Full text of Commercial and Financial Chronicle : October 14, 1916 : Bankers' Convention Section, Vol. 103, No. 2677

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BANKERS' CONVENTION
SECTION
COMMERCIAL & FINANCIAL CHRONICLE
OF THE

Copyrighted in the year 1916 William B. Dana Company, in the office of the Librarian of Congress, Washington, D. C.

Vol. 103.

NEW YORK, OCTOBER 14, 1916

No. 2677

$258,000,000 larger than the similar excess in any
previous year, and the net gold imports during the
eight first months of 1916 were nearly as great as
in the preceding year. On September i this year,
the Government estimate of the stock of money in
the United States showed that money in the form
of gold had increased $632,000,0oo since January
I, 1915.
Nor is this all of the great change in our annual
international trade balance. The recent estimate
by Mr. Loree indicated that the United States had
redeemed between January 31, 1915, and July 31,
1916, $1,288,000,000 of American railway securities
previously held abroad. We shall no longer, therefore, have to send abroad each year the substantial amount in interest and dividend remittances
due on these redeemed securities. We shall, moreover, at the end of the present year, be receiving
from abroad interest on something like $1,80o,coo,000 on securities of foreign states and corporations,
placed in this country during the war.
Nevertheless, the question of our international
WILLIAM B. DANA COMPANY, Publishers
trade position after the war—particularly the quesFront, Pine and Depeyster Streets, New York
tion of our exchange of gold with Europe at that
INDEX TO ADVERTISEMENTS
time—continues to engage attentioti. It is eviA complete index to the advertisements appear- dent on the
face of things that Europe will nating in the present issue of the Bankers' Conven- urally
use every means to reduce the balance
tion Section will be found on pages 97 and 98.
against her in her annual trade relations with the
United States, and in particular will labor to build
OUR GOLD RESERVE, NOW AND AFTER up again her own reserves of gold. How will these
THE WAR
influences affect our own post helium situation?
Probably no question engaged the mind of the
Two speeches before the National Bank ConNational Bankers Convention more strongly than vention directed attention thoughtfully
to these imthe probable bearing, on conditions after the war, portant economic problems. President Vanderlip
of our huge accumulation of credits through the of the National City Bank referred in his speech
war-time balance of outward trade and the con- to "the sensational influx of gold that seems
sequent unprecedented increase in this country's dangerously likely to submerge us in our own prosstock of gold. As to the economic position in perity"; adding that "it would be most interestwhich these achievements will have placed the ing to attempt an analysis of the ultimate effect
United States, there can be no dispute. During on prices, on our national welfare, of this unprecethe calendar year 1915, this country's merchandise dented accumulation of reserve money. It would
exports were larger by $1,066,0oo,000 than in any be worth while to study what is likely to be the
previous year, and the surplus of our exports over ultimate effect upon our money market of this
imports greater by $1,080,000,o00 than the previous importation of gold, as well as the potential possibest record. In the eight months ending with bilities for inflation in the Federal Reserve Act itAugust of this year, exports increased $1,204,000,
- self." As regards our export and import trade and
coo over the corresponding period even in 1915 the balance of merchandise exports, after peace, Mr.
and the excess of exports increased $688,700,0co. Vanderlip further suggested that "under the presGold imports last year in excess of exports were sure of necessity, the British people have become

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, 94

,BANKERS' CONVENTION.

enormously more productive. Industry has been
lifted out of the ruts of custom and rule, initiative has had free play, machinery has given new
powers to the workers and organization has been
modernized with results that have been a revelation." He asked the question, "Will industry in
the United States make the same progress?" This
was his somewhat tentative answer:
"There is warning in the fact that adversity is
usually a better teacher than prosperity. The latter comes by fortuitous circumstances and we enjoy
it, relax, and take our ease, while adversity puts
men upon their mettle and calls up all their resources. In some respects we shall be stronger
after the war. We shall be richer, our productive
equipment will be better than ever before; but these
will not avail without a spirit of unity and good
understanding in our industrial organization. The
account we give of ourselves will depend at last
upon the men behind the machines."
Mr. Paul Warburg, of the Federal Reserve
Board, touched on the same question in his address
to the Convention. Recognizing the abnormal
character of our recent import of gold, he expressed
the opinion that "the national bank currency ought
to be systematically withdrawn and the greenbacks
ought to be gradually turned into gold certificates."
But this was for the period of war itself. Having
noted that "there never was before in the world
a period of inflation such as is now in process in
Europe," and that "the adjustment after the war
will create the keenest competition for the yellow
metal," he gave the positive judgment that the very
fact of the great surplus stock of gold accumulated
in our Federal Reserve Banks, our private banks,
or in our general circulation, would in any case
make us "the target for gold withdrawals" after
the war.
With what result? Mr. Warburg thus outlines
the possibilities:
"Let us suppose that our member banks' excess
cash reserves have been wiped out, either by gold
export or by expansion of the loan and deposit
structure; let us suppose that our discount investment rates are fairly low as compared with those
prevailing in Europe; let us suppose that our shipments to foreign countries will no longer exceed
our imports. Then, as money flows where it can
safely earn the highest returns, our bankers will
probably have to finance foreign countries in government loans and individual transactions.
"We are faced with the simple question, Will
we be strong enough to share our plenty, during
the coming period of stress, with other nations and
be the world's banker, or will we be so weak that,
when these demands come, we must stop them at
once by raising our discount rates high enough to
retain our gold at home? . . . Our foreign
competitors will proclaim that only a country
willing to part freely with its gold may safely be
accepted as the world's banker."
These are highly interesting considerations. The
answer of most business men to the questions
raised by them would probably be that Europe will
not find it altogether easy to establish a credit
balance, in its annual exchange of goods and
credits with the United States, large enough to

affect such immediate results. Theoretically, it
might be done in one or all of three ways—through
an abnormally great excess of merchandise exports to the United States over imports from the
United States; through continuance of the sale of
new European securities in American markets on
a very large scale; or through money rates on the
open markets of Europe, so continuously high as
to attract great sums of capital from the United
States, with a resultant sharp turn of the foreign
exchanges in favor of Europe and a large export
of gold from this country.
There is something to say both for and against
these probabilities. Europe will undoubtedly endeavor to export merchandise after the war, as
largely as its own conditions admit. But the question is, whether that can be done, at any early date,
on such a scale as to reverse the balance with the
United States. Opinion on this point is highly
conflicting; one side basing its conclusions on the
urgent necessities of Europe and the consequent
probable forcing of cheap merchandise on the markets, the other side arguing from the coming demands for physical reconstruction of belligerent
Europe itself, the exhaustion of raw materials on
Europe's markets, the depletion of European labor
supply through the war and the consequent higher
European wages. We have already quoted Mr.
Vanderlip's suggestions regarding the important
consideration as to efficiency of European production.
Sale of new securities to us by Europe after the
war, and on a very substantial scale, would be a
wholly logical outcome of our accumulated wealth
and prosperity. It is also true that, after the war,
proceeds of such new loans would mostly be sent
to Europe through the exchange market, instead
of being spent in the United States, as has been
the case with the great English and French loans
of the past twelve months. Yet it is not to be
forgotten that Europe must also provide, in the
period immediately following peace, for redemption
of such obligations to this country as the $5oo,000,000 new French loan, the $250,o00,000 collateral
loan of the British Government and the $100,000,000 collateral French loan—all of which mature
two to four years from the present time.
The question of money rates in Europe after the
war is greatly disputed. Many good judges anticipate a period of very high money markets in
England and on the Continent. Yet, on the other
hand, high money ordinarily accompanies active
trade, and the theory is widely entertained that a
period of severe financial prostration and trade reaction is in store for Europe after the war. Such
conditions do not ordinarily cause high money. It is
also possible that rates in this country may be advanced through the auspices of the Federal Reserve
Banks, if the influence of European money markets
on our gold holdings were to be too great. Mr.
Warburg's opinion on this point, already cited,
gives the other side of that argument.

BANKERS' CONVENTION.
On the whole, the conclusion of most observant
financiers will probably be that natural economic
processes will lead to partial and perhaps very extensive redistribution of our abnormally large stock
of gold after war is over, but that the movement
would .not be likely to proceed on a sensational
scale, at any rate until normal conditions of peace
had been restored, years afterward. Nevertheless,
the facts and arguments set forth in the two
Kansas City speeches leave the implication plain,
that it is possible to place too much reliance on the
permanent influence of the present huge gold supply upon the American financial situation.
THE CONVENTION CITY
Kansas City, the meeting place of this year's annual convention, is one of the thriving commercial
centers of the country, and destined, by reason of
geographical location and exceptionally favorable
surroundings, to a steady growth and progress.
Situated at the unction of the Kansas (or Kaw)
and Missouri rivers, 275 miles west of St. Louis,
it is encircled by a rich agricultural territory, sometimes called the "bread basket of the world." The
wheat fields of the Dakotas, the cornbelt of the
Missouri river, the oil fields of Kansas, and the
zinc and lead mines of southwest Missouri are, naturally, tributary to it and a part of its increasing
power; while, as a trading center, it is now the
chief city after leaving the Mississippi river, and
confronts that vast region commonly denominated
the Great West. To south, west, and north stretch
rolling prairies, where soils are adapted to diversified farming, where winds are variable, rainfall
abundant, and seasons propitious, insuring a continuous production of the necessaries of life and a
constant increase in population, wealth, and commerce, to this favored city.
From its history we learn that as early hs 1821
French fur traders, operating along the Missouri
river in the northwest, established a station upon
its present site. Known as Westport Landing in
1838, it marked the point where caravans upon the
famous Santa Fe trail left this water route and
plunged boldly into the pathless west. The adventurous spirits who "crossed the plains" in '49,
to reach the fabled gold fields of California, outfitted from its stores. As the town of Kansas it
was first incorporated in 1850 and for the first time
named Kansas City in the subsequent incorporation of 1853. The present city really dates from
the coming of the first westbound railroad in 1866.
And no more potent illustration of the transformation of a continent in the space of half a century
can be found than this prosperous city set in the
midst of wide reaches of prolific farm lands once
known as the Great American Desert!
As an index to the fertility and commercial importance of the region around Kansas City, the
last available government statistics of farm values
for the geographical division known as West North
Central States show that this area contains con-

siderably more than one-fourth of the total farm
values for the United States ($40,991,449,090) and
that its increase for the ten year period was 132.5
per cent.
WEST NORTH CENTRAL STATES
1910
1910.
All Farm Property.
Land.
State.
$1,476,411,737
$1,019,102,027
Minnesota
3,745,860,544
2,801,973,729
Iowa.
2,052,917,488
Missouri
1,445,982,389
974,814,205
North Dakota
730,380,131
1,166,006,980
South Dakota
902,606,751
2,079,818,647
Nebraska
...
1,614,539,313
2,039,389,910
1,537,976,573
Kansas
Totals

$13,535,309,511

$10,052,560,913

1910.
Live Stock.
161,641,148
393,003,196
285,839,108
108,249,866
127,229,200
222,222,004
253,523,577
$1,551,708,097

Kansas City is the home of the Federal Reserve
Bank for District Number Ten, which comprises
the States of Nebraska, Kansas, Colorado, Wyoming, about half of Oklahoma and New Mexico, and
one fourth or fifth of Missouri. It is an interesting fact that this tributary territory by the same
statistics contains nearly one-seventh the total farm
values of the United States as shown by the following table. And if to this showing be added the
farm property values of .
the division East North
Central, namely, $10,119,128,066 (1910) covering
the States of Ohio, Indiana, Illinois, Michigan, and
Wisconsin, as indicative of the axis of trade westward from the Ohio Valley region, which connects
by lakes and canal as well as great railroad systems with the Seaboard through New York City,
we shall discover not only the inexhaustible agricultural richness of Federal Reserve Districts 7,
8, 9 and io (the two geographical divisions containing more than half the entire farm values of
the United States), an indubitable basis of banking
growth, but the intimate relation between the jobbing trade of Kansas City, St. Louis and -Chicago,
as distributing centers, and the wholesale and importing trade of New York City as the leading seaport of the world.
FARM PROPERTY VALUES OF FEDERAL RESERVE DISTRICT
NO. TEN.
State.
Nebraska
Kansas
Wyoming
Colorado.
1-2 Oklahoma
1-2 New Mexico
1-5 Missouri..
Totals

1910.
All Farm Prop.
$2,079,818,647
2,039,389,910
167,189,081
491,471,806
459,099,441
79.723,995
410,583,497

1910.
Land.
$1,614,539,313
1,537,978,573
88,908,276
362,822,205
324,533,334
49,403,248
289,196,477

$5,727,276,377

$4,267,379,426

1910.
Live Stock.
$222,222,004
253,523,577
65,605,510
70,161,344
76,216,398
21,747,339
57,167,821
$766,643,991

The Annual Statistical Report of the Kansas City
Board of Trade, for 1915, shows that there were
received by the railroads during the year 58,693,950 bushels of wheat; 20,803,750 of corn; 4,527,600 of Kafir Corn, Milo Maize, Feterita ; 6,247,500
of Oats; 361,900 of rye; 1,817,200 of Barley, making a total of grain received of 92,451,900 bushels.
By the same report there were manufactured 2,865,460 barrels of flour; 91,800 of Corn Meal; 22,900
of Oat Meal; making a total mill product of 2,980,160 barrels, the daily flour milling capacity being
14,250 bbls. The total receipts of Grain, Flax,
Bran, Hay and Flour in car loads for 1915 was
106,909. The total storage capacity of elevators
is placed for the year at 21,415,000 bu. The grain
handled went from 69,599,500 bu. in 1905 to above
total of 92,451,900 in 1915.
Considering bank clearings, capital, and deposits,
as sure indices of commercial prosperity, we find

BANKERS' CONVENTION.

by the same authority, that banking capital, including surplus and profits, (for Greater Kansas
City) advanced from $10,901,610 in 1905 to $23,599,236 in 1915; that bank clearings in Kansas
City, Mo. advanced in the same period from $1,197,905,556 to $3,835,061,547; deposits being computed, at close of 1915, at $168,705,036. Further,
while the aggregate clearings (Government statistics) of 163 Clearing Houses for the year ending
Sept. 30, 1915, amounting to $162,777,508,000 show
a net decrease over 1914 of $1,072,303,000, four
of the principal 14 cities in the list show an increase as follows: New York, $1,082,363,000;
Kansas City, $783,721,000; San Francisco, $39,
051,000; and Cleveland, $97,362,000.
As of dates Sept. 12, 1916, under call of Comptroller, the relative standing and business of the
national banks of Kansas City are shown by the
following condensed table:
Park
First
Commonwealth
Drovers
GatelCity
Interstate
Nat'l Reserve
New England
Security
Southwest N. B.
of Corn
Stockyards
Traders
Midwest
Total

RESOURCES
Loans &
Cash & Sight
Discounts.
Exchange.
$188,002
$63,236
18,469,964
24,214,725
4,355,929
2,707.395
7,218,603
6,604,195
1,821,493
917.569
7,766,434
9,791,022
6,435,314 •
5,645,474
10,879,406
8,762,073
781,344
578,259
26,735,131
1,354,936
2,127,117
547,154

17,789,071
931,886
1,763,144
1,887,580

All Other.
$8,269
2,441,395
152,500
233,225
241,803
224,225
1,220,384
1,103,943
251,917
4,803,921
74,800
342,000
75,847

Total.
$259,507
45,126,084
7,215,824
14,056,023
2,980,865,,
17,781,681
13,301,172
20,745,422
1,611,520
49,328,123
2,361,622
4,232,261
2,510,581

$88,680,827

$81,655,629
$11.174,229
$181,510.685
LIABILITIES
Surplus and
Capital Stock Und. Profits
Deposits
All other
25,000
213,640
7,000
13,868
1,000,000
2,388,242
41,137,841
600,000

Park
First
t200,000.00
Commonwealth
250,000
Drovers
500,000
Gate City
200,000
Interstate
500,000
National Reserve
1,000,000
New England
1,000,000
Security
200,000
Southwest N.B.of Corn 3,000,000
Stockyards
200,000
Traders
200,000
Midwest
500,000

545,078
249,047
63,991
1,203,200
124,727
. 664,361
101,670
1,377,966
85,333
54,165
52,614

6,370,746
13,093,608
2,560,670
16,028,165
11,546,445
18,902,061
1,134,850
42,503,657
2,015,948
3,778,096
1,857,966

250,000
213,368
156,205
50,316
630,000
179,000
175,000
2,446,500
60,341
200,000
100,000

Error in Commonw'th 8,575,000
6,924,262
161.143,693
Tabular Statements, as of following dates,show:
May 1, 1916 Mar. 7, 1916
May 5, 1915
Deposits
143,732,580 146,176,472
116,318,632
Cash & Sight Ex.
74,459,784
50,515,679
64,882,085
Loans and Die.88,402,247
75,091,405
80,965,973
Total Resources
137,306,761
167,184,057
164,859,771

5,067,730

t200,000

Estimates made by the Kansas City Star based
on the September call of 1916 place the total deposits of all banks and trust companies for Greater
Kansas City at $223,078,000. (This includes Kansas City, Kansas, and other adjacents.)
Somewhat earlier comparative estimates by the
same paper based on Sept. 1916 call, say: "Deposits in Kansas City national banks have increased
about 30 million dollars since June 30, the largest
gain ever made in that period. The total now is
about 167 million dollars, 53 million more than on
Sept. I, 1915. * * * * "The state banks
and trust companies also show big gains, and the
total deposits in all the banks of Greater Kansas
City probably will be 230 million dollars, when
all figures are compiled. This is 75 million more
than a year ago." (See foregoing tables for Nat'l
Banks.)
The Live Stock interests of Kansas City are
important and extensive. Although many of the
former wide ranges have been cut up into productive farms, the grazing lands of the western plateaus continue to pour their tribute into this mart.

At the stock yards there were received, Board of
Trade report, in 1915, 1,860,235 Cattle; 103;263
Calves, 2,530,730 Hogs, 1,814,683 Sheep, 102,153
Horses and Mules, totaling 114,617 cars. The
packing animals slaughtered in 1905 numbered
,422; in 1915, 4,785,827. From these and
4,812
comparative statistics, it is claimed that: "the
city is the largest winter wheat market, the second
largest livestock market, and the third flour-milling centre in the United States." It is estimated
that the total value of livestock marketed ranges
above $200,000,000 annually; that the sale of packing house products exceeds $175,000,000; and
shipments of stocker and feeder cattle will amount
to $50,000,000. Naturally its jobbing trade in
agricultural machinery will be notable. It is an
extensive hay and mule market, perhaps in these
products unsurpassed in the United States as a
center of distribution. It is said to "rank first
in the sale of yellow pine lumber and third as a
general lumber market."
The city is one of the greatest railroad centers
in the country. The great systems that gridiron
the country west of the Mississippi river practically all pass through or reach it by terminus.
The Mid-Census returns, but recently available,
give Kansas City a population of 281,900. To
gauge properly its commercial importance, however, the population of Kansas City, Kansas, 93,
must be added, as the two cities in all essentials
form one business community using in common
street car systems and telephone service, with ample
bridge connections. The population of Kansas
City proper judged by 1916 City Directory is estimated to be 314,600. The Assessed Valuation of
Kansas City, for 1915, Board of Trade figures, was
$206,753,700. As evidence of of ten years' growth
it may be noted that the above Assessed Valuation
is an increase from $97,128,370 in 1905.
Statistics such as we have enumerated indicate
a constant increase in manufactures for this growing city. Elements of production and distribution
command it. Geological surveys disclose vast
bodies of adjacent territory underlaid with bituminous coal. The raw materials for foodstuffs and
clothing are abundant. Around St. Louis and Kansas City closer congest the consumers of an interior
empire. Facilities of distribution, already widespread, under hoped-for favorable conditions, will
grow, according to needs. A trend of trade exists
from maker direct to user. Other things being
equal, manufacture tends to equalize itself among
the people. All these influences make for the city's
continuous advancement in this division of human
industry.
Kansas City is built upon terraced hills-the
lowest level, or river bottom, holding most of the
manufactories, the second level its retail business,
the third comprising its residential district. From
its heights magnificent views of wooded streams
and verdant slopes obtain. For hundreds of miles
around it the level landscapes invite to peace and
plenty, dedicating it to leisure, opulence, culture.
Having outlived its boom days, the speculative
excitements of its youthful energy, it now moves
forward, with assured step, to business achievements of high purpose, helpful service, and increasing magnitude. Its citizens are liberal-minded,
open-hearted, devoted to the practical, yet cherishing the modern ideals of social endeavor and patriotic unity. Set in the midst of the moving millions who constitute the American Commonwealth,
it is a brilliant gem in the coronet of shining cities
that crowns a country of unsurpassed promise.

INDEX TO ADVERTISEMENTS
PAGE.

Amsterdam, Holland.
BOISSEVAIN (ADOLPH) & CO

Atlanta, Ga.
FOURTH NATIONAL BANK

Atlantic City, N. J.
ATLANTIC SAFE DEPOSIT & TRUST
61
COMPANY
Augusta, Me.
STRANAHAN & CO

Baltimore, Md.
CONTINENTAL TRUST CO
37
ESTABROOK & CO
66
FIDELITY TRUST CO
51
GARRETT (ROBERT) & SONS
52
16
LEACH (A. B.) & Co
53
MARYLAND TRUST CO
NATIONAL UNION BANK OF MD.. 3
53
SAFE DEPOSIT & TRUST CO
52
UNION TRUST CO. OF MARYLAND
Berlin, Germany.
BANCO ALEMAN TRANSATLANTIC° 86
86
DEUTSCHE BANK
216
HALLGARTEN & CO
Birmingham, Ala.
BIRMINGHAM TRUST ,& SAVINGS CO. 49
Boston, Mass.
67
BAKER, AYLING & YOUNG
20
BLAKE BROS. & CO
BONBRIGHT (WM. P.) & Co., INC 35
28
BOND & GOODWIN
BOSTON SAFE DEPOSIT & TRUST CO. 65
2
BROWN BROTHERS & CO
29
BURR (GEo. H.) & Co
13
CHANDLER & CO., INC
68
CHASE & CO
67
COFFIN & BURR, INC
68
CROPLEY MCGARAGLE & CO
24
CURTIS & SANGER
66
ESTABROOK & CO
64
FEDERAL TRUST CO
10
GOLDMAN, SACHS & CO
HATIIAWAY, SMITH, FOLDS & CO 29
32
HORNBLOWER & WEEKS
67
HOTCHKIN & CO., INC
69
INTERNATIONAL TRUST CO
16
LEACH (A. B.) & Co
LYBRAND, ROSS BROS. & MONTGOMERY
56
MERRILL, OLDHAM & CO
69
NATIONAL UNION BANK
64
91
NEW ENGLAND TRUST CO
PARKINSON & BURR
66
PLACE (WALTER S.)
68
READ (WM. A.) & CO
1
SOLLERS, PHILLIPS & CO., INC
(it
STONE & WEBSTER
STRANAHAN & CO

Brooklyn, N. Y.
BROOKLYN TRUST CO
FRANKLIN TRUST CO
NASSAU NATIONAL BANK
Buffalo, N. Y.
DUQUESNE BOND CORPORATION
LEACH (A. B.) & Co
THIRD NATIONAL BANK
Camden, N. J.
CAMDEN SAFE DEPOSIT & TRUST
CENTRAL TRUST CO
Chattanooga, Tenn
HAMILTON NATIONAL BANK
Chicago, Ill.
ANDREWS & Co'
BABCOCK, RUSHTON & CO

214
66

88
25
88
37
16
70
63
63
50
40
41

PAGE.
BAKER, AYLING & YOUNG
67
BANK OF MONTREAL
71
BECKER (A. G.) & CO., INC
42
BONBRIGHT (WM. P.) & Co., INC
35

BOND & GOODWIN
28
BURNHAM (JOHN) & CO
42
BURR (GEO. H.) & CO
29
COMPTON (WM. R.) CO
35
CORN EXCHANGE NATIONAL BANK
Inside Back Cover
43
COUNSELMAN & CO
24
CURTIS & SANGER
66
ESTABROOK & CO
10
GOLDMAN, SACHS & CO
41
GORRELL (WARREN) & CO
HANCHETT (THE) BOND CO., INC 44
44
HARRIS (SANFORD F.) & Co
26
HARRIS, WINTHROP & CO
HATHAWAY, SMITH, FOLDS & CO 29
35
HODENPYL, HARDY & CO
32
HORNBLOWER & WEEKS
18
IMBRIE (WM. MORRIS) & CO
LEACH (A. B.) & Co
16
LOGAN & BRYAN
34
LYBRAND, ROSS BROS. & MONT56
GOMERY
42
MERRILL, COX & CO
40
NOYES & JACKSON
41
POWELL, GARARD & CO
1
READ (WM. A.) & Co
20
RICKARDS (W. T.) CO., INC
42
RUSSELL, BREWSTER & CO
SLAUGHTER (A. 0.) & Co
41
STAATS (WM. R.) Co
46
STONE & WEBSTER
214
WARE & LELAND
40
WHITE (THE J. G.) COMPANIES. 215
Cincinnati, Ohio.
COMPTON (WM. R.) Co
35
DOMINICK & DOMINICK
87
Cleveland, Ohio.
ANDREWS & CO
BONBRIGHT-HERRICK CO. (THE)

40
35

Denver, Col.
BOETTCUER, PORTER & CO
INTERNATIONAL TRUST CO

45
45

Detroit, Mich.
ANDREWS & CO
BONBRIGHT (WM. P.) & Co., INC
DIME SAVINGS BANK
HANCHETT (THE) BOND CO., INC
HORNBLOWER & WEEKS
MARTENS (A. H.) & CO
UNION TRUST CO

44)
35
43
44
32
76
43

Edinburgh, Scotland.
UNION BANK OF SCOTLAND

Elizabeth, N. J.
UNION COUNTY TRUST CO
62
Fort Worth, Texas.
FORT WORTH NATIONAL BANK
49
Glasgow
UNION BANK OF SCOTLAND
85
Grand Rapids, Mich.
HOWE, SNOW, CORRIGAN & BERTLES 45
KELSEY, BREWER & CO
44
44
MICHIGAN TRUST CO
Hartford, Conn.
BURR (GEO. H.) & Co
29
66
ESTABROOK & CO
HARTFORD-AETNA NATIONAL BANK 70
Havana, Cuba.
ROYAL BANK OF CANADA
84

PAGE.
Hongkong, China.
HONGKONG & SHANGHAI BANK80
ING CORPORATION
Houston, Texas.
FIRST NATIONAL BANK

Jersey City, N. J.
COMMERCIAL TRUST CO. OF N. J
FIRST NATIONAL BANK

61
27

Kansas City, Mo.
PRESCOTT & SNIDER

London, England.
ANGLO-SOUTH AMERICAN BANK
81
BANK OF BRITISH NORTH AMERICA 73
BANK OF MONTREAL
71
BANK OF NEW SOUTH WALES
82
BONBRIGHT (WM. P.) & Co
35
BROWN, SHIPLEY & CO
2
CANADIAN BANK OF COMMERCE 72
CAPITAL & COUNTIES BANK, LTD 79
CHARTERED BANK OF INDIA, AITSTRALIA & CHINA
81
DEUTSCHE BANK
86
DOMINION SECURITIES CORP
74
HALLGARTEN & CO
216
LONDON CITY & MIDLAND BANK,
LIMITED
82
LYBRAND, ROSS BROS. & MONTGOMERY
56
MORGAN, GRENFELL & CO.
Outside Back Cover.
NATIONAL BANK OF NEW ZEALAND,
LTD. (THE)
78
PARR'S BANK LTD
83
READ (Wm A.) & Co
1
ROYAL BANK OF CANADA
84
STANDARD BANK OF S. AFRICA, LTD 79
UNION BANK OF CANADA
76
UNION BANK OF SCOTLAND
85
UNION OF LONDON & SMITHS
BANK, LTD
83
WHITE (THE J. G.) COMPANIES 215
WOOD, GUNDY & CO
77
YOKOHAMA SPECIE BANK, LTD
SO
Los Angeles, Cal.
CITIZENS NATIONAL BANK
FIRST NATIONAL -BANK
STARTS (WM. R.) CO

46
47
46

Louisville, Ky.
FIDELITY & COLUMBIA TRUST CO

Mexico City, Mexico.
CANADIAN BANK OF COMMERCE

Minneapolis, Minn.
BOND & GOODWIN

Montreal, Canada.
BANK OF BRITISH NORTH AMERICA
BANK OF MONTREAL
DOMINION SECURITIES CORP
MERCHANTS BANK OF CANADA
MOLSONS BANK (THE)
ROYAL BANK OF CANADA
ROYAL SECURITIES CORPORATION
LTD

Morristown, N. J.
MORRISTOWN TRUST CO

Newark, N. J.
FIDELITY TRUST CO.

73
71
74
77
77
84

212

New Haven, Conn.
LYBRAND, Ross BROS. & MONTGOMERY
56
New Orleans, La.
BANKERS' LOAN & SECURITIES CO. 48

INDEX TO ADVERTISEMENTS—Continued

PAGE..
New York City.
.AMERICAN EXCHANGE NATIONAL
BANK
15
ANDREWS & Co.
40
A NGLO-SPUTH AMERICAN BANK.. 81
.
BABCOCK, RUSHTON & CO.
41
BANKERS TRUST CO.. .
.
4
BANK OF BRITISH NORTH AMERICA 73
BANK OF MANHATTAN CO.
BANK OF MONTREAL
BARNEY (CHAS. D.) & Co

BERTRON, GRISCOM & CO.
Iken- moRE (A. H.) & Co.
BLAIR & CO.
BLAKE BROS. & CO.
BOISSEVAIN & CO
BONBRIGHT (WM. B.) & CO., INC
BOND & GOODWIN
BROADWAY TRUST CO
BROOKLYN TRUST CO.
BROWN BROTHERS & Co.
BURNHAM (JOHN) & Co.
BURR (GEO. H.) & Co.
CANADIAN BANK OF COMMERCE..

33
71

25
34
22
92
20
85
35
28
30
88
2
42
29
72
13

CHANDLER & CO., INC
CHARTERED BANK OF INDIA, AUSTRALIA & CHINA
81
CHASE NATIONAL BANK
1
CHATHAM & PHENIX NATL. BANK 33
CHELSEA EXCHANGE BANK
29
CHEMICAL NATIONAL BANK
19
CITIZENS CENTRAL NATL. BANK.. 22
CLARK, DODGE & CO
12
COAL & IRON NATIONAL BANK .. . 30
COFFIN & BURR, INC.
67
COLGATE, PARKER & CO.
6
COLUMBIA TRUST CO.
27
COMPTON (WM. R.) Co
35

CONVERSE (A. D.) & Co
22
CORN EXCHANGE BANK
213
CURTIS & SANGER
24
DOHERTY (HENRY L.) & Co.
00
DOMINICK & DOMINICK
87
DUQUESNE BOND CORPORATION.. 37
.
ESTABROOK & CO.
66
FARLEE (J. S.) & Co.
32
FIDELITY TRUST CO.
36
TARBELL
FINCH &
87
FRANKLIN TRUST CO.
25
GOLDMAN, SACIIS & CO.
10
HALLO/MEN & CO.
. .216
HARRIS, WINTHROP & CO. .
26
HATHAWAY, SMITH, FOLDS & CO • 29
HODENPYL, HARDY & CO.
35
HoNatcoNo & SHANGHAI BANKING
CORPORATION
80
HORNBLOWER & WEEKS
32
67
Harm= & Co., INC
HUI/SON TRUST CO.
36
IMBRIE (WM. MORRIS) & CO.
18
32
KIDDER (A. M.) & Co.
LADD & WOOD
24
LAMARCHE & COADY
23
16
LEACH (A. B.) & Co.
LINCOLN NATIONAL BANK
31
LINCOLN TRUST Co...,
10
LooAN & BRYAN
94
LUDWIG & CRANE
34
LYBRAND, ROSS BROS. & MONTGOMERY
56
MAITLAND, COPPELL & CO
85
MARKET & FULTON NAT. BANK.. 21
MARTENS (A. H.) & CO.
76
23
11/cMELEIN (EbfERSON) & CO.
MECHANICS & METALS NATL. BANK 14
MERCHANTS' BANK OF CANADA . 77
.
MOORE, LEONARD & LYNCH.
60
MORGAN (J. P.) & Co.
Outside Back Cover
•
MULLER, SMALL & CO.
86
MUTUAL BANK
31
NATIONAL CITY COMPANY
17
28
NEW NETHERLAND BANK
NEW YORK COUNTY NAT. BANK. 33
NEW YORK LIFE INS. & TRUST CO 11
NEW YORK TRUST CO.
66
PARKINSON & BURR

PAGE.
READ (Wm. A.) & Co
1
ROYAL BANK OF CANADA
84
Itup§4E, BREWSTER & CO.
42
SCHMIDT & GALLATIN
87
SE/km:Ulu!) NATIONAL BANK
23
SECURITIES CORPORATION GENERAL 13
SMITH (
EDWARD B.) & Co.
24
SPEYER & CO.
8
STANDARD BANK S. AFRICA, LTD 79.
STONE & WEBSTER
214
STRANAHAN & CO.
66SUTRO BROTHERS & Co....
89
TRANSATLANTIC TRUST CO.
31
TURNURE (LAWRENCE) & CO
89
UNION EXCHANGE NATIONAL BANK 36
UNION TRUST CO.
9
UNITED STATES MTGE. & TRUST CO. 26
UNITED STATES TRUST CO.
28
WALRRIDGE (H. D.) & Co
87

WARE & LELAND
40
WHITE (THE J. G.) COMPANIES.. 215
WILLIAMS, TROTH & COLEMAN.. 36
.
WOOD, GUNDY & CO
77
YOKOHAMA SPECIE BANK, LTD.... 80
Norfolk, Va.
NATIONAL BANK OF COMMERCE . . 50
..
Omaha, Neb.
OMAHA NATIONAL BANK

Paris, France.
BONBRIGHT & CO
35
MORGAN, HARJES & CO
Outside Back Cover
Pasadena, Cal.
STAATS (WM. R.) Co.

Paterson, N. J.
FIRST NATIONAL BANK
PATERSON NATIONAL BANK...

€2
62

Philadelphia, Pa.
ANDREWS lc CO
BAKER, AYLING & YOUNG
BARNEY..
(CHAS• D.) & Co.

PAGE.
59
5

PEOPLES NATIONAL BANK
UNION TRUST CO.
Plainfield, N. J.
PLAINFIELD TRUST Co

Portland, Me.
BEttil & SMALL
HORNBLOWER & WEEKS

86
32

Portland, Ore.
CANADIAN BANK OF COMMERCE... 72
MORRIS BROTHERS,INC.58
Providence, R. I.
HORNBLOWER & WEEKS
INDUSTRIAL TRUST CO.
STRANAHAN & CO

32
69
66

Richmond, Va.
AMERICAN NATIONAL BANK

•
' • St: Louis, Mo.
BURR (GEO. H.) & Co.
COMPTON (WILLIAM R.) Co....
HATHAWAY, SMITH, FOLDS & CO
McCLusEY. & Co.
NATIONAL BANK OF COMMERCE.

29
35
29
20
38

St. Paul, Minn.
FIRST NATIONAL BANK
NORTH WESTERN TRUST CO.

39
39

San Francisco, Cal.
BANK OF Burrisit NORTH AMERICA 73
BOND & GOODWIN
"
28
BURR (GEO. H.) & Co.
29
CANADIAN , BANK OF COMMERCE.. 72
.
FIRST NATIONAL BANK
46
HATHAWAY, SMITH, FOLDS & Co
29
LYBRAND, ROSS BROS. & MONTGOMERY
56
STAATS (Wu. R.) CO.
46
WHITE (THE J. G.) CompANIEs

40
67

25
BERTRON, GRIscom & Co.
34
BIOREN Si CO.
25
BODINE, SONS & Co.
58
BONBRIGHT (WM. P.) & Co., INC. • 35
.
BROWN BROTHERS & CO
.... 2
BURR (GEo. H.) & Co
29
CHANDLER & CO., INC.
13
COMMERCIAL TRUST CO.
55
CONVERSE (A D.) & Co.
22
CORN EXCHANGE NATIONAL BANK 56
DAY'& ZIM MERMAN N
61
DREXEL & CO... Outside Back Cover
.
ERVIN 4 Co.
58
FIRST NATIONAL BANK
57
FRAN I<LIN NATIONAL BANK
213
FUQUA (W. F.) & Co.
50
GIRARD NATIONAL BANK
..213
GIRARD TRUST Co..Inside Front Cover
'
HARPER & TURNER
58
HATHAWAY, SMITH, FOLDS & CO. 29
LEACH (A. B.) & Co.
16
LYBRAND, ROSS BROS. & MONTGOMERY
. 56
MARKET STREET NATIONAL BANK. 57
.
MORRIS BROTHERS CO
58
PENNSYLVANIA CO. FOR INSURANCES ON LIVES, &C.
Inside Front Cover
READ (Wm. A.) & Co.
1.
REAL ESTATE TRUST CO.
54
SECURITIES CORPORATION GENERAL. 13
SMITH (EDWARD B.) & CO.
24
THIRD NATIONAL BANK
57
UNION NATIONAL BANK
56
Pittsburgh, Pa.
ANDREW & CO.
40
DONNER, CHILDS & WOODS
60
DUQUESNE BOND CORPORATION
37
FIRST-SECOND NATIONAL BANK
61
GLOVER & MACGREGOR
59
HATHAWAY, SMITH, FOLDS & CO 29
LYBRAND, ROSS BROS. & MONT•
GOMERY
. 56
MASTEN (A. E.) & Co
60
MELLON NATIONAL BANK
59
MOORE, LEONARD & LYNCH
60

215

Seattle, Wash.
BURR (CEO. H.) & Co.
20
CANADIAN BANK OF COMMERCE...72
LYBRAND, ROSS BROS. & MONTGOMERY
56
Spokane, Wash.
BANK OF MONTREAT,

. Springfield, Mass.
BAKER, AYLING & YOUNG
ESTABROOK & CO.
SPRINGFIELD NATIONAL BANK

67
66
• 89

Sydney, N. S. W.
BANK OF NEW SOUTH WA LES..... 82

Toronto, Canada.
AMES . A. E.) & Co.
(
BANK' OF TORONTO
CANADIAN BANK OF COMMERCE.
DOMINION $ECURITIES CO. •.
IMPERIAL BANK OF CANADA
MARTENS (A. H.) & Co.
WOOD, GUNDY & CO.
Trenton, N. J.
TRENTON' BANKING Co.
Utica, N. Y.
CITIZENS TRUST COMPANY

76
75
72
74
74
76
77
•

03
70

Washington, D. C.
COMMERCIAL NATIONAL BANK.

•••

Wellington, New Zealand.
NATIONAL BANK OF NEW ZEALAND.
THE)
78
LTD. (
Wheeling, W. Va.
MASTEN (A. E.) & Co
Winnipeg, Canada.
UNION BANK OF CANADA

60
76

Worcester, Mass.
MERCHANTS NATIONAL BANK
STRANAHAN & CO

70
66

Yokohama, Japan.
.
YOKOHAMA SPECIE BANK, LTD... • 80
•

BANKING SECTION
AMERICAN BANKERS' ASSOCIATION
42nd Annual Convention, Held at Kansas City, Mo., Sept., 28 and 29, 1916
INDEX TO CONVENTION PROCEEDINGS
Need for a United Nation, F. A. Vanderlip
.
Co-operation, Joseph Chapman
Hirsch
Country Banker's Opportunity, Joseph
G. Harding
Reserve Law and Amendments, W.P.
Warburg
Future of Reserve System, Paul NI.
Annual Report of Secretary Currency Commission .
Report of General Counsel
of Committee on Federal Legislation Report
Report of Law Committee

Page 99
Page 104
Page 106
Page 110
Page III
Page 122
Page 125
Page 125
Page 126
Page 127

Report of Protective Department Report of Agricultural Commission
Report of Library and Reference Department
Report of Treasurer
Report of Insurance Committee
Detailed Report of Proceedings
Addresses of Welcome .
President Lynch's Address
Report of American Institute of Banking
Remarks of Director of Mint, F. J. H.von Engelkeng

Page 128
Page 129
Page 129
Page 130
Page 130
Page 131
Page 131
Page 133
Page 137
Page 146

The Need for a United Nation
By F. A. VANDERLIP, President, The National City Bank, of New York
There has rarely been a time when there were more
subjects of interest which might be chosen for discussion before a convention of bankers. We have had two
years' experience with the Federal Reserve Act, a law
which introduced factors fundamentally novel to our
banking system. One might well stop at this time and
the light of
make some attempt to appraise this law in
experience which we have had with it. It would
the
operations have
be interesting to inquire just what its
just how it has commended itself to the
demonstrated,
inquire
experienced banking judgment. One might well
banking system where the membership is alwhether a
most wholly compulsory, where scarcely a bank which
has been permitted voluntary choice has chosen to. enter
It, has been established in its permanent form; and it
would be pertinent to inquire in particular whether a
banking system half Federal and half State, half held together by compelled membership and half free from the
authority of the Federal governing power is permanent.
You are familiar with one of the great utterances of
Lincoln, when he said:
"I believe this government cannot endure permanently, half slave and half free. I do not
.expect the Union to be dissolved. I do not expect the house to fall; but I do expect it to cease
to be divided. It will become all one or all the
other."
Would it be improper to paraphrase that great utterance in discussing the present position of our banking
system? Can a banking system endure, half compulsory
and half free? Will it not become all one thing or all the
other?
We all quite frankly understand of course, why practically no bank has voluntarily subjected itself to the
•action of the Federal Reserve Law. It is no secret why
State banks decline to become members of the Federal
Reserve system. They are apprehensive of the sort of
regulation which has recently been imposed upon national

banks. They are not desirous of subjecting themselves
to the sort of autocratic supervision under which the
whole National banking system has grown restive.
I am not, however, going to discuss the Federal Reserve Act nor Federal supervision of banking. I am not
going to discuss the fallacy of decentralization which has
been a controlling motive in much recent legislation and
regulation. Had I chosen to discuss the Federal Reserve
Act, I would have reached a conclusion that it embodies
sound fundamental principles too valuable, indeed, too
essential, to our financial life to be abandoned, the free
working of which, however, has been entangled and hampered in its inception by political considerations and administrative attitude to such an extent as to endanger
the success of what should rightly be the most important
step ever taken in American banking.
I might have chosen for a subject the sensational influx
of gold that seems dangerously likely to submerge us in
our own prosperity. It would be most interesting to attempt an analysis of the ultimate effect on prices, on our
national welfare, of this unprecedented accumulation of
reserve money. It would be worth while to study what
is likely to be the ultimate effect upon our money market
of this importation of gold, as well as the potential possibilities for inflation in the Federal Reserve Act itself.
It would be interesting, too, to speculate on the effect
likely to be manifested in money rates and in the distribution of business following the creation of the new
types of credit provided by the recent laws authorizing
domestic acceptances and the .mobilization of farm loans.
I should be glad to speak about international trade and
banking, subjects full of vital and pressing interest, presenting an insistent demand that our bankers begin to
think internationally and that we all better understand
the principles of the science of banking. The subject of the
better training of men for the wider field that American
banking is to occupy, is, in itself, of great importance. It
would be well worth while to give consideration.- to the

'01

BANKERS' CONVENTION.

matter of the relation of bankers to the present opportunity and demand for the foreign investment of American
capital, to the inelination of capital in this country to
seek 'employment to a reasonable degree in foreign fields
not subject to the tendency toward unwise regulation that
is encdtintered in some of our political tendencies. Or one
thight'kb further'affeid'and attempt some analysis of what
the vast expenditure of wealth, the creation of incomprehensible totals of national indebtedness, the gigantic
issues of pallaiciirrency and the depreciation of national
monetary standards which we are witnessing in Europe,
are likely to mean to the world at large and to us in particular.
These are a few of the'fruitful subjects that might well
engage our attention as bankers, but there are times in
the world which call men away from their personal and
Immediate interests. There are periods that compel them
to think together of fundamental things. Surely the present is such a time. It seems almost idle to discuss the
working of banking statutes when we can discern, even
though dimly, the working of great laws in the statute
book of human nature and society, whose action is so
fundamental and important as to make our men-made
laws and their workings seem inconsequential in comparison. We are in a time when it is of the utmost importance that we think socially and fundamentally. These are
not days when we can give our thoughts exclusively to
our business, to our immediate affairs. They are days
that demand that we think nationally and internationally
rather than individually or as a business class. We are
confronted by an insistent need for comprehending fundamentals.
_ Society in its international organization and relations
seems to have broken down. The most highly civilized
nations of the world, those most advanced in learning,
most enlightened in culture, most efficient and 'practical
in affairs, are turned aside from all the achievements
which signify progress and are grappling with each other
In a veritable death struggle. Primitive impulses seem
as sti•orig as they ever were at any time in the world's
.
history. Without any discussion of the relative responsibility for this outbreak, the fundamental fact appears
to 66 that the' world is yet deplorably deficient in social
capacity. Nations cannot live beside each other without
fighting out questions of supremacy, without raising isides thatleacl Men gallantly to make every sacrifice of effort;'Of wealth, of life, at the dictation of government. Then
there is the further result of national hatreds engendered
which 41'il last generations beyond any pact of peace that
cdn'166 draWn. tlio"World has proven itelf to be deplorably deficient in what Emerson called "facility of association"; in other words, in that degree of comprehension
which enableS" hien to understand each other and work
for the common good. Unquestionably, that ability is the
best fruit of civilization. It is that ability that is the
chief distinction between the civilized man and the barbarian. Civilization, we have supposed, endowed men
with the capacity for organization, with the vision which
would lead to a willingnes to subordinate the individual
to the good of society and thus to the greater good of the
individual.
' This revelation of incapacity, or undevelopment, which
Europe has given, comes as a startling surprise to most
of us. It has long been a common warning of the pessimist that human nature is just the same as it always
has been—but we have not belleired that. To believe it
Would be to lose faith in the best impulses and visions of
life. We had come to feel almost certain that the general European war, long talked of, had been postponed
until it would never occur, that human nature had
changed sufficiently so that a better social understanding
would prevent It; that the commonsense of mankind
would make ft hivoisible. In that we have been disappointed. Public opinion in every; belligerent country regards the war as a defensive necessity, although the com-

mon judgment within each country condemns war. So
the war goes on because of the sheer inability of the
peoples to come to a state of mutual understanding and
confidence, and there is to be seen little ground for hope
that the end is near. Fearful as tie cost has been in
effort, in treasure and in life, there seems ahead the inevitable tragedy of greater cost, of heavier blows to the
fabric of civilization, before anything like common viewpoints can be reached.
The countries engaged in this bewildering contest are
not inhabited by some strange, faraway peoples, whose
habits of thought and whose social ideas are alien to us,
whose mental processes are inexplicable. They are of our
blood, the sort of men and women of whom this nation
is made up. There are no fundamental differences between us and the peoples of the belligerent countries of
Europe. Nothing is happening there that might not as
well be happening within our own borders to our own
people. It is true that we are more happily situated
geographically, that we have a natural defence of broad
oceans, but it is true, too, that we must be awake to the
fact that we are of the same blood and sinew, with the
same incapacities, the same social misunderstandings,
the same lack of insight, of patience, of vision, and the
same immaturity of judgment that has made it impossible for the people of these European nations to deal
with a great crisis except through force.
If ever a people should pause, therefore, and take
stock; if ever they should look abroad and profit by the
experience of others, should comprehend their national
dangers in the light of the terrible realities that are being enacted before their eyes in other nations, it is now
and we are that people.
We must first recognize some of the practical facts of
civilization which the last two years have brought into
terrible emphasis. War is a fearful reality. It is a disaster that can come upon any people, no matter how
peaceful their intentions, how high their civilization, how
great their culture. It is a reality for us to reckon with.
The modern human mind has not before comprehended
what a horrible disaster war may be, but there is no reason for not now opening our eyes to it, because its realities are plainly before us. That is why I think there are
to-day matters of such fundamental importance for us to
consider that I have chosen to pass over the engrossing
subjects directly related to our business life that might
have been discussed.
Underneath any question relating merely to business,
or even to social welfare, or the relative claims of different classes of society, is the question of our national integrity and the means that it is necessary to employ to
insure the continuance of that integrity. In a word, I
believe the greatest need of the day—and a need so
fundamental as to make other matters inconsequential in
comparison—is the need of universal military, industrial
and economic preparedness. That does not mean ships
and armament alone. We have taken a tardy but substantial step toward remedying the neglect of recent years.
That neglect might prove the foundation of a terrible
national catastrophe, but at least we have now awakened
to action so far as Congressional appropriations go.
Modern warfare is largely a matter of machinery, but
more than ever before in history it is also a matter of
human organization. A modern soldier must be a more
highly trained man than a soldier ever needed to be before. I believe that the surest insurance of peace this
country can have is the universal training in military
service of its men. I admit that perhaps there is no
other subject regarding which I have so diametrically
changed my opinions. I once thought you could cdunt
universal military service as an economic waste. I feel
confident, in the light of the events of the last two years,
that it is not only a military necessity of superlative importance, but that our national life would draw a unity,
our democracy would receive a reinvigoration, and our

BANKING SECTION.

101

the times is the evidence of such misunderstandings withyouth would obtain a physical training and comprehenin our own nation. The very foundation of ,tlie socia,l
sion of the value of obedience and a patriotic devotion to
structure may be shaken by class antagonism and ,those
the welfare of the nation, which could be obtained in no
antagonisms may be inspired by mistaken views. of class
other way.
Interests. I believe that such antagonisms could be largely
Here in the heart of the middle west I can well see
dissipated by a clearer understanding of . the economie
how there has been but partial awakening to the significance of the portentous events of the last two years. I
and social factors involved, and that the highest duty
have heard a governor of an adjoining state boast that as
rests upon us, first, to understand those factors ourselves,
his state had no seacoast, his people had little interest in
and then, with all the influence that we have, to spread
the military madness with which the world is afflicted. that understanding through a wider field.
The fallacious idea that there is an Inevitable conflict
Let a man-of-war, with guns that outrange our coast
defences, stand off from New York or San Francisco, of class interests is urged by thousands of persons. They
may be in earnest in their belief that..there is such an
and levy a tribute as the price of saving these cities
inevitable conflict of class interests. Most of them, howfrom destruction, and the disaster would be as quickly
communicated to this great middle west as would the
ever, are uninformed, prejudiced, fanatical; but dangerously effective in their agitation. The propaganda goes
crushed hand or foot to the heart of a man!
.
I have a vivid memory of our unpreparedness in 1898. on around us with tremendous force and it is not receiving from men like us the attention which its mischievous
The confusion, the inefficiency, the wasted effort, were all
humiliating. We have made no advance in trained or- Influences demand that we give .it. It ,is the same sort of
ganization since those days, but the rest of the world has. fallacy, the same type of narrow and misguided spirit, the
The scale of military operations to which the belligerent same want of insight, sympathy and understanding,
which, working in one nation as against another, brings
nations have become accustomed sinks into insignificance
on war. It is my belief that war itself is scarcely more
anything we have known before. In the recent drive on
dangerous to a nation or more deadly. to industrial progthe Somme, the British troops alone lost on each of ten
ress than are some of the influences that are at work
successive days more men than the entire losses of those
within our own boundaries.
who fought Napoleon at the Battle of Waterloo. The
prodigious size of the military =Chines of the belligerent
If there is loss to the community in having men withnations is almost beyond our comprehension. It would
drawn from industry to take part in the activities or the
be so completely beyond our present combative effort that
deadly conflict of war, then there is loss in _having the
we might better be forehanded in providing a sufficient
efficiency of men curtailed or diminished in any manner.
number of white flags, if we are not adequately prepared
The moment that proposition is stated we are face to face
otherwise. To-day we are a nation grown unprecedentwith the fact that a large proportion of our people do not
edly rich, lying almost unprotected against the invasion
understand that the community, as a whole, is interested
of whoever wills to come. It no longer suffices to say
in the increase of production. There is, on the contrary,
that it is unthinkable that, with our peaceful intentions, a Prevailing idea that the wage earning class is interested
we could be seriously attacked. The man to whom such
in restricting production. They hold to that view because
a disaster is unthinkable has a defective imagination. they believe that the employer is a natural enemy, or
He has failed to interpret the great events of our day
more often, that there is not enough work to go around
and is, I believe, dangerous to the welfare of our country. to all laboring men, and therefore, that it should b
.ejnade
If we are to have anything like true preparedness, to go as far and last as long as possible. It is easy enough
however, it must embrace much beside physical training.
to see how such a fallacy has been bred by the alternatBack of physical training there must be moral training.
ing periods of activity and depression in the past. It is,
There must be the creation of a public opinion that will
of course, one of the greatest of all economic fallacies.
think deeply and clearly regarding the great international
There could scarcely be a greater drag upon industry or a
questions that we are facing. We have need for developgreater impediment to general progress than to have such
an idea fixed generally in the minds of men. Such a
ing a clear-cut, clear-sighted public opinion that will see
things as they are and that will have courage without
fallacy generally held is actually worse than war, for
audacity, firmness without impetuosity. We need to have
when war runs its course recuperation can follow, but
what we have not now—a public opinion that would not
when the idea of restriction of production as a 'means to
permit a shuffling attitude in regard to international
secure individual prosperity becomes fixed in men's
issues, an opinion that would make temporizing in the
minds, it has the same effect. upon production that a perhandling of our foreign relations impossible where fundapetual drought would have upon grain fields.
mental principles are involved. The greatest prepared• However natural it may be to feel impatient with a
ness that we can possibly have is the awakening of this
man who honestly holds such views, impatience is usecountry to a clear-sighted comprehension of what our
less. As long as he holds these views, he will act upon
relations to the rest of the world to-day involve. We them as you or I act upon our views. His opinion is a
must have a nation that cannot be lulled to drowsiness
fact to be dealt with. It is as real as a mountain where
by words, but will decisively demand consistent, clearyou want to build a roadway. In the case of the mounsighted leadership, will demand a government policy so
tain, we do not get impatient, but we endeavor to survey
sincere, so logical, so obviously the expression of a firm
it and find a way over or through it. Fortunately, erroand united nation, that there can be won back the respect
neous opinions, however stubbornly held, are more like
for the United States, and even the friendship of the
an ice-bank than a mountain. They will eventually .melt
other nations of the earth.
away and disappear before the truth—if not in, °one genThis means not only clear seeing and right thinkeration, in another. Understanding of economic laws
ing, but it means a moral awakening which will lead
seems to me almost the greatest need of our day., No
Men to make decisions that entail sacrifice when such
body of men will act contrary to their own interests when
decisions are required. It means that we must recogthey know what their interests are. The spread of a
nize that questions of money-making, of prosperity, of sound comprehension of economic laws seems to me,therethe division of profits, are superficial and trivial compared
fore, one of the greatest duties that go. with the responwith the deeper and encompassing problems of our nasibilities of bankers.
tional relationships.
Organized industry is necessary to our present stand.
Misunderstandings between nations are not the only
ard of living. We cannot live apart or provide wholly
misunderstandings that threaten society and impede prog- 'for ourselves; we must work with others; we are obliged
ress. There may be within a nation such misunderstand- to be partners, and in a partnership each is bound to do
ings. I believe that one of the most portentous signs of
his level best. Whatever controversies there may be

1'02

BANKERS CONVENTION.

about wakes or other divisions of the product, there ought
to be agreement upon honest, sinCere effort to increase
all production for the common good; Not to co-operate
to this end is to be disloyal to the community. It weakens the system by which progress must be achieved, and
upon which the welfare of all who come after us depends.
There is fin obligation and responsibility here of the most
binding character, and the people who best understand
this principle will surely lead in world affairs.
It is the duty of every one of us to do what we can to
Induce wage-earners to examine their relations to the industrial system as a whole and to be loyal to the industrial system as a whole, rather than to any narrow and
mistaken opinion of class interest. The whole idea of
separate class interests is an illusion, and if cherished,
fatal to the welfare of all classes. You cannot make
food, coal, clothing, housing, transportation, or even automobiles, dear, with benefit to any class, and least of all
to the wage-earning class. I would appeal, however, with
equal energy to the sense of loyalty and responsibility of
the employer. By virtue of his position he has a larger
outlook than the wage-earner at the bench, a more intimate contact with affairs, and his responsibility is correspondingly greater. He ought to be so consistently loyal
to that responsibility that his example will spread the
doctrine. I would urge nothing impracticable or revolutionary, but simply that policy of fair play which, when
established in all relations, will rid business life of suspicion and reproach. There can be no radical or sweeping
change in industry, but changes beneficial to all can be
hastened if there is the vision to prompt it. The entire
community is interested in safe-guarding the health and
"promoting the vigor, skill and efficiency of all our people.
Wherever we are related to that problem as employers
.we have a duty to perform, and wherever we can deal
:with it as citizens we have another. We have to see to it
that the new generation of industrial recruits come to
their work with a better preparation, physical and mental,
'than did their predecessors. This is for the common interest.
- Nobody can make as much money in a poverty-Stricken
.community as in a rich community. If everybody in the
.United States could be kept in health and completely
employed all the year round,. and made skillful in some
occupation, the volume of business and the rise of wages
and profits would outstrip the records of this war boom,
and it would be permanent business.
We hope that in this organization of industry which
is progressing, means may be found to maintain a better
state of balance in the industries so that the extremes of
activity and of depression, and the distressing periods of
unemployment, may be mitigated. One of the great economic losses that falls upon a community follows from
this lack of balance. The waste to the community that
comes from having able-bodied men in idlenes is perhaps
even a more serious waste than results from having ablebodied men under the discipline of army life. No problem is more worthy of investigation by associations of
business men than this one of reducing by more even production the amount of idleness, voluntary and involuntary. The most practical effert toward solving this problem of unemployment has followed the organization of
Industry into stronger units. Industry so organized is
equipped with greater reserve resources. Large industrial
'units tend to steady both prices and production and to
give greater regularity to employment. If this were more
clearly understood, it would offer a potent argument
• against government interference with economical largescale production.
The most important economic factor in industrial organization to-day is the equipment with which men work,
the machinery,. the :material industrial plant. The me• chanical plant multiplies the workman's capacity over
and over. It not only multiplies his capacity, but as a
rule enables'him to do the work more easily. Compare

the manual labor, the toil necessary to produce a bushel.
Of wheat or a ton of steel with the effort necessary fifty
years ago.. Everywhere in industry we see this process
of increasing the productiveness and easing the toil of
labor by providing better tools. . This improvement of industrial plants is clearly in the common interest. 'Every
man works for the common fund. If a community ,were
hiring a man to cut its wood, it would not deliberately
send him out with a dull axe. Just as truly is it of In
portance to the national community to be equipped with
industrial plants of the highest efficiency. No man should
work without a tool if a tool can be devised to increase
his capacity or reduce the expenditure of effort to attain
a result.
But tools cost money. Before they can be had, there
must be a command of capital. They represent savings.
It is the new savings, the new capital, which pays for
the experiments, develops the new machinery, builds the
new industrial plants, and thereby creates the additional
demand for labor and increases production.
Now in this connection, I should like to make a point
that I believe Would be of great national significance if
it were generally understood. Every time a workman
puts a dollar in a savings bank he has contributed to increasing the wage fund. With the new capital thus created there will inevitably be additional money to pay out
In wages. If we will but trace the process, we will see
that its 'action is automatic, certain, inevitable. If the
fund of capital seeking investment increases, and every
dollar put in a savings bank does increase the fand of
Capital seeking investment, the result of that increase in
capital must necessarily be further industrial development. It is true that the savings bank may, in the first
instance, invest these dollars, let us say, in an old railroad bond, issued many years ago, the original proceeds
of which long since went into construction, but somebody
sold that bend and, in turn, had the new capital fund for
reinvestment, and somewhere along the line inevitably
this new capital must go•into productive activity, and in
so doing must make a larger wage fund upon which labor
can draw and a new demand for labor. Now we are in a
period when the destruction of the world's capital is going
on at an appalling rate. Is it not, then, of the greatest
importance that every effort should be made' to replaCe
this destroyed capital? . There will be great need for
capital in the years to come when reconstruction is going
on. Our command over capital is of vast importance to
the comfort and welfare of our people. If we could impress upon every workman that he will contribute directly and inevitably toward an increased demand for
labor•and that he will add to the wage fund and tend to
Increase the rate of wages by every dollar of savings, I
believe it would have a profound effect upon our national
welfare.
But the argument in regard to fresh capital may well
.go further than that. While a dollar saved by a workman helps to give to some workman a job, so does every
other dollar of savings, whether it comes from wages, or
Interest, or profits. The economic effect of a dollar saved
and invested is just the same, whether the owner is a
wage-earner, an employer or an heir of inherited wealth.
Income, however it originates, that is saved and put to
reproductive uses, performs an inevitable service for society. Every form of savings finally seeks investment, and
if you will follow the investment through to its ultimate
reaction, you will see it putting men to work, you will
see it enlarging the agricultural, the industrial, or the
transportation equipment of the community, you will see
it creating new demands for labor, raising the rate of
wages and increasing the production of things which
men desire. If the savings are devoted to reproductive
purposes, it makes no difference whether they are the savings of the workman or the millionaire. They ultimately
accomplish the same result; they increase the suppiy of
things that the whole community wants.

BANKING SECTION.
, . If. that. view is sound, it demonstrates that there is a
fundamental unity in society which no power or conspiracy..can:Ido away, with. Individuals may be selfish,
theY May scheme for personal and temporary advantage;
but whatever gains they make, insofar as they are saved
and turned into reproductive capital, react' to the benefit
of.the whole community. If there is such a fundamental
unity in society, then any class conspiracy to gain . advantage for that class is futile. The employing class is
dependent upon the wage-earning class for a market. The
farmer cannot eat his own croli,"41341• 6inprOyett Wade goods
.
with each other. If there is increased production, it
must go to the only possible consumers, the niasseg, and
none can be so interested in every movement that will increase production as the masses. •
•
People talk vaguely and sympathetically about bettering the condition of the wage-workers, too'often with little comprehension of industrial conditions: They treat
it as a matter of sentiment and choice, instead of what
it is; viz.: a result dependent upon more effective organization and a more harmonious spirit in Industry.
The betterment of industrial conditions will come in
the future as it has come in the past, by increasing
the individual output, never by policies restricting the
output.
We have heard a good deal about a "new freedom." I
tell you that any new freedom that seeks to"thake conditions where inefficient managers of business can successfully compete with enterprising and capable managers of
business is a dangerous sort of freedom. , Any system
which aims at hampering the enterprising and the capable, circumscribing men of vision and originality for the
purpose.of protecting and supporting other men who lack
.those qualities, is not only, vicious. in its morals, but is
.bound to be disastrous in its economic effects, in Just the
proportion that, it is successful. Inefficient bmployers are
not the ones, who raise wages. They could not raise
wages if they. would. The important thing in our industrial life is not.that any particular individual. or concern
:
shall be kept in business, but that, business shall be so
conducted that production goes on in the most economical
manner.. We frequently make the mistake of putting.too
much emphasis upon the division of present profits and
too little emphasis upon the development of industry. Suppose a,man of superior skill with the.aid of large capital and the introduction of the most efficient methods
does make a great fortune where none existed before, who
really. profits by it? The answer is that society will get
all of it that he does not eat or wear out. . His.savings,
just as much as the savings of his humblest employee,
must find their way . into reproductive employment.
The industrial plant somewhere will be increased.
Production will in turn be cheaper and society will
be the
gainer.
I believe in the essential unity of society
the world
over, but I hold it to be no unworthy sentiment
to have
a special interest in the development of a
spirit of unity
in my own country. We cannot be one
people without a
knowledge of our common interests., The
war with all
horrors and burdens for the people,engaged
its
in it, is not
an unmitigated evil, and one of the benefits is the growth
of the spirit of national unity in these peoples. There is
no doubt that if all class misunderstandings are not
'cleared away, at least there is better knowledge and
'greater mutual respect. They have seen each other show
.the true metal and make the supreme sacrifice, and the
,extremes of society are nearer together there than they
have ever been before. It • will be easier for them to
*discuss their differences than before, while in
this country
on the other hand there Is danger that the
antagonisms
which vex and obstruct industry will be intensified
by the
conditions during and following the war.
Under the pressure of necessity, the British
people have
become enormously more productive. , Industry
has been

lifted.out of the, ruts of custom and rule, initiative ,has
had free play, machinery ,has given new powers to tlap
workers. and organization • has been modernized with. results.
that, have been a revelation. The war wages ca!;
not be paid upon commercial work after the war, if production falls back to the old methods, but they can be paid
if production is maintained by the new methods. There
is anxiety about the future, but the best observers do not
believe the British workman, now that the demonstration
has been made,,will go back to the old limitations and the
old pay. They believe "wages- will be biggei and costs
lower than before the war, and that the difference in the
cost of production may offset' the interest on the war'
debt. The cost of living is high there now, owing in part
.to the high freights on all importations, but after the
war is over these costs will decline rapidly and if wages
can be kept at the present level the condition of the wageearning class will be better than before.
Will industry in the United States make the same
progress? There is warning in the fact that adversity
is usually a better teacher than prosperity. The latter
comes by fortuitous circumstances and we enjoy it, relax,
and take our ease, while adversity puts men upon their
mettle and calls up all their resources. In some respects
we shall be stronger after the war. We shall be richer,
our productive equipment will be better than ever before,
but these will not avail without a spirit of unity and good
understanding in our industrial organization. The account we give of ourselves will depend at last upon the
men behind the machines. We have an opportunity such
as no country ever had to lay the sure foundations of a
great future, but we must not lose our heads. We must
be an harmonious and efficient people. We must work for
our common interests, employer and wage-earner striving
together, and the Government backing them up as it
properly can. We must not be so intent upon dividing the
proceeds of present prosperity that we fail to safeguard
its permanence.
, To just the degree that each of us is wise, it seems to
me that we should each see that at the present time we
have some extraordinary duties of citizenship, duties that
transcend in importance and are more fundamental to the
welfare of ourselves and our children than any of those
things that may seem more closely related to our business lives. These duties of citizenship involve the giving
of serious thought to the vast currents that are shaping
our affairs to-day. It is the personal duty of each of us
better to understand our relations to these world movements and to bring to the decisions regarding our national attitude a fine spirit,.a spirit of courage and deter,
mination to uphold our own just rights, and, if necessary,
to make present sacrifice for future welfare, ,We should
open our minds to the facts of life as they are presented
to-day in our affairs, recognizing that, no matter how rich
and brave a people may be, they cannot meet organized
opposition without adequate preparation and organization
of their own, without reasonable preparation for any contingency.
.While on the one hand we are turning our attention
toward foreign relations, we should, with proper sympathy, but with sound economic understanding, seek to
harmonize those differences in our own social order which
may become more dangerous than anything that theatens
us from the outside. .Seek to have yourself and to help
others to have a true spirit of unity. That spirit'is the
natural result of knowledge that our interests are mutual
and interdependent. There are few things more important to this country to-day than that such knowledge shall
be disseminated. If the leaders of industry understand it
themselves, they can disseminate it. The wise business
man does not quarrel with difficulties; he makes a study
of them and overcomes them. If he cannot overcome
them, he is not a successful leader, and some one else
should have his position of influence. It is a rule of the
business world to require results; not excuses that put

BANKERS' CONVENTION.

104

the blame somewhere else. Let us go home with a sense
of responsibility upon us, and at our own desks, and in
the business men's associations of which we are members,
do our part to spread a general knowledge of this funda-

mental truth that all social and industrial activities are
thoroughly interdependent and that society's welfare will
be promoted in the degree that co-operation and fair play
are developed.

