary Control, a Necessity to Success¬
ful Bank Management—because in this day I do not believe it is possible
to have successful banking without the use of these factors.
It has been said that there is no magic in the words, research apd analysis,
My discussion of the subject

been accomplished for the banking industry since
of facts and information developed through research

yet the results that have
1933 by the application
and analysis

have been amazing.

have an unusual
individual units range in size from the
one man cross-roads bank found in Kansas and other agricultural States
with total resources of as little as $35,000 to the largest bank in the country
with totals of three billion dollars and with officers and employees in excess
of 5,200.
The largest unit has seven or eight times as many deposits as all
the nearly 700 banks in the State of Kansas put together, and has more
employees than the total employed by all Kansas banks.
The same com¬
parison could be made with a number of other agricultural States.
Ap¬
proximately 44% of all the commercial banks in the United States have
deposits of less than $500,000 each.
The percentage is much higher in
Kansas.
These banks for the most part have a maximum number of em¬
At

the outset we

industry.

should recognize the fact that we?

An industry where the

ployees of four.
not in excess

banks ranges

The maximum gross income of any one bank is probably
From that high figure the income of this group of

of $25,000.

All of these banks
regulated by the same

downward to a probable low of $2,500.

from the smallest to

the largest are governed and

the Federal Government and the 48 States. The
Wage and Hour Law, if it applies at all, applies with equal force to the one
man bank in Kansas and the largest bank in the land with its 5,200 em¬
general statutes enacted by

The American Bankers Association finds itself with the problem of
formulating a program and outlining policies which will be acceptable and
ployees.

productive for this widely diversified group. That is quite a
Let us go one step further in reviewing our industry.

task.

Prior to 1933
with a minimum
management. Now, that statement may be challenged, yet taken as a
generality it is true. Up until that time with occasional interruptions, we
existed in a bankers' paradise—a sufficient demand for funds so that all of
lis were able to keep our loan portfolio full at handsome interest rates.
We
not only could make a nice profit on our own available funds, but the
business of rediscounting was likewise profitable.
Our main managerial
function was to endeavor to select the good loans out of the plentiful supply.
We gave no attention to bonds. . We didn't know the difference—if any¬
body does—between a high-grade and a second grade bond.
No worry
then about costs, budgets, merchandising our product, free services and
the like.
Income was sufficient to take care of wasteful practices, including
the payment of extravagant interest on both time and demand deposits.
|b In 1933 and the year that followed, all this was changed.
We found
ourselves at the end of the rainbow, and the pot supposed to contain the
gold was empty.
Those of us who were left—and our menbers had been
the industry as a

whole operated with more or less success

Bank, Kansas City, Kan.

one-half—started to beat back.
We were confronted by entirely
conditions: a scarcity of loan demand and a surplus of loanable funds

reduced by
new

and likewise a constantly

reducing interest rate,

which in some classes has

practically reached the vanishing point.
This producee a highly competi¬
tive situation for available business.
Higher operating costs have resulted

increased taxes. What a combina¬
sound bank management!
inaugurated by the American Bankers
Association and the various State associations we resolved to study our own
business.
This was the introduction of research and analysis to the banking
business, and the end of haphazard methods so long in vogue.
Fact-finding
probably defines our activities better than research.
After we are better
acquainted with our own business and have established the fundamental
facts which influence our operations we shall be ready for real research.
We found the immediate need to be budgetary control.
Our shrinking
income forced this upon us.
It became necessary for us to estimate the
minimum income we could expect to receive and to budget the expenditure
of that income so that we could be sure to have a margin of operating profit
at the end of the year.
Thus we adopted a practice that had been in use
by other successful industries for years.
It is one practice that applies to
all banks regardless of size, and has been responsible for much of the im¬
provement in bank operation.
It has been demonstrated that it is possible
to budget your expenditures at the beginning of the year and that the final
result will not vary more than H ©f 1 % •
Such a budget serves as a guide
for your day to day operations and permits the management to present
to his board of directors a picture of the bank operations in an understand able way.
A new word has been coined during this period; "Budgeteer,"
defined as "folk who work to make both ends meet."
It's a good word
for bankers to know.
Henry Ford may be able to give $46 tips for $4
lunches, but present-day bank operations require much better control

from new laws and
tion

regulations as well as

of circumstances

Under the stimulation

over

for the development of
of programs

expenditures.

day bank¬
present day
the facts in
connection with the operation of our banks.
We asked ourselves questions
such as: How can we operate our bank profitably Under present day condi¬
tions?
What services are we providing our customers and what is the cost
Research and analysis has been

the "Santa Claus" of present

The immediate need has been to adjust banking to meet
needs.
In order to do this it was necessary for us to know all
ing.

to us which have not
How can we increase the efficiency of
our personnel?
How can we gain the confidence of the public?
How can
we make our bank more useful to the community ?
These questions and many more we asked ourselves.
Other problems
such as interest rates on time and demand deposits and wage and hours
have been imposed upon us by Government law and regulation.
What is the net result?
By the analyzation of the facts developed and
adoption of policies based upon these studies, we have brought about better
bank management.
Today we have better banks and better bankers than
of these services?

What fields of activity are open

previously been utilized by

ever

banks?

before.

sulted?
to

We found that

their customers.

and what re¬
free of charge
that the cost of these services was sub-

of the things we discovered
banks were providing many services

Specifically what are some

We found

BANKERS'

stantial but that

previously these costs

willing to borrow

was

The result

that

was

CONVENTION

absorbed by the borrower who

were

our available funds at a substantial rate of interest.

enunciated the principle that there is no connection

between bank Income from loans and investments and bank income from

services.

to a realization that

came

are

merchants just as

surely

the druggist or the grocer and that one of our products consists of the

bank services which the public require and that we must sell these services
at cost

plus a reasonable profit.

charges has resulted.
income of banks
from

Universal adoption of

Income from this

immensely.

schedule of service

has improved the operating

source

In Kansas income from this

practically nothing to nearly $2,000,000.

With it all

source

has grown

services has been
services whichr

greatly improved that today

worth

are.

than

represents a profit to the bank.
feel that if we

charge,

they

This is

we are

selling

for them.

pay

our customers

Yet, each sale

ideal situation.

Personally I

to expect puollc acceptance of the principle of the service

are

we must have

out entire States.

uniformity within sizeable

Should

if possible through¬

areas,

adhere strictly to a cost basis, we will have

almost

as many different schedules as we have
banks, which would create
only confusion in the minds of the public, but also a very unsatisfactory
competitive situation.
As individual bankers, we must not forego any of

not

sound bank management in order,
seemingly, to obtain an advantage for
our own bank.
This goes for interest cutting as well as service
cutting.
In policy matters affocting our

relationships with the public,

If necessary to

should.

Improve public acceptance of banking, sacrifice

our

own

personal viewpoint to the viewpoint of the majority.
Tu«s represents a control

cne

we were

all interest on demand deposits and to limit interest

lot of

forced to eliminate

paid

time and

sav¬

ings deposits.

Nevertheless, banks have fully cooperated and by a careful
alanysis of their ability to pay, have reduced the payment of interest much
beyond Federal Reserve regulations.
The payment of interest on time and
savings deposits must be limited in every
funds at

profit.

In Kansas

made

to your ability to resell these

case
a

study of

of banks and

a group

found that in 1928 the interest paid on deposits
represented 25% of their
gross income; in 1938 the percentage had been reduced to less than
10%.
I want to say that one bank in that
group in 1928 paid out a sum, as in¬
terest

its

deposits, which

equivalent to 80%

was

in the year 1938, and the bank was

Incidentally, tne
in

1928 represented

1H% ot

of its gross income

50% larger in 1938 than it

income from service cnarges

of this

net profit of this group of banks in 1938

in 1928.

was

same group

income; in 1938, 1214%.

gross

service charges plus the reduction of interest

savings deposits.

That is

definite Illustration of the value of research and
analysis as an aid to

Bank Management.

Let's take

look at the

lending field.

that this field be surveyed.
part of our regular

Several factors made it essential

Among these

were:

Lack of demand

the

borrowing customers; competition of governmental lend¬

ing agencies; reduced interest

commercial paper.

These factors led to

study of the field of available loans and resulted in the discovery that banks
largely had been overlooking a very prolific source of loans that existed
at the very

front door of every bank.

I refer to personal loans, consumer

credit loans of all kinds, automobile
loans, equipment loans.
extensive incursion into this field and a

Result:

steady and rapid increase in this

type of loan, most of which

This has brought about a better

the banker and the
income.