Go-operation
BY JOSEPH CHAPMAN, Vice-President Northwestern National Bank of Minneapolis
Mr. President, Ladies and Gentlemen and Members of
the American Bankers Association: It is a great honor
to
to be allowed: address a convention of this character.
When I was asked to speak here last May I was given
the choice of a subject and I chose the subject "Co-operation," but after listening to the splendid address of our
President this morning, and of Mr. VanderliP, who. followed him, I found that, the groundwork of my speech
was pretty well covered., I feel a good deal like the
Swede up IR Minnesota where I come from, who, not
. having a very great command of the English language,
and he wanted to go into the lemonade and popcorn
business at the circus. He listened to the Americans who
were on the opposite side, of the street, calling out
"Lemonade, five cents a glass, popcorn, ginger ale, five
cents a glags'," and' when there would come, a little lull
in the conversation he would say,"Same pain over here."
(Laughter.)
I heartily endorse everything the gentlemen said this
morning on co-operation. Conditions originate in the
banking business, and I wonder how many of us realize
how rapidly they are changing. In the two years since
the Federal Reserve Act has gone into effect, marvelous
changes have come to this country, not only to business
in general, but particularly to the banking business. In
no department of our commercial activity have the
changes been more rapid or more revolutionary than In
the business in which we are engaged.
When Napoleon told his counsellors that he wanted
to found a bank in France whieh would make credit easy
and money cheap for the people of France, they carried
out his , wishes, and the Bank of France for over 100
years has.: heen doing that in France. Gentlemen, our
Federal Reserve Act is founded largely on the experience
of the old continental banks in Europe. As those banks
did in Europe, this Federal Reserve bank is doing in
America today, and we have not yet adjusted ourselves
to these changing conditions.
The first thing that occurs to us as bankers is, that
there has been a great deal of adjustment in the
rate of interest we are loaning to our customers for;
but there has been very little adjustment in the rate
of interest on the money which we are paying in the
shape of time deposits. Notwithstanding this great
reduction in the rate of interest, and the small profits
the bankers are making, I was very much amused last
evening to read in the city Star, in large headlines
the statement of the Hon. Skelton Williams, Comptroller
of the Currency '"Unrest due to high interest" in
large type. "Blame for much social and industrial
discontent was placed upon excessive interest rates by
John Skelton Williams, Comptroller of the Currency,
in addressing the City Club luncheon to-day." "Records
of my department show in communities where the interest charges to small borowers are excessive;" he
said; "there is the greatest unrest, and the cause
of this seditious reformer is given the most welcome
hearing." The Comptroller told of investigations revealing rates as high as 100 per cent., for short time
loans.
The Hon. Comptroller of the; Curency addressed one
of the Sections of this Association the' other night,
on: the ,topic "The Soul in the Dollar." He evidently

came here with two speeches in his pocket, one entitled
"The Soul in the Dollar," and the other should be
entitle "The Hole in the Dollar" (laughter). One is
delivered to the American Bankers Association, the
other to a semi-political luncheon club.
Gentlemen, I submit the first place that co-operation
ought to start in this counry is lieween the Federal
Board at Washington and the Comptroller's Office, and
the individual banks who are at their mercy today.
And I protest that it is absolutely unfair to the bankers
of America to have the man holding that great office
hold up to ridicule the thousands of bankers in the
United States, on account of the few half dozen or more
who were charging high rates for very small' loans.
If the system is going to be a success, gentlemen, I submit ,there must be co-operation.
A 'Member"'of the 'Federal 'Board ik'Wathilirefori,
rq
year agoi made this statement at a dinner—that the
Board had very little sympathy with the complaints
of bankers regarding the subject of the eliminating
of the exchange charges, because their investigation
showed that the people who were making the loudest
complaints were people who were paying five, six and
seven per cent, for time money. He said "Gentlemen,
If you want' to increase your earnings, the Board in
Washington will help you to reduce that interest rate."
I am going to speak about that a *little later; and
I am going to pause right there, in order to enable that
to sink into your minds. There is meat there—and
much meat. It has much nourishment in it.
The people of the United States have seen the operation of the Federal Reserve Act. They have seen that in
two years we have brought back from Europe two billions'of dollars in the shape of bonds and stocks. They
have seen us loan one billion and six hundred and
twenty-five million dollars to foreign nations. They
have seen our foreign trade expand two billion, two
hundred and fifty million of dollars. They have seen
that in a time of the greatest war that has ever existed in this world, and their verdict is that there is
something very good and substantial in the Federal
Reserve Act.
Gentlemen, I am going to submit this idea also, but
that it is impossible for the Federal Board at Washington and the Federal Reserve banks in the various
districts to adjust themselves to 'each of the twentyseven thousand banks in this country. If that is impossible, there is only one thing for us to do—we must
adjust ourselves to the Federal Banks, and whether
we like it or not is immaterial, and that is what we
are coming to.
During the past year, during the twelve months from
June 30, 1915 to June'30, 1916, I think the records in
the Comptroller's office at Washington will show that
the banks in a period of the greatest prosperity we
have ever had, have made less money than at any time
since. 1893. We are not in business for our health.
A bank that does not make money, that does not lay
up money for a rainy day, for losses are ahgoltitely
inevitable, that bank is not a safe' bank for people to
.t
do business with.- Now, the banks of this C6.in6; r
submit, gentlemen, must be allowed to earn their dividends, and something for a rainy day.

BANKING SECTION.
Now, is the initiative for this coming from Washington, or is it coming from ourselves.
When the Interstate Commerce Act was passed, we
did not see any commercial associations, or any bankers
associations going clown to Washington protesting that
the railroads were going to be put out of business. We
were all attending to our own business. Gentlemen,
that is the condition today. You need not expect any
delegation to go down to Washington to represent the
Bankers of this country. What we do, we must do in
ourselves, and by ourselves, and I am going to submit
this proposition to you: There are certain ways to
make money, there are certain things which banks were
warranted in giving their customers, prior to the Federal
Reserve Act, or the passage of that Act, free, which
we are not warranted in doing under conditions to-day.
For instance, I have been in banks in this country that
furnish safe deposit boxes to their customers free. Not
only did they furnish them free, but in some banks
I have seen the customers' keys hanging in the boxes,
and the master key hanging alongside on the wall,
where any customer might go in and help themselves
to any box which might take his particular fancy.
No charge was made in that case, because of the fact
that the banker was afraid that his competitor across
the street was going to give that service to his customer for nothing, in order to get his account. When
you consider liability, even in a well-managed safe deposit department, and then consider what liability might
be caused through • carelessness in such a case as I
have just described, there is no banker in America that
is warranted in furnishing that kind of service free.
Let us look at another proposition. I have referred
to the rate of interest which we pay on time deposits,
and to a suggestion made by the gentleman from the
Federal Board at Washington. In older countries, where
they have had systems similar to our Federal Reserve
Act, they do not pay the rates on time money that we
pay in this country. In other words, today, gentlemen,
we are in the situation where we are still paying the
maximum for our deposits, and are loaning at the minimum. That will have to be adjusted.
I am not saying that it should be a permanent adjustment, but certainly some sliding scale ought to be
evolved by the bankers themselves, by which they won't
be paying more for money than they can loan* the
money for, and pay taxes and dividends and expenses
besides. Such banks cannot last. They will go out of
business,
Another place where we can make money, and a
place where most of us are not making money at the
present time, is by following the same continental system they have, where they have these cheap rates in
the great government banks. There, if you want to
open an account with a Wank, and your bank account
does not average a certain amount, you pay a service
charge per month, for the bank doing your bookkeeping
for you and furnishing that service. How many banks
in America do that today? Gentlemen, we will be
forced to put that charge in, in order to make enough
money to keep in the banking business.
These three things which I have outlined—getting
paid for services in our safe deposit vaults; reduction
of rates of interest and the service charge on the balance,
where the balance does not warant us in giving that
Service free—these three ways will bring in a great deal
of money to the bankers of this country.
How are we going to bring that about? Well, I
will tell you one thing we have to do. There is nobody
as much interested in you, as you are yourself. If you
have not the ability to get together with your competitor
across the street, and get legitimate money for the
legitimate service performed, I don't see how you are
going to expect the Congress of the United States to

105

pay any attention when you go down there whining
about this thing and whining about that thing. We
must get together first ourselves in a legitimate way.
Now, in many cities in the -United States today there
are no clearing houses. Every town where there are
two or three banks, there should be a clearing house;
every county where it is possible so to do should
have a clearing house. There is the correct place for the
country bankers in that county to discuss what rate
of interest they can pay on deposits, and live, and in
what way they can legitimately increase their revenue.
. These two ways are neighborly ways, and to my mind
the best way we can accomplish it; but you cannot
do it by being jealous, and suspicious of your competitor, suspicious of everything that he does and everything that he says. You will never get anywhere if
we are to continue along that line. We are just beginning to realize today the value of associations of
bankers, because as we see our profits dwindle, we will
have to get closer to our competitors, and we will have
to do these things, where formerly it was more or less
of an academic question, with us in discussing them in
our bankers associations; but, gentlemen, we will have
to do those things from now on, whether we want to
or not, and we might as well smile and treat our competitor as a good fellow, and talk it over, and see how
we can each live, and make a little money. So much
for those organizations of banks in accomplishing these
results. Now, I am going to come nearer home for a
minute. •
In many banks in the country it is the custom for the
officers of the banks to get together, either the first
thing in the morning, or as soon as the bank is closed,
and go over the business of the bank every day, calling
in the younger men in the bank, discussing the bank's
business, laying out plans for the day, and designating
somebody to carry them out—that is efficiency. A great
many banks do not do that. Too many banks are
still one-man banks, where the boss has all the say and
the under-officers and the employees nothing. In my
own bank, I go even farther than that. For some
months I have offered a prize to the clerk in the bank who would get the greatest number of accounts" during
that month; another prize for one who would get the
largest balance in any account during that month; and
a third prize for the second largest number of accounts; but the most important prize of all is the prize
given to the employee of the bank who brings into that
monthly meeting the best idea for increasing the efficiency of that bank.
Gentlemen, the banking business in this country, as
a profession, is in its infancy. We overlook a great
deal of powerful force asleep in our banks, because
we don't recognize it, and the system of offering a
prize to the young men in your bank, not only develops
them, and makes bankers out of them, and better men,
if you will, but it will increase the business of your
bank.
I am very hopeful over the future of the banking
business in this country, and the reason I am is because
there are being trained in this country some 15 or
16 thousand young men in the Institute of Banking.
They will have not only the actual practice of banking,
but they will have what many of us never had—the
theory of banking, and international banking. (Applause.)
I am going to close now, and in closing I want to
leave this thought with you; it is just a little couplet,
but it is very pat.
"If I can be no good to you,
And you, no good to me,
The world without us would go well,
• So far as I can see."
Gentlemen, I thank you.

106

BANKERS' CONVENTION.

The Country Banker's Opportunity
By JOSEPH Hutson-, Vice-President of the Corpus Christi National Bank, Corpus Christi, Texas.
At the request of our Chairman, your Administrative
Committee has delegated to me the interesting task of
presenting an outline of work accomplished, and some of
the plans and purposes of your Agricultural Commission,
and I have selected the text, "The Country 13anker's
Opportunity," in order that I may set 'forth 'a 'few of
the striking opportunities presented 'Country Bankers
in this comparatively new field of practical endeavor.
- A 'retrospective glance may enable us to. more strikingly
'illustrate the increasing interest' aroused in this work
among bankers generally. Five. years ago the first conferencd of: bankers agrictiltural committees was held in Minneapolis: Eight associations were'represented. For two
days- figrictilturaf edticaterSScientists' who 'had'Mlide'
life -study of the agricultural: needs of this country—
pointed out ways by which bankers might assist in the
economic development of. their country, and 'plans were
disdussed by the hankers present for'fiirthering this niave-ment -their respective States. The conference proceeded
to DerMailent organliation by the. eleetion .of Joseph
Chapman of Minneapolis, as president, and the following
month the American Bankers Association, 'recognizing
the iniportance of the movement, appointed a.committee
on • agricultural and educational development,' with Mr.
Chapman as chairman, a position which he filled with
distinction for two years.
Your committee procedeed on its duties with the
utmost Vigor, and when Chairman Chapman sounded the
gavel for the second annual conference on August 7th,
1912; twenty-three State -Associations answered the roll
call, the United States and Canadian governments were
both officially represented, while agricultural and educational authorities and economists of national reputation
were on the program. The proceedings were not only
Intensely interesting, but reports from the 23 States
represented indicated that great practical benefit was
being derived by those communities which had interested
themselves in the movement.
I shall never forget the remarkable address delivered
before that conference by the lamented James J. Hill. I
can see his venerable figure as he stood before'us that
day, and I well remember the gratification he expressed
that. bankers were beginning to evince an interest in
the preservation and intelligent cultivation of our soil.
By a series of startling comparisons, he pointed out how
the nations of Europe excelled us in the production of
the great staple crops, and how foreign banks and business interests had increased the wealth of these European
nations by joining hands with Science in the upholding
of a permanent and prosperous agriculture.
• This .is the work your. Agricultural Commission is
endeavering to perform. It is seeking to extend to every
state of the Union the doctrine that .safe and sound
agriculture means safer . and Sounder banking and to
Stimulate the adoption of the .methods adVocated by the
agricultural colleges, through,the medium of a recognized
community leader—THE COUNTRY pANKER, .
-1-A. third meeting was held in 1913; and the Same year
your Association,. acting under its new ,
constitution, apfidinted an `
.AgricUltural.,CommiSsion;, with,,Mr., B.. F,
Harris,' of Champaign, Ill as 'chairman and nnder his
splendid leadership the movement has'continued to grow;
until to-day forty-two of the State liankeri Asgociations
.have standing committees on agritulture.' • 'A word' as- to the activities of the various'states may
he of interest at this' time. We shall have to touch on
•
• n
these very briefly.

Indiana, Illinois and Minnesota have been .foremost
In the development of the consolidated rural and agricultural high- schools and good roads Movements. They
employ seventy-five county 'agents, and have immeasurably increased the wealth of their states, by development
of. the dairying and live-stock induitriei.'"
The activities of the North Dakota Assooiation are so
well known that it is hardly necesSary to touch on them
at this time, further than to' say no State .in the Union
has done.. better work 'along the lines of:diversification
and the change frdm a one-crop to an. intelligent, selfsustaining livestock farming than' the 'State of North
'
Dakota.- !,
We -are receiiring encouraging reports from the Pacific
Slope. .The. Washington committee has been very active
in this wbrk from its' beginning, -due: largely to the inter,'
est aroused by Mr.' W. D. Vincent, one of. the first members aripointed .on your agricultural Commission. The
Wakhington Association is organizing. community Bankers and.Business Men's Leagues—is i)lahning a Bankers!
BlisinesS Men's and 'Farmers' excursion to their State
Agricultural College fOr•a joint conference, :and has been
stimulating the -employthent Of.county agents.
California is. just 'starting werk and has a live committee, 'which is advocating the purchase of pedigreed
stock for breeding purposes, and conducting a vigorous
campaign among California' bankers looking to the cooperative marketing of California products and the protection of her fruit industry, while a state-wide campaign
is being undertaken for financing the purchase of pure
bred dairy cows on easy terms. The Idaho Association contributed $500.00 for the boys
and girls club work, and largely as a result of hankers'
activities over eight thousand children are now enrolled
in the various clubs,'and the records show that the value
of the products raised by these little children of Idaho
amounted to over $50,000.00 last year.
Michigan has been active from the beginning of this
work, and, under the auspices of the Michigan committee,
conducted "Oat" and "Corn" Weeks last Spring, movements looking to better seed selection, and cropping
methods. Michigan now has over fifty agricultural
schools, due largely, it is authoritatively stated, to activities of Michigan bankers.
Missouri has done some remarkable county agent work,
while Missouri bankers have distributed thousands of
dollars in prizes for the boys and girls clubs. In its report the Missouri committee expresses the opinion that
bankers can do more to bring about improved farming
methods than. any other agency—because of the influence
of the country. bankers with. their farm customers.- The Middle West—Iowa, Nebraska, Kansas, Oklahoma
—all report increasing.interest'in the work. The Iowa
and Kansas Associations are doing .ft notable work in the
distribution of farm accounting books—Kansas having
distributed over thirty thousand of these accounting records last year, Through Unproved farming methods Kansas has become one of the richest States in the Union,
largely as a result of the co-operation of Kansas bankers,
with their AgriCultural College. .
,The ,Iowa Association, in stressing the importance of
farm, reeordei,' makes the interesting statement that the
farm and liVeSfoeii industries of Iowa exceed one billion
dollars in valne annually. Yet, it is estimated that less
.
than 'ten pei Cent of.the Iowa farmers'keep 'books. ,
.
We are beginning, to get reports from: Pennsylvania:
of. the'dlifo- Association,' has been an
PreShient

BANKING SECTION.
enthusiastic supporter of the work of your Agricultural
Commission, and Ohio bankers are evincing a lively interest in county agent and boys and girls club work, and
are contributing freely to the success of these movements.
Vermont and New Jersey are starting work, and now
Massachusetts—manufacturing Massachusetts—is developing a live agricultural committee, and under the aus•pices of the Massachusetts Agricultural College an interesting conference of bankers was held at Amherst last
May to consider measures looking to rural development.
The Massachusetts committee, in an interesting report
regarding rural conditions in New England, points to an
alarming decrease in rural population, while it is stated
that against 12,000,000 acres of improved farm land under
cultivation in 1860—there were but 7,000,000 acres in 1910
loss of 5,000,000 acres of cultivated land in a period
of fifty years, while the land that is still under cultivation
has greatly deteriorated in productivity. County leagues
are being organized to combat these conditions, and Massachusetts and .New England bankers generally, are interesting themselves in- the Movement.
Colorado is doing some excellent. work Under the'able
guidance of Chairman George T. Wells, a member of this
commission... Mr. Wells has been covering the ground in
some of the neighboring States of Idaho, Montana and
Wyoming. It IS interesting to note that fifty-six bankers
are 'enrolled on the Agricultural Committee of the ColoTado Association.
- Southern bankers have been particularly active, because
the need of agricultural development has come more
'closely home to the bankers of the South. .•
: Mississippi and Alabama present very interesting reports. They are especially interested in the government
demonstration work, in the boys clubs, in the home demonstration work, in the building up of the livestock industry—matters.vital to every Southern State. Mississippi
has done remarkable work in the eradication of the cattle
fever tick, which has cost the South untold millions of
dollars.
Last winter the Virginia Bankers Association sent
twenty boys to their Agricultural College for the short
course, and when the committee reported at the June convention the Association doubled its appropriation for this
purpose and announces that it hopes to send one hundred
boys and girls to college this winter.
Georgia makes a remarkable report. The Association
has subscribed a loan fund of $1,500.00 and has paid the
tuition for thirteen boys at the State Agricultural College
and for two girls at the State Normal College. These
fifteen pupils were advanced $100.00 each, for which they •
gave their notes payable on or before one year after graduation, with four per cent interest. The Association also
advanced $750.00 for the tuition of thirty boys and girls
for the short term at the Agricultural College. The Georgia .Association has taken an active part in the county
demonstration work and good roads movements, and is,
indeed, doing a noble work among the farm children.
•South Carolina's committee, headed by Robert I.'Woodside; a member of your Agricultural Commission, reports
great interest in the demonstration work. Many South
Carolina banks have advanced funds for the'purchase of
thoroughbred cattle. The activities. of the South Carolina
Committee were largely responsible for the adoption of
the Torrens System of Land Title 'Registration, and, in
many ways, South Carolina bankers are lending encouragement to all phases of rural development.
The Wisconsin Committee has done exceptional work,
and Chairman Von Berg, working) in.'&injunction with
President J. It Wheeler Oft-the Wisconsin' Association,
the latter a member of the Agricultural Commission for
the past three. years, has furnished an Inspiring example
of what intelligent leadership in this work can acconi/mgt. The • Association has stressed the importance of
pure bred grains and corn—has been active in county
tikenft viork.-;hai distributed More than 30,000'monthly

107

bulletins relative to agricultural betterments, and at its
annual convention this year conducted a special meeting
In conjunction with the Agricultural College, which
brought out and held the sustained interest of a recordbreaking attendance. But the outstanding feature of,the
Wisconsin Committee's activities was the famous BankerFarmer Excursion to the State Agricultural College at
Madison, last April. Over four hundred farmers and
fifty-four bankers attended this meeting, which was called
for the purpose of discussing the best methods of cooperatively developing the agricultural resources of the
state. Dean Russell, addressing the gathering, made the
statement that the activities of the Wisconsin Bankers
Association had immeasurably assisted in the agricultural
development of the'state, and it is authoritatively stated
that the assistance rendered by Wisconsin bankers in the
purchase of pure bred dairy cows and the development
of the dairying and creamery industries, has added millions of dollars to the wealth .of the state.
Texas has been active in county agent work—over one
hundred being employed in the state. Two hundred and
forty-five bankers -- one for every county — directed, by
fourteen zone chairmen, constitute the Texas committee.
Last year the Texas Association conducted a memorable
cotton warehouse and marketing campaign Etna increased
the warehouse.capacity of the state by over 709,000 bales,
The Texas Committee is now conducting a state-wide
campaign for increased livestock production. A chart has
been furnished each Zone Chairman, showing number and
classification of livestock in his district, compared .with
twenty years ago. The figures show startling decreases,
and present a striking illustration of the need of arousing interest in the matter of increased livestock production. Mr. W. G. Breg, chairman of the Texas committee,
Is president of the U. S. Bond & Mortgage Company of
Dallas, an institution conducting a farm loan business.
Be is a city banker who is taking an active interest in
the preservation of Texas land values—values which directly affect the securities of his company. I make this
statement because I desire to say to the officers of the
great savings banks, trust companies, and life insurance
companies, who invest so heavily in farm mortgages, that
your great metropolitan institutions are vitally concerned
In the problem of preserving—and increasing—our national land values. I urge your co-operation in the work
your Agricultural Commission is endeavoring to perform.
Some of you, I know, have considered this phase of
bankers' activities not germane to the purposes of the
American Bankers Association, but permit me to point out
that there is no problem—no one thing—which so concerns all the banks of America as the conservation of
our soil—which may be accomplished only by intelligent
crop diversification and the development of our livestock
Industry.
The work of your Agricultural Commission has consisted, largely, of keeping in touch with and stimulating
the activities of, the state committees. This has been
done through the medium of the commission's official publication, "The Banker-Farmer," and by the annual conferences of the Agricultural Committees. The memorable
Chicago Banker-Farmer Conference, the culmination of
months of effort on the part of Chairman Harris, was
One of the' most remarkable meetings ever held in Amer:.
lea. Thirty bankers' associations were represented. Over
three hundred and fifty men, foremost in the financial;
agricultural and Commercial life of the nation, outlined
a practical campaign for co-operative effort the result's
of which are spreading to every state of the Union. The
famous Tri-State campaign conducted by Tennessee,
SissiPpi and.Arkansas bankers, under the auspices of the
MenaphiS Farm Development Bureau, is directly. attributable to the influence of the Chicago conference,.and Mein=
phis bankers.already point to increased bank deposits in
their trade'territory as a direct result, while it is stated
that the agricultural .wealth of Arkansas has been in:

108

BANKERS' CONVENTION.

creased $30,000,000.00 and bank deposits $10,000,000.00 in • U. S. Department of Agriculture, in a number of ad• two years, largely as a result of the memorable Arkansas
dresses delivered by him before bankers' .associations.
Better Farming Campaign, conducted under the auspices
Over two hundred Texas bankers are now using- this
of Arkansas bankers and other existing agencies.
statement form, as the result of a campaign being conThe South has taken hold of this problem with an
ducted jointly by the Texas Bankers Association and the
energy that might well be emulated by our progressive
Agricultural College. A field agent is calling on every
brethren of the North.
country banker in the state, explaining the merits of the
Last year cotton states bankers, by' a vigorous, and con- system. The entire expense of this movement is borne
certed warehouse and gradual marketing campaign, are
by the college. The Bankers Association, co-operating on
said, by an eminent authority, to have added over $100,- .account of its influence with its members. With the in000,000.00 to the value of the cotton crop, while this year
creased appropriations now available to the Land Grant
Southern farmers, stimulated by a South-wide safe farm- Colleges, I believe these institutions will be glad to coing campaign, undertaken jointly by Southern bankers
operate in similar movements. I am sure every member
and Southern newspapers, have saved millions of dollars
of this Association will agree that it would be highly dein feed and food stuffs produced at home, and at the
sirable to have in his files the financial statements of his
same time have automatically held cotton production farm customers. It is equally advantageous to the farmer
down to barely the world's requirements and, as a result, to furnish a statement—it is the first step in farm bookthe value of the 1916 cotton crop will exceed the amazing
keeping. A farm credit sheet means safer farming and
total.of one billion dollars.
safer country banking.
Country bankers should play an important part in
In the publication of "The Banker-Farmer," your comshaping the policies of the new Federal Land Banks.
mission has endeavored to acquaint the membership with
Without entering into a lengthy discussion of this measthe work being undertaken by the various State Commiture, it is apparent that its chief economic value lies in
tees. Many of the greatest financial, educational and
the extended period of payment afforded the borrower.
agricultural authorities in America have contributed to
This, in my judgment, is of far greater importance to the
its pages. Twenty-three (23) of our state associations
farmer than a slight lessening of his interest rate—if
are now distributing "The Banker-Farmer" among their
the Act lessens the rate at all. But by decreasing the
members. The paper enjoys a circulation of some 400,000
annual burden of the farmer it will permit him the use
copies per annum, of which approximately 220,600 are being purchased by individual banks for distribution among of funds for development of his farm, for the construction of barns, silos, etc., and for investment in livestock.
their farm customers, while the remainder are being disIn short, it will permit the use of funds for what our
tributed by the State Associations. By the publication
distinguished vice-president and sound thinker — Peter
of special numbers devoted to rural problems of national
Goebel—calls "Constructive Purposes."
importance, "The Banker-Farmer" has endeavored to
The great rural problem of this country, as it has been
shape the policies of State Committees. Its cartoons have
of all countries, is to make it a nation of land owners.
been reproduced by a number of leading newspapers and
magazines of the country. A recent feature is the fur- It has been pointed out in certain quarters that the present measure offers no hope to the deserving tenant farmer
nishing of plate matter to member banks for advertising
who desires to become a farm owner.
purposes.
On the contrary, the act, providing, as it does, for long
Co-operation on the part of the members of the Assotime loans, running from five to forty years, on a basis
ciation will greatly increase the scope of the paper's inof fifty per cent of the appraised value of farm lands,
fluence. Country bankers are urged to contribute articles
presents an opportunity for the sale of lands by present
relative to agricultural development work being underland owners to hard-working, ambitious tenant farmers,
taken in their communities. The magazine invites your
accepting as first payment the cash advanced by the Fedcriticism as well as your support, and suggestions for the
eral Land Banks, and taking a series of long time, secondfuture conduct of the paper will be gratefully received
lien notes for the remainder of. the purchase price. Such
by the management.
an arrangement would permit thousands of tenant farmIn the prosecution of the work of your commission, in
ers to purchase their own farms and pay for them out
the publication of the magazine, in urging and obtaining
of the annual earnings.
the co-operation of the State Associations, in spreading
If the country bankers of America will join in a camthis great movement to every state of the Union, the
mainspring of our activity has been your chairman, Mr. paign to induce land owners to sell farm lands to present
tenants upon some such basis, they will be engaged upon
B. F. Harris. Whatever measure of work may have been
performed, I feel that I can speak for the other members one of the greatest movements ever undertaken for the
agricultural and financial development of the nation.
of the Commission in saying that .the results obtained
The consolidation of rural schools and the establishhave been due almost entirely to the untiring efforts of
ment of agricultural high schools, are movements which
our chairman. It has been my pleasure and my privilege
to have been associated with him in this work for the should spread to every state of the Union.
past three years. His example has been a constant inWe are just beginning to think about these things in
spiration to me and to every member of the commission. America. Europe long ago learned the lesson that in the
You little realize the tremendous amount of work that scientific cultivation of her soil—in scientific agricultural
he has performed. For three solid years I know that the instruction—rested her future prosperity. The marvelous
greater part of his time and effort have been given to
ability of Germany to feed herself during the past two
your service. Few men have labored as faithfully—few
terrible years of war is the result of a half century of
have performed as well. In his retirement as chairman
scientific agricultural education. France, the great proof this commission, I feel that the American Bankers ducer nation of the world, has nearly fifty thousand agriAssociation is suffering a distinct loss:
cultural schools.
Time will not permit us to dwell longer upon the work
The future of this nation depends upon its agricultural
already accomplished by the state committees. Much
prosperity. The establishment of agricultural schools and
has been done, but we are merely on the threshold of the consolidation of rural schools, which will give ouir
endeavor. One of the new activities which should engage farm children educational facilities equal to those enthe attention of our country bankers is the general adop- joyed by their brothers and sisters of the towns, constition of a farm credit statement system. I am submitting, tute the foundation of a permanent agricultural prosas a portion of this report, the Bennett rate sheet, which
perity.
has been recommended by Hon. Bradford Knapp, of the•
Experience teaches us that good roads are absolutely •

•

BANKING SECTION.
essential to consolidation. Under the Shackleford Act,
$75,000,000.00 of government funds will become available
for good road construction during the next five years,
based upon equal appropriations by the states. In shaping legislation leading to improved rural educational facilities and the construction of improved highways, country
bankers are offered opportunities for genuine national
service.
. But the greatest opportunity offered our country bankers lies in the extension of County Agent work under the
provisions of the Smith-Lever Act. Under this Act there
Is now available $1,580,000.00 of government funds, which
Increases by $500,000.00 each year until 1922, at which
time there will be available $4,580,000.00 per annum,
based upon equal appropriations from the states, thus
providing nearly ten million dollars per annum for agricultural extension work.
Up to 1912 practically all of this work had been con.ducted in the South.
The demonstration agent, as you doubtless know, is a
man of practical experience, who brings to the farmers
of his county the results of scientific investigations in
agriculture. Farmers cultivating land under agents' supervision are called "demonstrators." Farmers employing demonstration methods, but not actually under the
agents' supervision, are termed "co-operators." In July
of this year there were 914 agents and 105,522 adult demonstratprs ftniz4p-ogerfilvslinapt F.n.Otern §,tates, There,
were a o
wom
tit Leib agen s n the home demonstration,
e
or girls' and women's work. The results of the demonstration work are so amazing that I submit a few figures
for the careful consideration of the American Bankers
Association:
In 1914 the principal experiments conducted with the
great staple crops of cotton and corn show that on 9,392
farms, with a total of 129,475 acres, Southern demonstration farmers averaged 1,044.77 pounds of seed cotton
per acre, against 623.7 pounds — the general average;
while 13,565 demonstrations conducted on 110,408 acres
planted to corn show an average of 34.83 bushels per
acre, against an average yield of 20.7 bushels produced
in the Southern States. In 1915 over 20,000 Southern
farmers, employing demonstration methods, on 218,000
acres produced an average yield of 1,180 pounds of seed
cotton per acre, and 56,000 farmers employing demonstration methods on 480,000 acres, produced an average yield
of 37.7 bushels of seed corn per acre. Figuring lint cotton at ten cents the pound, and corn at seventy-five cents
the bushel, the cotton demonstrations show an increased
value of approximately $4,000,000.00, and the corn experiments an increased value of $7,000,000.00 over the
average productions of cotton and corn on equal acreages. Demonstrations in oats, wheat, rye, barley and
other staple crops, show equally amazing results.
In 1915 over 50,000 pure bred and grade animals were
brought into the Southern States, due to demonstration
agents' influence. Seventeen hundred farm clubs were
organized, with a total membership of nearly 50,000. The
agents made over 600,000 visits to farms, traveling more
than 3,000,000 miles. Thirty-two thousand meetings were
held, with a total attendance of 1,200,000 farmers, while
over 1,000,000 government bulletins have been distributed
by county agents. Over 13,000 visits were made to Southern schools by agents, and there are now enrolled in the
Southern boys' cotton, corn, pig and other clubs approximately 53,000 boys, while there are 37,000 girls enjoying
the benefits of the home demonstration work. The increased yield of our great staple crops is a matter of vital
Importance to this nation. Our population has increased
nearly 25,000,000 in the last fifteen years, while production of .our great staples has been almost stationary,
and there has been an alarming decrease in livestock production. ).11Vance, Germany ,and Denmark ,produce twice
as much wheat, rye and oats per acre, and far excel us
In the yield of other staple crops, and, in every phase of

1 IA "4ti

109

production, we make a lamentable comparison with the
great nations of Europe.
The extension of the field demonstration work will add
millions of dollars to the wealth of this country, and leading Governmental and State Agricultural authorities
testify that the co-operation of bankers has been a potent
factor in the development of the movement. The United
States Department of Agriculture and the Agricultural
Colleges furnish the scientific direction — the banker's
local influence helps to establish the work. Local legislation is necessary for the appropriation of county funds—
the banker's influence secures it.
Your Agricultural Committees should bend their energies toward placing a field demonstration agent in every
agricultural county of the Union, and in this field of cooperative endeavor a magnificent opportunity is offered
the country banker.
By some, who have not, I fear, made a close or intelligent study of the subject, the bankers' exploration into
the field of agricultural activities has been termed a
theoretical uplift movement. In my judgment, co-operation with the agricultural colleges in the extension of the
field demonstration work is one of the greatest practical
movements ever undertaken by this Association. It will.
increase bank deposits and add immeasurably to the
security of our loans. Your agricultural committees are
not endeavoring to teach the farmers of ,this Union,,I4ow
to Tann, .tiut..theS; 'are working in conjunction with the
agricultural colleges to bring about those methods which
mean a more permanent and prosperous agriculture and
a safer, sounder banking. I urge every conntry banker
in this Association to interest himself in the enactment
of such local legislation as may be necessary to enable
his community to participate in the benefits of the SmithLever Agricultural Extension Fund,and I venture the prediction that you will never have undertaken a work which
will bring to your community a greater and more immediate prosperity, or to you a greater personal satisfaction.
We of the South know what this york means. We are seeing communities change from the slipshod, dependent
methods of the past, and our country blossom forth as an
independent, self-sustaining, prosperous and contented
New South. We see the little boys of our Southland receiving a practical education on the farm. We see them raising
their little plats of corn and cotton and establishing records for production in the South. Through the establishment of boys' pig clubs and baby beef clubs, they are
learning the South's much needed lesson of increased
and better livestock production. Their sisters, under the
intelligent direction of the home economic agents, are
planting their little home gardens, preserving fruits and
canning vegetables, raising poultry, studying sanitation
and beautification of the farm home, and are qualifying
themselves to become intelligent, capable, cultured, modern farm women.
The boys and girls club work has been tremendously
accelerated by the bankers' activities, and the club prizes,
which so stimulate the children's interest, are due largely
to the financial support of the banking and business interests of the country:
The women of America have awakened to the importance of this movement, and the National Federation of
Women's Clubs is appointing committees on rural welfare
all over this broad land. You good women, the wives,
sisters and daughters of American bankers, have here an
opportunity to join with us in this great practical work.
I appeal especially to you who have dear children of your
own—children who enjoy good educational facilities—to
join with us in extending equal opportunities to the chitdren of our rural communities. Use your influence
for the betterment of rural conditions in your neighborhood. Help to establish the4Jemonstration work in your
county.
You, fathers and mothers, go out under the open sky—
spend a day in the Country with your. County Agent—

BANKERS' CONVENTION.

110

make a trip with that good woman, the Home Economics
teacher—visit the boys' and girls' clubs—and when you
see the interest manifested by these farm children—the
eagerness, the enthusiasm with which they grasp the opportunity to better qualify themselves for their calling in
life—I am sure you will return to your homes inspired
with the patriotic desire to become an active, personal
factor in this great work—a work which, delightfully
combining the practical and the ideal, enhances the material welfare of your country—while, through the development of a higher type of rural citizenship, it permanently
enriches society.
To help bring about these things in your community
may be called an "Uplift Movement," but it is a work
which "uplifts" him who engages upon it. In the education of our children lies the future of the nation.

We have heard much of the magnificent opportunities
offered American bankers in the development of our foreign commerce, and a number of our great financial institions are doing valuable educational work in pioneering
this field; but the greatest opportunity of this country
lies in the development of its marvelous internal agricultural resources. This is the mission of your Agricultural
Commission. It is to this work we are committed, and it
Is this work which we believe offers the greatest opportunity to the country banker.
Your Agricultural Commission is but a small unit in
this movement. We need the co-operation of every State
Association, and we urge the active support of every
member of this organization in the effort to make the
American Bankers Association a powerful factor in the
economic development of the nation.

The Federal Reserve Law and Its Amendments
BY W. P. G. HARDING, Governor of the Federal Reserve Board, Washington, D. C.
Mr. President and Gentlemen of the American Bankers'
Association: This is certainly a very pleasant surprise
to me. I did not come here loaded with a speech, but I
have had the banking habit so long that I find it very
difficult to throw it aside. I have never become accustomed to regard myself as a statesman, and I still feel
under the skin the sentiments of a banker.
I believe, however, that I am capable of taking a broad
view of things, and I am not hidebound.
I realize certain responsibilities, under my oath, to the
whole community, and not unto the bankers alone; I am
not ashamed of my banking training, and I have nothing
to gpologize for whenever I say things in the bottom of
my heart from a banker's viewpoint.
I know that many of you have been much disturbed
over Die ruling of the Federal Reserve Board, in regard
to I he collection of checks. Possibly a few words 4.f
explanation may not be amiss.
When the Federal Reserve Banks were organized in
November, 1914, the country was just recovering from
the great shock occasioned by the outbreak of the war
in Europe.
The Board at that time deemed it wise to defer the
full operation of Section 16. We had what we regarded
as much more important matters to attend to, but, gentlemen, a year passed, maybe a year and a half passed, and
nothing was done toward carrying out what seemed to be
the mandatory sections of that Act, and what the Board
regarded as its solemn duty. That Section 16, as I have
learned, was the result of a compromise. It was not
enacted as originally drafted nor was it enacted as in
the Senate Bill which was passed, after the visit of the
Committee to Washington in 1913, but it was amended
in conference. The language of the section is some wna t
invotvcd. The counsel of the Board gave that section
very careful consideration; he gave us his advice as to
the meaning of that section. We had that opinion checked
by the Consulting Counsel of the Board, an eminent attorney in the city of New York, and after a very careful
deliberation on the part of the members of the Board
we issued that circular and regulation of May 1st last,
which provided that the Clearing System should go into
operation on the 15th day of July.
I want to congratulate the members of this Association
upon the course they have adopted. It seems to me that
you have reached the correct solution. The Federal Reserve Board is not a legislative body; its functions are
administrative. Occasionally it has quasi-judicial functions to perform, but in the main its duties are admini-

strative. It is our province to carry out the law as Congross enacts it, and if there is anything wrong, if there
is anything unjust to the banking community in Section
16, as it stands, then it is clearly your right, guaranteed
by the Constitution of the United States to go to Congress to state your case and ask that body to remedy the
defects that you see in it.
Certainly no member of the Board has any desire to
antagonize the legitimate banking Interests of this country. We all realize how much you are doing to build up
the business of this country, and what you are doing for
the .welfare of every element in the country. Furthermore, we realize that many of you represent the banks
that are members of the Federal Reserve System, that
are stockholders of the Federal Reserve Banks. Others
represent banks that are not yet members of the Federal
Reserve System, but we hope in due course of time to
welcome you in as members, and certainly it would be a
very shortsighted policy for anybody charged with the administration of the Federal Reserve Law to deliberately
drive away and antagonize any important body of men
like the American Bankers. At the same time we realize,
as every thoughtful banker among you must realize, that
a banker has his duty to perform to the public, that he
is a quasi-public institution, that he owes something to
his depositors and to the public, upon whose business his
deposits depend; and I am sure of the result of your
deliberations, when you come to Washington, when you
meet the committee of Congress. I see no reason why
this whole problem should not be solved, to the satisfaction of all concerned.
To-morrow, gentlement, you will have the pleasure of
listening to an address by an able member of the Board,
a man who is known throughout the world as a great international banker. He will emphasize the importance
of the principle of the Federal Reserve Act. Section 16
shrinks into insignificance us compared with the underlying principles of the Federal Reserve Act; the utilizing
of the cash resources of this country: the care of the
gold, the ultimate monetary redemption, the only international money. We live to-day in the midst of a great
period of prosperity, such in point of volume alone, from
magnitude of figures, as has never been before equaled
in this country; but, gentlemen, we should realize that
in a time like this, when deposits are climbing day by day,
and money rates are easy, when the interest payments that
you have to make,•go along, without ceasing, night and
day, and you contemplate this vast accumulation of idle
reserves in your vaults—don't we know by experience that

••

BANKING SECTION.
now is the time when we are laying up trouble for the
future; that the losses which we appreciate will have
come to us in two or three years from now, perhaps,—
that the foundation of those losses is being laid to-day?
How long, gentlemen, can we expect to continue to absorb
the entire gold production of the world, as we have been
doing since the first of January, 1915? For ten years past
the average gold production of the world has amounted
to about $450,000,000. The net gain in the gold holdings
of this country since that time has aggregated over $700,000,000 In spite of the fact, as Mr. Chapman stated this
afternoon, that we have brought back from Europe over
two billion, five hundred million dollars' worth of security, and loaned foreign countries $1,600,000,000,--desp1tt
that we have absorbed the equivalent of the gold production of the entire world. It is a solemn responsibility
that we have to properly conserve with, and to avoid the
dangers of inflation of currency, inflation of credit, which
is more insidious, and just as dangerous. And I want to
say to you that the Federal Reserve Board has these
facts constantly in mind. It believes its highest progress
is to urge and caution better banking methods, to impress upon you the necessity of the conservation of our
gold stock in the Federal Reserve Banks of the country,
in order that when the tide turns, when conditions on the
other side of the water are different, and when, owing to
the high interest' rates prevailing there, when owing to
government financing or to restrictions, the tide of gold
flows from our shores back, as it surely will, we shall be
in a position to control that tide, so that we may not feel
the ill effects of its departure from our shores.
I take it, gentlemen, that in the transaction of our
domestic business that most of us will agree that gold is
unnecessary, that other forms of currency, in paper denominations are more convenient and just as efficient;
but I well remember a hearing in Minneapolis last Fall
when the great Builder of the Northwest, who has now
gone to his final reward, James J. Hill, remarked,." Yes,
gold is not necessary; we can use the National Bank
notes, we can use Federal Reserve notes, but, gentlemen,
we should be sure that the Redeemer liveth!" He wanted
to know that the paper money was covered by gold in
circulation, so that any who had it, whenever they needed
the gold, they could present the currency and get the gold.
That, gentlemen, is the highest province of the Federal
Reserve Bank, which is to regulate and stabilize our currency, so that those of you who hold any form of paper
money, issued through governmental agency, may be sure
of your Redeemer—and that you can get the gold when
the need for it arrives.
At the same time, you know that it is a great economic
waste to use gold coin in the ordinary course of business,
the abrasion amounts to so much, and the gold certificates
result, in the ordinary course of business, in a terrific

111

waste; for every dollar's worth of gold or gold certificates
In the vaults of the Federal Reserve Bank is a potential
power of expansion in case of need of two and a half
times.
One of your banks, having a demand from its customers for crop moving purposes, or due to temporary nervousness, may be called upon for a million of dollars, and
if you ship that million of dollars out of the
country in
gold how long will it be before it gets back into
your
vaults? You know the tendency to hoard gold
coin; you
know how pretty a yellowback certificat
e looks. If, on
the other hand, you turn that gold or that gold
certificate
into the vaults of the Federal Reserve
Bank, and use
some other form of currency, that temporar
y form is
more apt to come back speedily than the
gold itself.
It constitutes a more flexible and more elastic
currency;
but I fear that I am anticipating the remarks
that, my
distinguished colleague will make to you to-morrow.
In conclusion I want to call your attention to
one very
Important amendment which has recently been
passed
by Congress which has just adjourned, and that
is the
amendment to Section 19 of the Federal Reserve
Act,
which provides that any member bank, any National
bank, may carry any part of the cash reserve hitherto
required to be carried in its vaults, on the bobks of the
Federal Bank, as a balance; in other words, if there is a
bank that under the old rule would have to carry $100,000
of lawful money, gold or legal tender notes in its vaults,
and the balance of its reserve in a Federal Reserve Bank;
if in the conduct of its business, pay rolls, crop moving,
and whatnot, it finds that its lawful reserve in cash has
run ,down, say to $40,000 or $30,000 odd, so long as you
buildup to a corresponding degree, your balance in the
Federal Reserve Bank, you are complying with the law,
as now amended. You can take your time about shipping
that money from the Federal Reserve Bank to replenish
your vault reserve, and many in remote districts who
have hitherto found it expedient to keep gold or gold
certificates locked up in your vaults, in order that you
can have the lawful money reserve, now find to all intents,
and- purposes for your till money you can use a Federal
Reserve note, or a National Bank note, or any other form
of.currency that comes along.
Then again, the banks in the large cities have large
accumulations of gold, whenever they find it desirable to
increase the amount of money in circulation, which is
certainly not desirable to-day, but may be later on.; they
can transfer from their own vaults to the vaults of the
Federal Reserve Bank their gold holdings, and thereby
greatly increase the power of the Federal Reserve Bank
to relieve any sudden or difficult situation that may arise.
Gentlemen, I thank you very much for the pleasure of being here.

The Reserve Problem and the Future of the Federal
Reserve System
By

PAUL M. WARBURG, Vice-Governor of Federal
Reserve Board.

It has been suggested that I address you upon the subject of "the future Of the Federal Reserve System." To
venture to predict the future is always a risky undertaking and I, for one, dislike to attempt the role of
prophet. But if our new banking system is to attain
its
fullest measure of success, we must have in our
minds
a very definite ideal, a clear conception of the goal
towards which we are striving, so that each consecuti
ve
step may be a consistent move in that direction. I
deem
it, therefore, a privilege to 'be afforded this opportuni
ty

of addressing the leading association of American bankers upon a topic in which its members are so keenly and
vitally interested, and which—if we are to achieve the
most fruitful results—should be solved by their own efforts rather than by legislative initiative.
The well-known British writer, Mr. Hartley Withers,
in his new book, "International Finance," makes the following'statement:
"London's credit machinery has grown up in al- '
most complete freedom from legislation, and it has

112

BANKERS' CONVENTION.

consequently been able to grow without let or hindrance along the lines that expediency and convenience have shown to be most practical and useful."
When I read this paragraph, there came to me again
the feeling of regret that American banking had not developed in a similar manner; that—owing to reasons
which it is unnecessary to review here—our banking
methods had proceeded along lines that had proved
disastrous, and that multiplicity of banks, diversity of
Interests, and divergence of views precluded any possibility of voluntary agreement concerning the adoption of
uniform, scientific, and adequate modern banking methods. That failure rendered necessary banking under
Government regulation and, to a certain extent, in the
Federal Reserve Act, even under compulsion. By many
this method has been viewed with regret, but unfortunately there appeared no other possibility of success.
I believe it is safe to say that, in general, those laws
have proved the best which put into legal form existing
usages. already recognized by actual experience as sound
both in principle and practice. With us, it was impossible to use existing banking habits as the basis for our
legislation. It was necessary to take those banking practices that had proved their worth in other countries
and to adopt them as our model, with such adaptations
as our own conditions rendered necessary.
It is a most difficult task, however, to remodel fundamentally the structure of a fully developed organization and to do it while the machinery is kept going at
top speed. It is evident that it cannot be accomplished
without some temporary inconvenience and that it must
be done step by step. The tracks in the new depot of the
New York Central Railroad in New oYrk had to be
moved many hundreds of times in order to keep the
trains running while the larger basis of operation was
being perfected.
I am profoundly convinced that the Federal Reserve
Act will prove one of the most constructive contributions ever made by Congress, and that the further the
system develops, the more apparent will this become.
PRESENT FEDERAL RESERVE ACT NOT A FINALITY, BUT
A BEGINNING
But, in expressing my unbounded confidence in the
future of the system, I am fully conscious of the fact
that, in its present form, it is not a finality, but a beginning. The tracks will have to be shifted many a
.time, and, as the fields opened by the new organization
are developed, substantial changes in machinery will
have to be made in order to cope with new demands.
Indeed, the Federal Reserve Act would prove a failure
if these changes in the system did not become necessary
from time to time. In this process of developing the new
machinery to its fullest degree of usefulness, the bankers of the United States will have to play the most prominent part, and it is for this reason that I am particularly anxious that we all should reach a clear understanding about the future course of American banking,
its hopes and its fears. Only if we take this more comprehensive view shall we be able to plan wisely—not
for the morrow, not for single interests, but for the
larger future and the benefit of all.
IMPORTANCE OF COOPERATION OF AMERICAN BANKERS ASSN.
I have no doubt that your Association is in harmony
with these views and that, in cooperating along these
lines, it will prove a most important and helpful factor
In the simultaneous evolution of good banking practice
and good banking legislation. The natural development
will be that Congress will call upon the Federal Reserve Board more and more to act as an expert body in
questions of banking—though, unfortunately, this does
not mean that our advice will always be heeded. Our
conferences with your committees will assist us in the
tuture, as they have in the past, to do our duties fairly

In administering the Federal Reserve System, and in
planning for its future growth.
THE REAL MEANING OF "RESERVES"
Let us try . to review as briefly as possible the .main
features adopted from European banking, and to establish where we stopped half-way and what still remains
to be done. Time will not permit me to cover each of the
various phases involved,. but: it may be possible to deal
fairly comprehensively with .the topic of reserves, which,
after all, is to many the mostpuzzling and to all the most
vital question involved in the problem..
In 1910, I published a tentative plan. entitled, "A
United Reserve Bank of the: United States." Later on,
Senator Aldrich called the system. that he proposed, "A
National Reserve Association."; iand finally..the . OwenGlass committees devised the." Federal Reserve -System,"
which was enacted into' law: ..The word ".reserve" has
been embodied in all these varying names, and this is significant because the adoption : of the principle, of cooperative reserves is 'the characteristic feature of. each
.
•
of these plans.
"Monetary and banking reform" made. its greatest
step forward when public opinion recognized that it was
not essentially a question of note issues but one of reserves. But, though,this reserve problem has thus been
before us for many years; it is a strange fact that'there
still exists a singular confusion . In - the .minds:of bankers, writers, and students as to what the word "reserve ".
actually means in this connection.
There are all kinds of reserves. There are military
and naval reserves. We speak of reserves in dealing
with water supply, with food, raw materials, rolling
stock, electric power, and what not. In each case its
meaning depends upon the requirements of the organization maintaining the reserve. Reserve is, as the name
implies, what one holds back. It generally means an
extra supply of something kept idle for the purpose of
being immediately available to take care of an increased
demand in excess of normal requirements. Now, if we
wish to get a clear conception of the meaning, of reserves in connection with the Federal Reserve System,
we must understand that it is necessary to recognize central banks as entirely different organizations from the
commercial banks and trust companies 'and, consequently,'
that their respective'reserves differ as'much as those of
an ice factory, and a 'slimier .hotel—the 'one a producer
and the other a consumer of ice.
Reserves of central banks and reserves of the general
stock banks are two entirely different things.
• For the sake of greater. simplicity,.I shall in this ad,
dress call the national banks, State banks and trust companies,' the "stock' banks" and their reserves "banking
reserves,'!. and I shall term. the. reserves of the central
banks "gold reserves," leaving it open at this point
whether or not these latter reserves should include silver and greenbacks.
The Federal Reserve System is a co-ordination of
twelve central banks; and the same principle as to reserves, therefore, applies. aisif.we were dealing with one
central bank. I shall, therefore, in this address, class
the Federal Reserve System with the central banks.
FUNCTIONS OF STOCK BANKS IN CENTRAL BANK COUNTRIES.
Let us consider first the functions of the stock banks
In central bank countries.
Deposit banking is the art of wisely employing the
depositors' stored up purchasing power. It is based on
the principle that there is a sufficient variety of conditions amongst the depositors and borrowers of a bank so
as normally to preclude the probability of the depositors'
withdrawing and using their own money faster than it
can be collected from the borrowers, to whom the
depositors' purchasing power temporarily has been trans-

BANKING SECTION.
ferred. The bank's own capital and the uninvested part
of its deposits from the insurance, or reserve, fund to
act as an equalizer in balancing these scales. It is essentially a question of exchanging credits and, where there
is a central banking machinery enabling the stock banks
to liquidate a sufficient amount of their assets to make
good any deficits that may occur, the whole system is safe
and complete. The central banking organization provides the member banks either with balances to be used
in the .clearing, or, if currency should be required, with
notes which will be accepted by their depositors in settlement of the stock bank's obligations.
In countries where these notes of the central banks are
generally accepted in settlement of debts by business men
and banks, the "banking reserves" of the stock banks
may safely consist of the central bank currency, or of a
balance kept with the central bank, convertible into such
currency. These form the first line of bqnking reserves.
The second line consists of those assets which, with certainty and promptness, may be converted into credit balances with the central bank. It is simply a question of
having a reserve of such credit currency, or of power to
produce such credit balances, as will provide an acceptable means of satisfying depositors.
Balances with the central bank, and its notes, entitle
the stock banks, like any other holder, to payment in
legal tender; and if legal tender is demanded by creditors
of the stock banks, the latter must rely upon the central
bank to furnish it. The duty to keep its own deposit and
note obligation sufficiently protected by a proper proportion of metallic cover rests with the central bank, and its
reserves, therefore, must consist exclusively of the metal
in which its obligations are payable.
In central bank countries there does not exist any law
that requires stock banks to keep in actual specie in
their ,own vaults a certain proportion of their deposits.
All the central bank usually requires is that the stock
banks, and other firms, maintain with it free balances
commensurate with the scope of their transactions. As a
matter of fact, if we study the statements of European
stock banks we find one single cash item which includes
the combined holding of gold, silver, bank notes, and
the balance with the central bank.
I still remember that when I had my initiation into•
banking in Europe, twenty-eight years ago, we never
bothered much about our cash in vault. We never had
more than we needed as till money. If we accumulated
too much, we sent it to the central bank to be credited
to our account. If we ran short, we sent over to the central bank and got what currency we required. The cash
item was of very little interest to us, but we watched continually the balance with the central bank, and if our
balance approached tile prescribed minimum, we would
strengthen it by sending over for discount some
short
paper maturing within five, ten or fifteen days—or, if
demands were extraordinarily heavy and unexpected,
we
might have to send over paper of longer maturity.
Or,
at times, when the discount rate of the central bank was
higher than the ruling rate of the stock banks, the latter
would take our short paper—just as we would make
short loans to them when we had surplus funds to lend.
If conditions became such that the stock banks were
crowded so that the central bank would notice that the
maturities it was discounting were gradually becoming
longer, the central bank would have to consider whether
or not it was time for it to raise its rate. If the
increased
demand was due to seasonal requirements, the central
bank would maintain its rate and go deeper into
its reserves. If the central bank suspected that over
-expansion or speculation, or gold exports of alarming proportions, were at the bottom of the increased inroads
into
its reserves, it would counter with an increase in its
rate.

113

DIFFERENCE BETWEEN OLD AND NEW SYSTEMS IN THE
UNITED STATES.
In the United States our •old State banking systems
did not provide for any central organization to protect
the banks' gold obligations, nor did .they furnish the
machinery by which, in case of need, banks could convert their commercial assets into cash or credit balances.
The National Bank Act, therefore, required every national bank to maintain against its deposits a certain percentage of actual lawful money reserve, which it was considered should constitute its -contribution to the general
gold protection of the nation; in addition, credit bank
balances in Reserve and Central Reserve Cities were to
provide a certain liquitlity in case of emergencies. The
vicious shortcomings of this old method are well known
to everybody here, and need not be elaborated.
The Federal Reserve Act brought about a most radical
change. It created a system of twelve central banks
which, co-operating with one another, were from then on
to exercise two important functions in relation to their
member banks; first, to provide a Sufficient gold cover
for the country's gold obligations; and, second, to pre.vide
the machinery for turning, whenever desired, the member
banks' commercial assets into available credit balances,
or cash.
The first function relieved the member banks of the
necessity of keeping in their vaults large amounts of gold
for the general protection of the country; the second rendered unnecessary the so-called reserve balances with
correspondents in Reserve and Central Reserve Cities.
The safe and effectual transfer of these burdens to the
Federal Reserve Banks must be predicted, however,
upon a sufficient mobilization and concentration of
gold
in the hands of the Federal Reserve Banks,.and, furthermore, upon the existence of a large volume of
standardized commercial and banking paper, easily rediscountab
le
without red tape with the Federal Reserve Banks. This
is where the Federal Reserve Act stopped half way.
It
did not say to the member banks, "Maintain with the
Federal Reserve Bank a minimum balance sufficient for
the general safety of the country, and whatever cash you
keep in excess of that in your own vaults—be that
gold
or silver or Federal Reserve notes—is your own
concern.
But bear in mind that the larger the gold fund produced
by the combined contributions from your own vaults, the
stronger will be the protection to you and the entire
country." The law continued, instead, the anomaly of
requiring member banks to lock up in their vaults hundreds of millions of dollars, thus preventing them by legal
enactment from giving additional strength to their own
protective system, even if they should want to do so. It
further created the anomalous situation that, while a
balance with a Federal Reserve Bank could be considered
as reserve, the Federal Reserve note could not be so
counted, despite the fact that It is a prior lien against
the assets of the bank and is the obligation of the United
States, while the balance is not.
This inconsistency—to a certain extent at least—has
been cured; Congress having passed, upon the recommendation of the Board, a most important amendment
authorizing the Board to permit member banks to
keep
any portion of their required vault reserve as balances
with their Federal Reserve Banks. In passing this
amendment, Congress has opened the path for great
strides in advance, and it remains to be seen now,
how
far the bankers of the United States will be able to seize
this opportunity of doubling the strength of their Federal
Reserve Banks.
There has been a great deal of grumbling, particularly
on the part of the country banks, to the effect that
their
reserve requirements are too heavy, and they have
sometimes suggested that they be permitted to continue
to
count as reserve certain balances kept with their correspondent banks. If member banks' reserve requirement
s

BANKERS' CON VENTION.

114

should be found unnecessarily heavy, let us reduce them
outright; but do not let us continue the confusion of
counting as reserve what—by plain reasoning—should not
be called or treated as a reserve. Let us, in our plans
for the future, try to look at the problem as a simple
question of keeping a sufficient balance with the Federal
Reserve Bank, and when that is maintained, leave it to
the member bank to keep liquid and strong in its own
way. Do not let us apply the term reserve to a balance
with another member bank, which may be invested in
securities or loaned on the stock exchange; nor let us
count as reserve checks in process of collection, and yet,
at the same time, treat Federal Reserve notes as an asset
that cannot be counted as a banking reserve.

CAN WE MEET POST-BELLUSI DEMANDS.
In dealing with the problem of adequate reserves, we
must first and always consider the question of whether
or not our Federal Reserve Banks are sufficiently strong
for the protection of the country or whether they are
stronger than necessary. Whenever the latter question
can be answered in the affirmative, then only will we be
justified in considering the advisability of reducing the
member banks' reserve requirements.
What is the Federal Reserve System's lending power
today? If we set aside a gold reserve of only 40 per cent.
—which may do in times of stress, but is not a proper
and sufficient basis in normal times—we find that we
have a free gold reserve of about $206,000,000* or, if we
include the gold now held in cold storage by the Federal
Reserve Agents, about $380,000,000. This means that, by
additional rediscount operations, or purchases in the open
market, for home requirements or for export, we are able
to stand a loss of gold of from two to three hundred
million dollars. $200,000,000 is a very large amount, but
when we realize that the Nation's gold holding in one
year has increased by about $500,000,000, it is well for
us to consider whether or not we shall be able to hold
this gold at the end of the war. It is impossible to predict what will then be our economic and financial situation. Perhaps we may find ourselves in an over-expanded
or generally unsatisfactory condition, and we may have
to face a readjustment in which all our banking strength
may be required. On the other hand, things may go well
with us, but in the rest of the world there may be a
great deal of financial distress.
Present lending power of the Federal Reserve Banks (September
1, 1916).
Net deposits (Govt. & bank deposits)
$500,008,000
less float
175,003,000
35 per cent. thereof
20,890,000
Note liability
8,356,000
40 per cent. thereof
.Total required reserve against' deposit and
$183,359,000
note liabilities
365,376,000
Total cash reserve
24,084,000 389,460,000
of E. R. notes on hand
Cash equivalent
Additional lending power of F. R. banks if
' loans are taken in lawful money
Additional lending power if loans are taken
In F. It. notes

$206,101,000
$515,252,500

In that case (and it may be the more likely of the two)
we shall have almost boundless opportunities, but serious
obligations as well. Foreign loans In the old and the
new world may draw away our capital at interest rates
far in excess of our own. Our exporters will have to
meet :the keen competition of other nations, and even
though at first there will probably be a strong demand
for certain of our raw materials, the purchasing power
of many a country will be found materially reduced.
These are conditions which, in the long run, may be
the cause of heavy gold exports from the United States
and which, if we remain unprepared, may seriously check

our progress. If, on the other hand, we forearm, we may
grasp the opportunity of taking our place as the strongest of the world's bankers and furnish our industries
with the basis for a solid expansion.
AMOUNT OF FREE GOLD MOBILIZED RIDICULOUSLY SMALL.
Does it not appear ridiculous that a country owning
over two billions and a half of gold should not be able
to mobilize a larger free gold reserve than two or three
hundred millions of dollars, particularly when it is apparent that its future'financial and economic growth will
depend upon the extent of the "preparedness" that it
can provide in this respect?
During the critical period following the outbreak of
the war in 1014, there were issued $386,000,000 of currency under the so-called Aldrich-Vreeland Act. Has it
occurred to you that if a similar amount were needed
under the Federal Reserve Act it would absorb a gold
reserve, on a 40 per cent. basis, of $154,000,000? But
financial history has shown that each crisis develops
larger demands than its predecessor, and, with cur constantly growing pyramid of deposits and loans, and with
the gigantic scale upon which financial transactions are
now conducted, it is our duty to be prepared for evee
larger demands. The fact that we are strongly forearmed, far beyond a limit expected to be actually reached,
will be the only means of restraining these demands to
safe,and reasonable bounds. We ought to be able, therefore, to lose $300,000,000 to $500,000,000 and still have
$200,000,000 or $300,000,000 of free gold to serve as a
basis for emergency operations.
I cannot urge you too strongly, therefore, to co-operate to the utmost of your abilities in keeping your balances with the Federal Reserve Banks high, and your
vault money down to the minimum that your own till
requirements will safely and conveniently permit. It is
obvious that, in strengthening the Federal Reserve
Banks, you are strengthening yourselves.
If a country bank with $25,000 in capital and $150,000
in deposits keeps in its vaults $5,000 or $10,000 of gold,
does it expect that, in case of a national emergency, it
could protect itself with that amount of legal tender in
the event the Federal Reserve Banks stopped paying in
gold or stopped rediscounting? If a country bank's
depositors want cash, they will be perfectly satisfied to
take Federal Reserve notes. But the power to furnish
these notes, or credit, is limited by the amount of gold
held by the Federal Reserve Banks. While the $5,000
gold in vault of the member bank will not, therefore, protect it, the specie and legal tender notes held by all of
them collectively (about $770,000,000) can be made to
form- the strongest possible bulwark of protection for all
if deposited in the Federal Reserve Banks.
But you may ask me how is it that in Europe central
banks control these vast amounts of gold while the
deposit balances maintained by the stock banks are comparatively small, and why then Should it be necessary
for the American member banks to keep such large
deposit balances? This is, again, because we have
stopped half way. The Bank of England issues notes
only against gold. The other leading central banks of
Europe issue notes against gold (in certain countries gold
and silver) and commercial paper, There may be 100
per cent. gold, but there may not be less than a prescribed
minimum gold reserve. But they do not provide thqt
notes may not be issued against gold without a certain reserve of commercial paper. That theory—which makes
all Europe laugh at us—is, however, the one underlying
the Federal Reserve Act. The Board urged Congress
to remeay the law in this respect. The Senate responded
favorably by passing a bill on these lines, but, unfortunately, it was lost in conference.

BANKING SECTION.
EUROPE'S SUCCESSFUL EXPERIENCE
ILY CONDEMNED BY

NOT TO
US.

BE ARBITRAR-

It is hard to comprehend why, if this principle has
been universally and successfully adopted by the leading
central banks, and has been the root of their surprising
strength during the last two years of terrific strain, it
should be arbitrarily condemned or disregarded by us.
Let us examine the statements of some of these central
banks as they appeared before th4 war:
Metallic Reserves of the Principal Central Banks ol Europe* at the
end of the calendar year 1913, and the percentage of their demand
liabilities which were represented by notes in circulation and deposits.
METALLIC
RESERVES.
DEMAND LIABILITIES.
Notes in
Public
Private
Total
Millions Circulation. Deposits. Deposits. Deposits.
of
Mill Per Mill Per Mill Per Mill Per
Dollars. doll, cent, doll, cent, doll. cent. doll. cent.
Bank of France
800 1165 85
03
5 142 10 205 15
Reichsbank
344
189 23
617 77
• • ••
Russian State Bank. 818
857 57 490 33 142 10 032 43
A us tr o-Hungarian
Bank '
38
7
305
506 93
98 18 138 25
Bank of Italy
40
417 75
233
2
1
2
Bank of Netherlands 04
134 99
1
3
1
8
17
20
203 91
Nat. Bank of Belgium 59
61 84
11 10
Swiss National Bank. 37
Banks
Federal Reserve
51
9 485 88 530 67
14
3
September 1, 1916. 365

It is evident from these statistics that the United
States are following a course diametrically opposed to
that of all other central banks. While our central gold
reserve, disregarding capital, is made up 97 per cent.
from deposits and 3 per cent. from note issue, the statement of the Bank of the Netherlands shows that it obtained 99 per cent. of its metal from circulation and 1
per cent. from deposits. This is the most extreme case,
but the table speaks for itself in showing that, with the
exception of Russia, where public deposits (for reasons
which; it would lead too far to explain here) are extraordinarily large, the important European central banks
secure their gold reserve from. circulation to an extent
varying between 75 and 99 per cent.
It .may be worth our while to analyze further what
would be the effect of permitting Federal Reserve Banks
to issue notes in exchange for gold in the manner recommended to Congress by the Federal Reserve Board.
•
EXCHANGE OF FEDERAL RESERVE NOTES FOR GOLD CERTIFICATES WOULD AFFORD PROTECTION.

If we added $500,000,000 to the Federal Reserve Bank's
gold holdings by withdrawing gold certificates from circulation and issued against this gold $500,000,000 of Federal Reserve notes, the exchange in itself would not alter
the volume of the country's total circulation. But our
power of protection would be increased. If, after Such
exchange, member banks rediscounted with
Federal Reserve Banks $300,000,000 of paper and shipped
$300,000,000 of gold to Europe out of the credit
balances thus
secured, the Federal Reserve Banks' balance
sheet would
show against these transactions:
•
a I have not included the Bank of England,
because its organization
does not provide for so-called elastic note issue,
and because, during
the recent critical period, it proved anew its inferiority
in this respect
as compared with modern central banks like the
Banque de France
and the Reichsbank. Owing to the rigidity of the
structure of the
Bank of England, that country could not promptly
meet the first pressure following tile beginning of the war. There was an inelastic
and
Insufficient note issuing power and the consequence was that
a situation developed in which the Government credit had to be
thrown into
the scales to a much larger extent than with any other
nation. The
British Government had to guarantee acceptances, discounts,
and stock
exchange loans to an almost unlimited degree; it had
to issue, in
August, 1914, £37,603,000 of small notes to
provide the needed currency. I believe it is safe to say that the
moratorium and the great
inconveniences and losses inflicted upon England's debtor
nations might
have been avoided if the organization of tile
Bank of England had
been more modern and possessed of greater
elasticity. England's unparalleled power as tile world's creditor nation,
which was brought
Into play with marvelous boldness and ingenuity,
saved the day for
Great Britain and overcame the Bank of England's
organic weakness,
which, with any other nation, might have proved
fatal.

115

Gold, $200,000,000
300,000,000 Rediscount against gold shipped.
$500,000,000

Notes outstanding,
$500,000,000

$500,000,000

So that the mere exchange would have enabled us to.
bear a loss of $300,000,000 of gold which otherwise might
have affected seriously our financial situation.• This
argument is based upon the theory that possibly $700,000,000 to $750,000,000 of gold certificates and gold, in
addition to other kinds of currency, are at present carried in the pockets of the people and in business tills
where Federal Reserve notes would serve equally well.
The obligation of the United States, secured by all the
assets of the Federal Reserve Banks and a large cover
of gold, would remain a trusted medium of exchange unless indeed the credit of the United States went to pieces.
Experience has shown that a large and constant volume
of notes remains outstanding at all times and that, during a crisis, the amount rather increases than decreases.
It is certain, therefore, that a very large sum of gold
could be permanently withdrawn from circulation, and
that, as in Europe, the bank note circulation would take
its place. Against this well recognized practice, the hue
and cry of inflation has been raised. It is hard to see
why a process that spells "elasticity" in France, Germany, Holland, Belgium, Austria, Italy, Sweden, Norway,
Russia, Switzerland, and other countries, should spell
"inflation" with us. Elasticity without restraint may lead
to inflation. But elasticity well regulated by rigid supervision and definite requirements of gold cover, elasticity
subject to widest publicity and constant ruthless scrutiny,
may be trusted not to go very far astray.
As I said the other day, if you need police protection,
you must not deny the policeman the right to carry a
modern revolver for fear that he might shoot the wrong
man. If the Federal Reserve Banks and the Board
wanted to run amuck, their present powers are sufficiently large to enable them to do harm. Their ability to do
mischief would hardly be increased by the added power,
but their ability to protect would grow immeasurably.
OPPORTUNITY OF CONSERVING $600,000,000 GOLD IMPORTS
LOST.
Since the Federal Reserve Bank opened, there has
come into the United States from abroad over $600,000,000 gold. This stream of gold should have benefited the
Federal Reserve Banks. They should have impounded
the gold and issued their Federal Reserve notes against
it. As it is, they have lost this unique opportunity of
gaining additional strength; they have had to stand by
idly and let the gold flow into the member banks or go.
into circulation. Let us throw the searchlight on this
bogey that procuring additional gold by note issue is
dangerous, while to obtain it by additional member bank
deposits is safe. This will best be accomplished by
taking our present combined statement and adding $500,000,000 gold obtained by additional deposits, or, as an
alternative, adding $500,000,000 obtained by issuing notes
in exchange for a like amount of gold, and then comparing the results:
ALTERNATIVE "A"
Millions
Millions
of
of
Assets:
dollars.
Liabilities:
dollars.
Cash reserve 365 plus 500 865
Capital
55
Earning assets
182
Government deposits....
51
All other assets
60
Bank deposits 485 plus
500
985
Note liability
14
Other liability
2
1107
Reserve, 35% on 1036... 303
40% on
14...
6

Cash
Free gold.....

1107

369
805
496
1240

purchasing power.
note issuing power.

BANKERS' CONVENTION.

116

ALTERNATIVE "B"
Liabilities:
In case law permitted issue of
F. R. notes against gold or
paper, or both, as proposed by
Federal Reserve Board.
Millions
Millions
of
of
dollars.
dollars.
55
Capital
Cash reserve 365 plus 500. 865
51
Government deposits....
182
Earning assets
485
Bank deposits
60
All other assets.
Note liability 14 plus
514
500
2
Other liability
Assets:

1107
Reserve, 35% on
40% on

1107

536... 188
514... 200

Cash

394
865
471 purchasing power.
1178 note issuing power.