The

same

man

formerly handled by finance companies.

were

feeling and better undertstanding between

the street and at the

same

time has increased

type of survey and analysis with the same profitable

results has been conducted Into other fields of
activity.
of our banks, barring the reserve

re-invested in local enterprises

are

Consiueraiion of wages ana nours has been forced
upon us by the passage
of the Federal Act under that name.

Some of us think it does not apply to

banks.

All of

concerned about that phase of it

am not

from

feel that it is unfair and unreasonable if it does
apply.

bank management standpoint ?

today.

Yet most of them
believe they are.
our

are

beneficial 1 Why ?

Because it has made it
necessary for us to survey and analyze our internal
operations.
We have discovered that
many improvements and

thing about this entire program is the willingness of bankers
their cards on the table and compare results.
Each of us has de¬
new methods of operation that will be beneficial to other

bankers.

By exchanging this information

country
have

the conference table of every

been

time standards

of employee

efficiency have been established throughout the bank. In my own bank we
thought it would be impossible for us to operate on the 42 hour week with¬
Actually during the first six

months of this year we took care of our
operations and each employee worked
on an
average of 5% fewer hours than the legal limit of 42.
This is the

analysis.

direct and extremely
important by-product of research
keener and

they get into a meeting of this kind they really "let their hair down" and
trot out the most intimate and confidential details of their
operations.

True appreciation comes only
having had the opportunity of "settin' in."
I believe this is the

method in the final analysis that must be adopted if we are
going to ex¬
wonderful thing if,

and analysis

sive and who

are selling our banks to
the public with thoughtfulness, with
kindness, with courtesy and with a smile.
With it they have a new appre¬

to your own individual

individual personality and it is their
responsibility to develop this person¬
ality along the proper lines.
It is a peculiar thing, but we
give more at¬
we

buy than

do to

our

bank personnel.

The

minute we buy a new
machine, we immediately put that machine on a
service contract in order that we
might know, and be sure that it will oper¬
ate efficiently and function
efficiently at all times.
Yet, we do not show
the same consideration to our
personnel, in spite of the fact that in the
average

bank, 40% of the

I could go on

gross

expenditures

indefinitely and

are

represented by payroll.

recite items in connection with operation

and bank management that have
been the

subject of research and analysis.

The bank manager is the trouble
shooter of his organization.
must go on until all the facts
pertaining to the

operation of

available for every bank officer in the
land.

job.

One thing

exchange

facts

have developed and that is
and

information

about

with our competitor and fellow bankers.

lead to
we

This
an

our

means

This work
a

are

ending

operating problems

This cooperation will eventually

higher code of banking ethics and greater
uniformity.

have stressed the value of

bank

never

ability and willingness

own

uniformity of practices

as a means

In Kansas
of obtain¬

ing greater public acceptance.
Sometimes we feel that we are reaching
perfection in this matter until we receive a rude
awakening.
In our State
we have adopted a uniform
schedule of service charges and this has been
in

use

for

and 90%

number of years.

our banks claim

The
to

use

of this schedule has been beneficial

using it.

same

This

cases.

new

size were repre-

that

would

apply

spirit of cooperation is the real

safeguard to the future of banking in this country.

Research and analysis
aid to bank management is in its Infancy, but it Is the most
impor¬

as an

consideration

tant

before

bankers today.

American Bankers Association

It is for this

has organizeed

that

reason

number of

the

depart¬

new

ments—Consumer

Credit, Agricultural Credit, Real Estate Mortgage
Credit, which together with old standing commissions, such as the Bank
Management Commission, are providing facts and information which will
greatly aid you, regardless of the size of your bank, in your management
problems.
It is my

studied opinion that incredible

may

have profited by conditions which have confronted

years.

and in

than

this because

say

doing

we have

previously

developed

existed.

be, banks generally

during the past several

have been forced to analyze our own business

still

far better grade of bank management

believe

that good management is more
important to good banking than all the laws and regulations that were ever
passed.
It is up to you to encourage your competitor to adopt sound

operating policies.

It is just

important to

that his bank operate

you

at a profit as it Is for your own to do so.