"INFLATION" ARGUMENTS ANSWERED
increase in
. It follows from this illustration that the
to Inflate" is smaller if the added power is ob"
power.
tained by note issue than by deposits. Unwillingness to
grant an increase of power cannot be accepted, therefore,
as the motive of a Congress which encouraged increase
of power by authorizing larger member bank balances.
There. must be, therefore, another reason. Our, critics
say: "The theory of the Federal Reserve Act was to
Issue Federal Reserve notes which were to be redeemed
at once when the underlying commercial transaction has
been completed, and that, by making Federal Reserve
notes reserve money, or by issuing them in exchange for
gold, the note would not be presented promptly for redemption." But have these critics considered that an
individual note is never elastic, that it is only the aggregate of notes outstanding, the volume of the entire circulation, which fluctuates and is being made elastic? The
degree of this elasticity is controlled by the aggregate of
investments made bi the Federal Reserve Banks. Whenever the Federal Reserve Banks collect their investments
at maturity and do not reinvest, they are paid in their
own notes, or in lawful money. The result in both cases
Is the redemption of their notes. In the latter case the
Federal Reserve notes remain in circulation but the lawful money takes the place of the maturing paper as cover
for the Federal Reserve notes and reduces the volume of
outstanding circulation to its level before the Federal
Reserve Bank made its investment. As long as the
Federal Reserve notes remain outstanding an equivalent
of lawful money is withdrawn from circulation.*
Let us take an extreme case to make our point clear:.
If we suppose that we had issued two billion dollars of
Federal Reserve notes against gold and then, in addition,
issued two hundred million dollars of Federal Reserve
notes against commercial paper, there would be two billion, two hundred million dollars of Federal Reserve
notes outstanding, against which there would be about
90 per cent. of gold cover and 10 per cent. of paper. If
the makers of the two hundred millions of commercial
• Some of our critics strenuously object to the comparatively small
accumulation of gold in the hands of the Federal Reserve Agents as
brought about under present circuitous and very cumbersome methods
of partially accomplishing the results sought by the proposed amendment. It appears difficult to make these writers see that an exchange
par for par of a $10 Federal Reserve note for a $10 gold certificate is
not increase of circulation, but a substitution of one note for the
other. As long as the gold remains with the Federal Reserve Agent,
the Federal Reserve note is, in effect, a gold certificate; with this
difference only, that its holder has agreed in advance, in case the
Federal Reserve Banks should be called upon to rediscount heavily, to
change his gold secured Federal Reserve note into one secured by commercial paper with a gold reserve of not less than 40%. Instead of
remaining limited by the free gold secured from member bank balances,
the Federal Reserve Banks are trying to build up a further gold reserve
from noteholders willing to trust Uncle Sam, whether he gives them
his promise to pay in the form of a gold certificate, silver certificate,
greenback, or Federal Reserve note. It is needless to add that, in
thus strengthening themselves the Federal Reserve Banks are acting well
within the powers given them by the Act.

paper paid it at maturity with the two hundred millions
of Pederal Beierve notes the status quo ante would
clearly be re-established. But it would be just as clearly
re-established if the makers of the two hundred millions
of commercial paper paid it in gold. Then we should
have two billion, two hundred million of Federal Reserve
notes outstanding, against which the bank would hold
two billion, two hundred millions of gold. It would simply mean that two hundred millions of gold formerly in
circulation, and possibly much worn by use, had been replaced by an equal amount of new and clean Federal
Reserve notes. In other words, the two hundred millions are redeemed in both cases, no matter whether the
specific Federal Reserve note is resting in a vault in Oshkosh or is being carried around in the pocket of a farmer
in Texas. Whenever the Federal Reserve Banks collect
their paper their notes are in effect redeemed—no matter
where or how they are being held. But, under the proposed amendment, instead of having a circulation of
which, let us say, 90 per cent. is entirely secured by gold
and 10 per cent. is secured by commercial paper with a
40 per cent. gold reserve, we would have all such outstanding notes secured by about 90 per cent. of gold and
10 per cent, of paper; and if the method I am describing
prevailed, the Federal Reserve Banks could keep their
normal reserves much higher than under the present system. If this method were adopted, I for one should be
in favor of beginning to tax Federal Reserve notes at a
higher point than at present—let us say whenever the
reserve went below GO per cent. Instead of 40 per cent.
This•would probably satisfy the fearful minds which apprehendAhat the increased power might be abused, but it
would not prevent the country from securing the greater
protective power to which it is entitled.
It will be said that the gold that actually circulated in
France and Germany at the beginning of the war proved
a most valuable second line of emergency reserve. That
Is true and a similar reserve would undoubtedly remain
with us, because even if the full program here outlined
were realized, we should succeed in concentrating a certain portion only of all our gold. But it has been estimated that the central banks of France and Germany
controlled before 1914 about two to three times as much
gold as was drawn into their vaults from circulation during the war, while we have only one-fifth of our gold under control and four times that much, that is, two billions, scattered in circulation and in the stock banks.
Moreover, there never was before in the world a period
of inflation such as in now in process in Europe, and
the adjustment after the war will create the keenest competition for the yellow metal.
Our critics say that, by concentrating the gold in the
Federal Reserve Banks, we shall make them the target
for gold withdrawals. But they will be that target anyhow.
The only question is will they be able to resist without
being forced to take premature and unnecessarily drastic
measures of defence. Let us suppose that our member
banks' excess cash reserves have been wiped out, either
by gold export or by expansion of the loan and deposit
structure; let us suppose that our discount and investment rates are fairly low as compared with those prevailing in Europe; let us suppose that our shipments to foreign countries will no longer exceed our imports. Then,
as money flows where it can safely earn the highest returns, our bankers will probably have to finance foreign
countries both in government loans and individual transactions. Suppose then that Mr. IvanotT, in Petrograd,
draws $100,000 at 90 days' sight on an American banker
against a credit granted to him, rediscounts that paper in
New York, and, against this balance, Russia wants gold.
Where will it come from? The member banks have no
more excess reserves; shall we then begin to withdraw it
from circulation and how and against what? The New
York member bank will rediscount $100,000 of bankers'

BANKING SECTION.
acceptances or commercial paper with its Federal Reserve Bank and ask for gold. Ultimately, therefore, the
demand for gold will be made upon the Federal Reserve
Banks. We are faced with the simple question: will we
be strong enough to share our plenty, during the coming
period of stress, with other nations and be the world's
banker, or will we be so weak that, when these demands
come, we must stop them at once by raising our discount
rates high enough to retain our gold at home? Keep all
the gold in your vaults, gentlemen, where it is useless for
yourselves and deprived of the additional force that it
may gain in the hands of the Federal Reserve Banks;
keep every cash-till in hotels, railroad stations, drygoods
stores, and what not, filled with gold certificates, and
you will rob the country of its legitimate opportunity of
growth, of helping itself, and of helping the world. Our
foreign competitors will proclaim that only a country
willing to part freely with its gold may safely be accepted as a world's banker, and they will point to the fact
that, in past critical periods, our banks stopped paying
In gold. It is our duty to give to the world an overwhelming evidence of our ability and determination in
the future to maintain our gold obligations under any
and all circumstances.
ACCUMULATION OF GOLD NECESSARY FOR ULTIMATE DIMINUTION OF BOND-SECURED CURRENCY.
The vast accumulation of gold in the hands of the Federal Reserve Banks which I am urging, is of great moment in its bearing upon the future of the national bank
currency. The objects contemplated in this respect by the
Federal Reserve Act are highly to be commended; but
carrying. this scheme into effect is subject to too many
delays. More comprehensive action from the beginning
would have brought about better results. The ultimate
aim which we must have in mind is the conversion of a
large portion of the 2 per cent. Government bonds, now
securing circulation, into new 3 per cent, bonds, a sub. stantial portion of which will gradually be absorbed by
the people. This would have the consequence of reducing
the amount of national bank circulation, so that, at a
given point, whatever 2 per cent. bonds the Federal Reserve Banks acquired would ultimately be carried by
Federal Reserve note circulation and this, in turn, would
be of material assistance to the Federal Reserve Banks
in earning their dividends. As the absorption of the 3
per cent. bonds by the public proceeded, and as the growing acceptance market offered a wider field of investment
for the Federal Reserve Banks, Federal Reserve notes
would take the place of Federal -Reserve Banl notes,
bankers' acceptances and commercial paper would
take
the place of Government bonds, and an elastic and live
currency would replace the present Inelastic
Government
bond secured currency.
In order to carry out this process, however, it
will be
necessary normally to maintain against Federal
Reserve
notes at least the 40 per cent, reserve required
by law, as
against the 5 per cent, of reserve now required
against
national bank notes. And this, again, is an added
reason
for facilitating the concentration of gold in the Federal
Reserve Banks, so that they may be strong enough to
sustain this large volume of circulation on the higher
reserve basis.
The larger powers which we should enjoy would not,
therefore, be employed to inflate circulation. On the
contrary, as a net result, it would be used for the purpose
of building up a circulation covered by a far
stronger
gold reserve than that of the national bank notes.
Until the volume of the latter has been materially
reduced, and until Federal Reserve notes may be
accepted
as reserve money by the member banks, the lending
power of the Federal Reserve Banks will remain hampered.

117

FEDERAL RESERVE BANKS HAVE NOT INCREASED VOLUME
OF CIRCULATION.
In spite of all that has been said by superficial critics
about inflation caused by the issue of Federal Reserve
notes, the Federal Reserve Banks combined, as a net
result, have added to the circulation of the country no
more than $14,000,000 of Federal Reserve notes.* All the
rest has in effect been redeemed by depositing gold. In
Federal Reserve Bank notes, as a net result, there have
been placed in circulation less than $2,000,000, while $55,000,000 Government bonds have been purchased from
member banks and national bank circulation has been
reduced by about $50,000,000. We certainly have not inflated there!
It has been said by some critics that Federal Reserve
Banks should not, under any circumstances, issue Federal
Reserve Bank notes. There is no doubt that the national
bank note circulation is an objectionable feature in our
monetary system, but the fact remains that the country
is accustomed and adjusted to a certain volume of currency, and we could not eliminate about $700,000,000 of
it without putting something in its stead. It is most important that the process of filling demands for currency
by issuing national bank notes should stop, and that, by
a gradual reduction of the outstanding volume, a vacuum
be created for Federal Reserve note circulation. But,
pending this process of gradual substitution—that is, the
process of purchasing Government bonds from member
banks, conversion into 3 per cent. bonds and one-year
notes, sale to the public of 3 per cent. bonds, and reinvestment of the proceeds in commercial or banking paper
—there will be an interregnum when Federal Reserve
Bank notes must be issued temporarily, until there is
available a sufficient amount of paper to take the place
of Government bonds, a sufficient absorption of these
bonds by the public, and a sufficient strength in gold reserves.
Let us bear in mind that Federal Reserve Bank circulation is not added circulation, but a partial substitution
of new notes for redeemed old national bank circulation,
and that, when issued by Federal Reserve Banks, it will
have a certain degree of elasticity, because it will be issued from time to time only in harmony with the general
policy of the Federal Reserve Banks and not kept out
perpetually for the sake of the profit involved, as now
done by the national banks.
How THE PRESENT LAW DISSIPATES FEDERAL RESERVE
BANKS' GOLD HOLDINGS.
The Federal Reserve Banks have ,made investments
aggregating at present about $180,000,000, and have outstanding a net circulation of about $16,000,000. That
means that for $164,000,000 of investments they have
paid gold and thereby have reduced their reserve power
to that extent.
If they could have paid in Federal Reserve notes instead of gold, as they should have been permitted to do,
they would have wasted only 40 per cent, of this amount
and would have retained the balance, this is, about 100
millions, as a potential reserve for additional note issue.
As stated before, it does not necessarily follow that Federal Reserve Banks would have made larger investments
at this time; it is not at all likely that they would have
done so. But emphasis must be laid upon the resulting
reduction of their power to assist the country in an
emergency.
The argument is used that if Federal Reserve notes
had been paid out and could have been counted
as reserve-money by the stock banks, these notes would
have
* If we bear in mind that on September 1, 1916, the
Federal Reserve
Banks had on hand a total of about $24,000,000 Federal
Reserve notes,
we must admit that, as a net result of their issue
activities, the volume
Of the country's circulation has not expanded but
has been actually
contracted to the extent of over $6,000,000.

118

BANKERS' CONVENTION.

gone into the vaults of the member banks as reserve
money, and caused.a further expansion of loans. But we
must not forget that the same result has followed by the
Federal Reserve Banks paying out gold. As far as the
member banks are concerned, the effect is the same
whether they receive $164,000,000 in gold or in Federal
Reserve notes which may be counted as gold. But the
difference is, as we have stated, that, under the present
system, the lending power of the Federal Reserve System is being impaired too fast.
Federal Reserve notes "shall be obligations of the
United States and shall be receivable by all national and
member banks and the Federal Reserve Banks and for all
taxes, customs and public dues. They shall be redeemed
in gold at the Treasury," etc.
Did we not stop half-way when we provided that banks
are thus to receive Federal Reserve notes in payment of
debts between each other, and from their depositors, but
cannot count them as reserve for the purpose of discharging their deposit •liabilities? As a consequence,
banks when settling with each other through the clearing
do not accept Federal Reserve notes but must settle with
lawful reserve,money—that is, substantially in gold. If,
however, a bank settled directly with another, bank it •
could pay in Federal Reserve notes and the payee bank
could then send the Federal Reserve notes to its Federal
Reserve Bank, create a balance and then count that as
reserve.
It IS fortunate that the new amendment will permit
member banks to carry any part of their required vault
reserve as a balance with the Federal Reserve Bank and
to count it as reserve. It is hoped that this will cause
member banks promptly to adopt the habit of settling
their balances with each other by transfer of credit
through their Federal Reserve Banks, thereby releasing
gold needlessly tied up in clearing operations and in their
vaults and remedying, to a certain extent at least, these

puzzled by the question, what will be the coming standard of differentiation between Central Reserve Cities,
Reserve Cities and country bank places when, after
November 16, 1917, balances with correspondent banks
will no longer count as reserve. I cannot undertake to
discuss that problem today, but I think it is timely to
point to this phase and invite you to give it your most
careful consideration. The time is not distant when
we shall have to deal with this conundrum and we shall
welcome—indeed, we shall need—your very best thoughts
in the matter.
The Federal Reserve System is tile beginning of an imposing structure to be erected upon a broad foundation.
It will prove a costly edifice unless it is developed to its
full growth along these broad lines. Member banks and
the country at large have a very vital and obvious interest in this, and they may well insist that there be no
stopping half-way or haphazard additions or little patch
work here and there.
The banks and the country are now entitled to enjoy,
and will soon require, the strongest possible system., and
the further it progresses, the more the concentration of
gold in the Federal Reserve Banks proceeds, the further
the discount market develops and the further grows the
habit of banks, large and small, to invest in bankers' and
trade acceptances, the less will it be necessary for them
to keep unduly large sums locked up in their vaults, and
the easjer will it be for Federal Reserve Banks to return a portion of their paid-in capital. The roads to reduced reserve and capital requirements lie in these direc-

tions.
If member banks are to rely for their protection primarily upon their ability to create balances with their
Federal Reserve Banks, they must be certain that they
have in their possession an easy means of approach, a
reliable key that will open for them the door leading to
the Federal Reserve Banks' vaults.
AMENDMENTS TO THE LAW OF GREAT IMPORTANCE.
anomalous conditions.
The amendments just passed by Congress are of great
MUST RID THE COUNTRY OF CONFUSING MULTIPLICITY OF
importance in this respect. Domestic acceptances will
CURRENCY.
prove not only an efficient means of directing idle funds
to districts where they may be profitably employed,
In dealing with this question of reserves and note isthus working towards greater equalization of interest
it is proper and necessary that we proceed step by
sue,
rates—but the increased supply of eligible banking paper
step. Splendid progress has been made in these last two
will render much more easily accessible the credit faciliyears, and we realize, of course, that the tracks must be
shifted many a time before we can reach our final goal. ties of the Federal Reserve Banks.
I do not think that I should dwell here on what I said
But we must be clear about this ultimate aim and we
to the New York State banking institutions at Atlantic
must recognize the absolute necessity of taking certain
City a few months ago. Let me only state again that.I
consecutive steps before monetary and banking reform
consider it the duty and, at the same time, the best selfwill be complete.
interest of strong State banks and trust companies to
Ultimately We must iid our country of the confusing
multiplicity of currency with which we are now afflicted, join the system and contribute their share to the gold reand the Treasury will have to stop issuing small denomi- serve fund that is being accumulated for the protection
and progress of the United States. We have liberalized
nation gold certificates. The circulating currency of the
country ought to be silver certificates in the small de- to the utmost of our ability the conditions under which
these institutions may enter and be members of the 'Sysnominations, and Federal Reserve notes. The best place
will be in the Federal Re- tem. They may join with all their banking power pracfor gold and gold certificates
tically undiminished. It has been tile aim of the Board
serve Banks. The national bank currency ought to be
to bring about a basis of parity between State banks and
withdrawn, and the greenbacks ought to
systematically
national banks—not by needlessly tying the hands of the
be gradually turned into gold certificates as the missing
State institutions, but rather by unshackling tile hands'
time to time is produced by the excess
gold cover from
of the national banks where they are needlessly tied.
profits to be received from the Federal Reserve Banks
The amendment recommended by the Board, most of
rapid process that the future may
or by some more
which have now become law, such as power by ownership
evolve. While this process is taking its course, I think
Ave are fully justified in permitting the Federal Reserve of certain bank stocks to operate in foreign countries, to
accept drafts for domeStic transactions, and for certain
Banks to count greenbacks as part of their metallic reclasses of finance drafts for the promotion of our foreign
serve. It is freely admitted that this is not absolutely
banking, to make loans on mortgages, etc., are evidences
good banking theory. But, with the $153,000,000 gold
of the Board's policy in this respect. In the same spirit,
behind these notes and the power given to the United
the Board hopes that national banks will be granted the
States to provide the additional gold cover by a sale of
power to operate branches in cities where State laws do
Government bonds, we may be warranted i ntemporizing
not prohibit State banking institutions from operating
and not making an over-rigid discrimination.
One cannot deal with the future of our Federal Re- similar branches. Some banks have raised a cry of
alarm and have severely arraigned us for appearing to
serve System and our reserve problem without being

BANKING SECTION.
foster a branch banking monopoly apt to crowd out the
.
small bank. But where State banks and trust companies
enjoy the right to operate branches (in New York City
alone there are over 100 branches of such institutions)
small banks are already subject to the competition of
these State bank and trust company branches. National
bank branches would, therefore, hardly add to the alleged
discomfort of the small banks, while it appears unfair to
deny this right to national banks where their competitors,
the State institutions, freely exercise it.
CANADIAN OR EUROPEAN BRANCH BANK

SYSTEM

INADVIS-

ABLE HERE.

I do not believe that we should adopt the Canadian or
European branch banking system. It contains elements
of excessive centralization that, with the American spirit
of aggressive fight for supremacy and control, would lead
to unsound and undesirable conditions. But, restricted
to city lines—where State laws permit—branch banking
would not justify an outburst of hysterical fear of the
octopus. It would rather give an opportunity to the
smaller and weakdr banks to combine. It would thus
enable them more effectively to meet the competition of
their more powerful neighbors, to make better profits and
to give better facilities to the customers they serve.
DUTY OF

TO
SYSTEM.

STATE INSTITUTIONS

JOIN FEDERAL RESERVE

Self-respect and public opinion will not permit the
State institutions long to remain .in the position of shirking their duty towards the nation and the State banks,
at the expense of the national banks, and to the detriment of the entire country, cannot afford to refuse to
bear their fair share of the burden, nor can they afford
to be deprived of their fair share of the advantages.
I do not deny that, for some State institutions, particularly those that have private bankers on their boards,
it may prove a hardship to lose some valuable directors,
and that free balances with Federal Reserve Banks mean
some loss of interest for most of these potential State
member banks. But if that is the price to be paid for a
system which is to insure the banks and the industries
of the country against the horrors of some of the panics
of the past and which will give us the possibility of
future growth in relative safety under a modern system
of mutual protection—then these sacrifices ought to be
borne cheerfully by everybody as, indeed, being none too
•
onerous.
SUGGESTIONS

FOR

ELIMINATION

NECESSARY ' RESTRICTIONS

OF HARMFUL
IN

OPERATIONS

AND

UN-

NATIONAL BANKS.

While thus I do not hesitate to confess freely that
there are certain necessary inconveniences that have to
be borne for the general good, I hold with equal emphasis
that it is our duty to remove the unnecessary shackles
that hamper and inconvenience the banks of our country
more than those of any other nation in the world. My
vision of the future would be very unsatisfactory indeed
if it did not permit me to hope for the reversing of many
an antiquated ruling, court decision, or law, which needs
overhauling. Indeed, I see herein one of the most fruitful fields for the study and activity of the Federal Reserve Board.
It would lead too far at this time to do more than barely epitomize these thoughts. If banking in Europe is being carried on largely by cash advances on deposit account, why should it be unlawful with us to grant such
overdrafts to business concerns? Do ybu realize that all
rulings in this respect have been based mainly upon a
court decision rendered in 1828, involving a construction
of the powers of a bank operating under a charter granted
by Congress in 1812, about 50 years prior to the passage
of the National Bank Act?

119

Let me ask you further: Why should it be unlawful
to charge interest in excess of 6 per cent.? The present
discount rate of the Bank of England is 6 per cent. and
large corporations and firms in that country no doubt
pay more than 6 per cent. for their present credit facilities without the stigma of usury attaching to the British
banks charging the higher rates. When money generally
is worth 3 per cent. a charge of 5 per cent. may be excessive. but when money • is generally worth 6 per cent.,
;
a charge- of 7 per cent, should not be considered usury. I
strongly believe in the protection of the public against
extortionate rates, and to stabilize rates as far as practicable on a moderate basis is one of the chief aims and
objects of the Federal Reserve Act. But we should have
reasonable laws, laws recognizing the fluctuating value
of money, like that of any other commodity, and recognizing that usury exists only where there is a question of
extortion—where the borrower finds himself in a helpless
condition. But where strong and solvent concerns, of
their own free will, contract for loans, there can be no
question of usury. We should modernize our laws in
this respect.
Why should national banks be prevented from taking
commissions? In Europe the commission account of
banks is the one to which they point with the greatest
pride. Any bank may execute orders for the investment
of funds. I cannot see why the investment of depositors'
funds should not be a proper function of banks.
We have discussed the structure of the Federal Reserve System—the foundation, and the building we expect
to see erected upon it. Now the final question,—who
shall be the master of the house? Shall it be business
or politics or a neutral non-business and non-partisan,
judicial administration? I have no doubt that the country wants the latter, and I am delighted to say that the
character of the Reserve Board and of the administration
of the Reserve Banks is of that nature today. But if we
want to be certain of the future, I believe that nothing
should be left undone that will insure the greatest independence of the Board and will thus make tile positions
of members of the Board such that, in coming generations, these offices will be coveted by men of worth like
seats on the Supreme Bench of the United States. The
safety of the country and the confidence that the Federal
Reserve System will enjoy ard dependent upon the character and the ability of the men charged with its administration. If a safe future is to be assured to the System,
the Act must be perfected where it stopped half-way in
this respect. Of course, there must be at all times intimate relations between the Treasury and the Federal
Reserve Board and co-operation in broad questions of
national policy, but there must be only one banking and
discount policy and not the possibility of•two. The law
should provide that the administration of the Treasury
funds within the Federal Reserve System should be subject to some control by the Board, and emergency relief
operations ought to be carried out through the Federal
Reserve Banks and not directly through deposits with
member banks by the Treasury.
ADJUSTMENT OF RELATIONS BETWEEN RESERVE BOARD AND
THE TREASURY NECESSARY.

The business and banking community should feel certain that the adjustment between Treasury and member banks will take place at all times in a natural, wellregulated manner, in keeping with the general banking
policy adopted by the Federal Reserve Board and the
Federal Reserve Banks. If at certain periods large payments are to be made by the member banks to the Treasury, there should be an easy adjustment by having the
money withdrawn operate to strengthen the Federal Reserve System, leaving it to tile Board and the Federal
Reserve Banks, by rediscounting short paper, to return
to the member banks sufficient funds to re-establish the

120

BANKERS' CONVENTION.

equilibrium. But this important function of balancing justing this problem. The principle, as I have said, is
sound, and it is the duty of every one of us to devote all
the scales ought to be the constant care of the Board, unour energy and our best thoughts towards bringing it to,
der a consistent plan of operation, and not the domain
Its fullest fruition. Let us be frank in our criticism,
of the changing and arbitrary policies and views of each
but at the same time fair. We are never more severe
succeeding Secretary of the Treasury. That was the
original plan of the Glass bill; unfortunately it was than when we criticize our own children—that is because
we love them best and entertain for them the highest
changed in conference. It is much to be hoped that a
ambitions. That is why I have been frank today—bereturn may • be made very soon in the direction of the
original project so that the danger be removed that at cause I do care for this system, because I do care for this
country and want it to succeed and take its proper place
some future time Federal Reserve Banks or member
banks may ask and secure Treasury deposits without as a financial and industrial power amongst nations.
That is why I think that the bankers of the country
consultation with, and even in opposition to, the wishes
whose own success or failure is so closely linked to the
and policy of the Federal Reserve Board.
future development of the Federal Reserve System
In a similar way, the Board's authority and efficiency
ought to be strengthened by providing that examinations should now set their minds upon its problems in the same
spirit, as friends of the System, as fathers—if you please
and rulings by the Comptroller's office, and the compila—who want to see their child grow and develop, even if
tion of banking statistics should be carried on under the
auspices of the Board. However, the present members it entails some sacrifices upon the parents.
may have been able, by personal effort, to meet the organic defects of the law—the fact remains that as it
PLEA FOR CO-OPERATION BY BANKERS IN BRINGING ABOUT
stands today, it places the Board half way between inGREATER UNSELFISHNESS AND BROADER VISION.
dependence and dependence. It cannot remain long in
The greatest obstacle in the way of the Federal Re' that pOsition. Evolution will carry it either in one direc- serve System's freest and most beneficial development is,
tion or the other. The country will have to decide which
on the one hand, selfishness on the part of some of our
• development it desires and express itself in no uncertain
members, whose vision does not reach beyond their own
voice.
limited sphere, and who are unable to grasp the larger
I need hardly to say that, whatever view I have exquestion of the safety and future of the country. On the
pressed in this address I have given you as my own per- other hand, it is suspicion, prejudice, and half knowledge.
sonal convictions without attempting in any way to speak 'These obstacles will be overcome by public opinion based
for my colleagues. I want to emphasize furthermore that
uptin better education. In this work of national Scope
whatever I have just said concerning relations between
and importance your association can render the greatest
the Treasury Department, the Comptroller's office and
service. It can lead within its membership in developing
the Board must be considered as a strictly impersonal
sound banking practices and good banking ethics; and.
statement, having no relation whatever to present incum- as towards the public, it can lead in the work of teachbents, who are bound by the law as it stands, and ap- ing the gospel of modern and clean banking and help in
plying solely to principles which have an important bearenacting sound practices into sound law.
ing upon the future.
At the time of the opening of the Federal Reserve
Banks, Sir George Paish said to me, "The future of your
FEWER DISTRICTS WOULD
CENTRAL BANK UNWISE, BUT
system will depend upon your ability to get under the
STRENGTHEN THE SYSTEM.
control of the Federal Reserve Banks the scattered gold
of your country." Two years have passed since. We
And now, in closing, let me say again that I am an
have made great headway in many respects, but the orunqualified believer in and enthusiastic supporter of the
ganized control of our gold is still in its incipient stage.
Federal Reserve System. Its fundamental principles are
One reason for this disappointing condition is that the
sound; its benefits to the country have been immense and
will become more aPparent with each succeeding year. State institutions have not done their duty towards the
System; the other is that there has not been enough clear
Though from the point of view of banking technique, one
thinking and too much immature criticism. Congress will
single central bank would have been easier to administer
not give us the necessary relief until there is greater
and, in some respects, might have been more economical
accord in the minds of the banks and our financial
and efficient, I am convinced that • the undisturbed dewriters.
velopment of our financial system is better assured and
Has it occurred to some of our critics that, before asthat danger of business or political control are more cersailing us, it should be their duty to stop to consider that
tain to be avoided by a system of co-ordinated central
there is a difference between reserves of central banks
banks. That the system might possibly be simplified
and made stronger and more efficient by merging some of and member bank reserves, and that a greenback and a
Federal Reserve note are as different as day and night—
the districts, is an opinion held by many, a view which I
the one issued as a perpetual currency to pay 200 milentertained before the organization of the districts, and
lions of the Government's debts and the other issuable
to which I am still wedded.
The Federal Reserve System is an ingenious combina- only against the purchase of self-liquidating paper. expanding and contracting according to the amounts so intion of centralization and decentralization. But decenvested, and secured by a generous minimum reserve of
tralization carried too far defeats its own ends. If you
gold? Let them bear in mind that it was that kind of
try to create 100 independent centers each will be too
weak to act as a point of crystallization, and, as a result, superficial but persistent criticism that stood in the way
they will all depend upon the one that is the strongest of banking reform in years gone by; that made us endure
amongst them. If it is the object of the system to counthe painful experience of 1907 before submitting to the
remedy of more modern methods and that delayed final
teract the preponderance of one district, the other districts must be strong enough to become independent cenaction until, half prepared, we had to meet the storm of
ters of importance, containing a sufficient degree of 1914, subject to disturbances and sufferings which we
diversity of interests, and sufficiently imposing to commight have avoided, and losing opportunities which
mand undoubted prestige and confidence. By merging a
should have been ours.
few, districts into twin districts, greater strength, greater
Some of these critics, sitting in their little chairs at
efficiency, and cheaper operation might be secured, with- their little desks, within their four little walls, with very
out changing or weakening the intimate touch now se- little knowledge and very big words, stake their own
cured by the respective local organizations.
local views against the world's acknowledged experience.
But actual experience will guide us ultimately in ad- They disregard the fact that buildings have grown so

BANKING SECTION.
high and reached such dimensions that fire engines and
water mains-the weapons of protection—must be of the
most powerful and most modern type. Some of them
appear to •think "that the engine that was used, when
father's house burnt down to the ground is good enough
for everybody and that the big new houses won't burn
;
anyhow" others have a fire engine of their own invention, never tried, but better than all the rest; others are
sore because they, themselves, are no longer the fire
chiefs; and some object because they do not wish to pay
their share for adequate protection.
But, gentlemen, let those of us who believe in foresight, experience, and co-operation, stand together and
let us secure the very best possible protection, without
hysteria and extravagance—not as schemers, but as conservative and conscientious men; as cautious captains
alive to our responsibilities and to the storms that must
come.

121

later they might perhaps have made a bid for London's
place as the world's banker."
*

"It was the chance of a century, but New York
could not take it. When London called in its credits
from other countries, any centre could have said to
these countries, We will give you the credit that London
has cut off, and lend you the money to pay London,'
would have stepped straight on to London's financial
throne and set London a very difficult task to regain
it after the war was over. In spite of the large amounts
of gold taken from America to Europe before the war.
the 'United States had still a huge store within its
borders—some estimates of it ranged up to 400 millions
sterling. If the United States had had the courage to
use this mountain of metal and let other countries draw
on it, London would have had more gold than it knew
what to do with, and New York would have had a big
slice of London's business. But America feared to use
its gold and held on to it as tightly as it could, fearful
of internal trouble and a run on its banks if too much
of the metal went abroad."
Since writing the above, two years ago, Mr. Withers
Immediately after the beginning of the war, Hartley. has greatly modified his views. In his latest book, "InWithers wrote, in "The War and Lombard Street,"—
ternational Finance," published a few months ago, he
"It was the chance of a century for New York. Ameri- says
can ambition has long informed the world that the United
"America is now one of the leading powers in interStates, having been the world's granary, is now the
national finance, and on the wise and skilful use of its
world's most progressive manufacturer, and means soon
to be the world's banker. This may happen some day, strength the future prosperity of the civilized world
will, to a great extent, depend."
and might have happened already if American policy
In currency, financial and fiscal matters had been more
Shall we be found wanting? The answer will largely
thrifty. But they have tried their credit system in the
depend upon you, the bankers of the United States; upon
bonds of narrow banking laws and their trade in those
the strength you give to your Federal Reserve System
of a cramping tariff. These bonds they have just begun
to shake off, and if the crisis had happened a few years
and upon your contribution to the moulding of its future.

Committee and Officers' Reports Banking Section.
Annual Report of the General Secretary.
NEW YORK CITY, Sept. 1, 1916.
To the American Bankers' Association:
GIONTLEMIIN: My report as General Secretary of the American
Bankers' Association is respectfully submitted herewith and covers the
period from August 15, 1915, to August 31, 1916. The early date of
our Seattle convention last year compelled us to balance our books as
"of August 14, 1915," so that this fiscal year, while ending on August
31, covers a slightly longer period than heretofore.
Details of the activities of the Association during the past year are
given in the various reports presented by the officers of the Association, Sections, Commissions, Committees and Departments during the
sessions of the Convention. To these activities I shall refer but briefly,
while covering in detail the matters relating particularly to my administration of the affairs in general of the Association, including its
finances, as calred upon so to do.
EXECUTIVE COUNCIL
The growth in membership and increased attendance at conventions
each year serves to give emphasis to the fact that proper administration of the Association's affairs must be had through the medium of
the Executive Council.
The Spring Meeting of the Executive Council was held at Briarcliff
Lodge, Briarcliff Manor, New York, May 8, 9 and 10, 1916. The
attendance was above normal and the few members compelled to absent
themselves had good and sufficient reasons for so doing. The Council
gave consideration to many matters of interest to our vast membership, with a freedom of expression that argues well for the interests
of all concerned and resulted in a harmonious session.
•
Thirty-one members in the one-year class, twenty-four members in
tile two-year class, twenty-seven members in the three-year class and
fourteen members ex-officio will constitute the new Council which organizes after the adjournment of this Convention—a total of ninetysix. Three states have added each a new member of the Council—by
increasing .the necessary membership: Kansas, Minnesota and Oklahoma.
SECTIONS OF THE ASSOCIATION
The various Sections have actively engeged in matters of peculiar
interest to their bank members; much has been accomplished and it
affords me great satisfaction to report entire co-operation between all
the Sections and the Association officials.
On Friday evening, February 25, 1910, the sixth annual dinner of
the Trust Company Section was given at the Waldorf-Astoria in New
York City. Nearly 800 bankers were present and aside from its
record-breaking attendance it was a pronounced success.
The Thrift Campaign and the Centennial of the institution of savings banks in the United States are but two of the important matters
in the hands of the Savings Bank Section this year. . The Thrift Campaign as inaugurated and carried through the past fiscal year has been
one of the important epochs in the history of the Association. The
special committee, appointed by the Savings Bank Section, has been
very active in supporting this movement. Much credit, however, must
be given to Mr. M. W. Harrison, Secretary of the Section, for his
energy, resourcefulness and push. He has been indefatigable in his
efforts to make this the crowning effort of the work of the Savings
Bank Section, which culminates in the Centennial Anniversary and
celebration of the Thrift Campaign in Kansas City.
The Clearing House Section has been specially active in waging a
"NoProtest" check campaign and for the institution of country
clearing houses as well.
The fourteenth annual convention of the American Institute of Banking Section was observed in Cincinnati, Ohio, October 18, 19 and 20.
The Institute has grown in members during tile past year and its
increased activities in matters educational can but promise well for
the future of our banks and bankers. The Bankers Health Commission
is doing excellent work and considerable interest is being taken in the
efforts put forth by the Commission for the maintenance of health
among bank employees.
Again I want to commend the thoroughness of the activities of Mr.
George E. Allen, Educational Director of -the American Institute of
Banking Section. When the Institute was first established, Mr. Allen
set a high mark as the ideal of what should be accomplished by that
organization, along the lines of its educational features. Mr. Allen's
foresightedness, his energy and zeal have brought the support of all of
the banks in the larger cities of the country to the various Chapters,
with the result that the educational department is now what the Institute has been striving for and has realized.
The Secretaries of the various state bankers associations comprise
the Organization of Secretaries Section and during the past year they
have co-operated heartily in matters of local as well as general interest
to our members. Particularly, many of the state associations have
been active in promoting the educational features of the Institute Section and in due course the reward will come from this labor.
Organized at our Seattle convention, the National Bank Section has
earned its spurs. Its Executive Committee. and officials have been
active in the consideration of matters of interest to its Section members and to the Association membership at large. Important phases of
the Federal Reserve Act have been studied and changes recommended.
Conferences have been held in Washington with the Federal Reserve
Board and the Conference of Governors; and important meetings in
other sections of the country have been attended, with most excellent
results. Pending the selection of a Secretary for the National Bank
Section, for five months your General Secretary acted in that capacity,
until Mr. Jerome Thralls, former cashier of the Federal Reserve Bank
of Kansas City, was chosen as joint Secretary of this Section and of
the Clearing House Section; and in his selection these two Sections
have been most fortunate and are to be congratulated.

To Secretaries Babcock, Harrison, Thralls and Bartlett, as well as to
Presidents Bean and McFadden and Educational Director Allen, I extend my appreciation and thanks for their assistance and co-operation
during the year and I congratulate them upon their individual successes.
STATE BANK SECTION
Due provision having been made in our Constitution for a State Bank
Section, steps are being taken for the organization of such a Section
during convention week and a call for a meeting has been issued, signed
by prominent bankers in all parts of the country. The outcome of
this meeting will be referred to the Executive Council for approval,
and as I am a profound believer,in Sections, and the efficiency of the
work of our Sections now organized, I sincerely hope a State Bank
Section will be erganized.
JOURNAL-BULLETIN
With an increase in circulation of almost 4000 copies a month over
a year ago, the JOURNAL at this time issues over 34,000 copies each
month. More extensive use than ever before of the matter contained
in its columns is being made by the financial and daily press as well
as other mediums. Its importance seems to be established and Editor
Welton is to be congratulated, and the Association as well, upon the
success of our publication. Commendatory letters continue to come
in regarding the JOURNAL and we are specially glad to have the expressions of commendation of our members, and letters of protest as
well, although the latter are few in number. Through these communications the pulse of our membership is taken and detailed information frequently furnished on matters of interest to the particular
member. There are still evidences, however, that some of our members do not avail themselves of the columns of the JOURNAL as a.
pplletin of information of Association affairs, and to such I earnestly
recommend a careful perusal of each issue as received.
LEGAL DEPARTMENT
Of the many branches of Association work, none is of greater importanca than that of the Legal Department, so ably conducted under
General Counsel Paton. I bespeak your undivided attention to the
report of the General Counsel, when same is submitted.
STATE ASSOCIATIONS
There is now a bankers association in every state in the Union and
the District of Columbia—forty-nine in all. While some of these
associations, through greater size and numbers, must accomplish more
than others, all are healthy organizations and much is accomplished
through their efforts. Vast power is represented by the state associations and tile American Bankers Association, and when wielded
jointly results must come.
Your General Secretary has attended various conferences, conventions
of state associations, group banquets, dinners of the Institute, etc.
The Association has also been widely represented at state association
conventions, etc., by President Lynch, First Vice-President Goebel,
Assistant Secretary Fitzwilson, General Counsel Paton, Educational
Director Allen, Secretaries Harrison and Thralls and by Messrs. Welton
and Gammon, Managers respectively of the Department of Public
Relations and Protective Department. In this manner, I believe the
Association officials and Department heads have come in contact with
a larger number of our members than ever 'before.
DEPARTMENT OF PUBLIC RELATIONS
Manager Welton has again demonstrated the wisdom of the creation
of this Department and his establishment as its head and manager.
A forceful and versatile wilter,'he has through the medium of the
JOURNAL and otherwise given extensive publicity to items of peculiar
interest and import to our membership. Continued studied improvements have been effected in the JOURNAL and further changes may be
expected as time goes on. He has been ably assisted by Associate
Editor Lewis, to whom has fallen also the burden of publication, and
the management of the contract and purchasing department. Mr. Lewis
has proven himself eminently qualified for this important work.
COM AIITThES
In an organization as great as the American Bankers Association
has become, the importance of committees and their work cannot be
overestimated, and each year we must still further depend upon our
committees for the accomplishment of desired features of Association
work.
The Administrative Committee has held several meetings since the
Seattle convention and has given careful consideration to various
matters connected with the administration of Association affairs.
Among the more important that have been acted upon are:
Selection of Briarcliff Lodge as the place for holding the Spring
Meeting of the Council; deciding upon the dates for the Kansas City
Convention; approving the appointment of M. W. Harrison as Assistant to Educational Director Allen of the Institute Section; approving the selection of Jerome Thralls as Secretary (jointly) of the
Clearing House and National Bank Sections; and it referred various
matters to the Committee on Federal Legislation for their action.
The Insurance Committee has been active in enforcing betterments,
in its particular field, for our metnbers generally and has bthl peculiarly successful in several instances ill bringing about more liberal
settlement of cases than the companies were at first inclined to give.
A new form of Bankers' Blanket Bond has been effected during the
past year and was approved by the Insurance Committee as of June 8,
1916; and our members are advised to insist upon the form of bond
carrying this indorsement printed on the face thereof. The Insurance
Committee is fortunate in having as its Secretary, Mr. B. A. Ruffin,
who is so familiar with the intricacies and detail of insurance matters.
Secretary Ruffin conducts a vast correspondence with our members from
his office in Richmond, Va., and will ever be found ready and willing

BANKING SECTION.
to advise upon any point within his province. Mr. Ruffin has attended several state association conventions during the year, thereby
furthering the good work of his Committee and the welfare of the
Association.
The Committee on Law has again been actively engaged in promoting
• various phases of state legislation and its efforts have been very successful. Its report will merit your attention.
The Committee on Federal Legislation has had a busy year and has
met with success in many matters of Federal legislation it has recommended. Most prominent, perhaps, of all its efforts is the achievement
of the passage of the Pomerene Bill (the National Bill of Lading La)r)
after a campaign extending over a period of eleyen years. The full
details of what has been accomplished by this Committee will be told
In its report, covering perhaps the most important activities in its
history.
The Finance Committee, together with its Sub-Committees, have given
careful attention to matters of finance within the Association, analyzing
the various reports, statements, etc., submitted at Convention and
Spring Meeting periods. A committee on efficiency in the conduct of
Association affairs was appointed at the Briarcliff Spring Meeting, to
report at Kansas City, and it will be interesting to note that this
committee found the conduct of the varied details of the Association to
be generally up-to-date in every respect.
BILLS OF LADING
At our convention in Washington, in 1905, there was appointed a
Committee on Bills of Lading; said committee consisting of Messrs.
Lewis E. Pierson, New York, Chairman; William Livingstone, Detroit;
Frank 0. Wetmore, Chicago; J. A. Lewis, St. Louis, and William
Ingle, Baltimore.
The Committee performed active service in connection with the
task assigned it and presented reports' at subsequent conventions. It
also urged the various state bankers associations to form similar committees within their organizations, to aid in the work on this proposition.
In 1909, at our Chicago convention, Mr. Clay H. Hollister became
Chairman of the Committee, with Messrs. Whitmore, Lewis and Ingle
completing the same. In 1910 Mr. Daniel G. Wing was added to this
personnel, and in 1911 Messrs. Sol Wexler and Nathan Adams were
also added. This constituted the Committee until the Boston convention in 1913, the Committee, as such, making its last report at that
convention.
The Bills of Lading Committee not having been continued, the Execu.
five Council, at Boston, on Friday, October 10, 1913, passed a resolution referring to the Committee on Federal Legislation the task of
carrying on this important campaign.
This committee gave every attention to the proposition and its persistence along these lines has finally met with success. Chairman
Charles A. Hinsch, the members of the Committee on Federal Legislation, and General Counsel Paton are to be congratulated on the outcome—the passage of the Pomerene Bill, S. 10, and its approval and
signing by President Wilson on August 20 of this year. The culmination of eleven years of effort on the part of our Association has secured
national legislation which will give bills of lading their proper status
as instruments of credit. The vital parts of the law just enacted are
(1) integrity, (2) full negotiability and (3) punishment of forgery of
bills of lading.
CURRENCY COMMISSION
There have been no demands made upon this important body during
the past year, but the Commission is intact and stands ready to serve
when there is demand for its services.
AGRICUMURAL COMMISSION
Co-operating with various state associations and Agricultural Committees, this Commission has carried on its work during the year. The
Banker-Farmer continues to be well received and no doubt much has
been accomplished to bring about a closer relationship between the
banker and the farmer. The campaign for improved conditions in farming sections, with better roads, schools, better crops through the
diversification of same, etc., must of necessity be slow in showing
results, but there is a steady improvement all along these varied lines
of endeavor.
PROTECTIVE COMMITTEE
This committee, secretly named for obvious reasons, has given careful
attention to the affairs of the Protective Department and proper supervision to the conduct of its affairs. Unfortunately they cannot, as
individuals, receive the expressions of appreciation to which they are
entitled.
The report of the Protective Committee (to the Executive Council)
and the report of the Protective Department by Manager Gammon will
show in detail what has been accomplished in this important field of
Association endeavor during the year. These reports and the data
given in the full report of the William J. Burns International Detective Agency, Inc. (available to all Association members), furnish full
detail and warrant careful perusal by our members.
The Association has received many letters of commendation of the
work of the Protective Department. Only a few letters of criticism
have come to hand, and these generally have been written through misunderstanding of facts involved.
That there may be no misunderstanding whatsoever as to the nature
of the service rendered•by the Protective Department and to the end
that every member may have exact information, it seems again desirable to state that all cases which come within the rules of the Protective Department are handled without cost to the member concerned; the Association will prosecute the amateur as well as the.
professional criminal and cases reported to the nearest Burns Agency
office will be taken up without delay. It is unnecessary to communicate with tile General Offices in New York before a case will be taken
up, all allegations to the contrary being false.
Manager L. W. Gammon each year continues to improve and perfect
his Department. An untiring worker and with a thorough knowledge
of his line, he develops the best within his Department and can but
demonstrate each year his value to the Association and its members in
his particular field.

123

LIBRARY
In the Association Library and its Reference Department there has
been a steady growth during the year. The loan feature is becoming
better understood, and more general in use and the matter on the
library shelves is more frequently in demand by bankers and others
for reference and research work.
We trust that with the new year we are just entering upon, many
more of our members will avail themselves of the Library and the
wealth of reference data it contains.
The Association has received many contributions of books, pamphlets,
magazines, newspapers, etc., etc., from organizations, libraries, bankers
and individuals. These contributions stimulate what has already been
gathered together and are much appreciated.
The Librarian, Miss Glenn, will make a report on the Library and
Reference Department and to her untiring efforts much of the success
of our library is due.
FINANCES
The Treasurer's report shows a cash balance on band of $32,264.22.
The balance in 1915 was. $36,097.75 and $20,152.70 in 1914.
'rile reduction of the cash balance at the end of the fiscal year of
1916, as compared with the fiscal year of 1915, is accounted for by
the extraordinary expenses during the past year, which are covered in
increased expenditures of Seattle convention, additional appropriation
required by the Savings Bank Section for its Centennial and Thrift
Campaign, and other special items which do not ordinarily occur. I
recommend that the Finance Committee set aside, for investment, a
portion of this balance. All bills have been paid for the full fiscal year
just ended.
OFFICE IMPROVEMENTS
A new and up-to-date installation of the Turner Intercommunicating
Telephone System between the General Secretary's office and various
offices of his assistants has been put in during the year. This greatly
facilitates tile transaction of inter-office detail and proves a great convenience and time saver.
To our mechanical equipment has been added an Edison Rotary
Mimeograph No. 78, electrically controlled, for the supplying of manifold copies of circular and publicity matter; also a Graphotype, electrically operated, which now enables us to make our own stencils for
the addressograph equipment, without delay.
•
Some new furniture has been placed in the general "work room"
with the elimination of old-fashioned roll-top desks—resulting in improved appearance of the room and increased efficiency of the employees.
ROUTINE WORK
During the fiscal year just ended we sent out from the General Offices
more than 641,000 letters, circular .letters, Proceedings, Jammer,ButLE•rircs, etc. The following statement shows the volume of mail
and express matter in detail:
FIRST-CLASS MAIL MATTER
Letters
13,877
Circular letters, etc
57,578
First-class mail other than letters, such as typewritten
lists, etc.
2,474
73,029
SECOND, THIRD AND FOURTH CLASS MAIL MATTER
JOURNAL-BULLIMINS, including

those of A. I. B.

Codes
Signs
Lists of Members
Packages
Postal Cards

3910:303401

•

1,530
17,096
1,262
253
411,512

Total A. B. A. mail matter

485,441

SECTIONS AND DEPARTMENTS
Total first-class mail matter
Total second, third and fourth class mall matter

128,230
12,856
141,086

Total mall matter
Express packages

626,527
15,162

Grand total

641,689
MEMBERSIIIP

At the time of balancing our books, August 15, 1915, membership in
the Association stood at 15,010. At the Briarcliff Spring Meeting this
year, it was announced that we hoped for an increase of 1,000 members by August 31; and, on the date of closing our books, it is my
pleasure to report there were enrolled 16,016 members, representing a
net gain for the year of 1,006. Last year the net gain was 290 members. I am sure this result is most gratifying—a record that has
been excelled but twice in the existence of the Association. In 1901
there was a net gain of 1,113 and in 1912 a net gain of 1,251.
To the state of Oklahoma belongs the credit for greatest increase in
membership in the Association with 118 new members, a total of 530.
Kansas comes seeond with 111 new members, a total of 741. Nebraska
comes third with 91, a total of 483. Missouri is fourth with 73 new
members, a total of 611; Iowa is fifth with 70, a total of 678; Illinois
stands sixth with an increase of Cl and a total membership of 981; and
Texas seventh with an Increase of 47 and at total membership of 567.
New York ranks first in Association membership with 1,019, Illinois
second with 981, Pennsylvania third with 966. Kansas fourth with 741,
Iowa fifth with 678, California sixth with 636, Ohio seventh with 621
and Missouri eighth with 611.
Relating to increase of membership by the various Sections and
officers of the Association showing the number of applications known
to be received from the sources mentioned below during the fiscal year
ending August 31, 1916:

124

BANKERS' CONVENTION.

National Bank Section, through the co-operation of Mr. Jerome
Thralls, Secretary of the Section; the Vice-President of the National Bank Section for Oklahoma, Mr. T. P. Martin, Jr.; Mr.
G. D. Davis, Mr. E. W. Sinclair and others located in that state 150
92
0. T. Eastman, Vice-President A. B. A. for Nebraska
NOM-With the co-operation recently of Mr. W. B. Hughes,
Secretary of the Nebraska Bankers Association, they having signed
a joint circular.
Those who were most successful in membership campaigns:
32
M. A. Traylor, Vice-President A. B. A. for Illinois
27
P. NV. Goebel, Vice-President American Bankers Association
22
A. C. Smith, Vice-President A. B. A. for Iowa
20
Trust Company Section
17
W. W. Woodson, Vice-President A. B. A. for Texas
Wm. J. Burns International Detective Agency, Inc., general solicitation with good results.
Very many of our State Vice-Presidents, Members of the Executive
Council and State Secretaries gave us valuable assistance in increasing
membership during the past year; .and for this loyal work all are
entitled to the sincere thanks of the Association.
August 14, 1915
*Erased from the rolls through failure, liquidation, consolidation and withdrawel December 1, 1915

15,010

Membership '
August 31, 1916, new members joined during the year.. 1,422
467
*Regained members (secured from the above)

14,127

883

1,889
August 31, 1916, membership

16,016

A net increase for the fiscal year of
A net loss for the year in failures, consolidations, etc...
. A net loss for the year in delinquents

1,006
218
198
416
1,422

Making the actual gain in new members

The membership and resources of the Association have increased as
follows:
Annual Dues
Paid Membership
$11,606.00
'1600
September 1, 1875
10,940.00
1395
September 1, 1885
12,975.00
1570
September 1, 1895
127,750.00
August 31, 1905
7677
137,600.00
8383
August 31, 1906
150,795.00
9251
August 31, 1907
162,507.00
August 31, 1908
9803
175,352.00
10682
August 31, 1909
188,934.00
11405
August 31, 1910
198,530.00
August 31, 1911
12072
213,752.50
13323
August 31, 1912
229,324.48
14100
August 31, 1913
14720
233,915.00
August 31, 1914
245,651.00
15010
August 14, 1915
262,021.76
16016 (estimated)
August 31, 1916
INCOME
$4,730.00
Interest on Bonds and Corporate Stock
2,800.00
Interest on Bank Balances (estimated)
Estimated Annual Dues for Fiscal Year Ending August 31,
262,021.76
1917
Making Total Income, year ending August 31, 1917.......$269,551.76
MEMBERSHIP BY YEARS.
Gross Loss by Net Loss by
Failures, Mer- Failures,
ger, Delia- Merger, DelinMEMBERSHIP.
quents,
quents,
etc.
etc.
2,813
371
248
3,424
211
3,915
234
4,500
5,504
200
6,354
186
313
7,065
500
7,563
1,038
7,677
8,383
337
434
9,251
691
....
9,803
10,682
760
374
298
781
11,405
1,304
405
12,072
790
330
13,323
359
744
14,100
894
384
14,720
434
924
15,010
416"
16,016
883
•

YEAR.

1897
1898
1899
1900
1001
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916

.
Gross
Gain.

Net
Gain.

982
783
741
819
1,313
1,159
1,139
1,120
1,152
1,043
1,302
1,243
1,639
1,504
1,971
2,041
1,521
1,514
1,214
1,889

611
535
530
585
1,113
973
826
620
114
706
868
552
879
723
667
1,251
777
620
290
1,006

MEMBERSHIP OF STATES AND TERRITORIES HAVING LESS
TITAN 100 MEMBERS
(As of August 31, 1916)
82
Canal Zone
1
Arizona
42
Hawaii
16
Delaware
29
Philippine Islands
Nevada
70
Porto Rico
9
New Hampshire
Canada
73
43
New Mexico
49
Cuba
24
Rhode Island
85
Isle of Pines
1
Utah
76
Mexico
10
Vermont
Panama
93
Wyoming
4
17
Alaska
Total
727

MEMBERSHIP
DIVISION Or BANKS IN ASSOCIATION, AUGUST 31, 1916

STATE OR TERRITORY4•••
ArizonaAlabama

60
12
Arkansas
52
California
206
Colorado
109
Connecticut
69
Delaware
22
Dist. of Columbia
14
Florida
49
Georgia
98
Idaho
49
Illinois
333
Indiana
153
Iowa
, 205
Kansas
192
Kentucky
76
Louisiana
34
Maine
58
Maryland
80
Massachusetts
157
Michigan
90
Minnesota
188
Mississippi30
Missouri
106
Montana
59
Nebraska
175
Nevada
10
New Hampshire
47
New Jersey
181
New Mexico
36
New York
421
North Carolina
68
Ndith Dakota
111
Ohio
245
242
Oklahoma
Oregon
77
Pennsylvania
583
Rhode Island
18
37
South Carolina
South Dakota
86
Tennessee80
Texas
319
Utah
22
Vermont
41
Virginia
99
Washington
68
West Virginia
83
Wisconsin
117
Wyoming
32
Alaska
3
Canal Zone
1
Hawaii
4
Philippine Islands...
0
Porto Rico
0
Canada
0
1
Cuba
Isle of Pines
1
Mexico
0
Panama
1

a
4-.
es
1-...

+ rA
g

! :fl. 1
.2. 74
g

82
1
1
1
175
114 2
2
.'
7
48
1
82
0
20
1
0
164
2
26
1
1
247
1
296
6
36
87
1
4
636
98
7
17
242
1
1
9
9
7
44
48
1
1
179
1
1
15
2
1
42
0
3
3
16
1
1
341
125
4
4
1
0
195
12
253
7
18
12
1
1
381
85
145
2
1
1
0
7
314
215
76
41
1
1
981
152
405
40
3
1
0
56
164
53
30
225
1
0
678
533
2
6
7
1
0
741
70
1
27
4
1
1
180
1
123
21
5
1
1
186
0
0
36
21
1
0
116
36
23
19
26
1
1
186
2
27
74
109
1
1
371
165
44
9
168
1
1
478
304
6
1
8
5
2
514
122
1
15
2
1
0
171
401
22
46
32
1
2
610
151
19
12
0
1
0
242
294
2
4
7
1
0
483
17
0
1
0
1
0
29
1
0
7
14
1
0
70
27
3
97 • 18
1
0
327
1
8
1
1
26
0
73
261
145
92
92
1
7 1,019
97
1
35
7
1
0
209
215
0
3
3
1
0
333
139
62
56
115
1
3
621
275
0
11
1
1
0
530
90
10
12
8
1
1
199
99
52 194
34
1
3
966
1
2
19
7.
1
1
49
125
1
10
18
1
1
193
197
3
10
9
1
0
306
104
1
47
9
1
1
243
1
161
28
1
3
54
567
44
4
5
8
1
1
85
0
0
21
13
1
0
70
119
13
14
9
1
1
256
208
17
21
9
1
2
326
2
97
21
4
1
1
209
249
2
11
21
1
1
402
53
1
6
0
1
0
93
13
1
0
0
0
0
17
0
0
0
0
1
0
0
6
2
4
0
0 0
16
3
0
0
0
0
0
3
7
2
0
0
0 0
9
42
0
1
0
0
0
43
18
3
1
0
0
1
24
0
0
0
0
0
0
1
8
2
0
0
0
0
10
2
0
1
0
4
0
0

5,701 6,699

859 1,421 1,240

47 16,016

IN MEMORIAM
On February 15, 1916, at Orinond Beach, Fla., there passed to the
Great Beyond, George E. Lawson, president of the Peoples State
Bank of Detroit, Mich., and member (1916 class) of our Executive
Council and of our Finance Committee as well.
Mr. Lawson took an active interest in the affairs of our Association
and gave of his best in its interest and welfare. A man of ability,
always courteous, of a gentle nature and charitable, he will be missed
in our assembliugs as well as by all who knew him in his native city.
APPRECIATION
The General Secretary would take this occasion to word his appreciation of the assistance and courtesies rendered him by the Executive
Council, Departments, Sections, Committees and Commissions; as well
as by the Association officials, State Vice-Presidents and State Secretaries.
The general Association membership has been loyal in its support, and
for this and their letters of encouragement and the warm welcome
accorded when brought into personal contact with bankers of the
country, your General Secretary is apprecative and grateful.
His association during the year with President Lynch and the Administrative Committee has been most agreeable and helpful. With the
distance from the Atlantic to the Pacific separating us, President Lynch
has found it possible to visit the general elks' and attend Administrative'Committee meetings, and the other members have given freely of
their time and attention to the betterment of Association matters. To
Treasurer Wing, Assistant Secretary Fitzwilson, T. R. Wilsoh, secretary to the General Secretary, and to the employees in the General
Officers I also extend expression of my appreciation. The hearty cooperation given by them, all has made this year, the ninth of my administration, the more enjoyable and the results attained more effective
than heretofore.
KANSAS CITY
This convention of the Association in Kansas City is the forty-second
in tile history of our organization. Kansas City has once before entertained the American Bankers Association-on the occasion of our fifteenth annual convention, September 25 and 26, 1889. There are those

BANKING SECTION.
'among our number who will recall that convention as one of the most
successful held up to that time, and particularly marked was the unbounded hospitality of the bankers and citizens of Kansas City on that
occasion.
At that time the Association had a membership of about 2,200 and
the attendance at the convention was approximately 600 delegates, and
with guests totaling in all about 1,500 people.
A Missouri banker was President—Mr. Charles Parsons, president of
the State Bank of St. Louis; and Mr. Joseph S. Chick, president of
the National Bank of Kansas City, Mo., was a member of the Executive Council. Mr. William P. St. John (well known in the past in
this section of the country) wa*s one of the principal speakers and Mr.
George F. Baker of New York City, prominent banker and financier, was
Treasurer of the Association. The income for that fiscal year
was
$14,612. An interesting program was presented and there were many
speakers on question of the day, with spirited discussions.
Again We meet in this great mid-western metropolis with marked
changes in the Association, showing progress along all lines of
endeavor; with a membership of more than 16,000 banks and an
attendance of approximately 4,000 delegates and guests.
When the enterprising delegates from Kansas City presented their
Invitation at the Seattle convention there were promises made,
which
in every particular will be fully realized—in fact, will be more than
realized by those who are so fortunate as to attend this forty-second
annual convention.
Your General Secretary has made several visits to Kansas City during
the past year, meeting bankers and citizens on each occasion, and has
realized fully that Kansas City believes in co-operation; that its business and professional men co-operate thoroughly with the bankers in
providing entertainment and hospitality, and in every way carry out
the slogan of the city—" Kansas City, the Heart of America," "All
for One and One for All."
,
I wish to express my sincere thanks to the Executive Committee and
to all local committees of Kansas City for the aid and assistance I have
received at their hands in the endeavor to carry out the vast details of
this great convention; and to convey for the Association its thanks for
a most successful convention, so well managed, and carrying with it
the unbounded hospitality of the city.
FREDERICK E. FARNSWORTH,
General Secretary.

Report of Currency Commission
To the American Bankers' Association:
Your Currency Commission, through an interchange of views by
correspondence, are unanimously of the opinion that our
report this
year should be one of progress. There remains only the short session
.of Congress, which terminates on the 4th of March next. It would
be unwise, in our judgment, to attempt the'
,
accomplishment Of any general legislation at that session. The administration also changes
on the
4th of March, by the re-inauguration of the present incumbent or
the
inauguration of his competitor.
'As time passes we are obtaining a better knowledge of the
actual
working of the Federal Reserve law, its strong points and
its possible defects. It seems to us that upon the incoming of
the new
Congress the American Bankers' Association ought carefully
to consider the present law relating to banks and banking, with a
view to
suggesting amendments, prompted by our banking and business
experience. This should be done for tile purpose of perfecting the
Federal Reserve system and bringing it into co-operative harmony with
tile various banking institutions of the country.
In order to facilitate the labors of the Commission we think it
would
be well to have all papers and suggested amendments of a
rpeciflc
nature, *which are submitted to the convention, referred to the
Commission for its use another year.
Respectfully,
A. BARTON HEPBURN, Chair/W/1.
Jos. A. McConn
JAMES B. FORGAN, V. C. JOHN PERRIN
J. F. SARTORI
Mynos T. IImiamc
LuTfiEn DRAKE
L. L. RUE
FESTITS J. WADE
SOL WEXLER
E. L. Hown
Jos. T. TALBERT
ROBT. WARDROP
GEO. M. REYNOLDS
H. F. SWINNEY

Annual Report of General Counsel, Thomas B. Paton
A considerable portion of the work of the General
Counsel since the
Seattle Convention has been in connection with the
activities of the
Committee on Federal Legislation, both in an
advisory and executive
capacity. General Counsel has participated in
meetings, conferences
and discussions upon legislative subjects, drafted
and caused bills to
be introduced for the Committee, attended
Congressional hearings, had
numerous interviews with members of Congress
in Washington and
elsewhere, prepared briefs and arguments upon
particular measures, issued circulars, letters and telegrams, conducted an
extensive correspondence, kept track of all bills introduced in Congress
affecting the
banking interests, closely watched bills of an objectionable
character
and, in short, endeavored both in a legal and secretarial
way, to
do all things necessary as an aid and adviser of the
Committee in
the successful prosecution of its work.
A very considerable measure of success has attended the labors of
the
Committee on Federal Legislation, both in the enactment of
bills
favored by the Association and in defeat of objectionable
measures.
Legislation favorable to the banking interests has been enacted at
the
recent session of Congress modifying the Clayton interlocking
directorate
act, establishing a satisfactory bills of lading law,
modifying the
revenue law, including the substitution of a less onerous
corporation tax
for the bankers' special tax, extending the powers
of national banks
with respect to foreign trade and amending the
Philippine bill so
as to remove the danger to holders of Philippine bonds.
The year has
been unusually fruitful in national legislation of value
to bankers and
in procuring this result, our Committee on Federal
Legislation, under
the guidance of its energetic Chairman, has taken an
important part.
The report of that Committee will doubtless be looked
for with
particular interest for a detailed statement of action
and results
upon the Federal legislative subjects committed to its
charge.

125

In matters of state legislation, this has been
an off year, only a
minority of states holding legislative sessions. Nevertheless, some
of
the important measures recommended by our Association
and actively
pushed by the state bankers' associations have become law.
The report
of the Committee on Law (hereafter to be called the Committee
on
State Legislation) will contain reference to these subjects
of state
legislation.
Speaking in a general way, the aim and effort of General Counsel
in
the field of national and state legislation, has been to do all in his
power to carry out the policies of our Association in the promotion of
legislation having for its object the improvement of the banking system
and the soundness and negotiabilty of commercial instruments of credit,
and in opposition to legislation detrimental to the banking interests.
In this connection it may not be Inappropriate to emphasize
briefly
the importance of that branch of the legislative work
which has been
directed toward improving the negotiability and commercial
value of
those instruments of credit which are part of the machinery
of corninercial transactions. The chief instruments of commerce
upon which
credit is extended are the bill of exchange and promissory
note, the
bill of lading and the warehouse receipt. The former represent
money,
the latter goods in transit or on storage.
It has been a long and aggressive fight conducted under
the auspices
of the American Bankers Association and through the active efforts of
state bankers' associations to put the Negotiable Instruments
Act on
tile statute books of the different states. With its enactment this year
by the legislature of Mississippi, for which congratulations
are due the
blinkers of that state, there now remain but four states which
have
not passed the Act—Maine, Georgia, California and Texas. Before
the
passage of that Act the law governing bills and notes was
complicated by the divergent laws of some fifty states providing varying
standards of negotiability, and different rules governing liability
of
parties. A bill of exchange or a note originating in another
state
was discredited because of uncertainty as to its negotiabilty.
The
tremendous benefit of having one uniform law of negotiable instruments
throughout the country in facilitating the operations of banking
and
commerce is obvious and this result has now been substantially
achieved
largely through the organized efforts of the bankers.
Of equal importance to commerce and banking has been the work of
the Association in promoting legislation which would provide
full
negotiability and integrity to the bill of lading as an instrument of
commerce. For eleven years the American Bankers Association has
been urging national legislation to this end and has at last achieved
success through the approval by the President of the Pomerene bill,
passed at this session of Congress. In the 59th Congress we started
with the Townsend-Burrows bill; in tile 60th Congress we urged the
Maynard-McLaurin bill; In the Gist Congress, the Stevens-Clapp bill.
which passed the House; and in the 62nd, 63rd and 64th Congress,
the Pomerene bill which passed the Senate in each of these Congresses
but only in the last went through the House. Our Association was
the pioneer in the movement but as it gained headway, other organizations became allied and all share in the glory of the achievement.
The details of this year's successful campaign will, of course, be
covered in the report of the Committee on Federal Legislation. In
addition, largely through the efforts of our Association and its Law
Committee, the Uniform Bills of Lading Act has already been passed
in fifteen states and one territory and the Uniform Warehouse Receipts Act has been passed in 33 states. Congress at this session
has also passed a law providing for uniform warehouse receipts containing many of the provisions of this bill. These warehouse acts
facilitate commerce by enhancing the value of the warehouse receipt as an instrument of credit.
These subjects are mentioned as indicating the importance of the
work of our Association in the field of constructive legislation and the
great value of what has been accomplished in this direction. It is not
necessary to extend this report by discussing the underlying objects
and purposes of various other subjects of national legislation involving amendments of- the Federal Reserve Act and other Federal
laws nor the many subjects of state legislation handled by our Association in the interest of the banks. . These subjects will be sufficiently dealt with in the report of the Committee on Federal Legislation as to Congress and in the report of the Committee on Law as
to the different states.
It is interesting to note, in connection with the Revenue law which
was approved September 8th and, with certain exceptions, took effect
on the following day, that in addition to the elimination of the
special tax on bankers and substitution of a smaller tax on all
corporations, the stamp tax law was repealed and stamp taxes are
no longer In force. Also that certain provisions of the old law, the
interpretation of which has been matter of controversy with the Treasury Department, have been so changed as to remove the cause for
complaint. The former income tax law upon corporations provided that
in ascertaining net income there should be deducted from gross
income, among other things, "all losses actually sustained within
the year and not compensated by insurance or otherwise • * .."
Under this provision the Treasury Department ruled that banks would
not be permitted to deduct the loss upon securities charged off upon
their books within the year, unless the securities were sold or otherwise
disposed of; this notwithstanding the amount charged off was by order
of a national bank examiner or state bank department. Until sale or
disposition, the Treasury Department contended the loss was not actually sustained and this ruling was adhered to, despite requests for
reconsideration. The new law changed the provision to read: "All
losses actually, sustained and charged off within the year and not
compensated by insurance or otherwise • • * ." The words "and
charged off" were added by the Senate and agreed to by the conferees. Doubtless under the new law, banks will be allowed to deduct
from gross income, the amount of loss caused by depreciation of
securities charged off on their books within the year, without the
necessity of sale or disposition of the securities. It was furthermore
ruled under the old law that an individual could not deduct losses
arising from dealings in stocks or bonds where such losses were not
incurred in the trade or business of such individuals, although profits
arising from similar dealings were taxable as gains. The new law
corrects this injustice by a provision allowing an individual to deduct
from gross income "in transactions entered into for profits but not
connected with his business or trade, the losses actually sustained

BANKERS' CONVENTION.

126

therein during the year to an amount not exceeding the profits arising
therefrom."
In addition to the work of General Counsel in connection with
legislative matters, an extensive opinion work is carried on for
members of the Association and he has acted in an advisory capacity
upon matters presented by different sections and committees. It would
be impracticable to enter into any detail of the numerous phases of
this work. At the meeting of the Executive Council a year ago itwas determined that the General Counsel should prepare for publication a digest of the different opinions he has rendered. Owing to the
exigencies of the legislative situation during the last session of Congress
it has been impossible to find the necessary time to complete this
particular work. It is now in progress.
THOMAS B. PATON,
General Counsel.

Report of Committee on Federal Legislation
Mr. President, Members of The American Bankers Association, Ladies
and Gentlemen:
Your Committee on Federal Legislation has had a very busy year:
also a very successful one from the standpoint of results accomplished.
The Committee has had In charge a number of subjects of Federal
Legislation pending in the 64th Congress, and has worked to promote certain Bills which have been favored by the Association, and in
opposition to other measures.
The Committee has been aided throughout by a very effective system of organization, viz.: a Federal Legislative Council, consisting
of one member of the Executive Council in each State, who was
requested to perfect a State organization made up of a banker from
each Congressional District, who in turn was expected to secure
the co-operation of the bankers in his Distriet. To the hearty and
efficient co-operation of the members of the Federal Legislative
Council is due in a great measure the successful results obtained by
' our Committee.
Mention should also be made of the encouragement and advice
extended by President Lynch, Vice-President Goebel, our able Secretary Colonel Farnsworth, and the spirit of co-operation shown br
the Executive Committees of the National Bank and Clearing House
Sections, and their efficient Secretary Jerome Thralls, and the effective work done" by the Secretaries and other officials of State
Bankers Associations. It has been because of the combined efforts of
all these different agencies, working to a common purpose, and
under the guidance of our Committee, that the legislative policies
of The American Bankers Association have been so effectively carried
out.
An important measure upon which our Committee and Federal
Legislative Council worked unceasingly until a successful result was
obtained, is the Kern 11111, modifying the Clayton Act, which prohibits Interlocking Directorates.
The Kern Bill was signed by the President • on May 15th, and permits a person to be a Director in not more than two other banks not
in substantial competition, upon first procuring the consent of the
Federal Reserve Board. The Kern amendment has been interpreted
by the Federal Reserve Board, to allow a person who is permitted by
the Clayton Act to be a Director of a member bank and one other bank,
or Trust Company where the entire capital stock of one is owned by
stockholders of the other, to also be a Director in two other banks not
in substantial competition—making four in all under such circumstances.
The enormous amount of labor performed and campaign work
conducted throughout the progress of this measure, and the history of
the legislation in its successive stages of development cannot be
detailed here. Credit is especially due to Mr. George M. Reynolds
of Chicago, for most effective aid in procuring the passage of the
•
Kern Bill.
A second successful result was obtained in connection with the
Philippine Bill. As this measure passed the Senate on February 4th,
it contained ,an addition known as the Clarke Amendment, which
provided for the granting of independence to the Philippines in four
years, but contained no provision for safeguarding the holders of
some seventeen million dollars of Philippine bonds now in the hands
of American Banks and other investors. Request for an amendmet
protecting the holders of these bonds, was made on behalf of our
Committee to the House Committee on Insular Affairs, but the Bill
was reported without amendment. Following this, long continued
'efforts were made while the Bill was pending in the House to secure the
necessary protection, and as a result, on May 1st, when the Philippine
Bill came up in the House, the Clarke amendment was decisively
defeated by a vote of 213 to 165. As finally passed the Philippine
Bill provides for a more autonomous Government of the Philippines,
but the threatened weakening of the security of American investments
has been entirely removed and the holders of Philippine bonds are safe.
In procuring this result our Committee were without doubt, very ably
assisted by tile representatives of millions of dollars of Philippine Railway bonds, and by large business interests that would have suffered
by the termination of business relations existing between this country
and the Philippines.
A third success has been scored in connection with the Revenue
Bill. As reported to the House this Bill, in addition to increasing
the income tax on individuals and corporations from one to two per
cent., also made permanent a special tax upon bank capital and
surplus of one dollar per one thousand dollars. The attention of
the entire membership of the House was immediately called to the
injustice of singling out one class of corporations—the banks—and
imposing such a burden of taxation upon them. As a result, the
special bank tax provision was eliminated by the House by a decisive vote. Efforts to have the same put back in the Senate, were
combatted by our Committee and filially a provision was inserted imposing a special tax on all corporations or fifty cents for each one
thousand dollars of capital, surplus and undivided profits, with an
exemption of $99,000 front the capital of each corporation. This
removes from the operation of the tax the small corporations, including the banks, all over the country. The elimination of the
Er•nkers Spe.,lal Tax was a notable achievement, only made pos-

sible by the effective co-operation of the members of our Federal
Legislative Council throughout the States, whose immediate response
to telegraphic call for action and forceful protests against the injustice of the proposed double taxation carried great weight. Credit
for effective assistance is also due to a number of the Clearing House
and State Bankers Associations throughout the country. Bills recommended by our Association to amend Section 19 of the Federal
Reserve Act so as to enable country National Banks, at the end of the
36 months' period, to exercise an option to keep three of the required twelve per cent. of its reserves in a Reserve Member Bank
within the Federal Reserve District, or within a radius of three hundred
miles of the country Bank, were introduced by Senator Pomerene
in the Senate and Congressman McFadden in the House, but our Committee has been unable to secure a favorable report.
Quite a number of banks throughout the country object to the
three hundred mile radius. Some feel that the radius should be
extended, and others feel that it should be eliminated entirely. It would
seem that some change in the proposed amendment could consistently
be made. If the limitations are removed entirely banks would be
allowed to continue to carry 3 per cent. or one-fourth of their required reserve, with any Reserve or Central Reserve City Bank in
the system.
It has also been suggested that the reserve requirements of country
banks be reduced from 12 to 9 per cent. Of this amount 4 per cent.
to be carried in cash and 5 per cent, with the ,Federal Reserve
Bank in the District. This would, without a doubt, relieve the country
banks to a large extent, and the only objection to tits plan is the
tendency on the part of some country banks to run as close as
possible to the reserve required by law.
At a joint meeting of the Federal Legislative Committee and Council just held at Kansas City, this subject was fully considered,
and it was deemed unwise to continue to urge the adoption of the
Pomerene McFadden Bills, but in lieu thereof to recommend to the
Convention that legislation be urged reducing the reserves of country
member banks to 10 per cent.
House Bill 13391 recently passed by Congress, contains an amendment to Section 11 of the Federal Reserve Act, giving the Federal
Reserve Board power to permit member banks to carry in the
Federal Reserve Banks of their respective Districts, any portion of
the reserve now required to be held in their own vaults. This
is a most important measure and member banks should be urged
to forward to the Federal Reserve Bank of their respective Districts.
the cash (Gold if possible) in their vaults in excess of their needs.
This will strengthen the Reserve System and fortify our financial
position so that we will be able to meet readily the readjustments that
are likely to follow the termination of the European War.
Every encouragement should be given the Federal Reserve Board,
in their effort to mobilize the Gold held in the Country.
European Banks only carry sufficient money in their own vaults
to cover their customary needs, depending on their Reserve Banks
for emergency calls, thus concentrating the Gold Reserves in the
great Central Banks.
We are not in a position now to respond to a sudden and unexpected call for Gold; our holdings of the metal are known to be
enormous, but it is not readily available; if the state banks can be
induced to enter the system, their gold holdings would of course
augment the gold reserves of the Federal Reserve Banks.
H. R. 13391 also amends Section 24 of the Federal Reserve Act authorizing loans on farm lands by extending the territory in which
farm loans may be made to a radius of one hundred miles, from
the location of the Bank irrespective of District Lines, loans
limited to 50 per cent, of valuation and not to exceed five years.
This measure also permits loans to the extent of 50 per cent, of the
value, and not for a longer period than one year on improved and
unincumbered real estate, other than farm lands within the same
radius. The aggregate of both classes of loans is limited to 25 per
cent of Capital and Surplus or one-third of time deposits. If this
aggregate were to be increased it would doubtless tend to popularize
•
the system and encourage state banks to join.
Likewise a bill recommended by our Association to amend the Federal Reserve Act so as to reduce the paid-in capital of Federal
Reserve Banks to one-sixth of one per cent. of the capital and surplus of the member banks and provide a return of the excess, was
introduced by Congressman McFadden, but has not been reported.
The question of amending the Federal Reserve Act authorizing
the establishment of Branch Banks, was carefully considered by the
Executive Committee of the National Bank Section and by the Federal
Legislative Committee. Some members favored and some were opposd to such a measure, and inasmuch as the Association itself has
not given expression to an opinion on this subject, it was deemed
best not to either approve or oppose the passage of the amendment.
You are aware that this provision was eliminated from H. It.
13391. A great many bankers believe that if Branch Banks can
be established by an indirect method, that some provisions should
be made for them to establish Branches by a direct method. The
Association should give expression to its wishes in this respect,
and if the decision is in opposition to the establishment of Branch
Banks, then the Natonal Bank Act should be so amended as to
prevent the absorption by National Banks of State Banks having
Branches.
Probably the most important accomplishment during the year has
been the passage of the Bills of Lading Act, known as the Pomerene
Bill S. 19, which was signed by the President on August 29th.
For eleven years our Association has been consistently working for
a Federal Law which would give validity to Bills of Lading as instruments of credit, and in six successive Congress Bills have been
introduced to that end. The Pomerene Bill makes criminally liable
the person who forges a Bill of Lading, and the agent who issues
a bill that does not represent goods. This is a much needed
reform. No punishment whatever, was hitherto provided for such
criminals under Federal Law. The measure will promote the Interstate and Foreign Commerce of the country by making Bills of
Lading inherently safe. The 11111 is especially advantageous to the
small shipper, as the Bill of Lading will now have a commercial
value as a credit instrument, that it has not enjoyed in the
past, and Banks will more readily make advances on Bills on Lading
drafts. In the 62nd and 03rd Congresses the Pomerene Bill, which

BANKING SECTION.
had behind it, not only our Association, but the American Bar
Association, the United States Chamber of Commerce, and allied
Shippers organization, passed the Senate, but failed in the House.
The successful result in the present Congress has been due to the
combined efforts of all these organizations in impressing upon the
House, which heretofore proved the stumbling block, the great
importance of this measure in the promotion of our Interstate and
Foreign commerce. In this connection, great credit is due Secretary
McAdoo and Dr. C. E. McGuire, Assistant Secretary General of the
International High Commission, who have exploited the measure in
South America; in fact, submitted a Spanish translation of the law
to the International High Commission at Buenos Ayres in April, 1916.
The Commission adopted resolutions advocating the adoption of similar
laws, using this measure as the basis. The International High
Commission referred to is a body of twenty National Sections, each
of which consists of nine jurists of financiers with the Minister of
Finance (in the United Stated the Secretary of the Treasury) as
Chairman. The Commission was organized in the summer of 1915,
as the result of the recommendation of the first Pan American
Financial Conference, held in Washington May 24-29, 1915. The
Commission aims to "adjust and harmonize the principles and procedure of commercial law and administrative regulations in the
American Republics, and to seek a satisfactory solution for such
legal problems as present themselves in the fields of banking and
public finance."
Secretary McAdoo and Dr. McGuire have in addition been warm
advocates of the Bill before the Senate Committee. Credit is also
due to Mr. Charles S. Haight, representing the United States
Chamber of Commerce—to Mr. Francis B. James, representing the
American Bar Association, and to Mr. Guy M. Freer of the Cincinnati Chamber of Commerce, President of the National Industrial
Traffic League, 'for valuable efforts in behalf of the measure. Our
own share in the work, through our Federal Legislative Council
and this Committee, has been in the bringing of arguments to bear
upon individual members of Congress as well as in personal appeals
at Washington. The thanks of this Association are due to Senator
Atiee Pomerene, who introduced the measure and secured its passage
by the Senate, and when the Interstate and Foreign Commerce Committee of the House delayed in giving consideration to the measure,
the Senator arranged for a public audience on April 12th at the
White House. A delegation of Chippers and bankers, and members of
The American liar Association, and Chamber of Commerce of the
United States, was received by President Wilson, and addresses were
made on behalf of the measure by representatives of different organizations, including the Chairman of your Committee. On the
following day an all day hearing was given by the House Committee
to the delegation, and a series of hearings were subsequently held,
as a result of which the Bill was favorably reported, with a few
amendments on June 24th. It was passed by the House on August
0th—the Senate concurred in the House amendment on August 18th,
and the signature of the Bill by the President makes the law an
accomplished fact. By its provisions it takes effect on January first
next.
'rile potent influence of our Association as an adviser of National
legislation in tile interest of trade and commerce is illustrated by a
'piece of constructive legislation originating with this Association, which
has become law at this session of Congress as an amendment of Section 25 of the Federal Reserve Act signed by the President on September 7, 1916. This amendment is designed to facilitate foreign trade
through national banks by adding provisions permitting the investment
by National Banks in the stock of banks or corporations engaged in
foreign trade. It originated in a conference of our Committee with
the Executive Committee of the National Bank Section, following
which there was framed and presented to the Federal Reserve Board
the amendment proposed. The Federal Reserve Board favored the
amendment and recommended it to the Committees on Banking and
Currency of the House and Senate. It was included with .certain other
amendements of the Federal Reserve Act agreed upon by those Committees and by House and Senate, and has now become law. This
measure is known as H. R. 13391. In this connection it is interesting
to note a resolution adopted by the International High Commission:
"Resolved, That the International High Commission recommend to
the American Government the adoption of such measures as will place
the Banks of each country, wherever possible, in a position to extend
their activities abroad, to establish branches on terms of reciprocity,
and to facilitate the granting of credit to the trade and industries of
other countries of the continent.
"Resolved, further, That tile International IIigh Commission recommend to the institutions of credit of each country the adoption of such
measures as are indispensable for the establishment of relations with
these institutions in other American States, subject to their laws
and on terms of reciprocity."
In connection with the enforcement by tile Federal Reserve Board of
the provisions of the Federal Reserve Act authorizing par collections,
the Chairman of our Committee visited St. Louis and participated in
a conference of country bankers relative to this subject. At the suggestion of the Administrative Committee of'this Association, our Committee has in charge the matter of urging an amendment to tile Federal
Reserve Act which will eliminate par collections and provide for reasonable charges.
At the suggestion of tile Executive Committees of the National Bank
and Clearing House Sections, our Committee has deferred action on
this proposed measure until after the Kansas City Convention, when
there will be an opportunity to further discuss the subject. In the
meantime Congressman Kitchin has introduced a Bill to amend the
Federal Reserve Act, having this purpose in view.
In connection with Rural Credit Legislation, which has culminated
In the passage of the Federal Farm Loan Act, our Committee from tile
inception of such legislation, followed the large number of Bills introduced on the subject, and was successful in securing the elimination of
certain objectionable features from the Act as finally passed. The functions of our Committee have extended to examining and discussing a
large number of Bills upon a variety of subjects of Federal Legislation,
.objectionable and otherwise,, and determining what, if any action,
should be taken thereon. It will serve no useful purpose to detail the
subjects of all these Bills.
During the year our Committee have held a number of special meetings, in which the legislative situation has been thoroughly canvassed.

127

Initial meetings were held in Washington on January 19th and 20th,
on which occasion interviews were had with individual Congressmen
upon particular measures. A conference was also, held with a Federal
Reserve Board at this time. On this occasion also a joint meeting was
held with the Executive Committee of the National Bank Section with
regard to certain measures affecting National Banks, and a joint conference of both Committees was held with the Board of Governors of
the Federal Reserve Banks, at which a number of subjects affecting
National Banks were discussed.
At the spring meeting of the Executive Council at Briarcliff, a special
meeting of our Committee was held, and also a joint meeting with the
Federal Legislative Council. During the interim between meetings, the
method of communication between members of the Committee on _Federal Legislation and the Federal Legislative Council, has been by
printed confidential Bulletin, referring to the subjects of legislation of
more pressing importance, and by telegraphic communication on matters
of special urgency, supplemented by a large mail correspondence. Both
the Chairman of the Committee and General Counsel of the Association,
who has acted as its Secretary, have visited Washington on a number of
occasions in connection with its work.
In closing this report it is fitting that special recognition be made
•of the service of Mr. H. H. McKee, of Washington, D. C., member of
our Executive Council, and of the Federal Legislative Council for the
District of Columbia. Mr. McKee has given daily of his time in watching and reporting upon the development of Bills in which our Association is interested, in personally interviewing members of the Senate and
House, and in aiding and guiding our Committee by his valuable advice
as to the proper course of procedure at critical times. Ills intelligent
grasp of the matters entrusted to his care and judgment provided an
inspiration to those associated with him in the work. His services
have been invaluable.
This report would not be complete did it not bear testimony to the
splendid services rendered by Mr. Thomas B. Paton, General Counsel of
the Association, and Secretary of our Committee.
He has been tireless in the discharge of his duties, and our success
is due in no small degree to his counsel and advice.
In conclusion your Chairman extends his sincere thanks to the members of the Federal Legislative Committee, Federal Legislative Council,
and the members of the various organizations in each State, who have
given so generously of their time and ability during the past year, at
the same time expressing the hope that the Federal Legislative Council
will be continued, and that the organization in all of its ramifications
will be fully perfected, which will insure a continuation of the results
which have been accomplished during the past year.
We are submitting herewith, without reading, a summary of legislation which has received the attention of the Federal Legislative Committee for the past year.
Respectfully submitted—
J. IL MASON, Vice-President, Commercial Trust
Co., Philadelphia, Pa.
J. H. FULTON, President, Commercial National
Bank, New Orleans, La.
JAMBS B. HOGE, President, Union Savings and
Trust Co., Seattle, Wash.
Committee
J. W. PERRY, President, Southwest National
Federal Legislative
Bank of Commerce, Kansas City, Mo.
S. A. SADO, President, Chattanooga Savings
Bank, Chattanooga, Tenn.
CHARLES A. IIINscu, President Fifth-Third
National Bank, Cincinnati, Ohio,
Chairman.

Report of Law Committee (Committee on State Legislation)
By amendment of the Constitution adopted by this Convention, the
name of our Committee has been changed from the Committee on Law
to the Committee on State Legislation.
Aside from the special
duties imposed upon our Committee from time to time by the Executive Council or the General Convention, its chief function is to
give consideration to State statutes affecting the business of the members as well as the subjects of uniform laws and commercial usage
and to recommend from time to time drafts of new statutes for the
approval of the Association and urge the enactment of such approved
drafts through State organizations. Only eleven states have held
regular sessions of their legislatures during 1916 namely:
MEETINGS OF STATE LEGISLATURES
Georgia, convened June 28: Kentucky, convened January 4th;
Louisiana, convened May 8; Maryland, convened January 5th; Massachusetts, convened January 5; Mississippi, convened January 4th; New
Jersey, convened January 11th; New York, convened January 5th;
Rhode Island, convened January 4th; South Carolina, convened January 11th; Virginia, convened January 12th.
UNIFORM NEGOTIABLE INSTRUMENTS ACT
We are gratified to report that the legislature of Mississippi has,
this year, passed the Uniform Negotiable Instruments Act which leaves
only four states which have not yet enacted the law, Maine, Georgia,
California and Texas.
PUNISHING THE GIVING OF CHECKS WITHOUT FUNDS
The legislature of Mississippi also passed the law recommended by
our Association which punishes the giving of checks or drafts without
funds. The legislature, however, modified our recommended form of
law by making it a condition to conviction that money or something
of value must be obtained upon the check; that the check must be
presented by the payee or holder within 30 days from its date and
a further modification permits the drawer to pay the check within 10
days after receipt of written notice of its non-payment, upon which
he escapes the penal consequences of the act.
The legislature of Rhode Island has also passe4 err recommended law
punishing the person who issues a check without funds, but changed it
by provision to the effect that if the maker deposits with the drawee
the amount due on the overdraft within 7 days after he receives
notice that it has not been paid, this will relieve him.

128

BANKERS' CONVENTION.

UNIFORM STOCK TRANSFER ACT
The legislature of New Jersey this year passed the Uniform Stock
Transfer Act.
The above are the only measures recommended by this Association
which have been passed this year. Other legislation of interest to banks
has been enacted during the present year in the different states, as
follows:

NEW LAWS IN RHODE ISLAND
In Rhode Island an act has been passed taxing interest-bearing deposits in national banks on participation or deposited in the same manner as in savings banks, constituting chapter 1359 Laws 1916. This
tax on savings and participation accounts in national banks follows
closely the Vermont and Connecticut laws except as to rate of taxation.

NEW GEORGIA LAWS
Georgia. The legislature passed an acceptance act and a usury act.
The acceptance act authorizes banks and trust companies to accept drafts
and bills of exchange drawn on them by their customers having not
more than six months sight to run and to issue letters of credit authorizing the drawing of such drafts and bills of exchange with a
proviso that no letter of credit or acceptance shall be issued by any
bank or trust company in the State of Georgia except against marketable collateral, to be specified in the face of such acceptance or letter
of credit. The usury act repeals the old usury law under which
a person or corporation taking usury forfeited the excess of interest
and which also avoided all titles to property made as a part of an
usurious contract or to evade the usury laws and subtitutes a penalty:
of forfeiture of the entire interest and a provision that no further
penalty should be suffered. -

SOUTH CAROLINA USURY LAW AMENDED
In South Carolina a law has been passed amending the usury law
by adding a new section reading as follows:
"No lender shall be charged with 'usury under the preceding sections by reason of money paid or agreed to be paid others by the
borrower in order to obtain a loan where the lender never took nor
contracted to take more than lawful interest; provided, however, that
suit may be brought within six months from the date of such transaction against such other persons as may have charged excessive fees
or excessive commissions and recovery may be had thereon for the
excess over and above a reasonable fee or reasonable commission." No.
534 Acts of 1916.

NEW LAWS IN KENTUCKY
In Kentucky, the 12th day of February of each year has been made
a legal holiday to be known as Lincoln Day. The law relating to
state depositories has been amended by the addition of a provision
that national banks assigned as depositories, having a combined capital
and surplus of $50,000 or over, shall not be subject to the examination
'provided. A law also has been passed to prohibit the declaring of
bank dividends until the surplus equals 10 per cent. of capital.

NEW LAWS IN VIRGINIA
In Virginia, the act of 1914 relative to trust companies and banks
doing a trust business was amended by omitting the requirement that
the word "trust" or "Trusts ". shall be a part of the corporate name
of a bank desiring to do a trust business.
A law was also passed authorizing a bank or trust company to accept
for payment at a future date drafts drawn upon it by its customers
and to issue letters of credit authorizing the holders to draw drafts upon
it or upon its correspondents at sight or on time not exceeding one year,
with a proviso that the total of such drafts so accepted or letters of
credit so issued for any one person, firm or corporation shall not at
any time exceed 10% of the capital and surplus of the accepting or
issuing bank or trust company. Constitutes Chapter 298 Laws 1916.
The interest law was also amended by authorizing banks to "charge
a minimum loan or discount fee of 50 cents on loans or discounts for
thirty days or more."

NEW LAWS IN LOUISIANA
In Louisiana a law has been passed authorizing banks to forward
*Scks direct to the drawee which, under the judicial law is negligence.
Other laws have been passed as follows, by the Louisiana Legislature:
OKLAHOMA FIXES LEGAL RATE OF INTEREST
Amending Act 179, of 1902, regulating Associations and savings " In Oklahoma at a special session of the Legislature an act was passed
banks.
fixing the legal rate of interest at 6% and the contract rate at 10%.
Amending Section 5, Act 45, of 1902 relating to reserves of savings,
CORNELITIS A. PRESLEY,
safe deposit and trust banks.
Chairman.
Amending Sections 1 and 6, Act 193 of 1910 relating to the number
and qualification of directors of banks, savings banks and trust companies and the borrowing by officers of such banks.
Annual Report of the Protective Department, L. W.
To require officers and employees of trust companies to furnish surety
Gammon, Manager.
bonds.
NEW YORK, N. Y., Sept. 1, 1916.
Amending Section 2, Act 112, of 1910 creating a state banking
During the period covered by this report there has been no marked
fund. Amending Section 5, Act 198, of 1898 regulating powers and
increase in the number of crimes committed against members of the
duties of state bank examiners,
Association other than could, be expected in proportion to the large increase in the membership.
NEW LAWS IN MASSACHUSETTS
ARRESTS
In Massachusetts an act was passed to empower trust companies to
accept drafts and bills and issue letters of credit, constituting Chapter
For the period from August 1, 1915, up to and including August 31,
189 General Laws 1916.
1916, I beg to report as to operations against criminals, as follows:
Also an act amending Section 17 of Chapter 219 Laws 1913 to per108
Total cases not disposed of arrested prior to August 1, 1015
mit deposit of trust funds in trust companies incorporated under
428
Total arrests since August 1, 1915
laws, constituting chapter 101 General Laws of 1916.
state
Also a law to limit and provide for increase in capital stock of trust
530
companies, constituting chapter 37 General Laws 1916. Also a law
307
Convicted
requiring savings banks to pay certain unclaimed deposits to the
116 423
Released, escaped, insane and (lied
Treasurer and Receiver General, constituting chapter 198 General Laws
1916.
113
Awaiting trial
The Legislature of Massachusetts passed an act making January 1
a legal holiday. Constituting chapter 104 General Laws 1916. A further
Since August 1, 1915, up to and including August 31, 1010, there
act was passed which gives the bank commissioner the same power over
have been burglarieS and attempted burglaries on members, and
savings and loan associations as over savings banks. Chapter 26,
similar crimes on non-members, as follows:General Laws 1916.
An act was also passed imposing a tax upon incomes. Chapter
Members Non-Members
269 General Laws 1916.
1
2
Alabama
A law was passed to permit the appointment of national banks as
1
2
Arkansas
trustees, administrators, executors. This however, was vetoed by the
2
1
California
Governor and the veto was sustained.
2
Colorado
1
Georgia •
NEW LAWS IN MISSISSIPPI
2
Idaho
The legislature of Mississippi passed the folowing laws with reference
8
Illinois
2
2
to banks:
Indiana
Chapter 97 Laws 1916, the Blue Sky Law.
2
Iowa
Chapter 103 Laws 1916. Prohibits liquor shipments into the state
4
1
Kansas
and makes it unlawful for banks to collect or pay drafts having at1
1
Michigan
tached a bill of lading or order covering intoxicating liquors.
1
Mississippi
Chapter 125 Laws 1916. Declares Thanksgiving Day a legal holiday
3
Missouri
for all public schools in the state after proclamation of the Governor
1
Nebraska
setting apart a day to be observed as Thanksgiving Day.
1
New Mexico
Chapter 207 amends sections 15, 19, 23, 34, 35, 38, 39, 56 and
2
New York
59 of the Banking Law of 1914.
4
North Dakota
An act to authorize the incorporation and operation of farm loan
2
1
Ohio
banks was vetoed by the Governor and the veto was sustained.
5
6
Oklahoma
1
South Carolina
NEW LAWS IN NEW JERSEY
1
South Dakota
1
In New Jersey the following laws of interest to banks were passed:
Texas
1
•
1
Chapter No. 46 Laws 1916 amends section 1 of the Banking Law
Washington
•
1
by adding the following proviso: "Provided, however, that with the
Wisconsin
approval of the Commissioner of Banking and Insurance, any corporation organized under the act entitled an act concerning trust companies
Of the 26 attacks on members, 7 were successful burglaries, 19
(revision of 1899),' approved March 24,1899, to take effect and conunsuccessful.
tinue the business of any bank heretofore organized under this act,
Of the 43 attacks on non-members, 27 were successful burglaries, 16
or under special -charter, or any existing national bank, may use the
unsuccessful.
word '
bank' or ` banking as part of its corporate title."
'
The loss sustained by members in connection with burglaries was
Chapter 123, Laws of 1916 provides: "Any depositary subject to
$7,754.03; while the loss sustained by non-members amounted to
withdrawal, by check or demand draft, shall pay any check or demand
$60,242.30.
draft drawn by any person who has funds on deposit to meet the same,
There have been 35 hold-ups on members with a loss of $65,821.93;
notwithstanding the death of such drawer in the interval of time
also nine sneak thefts with a loss of $26,511.34.
between the drawing of such check or demand draft and its presentaDuring the same period there have been 40 hold-ups on non-members
tion for payment, providing such presentation shall be made within
with a loss of $68,229.56; also two sneak thefts with a loss of
ten days after the date of such check or demand draft."
$2,148.00.

•

BANKING SECTION.
Our members, as a rule, report all attacks on them, also the exact
loss, while on the other hand, non-members rarely report attacks on
them, with the result that we do not obtain a record of some of. these
attacks or losses.
The following figures show the reported and attempted burglaries on
banks since the inauguration of the protective feature, so far as known:
Non-Members
Members
Difference

1539
451
1088

Loss
Loss

$2,190,438.72
266,801.20
$1,923,637.52

CORRESPONDENCE
During the period from August 1, 1915, up to August 31, 1916, the
Protective Department has received 36,741 reports and other communications from our detective agents. The department has also received 1034
letters and telegrams, and written 2497 letters and telegrams. These
figures do not include circular letters and similar communications.
PHOTOGRAPHS
The department now has 4720 photographs of criminals, comprising
burglars, hold-up men, sneak thieves, forgers and bogus check operators,
with a complete record of each.
OFFICES OF OUR DETECTIVE AGENTP
The William J. Burns International Detective Agency, Inc., now have
twenty-three offices of their own in this country, as follows: Birmingham, Alabama; Los Angeles and San Francisco, California; Denver,
Colorado; Chicago, Illinois; New Orleans, Louisiana; Baltimore, Maryland; Boston, Massachusetts; Detroit, Michigan; Minneapolis and St.
Paul, Minnesota; Kansas City, and St. Louis, Missouri; Buffalo and
New York City, New York; Cleveland, Ohio; Portland, Oregon; Philadelphia and Pittsburgh, Pennsylvania; Providence, Rhode Island;
Houston, Texas; Seattle and Spokane, Washington; and one correspondent at Des Moines, Iowa. They also have three special representatives,
C. E. Sears, c/o Hotel Albert, Jacksonville, Florida; P. R. Schumacher,
601 Young Street, Dallas, Texas; and Wm. Duffy, 407 East Broadway,
Salt Lake City, Utah. They also have offices of their own in London,
England, and Montreal, Canada.
INSPECTION TOUR
During the fiscal year I made a personal inspection of the Burns
offices at Spokane, Chicago, Kansas City, Baltimore and Philadelphia.
I also attended tile convention of tile Oklahoma Bankers Association
in May last, and made a personal tour in that state with tile manager
of the Kansas City office by going over the ground where tile numerous
hold-ups had taken place, with a view of becoming personally acquainted
with the situation there. I am pleased to report that the operations of
tile hold-up men in that State have been practically broken up owing
to tile number of arrests as tile results of the co-operation of the various
state and county officials, the vigorous prosecution on the part of tile
district attorneys, and the severe sentences imposed by the various
judges.
SUGGESTIONS
A large part of our troubles are due to the carelessness on tile part
of the banks in permitting customers to use funds represented in uncollected checks, and I believe tills practice should be discontinued.
Another trouble is caused by members allowing checks to be left on
their counters, not alone pads of checks on their own institution, but
also pads of checks of other institutions in the same locality. I would
suggest that no bank leave any checks on its counters, unless such
checks be printed across the face in large type,"Counter Check," that
is, to be used for withdrawing funds from the particular bank wherein
the check is used. I would also suggest that banks in trying to accommodate their customers who desire to withdraw funds from other banks,
have printed a form of check on which the customers are required to
fill in tile name of the bank on which they desire to draw, and have
same placed in charge of a teller, to be handed out only on request.
By following these suggestions it would not only save the banks a large
amount of money, but also save this Association the cost of making investigations in cases which come as a result of these practices.
DETAILED REPORT
For more detailed information relative to individual cases and the
work accomplished, I respectfully refer you to the monthly JournalBulletin, Section Two, which gives a detailed account of what is being
performed each month in connection with tile work of the Protective
Department.
I wish at this time to thank tile Federal, state, county and local
authorities throughout the United States for their co-operation, for
they have aided this department very materially in the investigation
of cases during tile fiscal year.
L. W.• GAMMON,
Manager.

Report of the Agricultural Commission by the Chairman,
B. F. Harris, President, First National Bank,
Champaign, Illinois
Member of the American Bankers' Association:
It is not known to all of you that tile .Agricultural Commission
is not provided for by our constitution, but that it was created
by the convention, therefore, it must report to you and only lives
from year to year at your will.
The chief activity of tile Commission is its publication of The
Banker-Farmer in addition to the very large and extensive correspondence it carries on with state associations and individual banks
throughout the entire country.
The expenditures of tile Commission for the year just ended, including thirteen months' expenses in several lines was $10,081.05
while the total receipts were $10,469.94.
The American Bankers' Association gave us an appropriation of
$4600, of which we have on hand $442.54, while individual banks
and state associations paid us $5869.94. In other words, of twelve
months' expense 651 2 Per cent, came from outside sources and tile
/
net cost to this association for twelve months was $3837.46.
We are charging state associations that subscribe for The Banker.
/
Fanner121 2 cents per member per year and we sell it to in-

129

dividual banks in quantities at $1.25 per hundred copies. If we anvance these prices 30 per cent. which would still be below
cost we would increase our net income $1500 and reduce the expense
to this association by an equal amount.
Twenty-three state associations—a gain of five during the year—
almost every agricultural state of prominence except Iowa, Indiana and
Missouri, are getting The Banker-Farmer. These three splendid states
ought to come to us—the price is trivial though a financial loss
to us.
397,982 copies of The Banker-Farmer were printed this year of
which 180,000 copies went to state association members while
217,982 copies were purchased and paid for by individuals and
banks.
A statement in detail of every single item with receipted voucher
is in the hands of your General Secretary, and its summary attached hereto.
Not one cent of expense money has ever been used by the chairman or any member of this Commission except in attendance on the
annual May meeting where certain expenses are paid for all your
officials as provided in your by-laws.
Your Commissioners have
all done more or less traveling in connection with the work but
not at the expense of this association.
During the three years since the publication of The Banker-Farmer
was instituted more than a million and a quarter copies—twentythree million pages—have been distributed throughout the nation,
carrying the message of the bankers' living interest in agriculture
and the public welfare. If you have followed the column, "What
They Say" on the back page of each issue you can form some
meager idea of the impression made on others.
It seems clear that, as a result of the present and growing upheaval and readjustments in international and national economic
and trade conditions, and the severe competition to follow, it is
our bounden and patriotic as well as selfish duty to inform ourselves
and co-operate with the public generally, to the same end, by
broadening the scope of The Banker-Farmer to include an all-American,,
non-partisan discussion of our foreign trade, shipping, tariff and
fiscal, as well as our manufacturing and agricultural needs.
Foreign bankers lead in such work, which is another reason why
they lead in many other respects. The policy of Mr. Vanderlip's
great bank in its comprehensive literature and constructive efforts
in this direction should be applauded and emulated.
Several members of this Commission and the chairman have had
many calls to go out and address various meetings in behalf of the
cause and it has been a matter of regret to all of us that we had.
to forego so many interesting and urgent invitations.
A very sincere and concrete evidence of the bankers interest in the
banker-farmer work, lies in the fact that the various state agricultural
committee chairmen are so alive and constructive in their work
which has been so much appreciated that almost invariably they have
been elected to the presidency of their several state associations.
We cannot close without urging every bank to take up at once
tile matter of distributing a number of copies of The Banker-Farmer
each month among its clients. It is the cheapest advertising of
which we know and almost, without exception, every bank undertaking it continues and increases its orders. Several hundred copies
monthly are even purchased by Canadian banks to use in this
Way.

Very respectfully submitted,
B. F. HARRIS,
Chairman.

Report of the Library and Reference Department
MARIAN R. GLENN, Librarian.
Five years ago the Library Department was only an idea in the mind
of the General Secretary.
The need of such a reference service to Association members was
obvious, but no action was taken until Secretary Farnsworth created
the department in October, 1911. At that time no special appropriation existed, and tile facilities for developing the service consisted
only of a few books, some unbound periodicals, and a trained
librarian.
There now exists at headquarters, a department requiring a staff of
four assistants to collect, care for and supply the information requested by bankers. Three rooms are used as working quarters for
tile cataloging, the reference work, and the mail order feature known
RS tile "traveling package library" service, which supplies current
banking and business information to Association members.
Tile original book collection of less than 400 volumes has been increased to nearly 3,000, of which only about 700 have been purchased.
Where there were only a few unused magazines five years ago, there
is now a row of vertical filing cases, containing nearly. 40,000 articles, addresses, pamphlets, pictures and clippings, mounted and
classified according to tile hundreds of financial subjects which they
cover. Information which, five years ago, was unavailable to bankers
except at great expense of time and money is now easily supplied from
tile more •than 30,000 card index entries which have been made to
periodicals, books, reports and proceedings.
A noteworthy feature of the Library is the clipping records which
are kept of controversial subjects connected with money and banking.
From no other financial library can there be so readily obtained a
resume of such events, for instance, as the money trust investigation,
tile postal savings bank controversy, currency reform debates, the
Riggs Bank case, and the development of the Federal reserve system and the regional banks.
For the first four years, the Library was without a definite policy,
other than that of supplying Association members, and occasionally the
press, and economists, with the current information requested. In
1915 the Librarian suggested that, since the Library was maintained by
the national organization of American bankers, it should become responsible for keeping as complete a record as possible of American experience in monetary and banking systems.
Tile need of some library assuming the function of a central source
of such information, is emphasized by the amount of pamphlet and
document material wasted yearly by member banks, and the difficulty
of securing facts regarding early phases of American banking experience

BANKERS' CONVENTION.

130

which would be of current value in the analysis and interpretation of
the trend of economic events.
Since the Association Library is specializing in practical banking,
rather than economic theory or investment data, it seems a more logical
center than other financial libraries for the collection of information on
American banking experience, and its daily index of all articles and
Items of importance in financial periodicals, constitutes a fairly complete record of present events and conditions in American banking.
The Librarian suggests, for the consideration of the incoming Library
Committee, the problem of how the Library shall acquire that background of previous American experience in money and banking which
it should possess, or to which it should have access, if it is to fulfill
its function as the representative American financial library. There
are several important private collections which will eventually be
available for purchase, and which properly belong at Association headquarters. Financial provision should be made which will secure an
option upon at least one of these collections, or permit the purchase
of portions of other collections as they come into the market.
In the opinion of the present Librarian, it will not be advisable to
emphasize the historical as fully as the current features of the Library,
but, since it is keeping more complete current records than any library
of its kind, it is obvious that its future historical function in connection with banking, business, and economics, must be adequately 'provided for by making its resources as complete as possible now. Each
year adds to the value of the Library's card index records and its
special collections of pamphlets on certain subjects, but its usefulness
can be increased by reaching an early decision as to whether the
Library shall attempt to complete its resources by purchasing special
collections, or whether it shall begin the compilation of a central
card catalog of financial information in other libraries throughout
the country.
The Library's most immediate problem is always that of advertising
Its services to Association members. While the Library is now loaning eight times as much material as in its second year, and bankers in
all but three states borrowed data or requested information during the
past year, the department still has undeveloped posilbilities for
service which the international activities of American bankers will
Increase during the coming year.
Since the last report, 536 books have been added; 2,907 pamphlets;
11,400 clippings; 460 pictures; 216 advertisements, and 9,836 card
Index records; while 16,000 items have been loaned. In addition to
the referance correspondence and the answering of requests at the
Library and by telephone, a list of subjects covered by the package
library service has been published in pamphlet form; a purchasing list of books for bank libraries and a thrift bibliography for
the Savings Bank Centennial have been compiled; a check-list of
periodicals and annuals in New York financial libraries has been
made; a canvass of libraries has been carried on by correspendence
in an effort to secure financial pamphlet literature; and the Library
has distributed hundreds of current pamphlets to Association members.
MARIAN It. GLENN,
Librarian.

Report of the Treasurer, E. M. Wing
LA CROSSE, WIS., Sept. 13; 1916.
To the Members of the Executive Council and the American Bankers
Association:
The cash balance in the hands of the Treasurer, August 14, 1915, was
$36,097.75. The balance on hand September 1, 1916, was $32,264.22.
During the year the receipts have been $264,780.46 and the disbursements $268,613.99.
On September 1st the drafts for membership dues were sent out,
15,471 in number, amounting to $246,055, an increase of $10,250 over
last year, and 775 in number.
While the income of the Association shows a large increase, the expenses are increasing even more rapidly, and this year for the first
time in some years, will exceed the income of the Association.
The surplus funds of the Association are invested as follows. The
securities, under the control of the Executive Council, are held in the
Bankers Trust Company of New York as follows:
Carried On
Cost
Par Value Books At Market Value
Chicago, Burlington
and Quincey, Ill
Division, 4's due
1949
$50,000.00 $47,400.00 $47,000.00 $50,843.75
Chicago, Burlington
and Quincy, Joint
11,559.09
11,730.00
11,600.00
4's due 1921
12,000.00
Atchison,
Topeka
and
Santa
Fe,
General Mortgage .
27,750.00 30,825.00
28,500.00
30,000.00
4's due 1995
New York City Corporation,
Registered VA's due
25,506.67
26,500.00
27,675.00
30,000.00
1940
$122,000.00 $114,000.00 $114,155.00 $118,734.51
Respectfully submitted,
E. M. WING,
Treasurer.

Report of the Committee on Insurance
Your Committee on Insurance begs to report that its work for the
last twelve months has included many forms of activity from which
satisfactory results are being obtained. Among these are the compilation of a blanket bond, continued introduction of all copyright
forms to the member banks, investigation of claims, assistance in
the settlement of claims, collection of data at the direction of the
Executive Council and furnishing member banks information and assistance on a multitude of insurance subjects.
BANKERS' BLANKET BOND
There has been a great demand from many of the banks of this
country for a form of insurance covering fidelity and burglary as
well as forgery, sneak-theft, misplacement or destruction of money

or securities and other losses not heretofore included in the insurance forms offered by American insurance companies.
Certain underwriters, representing Lloyds' groups, of London, England, have, for a number of years, offered American banks a blanket
bond, undertaking to cover losses due to dishonesty of officers and
employees, burglary, hold-up and other losses referred to above. In an
effort to meet this demand we conferred early last year with various
insurance companies, looking toward some arrangement whereby the
American companies could meet the Lloyds' competition under a
form of bankers' blanket bond, that would meet the approval of this
committee, retain in this country large sums of insurance premiums
that are now going abroad and eliminate possible litigations in the
colection of claims, which might arise by reason of the fact that
Lloyds' underwriters are not licensed to transact business in the
United States.
During a period of twelve months four forms of
blanket bonds were compiled by insurance companies and submitted
for the approval of your committee, each form being an improvement
over the former, but none of them coming up to our requirements.
We are happy to report to you, however, that within a few days
after the May council meeting, one of the leading insurance companies
of New York made further concessions, which enabled this committee
to approve the form offered, and most of the insurance companies
have promptly followed, so that a very satisfactory form of blanket
bond has been available to the banks for the last four months, a copy
of which is hereto attached and made a part of this report. The
history of this new policy, together with a list of its principal advantages, will be found in the July issue of the Journal of the American
Bankers' Association. In purchasing this policy, the banks are cautioned to see. that they are furnished with the form bearing the printed
approval of this committee under date of June 8th 1916, The introduction of this blanket form of insurance by American insurance cornpanics marks an epoch in insurance underwriting, but your committee
is of the opinion that continued co-operation with the insurance companies will make available to a larger number of banks this attractive
form of insurance.
ADJUSTMENT OF CLAIMS
Your committee has found a wide field for service in assisting in the
adjustment of claims of the banks against various insurance companies.
Through the co-operation of the protective department of the Association we are furnished with a prompt report of all burglary, robberies
and hold-up attacks made against member banks, which reports are
immediately followed up by us by correspondence directly with the
bank.
Last year we investigated seventy-one cases involving total
claims of $107,276.11. Of this amount $43,272.02 was not collectible
under the terms of the policies carried.
In the majority of cases,
settlement is satisfactorily made by the insurance companies within
the terms of the insurance contract in force at the time of the loss,
and in such cases your committee can only obtain and preserve a record
which becomes invaluable both as to determining the losses of member
banks and more particularly for the information and guidance of your
cOinmittee in eliminating dangerous restrictions from insurance contracts,, In such cases however, where appeal is made by the banks to
this committee for aid we have been able to exercise a most satisfactory influence for better and more liberal settlements in spite of the
failure of the claimant bank to have secured the best available form
of insurance.
It will undoubtedly be of interest to refer to at least one of these
cases for the purpose of bringing to your attention both the value of
this Association's service to its member banks and the possible intimate
relation of the solvency of the bank to the character of its insurance.
Last 'April the protectLve department referred to this committee a holdup loss of approximately $17,000, occurring in one of the member
banks. The bank advised this con:mince in reply to its inquiry that
the loss exceeded the surplus of the bank—that the insurance company
had denied liability under its policy and that unless some adjustment
could be made, inevitable embarrassment to the bank would follow.
Upon investigation, we found that the bank held an old form of insurance contract provided by the company itself in which was contained under the schedule of equipment a warranty to the effect that
all money in excess of $5,000 would be kept locked in a safe under at
least one combination lock when not more than one man was in charge of
the bank. The robbers entered the bank quietly in the middle of the day
and waited until all employees but one had gone to lunch. • The safe
was not locked and the robbers were able to get away with about all
of the money in the bank. The insurance company's denial of liability
was based upon the failure of the bank to observe the warranties as
set forth in the policy.
Your committee after several conferences with the insurance company obtained a compromise settlement under which the bank received
approximately one-half of its loss, The insurance company attempted
no evasion of its exact legal liabilities as set forth in the contract
existing between itself and the bank.
The insurance company received this committee with every possible courtesy and finally made
settlement far beyond the technical restrictions' laid down in its
policy. The copyright burglary policy of the American Bankers' Association does not contain any warranties, and had our policy been
purchased by this bank at the same cost, the loss would have been
fully covered.
PUBLICITY
Your committee has not only undertaken the compilation of improved
forms of burglary policy, fidelity bonds and blanket bonds and the
investigation of burglary and robbery claims, but has further taken
every means possible to bring the service of this committee to the
attention of the member banks, The columns of the Journal of the
Association have been used, many copies of our annual reports have
been distributed, 25,000 copies of the warning cards have been gotten
out with the assistance of the state associations and interested banks,
and the correspondence of your committee has grown to approximately
3,000 letters in the last twelve months. Requests for information, opinions and other character of insurance service are being continually received in increasing numbers and our replies are bringing the most
satisfactory and complimentary acknowledgments.
For the information of the membership generally, it should be
repeated that the Association has provided this Committee with a
Secretary who is an able insurance expert, without whose services
it could not accomplish any important results in its consideration
of a business so highly technical as that of insurance.
Your committee desires to express publicly its appreciation of the services
Acknowledgment is also made of the
rendered by its Secretary.
hearty co-operation of the officers and other committees of the Association and the Secretaries of the state associations.
GENERAL
The Committee should continue to compile data which will enable
It to get accurate statistics in reference to proportion of losses to
premiums paid. When complete data is secured, it will be invaluable
to members. The improved policy forms have already greatly reduced
the cost in that our members are now getting more for their money
than ever before.
Conditions change rapidly in the business of insurance, and new
The banks
problems are continually confronting your committee.
of the country expend annually more than four million dollars for
various forms of insurance protection, the validity of which is the
most serious import to them, and your committee cannot too strongly
emphasize the need for continuous and expert attention to the subject
by this Association.
Just as the protective sign of the Association guards member banks,
just as the moral influence of bank supervision conduces to better conduct of the business of banking, so the continued activities of your
insurance department are exerting a wide and growing influence
for the better upon all insurance interests having relations with the
banks of the country, at a cost to the Association of twenty-five cents
per member per annum.
Respectfully submitted,
OLIVER J. SANDS, Chairman,

Detailed Report of Proceedings.
FORTY-SECOND ANNUAL CONVENTION, HELD AT KANSAS CITY, SEPT. 28-29, 1916
FIRST DAY'S PROCEEDINGS.
• MORNING SESSION,
. Thursday, September 28, 1916.

JAMES K. LYNCH, President, presiding.
FREDERICK E. FARNSWORTH, General Secretary
Convention IIall, Kansas City, Mo.
The President called the meeting to order at 10 o'clock
A. M.
Invocation was said by the Rev. George IL Combs.
THE PRESIDENT:
The Honorable George II. Edwards,
Mayor of Kansas City, will deliver an address of welcome.

Address of Welcome by George H. Edwards, Mayor of
Kansas City
Mr. President, Members of tho, American Bankers' Association,
Ladies and Gentlemen:
On behalf of Kansas City, / want to extend to your Association,
Mr. President, a hearty welcome to our city.
I suppose that this week we have had more wealthy men in our
town than we have ever had here before, and -we kind of like BA°
feeling. We would like to have you people stay as long as you can.
We would like to have you come back as soon as you can. If it is
possible for you to do so, we would invite you to stay until our tax
.assessor can get each one of you on his roll (Laughter), and we would
like to have you to be sure to come back in time to pay the taxes.
We are building a great city here at the Junction of the Kansas
and Missouri River, and it has not been an easy task. The site of
Kansas City was perhaps as forbidding for tile building of tile city,
as any that you could find, far or near. Where our great buildings
stand were high rocky bluffs. Where our streets are were deep ravines.
Those bluffs had to be leveled down, and these ravines had to be filled,
.and it was at the cost of tremendous energy, and the expenditure of
great sums of money that this was brought about.
The men who have made Kansas City, had plenty of courage, they
had plenty of foresight; they had plenty of energy, but they lacked
in capital; and I want to say to you, Mr. President, that the banks
•of Kansas City in that respect tire very largely responsible for our
rapid growth. We could not have in the time that we have taken
built such a city as we have here, regardless of the fact tliat we
have a tremendous territory back of us, rich in agricultural products,
rich in mineral products, with oil and gas in plenty, we could not
have, as I say, even with these resources built such a city as we have
•built in the short time that we have consumed in accomplishing this,
without the help of our friends tile bankers; and I know that each
merchant in town; I know that all our inhabitants realize tile part
that these banks have had in this work.
We feel that we have a great city here. We feel that we have
really a great city, but we are not content. We have ambitions, and
without endeavoring to discourage any of our sister cities, I might say
that we hope to be, and we expect to be tile third greatest city in
the United States.
We will not be satisfied when we have accomplished this purpose, but
we feel that we are making progress.
Today, Kansas City, greater Kansas City—and you know our town
lies in two states, though it is really one community. Kansas City
. just across the street from Kansas City, Missouri. Our interests are
-common, our business is common. Our bank clearings in Kansas City,
Missouri, are made up to a considerable extent of industries located
in Kansas City, Kansas, and I say that this community has a
population of something like 450,000 people.
We are first with a winter wheat market. We are first as a bay
market. We are first as a yellow pine market. We are first as a
market for agricultural implements, of all tile cities ill the United
•States. We are second as a primary grain market. We are second as
a live stock market. We are second as a packing center. We are
sixth in bank clearings part of the time, and part of tile time we are
fifth. I do not want our friends front St. Louis to take any exception to this, but I am merely stating facts. (Laughter.) We are
tenth in the value of factory products. We have over 1,200 factories,
with an annual output of over $300,000,000.
You have seen something of our park and boulevard system. You
have seen something of our residence districts. You have seen something of our downtown retail district, so I will not speak of those
things; they speak for themselves.
We have here an assessed value of property for taxation purposes
of $210,000,000, that is in Kansas City, Missouri, alone. We tax on a
basis of from 33% to 40 per cent, so that our real value is pomething
• over $525,000,000, and our total net indebtedness is $5,200,000.
In other words, our indebtedness is less than one per cent of our
net worth.
We are a young city. Fifty years ago, the first passenger train
entered Kansas City. Today, we are second as a railway center; but
while we feel that we have accomplished much in a material way,
I for one feel that we have been lacking in some respects; and I
feel that our lack is that which is common to business men, to men
who are absorbed in their individual business, and especially to
bankers; and I am going to say something about what I conceive to
be the shortcomings of your fraternity, as well as of other business
mot.

For many years, Mr. President, I have been taking advice from
bankers, and I can say to you that it is with a great deal of satisfaction that I have an opportunity to offer a little advice to you men.
(Laughter.)
I feel very strongly that the banker and the business man is inclined to take too lightly, his responsibilities as an American citizen.
If your city councils are made up of war dealers; if your state legislatures and your houses of Congress have demagogues and grafters
in them—and I do not believe, Mr. President, that there is nearly
as many of that sort of people in public life as some newspapers
p
would lead us to believe—but if your Congress and your legislatures and
your city councils are filled not with men who are crooks, but even
with men whose education and whose experience does not fit them to
discharge the duties of those offices, to tile good of the whole people,
you, Mr. President, and people like you, are alone to blame, and that
condition will not be remedied until the business man and the banker
realizes that be owes to the cdmmonwealth, something more than the
running of his business in an economical and profitable way. You
cannot get away from these responsibilities, and if you do continue
to try to get away from them, that lack will very materially decrease your power to earn money.
True, there are notable exceptions to the rule that business men
and bankers do not give of their time and effort to the good of the
commonwealth. Leland Stanford of California was a banker, yet he
founded Stanford University. Stephen Gerard of Philadelphia was
a banker, and he founded Gerard College. Lyman Gage, one of your
former Presidents, was a banker, and he served his country acceptably in the Cabinet.
Here in Kansas City we have had numerous instances of bankers
sacrificing their time and their money for the good of the city. Mr.
E. F. Swinney of the First National Bank, has devoted considerable
time to the Board of Education work. He has also served the City
as a member of the Hospital and Health Board. George W. Fuller, of
the Fidelity Savings Trust Company, is now, and has been once before, a member of our Park Board, and it is largely due to his efforts,
and to the efforts of the men associated with him, that we have such
a park system as we have here today. Granville M. Smith is giving
of his time to the City as a member of the Civil Service Board, a most
undesirable job. But these men are the exceptions. The ordinary run
of business men and bankers are_ content if they can handle theit4
business in a way to bring them profits, and take care of their
customers.
It is true also that many of you people will subscribe to campaign
funds and, sometimes, by so doing you make things worse than they
would have been had you not so subscribed..
What we need, my friends, is not only your money in politics, but
we need your personality. We need your brains; and until such time
as you can give of your personality, of your time, of your experience
and of your brains to the political affairs, politics will be run as
they have been run.
This week, I have been playing some golf with some of these
bankers. I can remember the time here when we were glad to get
money at eight per cent. You people are certainly developing into a
kind of benevolent society. Recently, we have been able to get money
at six per cent, and sometimes at five per cent, and these men to
whom I have been talking this week, are talking of four per cent, and
I would not be surprised if before long we could get it as low as three
per cent, and the time may come when you bankers will offer your
customers money without interest, as an inducement to bold their
business. (Laughter.)
Now, Mr. President, that there may be no misunderstanding, we
want to extend to you again our most hearty welcome. We are glad
to have ,you with us. We want to do everything that we can tei
make your stay here pleasant and profitable. We will go any lengths.
We will even go so far, Mr. President, as to furnish you with a
President for the coming year from Kansas City, and I want to say
to you that if you elect Peter Goebel, as President of this Associayou and
tion for the coming year, Kansas City will guarantee that
we will never regret your coming to us for this meeting.

THE PRESIDENT: I will now introduce Mr. J. W. Perry,
the President of the Kansas City Clearing House Association,
who will add something to the Mayor's words of welcome.
Mr. J. W. Perry (Kansas City Clearing House Association):
Mr. Presidefit and Members, Ladles and Gentlemen: It is a
great pleasure to me, on behalf of the Clearing House banks of
Kansas -City, to welcome the membership of the American
Bankers Association to our City.
From listening to the words of our Mayor, you would think
and I
that we were already the second city in the country,
Kansas
hope that sometime we may be; but the bankers of
City are not making claim to anything to which we are not
Justly entitled.
We invited you here because we wanted you, because we
like you, because we want to feel that we have an interest in
your work, and that you have an interest in our work, as
well as in our City, and we hope that your stay here will be
altogether profitable and pleasant.
It is somewhat of an undertaking for a city of our Size,
to entertain the membership of the American Bankers Association.
Our facilities for entertainment are not all that we would

132

BANKERS' CONVEN1ION.

like to have, but gentlemen, what we lack in facilities, and
what we lack in natural resources, we are making up to
the best of our ability, with our good will and our endeavors
on your behalf.
Since your coming here, the expression has been made from
time to time that you were quite satisfied with our efforts,
but I want t2 tell you something about the men who have
been responsible for this work. Mr. George Hobby, of the
Interstate National Bank, is the Chairman of the Entertainment Committee, 'and we leave it to you to judge of his
efforts in that respect.
Your convenience in hotel accommodations has been provided for and looked after by Mr. Menefee of the Commerce
Trust Company, the good roads that you have traveled over
in our cities, and some of them are darn bad, and in our country, have been looked after by Mr. William T. Kemper, and
Mr. George W Fuller, members of our Committee.
The Ladies' Entertainment Committee, of which Mrs. Perry
is Chairman, has also been well looked after by Mrs. E. F.
Swinney, in charge of the luncheons at the clubs of our
City, and by Mrs. George W. Fuller, looking after some this
afternoon in some of our Kansas City homes.
We regret very much, gentlemen, that we have not been
able to invite you to the clubs and to the homes, but we
took a solemn promise in inviting this convention here, that
we would do nothing in an entertaining way that would
detract in any way from the sessions of this convention, and
we are going to keep the faith.
Now, Mr. Chairman, rather than burden you with the remarks that I have expected to make, I am going to ask that
the few remarks that I want to make for the record be
handled as you see fit, and in conclusion, I want to say to
every man, woman and child that have been the guests of
our city, that the Kansas City Bankers welcome you heartily,
and we hope that your deliberations may be such as will bring
credit to you and very great pleasure to us.
Gentlemen, the banking business at this time is confronted
with problems that never before confronted the American
banker.
The devastating war that is going on abroad, the wealth
that is piling up in our country, such as was never had
in any country in the world, is going to be a problem, and
you and I as bankers are going to have to solve these difficulties; they are difficulties. No country was ever surfeited
with wealth such as we have. No country was ever put into
possession of wealth so rapidly as we now are getting it,
and you and I are laying up problems for the future; and we
just as well may make up our minds now as hereafter, that
you and I as individuals, and you and I as bankers are going
to have to pay the price.
I hope, gentlemen, that this price will not be such a price
as is being paid by our brothers across the sea, but it is
going to be paid, and you and I had just as well start in
• now to help to solve these problems, and it is one of the great
satisfactions in having you here that the American bankers
will at this convention plan well for the future.
I would regret it as long as I lived, if after the war is
over, the American banker was confronted with problems that
he is not able to handle, and I believe that with our new
Federal Bank Law and with our business as well organized
• as it is today, we need have no fear for the future, if we
are just as conservative as I think you are, and will be hereafter.
Mr. Chairman, again I want to say to you that we welcome
you to our city, not only on your own account, but, gentlemen,
we have a pride in having one of our number, Mr. P. W.
Goebel, a candidate for your presidency, and if he is elected.
as our Mayor has said, we are going to guarantee to you the
efforts of one of the biggest and best men ever produced in
this part of the world. (Applause.)

Address of Welcome of J. W. Perry, Pres't Kansas City
Clearing House Association
One year ago this month, in the city of Seattle, it wfis my privilege,
in behalf of the Banking Interests of Greater Kansas City, to extend
to the membership of the American Bankers Association, a cordial invitation to hold their Forty-second Annual Convention in our city.
We were sincere in our invitation and we are now delighted with your
presence, and glad of the opportunity to welcome you in the true
Kansas City spirit. Joining us in this invitation, were the bankers
of the great states of Missouri, Kansas and Oklahema, and in their
behalf, also, we extend to you a hearty welcome. The comfort, convenience and pleasure of each of our guests shall be our every,thought
.
while you are with us.
The history of your Association is closely linked with banking events
in our own state and many men prominent in your councils have been
among our most successful bankers. It was our privilege this very
week, twenty-seven years ago, to entertain the American Bankers
Association, with one of our awn state bankers, Hon. Charles Parsons, of St. Louis, as president. We sincerely hope that many of
those present at that time are with us today, and if here, they will
be the best judges of the real progress made by your Association and
by our city as well.

From these hills, an illustrious Missouri statesman, Thos. H. Benton, looked out over what he declared to be the greatest agricultural
empire on earth, and according to the late James J. Hill, here will
be builded one of the great cities of modern times.
It is a wonderful privilege to grow up in, :and have a part in building such a city as Kansas City.
It is here that an honest effort, if
well directed, can have its reward; and here also that opportunity is
knocking at the door of young America. Some of our success and
prosperity may be accounted for by the fact that Kansas City is surrounded by the greatest area of good agricultural land to be found
anywhere on earth. We reap not alone from the soil, but from the
depths of the earth, which yield to us treasures in oil and mineral.
Since the day John C. Fremont set out toward the land of the setting
sun, we have been receiving tribute from and supplying the needs of
a vast extent of territory to the West of us; and through this, the
gate-way .to the Southwest, there continues to flow a traffic that will
make this one of the great commercial centers of the country.
We are glad indeed that our friends from the East can be with us today; we are grateful to many of them for assistance in the past, for
no growing community such as this can be properly developed without
assistance both in men and money from older and richer states. By
drawing on the East for these essentials, in years past, we have been
able to make rapid progress, and to the East we now express our
gratitude. With such undeveloped resources as lie about us, we have
been able to attract a very desirable class of people,. and we have
also been able to interest capital in abundance for our needs. To
our friends in the South and West, we are rendering the same assistance we have received from our friends in the East in years past, and
as the East has prospered through our development, so we have prospered as development of the South and East has taken place.
While we of America may be separated by a vast expanse of territory, yet we are closely tied by bonds of kinship and by ties of
business, and all must acknowledge a marvelous pride and love for
the land we call "Our Country." We believe this to be the time and
place to discuss the many important problems that now confront us as
a nation. Wonderful opportunities in business have been pressed upon
us in the last three years, and an accumulation of wealth such as
never was known in the history of the world is ours. With this great
storehouse of wealth, and tile employment of all our resources, in
labor. and commerce, we must of necessity have been gathering problems for the future. When world conditions have changed, when we
are no longer able to employ all our commercial resources in profitable
foreign trade, when we must seek markets and trade under peaceful
conditions, and when the gold of the world shall flow. out to pay the
wages of millions of men in peaceful pursuits instead of in war, then
it will be that a steady financial policy, both governmental and commercial, will be needed. These changed conditions must come, and
when they do, it may well behoove us as bankers to have our house
in order; for the greater part of the wealth of the world outside of
America will have been either destroyed or mortgaged for generations
to come. No man here present will live, to see the day when the accumulating war debt of the waring nations of Europe will be paid,
and it is only on a false hypothesis that we congratulate ourselves over
the present prosperity of our country, had at tile terrible cost and
distress existing abroad. And we may as well make up our minds
now that we will have to help pay tile price. It may not come to us
in such severe form as it is now coming to our friends across tile sea,
but it must and will come in some way.
Therefore, gentlemen, let us Consider well tile signs of the times,
and so build our house of finance that the breakers will not fall too
heavily on our shores. Situated as we are, so far from the scenes of
war, and not being engaged in the manufacture and sale of war supplies to any great extent, we believe this to be a fitting place and an
opportune time to plan well tile work ahead of the American banker.
Not alone are we influenced by conditions abroad. Our own country
has conditions, political and financial, to be solved. Such a mass of
legislation, Governmental, State and Municipal, as Was never thought
of before, is being enacted, and the banking business is getting its
full share of attention. I am, therefore, led to believe that this is a
most important time in American finance and may your deliberations
here begun, be of a character that will protect the interests of your
members wherever situated.
The Associated banks of Greater Kansas City have only one purpose
for the present, and that is to see that you, our guests, enjoy your
stay. To this end, we shall endeavor to supply a pleasant and hospitable entertainment. In this effort, we shall have with us the Commercial Club of Kansas City, and every citizen. We are all really
glad to see you. Your membership is of such a democratic character
and the purpose of your association so fraught with high ideals, that
it is a pleasure to us to have you with us, and we feel that Kansas
City will be much benefited by this closer acquaintance. We extend to
you all a cordial welcome.

Reply to Address of Welcome, by Pres't James K. Lynch
TIIE PRESIDENT: Mr. Edwards, the Mayor of Kansas City,
and Mr. Perry, the President of the Kansas City Clearing House
:
Association, Gentlemen of the Convention. I have been asked
to say a few words in response to the addresses of .welcome
that have just been made to us.
I regret that I am not more competent to do it, more competent to express the thanks that we feel at the manner in
which we have been received.
For over forty years the American Bankers Association has
been . meeting in different parts of the country, usually at
the Atlantic seaboard or near there, but some of the meetings
have been on the Pacific and some on the Gulf of Mexico. Last
year we met in the extreme Northwest of this country, and
now we are assembled in the heart of the continent, in
Kansas City, the city nearest to the geographical center of
tbe United States.
I come from a state that produces oil and wine, nuts
and raisins, fruits and flowers, the salads and desserts of

BANKING SECTION.
our National Banquet; but the beef and the bread are produced here in Kansas City—in the vicinity of Kansas City,
the granary and the cattle market of America.
Our meetings are held for the purpose of mutual instruction,
of education, if you please; but I think that we all realize
that we learn more from the enlarged view that we obtain
of our country from the opportunities of seeing this splendid
heritage that has been handed down to us than we do from
addresses and speeches, no matter how carefully they may be
prepared; and so I congratulate you on meeting in this city,
that 'represents, as it does, the solid and substantial elements
in our everyday fields.
As far back as the time that I studied geography,—and
that was some years ago—I recall that the State of Missouri
was the center of the lead and zinc industries. Recently oil
has been developed, and you have in the minerals, as well as
in the food stuffs, a substantial—the necesary everyday elements of our prosperity.
It did not need the gracious words of welcome which we
have received to assure us that your citizens are giving us more
than their time and their money, that they are giving us that
gift without which all others are as nothing,—that they are
giving us themselves ; and in reply to the excuse or apology,
perhaps, given by Mr. Perry, I wish to say that in no city
that I have attended a convention have things been more
Mr. Perry, if you
pprfectly adjusted than they are here.
&ready occupied the position which perhaps some day you
are destined to attain, the first city in the United States, you
could not do better as regards those essentials than you have
done today, and on behalf of the bankers of America I thank
you.

• Annual Address of the President, James K. Lynch
Following the language of the Constitution, it is my duty to make
to you a formal report, "summarizing the general condition of the
Association." For statistical information, I shall refer you to the
reports of the other officers of tile Association and to the report of the
Executive Council. You will be pleased to note that there has been a
substantial gain in membership since the last Convention, and that
we now have 16,016 members. When we consider that the total number of banks in the country is about 28,000, and that of the nonmember banks a considerable number are savings banks affiliated with
national banks holding memberships, this is a very satisfactory showing. There are, however, many banks not now members that would
derive substantial benefits from the Association, which they in turn
would strengthen and assist in the work of raising the standard of
banking. Let me ask all of you to urge such banks to join.
Immediately following the Seattle Convention, the National Bank
Section was organized and during its existence of ices than one year,
has demonstrated its value. Of the Sections authorized by your bylaws, the State Bank Section is the only one yet to be organized, and
there is no reason why the work should not be undertaken at an early
date.
The policy of dividing the work of the American Bankers Association
into Sections has been fully vindicated. Through this means special
problems affecting particular lines of business are discussed by those
most interested, while the Sections have learned to co-ordinate their
work with that of the Association. Through the better understanding
which comes with time, there is no doubt that the small differences
necessarily arising will be adjusted and that the various parts of the
machinery will work together in harmony.
The Trust Company Section Is the oldest of the Association Sections. It is thoroughly organized and it has done much important
work in shaping the growth of this new branch of banking.
The Savings Bank Section has undertaken and is carrying out a
special campaign on the subject oc thrift, always a timely topic but
particularly so this year, as it is the centennial of the establishment
of savings banks in this country. The work has been characterized
by a high order of ability and must have a good effect even on a
people so extravagant as our own. It is to be hoped that this campaign will be continued and that the material furnished by the Association will be used by the savings banks throughout the country. It
is only by long and persistent effort that results can be secured when
dealing with a subject not in accord with the present disposition of
the people.
The Clearing House Section has been the means of co-ordinating the
activities of the loosely organized clearing houses in the different
states. Its great achievement is the numerical system, by which numbers are substituted for names of banks and adding machine records
and letters are made possible.
The State Secretaries Section keeps the state associations in touch
with each other and in touch with the American Bankers Association,
and through its means unity of action has been secured and duplication of work avoided.
The Department of Public Relations, authorized by the Convention
of 1914, has proved of especial value in securing for the bankers of
America the right kind of publicity. Of the other kind, we can all
agree that we have had too much, and this has been due in great
measure to a certain shrinking timidity which, comes over the banker
when he is invited to say anything for publication. Banking is such
an Important matter to the people that it cannot be ignored by the
newspapers, and if they are not furnished authentic information so
presented as to have a news value, they cannot be blamed for printing what they can get.
The JOURNAL, which is edited by Mr. Welton, the Manager of the
Department of Public Relations, has advanced from a formal announcement of the routine of the Association to a live publication,
giving not only news but opinion, so presented as to be eagerly read
and to be quoted by the daily papers as well as by the financial
journals.