Public acceptance of banking

behavior and

determined

obtained
a

and

results

group

by the behavior of each individual bank.

not

results

going to repeat

statement which I have

previously made and that is that the future of the
independent unit bank will not be decided in Washington, but by you and
by

are

home towns.
It will depend upon two things: Whether
bank indispensable to your community and whether you

our own

you make

your

able to do this and at the

and that goes for the one

same

man

time operate your small unit at a profit,

cross-roads bank out in

for the largest bank in New York.

research and analysis

And in both

cases

Kansas

well

it calls for constant

of improved banking methods.

DISCU33ION FOLLOWING ADDRE3S OF
Chairman Dart:

In order to determine the

M. L.

BREIDENTHAL

Are there any questions?

Mr. Waller (Washington):
Mr. Chairman, I would like to ask Mr.
Breidenthal, in this analysis, the analysis system that is supposed to be

followed

by the

banks

Kansas,

what

interest allowance is made

balances ?
Chairman

Dart:

Mr.

Breidenthal, the question asked by Mr. Waller

of Washington is, in your analysis
system followed in Kansas for analyz¬

ing accounts, what interest
Mr. Briedenthal:
Mr. Waller:
Mr.

rate is allowed on the net collection field?

The net collected balance you mean?

That's right.

Breidenthal:

Well, now, that's the

some

one

place where

flexibility, and that the interest credit

feel that

on the

realized

balance should depend somewhat upon the
ability of the bank to earn It.
have banks—well, as I said

moment ago

in this talk,

have

banks with $35,000 of total,

that are still able to get 10% on their loan.
larger cities, in our larger banks, thay are allowed a lower rate of
interest.
The average allowance is 30 cents per hundred.
It goes as low
In

our

15 cents.

It varies from

adopted calls for 30
to

answer

that

earn

your

much,

Question:

some

The schedule that

banks feel that they are not

they have reduced that

one

item.

Does that

Yes, thank

Chairman Dart:

just

15 cents to 30 cents.

but because

cents

question?.

Mr. Waller:

you.

Are there any other questions?

Mr. Chairman, if I may, I would like to turn the clock back

a moment

and ask Mr.

Woolley

question.

Mr. Woolley's comments on consumer
credit, I understood him to
that the cost in many instances is from .$3.50 to $7 to put a personal

say

loan

small loan

or a

elaboiate

responsibility in the successful accomplishment of the
Bank managers today recognize that each bank has an

tention to the machines

this group of bankers could be

You could really get some information then

sen ted.

own

bank program.

I cannot help but feel that it would be

tomorrow morning

broken up into smaller meetings, in which banks of the

alert personnel in all of

Heretofore bank managers had not
always recognized the
important part their employees play in the success or failure of
any operat¬
ing program and in the attitude of the public toward the institution.
Through careful consideration of this
problem, today, generally speaking,
we have in our
banks, a group of employees who are keen, alert and
aggres¬

ciation of their

impossible to describe these meetings.

after

banks.

our

of years.

assembling

able

Kansas

of discussing their

Now

number

bankers in size groups for the purpose of
affording them an opportunity
problems with other banks of the same size.
When

our

savings in every department.

has been the development of

banker.

exchanging this type of information for

there should be

result of research and

bring every banker in the

other

Year after year a large majority of our banks send in their
operating results
and these are tabulated by size groups.
Recently we have been

costs.
I was interested in a discussion of this
character between representatives of
larger banks at a meeting last spring.
It developed that many of these banks have
been able to make drastic

Increasing the number of employees.

The finest
to pur

efficiency and decrease

out

Most of them

veloped ideas and

changes

the first

uniform basis.

Now, because they do have the desire, next month

meetings we shall devote

group

misinterpretations.

could be made in the internal
operation of our banks which would increase

For

128 different answers to the problem.

were

desire to operate on a

entire afternoon at each meeting
to discuss this subject and iron out the difficulties that are
causing these

What have been the results

Offhand, they

We asked each

Wo received returns

The funds In most

city banks, are local funds, and In so far
possible, it is the responsibility of every bank to see that those funds

from 340 of our banks and there

of Danas

The entire

represented by the income of

was

consisting of

banker to figure the service charge on this account.

change this information properly.
We received

expenditure side.

help from the Government when by regulation

this uniformity we mailed a questionnaire last month to
every
This questionnaire contained a problem

hypothetical account with certain activity for the month.

have benefited

the bank customers because it is my opinion that the character of our bank

extent

banker of the State.
a

Mr. Woolley:
up to

Mr.