133

The American Institute of Banking, a Section of our Association, is
so firmly established and has so thoroughly demonstrated the importance of its work, that it requires no extended notice here. The
correspondence course of instruction is bringing the advantages of the
Institute to the young men in the country banks, and thus greatly
enlarging its usefulness. It is not too much to say that the development of banking in this country along sound and safe lines, depends
more on the Institute than upon any other agency.
The Library of the Association has become the nucleus of what we
may reasonably expect to be one of tile great financial libraries of the
world. It is already first in its collection of pamphlets on current
financial topics, carefully indexed so that they form historical mate.
rial of great value. Your continued and increasing financial support of
this department will be money well expended.
The committees of your Executive Council have been active in prosecuting the work entrusted to them, and have worked for the Association at considerable sacrifice of their .own time. Where all have
done well it is perhaps invidious to select one for special mention,
but the importance of the Federal Legislative Committee certainly
entities it to more than ordinary notice. I commend the report of
this Committee to your particular attention. Granting that bankers
have a right to be heard oil every question affecting their business or
relating to the financial affairs of the country, it is important that
the personnel of this Committee be kept up to its present high standard
of ability and efficiency.
The work of the Legislative Committee is greatly assisted and
furthered by the General Counsel of tile Association, Who has labored
most faithfully to obtain favorable action on the bills indorsed by the
Committee. As this work is in addition to the routine of the department, which involves extensive research and opinions on a great
variety of legal questions of interest to the members, it is obvious that
his time has been fully occupied.
The Finance Committee controls and safeguards the disposition of
the Association funds. Its duties are most responsible and have been
well performed. The Vice-President of the Association being the Chairman of this Committee, assumes the office of President with a full
understanding of Association finances.
The report of the Insurance Committee is one that you will find instructive; the efforts of this Committee have been directed toward
divising and securing the use of policies that would give greater protection to the insured, but recently they have been conducting an
investigation to ascertain if the banks are not paying more than their
share of the premiums on fidelity, indemnity and burglary insurance.
This information, when tabulated, will be of great value and may be
the means of securing a substantial reduction in the cost of insurance
to the banker.
While the Protective Department has nothing spectacular to report,
its work has gone on steadily making the membership sign a terror to
criminals and affording an increasing measure of safety to the members of the Association. On this account, if on no other, it is becoming understood that a bank cannot afford to dispense with a membership.
The work of the Agricultural Commission, a special committee of
the Association, will be presented by its retiring chairman, Mr. B. F.
Harris, a man who has devoted much time and energy to what has
been for him a labor of love. Mr. Joseph Hirsch, one of the active
members of the Commission', will tell you something of the results
accomplished in Texas and throughout the Southwest. You will be
well repaid for attending the session at which these reports are read.
The Commission has been time subject of a good deal of discussion
and I think of some misunderstanding, but I believe that tile bankers
how
are coming to realize that it is not an attempt to teach farmers
feeling
to farm, so much as it is a method of bringing about a better
between the country banker and the men and women who are his
know
-customers. The banker is himself learning things that he must
if he is to achieve success, and the farmer is learning much of the
banker which places him in a light very different from that in which
Ile is exhibited by the campaign orator. As the virgin fertility of our
soils becomes exhausted, better methods of farming are essential and
It is important to the banker to know these methods and to see that
his custotners are employing them. Above all, this movement makes
for the proper development of our resources and is a step toward the
organization of our people in a better citizenship.
of
I take this opportunity of thanking the officials and employees
Executive Council, for
the Association, as well as the members of the
cordial support and for much assistance and many courtesies extended
to me. All have labored conscientiously for the advancement of the
Association. General Secretary Farnsworth is entitled to particular
credit, as it is on him that the guidance and development of the Association principally depends. The combination of good qualities which
has enabled him to secure such a decided success is rarely met with.
Without doubt, the most important subject before the bankers of
America is the Federal Reserve Act, and the operation of the twelve
Federal reserve banks organized under this Act. When these banks
country
began business, the financial storm which had swept over the
in August, 1914, had subsided, and since then there has been no real
they afford. Banks in the principal cities
need for the facilities which
at
could hardly be expected to rediscount paper at rates above those
doing so
which they could loan their funds; nor had they reason for
ceaseless deluge.
while deposits poured in on them in an apparently
as an
The country banks rediscounted to a moderate extent, but more
experiment than from need; their requirements could, in fact, have
An excepbeen easily cared for by their established correspondents.
three reserve
tion to this statement must be noted in the case of the
and Southwest, where, on account of
banks located in the South
cotton crop,
special problems growing out of the financing of the
these banks have found a strong demand for their services.
Criticism of the reserve banks has come from different sources; the
reserve
banks in the financial centers object to the absorption by the
market
banks of the supply of bank acceptances, one of the few open
remote
oprations permitted to them; the small banks in the more
are too
paper
districts complain that the requirements for eligible
generally protest against an enforced
strict; and the member banks
and on
investment which carries no immediate prospect of dividends,
of the objectors
reserve deposits on which no interest is paid. To all
existed for two years
we may say—Wait! The conditions which have

134

BANKERS' CONVENTION.

We must all recognize that improved transportation, lessened time
past are abnormal and furnish no evidence of what the Federal reserve
in transit, reduced insurance and express charges, together with comsystem can do. In one sense, the reserve banks have not been in
operation, and yet if we but stop to consider, they have accomplished
petition, have worked to reduce or eliminate exchange charges, and
many things.
that the Reserve Act is doing no more than to hasten a process which
was already well under way. If the check collection plan now pubBank acceptances were for the first time made possible by the Federal Reserve Act, and these most important credit instruments are
lished, or some modification of the plan, provides a more economical
way of collecting checks than the one now in use, it will inevitably
rapidly coming into use in connection with the import and export of
merchandise. When there is more demand for rediscounts, the resucceed. If it does no more than diminish the amount of float and
serve banks will not monopolize the acceptance market, but it is the
cut out the roundabout methods of collection, now used to minimize
use of these acceptances that makes an international discount market
charges, if will succeed, and our opposition puts us in the position of
possible and gives us a place in the financial affairs of the world.
workingmen objecting to labor-saving devices.
The dollar credit is making its way in South America and in the
Nothing in the Federal Reserve Act, or in any other law of the land,
Orient, and I do not doubt that its use will persist, particularly as it
determines the amount of free service which the banker must render
is reinforced by a discount market which we can hope will be as open
to his client; that will be based in the future, as it has been in the
as the London market has always been. Prior to the passage of the
past, on the value of the account.
Federal Reserve Act, national banks could issue credits, but these
The Federal Farm Loan Act which became a law in July of this year
credits had to be addressed to foreign banks, usually to banks located
is a piece of legislation regarding which there is a wide difference of
in London and to a lesser degree, to banks in Paris and Hamburg;
opinion. That the Act . will prove workable is probable but that it
the reason for this procedure being that national banks were forbidden
contains great possibilities for evil is certain. When the government
by law to accept drafts other than those drawn at sight. These banks
places its credit behind one class of the community, no matter how
had no actual warrant for issuing the credits, but did so on the asImportant the class may be, it is setting a precedent which is sure to
sumption that, not being expressly forbidden, it was included in their
be followed by demands for assistance from other classes equally worthy.
general banking powers.
In part the end sought is sociological and is in fact an effort to stem
Now the power to issue the credits and to accept drafts drawn under
the drift of population to the cities. Lower rates of interest and
them, is definitely granted by law and is no longer open to question.
greater facilities for getting into debt will not of themselves serve to
Under the provisions of the Act our banks are empowered to establish
accomplish this result. The men who have the most intimate experibranches in foreign countries, and several branches have already been
ence with farm conditions generally believe that borrowing is already
started in South America and in the Orient. One very large bank is
too easy for the farmer.
about to open branches in Russia, and we may hope that we are really
Instruction in proper methods of husbandry, improvement in living
started on the business of international banking. Neither foreign nor
conditions and particularly improvement in facilities for social recreadomestic trade goes by favor, and it is only by providing ships to
tion will do more to keep the boys and girls on the farm. than will
carry the goods and banks to transmit the credit, that we can hope
Improved methods of borrowing. Reforms of this character also tend
to retain the business of the more undeveloped countries.
to reduce rates of interest by the only method which can legitimately
The Federal reserve banks are gradually concentrating the stock of
reduce them, that is, by improving the security.
gold which heretofore has been almost useless, because scattered. In
Tor two years, the great European War has overshadowed this country
the hands of those banks it will be a firm basis for a note issue which
and has produced the most profound effects upon our agriculture, our
will take care of any demands for currency that panic conditions may
commerce and our industries, which disturbances have been reflected
produce. We all know how futile it has been to attempt to meet
in our financial affairs and have resulted in a great increase in our
extraordinary demands by paying out gold, and we know how banks
bank deposits.
have competed with each other to secure gold, drawing it from centers
In his address read at the Seattle Convention in 1915, President
where it would be of some use to outposts where it was valueless. It
Law made some interesting comments on the course of financial affairs
is obvious that we have overworked the word "reserve." Gold is the
during the first year of the war.
only true reserve, for it pays debts in any civilized country and under
The beginning of the second year found this country accustomed to
any conditions. Under ordinary circumstances, balances. carried with
the unprecedented conditions and a new routine of business established.
corresponding banks form a convenient method of paying our debts to
The extraordinary fluctuations of exchange had practically ceased, and
depositors, so such balances have been called reserves though they
during the year ending September 10, 1916, the extremes for sight draft
cannot properly be so designated. Balances with the Federal reserve
on London have been from 4.66 to 4.77, with the ruling rate for a
banks are now legally entitled to be called reserves and yet they fall
long time not far from 4.75. This very gratifying steadiness was due
short in the final test—availability in all countries and at all times.
to a variety of causes, among which the foreign loans floated in this
These balances will liquidate deposits in our own country, so we may
country were without doubt the most important. Chief among the
ask why the notes of the reserve banks cannot be counted—if not as
loans extended to the warring countries are the Anglo-French loan
"reserve" at least as cash. In estimating the ability of a bank to
of $500,000,000 and the United Kingdom loan of $250,000,000; other
meet extraordinary demands we can certainly add to its gold, not
loans to the belligerents aggregate $292,000,000, while loans to neutral
only Federal reserve notes, but national bank notes, which paper might
nations in Europe, to Canada, and to Central and South American
be given a special designation such as "cash means." In a conutry
countries bring the grand total of foreign loans up to approximately
where such an immense volume of credit is transferred by checks, sub$1,025,000,000. As far as the loans to neutral nations and to Canada
ject to immediate payment and cancellation, it is perhaps unnecessary
are concerned, this country has followed the suggestion made by Sir
to demand the summary extinguishment of the bank note. At any
George Paish in 1914—that we take the place of the three great comrate it has not been possible to retire our bank notes with the promptmercial countries engaged in war, and keep the wheels of industry turnness theoretically demanded and it may be that the persistence of the
ing in the newer countries that had hitherto looked to them for capital.
notes marks a healthy development in our financial affairs. We may
The loans made to the Allies were in a sense. bookkeeping entries,
recall that at one time the check was no more than a receipt for money
for they owed us such large sums for supplies and munitions purchased
paid across the conuter. The Aldrich-Vreeland issue of national bank
in this country that there was no actual transfer et funds. At the
notes supplied the real need and allayed the panic demands in 1914.
same time the capacity of those countries to purchase here was kept
These notes were genuine bank notes issued against commercial paper,
up, to our own profit. It is gratifying to know that at such a crisis in
although the method of issue was somewhat cumbersome. We cannot
the world's history, our country was able to take on a substantial
doubt that Federal reserve notes with which the country is already
share of the world's financial burden.
familiar will perform the same service without friction and without
It is estimated that American securities owned abroad have been
disturbance to business. These are great achievements to which I
sold in this country in the neighborhood of two billion dollars, which
have so briefly referred, and they already justify the existence of the
amount has further liquidated debts due us from Europe. The abFederal reserve banks, no matter whether we support thm by direct
sorption of this vast sum was at fairly steady prices, which is further
assessment or whether in earning their expenses they may at times
evidence of the inherent soundness of our affairs.
cut into our profits.
In addition, gold has been imported to the amount of approximately
The check collection plan is a part of this subject which touches
$600,000,000 and at this time the inflow of gold seems to be increasing.
many of us. Panics seem far away, though we should remember how
We may expect that as soon as the war is over and the normal imquickly they arise. International finance has but little interest for
ports of merchandise are resumed the excess Of gold will leave us,
the country banker, little apparent interest I should say, for to him
and this will be by no means an evil. The surplusage of gold and the
as to all others it is vitally important that the seas be kept open for
loaning power set free by the Federal Reserve Act together are likely
the shipment of goods, and the avenues of credit be kept clear to the
to cause a credit expansion which will need careful supervision by our
end that the producer may be paid for his produce.
bankers, to the end that the corresponding contraction does not find
My sympathies are strongly with the country banker who is conus unprepared. The control of both the export and the import
templating a loss of revenue through the operation of this portion of
gold should be guided by the Federal Reserve Board, which was inthe Reserve Act. To my mind, it is pointless to compare the retended to perform this function and which has the power necessary
moval of exchange charges to the removal of toll gates from the highto stabilize exchange through this means.
way. The transfer of funds is a service which is as much entitled to
The products of the soil have advanced in price on account of the decompensation when made by a bank, as it is when made by an express
mand from the belligerent nations, and the advance would have been
company or by the post office. But exchange charges on drafts sold
still greater, were it not for our lack of shipping and the consequent
are not forbidden, nor is a collection charge on mercantile drafts and
Increase in freights which have prevented the sale of much produce.
notes interfered with; the one service which member banks are called
Our shipping laws have so hampered our citizens that tile carrying of
on to perform without pay is to remit for checks drawn on themour goods by water had already passed into the hands of other nations,
selves at par. There has been no uniformity about charges; some
and now they are no longer able to serve us.
banks have always remitted at par for checks drawn on themselves.
It is true that every ship yard in this country is working night and
In some towns and even in some states, this has been the general
day to supply the deficiency, but it will take years to overtake the derule, and I believe that the banks following this rule are generally the
mand and when the war ceases the problem of competition is still bemost prosperous, not always because they have remitted at par, but
fore us. Manufacturers of all kinds have prospered amazingly, on
certainly the two things have gone together. High charges, on the
account of the varied demand which the withdrawal of niillions of men
other hand, have usually originated under pioneer conditions which
from their usual avocations in Europe has thrown on this country.
justified them, but in too many cases the charges have continued after
It is not to boast of the prosperity which the niisfortunes of others
the conditions which made them necessary have passed. There is no
have given us, that I have recalled these facts, but rather to speak
place within the continental United States where a charge of one per
of the weaknesses which have developed. War tries the souls of men,
cent, is legitimate, and yet there are places where such charges are
and even a war in which we are not directly concerned has searched
made. Where banks have grown to depend on charges of this character
ours and found us wanting. We lack in national spirit, in national
for a considerable part of their income, there is obviously no room
unity, perhaps in national nerve. We are given to boasting of our
for a bank unless a complete change in policy should have the effect
size, but when we are no longer capable of feeling pin pricks in our
of building up a deposit line that would give the bank a legitimate
feet, are we not too large? For years our citizens in Mexico have been
income.
subjected to murder and the most untellable outrage, and the national

BANKING SECTION.
consciousness is barely aroused. Not in Mexico alone, but within our
own borders as well as on the high seas, have our people on their
lawful occasions been done to- death while the nation has slumbered
or murmured feebly in its sleep.
I am sure that Missouri is misrepresented when it is said that the
middle of the country cares nothing for a navy, because it knows
that even the most powerful of modern guns will not reach that far.
But, seriously, is there not some truth in the jibe? Do you fully appreciate that the bombardment of San Francisco, the invasion of Texas,
or the landing of a force on Long Island is also the invasion of your
own state? Yet each of these events is as much a possibility as any
one of the impossible things which have occurred since August, 1914.
It is easier to point out what is wrong than to tell how to remedy
the wrong, but there are certain fundamentals that are so plain that
none can ignore them. As a nation, we have grown rich, and have
grown fat, and have grown soft, and we are today the most tempting
prize under the blue canopy of heaven.
If as a nation we are sick, it is as individuals that we must supply
the cure. We are ourselves to blame, not Congress, not the government, but just we Americans. Congress does not lead, but follows
public opinion. First of all, we need co-operation, team work, the
things that win in any line of human endeavor, and to secure this
there is nothing quite so good as universal military training which
arouses national feeling and national consciousness as nothing else
can do. Our educators are already demanding this training as a remedy
for the excessive individualism of the boys who have an exaggerated
idea of their importance and of their rights, with a deficient sense of
their responsibilities and their duties. As has been aptly said, it
is as absurd to have some men volunteer to fight the battles of the
taxes.
Republic as it would be to have some men volunteer to pay the
poor alike,
Let the burden of military service rest on all, rich and
war should
and then it will not press unduly hard on anyone, and if
generous hearted
come, it will not be the best and bravest and most
sacrificed, but each will go in his turn.
that will be first
The primary purpose of a government is to provide adequate defense
for the country governed, and how shamefully this purpose has been
neglected under one administration after another is a familiar tale.
Should our people demand that the army be disbanded and the navy
scrapped, the position would be consistent, but to consent to an army
pitifully inadequate and to .a navy that dooms our boys to hopeless
defeat and certain death is not the American way of doing. In fact,
America is not awake; her people have been busy getting rich and
her legislators have carried village politics into national affairs, and
have busied themselves with petty improvements and meddled with the
business concerns of the citizens, without a clear idea of the harm
they were doing or an understanding of the world problems requiring
solution. We need the industrial organization of the country, and we
must in same way cause our legislators to understand that our steel
mills, our railroad systems, our ship yards, our factories and our shops
serve
are to be encouraged and developed to the end that they may
armor
the nation. If the government finds it necessary to build an
supplement the private factories
plant or a gun factory, it should be to
and not with the fatuous idea of putting any of them out of business.
There is enough work for all before this country can be deemed adequately protected.
The Federal Reserve Act has made the financial organization of this
country possible, and the preliminary steps to that end have already
been taken. This, to my mind, is the great reason why the bankers
should work with the Act and not against it; should try to make it
succeed instead of pointing out defects which might cause it to fail,
for in doing so, they will have not only strengthened the banking system but will have also strengthened the nation.
Here is the excuse for what may seem a digression to mtitters remote
from banking. Every question merges into the question of finance, no
matter what the activity; whether charitable or industrial, whether
educational or military, the banker must find the means or the project
contemplated must wait.
In the task of vitalizing the nation, the most important agency is
the press, which informs, instructs, advises, admonishes the people.
It ill becomes one ignorant of the difficulties encountered in collecting
and distributing the news, to criticise apparent failures or deficiencies,
but it is too much to ask of our papers that they take the larger view
of our national affairs and help in the difficult task which is before
us, and to ask of our people that they discriminate between the varying
grades of ability and integrity with which the work is done?
If our people can rise to the heights of citizenship that the times
demand, the work that must be done can be accomplished peacefully
and in order, but if they will not learn from the bitter experience of
our kin across the sea, the reformation will he worked out amid the
ruin of war. High ideals and lofty purpose are but feeble defenses
against invading armies, and the God of battles may have decided that
other ideals than ours are to prevail.
Let us not doubt, however, that we can return to the stronger and
simpler faith of our national youth, when we were poor in wealth but
rich in courage. The navy that remembers Decatur and Bainbridge
and Perry will again fly the starry flag on every sea, and our people,
no matter how far from home, can once more say, like the Rotnans of
old—"Civia Americanua Sinn" and find in the flag protection.

(PRESIDENT LYNCH, continuing:) We pride ourselves on
being prompt, and yet we did not begin our meeting until
thirty minutes after the appointed time.
Owing to that late start, we have not been able to conduct our program as arranged, and the hour has now arrived
at which Mr. Vanderlip was to address you: and we will
tberefore suspend the regular order of business while he delivers his address to the Convention.
Kindly take any scats that are now vacant, coining as near
to the front as possible. I will ask all delegates now to be
seated and out of courtesy to our distinguished speaker I will
ask that no one leave the hall or enter it after his address is

135

begun and until it is concluded. It is not fair to have constant disturbance by those who keep coming in late.
Mn. VANDERLIP, gentlemen! (Prolonged applause.)
Here insert Mr. Vanderlip's printed address, already furnished to the Financial Press and the Association.)

The Need of a United Nation, by Frank A. Vanderlip
[Mr. Vanderlip's address in full will be found on pages 99
to 104.]
THE PRESIDENT: Gentlemen, just one moment. I was going
to propose that this convention give a vote of thanks to
our distinguished speaker for the thoughtful, timely, and m6st
philosophical address which he has just given us. Will such
a motion be made?
(The motion was duly made •and seconded that a rising
vote of thanks be given to Mr. Vanderlip for his address.
The motion carried unanimously.)
We interrupted the usual program of the business in order
to hear this address. We will now take up the routine business which will be gotten through as rapidly as possible and
we will then adjourn.
The report of the general secretary is next in order.
THE GENERAL SECRETARY: Mr. President, it is not my intention to read the Report of the General Secretary, which is
published and you will find it in the printed report. I want
to emphasize only two or three things in connection with that
report and read some things that should be read to the convention.
THE PRESIDENT: Gentlemen, If you will kindly remain
'seated we will adjourn this meeting as rapidly as possible.
THE GENERAL SECRETARY: I want to call your attention
particularly to the clause on Bills of Lading. At the convention in Washington in 1895 there was appointed a committee
on Bills of Lading, said committee consisting of Mr. Louis
Pearson, of New York, Chairman, and others. That committee has been working eleven years, with the result that
the Bills of Lading bill has been reported out and signed by the
President within the last few weeks.
I call your attention to the large increase in membership
during the past year; you will find it on page 22, giving credit
therein to the members of our Council and State secretaries and
so forth, who have performed the largest amount of the work
in that connection. I will express our thanks to all of the
officials who have assisted.
It will be observed that the list of delinquents is exceedingly
small, considering our large membership. The delinquents
for the year were 198, the lowest in proportion to the membership in the history of the Association, with a membership of
15,000, less than the year before when the membership was
14,720 and the delinquents 216; or, in other words, with a
larger membership a less number of delinquents.
Now, in regard to the membership and collection of dues,
I received from the general offices this morning this telegram:
"Membership 16,107"—That is an increase of 100 since the
1st of September, when our membership was 16,010.
The cash receipts in collection of dues, up to September
25th, which have been reported to New York, are $212,660
as against a collection last year for the entire month of
September of $198,000.
I do not believe there is any organization or any other kind
of organization on earth which can show so large an amount
of money paid in so short a • time, and so promptly, as has
been paid now by the members in paying the dues of the American Bankers Association.
There is one other paragraph which I wish to read to the
members.
In Memoriam. On February 15, 1916, there pased to the
Great Beyond George E. Lawson, President of the Peoples
. State Bank of Detroit, Michigan, and member of the 1916
Class, on our Executive Council, and on our Finance Committee
as -well. Mr. Lawson took an active interest in the affairs of
our Association and gave of his best to its interest and welfare. A man of ability, always courteous, of a genial nature,
and charitable, he will be missed in our assemblings as well
as by all those who knew him in his native city.
I would like to say that the Executive Committee of the
Council at the May meeting passed appropriate resolutions on
the death of Mr. Lawson, one of their associates.
Now, in conclusion I want particularly to call your attention to page 30, of the pamphlet of the A. B. A. containing
the reports of the Association, which applies to Kansas City
and this magnificent convention which we are enjoying. I
will not read that because I hope that papers will publish
it, but it is simply an allusion to Kansas City, and the work •
of the Association.
I thank you, gentlemen, and Mr. President.
Mn. PETER W. GOEBEL: Mr. Chairman, in view of the fact
that all the reports which are listed on the program have been
printed, as part of the program, which is in the hands of every
delegate, I move that they all be considered, received and
filed. (The motion was duly seconded.)

BANKERS' CONVENTION.

136

Reports of Officers and Committees
[These reports will be found on pages 122 to 130 of this
publication.]
THE PRESIDENT: It has been moved and seconded that the
printed reports of the various officers of the Association, which
have been printed, be received and filed. What is your pleasure? All in favor will say aye. The motion is carried.
Now, gentlemen, before the adjournment is taken, please remember that the adjournment will be until two o'clock. We
will endeavor to call the meeting to order promptly and
transact the business in due order, and remember particularly
that at three o'clock Mr. Joseph Chapman—our own Joe—
will give you something worth listening to, so don't fail to
be on hand before that time and be in your seats.
Mn. LEWIS E. PIERSON (Chairman, Board of Directors, Irving National Bank, New York, N. Y.): May I rise to make
a statement? The General Council has very kindly given
certain credit for the enactment of the bill of lading measure
to the initial committee of the Association. I find on page 19
In the printed program, which may escape your notice, the
additional credit which should be given to the succeeding
members of the various committees who acted upon that
Important measure, and I deem it a duty on my part to voice
what I know is the gratitude of the Association here for the
work of the present Federal Legislative Committee, who secured
the enactment of the measure, that committee being headed
by Mr. Charles A. Hinsch. (Applause.)
TIIE PRESIDENT: I am 'very glad indeed that that announcement was made, and there is no one from whom it
conies with better grace than from Mr. Pierson, who has
labored long and faithfully and intelligently for the pasage
of this most necessary measure, and in fact it is through his
work that It has largely crystalized into the form in which it
finally passed.
The next business is—
PROPOSED AMENDMENTS TO CONSTITUTION AND
BY-LAWS.
THE GENERAL SECRETARY: I now call attention to the proposed amendment to Article XI, sec. 1, of the Constitution.
You will find these amendments on page 29 of the printed program. These amendments have been published in accordance
with the conditions of the Constitution, and they have been
published 30 days in advance of the Convention. The amendments were approved by the Executive Committee of the Convention', and submitted by them after the meeting on Monday,
recomand have been approved by the Executive Council, and.
mended to the Convention for their approval.
Mn. P. W. GOEBEL: Mr. Chairman, I move the adoption of
the amendment.
THE PRESIDENT: A motion has been made to adopt the
amendment. Do you desire to have it read, or are you sufficiently familiar with that already?
Mn. GOEBEL: Mr. Chairman, may I explain the first amendment is for the purpose of creating a committee on the
library. As you will find, if you will read the report of, the
Librarian, the American Bankers Association is organizing and
developing, and gathering together what will be eventually—at
least, we hope it will—be the greatest library on financial subjects in the world. Heretofore it has been simply under the
guidance of a department. It was deemed wise by the Executive Council. and at the Executive Session at Briar Cliff, last
Spring, that there should be a Library Committee to look after
the necessities of this department, which is growing more important every day, and for that reason the submission of this
amendment to the Constitution has been suggested, which simply provides for the appointment of a Library Committee.
THE PRESIDENT: I must ask you to remain seated a little
longer, gentlemen. This will be brief. You know Mr. Goebel
very well, and he will not take up your time.
Mn. GOEBEL: The Library Committee will be a council committee, and will not add anything to the expense of the Association.

THE PRESIDENT: The question is on the amendment as a
whole, or on the particular one which Mr. Goebel mentioned?
(Cries, "As a whole !")
Tim GENERAL SECRETARY: There is a Committee on State
and Federal Legislation. (Cries of, "Question !")
MR. GOEBEL: You will find Mr. Paton's note after this
amendment. Heretofore we have had a Federal Legislative
Committee and a Law Committee, which was somewhat confusing. The Law Committee was supposed to have charge of
State legislation, to prepare uniform bills that were desired
to be passed by all the States, and to be submitted to the variMIS legislatures by the State Associations; but the name was
somewhat confusing, so this is simply in place of calling it a
Law Committee; hereafter it will be called the Committee on

State Legislation and to which will be referred all matters in
regard to State legislation, while all Federal Legislation wilt'
be hereafter, as heretofore, handled by the Committee on Federal Legislation. These are the only amendments to the Comstitution, and I think they ought to be passed or rejected now,
and there are some propositions also to amend by-laws.
MR. SMITH: I call for the question.
Tan PRESIDENT: All in favor of the amendments to the
Constitution will signify by saying aye.
(The motion, after being seconded, was carried unanimously.)
MR. GOEBEL : The first proposition to amend the by-law is
on page 30 at the bottom. It simply amplifies the amendment
of the Constitution in regard to the Federal and State Legislative Committee. The next one is in regard to the subscription price of the Banking Journal, the journal of the American
Bankers' Association.
Under the Federal Postal law, it is necessary that you must
have a subscription list and a price of subscription, in order
to get the benefit of second class mail matter. Heretofore the
by-law said that the subscription price should be one dollar,
and for each membership one dollar has been set aside, and
the same subscription price has been made to outside subscribers, of whom we have some six or seven hundred. Now,
the price of everything that enters into the publication of the
Journal has advanced, and one dollar to outsiders. does not
cover the cost of the Journal that we sell to them. For that
reason, the amendment of this by-law is asked so as to raise
the price of the subscription to the Journal to two dollars. As
far as the membership is concerned, it is simply a matter of
bookkeepeing, because every dollar that has been expended by
the Journal must be appropriated by the Executive Council,
anyway; but it will enable us to get two dollars, which will
more nearly represent the cost of the Journal, from outsiders.
Mr. Chairman, I move the adoption of these amendments
to the by-laws.
(The motion was duly seconded.)
THE PRESIDENT: The adoption of the amendment to the
by-laws has been duly made by motion, and has been seconded.
Are you ready for the question? All in favor will please
signify.
(The motion was carried unanimously.)
There are no communications, but the Secretary has some
announcements to make.
OLD VETERANS HONORED
THE SECRETARY: They are very short, and I will detain
you but a moment. In 1875 at Saratoga, in July, the American
Bankers Association was organized-41 years ago. One of the
pioneers and I understand in fact two or three, are attending
this Convention. Mr. F. T. Hardwick of Georgia attended that
Convention in 1875, and he has asked me to read this notice.—
It is suggested that all members here who attended the first
meeting of the A. B. A. In 1875 at Saratoga are requested to
leave their cards or names with the General Secretary and indicate their willingness to Meet in an informal way at a
modest reunion dinner at some time and place to be agreed
upon.
THE PRESIDENT: Gentlemen, it is a very interesting communication and I hope there are some other members here, or
at least in the city.
Mn. GOEBEL: Mr. Chairman, I move that these old veterans
that are here be invited to take a seat on the platform during
the remaining sessions of the Convention. (Seconded.)
THE PRESIDENT: It has been moved and seconded, gentlemen, and all in favor will signify by saying aye.
(Motion carried unanimously.)
Tim GENERAL SECRETARY: I have a telegram from Major
Dinkins that an informal dinner will be given on Thursday,
September 28, 1916, at six P. M., at the University Club,
Kansas City, to which all members of the Old Guard of the
A. I. B.—the American Institute of Banking, who are in attendance at this convention, are cordially invited, in order to
enable us to arrange definitely for the necessary number,—
please signify your acceptance promptly by signing and returning speedily the enclosed slip to Box 1018, Muehlebach
Hotel. All members of the Institute are cordially invited.
Signed by C. W. Allendoerfer, E. G. McWilliam, R. S. hick,
Committee.
Also a telegram from the great State of Washington, 4 Congratulations from the bankers of the only State in the Union
having a perfect membership. W. II. Martin, Secretary."
I want to take exception to that remark, because we think
all the 49 States have perfect memberships, but what that
means is that Washington is the only State where every
bank in the State is a member of the State Association. Sonic
of them run very close, but I think Washington carries off
the palm.

137

BANKING SECTION.
Ma. BECKWITH: I move that Mr. Farnsworth make a fitting
reply to that telegram by the authority of this Convention.
THE PRESIDENT: If there is no objection, Major Farnsworth
will reply. He is a very good hand at doing such things.
"
Mn. ALLEN: "Question !
THE PRESIDENT: All in favor will say aye.
(Motion duly seconded and carried.)
THE SECRETARY: I presume you all understand that all
mails and telegrams not directed directly to your hotel, and
so • forth, the Local Committee are endeavoring to distribute
the same, but at the Information Bureau at the Hotel Baltimore is quite a collection of mail.
Now, I call your attention to the meeting this afternoon of
the General Nominating Committee. Those who have been
nominated by the various States to place in nomination at
this Convention the names of candidates for the offices of
President and Vice-president will attend. It was supposed
that when this announcement was made that the Convention
would adjourn at the time which I think it will, but for the
convenience of the Nominating Committee the meeting is called
for in this building, in the second floor, where there has been a
room arranged where the Nominating Committee can meet at
4:30 this afternoon. That is all, Mr. Chairman.
Tlin PRESIDENT: A motion to adjourn is in order and the
adjournment will be until two o'clock.
(Motion duly made, seconded, and adjournment taken until
two o'clock P. M.)

which now numbers some 18,000 members; and we are increasing constantly our educational forces. One feature I
would like especially to bring to the attention of the Association is the Correspondence Chapter. I trust you will all be
good enough to read the report when it appears in the proceedings, and especially the part to which I have just called
attention, the Correspondence Chapter.
THE PRESIDENT: You have heard the report of the Chairman of the American Institute of Banking Section; a motion
to receive and file the report is in order.
(Motion to that effect made, seconded and carried.)
THE PRESIDENT: Next is the report of the State Secretaries'
Section. Mr. Haynes McFadden is the Chairman of that section. Is Mr. McFadden present? (No response.) We will pass,
then, to the next number on the program,—the report of the
National Banking Section, of which section Mr. Hyde is
Chairman.
FREDERICK W. HYDE: Mr. President, and Gentlemen of the
Convention: If you will bear with me I will read the entire
report. It is not long. It is our first year, and we want to
let you know what we have done.

Report of National Bank Section

Report of American Institute of Banking

During the first year of its existence this Section has rendered much
valuable and constructive service to its members. Through its efforts
150 new members were added to the American Bankers' Association
during the period of six months ending with September, 1916.
The Executive Committee of this Section has held six important and
interesting meetings: One in the city of New York; two in Washington, and three at Briar Cliff, N. Y. These meetings covered seven days
and the major part of seven nights. At the New York city meeting
conferences were held with officers of the Federal Reserve Bank of
that city, and at the Washington meetings conferences were held with
members of the Federal Reserve Board, Governors of the Federal Reserve Banks, and the members of the Committee on Federal Legislation.
The Secretary of the Section represented the American Bankers' Association at the conventions of the Bankers' Associations of the States
of Missouri, North Carolina, Ohio, Oklahoma and South Carolina;
also at the meeting of the Reserve City Bankers at Detroit. The good
work which be did at these various meetings and the valuable information which he gathered are detailed in written reports which
he filed with the General Secretary and the Chairman and President
of this Section upon his return from these meetings. He returned
from one meeting with the applications of 24 banks for membership
in the American Bankers' Association. The Secretary rendered most
valuable service to the Association and its members at the Conference
of Country Bankers held in St. Louis, June 10, 1916, and at the
meeting of the Administrative Committee of that body later held at
Washington, D. C.
The Section has proven of great worth in co-operating with the
Committee on Federal Legislation on all proposed laws and amendments that are of interest to National Banks. Through its office and
organization of Vice-Presidents in the several States it can gather
data, disseminate information, and crystalize sentiment in support
of corrective and constructive measures and in opposition to the
passage of laws that are harmful to banks and general business interests.
The section has given earnest consideration to and has expended
'much effort on the following propositions:
Foreign Banking Connections, Interlocking Directorates (Amendment
to the Clayton Act), Bills of Lading, Special Bankers' Tax (Revenue
Bill), Readjustment of Bank Reserves, Retirement of Greenbacks,
Usury Bills, and the nation-wide Clearing Plan (Proposed Amendment
to Section 16 of the Federal Reserve Act).
The Section serves as a valuable agency in adjusting matters of
conflict between the Departments of the, Government and the Banks.
Complaints may come into the Section office which can be settled
only through personal visit to the Capitol, and the individual member
filing Such complaint cannot afford to stand the expense of a trip
to Washington, whereas a representative of the Section may handle
several such cases on one trip to the Capitol.
The appropriations made for this Section at Seattle and Briarcliff
aggregate $6,050. The expenses for the year ending August 31, 1916,
were $5,416.24. The estimated expense for ensuing year is $7,500.
The Section has on hand a balance of $633.76. and has requested the
Finance Committee for an appropriation of $6,770.
Three hundred and fifty-eight National Banks have joined the American Bankers' Association during the year. This brings the National
Bank membership up to 5,813 and of this number 5,733 are bona fide
members of the Section. Eighty National Banks that are members of
the American Bankers' Association are not enrolled in the Section.
There are 1811 National Banks that are not members of the American Bankers' Association. The Section will make all possible effort
to induce these non-member banks to join during the coming year.
The Federal Reserve System is yet in the experimental stages and
many changes and amendments may be necessary, and the Section can
be very helpful in bringing them about.
The Section is a very useful factor in encouraging better systems,
methods and practices among its members. There is a constantly
increasing demand for service to the members, and we feel confident
that the Section will be able to render even more valuable service
during the ensuing year than has been rendered during the year now
closed.
Respectfully submitted on behalf of the Section,
FREDERICK W. HYDE, 0114irMari.

As our report is more or less voluminous, and has been filed with the Secretary, I would ask that
as it is to be printed in the proceedings that the reading of
it be omitted at this time, I would like to say that we have
had the most successful year in the history of the .
Institute,

THE PRESIDENT: You have heard the report of the Executive Committee of the National Bank Section. What is your
pleasure?
(Moved, seconded and carried that the report be accepted
and placed on file.)

AFTERNOON SESSION
Thursday, September 28,.1016
President Lynch presiding.
Tim PRESIDENT: The meeting will please come to order.
The first number on this afternoon's program is the report
of the Trust Company Section. Mr. McCarter, will you please
come to the platform and present that report?

Report of Trust Company Section
Mn. U. II. MoCARTER: Gentlemen of the Convention: The Trust Company section begs herewith to report a year of increased prosperity in
Its growth, its membership having been increased during the year by
87 members, making a total of 1459 members. The work of the
Committees has been continued during the year under trying circumstances due to the prolonged and continued illness of its Secretary,
Mr. Philip S. Babcock, who by reason of such illness has been constrained to resign his position of Secretary and his place has been
filled by the selection of Mr. Leroy A. Mershon, as Secretary. Mr.
Babcock has served the Section for eight years and it is the unanimous
hope of the members of the Section, that he may soon be restored to
his usual health.
The sessions of the Sectfon at this Convention and the meetings of
the several committees have been largely attended and much interest
was displayed by those so attending. The Executive Committee departed from the usual custom of having set addresses at the meeting
of the Section, and the time was profitably consumed in a discussion
by the members of the practicial problems which they dall7 meet in
their business.
The appropriation granted the Trust Company Section last year was
$8,075.00, while $7,472.26 was expended and the balance, $704.34,
was returned to the general association.
The Trust Companies of the country have greatly prospered during
the past year, as is evidenced by an increase of their aggregate assets
during the year of $1,300,000,000, making their total assets at the
present time $7,600,000.
The new officers of the Section are:
Mr. UzAL H. MCCARTER, President,
Mr. FRANK W. BLAIR, PiCC-Pre8ideRt,
Mr. JOHN W. PLATTEN, Chairman of, Executive Committee,
Mr. LEROY A. MERSHON, Secretary.
Through the efforts of the Chairman of the Executive Committee and
Secretary, a much increased activity in the Section's affairs
our new
is confidently expected this year.
Respectfully submitted,
TRUST COMPANY SECTION,
By UZAL H. McCARTER, President.

THE PRESIDENT: Gentlemen, you have heard the report of
the Trust Company Section; a motion to receive and file is in
order.
(Motion made, seconded and carried to receive and file report of Trust Company Section.)
TIIE PRESIDENT: The next number on our program is the
report of the Savings Bank Section. The Chairman of that
section not being present at this time, I will call for the report of the Clearing House Section. Is the Chairman of the
Clearing House Section present,—Mr. Thralls? (No response.)
The next is the report of the American Institute of Banking
Section, Mr. Robert H. Bean, President of that section.
•

Mn. ROBERT H. BEAN:

BANKERS' CONVENTION.

138
TH11 PRESIDENT:

Next is the report of the Committee on

Laws.

Report of Savings Bank Section
TIM PRESIDENT:

Mn. C. A. PUGSLEY : The Committee on Law has a detailed
statement, and as that Committee is now specifically a Committee on State Legislation, as distinguished from the Federal
Legislative Committee, I do not think it is worth while that
the report be read in full. I am going to ask leave to print
it in the record.
TliE PRESIDENT: Gentlemen, you have heard the request
and motion of Mr. Pugsley. What is your pleasure?
(Moved, seconded and carried that the report be printed in
the record of the Proceedings.)

Report of Committee on Laws
[The report of the Committee on Laws is printed on pages
127 to 128 of this publication.]
Tots PRESIDENT: The next is the report of the Committee
on Federal Legislation, of which Committee Mr. C. A. Hinsch
Is Chairman. Is Mr. Hinsch present? (No response.)
We will call then on Mr. Thralls, on behalf of the Clearing
House Section, to make the report of that section.

MR. JEROME TimALLs: On behalf of the Clearing House
Section, I would like to ask for leave to file their printed report with the Secretary.
THE PRESIDNT: Mr. Thralls moves that the report of the
Clearing House Section be passed to print. Is there a second
to the motion?
(Motion seconded and carried.)

Report of Clearing House Section
KANSAS CITY, Mo., September 28th, 1916.
To the American Bankers' Association,
Gentlemen:
The Clearing House Section held' its annual meeting on Tuesday of
this week. The attendance was the largest in the history of the Section, and this fact, together with the animated and very general discussion of the topics on our program, convinces me that itnerest in the
Clearing House Section is greater than ever before.
In addition to very able addresses and discussion of topics of
interest to members, we had a Conference of Clearing House Managers and Clearing House Examiners, who had been especialy invited
to attend this year's meeting.
About thirty managers and examiners were present. They held a
separate meeting and arranged for a conference later in the year,
and we believe this conference of Managers and Examiners and the
organization resulting therefrom, will be of great assistance in extending the influence of the Clearing House Section.
The officers elected for the ensuing year were:
President—W. D. Vincent, Vice-President Old National Bank, Spokane, Wash.
Vice-President—John McHugh, Vice-President Mechanics' & Metals
National Bank, New York City.
Secretary—Jerome Thralls.
Members of the Executive Committee:
Mr. Stoddard Jess, President First National Bank, Los Angeles, Cal.
Mr. It. F. McNally, Vice-President Mississippi Valley Trust Co.,
St. Louis, Mo.
During the year, the work of the Section was carried on more
vigorously than ever before by our capable and energetic Secretary,
Mr. Thralls.
The Universal Numerical System: The No-protest Symbol Plan and
other methods and systems promulgated by the Section are developing
rapidly.
The Clearing House Examination System and the Country Clearing
House are finding new friends through the efforts of the Section.
Thirty-one cities are reporting total bank transactions. The transactions of these 31 cities for six months ending June, 1916, were
$28,471,000,000, while their bank clearings for the same period, aggregate $11,623,000,000. Total bank transactions we believe are the
only true indication of the volume of business passing through the
banks, and during the coming year we hope to bring the total number
of cities reporting total bank transactions up to 100.
The Section was instrumental in the organization of 22 new clearing
houses during the year and we hope to bring about the organization of
100 new clearing houses during the coming year.
Our Secretary represented the American Bankers' Association and
the Clearing House Section at 6 annual conventions of Bankers' Association and at various other Bankers' Meetings and in addition to
advancing the propaganda of the Clearing House Section on these
occasions, through his efforts, a large number of banks were induced
to join the American Bankers' Association.
Only a limited number of persons including bankers, seem to realize
the important part that clearing houses have played in the development of this country. Our numerous committees and state representatives have been quietly conducting a campaign of education—
along the lines of co-operation on matters of common interest to the
banks and general public.
We believe that next to the American Bankers' Association the
clearing houses of the country wield the greatest influence for good
among the banks, and every possible effort should be extended in their
development.
The appropriations for the Section for the year just closed were
$5,725. The expenses were $4,960.66, leaving a credit balance of
$764.34, which we returned to the Association.
Our estimated expenditures for the ensuing year are $7,000.00,
, which amount has been requested.
Ma. THRALLS: The report is signed by President Ayres.

The next is the report of Savings Bank
Section. I am informed that the full report of the Savings
Bank Section as submitted to the Executive Council appears
in the printed Proceedings .of that body.

Report of Savings Bank Section to the American Bankers
Association
KANSAS CITY, Mo., Sept. 25, 1916.
Mr. President and Gentlemen:
Since the Seattle meeting, the Savings Bank Section has done much
to further the interests of the American Bankers' Association and to
show to the members the real value of Association membership. The
Section has brought bankers together in hundreds of communities;
into co-operation with each other, thereby carrying out the fundamental idea of the Association. Better relationship and team work
between banks in the various communities are conducive to better
banking and a greater degree of confidence on the part of the people
in the banks.
Through the Nation-wide Thrift Campaign which the Section has been
conducting during the past year, and the systematic organization of
it, there has been effected an organization the possibilities of which
are excellent in creating an efficient machine to render constructive
service to the members of the Association. The public of the United
States has perhaps heard more of the American Bankers' Association
during the past year through the effort which we have made to promote thrift than at any other time. The result of our work is vast.
This has been evidenced by the number of letters received from
bankers and from communities respecting the good accomplished In
those communities by the propaganda conducted by the Section.
More than 100,000 pieces of mail have been sent out from the office
during the past year, and since the Spring Meeting over 5,000 letters
have been received.
Nine hundred and thirty-nine new members have been enrolled since
the Seattle meeting, twenty-seven more than the combined total number enrolled for 1913, 1914 and 1915. There are enrolled as members
of the Secti'o'n at the present time 3,533 banks of all classes.
The past year's appropriation to the Section's work amounted to
$13,888.25, inclusive of $3,500 appropriated at the Spring Meeting.
There were miscellaneous receipts of $45.96, making the total credits
$13,934.21. The expenditures for the year aggregated $13,542.34,
leaving a credit balance of $391.87.
.
Our Law and Segregation Committee has been on constant watch
for Federal legislation affecting the interests of savings banks. It is
the desire of that committee to promote the establishment of savings
departments in commercial banks and trust companies throughout the
tinted States. If this is not done, the inevitable law of supply and
demand will call for the creation of other kinds of institutions for
savings. In this respect, it is planned to publish a pamphlet detailing the organization of a savings department, suggested forms to be
used, etc.
The Special Committee on Postal Savings Legislation has kept in
touch with the activities of the postal savings system, and when it
has been necessary, owing to the aggressiveness of such system,
they have brought complaint to the attention of the Director of
Postal Savings.
The Secretary has visited forty-three cities in the past year and has
given forty-four addresses with respect to the thrift campaign and
other subjects pertaining to the banking business. He has represented the Association at the following state bankers' conventions:
New York Savings Bank Assoication, and Maryland, Virginia, South
Carolina and Colorado Bankers' Associations.
The detail work in the Section office has been well organized and
proper system is maintained.
It is with appreciation that the Section acknowledges the support
it has received from the Executive Council, the Administrative Committee and other Sections of the Association, particularly the American Institute of Banking, which has been of splendid service in promoting the thrift campaign throughout the country,
Respectfully submitted,
N. F. ilAwLEy, President.
THE PRESIDENT: What is your pleasure in connection with
this report?
You have heard the statement and the suggestion.
(Moved, seconded and carried that the report be received
and filed.)
THE PRESIDENT: The next is the State Secretaries' Section.
Is the representative of that Section here at this time? Is Mr.
McFadden present? (No response.)
THE GENERAL SECRETARY: There are a number of telegrams
here and I will call the names and deliver them to those who
respond. (Telegrams distributed.)
(The General Secretary Continuing:) Here is a telegram
which is addressed to the President from John Clausen, President of the San Francisco Chapter of the American Institute
of Banking:
"San Francisco, Cal., Sept. 25, 1916.
"JAMES K. LYNCH,
"President, Convention Headquarters,
"American Bankers' Association,
"Kansas City, Mo.
"One thousand and fifty meinbers extend greetings and desire to
express spirit of hearty co-operation with parent association in its
important deliberations which so markedly affect policies of Institute.
Appreciating necessity making education-bank4man paramount and
real factor for higher spheres his vocation. Our aim has been to obtain best results in collaboration with University of California, feel-

BANKING SECTION.
will be brought
ing confident with true effort our part subject matter
banking and finance
within a world that is practical. Commercial law,
accounting, English, French
outlined by Institute are interlinked with
attendance approxand Spanish. Members responding with regular
successful
imating six hundred. Bi-monthly lectures from prominent
of practical
business men also arranged, dealing directly with topics
sincere good wishes
• business value. San Francisco Chapter voices
successful convention corresponding to lofty motives which inspired
its inception.
"(Signed) Joitrr CLAUSEN."

THE PRESIDENT: Is Mr. McFadden of the State Secretaries'
Section in the room? (No response.) If not, we will pass that
by and I will call on Mr. IIinsch, Chairman of the Committee
on Federal Legislation, to give his report.

Report of Committee on Federal Legislation
[We print the report of this Committee on pages 126 to 127.]
Mn. HAwEs: I think it is fitting, sir, that a report of such
Importance, showing as it does, results for the good of the
whole financial community, be acted upon not in the routine
way; that a resolution of thanks be given to the Committee,
and especially to its Chairman, Mr. IIinsch, for the great work
rethe Federal Legislative Committee has done, and that his
port's recommendations be carried out, and a word of thanks
that magnifibe sent to Senator Pomerene for the passage of
cent Act.
by Mr.
Tim PRESIDENT: You have heard the motion made
Hawes of Missouri. Is there a second?
(Motion seconded by Mr. Downing.)
THE PRESIDENT: IS there any discussion?
(Cries of "Question !")
THE PRESIDENT: All in favor of such resolution say aye;
opposed, no. It is carried unanimously.
THE PRESIDENT : Mr. Ilinsch has another communication he
would like to read.
Mn. IIINscu: Our Committee had a hurried meeting yesterday afternoon, and our Committee recommends the adoption
of the foregoing resolution, modified so as to provide that the
requested hearing be given the Committee on Federal Legislation, acting in conjunction with the representatives of the
Savings Bank Section, and of such other section or sections as
may desire to be heard upon the subject.
THE PRESIDENT: Gentlemen, that is an important subject
and an important resolution. It cannot be considered except
by consent of the Convention, Under our Constitution. It has
not been submitted in time to have it considered at the Committee of Resolutions, is it your pleasure to consider it at
this meeting? I call on Mr. Edwards.
Mn. EDWARDS : Representing the section from which the
resolution, or preamble emanated, I would move you that consent be given to the consideration at this time.
THE PRESIDENT: Mr. Edwards moves that the Convention
consider the resolution at this time.
Mn. HINscrt: I second that motion, Mr. Chairman.
THE PRESIDENT: The motion is seconded: Do you desire
to discuss the question. If not, I will call the question. All
those in favor of considering the resolution will signify by
saying aye.
(Motion carried unanimously.)
The Convention has decided to consider the resolution. Do
you wish any discussion on the subject matter of the resolution.
: I move that the recommendation made by the
Ma.
Federal Committee be concurred in. (Cries of "Read the
recommendation.")
(Here the. Secretary again read the recommendation.)
THE PRESIDENT: Gentlemen, are you ready for tile question? The motion was made by Mr. Edwards to pass the
resolution as offered RS the resolution of the Convention. All
the favor will say aye.
(The motion was carried unanimously.)
THE PRESIDENT: Before taking up tile next business in
order, I will announce tile appointment of the customary Committee on Resolutions. These resolutions are merely resolutions
of thanks to.our hosts, and those who are responsible for the
splendid entertainment which we have received and are receiving. I will appoint Mr. Smythe, Chairman, President, New
York State Bankers' Association. Mr. P. C. Hill of San Francisco. Mr. Charles H. Bender of Grand Rapids, Michigan.
Captain James Dinkins of Louisiana.
Those gentlemen can meet at a convenient time and present
the resolutions tomorrow afternoon.
We will now have the pleasure of hearing an address by
Mr. Joseph Chapman of Minneapolis.

. 139

"Co-operation" by Joseph Chapman
[Mr. Chapman's address is printed on pages 104 to 105.]
Tau PRESIDENT: Mr. Nathan Adams, the Chairman of the
Conference of Country Bankers, has a resolution which he desires to put.
RESOLUTION CONCERNING PAR COLLECTION OF
CHECKS
Mn. NATHAN ADAMS: (Reading.)
WHEREAS, The purposes of the Federal Reserve Act are to mobilize
the reserves and to unify the National Banking System, thereby providing an elastic currency and a system of re-discounts, and
WHEREAS, The Act has in it the possibilities of preventing the
suspension of cash payments by banks, thereby making the country
safe from currency panics, and
WHEREAS, Section 10 of said Act providing for the so-called par
collection of checks is not a feature necessary to the attainment of
the objects sought by the Federal Reserve Act, and the system of
collecting checks now in operation under the law, as interpreted and
applied by the Federal Reserve Board, works serious hardships upon
and heavy losses to thousands of country banks, and
WHEREAS, It is the belief of the majority of bankers that Congress did not intend to deprive the banks of legitimate profit, therefore
BE IT RESOLVED, That the American Bankers Association, while
approving the fundamental principles of the Federal Reserve Act and
expressing loyalty to the Federal Reserve System, protests against
the provisions of the Act relating to the collection of checks, and instructs the Committee on Federal Legislation of the American Bankers'
Association to endeavor to secure amendments to the Federal Reserve Act, providing for the establishment of a collection system which
is fair and equitable to all Banks and to the general public.
BE IT FURTHER RESOLVED, That the President of the American
Bankers' Association be authorized and directed to appoint a Committee of twenty-five bankers, fifteen of whom shall be country bankers,
and ten of whom shall be reserve city bankers, and that this Committee co-operate with the Committee on Federal Legislation of the
American Bankers Association in bringing about the enactment of
th desired amendment.

I move its adoption:
THE PRESIDENT: You have heard the reading of the resolution, and Mr. Nathan Adams moves its adoption.
Mn. HAwEs: Mr. President, I rise to second the resolution
as offered to the Convention. I do so with the feeling that
the resolution as presented is fair and equitable to all classes
of bankers -.
THE PRESIDENT: One moment, Mr. IIawes. This resolution
coming as it does, the Convention will have to decide whether
it will consider it. A motion to consider this resolution at
this time.
Mn. Mw-Es: I move we consider it, Mr. President.
(Motion duly seconded.)
THE PRESIDENT: All in favor of considering this resolution
at this time will signify by saying aye.
(Motion carried unanimously.)
Mn. IIAWES: I do not desire to make a speech. I only desire to move the adoption of the resolution as offered. As I
have said before, I believe it fair and equitable, and because
it makes a Commission of bankers composed of all classes and
kinds, I hope the resolution will prevail.
THE PRESIDENT: The question now comes on the adoption
of the resolution as offered by Mr. Nathan Adams. All those
in favor of its passage will signify by saying aye.
(The resolution was carried with only one dissentient voice.)
Mn. GEORGE E. WEBB: Mr. President, I have a resolution
that I wish to present here at this time, and I ask for its consideration at this session of the Convention. May I read this
resolution?
THE PRESIDENT: Come to the front, Mr. Webb.
RESOLUTION CONCERNING CONSERVATION OF SOIL FERTILITY
Mn. GEORGE E. WEBB: (Reading.)
History records that only such nations have endured as have given
heed to the conservation of their soil fertility. The facts are that
dissiin all time there is no record of any nation having mined and
abandon
pated this priceless heritage with such a degree of careless
as ourselves. With thousands of acres of virgin land being brought
annually under the plow, we have reduced our annual average production
of grains per acre to about fifty per cent of the production of ouhl
virgin soils, producing today less than half the average per acre of
European farms. This, while yet our nation is in its infancy.
And whereas, it is recognized by soil economists that animal husbuilding
bandry is the most economical method of conserving and of
twenty
soil fertility, we face the alarming fact that for the past
years the production of cattle in the United States not only has not
kept pace with the increase of population but has decreased in number.
Now, therefore, be it resolved by the American Bankers Association
be
in convention assembled that the Congress of the United States
petitioned to order an investigation by the Trades Commission into
of
the production of cattle, the marketing of cattle, the slaughter
cattle, the distribution and sale of all products therefrom.
be found by which this important
In the hope that means may
agency in the conservation of soil fertility may be increased and the
masses of our people be supplied with this wholesome food product at
a reasonable cost.
by.
And to the further ends, that reliable data may be secured
which the value of loans based upon cattle as collateral may be judged,

140

BANKERS' CONVENTION.

so that the flanking interests of America may co-operate with the
farmer in developing the live stock interests to the maximum limit;
thereby increasing the fertility of our farms for the benefit of future
generations, and the safeguarding of the hundreds of millions of dollars invested in farm mortgages.
THE PRESIDENT: You have heard he communication read
by Mr. Webb. It is up to the Convention again to decide
whether the subject matter shall be considered. A motion on
this subject is asked for.
Mn. TRAYLAR: Mr. Chairman, I am very much interested in
the subject matter of that resolution. Would it be out of
order that the resolution be referred to the Resolutions Committee?
Tits PRESIDENT: We have no Committee on Resolutions except one on purely matters of courtesy.
Mn. Tnayr,An: I see. I should like to have the opportunity,
and I think this Convention would be entitled to an opportunity to think that proposition over, which has been brought
up in the resolution. I do not care to speak in opposition
to it —.
TnE PRESIDENT: The point now is whether it shall be considered or not considered, whether it shall be considered at
this time or a •future time.
MR. TRAYLAn: I move the consideration of the further resolution be delayed, until a further session of the Convention.
Tits PRESIDENT: Will you specify the session?
MR. TRAYLAR : Tomorrow.
TIIE GENERAL SECRETARY: The regular order of business
for resolutions is on tomorrow afternoon.
'MR. TRAYLAR: Tomorrow afternoon is satisfactory.
THE GENERAL SECRETARY: That would be your motion, that
it be referred to the regular order of business under resolutions,
tomorrow afternoon?
MR. TRAYLAR : Yes, sir.
TIIE PRESIDENT: It has been moved and seconded that the
consideration of the subject matter of this resolution and this
resolution be deferred until the session tomorrow afternoon under the head of resolutions. All in favor will signify by saying
aye. (The motion was duly carried.)
Is the State Secretaries' Section ready to report? They have
been called twice. I call on Mr. McFadden. (No reply.) Now,
the report of the Currency Commission.
.

Report of the Currency Commission
[This report will be found on page 125 of this publication.]
MR. MOEHLENPAII: A majority of the American Bankers'
Association feel like expressing a proper vote of appreciation,
and I also believe that the rank and file of this Asociation believe that the work, the function of this Commission has
ceased, and I would like to have time to gather some of my
associates, if it would be in order for us to do so, to draft this
appropriate resolution, that it may be put properly upon our
record, and go to this ex-Commission.
THE PRESIDENT: It seems to me, Mr. Moehlenpah, that the
purpose that you desire to carry out must be divided into two
parts; one would be the receiving of this report, and.the other
is the discharging of the Commission. It can be done by the
Convention.
Ma. MOEHLENPATI: Mr. Chairman, the first is entirely agreeable, but the second takes some time. I believe just as I
have stated that you can rule that way, so that we can vote
that way, it would be satisfactory to the membership.
Ma. GOEBEL: Mr. Chairman, I do not think that this Convention is ready, upon a few minutes' notice to discontinue the
Currency Commission that has done such notable work in behalf of currency reform.
I also believe that it would not be wise at this time, without
further consideration to concur in the recommendation of the
,Currency Commission, as announced in their report. Therefore, I move that the report be received and filed. •Motion
seconded. (The motion was carried unanimously.)
THE GENERAL SECRETARY: I want to notify the Nominating
Committee, who are now present here, that the meeting
scheduled for this afternoon is at 4:30 o'clock, and it has been
arranged to have it in this building so that you can remain
at the Convention until about that time, and the meeting is
held in the rear of the building. That is all.
Ma. COLLINS: We have with us this evening a very distinguished member of the Federal Reserve Board, and I feel
sure that every member of this Association would like to hear
hint say a few words to us this evening, and I make it a motion
to ask him to say a few words, Mr. Harding.
THE PRESIDENT: It has been moved that Governor Harding,
of the Federal Reserve Board, be invited to address this meeting. All in favor will signify.
(The motion was seconded and carried.)
TIIE PRESIDENT: I now call on Governor Harding.

The Federal Reserve Law and Its Amendments, by
W. P. G. Harding
[Mr. Harding's address will be found on pages 110 to 111 of
this publication.]
MR. GOEBEL: Mr. Chairman, Mr. A. J. Frame desires to
say a word at this meeting on the subject of the resolutions
that have been adopted.
MR. A. J. FRAMES: Mr. President, Gentlemen of the Association, I was delegated at the Country Bankers' meeting to
present the resolutions which were passed by them the day
before yesterday to this Convention. I have come for just one
moment, perhaps not to present the resolutions, because it appears to me without consultation with the rest of the Committee that the Federal Legislative Committee has practically
covered the very things that we had in our resolutions—that
is correct, is it not? Therefore, the object for which I was appointed seems to have been accomplished. The 'voice of the
country banker has been heard, and I feel under a debt of
obligation, and, as harmony seems to be in the air, for the
uplift of this nation, I commend you all, and thank you for
your attention, and that is all I have to say.
Ma. CORBEL: Mr. Chairman, I am informed that Mr. Von
Angleken, the Director of the Mint, is present. If so, I would
move that he be cordially invited to address this Convention
at this time.
TIM PRESIDENT: Is the gentleman present—the Director of
the Mint? (No reply.)
The Secretary desires to make an announcement.
THE GENERAL SECRETARY: On behalf of the Entertainment
Committee of the local bankers, I wish to call your attention
to the ball in this room this evening, at nine o'clock, and to
those of you who were not here on Monday night, it is well
to •tell you that this entire room is used for the ball purposes.
'You will have plenty of room to dance, if you want to dance,
and several thousand seats close by, if you want to look on,
and plenty to eat, first-class music, a very hospitable Reception
Committee—and pretty girls.
THE PRESIDENT: A motion to adjourn is now in order. We
will adjourn till tomorrow at 9:30 A. M.
(Motion duly made, carried and meeting adjourned.)
SECOND DAY'S SESSION
Friday, September 29, 1916.
The President called the meeting to order at 9:45.
THE PRESIDENT: Gentlemen, before formally asking the
meeting to come to order, I will request you to come to
the front
and fill up the seats vacant there, disregarding the
positions of
the state banners.
The first business which we will take up from the program
this morning is an address by Mr. Joseph Hirsch, of Corpus
Christi, Texas, Mr. Hirsch is going to speak on "The Country
Banker's Opportunity"; and it is An address which will well
repay your closest attention, I am sure. MR. Ihnscir, gentlemen.

The Country Banker's Opportunity, by Joseph Hirsch
[Mr. Hirsch's address is printed in full on pagees 106 to 110
of this issue.]
THE PRESIDEgT: Will the gentlemen who have come in since
we opened the session please come to the seats near the front,
and it will be easier for them to hear and it will be very much
easier for the speakers to "put it over."
The next business in order is the Report of the Chairman of
the Agricultural Commission, Mr. B. F. IIarris.
MR. B. F. HARRIS: Mr. Hirsch's splendid presentation can but
give you a meager idea of some of the great accomplishments
of the Banker-Farmer Movement. Some of us are apt to place
the value of the thing on what it costs; but in this work I
ask you not to value this by the cost of the work to
the
American Bankers' Association, because it only cost the Association less than $3,900 this past year. It is not known to all
of you that the Agricultural Commission was created by the
Convention. It is not a constitutional committee, so it only
holds over from year to year, and with the presentation and
acceptance of its report it dies, and at a proper time its work
Is continued by the Convention.

Report of the Agricultural Commission
[The reader will find this report on page 129.1
ADDRESS OF B. F. HARRIS, CHAIRMAN OF THE AGRICULTURAL
COMMISSION.
And now, having reported for your Agricutural Commission, may I
address you briefly and speaking solely for myself? I have just completed five years of service with this association—from the inception
of this work.
Three years ago I suggested and with the generous endorSement and
whole-hearted support of the Agricultural Commission launched The
Banker-Farmer monthly, which has given the nation-wide known name
and far-reaching impetus to our movement for a better agriculture and
rural life and citizenship in the United States.

BANKING SECTION.
The Banker-Farmer is now an established institution, organized on
a permanent basis,—just as the Savings Bank Section, for instance.
Therefore, I am doing neither you nor the cause an injustice when I
say to you that, with your acceptance of this report, my five years'
work and service as member and Chairman of your Agricultural Commission and Editor of The Banker-Farmer is terminated and I retire
to the ranks of the country bankers. I haven't words to express to
you my deep appreciation of the faithful and loyal support the Commission, the Executive Council and officers, the Associate Editor, and
the rank and file of the members have given me.
Like all really great movements, this movement we call the bankerfarmer movement started in a simple, quiet way with none of its
pioneers—optimistic and persistent as they were—having any adequate
conception of the dimensions it would attain. And just here I want
to make the confession, which you have closely read—and read between
the lines of The Banker-Farmer—have long since discovered, to-wit:
That so far as I was concerned the effort was not simply to enlist the
bankers in service with the farmers to build up a permanent agriculture
and better country life—great as is that need and duty—but greater
than all to arouse and inspire our fraternity generally to become cooperating, militant citizens, working for a greater local and national
life and citizenship; for a real, all-American citizenship embraces,
cares for and solves all our problems.
At our great conference in Chicago, July 7-8, 1915,—" The story
of a great aspiration but of greater achievement; the most representative meeting for agriculture ever held in the United States," as one
prominent wrtier put it;"Sounding a new note in national life," and
"Doing a work that cannot be undone," as the Chicago Herald and
New York Thnes expressed it,—we permanently placed "Citizenship"
•
as the first plank in our platform.
If we do our duty as militant citizens we will cover every phase of
social, industrial, commercial and agricultural welfare, and instead
of being simply banker-farmers, we become bankers-everybody. As
the Saturday Evening Post, speaking Of us editorially, said—' What a
startling difference it would make if the banker-farmer partnership
took in everybody!" How the world and these United States need
just that partnership—and just at this time; not that we be our
"brother's keeper" so much as our brother's brother.
As Financial America said of our work: "Inspiration is a particularly valuable asset at this time when there is such imperative need
of men in business and financial life who will guide their activities
with constant regard for their responsibilities to ther neighbors."
The more points at which we touch a human life and interests, the
more alive we become and the longer we will remain so. Most of us
are proceeding now with the conviction that, if you succeed, I benefit;
If I fall, you are injured; should you do the community service, we
are all gainers, while if I waste its taxes or resources or opportunities,
I am a public enemy, for the interests of each of us are inseparable
from the welfare of all of us. None of us are so small that we cannot count for good or evil l none of us are so big but that our bigness
makes us more responsible.
Mr. Lynch, our president, addressing the bankers of Minnesota,
covered the point, as he always does, wildn he said—speaking of the
banker-farmer movement—" its chief merit, I am convinced, is that
it marks a departure from the traditional policy of the banker; I
will not say his real policy, but the one - that has been ascribed to
him and whose existence he has hitherto done nothing to disavow. In
other words, it has shown to many people that the banker is human,
that he does not take an interest in his customers and in his neighbors,
and that he is willing to help them to succeed with only the remote
possibility in mind that their success will in turn benefit him."
This world, or perhaps I should say the United States, is getting
better and farther every day because it is getting more practical,
more human. We don't believe in honesty today for "policy's sake,"
our religion and all the
but for honesty's own sweet sake. We want
verities not as a seventh day, but as a seven day proposition, and we
are beginning to look at politics .or government not as an annual
election day nuisance, but as a 365-day business propositon. In other
words "Service" expresses it, and service grows out of a sane
combination of sense and sentiment; though sentiment, not so long
since, was supposed to have as little place in business as business had
in politics. We must mix the quantity of our materialism with the
quality of our idealism; we must propogate our citizenship or give
it up.
Democracy is on trial;—we must learn what "Sovereign Citizen"
means, for never did your country need you as it needs you today.
Look about us, all the way from the township up to the Capitol,
then ask ourselves the question—" What would my community or this
nation be be if all its citizens were like me?"
Today our boys and girls are learning or unlearning their ideas and
ideals of citizenship from the apathy of the average citizen, or the
affinity of the average politician or public official toward petty or
monstrous indifference, waste or worse. Our greatest danger today
is not so much from corruption in public life, as from the cowardice
of our public officials and from citizens, particularly those situated
as are we. And just here, as emphasizing this greatest danger to our
Republic—cowardice;—and speaking solemnly and solely for myself,
I register my protest, as every similarly-minded American should, at
the amazing attitude of the National Administration and Congress
in the illy considered and panicky haste with which they,—sworn to
act for the welfare of every citizen of the nation—cringed and threw
up their hands on forty-eight hours' notice so to do from a handful
of men.
I care not who the men are, nor the merits of their case—the
humblest toilers or the most arrogant captains of industry would
hardly hold their flag and its representatives so lightly, or dare to
attempt so gigantic a "hold-up" of the rights of a free people.
And yet, un-American and intolerant as were the methods of these
men, the abject, unjutifiable surrender of Congress is the sinister sign
in the whole miserable transaction. It is the greatest break-down, the
heaviest body blow our nation has had. The international situation;
the effect of a nation-wide strike, sing into insignificance for us in
comparison with this fundamental assault on and surrender of vital
principles, the square deal and self-respect.

141

With such appalling cowardice on the part of public officials, how
can a good American hold his peace or hold up his head?
We call character the real basis of all our banking transactions—
yet how little we do to help build up that priceless possession in the
community, even by our own forceful, constructive and helpful example. Can't we do more to teach that ability and genius are as
nothing without character and the will to work,—and to work for
others? Our work for citizenship is character building.
What can we do?—a hundred things all near at band. One of the
easiest is to help mobilize public opinion and get that greatest force
In this nation to work along sane and constructive lines.
We can work for a patriotism that rises superior to partisanship.
We want a patriotism that will not allow us to permit a party label
to prevent us from' seeing that every public office is better manned
and every school better womaned than it has ever been before.
There are many false notions abroad and not a few of these are with
reference to the banker. Here, for instance, is our great American
.
Bankers' association of some seventeen thousand members. The press,
the public, even many of our members, don't realize, or act as if they
did, that over fifty-five per cent of our members are actually country,
cross-roads bankers with a capital of $25,000 or less, while seventyfive per cent have a capital of $100,000 or under. If all of the more
than 28,000 banks in the United States are considered, at least seventyfive per cent have a capital of $25,000 or less.
This association really belongs to the country bankers, too modest
to assert their views as are so many majorities,—yet the politician,
the demagogue, the funny paragrapher only sees or picks out the relatively few Morgans, National Cities, big trust companies, etc., and
leaves the impression that we are all as opulent. It only goes to show
how we frequently lose our bearings, forgetting that this great nation
and its great industries or lines of human endeavor are really constituted of the great average; the great common people of whom Lincoln
said "the Lord most loved because He made so many of them." They
are our bulwark; they made this nation great, and the average
banker—the banker-farmer—is "one of them," with several of his
neighbor farmers and merchants as big a "magnate," or probably
a bigger one, than is he.
The nation stands on the shoulders and lives from the business, the integrity, the industry and the citizenship and patriotism of the
average man, and the well-being- and perpetuity of all depends on his
prosperity.
The banker, however, is in many respects the most important man in
town whether he knows it or not; he should be the bravest and the
least afraid of criticism, and our effort has been to have him as well
and favorably known in front of his counter as he is behind it. Such
prejudice as existed against the banker was largely because of his
failure to show his interest in public welfare. Fear of being misunderstood explained his inactivity and resulted in his really being misunderstood and misjudged.
We must be progressive in order to be conservative; we know that
life is something more than living; that "no man liveth to himself
alone, not by bread alone," and so we are working for the big, broad,
human and public-spirited side of things. We do not believe that
any man can be a good banker or a good business man who is not first
a good citizen—in all that term implies. You may call this idealism,
but I ask you to show me today the man, or the business; the bank
or the institution not directed by service nor squarely up- to the
Golden Rule—within which all my suggestions are encompassed—and
I will show you a dead or a passing one. Some incentive besides the
dollar is needed to save us from failure.
I do not believe as many of you as should realize what our movement
.
has done or can do for you and our fraternity; not to speak of its
service to public welfare, its demonstration of our vital interest and
practical co-operation, nor that the movement is just coming into its
own—with enormous possibilities.
Our phrase, "Take interest in the farmer as well as from him" has
gone throughout tile country with constantly increasing emphasis on
the "in."
It was really not so necessary for me to reiterate so many of the
things we have been preaching in The Banker-Farmer because bankers
now in every section of the country are preaching and acting on the
banker-farmer platform,—but I could not resist this, my last chance.
Let me quote H. C. Carr of the First National of Portville,
California, who, writing on the banker-farmer movement, said: "It
may be that you haven't given this proper and serious consideration.
It may be that you do not care. If you don't care, then hang the
three balls over your door, don the grey garb of the collector of tribute
and go out and clean up the earth of its substance, and while you are
accumulating all those glorious dollars you may be sure that you are
also accumulating the hatred of mankind, the contempt of their wives
and daughters and the curses of the luckless victims who have been
cleaned. 'The bank that helps' is a good motto, but 'The banker
that helps is a better one." Mr. Carr, like many another convert to
'
our cause, has found new life and a new vision, realizing that nothing
we can give counts like the giving of ourselves. It all sums itself up
into the question, "What are we working for; what is the journey's
end; have I or we any vision or ambition either for ourselves or our
country?"
And now, finally,—my whole conception of, and work and hope for,
this banker-farmer movement is to bring about militant, co-operating
citizenship among all classes of our people, and for that reason I have
confined may remarks entirely to the spirit back of, and the spirit that
I hope will continue to actuate, this work.
Never in the world's history, nor in our own in these portentous
times of stress and readjustment, was such a spirit so necessary, nor
from any class of men more than from the banker-farmer class. We
have very much to maintain as well as to attain ;—all that we and
the beloved who have gone before us sought for and wrought for and
fought for is more than ever worth lighting for, and these requisites
of citizenship we are working for spell thorough preparedness, independence and protection in every sane form.
The solution of many problems presses upon the present and every
person, and a prompt and successful solution reaches far into the
future, for it furnishes the foundation for all the years that are to
come. We are barely peeping through the portals of our possibilities,
the greatest ever vouchsafed to man. Are we going to be equal to it;

142

BANKERS' CONVENTION.

will the bankers lead the vanguard of aggressive citizenship? "Lord
God of Hosts, be with us yet; lest we forget, lest we forget."
•
If you agree with me, see that the work of this Commission is continued, and particularly the publication and wide distribution of The
Banker-Farmer, along the lines seuggested,—with "Citizenship"
always at the masthead,—for it is the most needed and worth-while
work we have undertaken.
"THEREFORE, when we build," as Ruskin said, "let us think that
we build forever. Let it not be for present delight, nor for present
use alone; let it be such work as our descendants will thank us for,
and let us think, as we lay stone on stone, that a time is to come
when those stones will be held sacred because our hands have touched
them, and that men will say as they look upon the labor and wrought
substance of them: '
See! this our fathers did for us.'"
MR. SHEPPARD (Idaho): If it be not out of order at this time,
I ask the privilege of offering a resolution.
THE PRESIDENT: Bearing upon the report just read?
MR. SHEPPARD: Yes.
THE PRESIDENT: It is in order.
Mn. SHEPPARD: After listening to the admirable address of
Mr. Hirsch, and the very interesting report of the retiring
Chairman of this Commission, I am 'sure there is not a man or
a woman within the sound of their voices who would for an
instant wish the discontinuance of this excellent work inaugurated by the Agricultural Commission. I therefore, Mr.
Chairman, make the motion that the Agricultural Commission
of the American Bankers' Association be continued.
(The motion was carried unanimously.)
In addition, my attention is called to the fact that the report
has not been acted on. A motion was made to continue the
Commission, but a motion should be made to receive and file
the report.
Mn. McCuLLouox (Ind.): I move the report be received and
filed.
(The motion was duly seconded'and carried unanimously.)
THE PRESIDENT: The next business before us is an address
by the Hon. Paul M. Warburg, Vice-Governor, Federal Reserve
Board, Washington, D. C., on "The Reserve Problem and the
Future of the Federal Reserve System." Will the gentlemen
kindly walk to the front seats, as far as you can, so that you
can hear?
MR. R. F. Mennox (Atlanta, Ga.): I understand that a motion has been made and carried to continue the Agricultural
Commission. I also understand that a motion has been made
and carried to receive the report. If I am in order, Sir, I think
it would be quite appropriate at this time to express the
thanks of the Association for the splendid and unselfish work
that the Chairman of this Agricultural Commission has given
to this .matter during the last few years.
I believe there is no movement started by the American
Bankers' Association that has brought more advantage to this
Association and the country. I believe the 'co-operation of the
banker and farmer will make for the permanent and great
prosperity of this country, and the gentlemen who have thus
promoted it so far, and given it such a good start, should
receive the thanks of the Association. I therefore move you,
Sir, that the thanks of this Association be extended to Mr.
Harris, and the Committee for the splendid work which has
been done.
(The motion was duly seconded and carried.)

The Reserve Problem and the Future of the Federal
Reserve System, by Paul M. Warburg
[Mr. Warburg's address in full will be found on pages 111
to 121 of this publication.]
Ti
-in PRESIDENT: Gentlemen, we will not detain you but a
few moments longer.
MR. GEORGE REYNOLDS (Ill.): Mr. Chairman, I ask your
recognition, in order to introduce a motion in connection with
this address that has just been made, and while I am on my
feet I ask for only a moment for a remark or two in connection therewith.
The splendid analysis which Mr. Warburg has given of
what I believe to be the very crux and the vitals of the Federal Reserve System, has been so comprehensive and so logical
that I feel very little emphasis is necessary. However, since
this is an institution that is here to stay, and since it is an
institution which belongs to you gentlemen, I would like to
.
impress upon you the fact that in your assembly here today you are very much in relation to this problem and to the
address which Mr. Warburg has made, as your facilities are in
your respective banks, in your relations to your stockholders,
in your annual meetings. You are always glad to have stockholders, who are interested in the success of your institution,
make recommendations to you, and I regard the recommendations which Mr. Warburg has made to-day as being another
relation to this institution, which, gentlemen, is after all your
institution, not only because you own all the stock but you
are the entire depositors; whether or not you are voluntary
stockholders or involuntary makes no difference, the condition
exists, and it is the only bulwark in which we can turn in

times of stress or need, and whether that bulwark is one of
strength or weakness depends very materially upon what we as
Individual stockholders, people interested in it, may do in our
individual capacity, and in our individual relations toward it.
I only want to emphasize one thing,—Mr. Warburg, in connection with your address to-day, and that is what I believe
the efficacy and benefits which will be derived through this
Association, if we as bankers follow the practice which has
prevailed in Europe for one hundred years nearly, and 1. lve
-,
to the Central organization the Federal Reserve System, the
Federal Reserve bank, in our own respective districts the bulk
of the gold reserves which we carry, and go more nearly to.
the basis practiced by the European bankers of carrying till
money. To emphasize the thought I have in mind, I want ta
say that the institution over which I have the honor to preside,
while carrying a Federal Reserve Bank balance in Chicago at
this time, about $15,000,000 on deposit, carries in its vaults
some 25 to 30 million more of legal reserve money; and it
may be of some interest to you to know that I have already
given instructions that the reverse of that condition shou1,1
be true, and that in the future it is our purpose to carry twothirds of that balance with the Federal Reserve Bank, and
only one-third in the institution's vaults. This system will be
exactly what we make it, and it is in these vital things that I
invite your co-operation.
Mr. President, and gentlemen of the Convention, I -rise for
the purpose of asking for a standing vote of thanks to Mr.
Warburg for his splendid address which he has given to this
Convention to-day on the question of the Federal Reserve
System.
Mn. PULIKER : Before putting the motion, may I amend it
by asking the Association in addition to publishing the addsess in the Proceedings of this Convention that it be put in
pamphlet form so that it may be read and studied by every
banker of this land, be he National banker, be he State banker,
or be he private banker; be he for the Act, or be he against
the Act.
I therefore move you, Mr. President, that this Association
publish in pamphlet form—if I am in order—for general distribution, the address of Mr. Warburg which we have just
heard, and if Mr. Reynolds will permit me that the rising vote
may be considered the affirmative vote to the motion.
THE PRESIDENT: I would like to call the gentlemen's attention to the fact that the address will be printed in Tim
JOURNAL and will receive the circulation that it carries, which
is more than 16,000 members, because it goes also to the
American Institute of Bankers, and 35,000 copies will be circulated in that way. (Cries of, "Question !")
The question is as I understand it on Mr. Reynold's motion,
a rising vote of thanks.
(The motion was carried unanimously.)
Kindly give us a little more attention, gentlemen.
THE SECRETARY : I have just received the following telegram :
(Reading.)
"The Farm Mortgage Bankers' Association of America sends cordial
greetings and congratulates the American Bankers' Association upon
the splendid attendance at its 42nd annual convention and expresses
the hope that it has been marked with the success of its preceding
notable conventions.
(Signed by) Fred. W. Thompson, President."
I want to call the attention of the Convention particularly
to this afternoon's session and urge all the delegates present
and guests to be on band at two o'clock. You will have one
of the most important reports of the week in .the report of the
Insurance Committee. Then, at that session, the special committees are appointed for the invitations for the next convention, and the communication from the Executive Council and
a resolution which was laid over yesterday. Then comes the
report of the Committee on Nominations, and the election of
your officers, and the installation of the officers. Those are
very interesting ceremonies.
Then we have some visitors here as well, whom I know you
will be interested in hearing, so I hope there will be a full and
large attendance at this afternoon's convention, the closing
session of the most successful convention the American Bankers'
Association has had in its history of forty-one years!
THE PRESIDENT: A motion was made this morning by the
gentleman from Idaho, Mr. Sheppard; passing a resolution continuing the Commission, but it did not include in that motion
the power to the President, that will be the incoming President, to appoint the members.
Mn. B. F. HARRIS: Mr. President,. I move you that inasmuch as there are to be changes in the Commission, that the
motion be corrected to provide that the President shall appoint
the seven members of the Commission for the ensuing year.
Mn.•SHEPPARD: I accept the correction.
THE GENERAL SECRETARY: That is one of the orders already,
that all committee appointments must come in under the heading toward the close of the Convention, and this appears under
Friday, September 29, under the head of "Committees and
Committee Membership." The reports can be approved, but
the committees must be appointed at that time, under the order
of business.

BANKING SECTION.
MR. I'. IV. uokasra.: Mr. Chairman, may I ask every member
of the Executive Council to be here at the platform five minutes
before two o'clock this afternoon for a short conference, both
the new members as well as the old ones?
TIIE PRESIDENT: A motion to adjourn is in order.
(Motion duly seconded, carried, and meeting adjourned.)
AFTERNOON SESSION.
Two o'clock P. M.
CONVENTION HALL, KANSAS CITY, MO.
The meeting of the American Bankers' Association in the
afternoon met at Convention Hall.
President James K. Lynch called the meeting to order at
2:30 P. M.
THE PRESIDENT: Gentlemen, I must apologize for the delay
in opening the session. Matters developed which I could not
very well control. The first business of the afternoon session
is the Report of the Insurance Committee, Mr. Elder J. Sands,
of Richmond, Va., Chairman. This is a very important report
and one which will repay your close attention.

Report of the Insurance Committee
MR. Cox: I happen to know something of the great amount
of the work which this committee has done, and I know that
a new committee would take years to acquire the information
that this committee has, and I move you therefore, sir, the
acceptance of this report and that it be filed, and the same
Committee continued as provided by our Constitution in Section 6, I think.
Ma. JESS : I heartily concur in every way in what was said
by the mover of this motion. The Insurance Committee has
rendered the bankers of this country signal service; the securing of this Banker's Bond, the blanket bond which was discussed by the Chairman of the Committee in Ills report, is a
step in the right direction ; not only is the covering better
than any other policy offered but the premiums that we are
called upon to pay for insurance are something that are far
less than ever before. This Committee has given freely of its
time and strength in the interests of the bankers of the country.
Its work is not finished, and I, with great pleasure, second the
motion made by Mr. Cox that the Committee be •continued.
THE PRESIDENT: In order to get it before the Committee
In regular order I would request that Mr. Cox divide his motion, and we will receive and file the report.
MR. Cox: I shall be glad to do so. I move that we now
receive this report, and that the Committee be appointed.
TIIE PRESIDENT: Yes; it is seconded by Mr. Jess, and all in
favor will say aye.
(The motion was carried unanimously.)
The motion is carried, and the report will be received and
filed.
MR. Cox: Now, I move you, Sir, that this Committee be continued, as provided by our Constitution.
MR. JESS : I now second the motion.
THE PRESIDENT: The motion to continue the Committee,
with same membership, is made and seconded. Are you'ready
for the question? All in favor will signify by saying aye.
(The motion was carried unanimously, with the exception • of
one dissenting vote.)
Now, Committees and Committee Membership, this is .the
next in order on the program. Under that heading will come
the membership of the Agricultural Commission.
COMMITTEES, AND COMMITTEE MEMBERSHIPS
A motion to either continue the Committee or have the
incoming President appoint them, will be in order.
MR. SHEPPARD (Idaho): Mr. President, at this morning's
session I made a motion providing for the continuance of the
Agricultural Commission, which motion was carried. however, I overlooked making provision for the method of continuance, and I wish at this time to amend my motion by
providing that the Commission be continued by appointment
by the President.
THE PRESIDENT: A motion has been made and seconded with
respect to the Agricultural Commission, to the Convention Committee, to the effect that the Committee be continued, the appointment of the personnel, and the committee, to be left to
the hands of the incoming President. Are you ready for the
question? All in favor will say aye.
(Motion carried unanimously.)
There appear to be no other committees. The Secretary will
make a statement.
THE GENiatAL SECRETARY: The next order of business is the—
INVITATIONS FOR TIIE NEXT CONVENTION.
Those are submitted to the Convention, with a view of having
the Convention express, if they wish, any desire they may

143

have in regard to that, but under the Constitution now a
decision for the choosing of a city for the next Convention
is vested in the Executive Council. The invitations which
have been received for the Convention of 1917 are as follows:
Atlantic City, N. J.; this invitation comes from the Atlantic
City Bankers' Association, or, in other words, the bankers of
Atlantic City.
From the New Jersey State Bankers' Association, the Governor of the State, the Mayor of Atlantic City. I have on this
file written invitations of these various bodies which I will
read to the Convention if they desire to have them read. They
are all in most hospitable terms. Now, the other invitations
which have been received, and which are also on this file, come
from commercial bodies.
Chicago, Ill. From the Chicago Association of Commerce.
Asbury Park, N. J. From the Mayor and Director of Public
Affairs.
Milwaukee, Wis. From the Merchants and Manufacturers'
Association of Milwaukee.
Columbus, Ohio. From the Columbus Convention & Publicity Association.
Portland, Ore. From Portland Chamber of Commerce.
New York, N. Y. From the Merchants Association of New
York.
Toledo, Ohio. From Toledo Convention & Tourist Bureau.
San Francisco, Cal. From San Francisco League.
Norfolk, Va. From the Chamber of Commerce of Norfolk.
I will only say that in that connection the American
Bankers' Association has never accepted the invitation of any
commercial body. It has been the rule to observe only those
invitations which come, and which are joined in, by the bankers
of the city that wish to entertain the Association.
MR. EDEN: I move you that the American Bankers' Association accept the invitation extended on behalf of the bankers
of Atlantic City, and of the State Bankers' Association of
New Jersey, and of the commercial interests at Atlantic City.
THE PRESIDENT: Mr. Eden, will you modify your motion to
make that recommendation to the Executive Council? That
will be following the form provided; the Convention can not
settle the question. It has to be referred to the Executive
Council, who will without doubt attach great weight to the
recommendation of the Convention, and unless something arose
between now and the Convention date would unquestionably
follow it out. Will you therefore change your recommendation
to that effect, Mr. Eden, as a recommendation that this Convention recommend the Executive Council to accept the invitation from Atlantic City?
MR. EDEN: Yes, sir.—So that we get to Atlantic City!
MR. COLEMAN: I second that. (Motion duly carried.)
The recommendation goes for Atlantic City.
MR. C. A. IIINscit: I believe the next in order will be Unfinished Business?
THE PRESIDENT: Yes.
CONVENTION VOTES IN FAVOR OF REDUCING RESERVES
OF COUNTRY BANKS FROM 12% TO 10%.
: I would like to call attention, Mr. ChairMR. C. A.
man and Gentlemen, to the fact that in submitting the report
of the Federal Legislative Committee we asked for an expression of opinion.from this Convention as to two subjects: One
was the recommendation of the American Bankers' Association
recede from the position taken by it at the Seattle Convention,
in which we recommend the adoption of what is now known as
the Pomerene-McFadden Bill, pertaining to the readjustment
of bank reserves. Our recommendation was that we abandon
the provisions provided for in the Seattle Resolution, and instead thereof that we recommend a reduction in the required
legal reserves of banks, country banks, from 12 to 10 per cent.
I would like to have an expression from this Convention on
that subject.
In addition, I would like to have an expression from you in
regard to the question of branch banks. This Association has
never given an expression upon that subject; and In submitting our report we called your attention to the fact, asking
you to do so. I would ask, if you please, Mr. Chairman, that
you take that up separately; one upon the question of the
reserves, and the other upon the question of branch banks.
. THE PRESIDENT: The question is before you, gentlemen, and
the Chair will entertain a motion.
MR. W. M. VAN DEUSEN (Newark, N. J.): I move that the
Convention recede from the position taken at the Seattle meeting, with regard to the reserves, and that the Legislative Committee be instructed to secure a reduction of the reserves of all
country banks to 10 per cent., to be kept entirely in cash or
in the Federal Reserve Bank.
MR. Httiscir : I second that, Mr. Chairman.
THE PRESIDENT: It has been moved by Mr. Van Deusen, and
seconded by Mr. Hinsch, that the action taken at the Seattle
Convention be rescinded, and that the Convention recommend
a reduction of the reserves of the country banks to 10 per cent.,
to be kept either in their vaults or the Federal Reserve Bank.

144

BANKERS' CONVENTION.

The question is an important one and I would not like to have
it voted on without proper discussion. It is before you for
discussion. (Cries of "The Question!")
MR. C. A. HiNscii: Mr. Chairman, it might seem proper to
advise the Convention that at a meeting held in New York,
this Spring, that this matter was pretty thoroughly discussed
with Governor Strong, of the Federal Reserve Bank of New
York, and while he did not state at that time that he favored
the reduction of the reserve from 12 to 10 per cent., he rather
intimated that he would look in favor upon such a proposition, stating that he believed that that would be economically
sound, for he did not believe the other proposition adopted at
Seattle would be.
I want you to understand just his attitude, and also it
seems to me that Mr. Warburg this morning gave us some encouragement to believe that the Federal Reserve Bank itself
might look favorably upon such a proposition. We all realize
that in addition, of course, to the legal reserve of 10 per cent.,
each bank will be required to continue to carry balances with
allied banks in their control, which will not count with part
of their legal reserves but will be a quick reserve from which
they can call. I think it would be wise to let you know that.
Mn. COLBURN (California): This question that is submitted
by the Legislative Committee at this last session of the Convention is one of the most definite recommendations that this
Convention has been called upon to act on. It does not seem
that in the limited time at our disposal there can be sufficient
discussion or sufficient thought applied to this important
measure to give it the weight that it should have. Many
speakers that have addressed us from this platform have cautioned the bankers of the country that we were in the presence
of very uncertain times; owing to the fact that the Great
European War, possibly, it is to be hoped will be brought to a
close, and that the American bankers and American businessmen will then be confronted with a situation that is entirely
new, and greater problems for their solution that have met us
here before.
In view of that condition of affairs, Mr. President, I move
that action on this recommendation be deferred until the next
convention of the American Bankers' Association.
There is an additional reason, that the reserves of the banks
of the country have recently been reduced from 15 to 12 per
cent., and it is possible that we are not entirely readjusted to
that change. I, therefore, offer that as a motion.
(Motion seconded.)
Tun PRESIDENT: It is a motion to postpone until the next
meeting of the Convention. Are you ready for the question?
(Cries of "Question!
") All those in favor of the postponement of this question will signify by voting aye. (Numerous
votes.) Those opposed will vote no. (Numerous votes.)
The Chair is in some doubt. Will those who have voted aye
kindly rise? Kindly remain, gentlemen, until the tellers have
an opportunity to count you.—The Tellers report 110 ayes.
The gentlemen who are opposed to the postponement, now
rise. The motion to postpone is lost, by a vote of 136 to 110.
The question now comes upon the adoption of the resolution.
All those in favor will indicate by saying aye.
(Some voting for, and some against the motion.)
The ayes have it.
CONVENTION ADOPTS RESOLUTION DECLARING
AGAINST BRANCH BANKING.
The instruction asked for by the Chairman of the Federal
Legislation Committee was for a declaration of the policy on
the subject of the Branch Banks, by this Convention. A
motion is in order.
Ma. Wu. J. CousE (Asbury Park, N. J.): I would like to
make a motion that this Association go on record as opposed
to Domestic Branch Banking, if that is in order. My reason
for it is that in our opinion it places the control of the banking business—
THE PRESIDENT: You have heard the declaration that the
Convention is opposed to Branch Banking, applied to domestic
banks. Does the motion receive a seconder?
(The motion was seconded.)
It is now before the Convention for discussion.
MR. Wu. J. Cousu: My reason for making that motion is .I
believe it places the control of the bank business in the bands
of a few big institutions. We have had that tried out in New
Jersey, and find it to be a bad law, and we had a law that
provided for Branch Banking, within county lines. We found
it necessary to have that law repealed. There were 300 independent banks opposed to the system, and two banks only that
I know of that were in favor of it, and yet, after passing the
repealer throughout the Senate and House, unanimously in the
Senate, and 40 to 6 in the House, the Governor saw fit to veto
the measure through the influence of two very large trust companies; notwithstanding that we passed the repeal over the
veto of the Governor, thus repudiating the dangerous principle
of branch banking. It concentrates the funds of the different
communities in a few large cities, and does not enable the

deposits to be used locally. Therefore I am in favor of this
Association going against Branch Banking. Branch Banking is
wrong in principle, and any limitations that might be made
would not safeguard the independent banks from the danger of
gradual expansion of the system. It is not proper for us in the
United States, except to foster a monopoly.
Mn. U. II. MCCARTER (New Jersey): Mr. President, it does ..
seem there to me that this is not the proper place to bring the
quarrels of the bankers of one state before the National Association. I think it is a matter that each State can figure out
for itself. If we get into an argument on a question of this
character this afternoon, we will not get to Mr. Long's lunch
'to-morrow; and I therefore move that this motion be laid on
the table. (Cries of "No!")
THE PRESIDENT: Mr. McCarter, while this is in fact a
declaration of principle on behalf of the Association, and runs
some danger of being entangled in the apparently local difference of opinion, it nevertheless came as a request for instruction from the Federal Legislative Committee. This question is coming up in the next Congress, and bur Legislative
Committee is asking us for advice as to whether they shall
support a measure for Branch Banking. However, it may be
limited, and whether they shall oppose any and all measures
for Branch Banking.
I wish very much that this could be considered apart from
any local disturbances, or any individual interests. It is an
important question and I do not feel that the whole story was
told by the last speaker.
I should, however, prefer to have this voted on, and an
expression of opinion obtained from the meeting. Mr. McCarter, will you therefore withdraw your motion to oblige me?
Mn. McCAirrEa: Certainly, Sir. I would ask the Legislative
Committee to be kind enough to define just what they mean by
Branch Banking.
MR. C. A. Husiscu ; Mr. Chairman, I am very glad indeed to
have an opportunity of saying another word upon that subject; in presenting this subject we really should have divided
it. We have Branch Banking contemplated by the recent Act,
13,391, and it pertains to cities and counties, and another
that extends to the country districts.
Nitw, it seems to me that it might be well, therefore, in
considering this subject of branch banking to divide the proposition (1) A. question of whether or not we favor the establishment of Branch Banks in cities of a certain size; and (2)
whether we favor the Branch Banking as extended to the
country banks. I would suggest, Mr. Chairman, that you call
for a vote for a division on the subject; first, on the city banks.
Mn. Wu. J. Cousn (New Jersey): Mr. Chairman, if I might
be permitted to add a word, I do not think the country bankers
have any objection to Branch Banking being conducted within
the city lines. That is a matter for the bankers who are conducting business in the larger cities to determine. I believe
the rank and file of the bankers, of country bankers, are opposed to branch banking conducted either within county lines
or statewide branch banking.
GOVERNOR BAILEY: I am opposed to any system of Branch
Banking. I wish to go on record so hard that it will catch
the ears of Congress on that proposition. It appears that in
the States that have the system of Branch Banking that the
National Banks are working to disadvantage in those things;
more than that, I grant that be true, I would rather have
corrected the mistakes in those States than to make a greater
mistake by establishing a national reputation of branch banking
You all know about the various banking systems in
Canada. You must realize that another entering wedge into
our branch system, will ring our death knell eventually of the
individual banking systems of our country. I have in mind an
experience of my own, up in my county in Kansas, where I
lived for years. A couple of families of repute, hard working, industrious people, moved up into one of the provinces of
Canada. They were thrifty, well-to-do people, but after they
started in this new country they needed some accommodation.
A branch bank of one of the great Canadian system banks
was in this community, where I lived. They borrowed some
money of them. That was all right, in the inception, but
stringent times came on, and instructions went out from the
Bank of Toronto to "Cnrtail your discounts."
These men were notified that their notes would be due on
a certain time, and they were asked to pay them. They had
removed from that personal equation that exists between every
country banker and his clients, that bond of sympathy that
enters into the banker, with the man who does business, was
eliminated. The man who was running a branch bank up there
in the district in Canada felt somewhat sorry for this other
man, but he said, "My instructions are frotn Toronto, and
you must pay your notes," and the borrower had to write
down to his old friends in Kansas, and if we had not had a
little extra money to send to him, he would have suffered an
irreparable loss, as the result of the branch banking system. ,
I am sorry for the fellows running national banks in states
that have the branch banking system, but I suggest we correct
the wrong in our states first. This would then put an enter-

BANKING SECTION.
ing wedge into the branch bank system from the national point
of view. I hope this Association will keep this in mind. I
hope your voce will ring out today, so strong as to be heard
in the halls of the American Congress. I quite realize that
great influence and power is behind this thing. And let us
therefore do the thing that is always potential with Congress.
I know how Congressmen behave, when they get into that influence at Washington. The man loses track of the fellows at
home, and that mysterious influence sways him; but the silent
letter that comes from the fellow that elects him, is the man
that moves his sentiment. It is up to you to see to that
legislation, and I want to emphasize my opposition to any
system of branch banking in this country.
MR. GEORGE REYNOLDS: I think I agree in the main with all
that Brother Bailey has said on this subject. In the first place,
the enactment of the law as it was proposed, would give the
national banks in a few States privileges which the national
banks in the majority of the States could not enjoy, because
• they had no laws in those States providing for branch banking. I know of no institution in America that would profit
more by the passage • of this law than the institution with
which I am connected, and yet I am opposed to it.
I believe in public life and private life and in business and
all civic endeavors of every kind that the question of ownership, the question of proprietorship, is the biggest and the
broadest thing that will make for a betterment in our citizenship in every direction.
I am frank to say if we were organizing a new currency
system, I believe that the safest system from the standpoint
of the stability of your deposits, would be in the adoption of a
system of branch banking. I am frank to say, however, on the
other hand that while with the currency commission in Europe
in 1908, in a study on this question, there was one question
that could not be satisfactorily answered by any of the joint
stock banks of any of those countries, where they allowed
branch banking, and particularly in England, and that is the
question that Mr. Bailey has just raised as to personality.
The statements are all sent to the head office. They are all
measured by the dollars and cents standard; the question of
personality, the ability or the initiative of the individual in
the community, is not given any greater advantage in one case
than another. You all know that in every community there
are two or three or four people who have initiation, who have
progressed, and are successful in the consummation of the ideas
that they undertake. Now, gentlemen, one gentleman from
New Jersey, who has spoken of the condition there has said
that he did not think the bankers would object, if it is only
city-wide in its effect. We have in Chicago perhaps one hundred banks that would feel differently to that, probably seventyfive of those banks have their accounts with my institution.
They have carried good balances with us, and have carried
them for years, and I do not want now to prostitute the information which I have gotten through the benefits which
they have endeavored to bring to me in giving me their accounts, by taking that information and starting branch banks
across the street, in order that I may take away from them
the business which many of them have been 25 years in
building up. I hope that this Convention will go on record
as opposing branch banks in every form, and I suggest, as Mr.
Bailey suggested, to right the few instances where the competition is hurtful to the national banking system, and not
make the sore so big so that it will extend to the banks in all
the States.
THE PRESIDENT: Is there anyone here to take the opposite
side?
•

Me. WILLIAM LIVINGSTONE (President, Dime Savings Bank,
Detroit, Mich.): Mr. Chairman, I am sorry to disagree with
my particular friend, Mr. George Reynolds, but I fully grant
before this Convention that his experience is worth a great
deal more than perhaps mine is; but it does seem to me that
on the question of branch banks, we might have some limitation. Take Governor Bailey's illustration of the Canadian
banks. You have the Canadian Bank of Commerce, and the
Bank of Montreal, that run into hundreds of branch banks,
extending all over the provinces of Canada. I fully agree with
him about the man who is away from the main bank, that he
loses the personal equation, which you would have in a bank
confined entirely to a city. •
Without desiring in any way to take up the time of this
Convention, may I be pardoned if I just say a word relative to
my own particular city, the City of Detroit? It seems to me
that applied to the experience we have there, that under proper
limitations and under proper laws—all State laws are not alike,
but the way in which the branch banking system is controlled
in our State indicates to me that it was understood there
could be but little objection to our city banks, particularly,
having branch business. We have one hundred branches in the
City of Detroit, a fraction over that in fact. These branches
are owned by all the respective State banks, some have more,
and some less. The reason for establishing those branch banks
is what?—for the convenience of our depositors. They are

145

scattered all over the city, and the result is that it is much
more convenient for them in many ways to make their deposits at places which are near their own residences, which are
on the outskirts of the city, scattered all over the entire districts of the city; it is so much more convenient and advantageous, that the customers are very much pleased with it,
indeed; and the bank that did not have branch banks, I am
speaking particularly of savings banks, throughout the city
would be at a very grave disadvantage, indeed.
It is a public convenience in every way. The depositors want
it, and they have asked for it. And they will tell you that
there are many in that locality who say that we have a large
plant here, and we cannot afford to come downtown to make
.our deposits, and the result is if you do not establish a branch
bank we will go elsewhere.. I am talking now particularly,
and confining it to the limits of any one particular city, not
going outside of it, not spreading all over thousands of miles
throughout the entire province of Canada, and I am very
familiar with their way of banking; but so far as our experience in Detroit is concerned, at least, I am satisfied that every
banker in Detroit who has had any experience in the banking
business whatever, would be utterly opposed to, and would vote
no on this particular proposition.
Now, so far as we are concerned, you take the State business, and I happen to represent a State bank. If I were looking at it as an entirely selfish proposition, I would be opposed
to national banks having branches, but the very reverse is the
case. I think that we should all stand on equal footing, with
equal rights and equal privileges, and I am heartily opposed to
any resolution so far as my own personal opinion goes, and
I know that I voice the opinion of all our State banks, at
least in Detroit, and I am entirely opposed to the passage of
this resolution, in the policy of all branch banks, without regard to the locality, or their particular limitations. If there is
any question of branch banks having too much latitude, if
there are some States where the laws are not sufficient, and
the limitations are not such as provide for safety, then, it
should be altered. Governor Bailey has raised the point here
about the persona. equation, which is true in the way be has
stated it, but not so for instance in the city. There is no
depositor in any of our banks that cannot come down to the
man at the bank at any time, and be listened to with all consideration, and receive all the attention and help consistent
with good banking, that he can have, provided he was keeping
his account in the main bank. The fact that he is in the
branch does not make any difference. If his credit is good,
his integrity is good. He will get all the accommodation, all
the help that he can possibly get under any circumstances in
the main bank.
Mn. Fuvrox (New Orleans): I would like to defend the
system of branch banking. I have been brought up in that
system of banking myself, and I know the good it is to the
general communities, and in the city in which I live the State
has authorized the establishment of branch banks within the
county in which your bank is located, and it has not worked
any hardship. It has worked to the benefit of the different
communities.
In the City of New Orleans there are about 20 different
branch.
banks. These branch banks have been established at
the request of the people in these different sections. They
find that they want a bank in that section. They are not
strong enough to own a bank, but they want a bank that they
can deposit their money in. We.have established five, eight or
ten banks, all through the city of New Orleans, and I want to
defend it, as I think the branch bank system is something that
is worthy of a great deal of consideration. I would like to
see this Association go on record as favoring branch banks
within the city limits.
(Cries of,"Question.")
Tna PRESIDENT: The question is on the resolution,
Ma. WALDO NEWCOMER (National Exchange Bank, Baltimore,
Maryland): Mr. President, for me to get up and say a word
that is not entirely in accord with Mr. Reynolds, is enough to
make this assembly laugh, but I take the liberty, for just a
moment. The question of competition between the banks that
have tried to establish branches, and those who have not, has
been referred to, and the gentleman over there has said such
a situation should be corrected, be corrected locally; but the
trouble is a local man has it in his charter, and you cannot
change that. You have to meet it, and as you stand today,
the man outside of the national bank system, or outside of the
Federal Reserve system, can come up and establish a branch
near you, cop your business, and you cannot retaliate. In the
peculiar position where Reynolds is, where he is getting deposits from other banks, and they are on good terms, naturally
he does not want to alter it, but in the city where it is not
so easy, it may be an important question, and may I add one
word more. An effort is being made to get non-member banks
into the Federal system; I am not sure I am right, but I
submit, is it not the fact that a State bank having branches,
if it came into the Federal system would have to give them
up, or else could not come in? (Cries of "No.") If I ern

146

BANKERS' CONVENTION.

right in that assumption, this may be a step to let more of
them in.
Mn. GEORGE REYNOLDS: That is a mistaken assumption. The
Corn Exchange Bank, of New York, which probably is the
most highly developed system of banking in this country, has
recently—
MR. NEWCOMER: I withdraw the last part of that argument,
sir, and submit we should have it within the city limits.
MR. C. A. HINSCH: Is this going to come up under two
sections?
TIIE PRESIDENT: No, it is coming up under Mr. Newcomer's
motion, placing this convention on record as opposed to branch
banks in any form. All in favor will signify aye.
(The motion was carried with applause.)
CONVENTION
ALSO VOTES AGAINST PERMITTING
NATIONAL BANKS TO ABSORB STATE
BANKS WITH BRANCHES.
MR. HINSCH: In the report of the Federal Legislative Committee, you doubtless recall it was stated that we would like
to have an expression on this subject, and if the vote of this
Association was in opposition to branch banks, then that we go
on record advocating the introduction of the amendment to the
National Bank Act, which would prohibit national banks absorbing state banks with branches, thereby accomplishing in
an indirect method something that cannot be accomplished by a
direct method. I offer that as a motion.
THE PRESIDENT : The resolution which has been offered by
Mr. Hinsch, is a logical successor to the one which has just
been adopted by the Convention, but I wish to place myself on
record as saying that I expect to attend a meeting of the
American Bankers' Association when they reverse the action
taken today. That is only an expression of individual opinion,
and is not expected to go any further. (Applause.) •
• The resolution offered by Mr. Hinsch has not yet been
seconded.
Ma. J. M. DINWIDDIE (Cedar Rapids, Iowa): Mr. Chairman, I want to ask if you would repeat that statement. We
did not quite catch what you said about the Association reversing itself.
THE PRESIDENT: I have a reasonable expectation of life, and
I expect to live to attend a meeting of the convention at which
the action taken today on this subject will be reversed, for
I believe that you are going directly contrary to sound, tried,
proved banking experience.
MR. BAILEY: Too many of the rest of us have a reasonable
expectation, and we will hammer on it when it comes.
THE PRESIDENT: The motion is made by Mr. Hinsch that
the Legislative Committee introduce a bill forbidding the
national banks to absorb the state banks with branches, by that
means forming national banks with branches. Any discussion
desired on that motion? (Cries of, "Question.")
(The motion was carried with two dissentients.)
COMMITTEE ON CREDIT FORMS CONTINUED.
TIIE GENERAL SECRETARY: The Executive Council, about a
year ago, appointed a committee to prepare new credit forms
which might be used by the members of the Association who
desired to do so. That committee has given a very great deal
of time and consideration to the subject, and has made some
headway, and has communicated with the Federal Reserve
banks of the outlying districts, with a view of compiling forms
which would be adopted for both purposes. The Council Committee expires—it is a special committee of the Council, and
the members of the Committee retire from the Council, so that
it would not be practicable that the same Committee can be
appointed by the Council. This action was taken by the Executive Committee at this meeting, as a recommendation to the
Association. I will read the minutes. (Reading.)
MR. BONNER : Mr. Chairman, in view of the fact that this
Committee has expended a great deal of time on the work and
got a great deal of information, I move you that this financial
report be received, and this Council recommend to the Convention that the same Committee be continued one more year
in order that they may complete their work and recommend
a definite form.
It was moved by Mr. Hinsch—Mr. Chairman, I second the
motion, knowing the •great work that the Committee has done
the last year.
Now, that is put in the form of a recommendation to the
general Convention that the General Convention appoint a
special committee on credit forms, which will last for one year,
and that the Committee which has been acting on that matter
be appointed for that purpose. The present Committee is Mr.
Sharer of Ohio, Chairman, and Mr. Law, of Philadelphia, and
Mr. Lampert, of Chicago, that is the Committee on Credit
Forms.
MR. PETER GOEBEL: On behalf of the Executive Council I
move that theSe recommendations be adopted by the Convention,
and the same committee be continued for one more year.

THE PRESIDENT: It has l;cen moved by Mr. Goebel and sevonded that the committee be continued for another year, the
Committee on Credit Forms. Are you ready for the question?
All those in favor will say aye. (Motion was carried.)
THANKS TO KANSAS CITY.
THE PRESIDENT: Now, resolutions are in order.
Ma. SMYTHE : Mr. Chairman, and Gentlemen of the Convention, I would like to present the following report:
It is the unanimous opinion of your Committee on Resolutions that
the American Bankers' Associaiton, assembled in convention, should
express by a rising vote its appreciation of the entertainment and the
efforts made by those who have contributed so much to make this Convention one of the most successful in the history of the organization.
To greater Kansas City the American Bankers' Association is generally indebted for the hospitality extended.
To the committees representing the Clearing House Association and
the banks, particular thanks are etxended for the very adequate
preparations for their hearty co-operation with the officers of this
Association and for the facilities afforded and the entertainment
provided.
To His Honor, George II. Edwards, Mayor of Kansas City, thanks are
given for his generous words of welcome, and to the clergy who asked
divine blessings on these assemblies and to all the speakers whose
addresses have been most cordially and profitably received by the
members, we express our appreciation.
To the Ladies' Entertainment Committee and their coworkers, who
contributed in a high degree to the pleasure of the vistiors, the Convention desires to express its warmest appreciation.
It is the pleasure of the Convention also to extend to Mr. and Mrs.
R. A. Long and their charming daughter, Miss Loula Long, our particular gratitude for the most delightful "Day in the Country," that will
never be forgotten.
The hotels of Kansas City have afforded us not only adequate facilities, but have been most successful in meeting demands for additional
accommodations and the extension of courtesies. The management of
the Convention Hall has been of the greatest assistance in making the
machinery run smoothly and has contributed notably to the general
success.
To the press of Kansas City, to the newspaper correspondents and to
the Associated Press, we extend our thanks for courteous treatment,
for liberal space and intelligent operation.
To all who have in any way contributed to the pleasure of the members or guests of this Convention, we express most hearty thanks.
Respectfully submitted,
JAMES DINKINS,
P. C. HALE,
B. A. SMYTIIE,
Chairman.

I would like to present this for the consideration of the Convention, Mr. Chairman.
MR. WALTER HALE: I second that and move it be carried
by a rising vote. (The motion was carried by a rising vote.)
THE PRESIDENT: Are there any other resolutions?
MR. GEORGE E. WEan : I introduced a resolution here yesterday afternoon, which was referred to this session for action.
I ask your unanimous consent to withdraw the resolution.
THE PRESIDENT: Mr. Webb asks for our unanimous consent
to withdraw a resolution which he offered yesterday.
A VOICE: What was the resolution?
THE PRESIDENT: A resolution having something to do with
the cattle question. Its purport was not clear to me at the
time it was read, and I am still in some doubt. However, Mr.
Webb desires to withdraw it. It seems to me that if there is
no objection, that .the purposes that he wishes to achieve are
gained. Is there any objection made to the withdrawal of the
resolution? None being offered, it will be considered as having
your unanimous consent to the withdrawal. Mr. Von Ingleken,
the Director of the Mint of the United States, has honored
this Convention by attending its sessions.
We have a few minutes at our disposal, and I am sure
that we shall all be glad to hear anything that he may have
to say to us. I will now introduce Mr. Von Ingleken.

Remarks of Director of Mint
•

Mn. F. J. II. VON ENGELKENG (Director of the Mint, Washington):
Mr. President, Ladies and Gentlemen of the American Bankers' Association: It is a little bit difficult to interfere with the election of
officers, and the routine of business at the last meeting of this Convention; but, as the manufacturer who supplies you with the tools of your
trade, there are perhaps a few things of interest which I might be
able to tell you about very briefly, particularly as to the outgo of our
factories, and of the product that comes in.
We are at the present time confronted with the situation which is
unparalleled in the history of this country, and which is caused by
the demands which you gentlemen are making upon us. I want to
give you just a few figures. These figures are indicated by the
economic condition of the country, and as the country's bankers, you
gentlemen should be interested in the trend of supply and demand,
as indicated by the spending capacity of the people.
When I caffie into office on the 1st of September the demand for
money coined was slightly on an increase. Since the 10th of Septemberyour demands upon us have forced us to run our mints 24 hours a
day, and so far- we have not been able to keep the supply up to the
demand. For half dollars and quarter dollars there has been no
demand. Dimes, we coined up to September 10 last year, $441,000;
up to September 10 this year, $1,031,000. Five-cent pieces, last year,
up to September 10, $1,158,000; this year, $2,041,000. One-cent:

BANKING SECTION.
pieces, last year, to September 10, $222,000; this year, $700,193,
and since September 10 this ratio has been on the increase, the ratio
of difference in demands which you are making upon us this year,
as compared to last year.
What that means, and what that implies, I have not been able to
discover. I hope it is due to the Thrift Campaign that you gentlemen
are now encouraging in your banks and the things which are going on
in connection with the savings banks. So much for the outgo.
The incoming money, in the shape of gold that we get from the
Allies, from England, may be of some interest to you as far as concerns the manner in which we handle it.
We have received in the Assay Office in New York and in the Mint
in Philadelphia, beginning on the first of January, 1915, which precludes, or does not include, the first five months of the war, $474,843,090 in gold.
At the beginning of this gold shipment it came to us in bars. Within
the last eight months it has come to us in coin. The quantity of
English sovereigns which we have melted up is absolutely incredible.
The supply of English sovereigns having given out, we are now working
on the French 20-franc piece. This money come to us from J. P.
Morgan & Company, both in bars and in coins. Our capacity to
handle it is twenty-five million a week, and the supply we receive
from Morgan & Company is absolutely limited to our capacity to turn
It out. We have it stacked in the Assay Office in New York and
what we cannot handle in the day is sometimes left in boxes. We
cannot handle all we get there in a day, for we have to open them
and take them out and count and weigh and melt them. Everything
we receive in gold is reweighed and valued, Morgan & Company keep
their own guards in our office to guard what we have not used up.
What we use is paid for the following day on the weight basis; that
is, we pay J. P. Morgan & Company by an order on the Treasurer of
the United States, 99 per cent of the gold we have weighed the previous day. The remaining one per cent we keep until we have weighed
and melted and assayed this gold as to fineness, and then the difference is paid to Mr. Morgan, which sometimes takes the remaining one
per cent, and sometimes'a lesser portion of it. This period during
which we hold back this one per cent runs as high sometimes as two
weeks, and the amount is around $600,000, so you see we keep all the
time something which belongs to Morgan.
This gold immediately comes into this country, is transferred into
American money, which is placed in the hands of Morgan & Company,
and is used to pay for supplies which are furnished to the nations on
the other side.
These are two important economical factors which have presented
themselves to me in the Mint service, and I pass them on to you gentlemen, who hold in your hands the destiny of our financial service; and
I want you to think of what these conditons will bring about in the
next six months or a year.
I want to thank you for your kindness in permitting me to attend
your meetings. I have enjoyed this Convention very much and it
has
been immensely educational to me.
Lam compiling the demands on the Mint for coins at different
periods
in the last ten years. If you care to have these figures in
order to
anticipate the demand on you for a coinage, if you will
write me I
will gladly give you any information which the Mint Bureau has
which
is available.

NOMINATIONS AND ELECTIONS.
TIIE PRESIDENT: The next in order of business is the Report
of the Committee on Nominations.
THE GENERAL SECRETARY: Before the Report of that Committee is presented I would like to read this letter. It is addressed to F. E. Farnsworth, Secretary, American Bankers'
Association, Kansas City, Missouri.
"My DEAR SIR:
As the Country Bankers have practically accomplished the objects
for which they convened, I respectfully withdraw from any
contest
upon the floor of the Convention for the Vice-Presidency, and
take this
occasion to warmly thank my friends for their support.
Very respectfully your,
ANDREW J. FRAME."

THE PRESIDENT: The next is the Report of the
Committee
on Nominations.

•

"Your Nominating Committee beg leave to report
the following
nominees unanimously chosen by the Committee to be
submitted to the
Association as officers for the coming year, 1016-1917:
For President, Mr, P. W. Goebel, President of
the Commercial
National Bank of Kansas City, Kansas.
For Vice-President, Mr. C. A. Hinsch, President
of the Fifth and
•
Third National Banks of Cincinnati, Ohio.
By order of the whole Nominating Committee.'
(Signed) C. H. HOLLISTER.
FRED. CALKINS.

MR. BECKWITII: I move you, sir, that the report be received
and approved and that the Secretary be instructed to cast one
ballot for the members here and those associated. for Mr.
Goebel for President and Mr. Hinsch for Vice-President for the
ensuing year. (Motion seconded.)
THE PRESIDENT: A motion has been made by Mr. Beckwith
and seconded by many members, that the report of the Committee be received, and that the Secretary be instructed to
cast the ballot of the Association for the gentlemen named.
Are you ready for the question?
(Question stated and unanimously carried.)
Tun GENF:anb SECRETARY: In accordance with the instructions of the Convention, embodied in the motion of Mr. Beckwith, the General Secretary casts the vote for Mr. P. W.
Goebel
for President for the ensuing year, and Mr. Charles A. IIinsch,
for Vice-President for the ensuing year.

147

THE PRESIDENT: The next business before the Convention
is the duty which devolves upon me, and I wish to say it is a
very pleasant one. It is, to introduce to you an almost unknown man, Mr. P. W. Goebel of Kansas City, Kansas.
The retiring President has, with some difficulty, invested the
incoming President with the badge of office. He is now fully
Installed, and I turn him over to the tender mercies of this
Association.
PRESIDENT-ELECT GOEBEL: Mr. President, Ladies and Gentlemen: It was my good fortune at the noon hour today to take
luncheon with seven of the ex-Presidents of the • American
Bankers' Association. As I sat there and listened to their
words of wisdom I was appalled at .my insignificant qualifications to assume this, the greatest office that any American
banker can aspire to.
I only want to say to you, gentlemen, that it shall be my
best endeavor and my continuous purpose to follow in their
footsteps as far as my limited ability will permit me to do so.
The American Bankers' Association is, in my opinion, the
greatest Association in the world, and its potentiality for good
is the greatest in the world, and especially is that so at this
particular time. It is not the custom of the American Bankers'
Association, for the incoming President to make any extended
remarks, but I want to say to you, gentlemen of the Convention, I am delighted with your steadfast purpose of 'participating in this Convention from the beginning to the end. I have
teen something of a convention-goer, and never in my experience in the American Bankers' Association has there been such
uniformly good attendance at all meetings from the beginning
to the end of the Convention as we have had this time in Kansas City. It is an augury for good; gentlemen.
If we would achieve that which we can achieve for the
people through the American Bankers' Association, we must
•give our earnest attention to the problems before us. The
American Bankers' Association consists of various sections—
the State Bankers' Associations and the National Bank Section, the Trust Company Section and the Clearing House Section, and so forth. Now, this, I think, is one of the wisest
provisions that was written into the Constitution of the Association, that each may look to the strengthening of the
system to which he belongs. And I want to say to you that
that idea of sections must not be misconstrued into sectionalism; it must be construed in the light that these Sections
are formed so that all sections may be co-ordinated to build
up one great, solid banking business in the United States.
As Mr. Vanderlip said in his address yesterday, paraphrasing
the immortal statement of Lincoln, that the country could not
be half slave and half free, so that unless the several different
classes of banks are co-ordinated they cannot exist; for if the
state banks give better privileges and opportunities for their
constituents to serve, the national banks naturally after a while
will do the same thing, and vice versa; but I believe both have
their proper functions, and it is the province of this Association to work for the harmonization of the whole system.
I again thank you for this splendid honor which you have
conferred upon me, and admitting my inability to serve as I
should, I wish to assure you that I will do the very best I can.
MR. E. F. SWINNEY : I am glad to be able to meet you as
the first individual in the American Banking Association.
Whenever you wish to learn what kind of a man any one is, it
is an old saying, "Go to his home town and see what his
neighbors think of him." Last year a few of us conveyed to
you the information how Mr. Goebel was considered in Kansas
City. I am today delegated by the banks of Kansas City,
Missouri—and by the banks of Kansas City, Kansas—to show
how the banks regard you, Mr. Goebel, and I take this opportunity to present to you a token of how you are regarded by the
various banks of Kansas City.
(here Mr. Swinney handed Mr. Goebel a very large flowerpiece, composed of American Beauty roses and white chrysanthemums.)
• (Mr. E. F. Swinney, continuing): We country bankers feel
that at the next meeting we will sit at the feet our our next
President and listen to the words of wisdom.
THE GENERAL SECRETARY: I have• been asked by the Kansas
City Banking Association to read this letter addressed to the
retiring President and members of the Association:
"Greetings from 1,000 Kansas bankers and wives assembled at this
Convention and our sincerest appreciation in the election of our exPresident, the Hon. P. W. Goebel, as your President.
We, who know him best and his sterling worth, bespeak for him a
Fplendid, progressive and successful administration; at the same time,
we extend to each and all a cordial invitation to visit Kansas, with its
fertile lands, rich in agriculture and live stock, its gas, oil, coal and
mineral fields in the southeast part of the State, salt beds at Hutchinson and Ellsworth, our Capitol at Topeka, splendid University at Lawrence, the world's greatest Agricultural College at Manhattan, largest
Maneuver Grounds in the Unted States at Fort Riley. Soldiers' Home
at Leavenworth, with its Fort Leavenworth and its War College, Disciplinary Barracks, and United States Penitentiary.
We want to show you that, besides having a big President, we have
a big State—big in everything.
KANSAS BANKERS' ASSOCIATION,
By L. H. WULFEKIIIILER, President."

148

BANKERS' CONVENTION.

PRESIDENT P. W. GoEBEL : Gentlemen, it gives me great
pleasure to introduce to you Mr. Charles A. Hinsch, .of Cincinnati, whom you have selected as your Vice-President for
the ensuing year. Mr. Hinsch, gentlemen:
My dear friend Hinsch, it gives me peculiar pleasure to pin
upon you the badge of the First Vice-President of the American Bankers' Association; and I know, if any one has ever deserved the honor of this preferment by hard work in the service
of the Association, by unselfish use of talent and time and
money, to look after the various legislative interests of the Association, you are certainly the one; and it gives me pleasure,
gentlemen, to introduce to you my friend as the First Vice-President of the Association! •
MR. CHARLES A. HINSCH: Mr. Chairman and Gentlemen, I
am deeply sensible of the great honor you have conferred upon
me this afternoon and I will, with your co-operation and assistance—yhich you have always so generously given to me
throughout the past year as Chairman of the Federal Legislative Committee—I will do the best within me to promote the
interests of the American Bankers' Association during the coming year. I have been associated on the Executive Council, as
you know, for the past three years, and I have enjoyed the
work, and I am glad, indeed, to be able to, in this way, keep in
touch with the activities of the Association.
I thank you kindly.
Ma. LAW: President Lynch, I have a very delightful duty to
perform at this time. You are just closing a term of (Ace
during one of the most remarkable periods in the history of
this Association, a period unprecedented in the stirring events
which have occurred in perfecting the business and the fortunes of the members of this Association.
During the year which has just passed, I feel that the Association has become important, through large opportunity, beyond anything it has ever done before. Its forces are now
mobilized for work, all the banks and trust companies of this
country have a better organization than they have ever had
before. It also occurs to me that this Convention has reached
the highest mark reached, in the quality of members which we
have here and of the addresses which we have heard, and particularly in the frankness and cordiality of the discussion in
which our members have participated. We feel a great deal of
this is due to your personality. You are a man having convictions, and being a gentleman unafraid, you have never hesitated to express them. You will look back all your life upon
this interesting period of your career, and we want to give you
in trust a little token of our affection. We are giving it to
your devoted and brilliant wife, but we are nominally giving
it to you. And I trust, as the years go by, and this silver
tea set is in your dining room, and your children and grandchildren use it, with you around the fireside, it will recall to
your memory those friends who have learned to love you and
whom I think constitute the greatest by-product of the American Bankers' life. (Applause.)
RETIRING PRESIDENT LYNCH: Mr. Law, and Gentlemen of
the Convention: It is with great pleasure that I accept this
gift in trust for my wife, with all that Mr. Law said of her—
and more. I cannot profess the surprise that Presidents of the
past have stated; I have seen it done so often, but nevertheless
It is a great pleasure and a novelty. It has all the charm of
the first sunrise, this presentation. But I assure you I appreciate this fine gift, and I congratulate the gentlemen who
selected it for the taste which they have shown.
The year which has passed has been a very happy and a
short one. The honor conferred upon me at Seattle was overwhelming. I realized my shortcomings and I further realized
my distance from the banking centers of the country, that they
would in some Way mar my usefulness; but I have done my
best to work for the Association; and if you feel I have
achieved any measure of success such as Mr. Law is kind
enough to say I did, I can assure you I am very happy, and I
wish to assure you that this year of my Presidency will be one
of the best recollections of my life. (Applause.)
MR. Cox: Mr. President, I have been impressed for several
days and particularly pleased at the attendance on this Convention of many ex-Presidents. In my attendance at conventions of the American Bankers' Association, I think I have
never seen so many ex-Presidents on hand .as we have had on
this occasion. While they have been honored in the past wit:

the highest position within the gift of this Association, we
have with us at this time Mr. George M. Reynolds, Mr. Arthur
Reynolds, Mr. Watts, Mr. Livingston, Mr. Law, Mr. Walter Hill,
and Mr. Swinney,—
RRTIRING PRESIDENT LYNCH: And Mr. Lynch.
Ma. Cox: Yes, and Mr. Lynch. I move you, sir, as a manifestation of our appreciation of the presence of these gentlemen, and for their wise counsel, that we manifest our appreciation by a rising vote of thanks. (All rise.)
PRESIDENT GOEBEL: I thank you, gentlemen, for this manifestation.
Ma. WALTER Him.: Ladies, Mr. President, and Brother Pawn
Brokers:—I always put the women first, because without
woman we would have no country, no banks, no nothing!
(Laughter.)
It has been ten years since I have had the chance to look
you gentlemen in the face and say one word to you. Many,
many thoughts have come up in my mind that I am not going
to take your time to give you this afternoon. It would take
me ten years to do so.
I miss names that were not mentioned, but names that will
be revered as long as this Association lasts. I will only mention two, because there are a great many of them: One of
them is that giant among financial intellects, George H. Russell, and the other is that other intellectual giant, Joe Hendricks, of New York, who was born and raised in this great
State, and although maimed in body he went to New York
and became one of the greatest reformers, political reformers,
in New York, and afterward became one of the greatest bankers
In New York.
But I have got to talk upon a sentimental subject and I
have before me a man who cannot and will not excite any
sentiment in me. It is Mr. Fitzwilson. We were born in that
great State which has made States and statesmen, when states
and statesmen were made the foundation of this Government.
We both have fed on peanuts and- past recollections. He is
forty-four years old, he says, but I have known him longer
than that. (Laughter.) He is not married ; I am sure it is
not his error * * *
Mr. Fitzwilson, I want to present to you—they call it a
_ loving cup—I would rather present to you some charming
woman and have her for your loving mate. You will never be
a man unless you get it. I have peculiar feelings as to why
you should make a combination here in tliis great Banking
Association, with men that are fitted to rule the world. We
never think about it. The Army and Navy, through Perry and
Grant and Lee, are praised all over the worhl ; but many a
Grant and a Lee and a Perry have been in only financial wars,
and I will mention two of them, one was George S. Coe, of the
Exchange National Bank of New York, who died in 1891, and
the other is Charles Fry, who died in 1894; they were both
financial heroes.
(Addressing Mr. Fitzwilson): Mr. Fitzwilson, they told me
to speak two minutes in presenting this gift to you. I want
to present this loving cup, on which is this inscription :
"Twenty years of Loyal Service and His Twenty-first Convention." Mr. Wilson asked me to say this, hence I say it.
MR. WILLIAM FITZWILSON : Gentlemen, I sincerely appreciate
this token and I shall prize it always. I have enjoyed my
twenty years, or my twenty-one years, with the American
Bankers' Association, more than I can tell you, and I desire
simply to thank you for this lovely token.
I thank you very much.
PRESIDENT GOEBEL: Next on the program is "Communications." The General Secretary informs me there are none.
Next is "Announcements."
Tnn GENERAL SECRETARY: I desire to make an announcement that the new Executive Council will meet in the Francis
I Room in the Baltimore Hotel one-half an hour after the adjournment of this Convention, for the temporary organization
of the Council. I trust every member of the Council will be
there.
PRESIDENT GOEBEL : Is there anything further?
motion to adjourn will be in order.
(Motion made, seconded and carried to adjourn.)
Convention adjourned.

If not, a

CLFARING HOUSI-4, SI-4,CTION
AMERICAN BANKERS' ASSOCIATION
Tenth Annual Meeting, Held in Kansas City, Mo., September 26, 1916
INDEX TO CLEARING HOUSE PROCEEDINGS

Page 149
Exchange Charges, Country Clearing Houses, etc.
Page 152
Credit Statements—Standpoint City Banker
- Page 154
Credit Statements—Standpoint of Merchant

Credit Statements—Standpoint Country Banker
Note Brokers and Commercial Banks Committee and Officers' Reports

Page 156
Page 158
Page 160

Exchange Charges, Country Clearing Houses, and
Settlement of Balances
By JOSEPH WAYNE, JR., President, Girard National Bank, Philadelphia.
Your Committee on Arrangements has allotted to me
the pleasant task of discoursing on the subject of "Exchange Charges, Country Clearing Houses and Settlement of Balances."
I feel that instead of making a business address on
these subjects, I am more called upon to make a funeral
oration over the remains of one of our departed friends,
as the matters referred to are more or less dead issues,
and relate to the business of banking as it was conducted
during the dark ages existing prior to the time the Federal Reserve Act was thrust upon us by a benevolent Congress.
The question of exchange charges, however, may well
be of interest at this time, as the Federal Reserve Clearing Plan has forced upon us a considerable readjustment
of exchange relations.
The much heralded par clearing plan does not offer
par collection facilities as our customers and the public
understand the word par. To them the word implies
no costs, but unfortunately that portion of exchange
charges formerly based on service and allowance to cover
items in course of collection still remains to be provided for. The Federal Reserve Banks are accepting
checks from member banks at par as to exchange, but
they are not actually accepting checks at par when
making a service charge, and not giving immediate
credit for deposit of out-of-town items for reserve purposes. The bank realizing what the par feature of the
Federal Reserve Clearing Plan actually means is the
paying bank whose income from collection or exchange
business has been legislated out of commission.
The Federal Reserve Act has much to commend it,
but one of the most objectionable features in connection
With the passage of that Act was the evident intent of
its framers to break up the inter-relations existing between the banks of this country, on the ground that
such relationships were prejudicial to the smaller banks
and to the public, but are they?
The banking structure of this country is entirely unlike that of any other country, in that we have over
twenty thousand separate financial institutions, all endavoring in their humble way to serve the community
in which they may be located. To give satisfactory

service to customers it was necessary for each and
every banking institution to have close relations with
one or many other banks or bankers, in order to have
an outlet through which the miscellaneous checks and
other items deposited by customers might be collected.
The records of all our older banks show that since the
beginning of banking in this country, banks have found
it necessary to maintain relations with banks in other
centers to clear the business of their depositors, and as
the country has grown so has necescity for more and
more connections grown, until we reached the highly
developed inter-bank relationships existing at the time
the Federal Reserve Act was put into effect. To say
that this relationship was a menace to the public and to
the smaller banks, as was claimed by the sponsors of
the Act, was a gross injustice to the bank officials of
this country and to the intelligence of the customers
thdy serve.
The checks, drafts, notes and other papers received
on deposit by our banks must of necessity be presented
for payment at the bank or point on which they may be
drawn, and through the channels of our inter-bank relationship these banking papers were presented for payment. The bank making the collection and remitting
the funds to the bank requiring this service naturally
made a charge for services rendered, and while this
may have been termed a service charge, it has been
known in our profession as an exchange charge. The
fairness of these charges was in the majority of cases
never questioned, but where so many banks were concerned and such a multitude of transactions involved,
some cases of extortionate charges were bound to appear, but this is no reason why our mutual relations
should be ruthlessly discarded. You will never get the
same personal service through the Federal Reserve
Banks that you have enjoyed in your dealings with
banks of your own choice. Competition has given us
in many ways an ideal system, as your wants have been
catered to by banks that were eager to secure your business, facilities have been offered you without charge that
you should have been glad to pay for, and as a consequence your customers indirectly received the advantage
of the competition existing.

150

BANKERS' CONVENTION.

The Federal -Reserve Banks have very little interest
in your affairs outside of seeing that you maintain with
them the reserve required by law and that you pay for
any service required. This is all right in its way, as.
the Federal Reserve Banks have no favorites, and we
should each one of us pay for what service we require
from them; but are we in America going to eliminate
by government mandate all the expenses in business
that are the results of competition? Most decidedly not,
and if not, why should we be compelled to eliminate
from our business a charge for services that produced
a revenue for facilities extended?
City banks charging customers on out-of-town items
generally computed exchange rates on a basis of service
expenses, plus loss of interest in transit, plus charge
made by the bank remitting. The charge made by the
bank remitting being figured on the cost of shipping
cash to its reserve agents, plus service, and a small allowance for profit. On this basis the only bank making
a profit was the bank actually making the charge for
remittance, as the bank charging its customers on the
deposit of out-of-town items merely _exacted the cost it
incurred converting out-of-town items into bankable
funds. The only change effected by the Federal Reserve
Clearing Plan is to deprive the remitting bank of any
opportunity of profiting by the transfer of funds from
point to point, as this may now be accomplished through
the clearing plan at par as to exchange, by the elimination of the charge formerly made by the remitting
bank. That portion of exchange charges based on service and loss of interest in transit have, however, not
been eliminated, but have been augmented by the addl.-Lion of the service charge made by the Federal Reserve
Banks. The result being that banks formerly charging
exchange to customers on their deposits of out-of-town
checks have been able to reduce charges somewhat, but
only at the expense of their out-of-town banking friends.
It is also well to rethember that the collection facilities available through the Federal Reserve Banks cover
checks only, and that our banks must continue to maintain expensive collection departments and facilities for
clearing checks that will not be accepted by the reserve
banks, and for the handling of notes, drafts, coupons,
etc., all of which are a vitally important part of the
service demanded and required by your customers, and
a service for which a bank must in some way receive
compensation.
The purpose of incorporating in the Federal Reserve
Act a Clearing Plan was to benefit the smaller banks
and the business community at the expense of the larger
city institutions. The act has, however, evidently missed
fire, as the only organized opposition to the enactment
of the No Exchange Clearing Plan has come from the
country bankers, who are being deprived of income from
collection business formerly handled for the Reserve and
other City banks.
The plan for clearing checks on member banks, and
other financial institutions that have charitably agreed
to abide by its requirements, has been effective since
July 15th last. 'As a consequence exchange charges
bring up a very sore 'subject to many bankers, as the
charging of exchange was,. up to a few months ago, considered a just recompense for services rendered, and the
income derived from those charges was part of the
legitimate income of a considerable number of our banks,
and one that was fairly earned.
The exchange relations existing between financial institutions were the outcome of years of competition and
competitive service, and very few of the large army of
depositors in our banks, outSide of those in some of our
larger cities, were aware that any expense entered into
the collection of checks and other items passed to their
credit at par.