Woolley, will

By putting

the time that

costs that

the bank's books.

I would like to have Mr. Woolley

that, if he will; please.

Chairman Dart:

accrue

you

loan

you answer

up to that

time.

that?

the books, I mean it costs that much

actually turn the money

over to

In other words,

the borrower; the

there is the cost of

advertising for the loans, there is the cost of investigations, which is a large
cost and largely depends on how
many applications—that is, what the
percentage of rejected applications is to the total applications.
Personally,
I am in great favor of an
investigation fee.
It costs more money, very

frequently, to turn down
if

recognize that

books—they will

one

of these loans than it costs to accept them,

fact, that it does cost

vary; your

have

making it, "Now,

we are

Now, if

investigate a loan, then

investigation fee.

If the loan¬

going to investigate this loan," and he can tell

worthy of investigation, then he
you have told

money to

who makes the loan, tells the borrower at the time

from the application form, the

gate.

apologies to make for getting
man

and

loan on the

accepted applications to the total applications

received will vary from 70 to
90%.
If we really recognize that it costs

ing officer, the

money to put a

answers

says to

that he has,

whether or not it is

the borrower, "Now, if everything

is true, then the loan will go through,

but we must investi¬

we turn down the

loan, you are not going to get this $2 or
whatever the investigation fee is, back, because if we are going to
turn dowh this loan, it is because our
investigation has revealed some facts

which you are not revealing on
your application form, or

ling

something that is not true."

therefore, to having

There is

investigation fee.

else you are tel¬

objection, in my opinion,

Some States have a law that

ROUND TABLE CONFERENCE
makes it

that is because the

little difficult. New York among them, but

bankers have not educated the legislatures as to

have to go to, to

investigate

the amount of work they

expenses

You have to call up many different people, such as

credit bureaus, per¬

look up the borrower.
question?

Mr.

I have

Question:

Does that answer your

Mr. Woolley:

Two dollars "will not cover the average

From $2 to $5.

Again, it depends upon the rate

loan than to

minds, that it costs more money to reject a

our

make it, we will see the reason

Question:

It costs more money—if we get

received.

to applications

that clear in

for

investigation fee.

Arriving at

question?

Woolley, may I ask a further

Mr.

that cost, do you use the total application into

the office, or do you take

total cost and put a stopwatch on it, take the time for

your

the average

it?

No, I don't think that any stopwatch is necessary, is

Mr. Woolley:

duties

In the smaller banks where a man's

are very

much mixed up, it is

who are
and the
advertising
is for, Isn't it t—thecost of the man's looking up the credits and other infor¬
mation, as well as all costs of men's time and forms up to the point where

harder than in

looking
cost of

larger bank, but in the larger bank that has men

credits, it is the time that you are looking up the credits,

advertising that goes into new loans—that is what your

various costs and expenses is
If we will take merely a schedule

think it is.

showing every half-hour, put it on a sheet of paper, and let a man
track of the time

that

he is devoting to

various days—take half a dozen

days; peak periods, low periods and

high

ially lower scale of salaries

practical pur¬

whether

know
I

that

your

answers

that.

have found that out, you can base the rest of it on

When you

as near as

question specifically, but that

Well, in a large bank where you have a line of

I know where there is

small bank.

demarca¬

much easier than in a
doing all the work it is

one person

However, if he will take all the stationary, all the

harder.

all the investigation forms, everything up to
handed

to the

over

You

are

advertising,

the point where the loan is

more—doesn't
using the head help

borrower, ho will find that it costs much

using much more expensive help, you are

and it costs more than it does to accept the payments,

because that is done

Probably half of them here are less than

million-dollar bank ?

five-million-

dollar banks.
Mr.

Well, you know, Mr. Robey, the funny thing about costs

WooJey:

is that it costs more per

transaction, very frequently, in a small bank than

The reason that bankers can never control costs in the

large bank.

that manufacturers control costs, by

the unit of the thing they sell, is
going to very without the dol¬

because the activity or the transactions are

the gen¬
tleman was just talking about.
Under any circumstances, no matter what
costs you may have found, they are going to be higher in February than
they are in January because they are in direct relation to the number of

lar costs

In other words, take the service charges that

varying.

items that are

handled, and that is just as true in your personal loans.

Tae average small bank
are

which I have visited, I have found has costs

No, I have not, and the reason why I haven't is, again,

Woolley:

that your averages
tell you

would be no gocd.

Any average of costs that I could

would be misleading because a great deal depends on how you are
haven't proper methods, if your methods are

antiquated,

operating.

using mt chines where you could use machines, your costs are

control

that it

There is no way that I know of that you can either

means very

much to have those item costs in the banks.

Loan Department classified at different interests

other

loans,

That is why I say the only solution to better management

yardsticks or budgets for your own institution on the

dollars of

of the Personal

and different princi als.

they can find an effective rate on each individual

that

woras,

have automobile loans direct, you

you

Then you certainly have the

classes of loans.
in

that

classification.

have personal
have automobile dealers'

Personal Loan Department you

your

loans, you have FHA modernization loans, and you have

all the various

people who are employed

department.

our

from the money

returns

invested

satisfactory?

I think that

started many a bank
personal loan business.
They saw that they had been getting a
3.12 return on regular commercial loans and that they had been averaging,
after all expenses, a 4.00 return on their personal loan departments.
Now.
if I am getting 4% net after all expenses, I have a department that is pay¬
ing me, no matter what the individual transaction may or may not cost.

fact, an analysis on that style, has been the thing that
in

the

Isn't that true?

Mr. Dart, may I ask Mr. Breidenthal a

Question:

stood him to say that he

Now,

and 15 cents.

I also understood 10%

what?

I under¬

question?

allowed interest on revised balances of 30 cents
On the dollar or on the hundred dollars?

loans.

What rate of interest does he allow on

realized loans?

That allowance is made

You mean on the earnings?

Mr. Breidenthal:

the net realized balance.

Yes, I know, but is it 30 cents on the hundred?

Question:

control costs through

needs to know is, does that Personal Loan

The only way that they can tell whether they are get¬

ting a satisfactory return from that is to keep the expenses

net realized

anything that would give me even a really fair average of what

cost should be.

is to build

you

going to be higher.

There is no such thing

found anything yet that would a'low us to

never

item costs or
a

on.

Mr.

What do you mean by servicing a loan?

I mean collecting the payments and the stationary and audits

Question:
and

mentioned on

of the cost of servicing a loan, say.

12-month period?

350 to 400 banks on costs—I

higher than you have in the larger banks.

that I know of as yet—and I have been in
have

that somebody else is selling it for.

the books, do you have any estimate
over

bank, sell at three

Mr. Woolley, along the lines of costs that you

Question:

points, in

They are never going to be able to sell things at

four times the price

Are

Mr. Woolley, what would be the cost, do you think, in a

Mr. Robey:

that

That is why

in its good licks.

three and four times the price which I cannot, in your

by cheaper labor.

way

must get

management must know what is going on in between those two

Department pay?

It answers it fairly well.

Mr. Woolley:

It is only in between those

anything else.

The thing that management

tion, the problem of allocation of cost to services is

They are not able

buy stationary and supplies, or pay a mater¬

management

order to control them.

get it in generalities.

can

Question:

it?

points that

in banks are governed, naturally,

by competition, aren't they?

you are not

periods—we will get an average that is good enough for all
poses.

don't

the same

I think so; I most decidedly agree with you.

Woolley:- Yes,

the other hand, they cannot

keep

those activities thr ughout the

bound by

Don't we have to think about that, too?

other words, a lot of the selling prices

law, by custom

This thing of splitting salaries in between
not so difficult as we like to

you?

Isn't any business, Mr. Robey,

yes.

selling ?

Well, the "New York Times" costs in my town

Mr. Woolley:

the money over to the borrower, should apply.

you turn

and that Is, you

In
by
to
raise the interest rates higher than the average in their community or what
other people can get money for; neither are they able to sell their services
at a considerably higher price.
They do not have a patented article.
On
Mr.

two

application?

Well.

it does in Times Square.

investigation fee?

investigation cost; $5 will about cover it.
of rejections

Mr. Robey:

In your experience, what has

Full text of Commercial and Financial Chronicle : October 12, 1940 : American Bankers Convention Section, Vol. 151, No. 3929

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