The collection business of this country cannot be.pan.
died without expense, the only question is—who is to
foot the bill? Theoretically, the customer depositing the
checks or collections should pay for the service -required,
but in a great majority of cases competition has ruled
otherwise. The business of a customer maintaining a
valuable account has been desirable, consequently in
consideration of his paying business banks have been
willing to accept his deposit of out-of-town items at par,
notwithstanding the fact that the bank may have been
put to considerable expense in collecting his business.
Banks maintaining desirable accounts with other banks
in reserve cities have received similar treatment, not
tba t there was no expense attached to collecting deposits
of out-of-town items, but this expense could be absorbed
Ly the city bank if adequate balances were maintained.
Again, in order to secure and properly serve out-of-town
Lank accounts, Reserve City Banks were of necessity
obliged to open collection accounts with banks at other
points, where they had items to be cleared, and were
wiling to allow a commission or exchange for the facilities they required, as they could hardly expect to obtain
them in any other way. All this accrued to the benefit
of the out-of-town or country banker and at the expense
of the City banks.
The practical working of the Federal Reserve Clearing
Plan results in the customer of the City bank or the
City bank itself being relieved of a great part of this
expense and eliminates the profit formerly made by the
country banker out of the City banker, in consideration
of the services the country banker was able to extend.
This beautiful Clearing Plan may be theoretically per-,
feet and the last word in banking, but I do not approve
of it for the reason that it tends toward taking the
initiative out of our business. Add to the Clearing Plan
a Guarantee of eposits, regulate the interest we may
allow on deposits and fix the rate we must charge on
loans, and your picture is complete, but you have taken
the pep entirely out of our business and we become
mere automatons.
The Federal Reserve scheme at present reminds me
very much of a graveyard. Many of those within would
prefer to be without, and there is nothing very alluring
within its scope to encourage State Banks and Trust
Companies to enter, but there is hope even the most
unattractive graveyard presents possibilities. My opinion
is that the clearing plan never should have been incorporated in the Federal Reserve Act, and further that
the Act should have permitted banks to maintain a portion of their reserve with other banks, so that our interbank relationship might not have been disturbed and
the collection proposition left to the individual banks to
handle.
The Country Clearing Houses that were being organized throughout the country, were taking care of the
check collection proposition long before the Federal Reserve Act butted in, and the bankers of the country
could have settled their own exchange matters and at
their own expense, or at least at an expense to their
customers commensurate with services extended.
I don't think it necessary to dwell on the subject of
country clearing houses for the collection of country
checks, as conditions in different parts of the country
vary widely, and .
what would meet the situation in
Boston, New York or Philadelphia might not be adaptable to Kansas City, St. Louis or San Francisco. The
bankers in any centre have the brains and the knowledge
of conditions to meet their local needs, and we were progressing rapidly toward consummation of a comprehensive collection system among ourselves, before the Federal Reserve Act appeared in the field.
There is very little to Le said concerning Settlement
of Balances, usually the only thing to do is to pay what
you owe in currency or in exchange that will be accept-

CLEARING HOUSE SECTION.
able to the creditor bank, when this has been done the
settlement of balances has been accomplished, at least
to the satisfaction of the creditor bank.
I would like to say a word concerning our inter-bank
relationships and their value. The banks of this country are so closely woven together for their own protection and their mutual welfare, that in my opinion it is
going to take more than one federal reserve act to make
them dependent upon the Federal Reserve Banks, for
all the facilities they now enjoy through reserve and
other similar connections. When the Act is in full
effect, and deposits with other banks become more due
from banks, the real test will come, but as none of us
can afford to keep larger balances with the Federal Reserve Banks than the law .requires, we will still retain
accounts to some extent with banks for the double purpose of securing interest on idle funds, and of securing
the judgment of our banking connections on the question of credits and investments.
The banks in our larger cities have found it necessary to have highly specialized departments for the
securing and tabulating of credit and investment information, which is theoretically at the service of their
depositors and correspondents but practically at the command of the entire banking fraternity. The Federal
Reserve Banks can't replace this service, and it cannot
be maintained by us at its present efficiency if all deposits by banks should be transferred to the Reserve
Banks. The profit of inter-bank relationships has been
responsible for this valuable adjunct to bank equipment.
Then again I think it would be a very serious matter
to the business community, if all reserves of all banks
and trust companies were transferred to the Reserve
Banks. These reserves constitute a large portion of the
loanable funds available for investment by banks • in
commercial paper, take these reserve funds out of our
banks, and you will seriously curtail their loaning ability
to the detriment of the borrowing public.
If all bank reserves were transferred to the Federal
Reserve Banks, the only way the funds could get back
into circulation would be by the direct purchase of paper
or loans by the Reserve Banks themselves, or by our
buying the money back by re-discounting. The business
.
community generally would prefer to have the purchasing power remain with the individual banks, and
the banks would be very reluctant to re-discounting
heavily in order to have funds for investment in commercial paper.
From the standpoint of the bankers, what is wrong
with the Federal Reserve Clearing Plan? It only appeals to a few banks in the larger cities that never had
any real collection facilities of their own, and to banks
outside of the reserve cities that receive from their customers more items to be cleared than any of their reserve connections are able to accept at par, on balances
maintained with reserve city banks.
In the first place the army of small banks suddenly
find their revenue from collections practically cut off,
when considering this, it is well to remember that these
institutions have a place in the banking world. The

151

establishment of these small banks has been encouraged
by national and state authorities, they serve communities, where the possible income from loans is not
sufficient to meet running expenses, so what incentive
will there be to invest money in these small institutions?
To the numerous larger and well established banks
it simply means cutting off revenue any banker is Justly
entitled to receive from a department of his bank that
takes expensive equipment, time and money to properly
run.
To the banks handling reserve deposits, it is also quite
a serious matter, these banks after years of hard work
secured at large expense, collection facilities to handle
the business of the country. The Federal Reserve Act
will practically transfer reserve deposits from these
banks to the Federal Reserve Banks, forcing on us all,
whether we like it or not, a collection system that no
Individual bank can hope to compete with in efficiency or
as to cost, exchange being arbitrarily eliminated.
Reserve City Banks are now finding their well established collection arrangements a burden, instead of an
aid to their business, and the result is bound to be a
curtailment of these banks' activity in the collection
field, at a direct loss to all banks concerned.
There is one thing that we must bear in mind, if we
don't like the Clearing Plan we don't want to pour our
displeasure on the heads of the Federal Reserve Board
or on the officers of the Reserve Banks. The plan is
incorporated in the Federal Reserve Act and there it
will remain until it is removed or amended, and the
Board and Reserve Bank officials can't be blamed for
complying with its requirements.
Do we intend doing anything relative to this exchange
matter? There has been a lot of idle talk about making
checks circulate on the same basis as bank notes or
other real money, it can't be done. A check is a check
and it always will be, and is not money until it has
been presented at the bank on which it is drawn and
real money given in exchange. In arranging for this
conversion and carrying it through, the banks of this
country are most certainly entitled to compensation.
The principle of private capital being compelled by law
to furnish for .nothing, to other privately owned business, facilities entailing a cost to the first named, is all
wrong. Carried to the extreme as it may well be, it can
only result in the withdrawal of capital from the business affected and its investment in more lucrative ventures.
In other words, I feel that the a/Most unlimited competition in the banking business precludes the idea of
the business community being unfairly dealt with. Appreciating the good features of our esteemed but much
abused Federal Reserve Act, I am very fearful that it
is only the first step toward endeavoring to place the
banks of this country under control of those who have
very little interest in the development of our institutions, but who are more Interested inthrottling individual activities on the part of those capable of serving the
community, not only to its entire satisfaction but to its
greater advantage.

152

BANKERS' CONVENTION.

Necessity for Credit Statements and Uniformity Thereof
from Standpoint of the City Banker
BY W. W. SMITH, Vice-President Third National Bank, St. Louis
I have been requested to discuss, from the standpoint
of the city banker, the "Necessity for Credit Statements
and Desirability of Uniformity Thereof." The subject is
most vital to the banker and, with the increasing scope of
our commercial operations, of growing importance to the
borrower in every character of business.
Mr. Warburg has recently urged national standardization of credit as a condition precedent to national uniformity of discount rates. Contemporaneously, this eminent authority on banking is quoted as being fearful,
should the state banks continue in their refusal to join
the Reserve System, that their applications cannot be accommodated in a time of stress.
It is an agreed fact that there cannot be either standardization or uniformity in American banking without the
co-operation of state banks with the Reserve System and,
in order to prepare for the financial strain which will
follow the cessation of hostilities in Europe, it is absolutely necessary that the two arms of American banking
should co-ordinate.
In considering the desirability of uniform statements,
It is well to realize that it is only within the past twenty
years that the bankers of this country have requested
written statements, and not until the year 1899 did the
American Bankers' Association lend its approval to a
standard financial statement blank; but with the opening
of the Federal Reserve Banks, and the requirement of the
Federal Reserve Board that practically all borrowers
whose paper is submitted for rediscount furnish written
statements showing a proper ratio of quick assets to
liabilities, we have entered an era where the borrower
that refuses to make a statement has very little, if any,
credit standing, and I am sure timt, with the rapidly increasing volume of commercial paper and trade acceptances, we are approaching a time when the banker will
discriminate against the paper of the borrower, which Is
unaccompanied by a form of statement that will be standard from the Atlantic to the Pacific
I am advised that the New York Stock Exchange Listing Committee is now requesting companies seeking to
list their shares on the exchange to make semi-annual
or quarterly reports of earnings
The banking experience of many of those present includes the period when first the customer whispered to
the President or Cashier of his bank a brief outline of the
assets and liabilities; later furnished a slip of paper with
a partial statement of the condition of the business, which
gave way to the detailed financial statement,—these haying been superseded in many instances by the figures submitted over the certificate of public accountants. These
changes were not, as far as they should have been, the
result of concerted demand upon the part of our financiers, but the beneficial result of the many serious losses
sustained through out ever recurring financial panics. We
are all too prone to let well enough alone, and I can state
without fear of contradiction that we bankers, owing to
our fear of competition, would not have been as rigid in
our present requirements of fjnancial statements if the
losses resulting from violent financial reverses had not,
from the standpoint of self-preservation, necessitated
positive action.
Each progressive step in obtaining and checking credit
Information and the compiling and analyzing of same has
been slow but certain, but there has been practically no

concerted demand for information in a standardized form.
In my estimation one of the most progressive steps taken
by the bankers within the past twelve years has been the
appointment of Clearing House bank examiners, and today we have the associated banks in seventeen cities employing experts to make periodical examination. With
the co-operation of these practical men, we should have
no difficulty in selecting a uniform financial statement
which would meet the requirements of the commerce of
this country. True, a great deal of missionary work has
been done by the various Clearing House bank examiners
and, with the co-operation of the bankers and the Federal
Reserve Board, we hope to look forward at no distant
date to the adoption of a uniform financial statement.
Inquiries from seventeen cities maintaining Clea ring
House bank examiners reveal the fact that in only two
has the Clearing House required the member banks to
obtain financial statements of all unsecured borrowers,
but in only one has a standardized form of statement been
adopted
Simultaneously with the opening of the Federal Reserve Banks, the bankers of this country were confronted
with materially reduced interest rates, due to the increase
in loanable funds owing to the reduction in reserve requirements, which has been steadily augmented by the s
enormous gold shipments received from European commatries,—we to-day holding approximately one-third of the
world's gold supply. This condition has resulted in lower
rates for credit accommodation than were probably ever
experienced for the same length of time. Competiron always results in the "survival of the fittest," and the
current of desirable business follows the direction of
cheaper interest rates. It will, therefore, be necessary
for the banker, in order to maintain his former earning
power, to increase the volume of his business, reduce the
overhead expense and, as far as possible, eliminate his
losses.
Our subject permits of a discussion of only the plans
to be offered to reduce to a minimum those all too frequent items, which must be charged to "Profit and Loss."
The trend of the times is unmistakable. We are slowly
but surely reaching that enviable condition when all lines
of credit will be granted upon the basis of detailed financial statements, standardized as to form, certified by a
public accountant as to its correctness, accompanied by
an appraisal of assets by a competent appraiser, with the
validity of the notes of the borrower authenticated by
a responsible registrar.
I realize fully that I have struck neither a new nor a
"lost chord" (and am sure not a false one), but in order
to make our suggestions bear fruit we must have cooperation. Without it we can have no measure of success, and when a canvass of seventeen Clearing House
bank examiners brings a unanimous approval of the
necessity for uniform financial statements, I feel that the
Clearing House Section of the American Bankers' Association must request the adoption of a standardized form
by the Federal Reserve Board.
The time for action in this connection was never more
opportune, as a committee of Federal Reserve Agents
will meet in October to consider the adoption of standardized statements, and I believe would welcome any suggestions bearing on the subject which thig 'body would
care to submit.

•

CLEARING HOUSE SECTION.
It will, no doubt be suggested by some that a given
form cannot be made available for every type of business.
By the suggestion of uniform statements, it is not intended that only one form shall be used; but the complete statement blanks that have been adopted by the
banks associated with the Cleveland Clearing House have
proven so successful that the division of financial statements into forms for individuals, partnerships and corporations can, in my judgment, be safely adopted, including appropriate blanks for additional data which, owing
to local conditions, would make them capable of covering
credit data considered necessary by bankers in any section of our country.
Not many years ago, through the exactions of the Interstate, Commerce Commission, the great railroads of
this country were required, not only to standardize their
statements, but were compelled to a certain extent to introduce uniform methods of accounting. Many railroad
officials complained that for some particular reason or
other, the affairs of their companies could not be intelligently reported on the forms adopted; but after a
thorough trial we have to-day a standardized form of railroad financial statemetts, which are not only comprehensible to the layman but owing to the uniform manner
In which the ,data is arranged prove of the utmost value
to the railroad managers in making comparative estimates of the workings of the various departments between competitive properties,—thus resulting in a higher
standard of operation than existed prior to the adoption
of uniform statements.
There is no doubt that the Federal Reserve Board
would welcome the adoption of a standardized statement
of borrowers, and I feel sure that no greater protection
could be afforded the American bankers than the adoption
by the Reserve Board of a requirement to that effect,
making 1he filing of such a form of statement a condition precedent to discounting paper with the Reserve
Banks.
As our time is limited, we will not endeavor to itemize
every requirement of information this statement should
contain; but we cannot leave the discussion of the details
without offering the following suggestions to be embodied
in all standardized forms.
Inquiry should be made to determine if the "cash" is
subject to any liens.
The accounts and bills receivable should be accompanied by details as to whether they are hypothecated;
the amount due from officers, directors, employees and
subsidiaries should be clearly stated.
Under inventory we should require information as to
raw and unfinished merchandise, and basis of value.
We will deal later with the appraisal of assets.
Likewise, detailed information with reference to investments should be required, as often the ownership of stock
in an allied corporation may prove indirectly a liability
instead of an asset, due to the fact that obligations of
that corporation may have been guaranteed or endorsed•
by the borrower under consideration.
So, also, should full information be given with regard
to lands, buildings and machinery, and in no case should
the net amount or equity be shown, but full details and
descriptions of the property, together with data covering
the indebtedness against same.
The details of the liabilities have not in the past received the same degree of scrutiny as the assets, but in
my opinion their investigation is of equal importance.
Our form of statement should by all means show if notes
are given for merchandise, and the banker should know
if it is customary to pay by notes in the particular line
of business.
Details of notes payable, the amount due to officers,
employees and the members of their, families should be
itemized; the amount due banks and brokers should be

153

clearly stated, with information as to the maturities of
these obligations.
The amount of accounts payable, past due.
The details of any mortgages or liens on fixed or current assets.
Amount of receivables discounted or pledged.
Amount of endorsements or guarantees.
Terms of lease, if any property occupied is not owned.
While the asset and liability statement is the one
usually submitted as a basis for credit, in my judgment
the statement of iucome and expense is almost indispensable to the banker in considering a line of credit. The
one reflects a condition on a given date; the other how •
that condition was made possible, and to a great extent
suggests a healthy or unhealthy trend of the business.
Every banker would prefer the credit risk offered by
a growing business, with steady and substantial profits,
although somewhat lacking in the usually desired ratio
of quick assets to current liabilities, to one showing the
required margin where the Profit and Loss Account indicates operations at a steady loss; the one insuring a desirable future connection; the other fraught with worry
and possible unitimate loss
Complete information should be obtained relative to
insurance of all kinds on buildings, machinery and merchandise, (fire losses in our country reaching the alarming sum of approximately $200,000,000 per annum). The
necessity of insurance on the lives of corporation managers and partners has survived the experimental stage,
and is to-day recognize!" by all far-sighted bankers, for
we are confronted with the fact that, while a fire may
never occur, death is inevitable. Too frequently the affairs of our great corporations are directed chiefly, if not
wholly, by a single manager, whose death means heavy
financial loss which should be covered by business insurance.
The death of a member of a firm, in addition to the
loss of his active co-operation in the management, may
involve the withdrawal of his capital from the business.
How often in our checking of the corporations and firms
selling paper on the open market, do we find the suggestion that this or that banker (owing to the death of the
founder or manager of the business under investigation)
has discontinued purchasing the note until such time as
the new organization has shown its ability to safely
handle its affairs. This situation would be materially improved if, in.response to our inquiry, we were advised
that the company, while losing a capable official, had collected a large sum of life insurance.
Appraisal of Assets: In my judgment far too little attention has been given to this vital element in our consideration of a credit risk. Approximately fifty per cent.
of the liquid assets of our large corporations are made up
of merchandise and raw material, and the valuation of
same is left to the judgment of an accountant, who too
frequently is incompetent to in any degree approximate
their true value. In other instances, the accountant often
states that the inventory has been certified to him by a
responsible representative of the borrower whose affairs
are under investigation, and what avails it to have complete data with reference to the cash, bills and accounts
receivable, if we are ignorant of the value of the investment.
In the famous English case of the Kingston Cotton
Mills, Lord Justice Lindley stated: "It is no part of an
auditor's duty to take stock; no one contends that it is.
He must rely on other people for the details of the stock
In trade on hand." . . . In this case the Associate
Justice, L. J. Lopez, so well defined the position and responsibility of auditors that it would be advisable for
every banker to read the decision, carefully noting the
limitation of responsibility of auditors before the English.
Courts
This opinion was followed by the Irish Courts and reaffirmed lately in the case of Mead vs. Ball, Baker & Co.,

154

BANKERS' CONVENTION.

by Lord Chief Justice Alverston ; and while this point
has not, as far as I have been able to ascertain, been
raised in an American Court, I am of the opinion that if
the issue were to be passed upon it would be decided in
accordance with the English precedents.
Therefore, it is necessary that we co-operate in requiring the services of trained appraisers, who are specialists
in all important lins of business, who shall shoulder the
reponsibility for which the auditor is at present not
legally bound.
This weakness in our investigation of credit risks has
already been recognized by some of our more progressive
bankers and they have, as an adjunct to their "Credit
Department," employed experts in various lines, whose
duty it is to make a detailed appraisal of the assets of
the proposed borrower in conjunction with the work of
the Certified Public Accountant.
I am strongly in favor of the results accomplished by
many of our Certified Public Accountants and hope that
I will not be misunderstood when making the suggestion
that in many instances the banker relies too much upon
an audited statement, indicating a desire to accept the
audited statement as a "cure all" and not a safe-guard;
but experience has taught.that it is merely an -additional
line of information, and not, in any sense, a guarantee
of value. A few years ago a number of the bankers of
this country suffered severe losses through the failure of
a large corporation, the audited statement of which indicated quick assets of three and one-half times its liabilities, but up to this time there,is no indication that the
creditors will receive over thirty cents on the dollar.
I would like to digress for a moment in order to make
a suggestion, which I believe is of the utmost importance
to every American banker and business man.
Shortly after the commencement of the European War
we experienced a wonderful revival of trade and commerce in practically every line of business out of all proportion to fundamental conditions; this has resulted in
the highest wage scale ever known in this or any other
country, greatly increased railroad earnings,—an increase
in commodity prices in many instances of over one
hundred per cent. There is no line of business that has

not felt this enormous impetus, and at this writing the
advance orders are as great as at any time in history.
We know this condition cannot continue indefinitely; you
have all witnessed in the past the periods of remarkable
expansion and inflation, followed as certain as night follows day by the resultant period of depression.
There is a burden imposed on every American banker,
not only to safeguard the interest of his particular bank
but a higher responsibility,—a patriotic duty to protect
the financial structure of our nation, and I feel that in no
way can we be of such invaluable service to our country
than to inculcate in the minds of the merchant and fanufacturer a spirit of conservatism. There is a tendency to
pay enormous dividends, to increase plant expenditures,
to buy raw material at extremely high prices for months
In advance, a disposition to raise wages to a point that
normal business cannot maintain.
While I do not wish to be considered a pessimist, I am
of the opinion that it is a duty we owe our customers to
suggest and counsel policies which will result in such protective measures as will enable them to contract their
business as successfully as they have been expanding it
during the past eighteen months.'
The word "preparedness" has been applied to activities in so many different directions of late; on the one
hand, we find co-operation of our great engineers and
scientists with the military authorities, a thorough canvass,of our railroad situation in reference to the ability to
mobilize and handle our armies, should the necessity
arise, but the banker should also adopt a measure of preparedness, not for a war of defense or military aggression, but ,to furnish the sinews of war to our merchants
and manufacturers in waging that contest for commercial
supremacy which will naturally arise when the armies of
Europe return to peaceful pursuits and bend all of their
untiring energies in an attempt to acquire the commerce
which we are so hopeful of securing.
I believe that we bankers can in no way lend greater
service to the commerce of our country than to require
a standardized form of financial statement which will result in the immediate extension of credit, even in times
of stress, to all deserving borrowers.

Necessity for Credit Statements, and Uniformity Thereof
from Standpoint of Merchant
By It. A. LONG, President of the Long Bell Lumber Co. of Kansas City.
As I understand it, faith is the primary basis of all
credit. Faith, not in honesty alone, but honesty coupled
with business ability (and this implies not only soundness of judgment, but industry, persistency, and a tactful disposition) supported by methodical. or systematic
system of accounting that one may know at a glance
the condition of his business.
One may be honest and yet, if not possessed of good
judgment, he fails.
One may be honest, possessed of good judgment, but
fail because of lack of industry.
One may be honest, possessed of good judgment, industrious, but lacking in persistency, and failure eventually follows.
One may be honest, possessed of good judgment, industrious, persistent, but in disposition very faulty, unreasonable in his demands, thus making enemies both in
and out of his organization, hence success is not his in
very large degree.
One may be possessed of all these attributes, but lacking in the use of a methodical or systematic plan of ac-

counting, thereby fails to know many things about his
business that should be known, and hence does not
attain the large degree of success that would otherwise
apply, and so it seems to me that all of the attributes
mentioned are necessary in order that one may establish an outstanding, enviable credit; and yet one might
possess all of such attributes and not be entitled to a
comparatively large credit, unless supported by a carefully prepared statement of his resources and liabilities,
for without such a statement his banker, or person of
whom he might solicit loans, could not correctly measure the security offered, hence to be safe, would limit
the amount to be loaned to the side of extreme conservatism, possibly, as compared with the credit that
might have been extended had a statement of the exact
financial condition of the would-be borrower been furnished. With such a statement before the person of
whom credit is sought, especially if the attributes heretofore mentioned are possessed in a reasonable degree,
in the large majority of cases, the borrower will be
treated as liberally as he might have a right to expect.

CLEARING HOUSE SECTION.
It is needless to say such a statement should be prepared methodically and in a manner most easily understood, and the value assigned to each iteni, under,
rather than in excess of its real worth, for a shrewd
credit man will soon be able to discern the inclination
of the borrower in this direction, and if he finds a disposition to stuff the statement, so to speak, his suspicions will be aroused, and the natural tendency would
be to discredit the whole statement.
It is to the advantage of the borrower to prepare such
a statement at least as often as once annually, for the
reason that:
1st. In order to make a statement that is true and
correct, and do it readily, his accounts must be conducted so as to accurately, plainly and minutely set
forth the business done from day to day, and the possession of such a record is of great assistance to the
owner or manager in discovering leaks, or troubles leading to losses, for often large losses are sustained, especially in an active business, because of the lack of knowledge on the part of the responsible head of the details
of his business. I once heard a representative of a large
manufacturing concern say that his "company experienced no difficulty in competing with well-managed
companies, those who fully understood their business.;
the most vexatious problem being competition with those
manufacturers who kept on making money until they
reached bankruptcy." This statement couples with the
thought expressed by Edward N. Hurley, Chairman of
the Federal Trade Commission, before the Boston Commercial Club on March 28th of this year. Mr. Hurley
said:—"Out of sixty thousand successful corporations
doing a business of $100,000.00 a year, thirty thousand
charged off no depreciation whatever; that only 10 per
cent of our manufacturers and merchants know the
actual cost to manufacture and sell their product, 40
per cent estimate what their costs are, and 50 per cent
have no method, but price their goods arbitrarily. Most
of the manufacturers and merchants who do not know
what their goods cost are basing their selling price on
what their competitors sell for, and with only this
knowledge for a basis, they are frequently cutting prices
and demoralizing the industry in which they are engaged."
2nd. The very fact that such statements are to be
made annually and submitted to one's banker doubtless
has a tendency in many cases (and I should not be
surprised, in the majority) to cause the more ambitious business men to go a little slower (such men need
to be checked up occasionally) in extending their business, and hence their credit, than would otherwise apply,
and possibly thereby save them from at least serious
financial distress, if not failure.
3rd. In the furnishing of credit statements it gives
your banker a good understanding of what you are doing, and makes it possible for him to give advice at
times that might be helpful, for, in fact, the interests
of the banker and his customer are, or should be, very
closely allied. In truth, even though one may not be
for the moment a borrower, we believe it well that he
voluntarily supply his banker with a carefully prepared financial statement of his condition, for, added to
the benefit which would probably come as the result
of a careful study of the details of his business in the
preparation of the statement, is the decided advantage

155

of the close contact and relationship thus established
between the two parties. Business men are being inquired about constantly as to their financial responsibility by other men in business, and the banker is the
usual source of such inquiries, and so it is much better
for the banker to be able to say something positive in
answering such inquiries, than to be unable to say anything; and again, in most any large, well-conducted
business, the time is most likely to some when money
may be borrowed to advantage, and when the standing
of one's business warrants a banker in extending credit.
If such an applicant, although not a borrower commonly, has in fair and open way gained. the banker's
Interest and attention by his foresight in supplying such
statements, kept him in touch with his affairs, and acquainted with his progress, he is almost assured of receiving credit to the fullest extent he is entitled to,
for the mere asking.
Naturally, the banker should be cautious in extending
loans, even to customers that have before carried satisfactory balances, especially the one who has not taken
his banker into his confidence, but held aloof with his
credit statements until such time as he might be seeking accommodation. Particularly in times of emergency
does the man in close touch with his banker have the
advantage of the one who is not. It should be well understood that it is a source of great satisfaction to have
a credit established when requiring its use, rather than
waiting to do so until needed.
Pertaining to ." the desirability for uniformity in
statements," I take - it that uniform statements are
needed more for the use of the banker than for the
borrower, and yet, applying this thought directly to the
borrower, it would seem advisable that his statements
should be uniform from year to year, so that inturning
from the current statement back to the statements of
Previous years, the directing head of an institution could
the more readily see the changes that were material and
well for him to understand, or know about, than would
be. true if the statements were not uniform, or were
changing from time to time.
Again, the more uniform the statements, the easier
they are to check and the more intelligently understood,
and a proper understanding of such statements is certainly very essential to both interests, viz: the lender
and the borrower. In short, a standardization or uniformity of balance sheets arising from systematic accounting I believe is one of the forward steps of the
age, and will save a vast amciunt of time in examination, hence conserve mental energy, and make more
readily possible the rendering of more intelligent decisions as to the exact condition of a given business.
Finally, every man should be sensibly ambitious to
accomplish with the talents that are his the greatest
possibilities in his line of honest activities, and hence
should pursue that course that will produce such results,
and since in the commercial world the most of us need
to use our credit, and many of us in large way, we
should not hesitate to set forth in the plainest, frankest manner a complete statement of what we have and
what we owe, and in uniform way, from time to time,
for by so doing it is my unqualified opinion that we
thereby establish a basis to accomplish our greatest possibilities.

156

BANKERS' CONVENTION.

The Necessity of Credit Statements from the Standpoint
of the Country Banker.
BY W. C. GORDON, Cashier Farmers Savings Bank, Marshall, Mo.
It has frequently been declared that two of the most
Important governing principles in modern business are
efficiency and accuracy. The prevalent settled tendency
In all commercial activity is unmistakably toward the
elimination of waste and uncertainty in methods, thereby making reasonably sure from the outset that the object in view shall be accomplished quickly, definitely
and inevitably. Approximation in plans and loose, haphazard methods of execution are no longer tolerated.
The complexity of modern business, with its ramification ever increasing as our civilization advances and develops, demands that certainty and directness be characteristic of every important undertaking.
In no other field of commercial activity may this be
seen and understood more clearly than in that of banking. A review of the past twenty-five or thirty years will
reveal a marvelous development in the details, if not
the theory, of banking practice. Changing conditions
and the obstruction of perplexing problems have necessitated the contribution of much serious thought on the
part of financiers, not only for their own protection but
that the best interests of their patrons may be conserved.
The mere mental contemplation of the vast resources, in
money and securities, controlled by any one of the large
banks of this country, is calculated to produce in the
minds of the uninitiated a feeling of awe and amazement. Even a casual investigation of the daily routine
operations in the various departments of such an institution will but serve to magnify that impression or wonderment. Here, if anywhere, efficiency, accuracy, tact
and sound judgment are prime requisites. And if this
be true of the large banks in the cities, it is equally the
case , though in less degree perhaps, that the same qualities of thoroughness be manifested in the smaller institutions in the country.
Confidence and credit are the two chief stones in the
foundation upon which any bank successfully rears its
financial edifice. Confidence is a possession of the public which the bank. serves, much courted by the latter,
for in its wake follow deposits of money and loyal patronage. It is a sensitive and timid thing, bestowing its
favor only upon those institutions which have ample resources and are officered by men of integrity, courtesy
and good judgment who pursue a policy that is liberal
though always safely conservative. Credit, on the other
hand, in a financial sense, is but confidence of a different
kind, bestowed by banks and other business concerns
upon customers who seek temporary accommodation in
the way of financial assistance. It also is, or should
be, characterized by caution and reserve, yielding itself
only to those whose moral and material worth justify
its possession and use. There is need that it be jealously
guarded by every bank. Its proper employment gauges
the success and prosperity of the institution, constituting, as it does, the source of certain and gratifying revenue, while the reckless extension of it, where undeserved, brings inevitable worry and often serious loss.
In this present discussion we are chiefly interested in
the extension of credit by country banks to their customers and the means for its proper safeguarding. It
is almost a truism to state that there is no bank which
has not always kept some sort of a repository for information regarding the financial worth of prospective
borrowers, to be drawn upon when accommodation is

asked. Until quite recently, in very many country
banks, this storehouse has been a nook in the brain of
the cashier or some other active officer. The precariousness of such a practice is too self-evident to need much
comment. Except he be a genius at details, no bank
officer can carry constantly within his mind full and
accurate information as to the financial responsibility
of the many applicants for credit with whom he has to
deal. At best his conception of their credit worth is
but a general impression which often proves decidedly
Insufficient. Moreover, by reason of the changeableness
of things, the time must eventually come when this sole
custodian of the bank's credit data will be removed by
death or otherwise. The bank is thus deprived of valuable and vital information, to the permanent possession
of which it is clearly entitled. The possibility of a contingency like this arising, together with the increasing
complexity of business procedure, has brought a realization that tedit information, to be of definite value to
a bank, must be recorded in writing and preserved for
• analysis and reference. In matters of this kind it is too
uncertain to have "memory as the only reference and
intuition as the only guide."
Again, the obtaining of credit statements from borrowers is a valuable protection to the directors of a
bank. In city banks, a committee of the directors meets
regularly to pass on applications for loans, considering
at those times the credit data which has been compiled.
In country banks the common practice is for directors to
meet once a month, perhaps, listen to the reading of a
list of the loans made since the last session and give a
perfunctory approval to them, often without close investigation. A realization of their legal liability in case
the solvency of the bank is threatened by bad loans
would doubtless induce all directors of banks to insist
on the compilation and recording of credit data.
The reasonableness of a bank's request for a written
statement from a borrower as to his financial condition
should be apparent to any just and. right thinking individual. A bank's resources are not essentially its own.
Its capital and surplus belong to shareholders. Its deposits are the property of its patrons. It therefore exercises a sort of trusteeship for the public and is custodian of the funds of others. In the lending of this
money for any purpose it is imperative that the bank
use all due precaution to guarantee its repayment in full
at a specified time. This can only be accomplished by
having full information as to the worth and ability to
repay of the individual seeking the loan. Such assurance can be definitely given only through the medium
of detailed credit statements in writing, obtained from
the borrower and analyzed and verified by the bank.
The bank, in extending credit, becomes in a sense a partner in the business of the borrower for the time being,
and as such certainly has a right to know the solvency
and prospects of the enterprise in which he is engaging
together with the moral and financial worth of the person or persons with whom it is associated.
The furnishing of credit statements is often of decided
advantage to the borrower as well as a protection to the
bank. Every worthy banker is, or may be, the confidant
of his customers. Why, therefore, should it be unreasonable for a borrower to acquaint his banker fully with
his true financial condition and the specific ,purpose for

CLEARING HOUSE SECTION.

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157

principle by the banker and a withdrawal of the request
which accommodation is sought if he is honest and
financially responsible, the disclosure cannot injure him. for a detailed credit statement. There is certainly need
If he is unscrupulous and insolvent, most assuredly the of co-operation by banks located in the same community
banker needs to have knowledge of all the facts in mak- to prevent abuses of this kind. An Agreement made and
rigidly adhered to not to accept a customer of another
ing his decision to withhold or extend the credit asked
bank unless he shall have severed his connection -with
for. Frequently it occurs that the making of a credit
that institution for the most legitimate reasons, would
statement to a bAnk which is subjected to a thorough
analysis, gives to a borrower the first intimation of his do much to preserve the rights of banks in a Commureal financial condition. It may be, also, that this analy- nity as related to their borrowing customers.
sis of the statement may enable the banker, through his
Generally speaking, all the difficulties mentioned may
experience in such matters and his unbiased judgment,
be successfully obviated by the use of reasonable arguto point out defects and wrong practices, which, if perments, tact and diplomacy in broaching the subject of
sisted in, might eventually lead to disaster to the borcredit statements. After all, success in this direction is
rower.
a matter of education and involves the use of a method
The difficulties confronting the country banker in sesuited to the particular case in hand. Little trouble
curing credit statements from customers differ in degree
should be met in getting statements from those making
only from those which the city banker must encounter.
a first application for credit. Borrowers .of long standBoth deal with individuals, firms and corporations. The
ing, who have been accustomed to receive accommodapurposes for which money is desired and the proportiontion on a mere statement of their needs, may marvel at
ate amount of credit which may be extended are similar.
the innovation of written statements for a while and
As a rule country merchants and manufacturing coneven combat the idea, but tactful handling of the situacerns which keep books regularly, take inventories and- tion will
doubtless result 4n attaining the desired result.
object seriously to makmake commercial reports do not
The sources from which may be obtained all the inforing credit statements to banks, for they can see the wismation needed by a country bank in determining the
dom and -reasonableness of such a thing. The country
credit responsibility of borrowers may here be enumerbanker may meet a real problem, however, when. he enated.
deavors to persuade his farmer customers that credit
statements in writing from them would . go far toward
First of all, the past record of the borrower in meet,
materially lightening the ,burdens of banking. Frequenting the payment of interest and principal of his note at
ly, such a request is met with an instant and indignant
maturity, and his habit of asking extensions of time, are
declination. Accompanying this is an air of injured
items of collateral information which are very imporpride and an unconcealed conviction that an attempt is
tant in analyzing the credit statement. Doubtless there
being made to reflect on his integrity and standing in
are but few banks which do not keep a record of this
the community. The less tact used by the banker apkind. The alertness and punctuality of a borrower in
proaching the subject, the greater the indignation regismeeting his obligations when due go far toward prejutered by the customer.
• dicing the banker in his favor. In country banks loans
There are three. reasons for this attitUde on the part are sought for a specified purpose and the borrower is
of farmer customers. In the first place, few farmers
allowed to designate the length of time he desires to
keep books on themselves or even make a record of their
use the money. The bank has a right to expect that this
operations, consequently they are unable to furnish a
contract will be faithfully kept and the funds returned
correct detailed statement of their financial condition. at maturity. Banks should loan money as temporary
Agriculture and stock raising are as much a serious
capital only. That bank is prejudicing its own best inbusiness as any other enterprise. Much .
terests which furnishes permanent capital to either a
stress is now
being placed on farm,accounting and when the practice
merchant manufacturer or individual. The so-called
of this principle becomes general, farmers will see the
credit worth of an individual or firm is not so much the
ability to borrow as the ability to pay when due. Nor
wisdom of it and be able to compute the gain or loss in
their operations for the year. They will not then de- is it sufficient that interest only be promptly paid,
though some borrowers seem to think that this is all a
cline to make statements because of an unwillingness to
bank should reasonably insist on. When an extension
admit their neglect of a necessary business habit.
of time is asked on a note, that action alone is evident
In the second place, there are two things about which
proof that the money is being diverted to other uses or
any sane human being is naturally reticent, viz., his
that the purpose for which it was loaned has failed of
family and financial affairs. Aim attempt to pry into
accomplishment. The latter contingency may be due to
either is met with an immediate rebuff. As soon as the
misfortune of one kind or another or a bad business seafarmer is convinced, by reasonable arguments, of the
business necessity for showing his financial condition son,—therefore, not altogether the fault of the borrower.
when credit is applied for, and that the request is not The need for an extension of time, however, should
made in an effort to meddle in his.affairs, this antipathy serve as an incentive to redoubled efforts in order that
the obligation may surely be met at its next maturity.
will likely disappear. .
Repeated requests for renewal generally mean that the
The last, and in some ways, the most serious difficulty
encountered in securing credit statements from borrow- borrower is growing careless or is falling behind financially. In such a case the prudent banker will take
ers by country banks is due to the fact that competition
business between banks has had a tendency to spoil steps to protect himself immediately in whatever way
for
seems best to him. A banker likes to see his customer
•borrowers and give them a somewhat exaggerated idea
desirability as customers. The multiplication "clean up" or liquidate his obligations regularly and
of their
promptly and a conscientious borrower can add to his
of banks in some communities and the ruinous rivalry
credit worth in no more effective way than by so doing.
between .them has produced over-expansion of credit and
a lowering of interest rates. In many cases this pracExtension of credit is sometimes partly based on the
tice has produced a situation wherein the borrower, average monthly balance maintained. In country banks
though It;seeker of needed accommodation, has attempted
this can hardly be considered an important governing
to dominate the banker by threatening to transfer his factor, for the reason that often the most solvent borbusiness,to another institution where he claims to have rowers keep the smallest balances. Money is needed for
received tithe assurance that his wishes will be acceded
a specific and immediate purpose and is checked out to
• to. In too. many instances the imminent catastrophe has meet the emergency. The size of the balance maintained,
been averted by a complete surrender of position and at other than borrowing seasons, by merchants and

BANKERS' CONVENTION.

158

farmers, may be deemed of some value in determining
the amount of credit to be extended.
The signed statement of the borrower himself, giving
essential details of his financial condition, is, of course,
the most, conclusive source of information possible in
determining credit worth. Yet the unqualified acceptance of such a statement without proper analysis and
comparison, is apt to prove a dangerous proceeding. Few
men are prone to over-conservation in estimating their
financial ability. Pride of possession, self-assurance, and
ignorance of the principles of business accounting may
often lead a borrower, innocently, to overestimate the
real status of his affairs. Care must be exercised in
seeing that real estate holdings are not inflated beyond
a conservative figure. Collateral liabilities, such as
notes to individuals, notes endorsed or guaranteed for
others and current accounts must be fully listed. It is
frequently desirable to know how much life insurance is
carried, the company issuing the policy and who is
named as beneficiary. All these and other details which
might be mentioned are essential to the statement which
should be kept in writing, even though the borrower be
unwilling to sign and acknowledge it.
Finally, all data thus secured should be verified by
reference to official county records relative to real estate
and mortgages, investigation of commercial reports and
by correspondence and consultation with persons acquainted with the borrower's condition.
Some one has said that it is essential for a bank to
know three things about a prospective borrower, viz.,
his character, capacity and capital. The first two are
largely intangible in terms of figures, but all three are
absolutely necessary and interdependent. The country
banker must often give more consideration to character
and capacity than would his brother financier in the
city. Many a bank has profited greatly in after years

in the possession of loyal and prosperous customers, to
whom as young men reasonable credit was extended because of their known ambition, energy and scrupulous
honesty, but whose capital holdings were a decided negative quantity. The country banker cannot observe
/
rigidly the proportion of 112 or 3 to 1 of quick assets to
liabilities. It is often safer to loan up to 75% of his net
worth to a man of good character and capacity who you
are certain will devote his last dollar to liquidating his
debts, than to loan 20% to a man whose methods are
questionable and unscrupulous.
The second part of the question under discussion, viz.,
the desirability for uniformity of statements, may be
treated very briefly from the standpoint of the country
banker. It will be admitted without argument that uniform statements are greatly to be desired. Every bank
deals with individuaLs, firms and corporations and will
have need of an appropriate form for each. It would
seem, however, that more latitude and individuality
might be allowed the country banker in the preparation
of his credit forms than is possible in the case of the
•city banker. The reasons for this are readily apparent,
due to the changed conditions and requirements under
which the two operate. Those country banks 'which
are members of the Federal Reserve System and avail
themselves of its re-discount privileges should certainly
use uniform blanks. It is probable that such blanks
will be prepared and issued by the Federal Reserve
Bbard at no distant date, and that their use will be insisted on in all of.the twelve districts. As •a general
rule, the essential details in all credit statements required of a particular class of borrowers should be identical, however much difference in arrangement of the
data is permitted to the individual bank. The one necessary requirement in every statement is that it be
'simple to the last degree, readily understandable and
easily lending itself to analysis and comparison.

Effect Increased Operations of Note Brokers upon the
Earnings of Commercial Banks
BY THOMAS P. BEAL, Ja., Vice-President of the Second National Bank of Boston, Massachusetts
Mr. President, members of the Clearing House Association
and ladies present: When your President asked me to speak
to-day I had a little hesitation because I was going to be
traveling for quite awhile but I told him I would put down
a few personal thoughts upon the subject and I am very glad
to express them.
Nineteen years ago a party of bankers and grain men started
from Minneapolis for a tour of inspection of the wheat fields of
North Dakota, South Dakota, Minnesota and the section of
Canada in the neighborhood of Winnipeg. In that party I was
included as a young boy because even when I hoped to enter
the banking business and my father, who was the president of
the Second National Bank of Boston, believed that if a man
were to become a banker in Boston, it was the utmost importance for him to meet and know the men who handled the
grain crops in the Northwest.
Acting in accordance with this belief, the bank had for many
years loaned its surplus money every autumn in a manner
which seemed to approach as near absolute safety as possible,
for the loans were made to men whom it had been possible to
meet and form a judgment of their character and ability and
at the same time were secured by warehouse receipts for grain
stored in public elevators which had a ready market at any time.
At that time note brokers were almost unknown in that section
of the country. The country itself had less wealth than it has
to-day, and offerings of money were eagerly accepted at rates of
from five to six per cent.
To-day such loans at such attractive rates are a thing of the
past, except in abnormal times. The borrower instead of appreciating an offer of money and making his paper attractive
by adding collateral, now in most cases insists on issuing his
single name paper and threatens to withdraw his business if

you do not lend him the amount he desires at the rate he
wishes. Is this not typical of banking and the relation of
banks and their depositors all over the country to-day? Of
course this is largely due to their added wealth and therefore
increased independence but is it not due to another force,
namely,,the competition of those who are seeking to make them
borrow in order to obtain the commission for selling their
paper?
Now the broker sends out—when money is plentiful—scores
of telegrams to both those accounts which he handles, offering
money to the borrowers at the market rate in the lowest
money market in the country plus his commission, and to those
accounts which he is soliciting at a still lower rate, a rate
at which even with the commission he probably would not be
able to sell the paper at a profit because he knows that in all
probability his bid will not be accepted. What is the result?
The borrower not only forces the broker with whom he deals
to take and therefore offer his paper at a lower rate than otherwise, but goes to his bank, says he has had an offer of money at
that rate—which Might be far lower than was fair owing to
conditions in that locality—and forces the banker to meet his
wishes from the fear of losing his deposit. For are we not all
to-day too anxious to be large rather than to obtain a profit
for our stockholders?
Only a short time ago one of our valuable depositors in asking our rates for money used these words: "Brokers are offering
us lots of cheap money, but if your rate is right, we should
prefer to borrow direct." We wrote back naming what we believed to be a fair rate for the Boston market and asking him
to remember the fact that the rate named by brokers plus their
commission was equal to or greater than our quotation. But
we could not help feeling that these brokers' offers were placing

••

CLEARING HOUSE SECTION.

•

159

rather than to purchase outside paper which will not mature for
this man in a state of mind antagonistic toward us if we did
six months.
not quote a rate equal to the lowest offered anywhere in the
This would be an unfair picture of the brokers' position in
country.
the banking world if this were all that was said. There is
I remember very well one time when the money market in
another side to the question even from the point of view of a
/
1
2
the autumn in Boston was 4 % receiving a telegram from one
bank officer who is looking only for the profit of his stockholders,
of our valuable depositors in the Northwest, in fact one of
and here the broker is invaluable. How often has each one
those who had formerly been eager to receive our money each
season, asking us at what rate we would loan them $30q000.
of us sat in his office with a large surplus of funds which were
/
1
%. They replied that even locally they could
either drawing no interest or were on deposit with our corWe wired back 42
respondents at 2%. Then we have welcomed the broker with
obtain money at less from the brokers. Later I faund that the
facts were that a broker from Boston who was in their city had
his offerings of commercial paper and even sought him, taking
his offerings at even a lower rate of discount than we would
taken $500,000 of their. paper at 4%% and had only been able
be willing to name to our own depositors, thus being guilty of
to sell $50,000 and was carrying the rest. And yet this had
the very act which we have criticized in others and which has
made the quotation and offer which we had made seem undetended to bring about the result which we have all objected to.
sirable to our friends. Again, only a few weeks ago, a friend
Looked at from this point of view, the broker is a very economin Boston asked the rate for money, was told 4% for six months
ical method of placing our idle funds at the disposal of those
and replied that that was absurd as he had lots of money
who can use them. If he were not in our midst, the banks, at
offered him at 3%%. After some questioning he acknowledged
least in the larger cities, would have to send highly paid men
that it was by a broker to place with a bank in another part
of good judgment over the country in search of parties to whom
of the state and yet he considered that it represented the market
they could lend money whenever a surplus of funds occurred.
in Boston.
Would not this in a certain measure bring the same condition
I will acknowledge that the brokers are not alone in forcing
which has resulted to-day from the offerings of brokers; namely,
down rates, for this force is now exerted in Washington by the
the lowering of rates to our own borrowers below the point
sectional deposit of government funds It is also caused by the
which we believe is warranted from the many services which
banks in larger cities who offer money at abnormally low rates
we render to them.
in their competition to invest their surplus funds and also
So far as I can see, this is the chief way in which the infrom their desire to increase their deposits by obtaining accreasing activity of brokers is having an unfavorable effect on
counts thrOugh such offers. This competition, however, is not
the earnings of commercial banks, for as previously stated
nearly so severe and I believe may grow less when two forces
the lower rates on commercial investments are the result of
operate to reduce the volume of deposits in the largest cities in
competition which would come from other sources if it were not
proportion to the deposits of the entire country; namely, the
for the brokers, although possibly to a considerably less exreduced bank deposits With correspondents which would be the
tent. I have been asked what steps may properly be taken to
result of the complete operation of the Federal Reserve System, and secondly the withdrawal of large deposits of foreign
correct this situation. If I am correct in my belief that the
money which will come with the end of the war and which will
situation is the result of competition and the present condition
tend to keep rates exceptionally easy in our largest cities. It is
of human nature, no direct relief is in sight until either human
the institutions in these cities which would be the only ones
nature or competition changes.
competing with other localities in this manner.
Just as long as some of us are willing to loan money at less
I do believe that the brokers with their desire to increase
than others, just so long will the return on our surplus fundg
their sales, and therefore their commissions and profits, are
be less than we believe is warranted and less than in the past
when money was less abundant and transfer of funds less easy.
the greatest force in this direction when there is an abundance
money, for they will frequently acknowledge that they have
But with our own depositors there might be some hope if we
of
could all work together along the line of educating them to
to take paper below the market in their district in order not
appreciate the personal character of their relations with us and
to lose the business and compete with another broker handling
another district. What happens when money comes scarce?
our willingness to be of the greatest service to them in case of
The broker largely disappears and because his resources are
need. If we could instil in them the realization that, because
insufficient to fulfill all the obligations which he has incurred
we are their best friends, they should be our best friends, and
when banks have been eager to take paper off his hands, he
if we are worthy of sufficient confidence to do business with
either forces the borrower to seek accommodation from his
them at all, we should be worthy of even such great confidence
own banks, which he has deserted at a time when they would
as would be necessary to make a rate of discount charged by us
have been eager to loan him, and therefore increases the preswhich was higher than that quoted by an unknown competitor,
sure under which they are to meet the withdrawals of. their
seem entirely reasonable—we should have taken a long step
deposit, or else forces the banks under threat of loss in case of
toward eliminating the harm done to our earnings by the inreceivership to hold and renew paper which they have taken
creased operation of brokers. But even more than this is it necessary to drive into the mind of the borrower the difference
with the distinct understanding that it should be paid at
between paper which he gives to his broker and paper which
maturity and therefore possibly at a lower rate than otherwise.
he discounts at his bank. One must be paid at maturity, the
A few figures which I have obtained from my friends who
other can be renewed at his own discretion if his deposits have
are large buyers of commercial paper are interes.ting in making
been satisfactory and his credit continues good, no matter how
a comparison between the last four months of 1914 when, as
undesirable it may seem to the banker if he is short in his
you will remember, it was difficult to supply all the demands for
reserve. Is not this a service which should be paid for? Should
money, and the same period in 1915 when rates were comnot the depositor ascertain the wishes of his best friend, the
paratively easy. In the earlier period one bank bought three
millions of paper and another ten millions, 85% of which was
banker, and give him the first opportunity of lending the money
bought in the last six weeks, which institutions last year purwhich he may need and at any rate which is reasonable even if
chased 15 millions and 28 millions, respectively, in the same
it is. slightly higher than that quoted by brokers?
period. Still another stated to me that in the former period
If this were done, it -might mean a slightly higher interest
they were really not purchasing any paper as they had diffirate when rates were low, but it would also mean a lower inculty in meeting the legitimate demands of their regular deterest rate when rates were high. But of even greater impositors and only had four millions of purchased paper on hand
portance to the borrower should be the knowledge of having
January 1, 1915, whereas in the latter period they were heavy
some one who can and is glad to help him in time of trouble.
purchasers.
It should and would bring back the personal relationship in
Thus in easy times rates are forced lower by brokers and
business which seems to me to have largely disappeared in the
yet in hard times they are forced higher by the same parties,
larger cities, in this present .day, in spite of its having been
making borrowers whom they have sought 'return to the bank
that feature of business which gives the greatest amount of
which they have deserted and forced to become a purchaser of
pleasure and satisfaction to those who have it.
the paper of some other bank's depositors at a lower level of
Thus I can only say that the one hope which I have of inrates because no other means of investing their funds was
directly correcting the harm done to the earnings of commeroffered.
cial banks by the increased operations of note brokers, which
has resulted in the general lowering of rates of interest to
I have been asked by a broker if the bank which was loaning
entirely on commercial paper which was bought withthose depositors who really are obtaining an insurance in time
its money
conditions of renewal was not in a much safer position
of trouble from the bank, which they do not pay for, by forcing
out any
the bank to loan them at rates quoted on strictly, commercial
than one loaning entirely to its own depositors, which loans
paper, is for all of us to co-operate in bringing back the spirit
would have to be renewed. The question of safety does not
of personal relationship and co-operation with our depositors,
depend on the character of its loan as much as on the character
of its deposits. If these have been obtained by granting lines
making them glad to help us if we are to be willing and glad
of credit, then a bank which has these lines open when money
to help them.
becomes scarce and these lines unexpectedly used, is just so
One of my friends has suggested that the correction might
much worse off if they have a certain amount of paper which
be made by offering money to our own depositors at a lower
they have been forced to renew as previously suggested. I do
rate. I do not agree with this if other conditions continue the
• not advocate going to the other extreme but I do believe that
same, for it would be difficult for us in Boston to make such
times of easy money when firmer rates may be in sight that
in
offers when brokers offer paper as they have done during the
a bank would be better off to encourage the use of these obliga- • last twelve months as low as 3% and even in some cases as
tions which they are under and thus get them out of the way
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1
2
low as 2 %. A large volume of our deposits are now drawing

BANKERS' CONVENTION.

160

2 and 2 % and some even 3% where a time notice of with/
1
2
drawal is given. Would it not be difficult to maintain our
profits, to say nothing of increasing them If this suggestion
were adopted, especially at a time when the tendency is to increase the other services which we offer without charge, such
as the free collection of checks?
It may seem to the borrower at this time when money is
abundant and rates are easy, when banks have still the almost
as yet untried relief in time of need to resort to—of rediscounting their paper at the Federal Reserve Bank—that this insurance and this personal relationship is no longer necessary. But
the time will come—as it always has in the past—when money
will become desirable to the borrower and he will be very glad
of his banker friend Are we not now in an abnormal position,
doing a greater volume of business on a lower percentage of
reserve than ever before? And is not the volume of our gold
supply maintained by unusual causes which at the end of the
European war will disappear? When normal conditions return
and all danger in Europe has passed, then gold will go where
it is most needed and will bring the highest return. Then
where will our reserve be if our business continues and our depositors still need money to carry their accounts and their
stock of merchandise and raw material?
If this occurs, then this personal relationship will be rated
at its true value. But it can only be attained if a greater
spirit of co-operation can be produced among ourselves just as
we desire to bring it between each of us and his individual
customers.
Then we shall all receive a fairer return for the service
which we render and those who receive this service will be
glad to pay for it. Their rates for money may be four per cent
instead of three and a half, but to offset this they will be six
instead of eight or possibly a fiat refusal to be of help in time
of need.

Then we could watch brokers increase their activity without fear and know that its only result upon our earnings would
be the rate at which we could invest our surplus funds. Here
we come•into competition with the rest of the world and our
profit must be governed by the condition which exists at that
time.
There is much to be said on both sides, for I have been
greatly interested in the widely different comments made to me
by one of my friends, a broker, to whom I have shown this
paper, and a bank officer from another city, with whom I have
talked. The former stated that he did not think that I was
entirely fair in my criticism of his line of business as his firm
sold more paper when rates were 5 and 6%, especially in the
country, than when rates were 3 %, and that even in 1914
/
1
2
there were only thirty days when their volume of business was
not large and that they always tried to cultivate close relations
with their accounts and watch and help them. Nevertheless I
have often heard brokers state that they had either none or
very little paper of concerns in trouble on their own books, and
take satisfaction in it. Undoubtedly this is not the position
always taken, as there are various kinds of brokers just as
there are various kinds of bankers, but I feel sure it has often
occurred. My bank friend on the other hand had written to me
to "give it to them" and said that although he felt strongly
on the subject, he supposed that I could not speak more forcibly
before the present meeting. I have tried to be fair to each
party, realizing that there are many arguments on both sides
and that, therefore, the only improvement could be greater cooperation, first between ourselves and secondly between each of
us and our own depositors and borrowers.
Could we not accomplish this result to a certain extent if
we were•more careful in the credit information we gave and is
it fair that Ive injure our own earnings by reporting our favorable relations to those who will work against our own interests?

Committee and Officers' Reports
Section
Annual Address of President J. D. Ayres
PRESIDENT AYRES: It has been curtomary for the President's address to contain a review of business conditions and a great many
statistics regarding Clearing House Associations. I shall touch very
lightly upon the first, omit the second altogether, and confine my
remarks very largely to matters pertaining to the Clearing House
Section. Therefore my address shall be very brief, and I think this
is quite fitting because we have an interesting program before us
which will require all the time which has been allotted the Section.
At a time when the business of the country is of a volume almost,
if not entirely, unprecedented and profits are generally large, and in
some lines of business undreamed of, perhaps the question most
active in the minds of most business men and bankers is "How
long will these conditions last?" Soon after the great war was
precipitated many prophecies were made by economists, bankers and
business men as to the effect it would have upon the business and
finances of the United States. Most of these prophecies were of the
most pessimistic character and tnost of them have proved to be erroneous. I hesitate, therefore, to enter the hazardous ground occupied
by the prophet, but venture to do so to this extent: "It is my firm
conviction that the present period of prosperity in this country will
My observation is that,
not be terminated by the end of the war."
while the present period of prosperity received its initial impetus
from the war, in most lines of business the present volume is not
dependent upon the continuation of the war. It is, however, almost
certain that a readjustment of prices of both material and labor
will follow the termination of the war, and the tariff on imports
will have to be skillfully adjusted, if we are to successfully cope
with the competition from abroad, which we are certain to meet.
These views, I believe, are very general and the business men of
the country and the Administration at Washington are giving their
Our
best thought to the solution of these important questions.
bankers and business men agree that "Preparedness" must be beyond naval and military questions, and must extend to the business
To construct that wall of protection both
interests of the country.
military and economical which I think .it is generally believed we
should have, requires the co-operation of all the business interests
of the country, and in this the Clearing House Association can and
should play a large part. Along the line of constructive work a
great forward step has already been taken in the adoption of the
Federal Reserve Act.
Under the provisions of this new law the
Federal Government has given us a unified banking and currency
system, and, while we all admit that it has imperfections, yet we
must agree that it is built upon sound fundamental principles, and
has immeasurably strengthened the hands of bankers and business
men to meet the conditions which will follow the termination of the
Therefore I believe the Clearing House Associations of this
war.
country and the Clearing House Section of the American Bankers'
Association will do a great patriotic service by cordially co-operating with the new banking system so that its possibilities can be
understood and used to the best adavntage.
The country check collection system of the Federal Reserve Board
has met with a great deal of opposition from many bankers, but
in my opinion this system should be given fair trial and no amend-

Clearing House

ment of that section of the Act under which the system was established should receive the support of this Section until actual operation of the plan for a reasonable time shows Where the Act should
be amended.•
The Clearing House Section of the A. B. A. has now been in
existence for eleven years. In that time It has made an enviable
record for initiating and causing to be adopted many new practices
of great practical value to banks and Clearing House Associations,
and has come to be recognized in the Council of the American Bankers' Association as a most virile and valuable arm of the parent body.
Among its accomplishments are: The Clearing House Examination
System, the Organization of New Clearing House Associations (both
city and country), the Universal Numerical System, the No Protest
Symbol, and the encouragement and help it has given freely in all
matters looking toward safer and more conservative banking practices.
Its work has been done with such careful and economical expenditure
of money that its standing with the Finance Committee of the A. B. A.
is of the highest, and its requests for appropriations to carry on
Its work have always been readily met. This standing of the Section
with the controlling committees of the American Bankers' Association
should be jealously guarded and maintained.
While the Section has accomplished great things in the past, its
possibilities for the future are, to my mind, still greater, and I
shall suggest for your consideration the lines along which these
possibilities can best be realized: I believe that our annual meetings can be made more valuable by having an open discussion of
topics instead of the usual set addresses. It would be well, of
course, to have each topic presented by some chosen speaker, but
let his address simply be the means of opening up a general discussion.
I should like to have every man here to-day take a part in discussing
the subjects on the program. Let each one of us contribute something to the discussion of each question, and if that is done we shall
all get the benefit of each other's ideas and experiences. I believe
we should all work toward ultimate uniformity of constitutions and
by-laws among the various Clearing House Associations, uniformity
In methods of settling clearing balances and, in so far as it Is
possible, uniformity in the extent of the powers to which Clearing
House Associations may govern the activities of their members.
Such uniformity should be worked out through our Section, and at
the conference of Clearing House Managers to-day I hope the initial
step will be taken along these lines. We should have the greatest
possible amount of co-operation by the members of this Section with
our Executive Officers. Instead of attending the annual meeting and
then forgetting all about the Section and its important work until
next year, I should like to see the members keep in close touch with
the Executive Officers, and when you have a local Clearing House
problem, take it up immediately with the officers of the Section;
they will be glad to hear from you, and if they cannot solve your
problem, they may be able to offer some helpful suggestions. Questions of legislation inimical to banks and Clearing House Associations will frequently arise, and co-operation of the members of this
Section should be of great value to all. Only recently such a question was involved in the new Federal Revenue Bill, • and, by prompt
action of the Secretary of this Section, a proposed •Increase in the

CLEARING HOUSE SECTION.
taxation of banks was. considerably reduced. Officers of the Section
will greatly appreciate suggestions from members as to the means
We want every memof increasing the effectiveness of the Section.
In this
ber to feel a personal and direct interest in the Section.
direction an important step was taken in our last atinual meeting
when provision was made for a representative to be appointed from
each state to assist the Executive Officers of the Section in extending its propaganda. This is a splendid idea and should be continued.
I regret that more Clearing House Associations are not reporting
Total bank transactions are the only true
total bank transactions.
index of the volume of business, and yet some of our principal Clearing House Associations continue to use the faulty method of judging
the volume of business by the clearings.
The beginning of the present fiscal year found the Section without
During the
a Secretary, owing to the resignation of Mr. Wolfe.
year this vacancy was filled by the selection of Mr. Jerome Thralls,
of the Kansas City Clearing House Association. I
former Manager
regard the Section as very fortunate in having secured the services of
Mr. Thralls, and under his experienced guidance and energetic application the work of the Section has been kept up to the highest
standard. A full report of the work done during the year will be
made by the Secretary.
The Executive Committee held its usual meeting in May and accomplished an unusual amount of work, which will be covered in the
report of that Committee by its Chairman, Mr. McHugh.
I take this opportunity to say that the Section is particularly fortunate in the personnel of its Executive Committee, the members of
which work for the Section's best interest with a conscientiousness
and earnestness that deserve your keenest appreciation.
It has been my privilege and pleasure to be associated with this
Section as a member of its Executive Committee or as an officer
for five years, and it is a source of regret to me that during the past
year (when I held the highest office within your power) my duties to
my own Bank have prevented me from giving to the affairs of the
Section more time and attention than was my privilege, but the splendid capacity, thorough knowledge of Clearing House work and untiring energy which your new Secretary has brought the Section, has,
I believe, amply covered any delinquencies upon the part of your
President.
The Clearing IIouse Section can be made a great power, operating
for the good of all of its members, but this can only be done if we
all co-operate to that end, and each one take a personal interest in
advancing the work of the Section. This is the thought which I want
to leave uppermost in your minds to-day.

Report of the Executive Committee, Mr. John McHugh,
Vice-President of the Mechanics & Metals National
Bank, New York City, Chairman

•

Mr. President and Gentlemen:
Your Executive Committee has held seven sessions during the year
The first was the organization meeting, which was
now closing.
held at the Elks Club, in Seattle, following the regular annual meetthis session the regular routine business was transacted,
ing. At
plans outlining the future activities of the Section were discussed,
and your President, Vice-President and Chairman were appointed a
Committee authorized to employ a Secretary of the Section with the
advice and consent of the Administrative Committee.
Six sessions were held during the time of the Spring Meeting at
Two of these sessions were held jointly
Briarcliff, N. Y., May last.
with the Executive Committee of the National Bank Section for the
purpose of considering the Nation-wide Clearing Plan and evolving
ways and means of bringing about a postponement of the inauguration
of the plan, so that the bankers might have an opportunity to study
it and to familiarize themselves with the details which were yet to
be worked out by the sub-committee appointed by the Federal Reserve Board, and would be given„ an opportunity to suggest whatever
changes, modifications and improvements that might be necessary in
. order to make the plan workable. The other four sessions were devoted to the routine business of the Section, consideration of the
program for our Tenth Annual Meeting; the future activities of the
Section and a general found-up of all the plans, methods and systems that have been evolved, fathered and developed by the Section.
The action of your Committee relating to the then proposed Nationwide Clearing Plan resulted in the Executive Council of the American Bankers' Association passing a resolution approving a form of
communication prepared by the Joint Committee of the Clearing
House and National Bank Sections, directed by the Federal Reserve
Board, and urging postponement and modification of the plan. This
resolution provided for the appointment of a Committee of Five and
directed that Committee to convey the communication to the Federal
Reserve Board to confer with the Board, and if the conference did
not result favorably to the American Bankers' Association the Committee of Five, acting jointly with the Executive Committees of the
Clearing Houses and National Bank Sections, were then authorized
to take such further action as in the judgment of the three committees it be deemed necessary.
Later the Administrative Committee of the American Bankers' Association recommended the drafting and introduction of an amendment to Section 16 of the Federal Reserve Act contemplated to
eliminate therefrom the provisions for par collections and to give
the Federal Reserve Board the power to fix reasonable charges for
the collection of checks. The three committees expressed themselves as
favoring the introduction of an amendment along the lines referred
to in the recommendations of the Administrative Committee of the
American Bankers' Association.
The general counsel of the. American Bankers' Assoication, acting
under the direction of the Committee on Federal Legislation, and at
the request of the Committee of Five and the Executive Committees
of the Clearing House and National Bank Sections, submitted to Secretary Thralls a tentative draft of amendment to Section 16. Secretary Thralls referred this tentative draft of amendment to the members of he Committee of Five and the Executive Committees of the
Clearing House and National Bank Sections with requests for criti-

161

The responses indicated that it was the view of
cisms thereon.
the three committees that action towards introducing any amendment
to Section 16 should be withheld until after the annual convention,
when opportunity would would be afforded for full and free discussion of the whole question, and where valuable information might
be developed. Further, that the system would have had a fair trial
by this time and claims for relief in the form of amendments and
modifications might then be based upon actual experience and proven
defects rather than upon theory.
Uncertainty as to what functions of the Clearing House the Federal
Reserve Banks would undertake to perform has to a great degree
retarded the activities of your Committee, yet much constructive
work has been done during the year. Widespread interest has been
taken in the Universal Numerical System, the no-protest symbol .plan,
and the other ideas that have been advanced by the Section.
Your Committee on employment of Secretary, believing their action
would prove advantageous to both Sections and to the American
Bankers' Association, joined with the National Bank Section in the
employment of Mr. Thralls as your Secretary.
We highly appreciate and thank the various committees, the Clearing Houses and our State Representatives for the splendid support
and co-operation accorded during the year.
You have each received
a copy of the Secretary's report giving details of the work of the
Section for the year.
In order to expedite business and to be In
a position to get the official action of the Executive Committee between meetings, arrangements have been made whereby qustions may
be submitted, motions may be made, seconded, discussed and voted
upon by mail.
This Section can wield a great influence for betterment in banking
methods, systems and practices, and your Executive Committee believes that by pulling together we can make the next twelve months
the banner year of accomplishments in the history of the Section.
Respectfully submitted on behalf of the
ExzenTivo CommIrrns.

keport of Special Committee on Country Clearing Houses,
by A. S. Hawes, Chairman
Mr. President, my report will be very brief because it is in printed
form. You who were at Seattle will recall that there was a committee appointed of five to investigate the establishment of country
clearing houses, their obligations and whether they were practicable.
This committee was requested to report its findings to the Executive
Committee of your Section at the May meeting in Briarcliff.
The committee unfortunately was not able to hold a meeting, but
we did work through active correspondence and gathered toegther
considerable data which I present to you in printed form. Suffice
to say that your committee found that there were $1,136,000,000
of country items now handled through the operating departments
designated as country clearing houses.
There are 30,000,000 handled yearly through these departments.
We find on investigation
that the establishment of such departments in clearing houses initiated in a year a saving of 30 to 40 per cent in the exchange
charges, a saving of one cent, which you can readily see is quite an
important item, and it will be a saving on 30,000,000 items of
$300,000 a year.
When I speak of items I mean a bunch of items,
for it is customary for individual banks using the country clearing
house department to bunch their items, and the average number of
Items in a bunch are between three and a half and four. The St.
Louis country clearing house, with which I am more familiar when
it comes to details than any other, operates on an expense of 1.89
per item, which, as I have explained, is a bunch items. Therefore
the actual operating expenses of the country clearing house of St.
Louis is in reality less than the postage paid by the banks whb
would otherwise send those items to the paying banks. Now I bear
down Upon that subject because I believe it of great moment, Mr.
President.
I think that the clearing houses of this country can
serve their members in no better way than to establish in their midst
the country clearing house department to make a common avenue of
collections.
One thought has stepped into the minds of bankers which may
perhaps work against the establishment of country clearing houses,
and that is the establishment of the country clearing houses interferes with the relations of the depositing banks in your city. That
is not _true. In nearly every country clearing house I know of the
items put in there for collection are not on your correspondent, but
are on the other man's correspondent to whom you have been paying.
Now take the country banker's point of view of the country clearing house. The country bankers in our section have said this to us:
"We prefer to get our items in one bunch, items from one source."
We add a reasonable exchange for remitting it to that concern, and
it costs us one draft and one postage item and one clerical. It
minimizes work for the country bank and certainly minimizes it for
the city bankers, and I think they should think the sooner this Section of the American Bankers' Association puts forth its active efforts
on the establishment of the country clearing house section in every
clearing house, the greater will be the benefit to be derived.
I want to say that we have a secretary of this Section, Mr.
Thralls, who is an expert on country clearing houses and established
in Kansas City a country clearing house, which is operating here,
and L do not hesitate to say that it is the best in America. And it
is the most efficiently operated, and his experience in that matter, I
am sure, is at your disposal.
He said so, in fact.
There is in
progress an organization in America now of eight new country clearing
.
houses.
Now the fact that arises in my mind in that connectiou
is that perhaps it may be said that we have a common avenue of
collections in the Fgderal Reserve System. But I want to say that
these country clearing houses will furnish an avenue of collections
which will be available to the non-member banks of the Federal
Reserve and will be able to reach and serve these non-members on
items that cannot be handled through the Reserve Bank.
You will find here to-day a copy of this report and I hope that
you will read it and take it back to your clearing houses and study
it. I am sure if you do you will see the advantages of this system
and will be desirous of handling your items through that source.

NATIONAL BANK SECTION
AMERICAN BANKERS' ASSOCIATION
First Annual Meeting, Held at Kansas City, September 26 and 27, 1916

The Soul in the Dollar
BY JOIIN SKELTON WILLIAms, Comptroller of the Currency
Mr. President, Members of the Association, Ladies and
Gentlemen:
This is a political year, but so far as possible, politics
will be kept out of this address which you have done me
the honor to ask me to make before you. Unfortunately,
it will be necessary for me to use now and then that most
dangerous of all of the letters of the alphabet, for the
speaker, the capital I. It is a matter of common observation that in colloquial or oratorical talk in which the
dear I's are most frequent, the ideas are scarcest. I
don't know whether that is a bad pun or a good epigram;
but it is a fact.
The last time that I had the privilege and the pleasure
of addressing this distinguished and tremendously important body was just fourteen years ago, when I appeared before it as Chairman of the Trust Company section of the Association. I wasn't a trust buster then and
I am not one now. I knew then, as I know now, that
with money and resources, as with an army, for efficiency
there must be the power and facility for concentration for
defense or attack, that there must be guidance and direction, and the gathering of units for a common purpose.
Your units are dollars, as the units of the military commanders are men. Your real business is to do your respective parts to see that those units are marshalled and
applied, as occasions may suggest, for the good of your
communities and the country, taking care that your depositors and stockholders shall have their fair shares of
the resulting benefits in return for their faith and enterprise, and that you shall have your own just return for
your labor and care and thought.
My understanding of democracy—not in its political
meaning, as we make it now, not in its derivative meaning, but in the significance of it that all of us, of all parties here, accept—is that brains honestly use, thrift and
industry, and even, if you please, good luck, allowed to us
by the unseen powers, are entitled to their rewards. The
diligent should, and must, prevail. The courageous will
win and should win. The strong must hold and direct
power. That is the law of nature and of the God who
created and ordered nature. Thus far the law of the
jungle and the low of human life hold together. The difference is that God has given to us soul and understanding.
Some of us have learned much since the last time I had
the honor of addressing you; some of us by hard and
painful experiences; some by careful observation and
earnest study. In that time we have seen many changes
in conditions and standards, and in habits of thought. We
are getting further, and each year further, from the law
of the jungle.

Look back, gentlemen! Not so many hundred yeats
ago we bankers were classed as mere money changers and
usurers. Our predecessors won their gains by preying
on the necessities of kings and nobles and common people alike. That was the jungle law put into polite and
elaborately entangling and ruinous phrases, supported
by the imp of all the old countries. Now and then it
was found necessary, in England, and other lands, to
change the laws on usury and decree violent penalties to
save the throne, the haughty nobility and the yeomanry
from the rapacity of the money lenders. The forces of
law and arms were set up against the forces of garnered
riches; sword and rope and lash were applied in attempts
to check the ceaseless encroachments of usurious interest; but in these modern days we have learned that the
dollar has a soul, and that even great accumulateions and
gatherings of dollars may have souls.
In this connection I may define the word soul as the
inspiration of a real and high purpose. John Randolph,
of Roanoke, described a corporation as a thing without a
body to be kicked or a soul to be damned. As we know
now, many of us by painful experience, our legislating
powers, administrative officers, courts and labor unions
have found innumerable ways to kick corporations and
the accumulations of capital they represent. Perhaps
partly because of this kicking and certainly because of
what I may call the improved civilization of our standards and an understanding of our relations with each
other, our corporations and our dollars have developed
and are developing souls.
We are learning that justice and mercy are sound
business principles and make the one sure foundation for
enduring and real business success. If the history of the
human race, of countries, communities and individuals
proves any one fact, that fact is that no community can
thrive permanently or continue to exist where the few
gather great riches and the many are deprived. In the
jungle the ruthless use of strength or craft, the sudden
spring of overmastering power on weakness, the stealthy
.destruction by cunning of the unwary, are appropriate.
These are the beasts that perish. They do not build or
,
think for the future.
We of the human kind are made to build, to establish,
to plan for those who are to come after us, to contribute
something, each as he can, to the permanency and usefulness and growth and greatness of our nation. We know
the only real prosperity is the widespread prosperity in
which all share; that the one assurance for stability of
government is the justified contentment of the masses of
the people. That is not politics. It is, maybe, a trite
statement of the conclusions of all the social and

NATIONAL BANK SECTION
economic philosophies and of the opinions of all the
thinkers of all parties and countries.
But it is like some of the principles of our religion.
They are drilled into' us from childhood and live in our
Memories. We recognize their theoretical truth and
beauty and value, try to impress them on others—and
then in the moment of opportunity or temptation, go in
for the immediate %nib, snatch at the fruit of profit
dangling before our eyes; apply the law of the jungle,
forget that we are men, and in effect become tigers, cormorants, crocodiles, panthers—even carrion eaters feasting on some commercial carcass. We people of this great
banking world of ours can do for each other no better
service than to continue to reiterate to each other the old
axioms until they are graven on our hearts and expressed in our daily transactions and in our attitude toward our customers and the public.
Gentlemen, it is difficult to comprZhend the enormous
growth in strength we have achieved in the fourteen
years since, as a banker, I addressed your Association.
It may be even more difficult to comprehend the corresponding increase of our responsibilities. We have outgrown responsibility to our own country and generation.
We have become responsible to the whole world because
we have become the supreme world power, especially in
that vital department reaching to the root and core of all
things which we here directly represent—the financial.
We have become responsible for the future of the
human race. This republic is the hope, the refuge, the
one unshaken and unshakable edifice among all that mankind has built. You have a homely—and I hope a familiar—illustration in your pockets. Each of you has some
paper money. I venture to say that not a man here has
looked to see whether the notes in his pockets are issued
by a National Bank on the Pacific or the Atlantic Coast
or in tile most remote country town, or by the Treasury
for gold or silver or by a Reserve Bank. All any of us
look at is the denomination and the "U. S. A."—thf?
United States of America—the signature of our "Uncle
Sam." We know that stamp and signature make that
piece of paper as good as solid gold, not only here, but
everywhere in tile world. And it is virtually the only
paper money that is receivable everywhere in the world
to-day as representing its full face value in gold. Our
dollars are the good dollars and the dominant.dollars. It
is for you gentlemen, controlling the powerful banking
interests of this supreme country to determine whether
these dollars of ours shall prey upon our own country and
the world with teeth and claws, or shall have souls put
into them to unbuild, to help to heal the horrible scars of
war; to lift the stricken to strength and hope. In this
.
connection some one has prettily said that "By doing
good with his money, a man as it were, stamped the image
of God upon it, and makes it pass current for the merchandise of heaven."
Let us look a moment to see what we have done, and
where we ate just now. I have said some of this before
elsewhere, but the facts and figures are tremendously impressive.
No nation on this planet; no nation at any time in the
world's history, has ever made such gigantic strides forward in material wealth, in commerce, in industrial
growth, or shown such wonderful advance in banking resources, deposits and in savings as has this country of
ours in the fourteen years which have elapsed since I last
had the pleasure of addressing you.
I will try to avoid details, but I do want to bring before
you figures expressive of our country's growth from 1902
to 1916, which must arouse the attention of every citizen.
Let me begin with our national banks, whose total resources in 1902, amounted to just six billion dollars, for
the 4,535 national banks then in operation. To-day there
are 7,600 national banks with fourteen billion dollars of

163

resources. In this brief period the resources of national
banks have doubled, with two billion dollars of additional
resources thrown in for good measure. In the Summer
of 1902 the deposits of the national banks were 4.468
million dollars. At the time of the June, 1916, call, these
deposits amounted to 10,877 million dollars, an increase
of 6,409 million dollars, or 143 per cent.
Deposits in our national banks alone new exceed by
250 million dollars the aggregate deposits held by all
banks, national and state, including trust companies, in
1902—just fourteen years ago.
In 1902 the total deposits of State banks, savings
banks, trust companies and other banking concerns under
State supervision aggregated six billion, one hundred and
fifty-seven million dollars. On June 30, 1916, the deposits
of these State banks and trust companies were reported
at 15 billion, 350 million dollars, an increase of 149 per
cent.
I trust I will not be accused of talking politics if I
should call attention to the pleasing fact that the greatest
increase in deposits of both national and State banks (including trust companies) which was ever made in any
three-year period in our country's history has taken place
in the past three years. It may also be a gratifying circumstance to you gentlemen of the national bank section
to learn that while the deposits of State banks and trust
companies have, during this period, increased 3,358 million dollars, or 28 per cent., the deposits of your national
/
banks increased more than '3312 per cent., or 2,733 million dollars, showing that since the passage of our Federal Reserve Act, which was approved by President Wilson December 23, 1913, the deposits of the national banks
have been growing decidedly faster than the deposits of
the State banks and trust companies throughout the
country.
The tremendous growth in wealth and banking power
which these figures indicate may be more fully realized
when I tell you that the increase alone in deposits in all
banks since June, 1913, exceeds by 500.million dollars the
total amount of all loans and discounts made by all the
banks in the United States—national banks, State banks,
trust companies and savings banks, for all purposes of
trade, commerce, industry, agriculture and business of
every kind, as late as the year 1900.
The records show that business in every direction has
expanded so enormously that the total clearings of our
clearing house cities which, for the year ending June 30,
1902, aggregated slightly less than 112 billion dollars,
amounted for the year.ending June 30, 1916, to more than
224 billion dollars, an increase of more than 100 per cent.
in fourteen years. These colossal figures become the more
impressive when we consider that the bank clearings represent only about 40 per cent, of the total bank transactions in these clearing house cities.
Is it not hard to grasp the thought that this country
of ours, which in 1902 had already reached a pinnacle
among the nations, has since that year doubled the volume of its business in virtually all the great cities of the
land?
The latest census records as to manufactures are those
for the year 1914, taken in the midst of the depression
which followed the outbreak of the European War, Since
1914 manufacturing interests of all kinds, as we all know,
have been prodigously stimulated. If, however, we compare the census reports giving the figures for 1899, as to
manufactures, with the census reports for 1914, we get
the following results:
The number of manufactories increased in these 15
years from 207,000 to 275,000, or 32 per cent. The average number of workers employed in factories on salaries
or wages increased from 5,076,000 in 1899 to eight millions
in 1914, an increase of nearly 3,000,000—almost 60 per
cent.; while the value of the products of our manufactories was increased from 11,406 million dollars to 24,246

164

BANKERS' CONVENTION.

million dollars, an increase in the value of the products
in this period of nearly 13 billion dollars, or 112 per cent.
By 1902 the United States had become the greatest
manufacturing nation on earth, and her output of coal,
which is largely the basis of all manufacturing, had
reached the enormous total of 301 million tons, already
far exceeding the total output of Great Britain, formerly
the greatest coal producing country on earth. For the
year ending June 30, 1916, the official estimates place the
coal production of this country at 601,900,090 tons, which
Is just twice our production in 1902, our production of
coal for the past year being far greater than the combined production, even in normal years, of the British
Empire, the German Empire, and the Republic of France,
which, next to this country, rank as the three greatest
manufacturing nations on earth.
That you may form some idea of the enormous expansion which has taken place in the iron and steel business
since the 1914 census as well as since 1902, I ask your
attention to the following figures:
The production of pig iron for the year ending June
30, 1914, was reported at 27 million tons; for the year
ending June 30, 1916, the output is given at 37 million
tons, against production for 1902 of only 17 million tons.
The output of iron ore for the year ending June 30,
1914, was 57 million tons; for the year ending June 30,
1916, the production was 66 million tons, against only 35
million tons in 1902.
The production of steel, which for the year ending
June 30, 1914, was given at 27 million tons, had increased
for the year ending June 30, 1916, to 39 million tons,
against only 15 million tons in the year 1902.
The story of our railroads for the period from 1902 to
1916 fully corroborates the other figures expressive of
our commercial and industrial growth. Although our
railroad mileage increased from but 200,000 miles in 1902
to 260,000 miles now, the latest figures available indicate
that 300 billion ton miles of revenue freight were the record for the year ending June 30, 1916, against 157 billion
ton miles in 1902.
The gross earnings from operations of these roads for
1902 were 1,726 million dollars. According to the latest
figures obtainable, these earnings for the twelve months
ending June 30, 1916, amounted to 3% billion dollars, an
increase of approximately 100 per cent., while net earnings
from operations, which in 1902 were reported at 610 million dollars, for the year ending June 30, 1916, reached
approximately 1,200 million dollars—showing that our
great transportation lines are enjoying as a whole a full
share of the country's prosperity and are very far from
being run at a loss.
The capitalization of the railroads, including bonds and
stocks, increased during this period, approximately from
12 billion dollars to 20 billion dollars.
Progress and efficiency are shown in the fact that, while
we have now about a million more freight cars than we
had in 1902, the average capacity of all freight cars has
also increased from 28 to 40 tons per car.
This country's exports in merchandise for 1902 were
1,381 million dollars. For the past fiscal year, our exports aggregated 4,333 million dollars. In other words,
our exports for the past year exceeded our total exports
In 1902 by the colossal sum of nearly three billion dollars.
Our imports for 1902 were.903 million dollars. In the fiscal year 1916 they were 2,197 million dollars. Our credit
balance of trade in 1902 was 478 million dollars. For the
past fiscal year it was 2,135 million dollars, and is still
growing.
Patriotic Americans have the right to gloat over such
a showing with swelling pride. Ambitious Americans—
and ambition is one of the chief elements of patriotism—
may read in them brilliant promises of a future of almost
Inconceivable greatness. Thoughtful Americans will find
in them cause for fear that wealth may betray us into

rapacity and inequality of distribution that Will mean
destruction; or cause for noble dreams and hopes that
our riches may be applied with magnificent and intelligent benevolence, to bless the world and augment our
own prestige, power and accumulation.
Rome mistress of the world, rotted to death from
wealth, luxury and sloth. The internal relations of her
people With each other, and her conduct towards other
peoples, were directed by the law of the jungle. We can
share Rome's fate only by imitating Rome. We are in a
world infinitely vaster than Rome knew. We can hold
In it power and place far beyond the wildest vision of
the proudest Romans if we will absorb the teachings from
the fates of the peoples who have gone before us and
failed miserably; learn to regard the highest ideals as
real and powerful things; accept as a firm conviction the
belief that as a nation Providence and circumstance have
entrusted us with an actual mission.
The ancient historians tell us that a census of Roman
citizens was taken in the reign of the Emperor Augustus,
about the time of the birth of Christ, and, that the number was estimated at 25 millions, including the districts
and provinces of Italy, Gaul, Spain, the Balkan Peninsula, Greece, Asia Minor, Syria, Egypt, Northern Africa,
and the islands in the Mediterranean.
Gibbon, the historian, estimates that the revenues from
the provinces of the Roman Empire was the equivalent of
about 100 million dollars of our gold.
The annual revenues of the United States Government
at this time are 1,000 million dollars per annum, or ten
times the revenue of the ancient Empire of Rome in the
Golden Age; while the total incomes of the people of the
United States in the past twelve months are estimated to
have amounted to not far from 35 billion dollars, and the
people's savings, over and above their cost of living, to
between six and seven billion dollars.
It is worth our while to turn our minds back over nineteen crowded centuries, to reflect that Rome was where
we are—the greatest, strongest, richest power of the
known world. There is solemnity and seed for wisdom
in the reflection that Rome was; and perished. At the
very zenith of her power and pride and wealth, the same
Augustus who took the census foresaw for her the same
perils thoughtful men now foresee for our own Republic.
He attempted measures of reformation, of preparation, of
prevention against disaster, which it will be well for us
to consider thoughtfully. "In all times of our adversity
in all times of our prosperity, in the hour of death and in
the day of judgment, Good Lord, deliver us" runs the
Litany. Men wise as Caesar Augustus wrote that for us
to use in our prayers. They understood, as he did, that
the dangers of prosperity are as deadly as those of adversity, death and judgment; and that pride, vain glory and
hypocrisy may destroy congregations and nations as they
do individuals. Countless sages and thinkers have given
us the same thought and warning. Kipling expresses it
musically:
If, drunk with sight of power, we lose
Wild tongues that have not Thee in awe—
Such boasting as the Gentiles use,
Or lesser breeds without the law—
Lord God of Hosts, be with us yet,
Lest we forget—Lest we forget!
Froude tells us of the Emperor Augustus, that under
his reign—
"Society had grown ashamed of its orgies' , and
returned to simpler habits of life, and the Emperor
led the way in the reform. Like Charles V., Augustus
banished plate from his household, and was served
with the plainest food on the plainest earthenware.
* * * His furniture was scarcely fine enough for
a private gentleman. . His dress was homespun, not
distinguishable from the dresses of his. attendants,

NATIONAL BANK SECTION
and to emphasize the example, was manufactured by
the Empress and his daughter. * * * He was
punctilious in each and all of his religious observances. * * * ; and during his long reign the
harassed peasant, who at last could till his farm and
eat his bread in safety, poured libations with unhesitating faith to the divinity of the Emperor."
Here and now, each of us sovereign by right of birth.
each of us. entrusted by _Providence with power among
his fellow sovereigns, may realize profitably how well
we might use that power by promotion of the habits of
simplicity and austerity. It is easy to imagine that if the
principles taught by the great emperor had become part
of the permanent life of the Roman people, the power o2
Rome would have remained unshaken. It is easy to know
that if this nation of ours is given over to luxury and
riot, to huge wealth unequally divided, to effeminancy on
one, side and misery and rage on the other, our destruc
tion will come surely, swiftly and shamefully, without
even the alleviation of pity or sympathy, with all the
added ignominy of the world's contempt, and the knowledge that we will live in history, not as an example of
grandeur but as an instance of disgraceful failure.
The wealth of this country at this time has become so
vast as to be beyond the comprehension of the average
mathematician, and we are learning now to think, financially and industrially, in astronomical units.
We have to-day a population of more than 100 million
people, with more than 40 million men, women and children engaged in gainful occupation—employed in the
creation of more wealth—piling Pelion on Ossa.
If we should divide the new wealth created annually
among all the men, women and children engaged at work,
they would have not far from $1,000 per year each.
It would not be difficult for this nation, by economy,
thrift and efficient work, to increase its annual savings,
which two or three years ago were estimated by expert English economists at five billion dollars per annum,
to ten billion dollars per annum; and thid huge sum could
then be used to help forward the development of our own
country; for the promotion of civilization and for the
advancement and upbuilding of the near and remote
countries of the earth. But, while we are planning gigantic schemes for world development, let us not forget that
the most immediate and vital business duties which lie
before us relate to the upbuilding of our home enterprises,
especially the smaller factories and mills and development undertakings in the lesser cities and towns and in
our country districts. Those provide the surest and
.
safest foundation on which to erect national wealth.
They keep money at home in local banks and in active
circulation in the territory in which the laborer lives and
where the capital is invested. They provide work for
home people, employment for home capital and energy,
trade for home merchants. They make also opportunity
for talent and give means of study resistance to encroachments on the pockets of the people by great monopolies.
They tend directly toward promotion of the intimate and
cordial relations between employers and employees of all
grades, which make for ideal conditions.
In a letter which I had the honor to receive some years
ago from England's great statesman, Mr. Gladstone, he
spoke of the vast power of production of this country,
and predicted that the time would come when our wealth
would overflow into other lands. This predicted hour has
struck. The time has come, and our wealth is already
overflowing into other lands with a rush and abundance
never before witnessed in the history of commerce or of
finance.
Students of the situation estimate that this country is
now creating wealth over and above the living expenses of
the people at a rate four or five times greater than the
savings of the British people at the time when their in-

165

come was greatest and their investments in foreign emutries were at the maximum.
Just two years ago, after the outbreak of the European
War, we were considering how we could find means to
meet our floating debt, estimated at 350 million dollars,
in gold, which was to mature in Europe between September first and December thirty-first, 1914, and .what we
should do to avert financial calamity if the European nations should begin to unload upon us their American
securities, of which they held an amount then estimated
at four to four and a half billion dollars. In the two
years which have intervened we have paid this floating
debt in full, have bought back of the American securities
held abroad an amount estimated at between two and
three billion dollars, and have loaned to foreign nations
in both hemispheres one and a half billion dollars of new
money.
If a balance should be struck to-day, taking into account the amount of our securities still held in foreign
countries and the amount due our people on account of
their foreign investments, the probabilities are that we
would find ourselves for the first time in our history, a
distinctly creditor nation. We hold a mortgage on the
world's physical assets. The world holds a mortgage on
our soul, on our good will and broad nobility of purpose.
Gentlemen, all of us know the self-multiplying power
of money, the capacity of wealth to propagate and increase itself. The law of gravitation, as we know, applies
in finance as in the physical world. Huge accumulations
of values naturally draw to themselves the lesser masses.
Seeing how we have grown in fourteen years from the
basis we had in 1902, imagination is baffled by the possibilities for the coming fourteen years from the basis we
have now. But it is for us here to keep steadily in our
minds that the only real wealth, after all, is the common
wealth, that wealth to endure and go on accumulating
must be used for the common weal. A superstructure of
great fortunes based on a foundation of general poverty
and discontent must topple and crumble as surely as a
house builded on the sands. We see what we have. We
can but vaguely imagine what we will have if we will
look carefully to our foundations and be guided by the
practical business sense represented in the best ideals.
The altruistic conception of our duties to each other is
not a vapor or a rainbow vision. It will come out right
and show satisfactory results under the keenest analysis
and the coldest dissection.
By spontaneous, inward growth, by natural strength,
by the inborn restless, tireless enterprise and industry
and productive power of our people, we have expanded
enormously. Certainly no men in the country have done
more to bring these wonderful results than the bankers of
the United States. It will interest you to know that our
National Banks are now manned by an army of about
seventy-five thousand men, including officers, clerks and
other employees, generally able, faithful and efficient,
with a payroll of nearly a hundred millions a year, operating on a capital of more than a thousand million dollars contributed by 441,000 stockholders, and having as
clients over fourteen million depositors.
Charged, as I happen to be, with the sometimes ungracious and unwelcome task of supervising their conduct of their own affairs and scrutinizing the most intimate details of their business, it is a real pleasure to me
to bear witness to the high character, the incalculable
usefulness, the conscientious devotion to duty and the
breadth of view and purpose of the average American
banker. He combines the functions of a driving power
and a balance wheel, an accelerator and a brake. Maybe
I know about as much about him (although I do not wish
you to understand from that that I am a Methusaleh) as
any man alive; as an American citizen I am pleased to
say that I am proud of him. Nine times in ten I take
even his most vigorous kicks against my administration

166

BANKERS' CONVENTION.

as evidence of his self-respect and American spirit of assertion of what he may believe to be his rights.
Please do not construe that statement, gentlemen, as
an invitation for additional kicks. I have a plenty, thank
you. I am one of those individuals who must find consolation in consciousness of good intentions, and in faith
that, instead of being a part of the pavements of Hades,
they will be found presently smoothing the thoroughfares
of commerce here; and I have the hope that presently
It may be said of me, "After all, he performed his duty
as he saw it and really did do some good." That is about
the best most of us can hope for. As I think I have said
before, gold-headed walking sticks or loving cups with inscriptions or engrossed votes of thanks come to comparatively few of us when our duties forbid us to be invariably affable and universally urbane and complaisant. I
have found some satisfaction in the statement of General Goethals, who, in reviewing his own experiences, said
that he had learned the important lesson that "a man's
usefulness in the public service is determined by the
abuse and criticism he can take without complaining."
With your permission I will here answer a question
which critics of the Federal Reserve System have sometimes asked as to whether our national banks continue to
be profitable to their shareholders.
. I .am gratified to be able to tell you that notwithstanding the lower interest rates which have prevailed since
the inauguration of the Federal Reserve System, and •
despite the fact that Federal Reserve Banks pay no interest on reserve balances, the latest official returns of
the national banks indicate that in the aggregate their
earnings, both gross and net, are now far greater than
at any previous period in the history of the national
banking system.
In 1899 the gross earnings of all national banks were
less than 150 million dollars and their net earnings
slightly under 50 million dollars. For the calendar year,
1916, the indications are that the gross earnings, based
upon the actual returns for the first six months, will approximate 600 million dollars, and net earnings over and
above all expenses and losses 170 million dollars.
Since 1899 the capital of national banks has increased
75 per cent., while the net earnings on the above basis
have increased about 240 per cent. In 1899 national
banks earned on their 604 millions aggregate capital stock
a fraction over 8 per cent. The current year the figures
thus far received indicate that they will earn approximately 16 per cent. on their total capital stock of 1,070
million dollars. In 1899 the national bank surplus was
248 million dollars. Now, the surplus fund of the national banks is 730 million dollars. Undivided profits in
1899, 94 million dollars; now, they amount to 305 million
dollars.
My attention was directed recently to newspaper statements to the effect that national banks are week by week
surrendering their Federal charters and taking out State
charters instead, and that the number of national banks
"Is decreasing instead of increasing." That statement is
squarely contradicted by the facts. From the opening of
the Federal Reserve Banks November 16, 1914, to September 16, 1916, one year and ten months, the Comptroller's
office has issued charters to 248 new national banks, with
an aggregate capital of $15,249,500. During the same
period 180 national banks increased their capital to the
extent of $20,762,700. The aggregate number of new
charters and banks increasing their capital was therefore 428 and the aggregate new capital authorized $36,012,200. During the same period 133 banks other than
those consolidating with other national banks went into
liquidation, their aggregate capital being $11,183,000; 33
banks reduced their capital in the same time to the extent
of $2,710,000, so that the total number of banks liquidating or reducing their capital other than those consolidating with other national banks was 166 with capital re-

duction of $13,893,000. In addition to the above, during
this same period there were 27 national banks placed in
charge of receivers; representing an aggregate capital of
$2,635,000. Of this number, eight with an aggregate capital of $530,000 have been restored to.solvency.
The records thus show that since the opening of the
Federal Reserve System, (excluding the banks consolidated with other national banks), the number of new
banks chartered plus the number of existing national
banks which have increased their capital exceed by 243
the number of national banks which have gone into
liquidation or which have reduced their capital, and the
capital of the newly chartered banks plus the increased
capital of existing banks exceeds by $20,014,200 the capital of all national banks which have gone into liquidation
or which have reduced their capital. The Comptroller's
office has also refused about thirty applications for charters for new national banks during the same period.
When the Federal -Reserve Act became a law the
friends of that measure confidently predicted that three
principal results would follow:
First, that the rates for money would be reduced
throughout the country, and that there would. be a general equalization of interest rates. That this result has
been accomplished is universally admitted. Arguments
on this point, would therefore, be useless.
Second, the prediction was made that With the inauguration of a'sound, elastic and scientific currency system,
business of all kinds would be placed upon a stronger and
firmer foundation and that increased business activity
would follow. This promise has also been splendidly fulfilled.
A third prediction was that with the institution of
this new financial system bank failures would be greatly
reduced, if not entirely eliminated, and I now ask your
attention to figures which will enable you to determine
for yourselves how far this expectation is being realized.
The Federal Reserve Board was organized on August
12, 1914, and the Federal Reserve System began business
November the same year. For the twelve months immediately preceding, namely, for the period ending June 30,
1914, nineteen national banks failed with liabilities aggregating $39,952,000. For the twelve months ending
June 30, 1915, including seven and a half months of the
operations of the Federal Reserve System, there were
sixteen national bank failures with liabilities aggre•
gating $15,972,000. For the twelve months ending June
30, 1916, the first complete fiscal year under the new system, there were fifteen national bank failures with aggregate liabilities of only $3,838,000.
This shows that for the first full fiscal year under the
operations of the Federal Reserve System the liabilities
of the failed national banks amounted to less than onetenth of the liabilities of the national banks which failed
In the year immediately preceding the inauguration of
the system, and those banks which failed during the past
twelve months were generally small concerns whose failures were traceable directly to criminal acts of management—defalcations, embezzlements, etc., which it is practically impossible entirely to eliminate under any banking system, although under our improved methods of
bank examination, these are now being reduced to a minimum.
You may also be interested in receiving further facts
as to the fifteen banks which failed during the last fiscal
year, and whose liabilities, as I have stated, aggregated
only $3,838,000. Two of these banks already have resumed operations; five more already have paid or are expected to pay depositors 100 cents on the dollar, and the
remainder are expected to pay from 65 per cent. to 95
per cent. of their liabilities.
It is estimated that the total ultimate losses to depositors from these failure of the fifteen banks which
closed during the year ending June 30, 1916, will be less
than $250,000. As the total liabilities of all national

NATIONAL BANK SECTION
banks, exclusive of capital, surplus and undivided profits,
during this period amounted to about 12 billion dollars,
is it not tremendously reassuring to learn that the proportion of losses to depositors and other creditors of our
national banks for the past year has been only two dollars per each one hundred thousand dollars of liabilities?
On this basis an insurance company could afford to guarantee the deposits of a bank with a million dollars of deposits for a yearly premium of $20 and a bank with $10,000,000 of deposits could secure for its depositors immunity from loss at a cost of about $200 per annum.
So much for what the Federal Reserve System is already doing for us. As is said of matrimony, it divides
our cares and multiplies our joys. Our new banking anti
currency system has been given to us fortunately precisely
at the time in the world's history when it was most
vitally needed and when its power for good not only to
us, but to all the nations of the world, could be most
widely and most advantageously exercised.
But looking back and looking ahead, I am profoundly
and tremendously impressed by the unprecedented and
almost inconceivable opportunity now before this United
States, this Republic of ours, and especially before the
men of your profession—for banking has long since
grown from the position of an ignoble trade to that of a
noble and honorable profession. We have been forced by
our own growth out of the trammels and confines of
timidity and isolation our forefathers wove about us
while we were a feeble folk and wisely afraid. We have
been born into the world almost in a moment, full grown
—I hope and believe with teeth. We are not only a
world power. We are the world power. While nearly
every other country has been depleted, we have been
augmented. Our credit and resources are inexhaustible.
Our population is intact and increasing, our cities are
unmarred, our many millions of acres of soil are tilled
in peace, our natural resources find profitable and constant outlet.
Our deposits in all the banks throughout the United
States at this time are so huge that if there should be
withdrawn from these banks an amount of deposits equal
to the total resources at this time of the Bank of England, the Bank of France, the Bank of Spain, the Bank
of the Netherlands, the Bank of Norway, the Bank of
Sweden, the national Bank of Switzerland, and the Imperial Bank of Japan all combined, the deposits of our
banks would still be as great as they were three years
ago, at the beginning of the present administration.
To follow several distinguished examples and come
to the vernacular, gentlemen, it is up to you. No nation
in the world's history has had the opportunity this nation of ours will have, at the ending of the European
War, for self-building and for raising to their feet a sad
procession of exhausted nations.
And in this connection, let me suggest, deferentially,
not to say timidly, another thought. In my recent inthnacies with the machinery of our Government, in its
legislative and executive departments especially, I have
been impressed by the advantage and importance of having practical business men in our politics. My study of
history and of latter-day conditions, has impressed on
me that a curious reversal of process sometimes has occurred. While banking, the handling and lending of
money, which used to be regarded as one of the most
ignoble of trades, sometimes prescribed by law, has risen
to the dignity of an honored and tremendously important
profession, politics, which in olden times used to be the
most important of all professions, enlisting the labor and
thought of the greatest men, has in recent years shown
now and then a tendency to descend to the level of ignoble
and selfish trade.. We need in our offices, and in all our
political affairs, more men who will regard office-holding
and political work, not as the last hopes of earning precarious livings or winning temporary distinction, but

167

honestly as opportunity for doing real good for the country and their communities. I realize as clearly as any
of you how distasteful practical politics is to most business men. I recall the story of a voter—maybe an average American voter—down South, who, when asked to
vote for a prominent and useful citizen, replied with
scorn and indignation, "Vote for him? Why, he's a rich
man! I'd as leave vote for old banker Simpson." Mr.
Simpson was the leading banker of the county, probably
the ablest and most useful man in it, and had never committed any offense but to be a successful business man
and banker, in whose life and methods not a flaw could be
found.
My own conscience, I confess to you frankly, is very
bad on that point. To my discredit, be it said, I suppose
I never in my life attended more than a half dozen ward
or precinct meetings. Mosi of the time I would have
found it hard to name offhand the aldermen or councilmen from my own ward, and often went to the polls with
hazy ideas of who was running and of what and who the
candidates were. This is all wrong. You know it and I
know it. We business men, especially we bankers, are
much given to growling about political conditions, the
leadership and management of our respective parties.
Frequently our growling is justified by the facts, but
usually we have had no right to utter it, because we have
shrunk from lifting hand or voice to bring improvement.
Regardless of the political parties to which we may
severally belong, we would be ungenerous were we not to
acknowledge that our country has been singularly fortunate in having had at the head of its Treasury Department when the world crisis arose two years ago, and
when our country was called on to solve, and did solve
most successfully, problems of unprecedented perplexity
and moment, a man who has proved himself equal to
every exigency which has arisen and whose experience,
skill and splendid ability have been such tremendous factors in guiding us through menacing perils to stability
and prosperity. Problems which loomed so large in years
that have passed and which were dealt with by such masterful men as Hamilton, Gallatin, Chase, McCulloch and
Sherman seem small compared with those which our
country has faced and triumphantly solved under the ad
ministration of our courageous, untiring and resourceful
Secretary of the Treasury, William Gibbs McAdoo.
I have endless faith in the capacity of the American
people, and especially the American business men, to discover and rectify their own errors before the resulting
damage is irreparable. Therefore I cherish the hope that
the time will come when more of our Americans who
have achieved distinction in other vocations will realize
that they owe personal service to the country In which
they have prospered and succeeded and will acquire the
habit of adopting politics as a career and opportunity,
and will give their riper years and the influence they
have won to leadership of their fellow citizens, defying
the annoyances, the disappointments, the stings, that
inevitably accompany such work. It is as well worth
while to endure such things for the welfare of people and
country, as to endure them, as all of us must, for the piling up of money. As I have said before, on another occasion, political activity within the limits of good citizenship applied to productive endeavor is a solemn duty.
Politics as a diversion of earned and safe leisure is a
useful amusement. Politics, when a man has achieved
success in his personal affairs and contributed his personal part toward the upbuilding of his community and
the establishment of his family, offers noble occupation.
Politics as a business, a trade, a dependence, a means
to mere selfish ambition, for young men, is crowded with
dangers, thronged with foes to character and manhood,
ambushed at every step. Eminence is a fruit we can afford to pluck only when we ourselves are ripe. For the
weak and untried, it is poison, the most ruinous of intoxi-

BANKERS' CONVENTION.

168

cants. It is for strong men, proved strong and toughened
by toil and by doing.
It is a strong contradiction that many of us who encourage the younger men to accept the dangers and privations of military service for the sake of flag and country
and people, ourselves cower away from the suspicions d,f
the rabble or the worse criticisms of blackguards or op
ponents.
That is a matter intimately associated with my general
theme, but a little aside from it. We should keep In
mind our personal duty to our own country. We cannot
forget that before we can be of permanent value to the
world and hold permanent power in it, we must make
ourselves and our own internal affairs clean and strong
and inspired by high, clean and plain purposes. Maybe
the two tasks will react to each other—that as we appreciate our responsibilities as the world power, we will
realize the need for new and better forces applied to our
Internal political machinery; and that as we purify ourselves, our conceptions will be higher and vision broader
and clearer. However that may be, it is certain that just
before us, a few months or two or three years, a mighty
task is to be done to reorganize and re-establish the nations of the earth. Let us do whatever the genius, the
power, the talent for reorganization and administration
of our country can do. We have the right to do it to our

own profit. But it is our duty and our opportunity to let
the word "fair"go hand in hand with the word "profit."
Let us have the great American soul go in company
with the great American dollar. You bankers can see
to that. You can see that the spirit of civilization and
man thought, and purpose, shall banish the law of the
jungle and the mere animals. We should take no advantage of necessity to extort hard terms, at home or abroad.
as did the usurers and money changers before banking
advanced from proscribed and furtive trade to honored
1 rofession.
Without loss or risk to ourselves, we may win for our
Republic a place never before held by any country. It is
not only possible, but comparatively easy for us to stand
with none jealous of us or afraid of us or suspicious of
us, with the gratitude, the affection and the confidence ?f
all the nations concentrated on this nation of free and
self-governed people. That would be a transcendentally
glorious culmination of the fondest and highest dreams
of our great founders.
We have the people with the souls in them. We have
the dollars beyond our most exaggerated hopes. If we
put the soul of the people in the use and application of
the dollars, the loftiest and noblest conception of the centuries will be fulfilled by us. And, gentlemen, you govern
the use of the dollars.

Report of Proceedings
First Annual Convention of NATIONAL BANK SECTION, at Kansas City, Sept. 26-27, 1916
Annual Address of President Fred. W. Hyde
To the Members of the National Bank Section:
-We are met in the First Annual Convention of the
GENTLEMEN.
National Bank Section of the American Bankers' Association. It is
Your officers and Executive
a momentous and significant occasion.
Committees are to render an account of their stewardship for the
twelve-month past; addresses are to be made by men of distinction
in the fields of finance and economics; questions of importance to
the bankers and to all the people are to be discussed, and business
germane to the organization will be transacted. The history of the
Only one year has transpired since
section is yet to be written.
the section was brought 'into being. Of the future who shall say,
"Beyond the Alps lies Italy?" We have accomplished much; much
more will be expected of the section in years to come.
This unit of the American Bankers' Association is national in its
origin, membership, scope and purpose. Under the National Bank
Act the members of the Association were practically independent of
each other. The Aldrich-Vreeland law not only tided the banks and
the country over a period of grave danger, but also demonstrated
that in co-operation and united effort lay the secret of a national
fabric of sound finance. The Federal Reserve law gives to the United
States a financial system which, despite manifest defects and insufficiencies, appears destined to become an all-embracing combination
and conservation of the money resources of the nation for the nation's weal and to enable the United States to maintain its eminence
in the sisterhood of nations. All national banks are by law members
of the new system. The plans and hopes of those who conceived and
framed the law embrace every form of banking institution in the
country. We are actors in a period of unexampled financial readjustment. Years may elapse before all branches of banking will
be coordinated. But we, the national banks here assembled, form
the nucleus and no special powers of seer or prophet are required to
predict that within a decade the more than seven thousand members
of the system at present will be increased four-fold. To paraphrase:
"The steam roller of government moves slowly but moves exceeding
sure."
The actuating motive of those who formed the National Bank Section was a desire for a union of all national banks for mutual benefit and for consideration and action on questions distinctively pertaining to the new system. A broad and catholic spirit animated the
founders at Seattle in 1915. With the conclusion of the business of
organization a year ago the affairs of the section were in the custody
of the officers and the executive committee of six, representative of
the different parts of the country, and this committee has fulfilled
.
every expectation in respect to fidelity, ability and service. The
various meetings in New York and Washington have been fully attended and the sessions have been devoted to hard and conscientious work, the details of which will be furnished in the reports of
the Chairman of the Executive Committee and of the Secretary of the
Section. In addition to definite results attained, it is certain that
preliminary action in constructive fundamental finance has been taken
which will materialize later in ways beneficial and satisfactory to
banker and nation.
The President would be lacking in appreciation were he to fall
here to acknowledge the ability and zeal of the Executive Committee

throughout the year, the personal and business sacrifices which the
members have made in behalf of the section, their loyal support.
Each and every one deserves the thanks and plaudits of the National
Bank Section.
It is merely rendering honor where honor is due to voice the sentiments of the conimittee in an appreciation of Secretary Jerome
Thralls, who came to us from Kansas City and brought to his exacting position a degree of intelligence, training and devotion which
have won the respect and admiration and the high regard of his coworkers. To say that he has more than met every requirement is
simple truth and the section has reason for thankfulness in possesSiOil of the services of one in every way so capable and praiseworthy. Nor should we forget to express our thanks publicly to
General Secre.tary Fred E. Farnsworth and his staff who gave 90
unstintingly of their knowledge and labor in order that the section
should make a right beginning and accomplish its legitimate purposes.
An encouraging and gratifying experience has been the generous
recognition of the section by the Federal Reserve Board and the
Governors of the Federal Reserve Banks who have welcomed the cooperation of the Executive Committee, have listened interestedly to
such representations as the committee has made on behalf of the
section and have discussed and advised with the Committee, disclosing
a desire to reach conclusions without prejudice or preconceived opinions. This friendly and hearty attitude of the Federal Reserve authorities bodes well for future activities and results.
In its relations with the Federal Legislative Committee of the general association, our committee all along has been on the basis of
unity and amity with the result that much has been done for the
welfare of banking where alone either unit might have failed. Mutual confidence and associated action have made for general efficiency.
The homogeneity and interdependence of the present system of national banks are new features among financial institutions in the
United States. Hitherto each bank has stood by itself; now all
members of the Federal System are co-Felated ; each shares in the
strength of the aggregation. With the date of its organization nearly
coincident with that of the placing in operation of the Federal Reserve
Law, let us hope that the section will develop in membership, usefulness and power; that it will prove a bulwark of strength to the
people and the government, and in all particulars justify the hopes
and expectations of its founders.
To that sentiment to which we all subscribe—" One nation, one
flag ''may we not soon add—" One monetary system!"

First Annual Report of Secretary Jerome Thralls
To the Members of the National Bank Section of the American
Bankers' Association:
This Section is a department of the American Bankers' Association,
organized for the purpose of affording a .channel through which questions of importance and of common interest to National Banks may
be discussed and solved.
It devotes its energies to evolving, developing and encouraging better banking methods, systems, and practices. Five thousand seven
hundred and twenty-three National Banks are members of the Section.

NATIONAL BANK SECTION
The Section was organized at Seattle, Washington, September 9,
Its affairs are administered by an Executive Committee of
1915.
six regular members and three ex-officio members, namely the President, Vice-President, and ex-President for a period of one year, all of
whom are elected by the representatives of the members in annual convention. The terms of office of the six regular members are so
arranged that two expire each year. •
Much of the business of the Section is transacted through a ComThe members of this Committee are known as
mittee at Large.
"Vice-Presidents" of the Section for the States and are elected anthe members in their respective states.
nually by
The President of the Section is ex-officio member of the Executive
The Secretary is
Council of the American Bankers' Association.
elected by the Executive Committee with the approval of the Adminthe American Bankers' Association.
istrative Committee of
Your Secretary, upon assuming his duties six months ago, ordered
the necessary equipment for the office of the Section and installed
a system under which a permanent record is made of all work done.
This record 'shows that 1,544 dictated letters have been dispatched
since Mach 1, 1916; 1,625 letters have been received; 3,109 circular
letters manually signed and 4,000 copies of leaflets have been mailed
in the interests of the Section and the Association; 156 telegrams
have been sent and 27 have been received.
Your Secretary prepared
the articles that appeared in the National Bank Section of the
Journal Bulletin during the past six months, and also wrote a number of articles for other financial journals In the interest of National
Banks.
The Section has co-operated closely with the Committee on Federal
Legislation, and it was largely through the agency of the Section
that the reduction of fifty cents per thousand dollars and the exemption of ninety-nine thouasnd dollars for each institution, in relation to the special bankers tax, was secured and that • this tax was
made to apply to all corporations, thereby eliminating its discriminatory features.
The following excerpt from a letter received from- the Chairman of
the Committee on Federal Legislation relating to this matter and to
the passage of financial legislation during the year, will be gratifying
to the members and to the State Vice-Presidents of this Section:
"What has been accomplished Would not have been possible bad
it not been for the co-operation of the National Bank Section."
The Federal Reserve System, though conceded to be a strong and
beneficial piece of financial machinery, is yet in the experimental
Its operations have been limited, its strength and efficiency
stages.
have not been tested. Limited experience, however, has demonstrated
the necessity for certain amendments to the law in order that the
system may work smoothly and render satisfactorily the service it was
intended to perform.
The principal functions of the Federal Reserve System oonstitute
Bankers'
a safety valve that will serve all member banks alike.
views as to the amendments and new laws that are necessary to
Scattered opinions are
govern these functions should be in accord.
of little value, but crystallized sentiment and unified opinion are two
of the most potential factors in the financial and political life of this
How are the necessary amendments and new laws to be
country.
secured
They can be secured by determined effort and close co-operation
through the agency of the National Bank Section and the Committee
This Section is a means through which the
on Federal Legislation.
National Banks may register their _solid strength In support of
amendments and laws that are of a constructive and corrective character and in opposition to the enactment of legislation that may be
s
harmful not only to the banks but to the general business interet ts.
Some of the most important financial measures passed by the recent
Congress were evolved and recommended by this Section.
Much time and consideration have been given to the Nation-wide
Clearing Plan and the proposed amendments to Section 16 of the
Federal Reserve Act.
The Executive Council of the American Bankers' Association, in
session at Briarcliff, N. Y., May last, appointed a committee of five,
directed that committee to confer with the Federal Reserve Board, and
In event their conference failed of its purpose to then confer with
the Executive Committees of the National Bank and Clearing House
SectionE.
The three committees were given full authority to take
such further action as in their judgment may be deemed necessary.
A tentative draft of an amendment to Section 16, contemplated to
eliminate. therefrom the provisions for par collections and giving the
Federal Reserve Board power to fix reasonable charges for collection
of checks, was prepared by General Counsel Paton at the request
of these three committees and was submitted to them for consideration
The referendum vote of the three committees indiand criticism.
cated that the majority of the members thereof preferred that action
toward introducing and supporting this or any similar amendment
should be deferred until after the annual convention at Kansas City,
in order that the Nation-wide Clearing Plan might be given a fair
trial and that the claims for amendment of the law and modifications in the plan might be based on actual experience and proven
The Chairman of
detects rather than on theory and assumption.
your Executive Committee has made report on the other legislative
matters in which the Section has been interested.
Your Secretary represented the American Bankers' Association and
this Section at the annual conventions of the following bankers' asso-

169

clations: Missouri, North Carolina, Ohia, Oklahoma, South Carolina, and The Reserve City Bankers; also attended the conference
of Country Bankers at St. Louis, June 10, 1916, and the meeting
of the Administration Committee of Country Banks held at Washington, D. C., July 11, 1916; lated visited the Federal Reserve Banks
of Chicago, Kansas City, New York, and St. Louis, and conferred
with the Comptroller of the Currency, the Governor and other members of the Federal Reserve Board, and with the heads of various
departments of the Treasury in the interests of the Section.
The expenses of these trips, except one, were borne by the American Bankers' Association.
The expenses of the one exception were
divided with the Clearing House Section. Upon his return from each
trip your Secretary flied a complete detailed report with the General
Secretary of the American Bankers' Association, and made a brief
report to the President and Chairman of the Section.
Your Secretary delivered an address before the North Carolina
Convention on the subject "The Nation-wide Clearing Plan," and
addressed the convention of the Ohio Bankers' Association on the
subject "Co-operation and Diversified Banking," and made formal
talks on banking topics before many of the other meetings which it
He secured 24 new members for the
was his privilege to attend.
American Bankers' Association at the Oklahoma meeting and quite
a number at each of the other meetings. Through the efforts of the
Section, 150 new members have been added to the American Bankers' Association since March 1, 1916; of these 42 were State Banks
and Trust Companies.
One thousand eight hundred and eleven National Banks are not
members of the American Bankers' Association. A total of 1,016 new
members were added to the American Bankers' Association roster
during the fiscal year; of these 358 were National Banks.
Ninety National Banks, members of the American Bankers' Association are not enrolled as members of the Section. Twenty-three
states show a solid membership, and the slate will be cleaned of
the ninety "hold-outs" within the next two months.
The appropriations for the Section last year were $6,050.
The
expenses for the year were $5,416.24.
The estimated expenses for
the ensuing year are $6,770.
Difficulties often arise between banks and the several departments
of the government, which can be adjusted only through personal
visit, and which have heretofore gone by default because the individual bank could not afford to bear the expenses of a representative
on a special trip to the capital.
These matters may now be filed
with the National Bank Section and the representative of the Section can look after several such cases on one trip to Washington.
The banks of the country have shown more improvement from the
standpoint of strength and service during the past eight or nine
years than during any like period. This improvement has not bees
due so much to legislation as it has to friendly co-operation through
organizations such as the National Bank Section.
Your Secretary earnestly believes that dere are great possibilities
for the development and extension of the Section in the direction of
rendering valuable service to the members.
He acknowledges and appreciates the splendid co-operation on the
part of the Committees and State Vice-Presidents of the Section,
also the assistance that has been rendered by the employees at the
general offices, and further appreciates the privilege of serving the
American Bankers' Association under your direction and guidance.
Respectfully submitted in printed form in order to conserve your time,
JEROM a THRALLS.
KANSAS CITY, Missouni, September 27, 1916.

Resolutions Adopted or Disposed of
The following resolutions were adopted:
Resolved, That this National Bank Section of the American
Bankers' Association ask through this resolution that all banks
will please not encourage the public in printing on personal
checks the words "Collectible at par through the Federal Reserve banks" until such time as the member banks may be
able to obtain *credit at par and for immediate use at the
Federal Reserve banks of such items.
Resolved, That inasmuch as the public and not the banks.
mutilate the currency of our country, by this resolution we
ask that Congress will arrange that express charges on mutilated
currency sent for redemption, and cost of returning new bills
In place of those redeemed, be paid by the Government.
Resolved, That Congress is hereby asked to pass a' law making it an offense against the United Stites Government. to
burglarize either with or without explosives, any national bank.
Resolved, That a request be made of Congress for the passage
immediately of a law providing for the retirement of greenbacks, and gradual retirement of the national bank notes.
The resolution below was referred to the Executive Committee:
Resolved, By this resolution, we ask Congress to so amend
existing laws that national banks in towns of not over 3,000
people may class as reserve, any kind of actual money aa the
banks may have on band.

TRUST COMPANY SECTION
AMERICAN BANKERS ASSOCIATION
Twenty-first Annual Meeting, Held at Kansas City, Mo., September 26, 1916

INDEX TO TRUST COMPANY PROCEEDINGS
Standardization of Charges
Report of Executive Committee
Report of Committee on Legislation

- Page 170
Page 175
Page 175

Report of Committee on Protective Laws
Report of Secretary Detailed Proceedings

Page 175
Page 175
- Page 176

Standardization of Charges for Trust Company's Services
REMARKS OF A. A. JACKSON, VICE-PRESIDENT
GIRARD TRUST COMPANY,PHILADELPHIA,PA.
When our Chairman in his report said I had been asked
to lead the discussion he said truly when he said I consented. Of course I was then flattered, but my leading,
however, I fear will only be, and I hope will be, only to
lead my fellow membef§ into a discussion, because as far
as I am concerned, I shall not trouble you with a very
long dissertation on this subject.
I personally think it would be very hard to standardize
charges of trust companies all over the country. There
are so many different items entering into the discharge
of their duties in different localities. I dare say we
might standardize them in one state, and in other states,
so far as that particular state is concerned, just as we
know that in certain states there are now laws governing the charges to be made by trust companies; but those
laws really are not altogether efficient, because I know in
Pennsylvania we have no statutory provision for charges,
and each man goes on his own bent, s() far as he is allowed to by his ideas, and those of his client.
In other states, I have found where the statutory provisions govern, that whereas the trust company in acting as
executor and trustee, let us say, charges so much percentage, which is not in very many cases at all adequate
for the service performed, that the trustee turns over to
some agent, work to do, which is charged for in addition
to the work, and in addition to the fee that is allowed by
law; whereas, in some other state, where there is no
statutory provision, the fee covers all the duties performed by the trustee.
It is very hard, I should think, to standardize these
charges. It seems to me the difficulty would be just as
much in relation to the standardizing of fees in trust
companies, as it would be for the standardizing of fees
of lawyers.
We know in certain states, there are fee bills, or as I
understand it those bills may give the lawyer an, opportunity to charge a very exorbitant fee in a small case,
and perhaps would limit him to a small fee in one of
great monetary value. The court, therefore, I understand, in those cases perhaps exceeds the provision in the
fee bill; and therefore this matter of standardizing is one,
I think, that will be very difficult of accomplishment.
• If we can, let us *make some recommendation, just as
we tried here in this Section, to evolve a model trust

company law; from which there should be derived benefit
to all the companies throughout the country, including
those who needed that benefit more greatly than others—
those existing in states, where they had had no requisite
laws, and no provisions for examination.
I really think that if we could establish such a standard for general consideration, that it would be well.to
establish one that would give a minimum wage to ourselves. Now, we have so many things to do, and we do
not want to rob the people—we don't want to do so—I
don't know whether you have heard of this incident or
not, and maybe the story has been repeated to you, and
any number of people, and told in any number of places,
but it came to me as authentic, of the man who somewhere in this country was asked to lend five dollars, the
cashier of some bank or trust company. He said he
would, and he took a note and he charged $15, and he was
asked what the interest would be, and he said,"Oh, there
is no interest. The $10 is just for drawing the papers."
So we do not want to do that, but we really should have
some adequate provision.
Now, suppose in the matter of a trust under a will,
that we are limited to the statutory provision, and some
maximum, as we are in Pennsylvania, of five per cent.,
and we have a small estate, and an estate of a man who
died worth $100,000, and say it produces $5,000 a year.
Five per cent. on an estate of $5,000 a year income, is
$250 a year, that is $20 a month. Now, that is the pay
of your office boy, and you may say that the company
by reason of its size and its machinery, is able to do this
for the pay of the office boy, and the more estate you have
the more machinery you will have to have. They are so
complicated and so complex, and you have to do so many
things.
I know of a case where we, for instance, were telegraphed one day by one of our friends, a trust company
in the middle west, saying that a certain man who was
recently a resident of that city had died leaving a will, or
had made a will in favor of this trust company. "As he
is dead, will you please give him a look-up, and call and
have him shipped West, if he is the right man?" This is
a rather peculiar function for a trust company to perform, but that is one of the functions we have to do. If
we take a man's estate, we settle his business of all
kinds. It requires great knowledge, and it requires a
staff of a great many people, and it requires constant ex-

TRUST COMPANY SECTION.
pense, and we ought to be paid to do it, but how to standardize the charge and say what we are going to charge
under a statute, for doing all these multifarious occupations, I confess I cannot see.
Then, you have your large field of trust funds, and corporate issues, and bonds, where you will say that you will
make 50 cents a bond for certifying, or less, or one dollar
a bond in a small issue, and so much for making a transfer, and so much for leases, and so much for substituting
a mortgage—there are a great many things to attend to
in these cases. There are so many forms of mortgage, for
instance, that place upon the trust company the duty of
discharging different Antics in different trusts.
It used tO be the case that the trustee would, we will
say, dictate the form of the mortgage. Now, the banker
who underwrites, wants a certain form, and the employer
of the corporation wants the form, and the trustee has to
examine those. He is not simply taking what is coming
to him. His lawyers examine them. Therefore it is very
hard to say what shall be made a statutory fee.
I was sent a little while ago a reprint from the Trust
Companies magazine of August of, last year, by the publisher, of a scale of charges made by Trust Companies, as
compiled by Mr. Sheppard of the Title & Trust Company
of Portland, Oregon, and a most valuable compilation it
is. It runs the gamut from holding the title to real
estate, to acting as receiver and assignee and registrar
and transfer agent and a great many other activities, and
when I looked at this table, and saw these replies that
these gentlemen had received from only, I think, 25 companies who answered his 52 letters, and saw how they
varied in all these different respects, you would see what
they think of this general scheme of standardization and
how difficult it would be of accomplishment.
Now, I am not going to say anything more, because, as
I said, I am going to endeavor to take away some of the
discussion, and I fear that in the language of the immortal bard—"I have come to bury Caesar, not to praise
him."
REMARKS OF HERBERT A. RHOADES OF THE
DORCHESTER TRUST COMPANY OF BOSTON
I have had previous consultations with Mr. Jackson..
I had no idea of his remarks which he was going to make,
but I think he has covered the field outlined in my mind
so thoroughly that anything I can say would only be a
repetition.
I have felt that the question of the standardization of
charges for services rendered by trust companies, was
more or less of a local affair. There are so many things
that enter into the question of charges, especially as our
trust companies are arranged in Massachusetts. Of
course many of the trust companies of Massachusetts are
more or less commercial institutions. We all do a bank
business. Many of us do not do a trust business at all.
Many of the trust companies do not—the older and larger
trust companies of Boston—and it seems to me that there
are so many things that enter into the question of
charges. You have a good customer who wants a mortgage, and the question is, how much you shall charge him
for your legal services, and as Mr. Jackson says, you
have so many lawyers who want to look into this thing.
Mortgages are drawn by the corporation and looked into
by your own attorneys, and the charges are governed
very largely by the amount of work that is to be done
in those particulars.
Then there is the question of registrations of bonds,
registration of stock certificates.
You have a customer who has a large balance with you
and you don't feel like charging him so much for those
services as you would a man or corporation that came in
from the outside. It seems to me that if we could fix
some kind of a charge, or a minimum or maximum charge
as a suggestion, it would be a good thing.

171

I don't believe the trust companies ought to enter into
competition in this business to the extent of quoting
prices that would not enable anybody to make any money.
I do not know, Gentlemen, that I can cover the commercial field, as Mr. Jackson has covered it so very
thoroughly.
REMARKS OF LUCIUS TETER, PRESIDENT
CHICAGO SAVINGS BANK TRUST CO.
Mr. Chairman and Gentlemen, I was in a business
meeting the other day as to the fees of an engineer who
had investigated some properties. The question was being discussed, and he was approached eventually and
asked by a rather exacting trust company man,—"How
many days did you expend in preparing this report?"
He said, "As a matter of fact I don't just know." He
further said, "As nearly as I can remember it took me
about fifteen years to fit myself to make that report."
Now, I am sure I cannot bring you anything new today, but I think I can bring to you from that reply a
thought which I think is a thing that we can pass along
to many of our friends, and to particularly some of our
newer friends in the trust company business.
It is not so much that we need to have the size and the
question of standardization of price settled, as it is for
our trust company friends to realize the responsibility
which they have. There is altogether too much of a
forgetting of how much past training it has taken to enable us to do what we do; altogther too much forgetting
of the future responsibility which we take on in fixing
our present charge.
Our clients have helped us in going astray in that way.
While, as former speakers have said, the question of a
definite standardization as to prices may not be exactly
possible, I believe that it is possible for this Section to
atempt to bring a realization of a proper charge for these
two things—past training and future responsibility, to
bear on our price, rather than that it should be determined by five minutes, or five days, by the drawing of
documents.
If that is realized, the price can be easily settled. I
am very glad to say that in Chicago that evolution has
been going on. As our younger institutions have been
eliminated for one reason or another, either by consolidation or retirement or getting old, the competition in
charges has also rather drifted out, so that I think I can
say with some assurance that our charges there are fairly
uniform; and I hope that the quality of our work is fairly
uniform. I think those things go hand in hand. I think
the quality goes ahead of the price. if the quality is
produced, the price.must follow. I believe that in some
form we should get this thought before our members, and
in all kindness before our younger friends, and I have
been one of these—I am not as young as I used to be—
but I know the temptation to do business, and as we go
along we realize there is only one kind of business to
take, and that is good business, and we can not afford
to lend our names to things that are not sound, and it
does not pay to take trustees, and securities and things
of that sort, that we ourselves do not approve of. As we
standardize the quality of our work, we should then be
able to standardize the prices.
REMARKS OF W. R. HERVEY OF THE LOS ANGELES
TRUST & SAVINGS BANK
Mr. President and Gentlemen of the Section, I was not
aware that the honor was to be paid me of addressing
you on this topic. I came up from my home to this convention. It is a subject in which I have been very much
interested for some years, the question of a standard
charge for trust companies' services, because we have
on more than one occasion been stung by not knowing
what some other trust company would charge our customer or client, who was recommended to go to a certain
towh and call on a trust company, and they would treat
him right, then he would come back and tell his tale of

172

BANKERS' CONVENTION.

woe and we Were aggrieved and had some correspondence,
but that did not heal the wounded feelings of the cus• tomer.
It has been within two months that a trust company of
standing in one of the Eastern states has charged a customer of ours a commission for collecting its own dividend. This trust company has in a trust fund 150 shares
of his bank. They have charged him one per cent on his
dividend as a collection fee.
We recommended a customer a trust company where
he could put his funds. And that is one of the things that
made him think and believe that we should have some
idea of a standard charge, that is, a maximum charge
that would be made by a corresponding trust company or
a company bearing the name of a trust company, and if
that company was inclined to charge a larger fee, that it
would take the matter up by telegraph or correspondence,
so that we and our customer might know what we should
pay.
I quite agree with Mr. Jackson that the question of
standardizing trust companies' fees at this time is wholly
impossible, due to the lack of uniformity in the state legislation dealing with trust companies.
You take it in California, for instance, where we have
departmental banking. The trust companies' operations
are in a department of the bank quite segregated, Wholly
and entirely, from the other departments, as much so as
though it was a separate institution. There must be a
segregation of capital through that department. That
capital must be increased as the trust business of the
company increases. There is a tax, a state tax, as well
as a federal tax on that capital.
The increasing volume of the trust companies' business
requires increasing deposits with the state treasurer,
which means the crystallizing or solidifying of funds in
some form of investments, and sending the investments
to Sacramento to hold as security for the faithful performance of trust obligations.
Now, there are $350,000 in surplus, apportioned to the
trust deposit, every cent of which is in Sacramento, as
guarantee for the performance of their trust obligations,
and we have to increase that from time to time. We
have a peculiarity in our statute, of segregation of private
trusts and court trusts. We deposit $100,000 to cover
private trusts, and we have deposits in other directions,
but we must increase our deposits to cover court trusts,
and our court trust business is all under the direction
of the court, and we have a separate account, and we
have one account for one, and one for the other. The law
also provides that the beneficiary of the trust can convert his trust from a private trust to a court trust if he
desires to do so; and I am informed that in the entire
state of California, not a single soul is able to make conversion of one form to the other form. By means of this
restriction of the legislation, it is more expensive to do the
trust business, and particularly the trust that results in
administration than it would be for a company in a state
where the trust companies are not so regulated, and
where the burdens are not placed upon them, and therefore a trust company in another state that is acting under
a general banking law would not be justified in making
charges that we are required to make in order to direct
this business.
My theory of trust company charges is that all trust
work should be carefully and honestly done. When we
receive in our banking department deposits of money, we
have a check or checks which is drawn out on a deposit
slip, making a record of the entry, and the entry in the
book. That can be filed away, and is a very small record;
but every transaction in the trust department requires
more or less documents, correspondence files and records.
They are difficult records to keep because of the perversity of the business, and they must be kept perpetually.
Within six months two of our officers have spent more

than two days as witnesses in a court of law away from
their business to testify to transactions that happened
years ago, transactions that were closed, transactions
for which we have received no more compensation; and
yet we have to spend valuable time on those old transactions today. Those records must be perpetually kept,
and the trust is never dead, and is never closed. None
of us know when it will come to the front to require attention.
I believe, therefore, that we should give the legal and
best attention to those affairs that they are entitled to,
and that every trust should be handled conscientiously
and that a legitimate and proper charge should be made
for the service.
I realize that some trust companies do work for a
song, because a man has a large balance or other business, or is a friend of another company, and for many
reasons. I know a few trust companies who reduced
prices to meet the prices of their competitors. I should
not like to see any of my competitors go out of business,
but the easiest way in the world for them to go out of
business would be to cut the fees down under a legitimate
charge for the service. They could not last long. One
of The speakers said here: "A sound price for a sound
product. Good pay for good quality." I think that we
in our trust work should all look upon the thing that we
should give our customer, the service to which he is entitled, whether he recognizes its burdens or character or
not. That is the only way we can serve our stockholders
and our'officers, and we should charge a legitimate price
for that service.
It can be standardized in each state, but I see no manner or method by which it can be standardized throughout the United States, as much as that result might be
desired.
It is difficult to say what a trust company and particularly a new company will charge a customer, or you,
if you send business to them, in a hurry. The trust business being experimental, I presume that everyone of us
took several years before we found out what the cost of
doing trust business was. Some of us have not found it
out yet; but of course it is very hard on our costs to
determine what.the product really entails in dollars and
cents, and then to add a legitimate profit to that cost;
and the trust company experimenting on this is apt to
make many figures ridiculously low, and oftentimes make
charges that are wholly unintentional.
I believe a committee of our section, or the Bankers
Association could devise a tentative schedule of fees that
would be charged generally by their members unless other
arrangements were made with regard to them. I thank
you.
REMARKS OF B. C. HOWARD OF KANSAS CITY
Mr. Chairman and Gentlemen: The previous addresses
that have been made here this afternoon bear along on the
same lines. As far as standardizing the trust charges, I
for one am convinced that it cannot be done, for the
reason that there are so many different things, as has
been said before, entering into each one of these transactions. In some cases, you have the fees regulated by
law. In others there are no laws at all, and it is left
entirely to the trustee or to the beneficiary, or to the
agreements that have been made by them as to what the
fees .shall be.
The fees have, in a great many instances, seemed large
to the beneficiaries, when they are exceedingly small to
the trustee or the trust,company performing the services,
because the beneficiary does not realize the amount of
time that has been taken up by the officers of the institution that serves them.
A woman with an estate of $5,000 will take up as
much of your time or more of it- than another estate of

TRUST COMPANY SECTION.
$500,000. It is just according to the character and the
make-up of the people you are dealing with, as to what
kind of fees you are to get, and what you are to get in
order to be paid for the services rendered.
Now, as far as the payment of coupons on these bonds,
where the customer is a trustee, in my opinion the services should be paid for, but the fees which should be paid
do not always pay you for the services which you render.
Take an issue of bonds of $100,000. Divide them up into
$100 combinations, and $500 combinations, and look at
the vast number of coupons that you have to handle
every time you pay a dividend.
In addition to that, with this new federal income tax
law, you have got to examine every single certificate that
comes in. Now, the work in connection with that thing
amounts to a great deal more than the fees ordinarily
charged by the trust companies for disbursing that interest.
Now then, in paying this interest the size of the issue
and denominations of the bonds have a great deal to do
with the charges for those services. With a $2,000 bond,
you can handle it easier than a $100 bond.
So far as the administration of the companies are concerned in Missouri, that is governed by statutes. We do
not enter into that question at all. The law fixes the rates
and the fees that we receive, and we receive them.
Now, when it comes to acting as trustee under the will,
that is left entirely to the trust company and the trustee
and beneficiaries as to what those fees shall be. That is
where we have to use our ingenuity in arriving at .the
right and proper fees to be charged. The fees in those
connections are hard to determine. If it is a customer
that has a great amount of business for the other departments outside the trust department, you have to regulate
your fee according to the services, or to the value that
you want to give that man. If that man is a very large
man, naturally you will take better care of his business
than for some one else who has nothing at all except
his trust work.
Now, it is almost impossible to fix a standard price. I
was talking to men today, as to what the charges were
for registering stocks, and for fees for transferring
stocks, and I was very much surprised to see or hear it
stated that some persons were registering stocks fcir ten
cents, and in other places they were registering tranfers
of shares of stocks for very little more. Now, I do not
believe that will pay for the expenses in attending to
that kind of business, when you stop to think of the
transfer agents, you have got to be responsible for every
one of those endorsements. You have got to make the
transfer, and if anything is wrong, the company is liable.
It is transfering from the corporation itself, the responsibility of transferring stock as a transfer agent, and
I think whenever any trust company assumes that kind of
an obligation, it should have a reasonable fee, not only
for the work that they do, but for the responsibility that
they assume, and I do not see how any trust company,
acting as transfer agent, can make anything for less than
50 cents a certificate for each transfer.
Now, we go again to this same question, this matter
of competition. I was in Chicago a short time ago, and
they told me that they cut the prices all to- pieces, because there was a new trust company starting out in
business, and it cut it down, and they had to meet those
cuts. It is impossible there again to establish any uniform price, because some of them were bound by the uniformity, and others were not, and on that account you
cannot establish any uniform system for any of this
work, as lo*cal conditions have always governed every
Case.

Thank you, Mr. Chairman and gentlemen for listening
to what I have had to say although it is no more than
anybody else has already said, but I would like you to

173

know what other people are saying and doing on these
subjects.
REMARKS OF UZAL H. McCARTER OF THE
FIDELITY TRUST COMPANY OF NEWARK
Mr. Chairman and gentlemen, there is one thought
which occurred to me, which has not been brought otit,
and for which nobody is to blame but the trust companies themselves. I speak now of an experience in New
Jersey, where we have a statute that prescribes our fees.
We have nothing to say about it. The Probate Court
settles the entire matter of fees, but day by day, due to
the organization of new and small trust companies, the
business of handling trusts is being commercialized, and
that is a thing that I am against.
A man who is going to draw his will writes around to
15 or 20 trust companies throughout the state: "I am
drawing a will of so many dollars, and think of appointing your company; what will your company charge to
administer such an estate?" You are suspicious of the
bummer, and you call up one or two of your friends to
find if they have all got the same letter. The old iron
trust companies, so to speak, of course, fall back entirely
on the statute and will not make any cut rate whatever;
but the new companies that come into the business do not
realize as the gentleman from Les Angeles said, the responsibilities—they don't understand the responsibilities
Involved.
I do not believe any one of the companies in this country are getting commensurate pay: for the transfer of
stock. I do not believe the new trust companies in the
business realize the responsibilities assumed by them in
the transferring. My thought in the matter is this:
That all that this general body could do would be to
refer through its law committee, the endeavor to have
passed through in the states, where there is not a statute
referring to the fees, such a statute. Now, each state
can fix its own rate, but then let the weight and the influence of this Section be, that the trust companies within
the state shall stand to that standard that has been established within that statute.
We cannot prescribe one rule for all over this broad
country but the conditions which meet the various trust
companies in New Jersey, in Pennsylvania, and in any
other state that you choose, are practically identical, and
this idea of competitive situations affects the trust companies themselves. One trust company having, as mine
has, for over 25 years, built up an organization for the
proper handling of this business, cannot compete, will
not compete, and could not if it would, with the new
trust companies that do not understand the necessities of
the legal department, and of the various functions that
go with the proper maintenance and care of the trust.
I think we should turn our faces against commercializing fiduciary business. I speak . now of the probate
business. I think the other matters of bonds, are largely
competitive situations; but I do believe that the court
business, the so-called probate business should be taken
out of commercialism, and that the company, if it knows
It, should not depart from the rate established, by which
it exists. ,
Mn. A. A. JACKSON: Mr. Chairman, I would ask Mr.
McCarter, would it not be a better result if statutory
provisions were enacted in every state, making it clear
that the companies could not be corralled in charging the
statutory rate by other companies who wanted to cut
under?
Mn. MCCARTER: Of course that would be, advisable,
but I entertain hopes to overcome that by the influence
and effort of this section, which should be used in advising the trust companies of the different states against
just such action. I think that a propaganda could be put
forth by this Section, calling to the attention of the trust

174

BANKERS' CONVENTION.

companies the dangers and risks involved in this business. Now, if a new trust company gets a will away from
any of you gentlemen,. and it does not have the proper
equipment to handle that trust which it gets, it does every
trust company in the country injury owing to the fact
that it has had the management of that trust and has
made a failure of it.
The building up of corporation trusts has been an exceedingly hard job even amongst the best trust companies of this country, an exceedingly difficult and hard
job, and fortunately there have been few failures in it;
but let there be one failure in a trust company handling
the estate of a prominent citizen, and the work of a
century will be undone by that one failure. That is what
I want to guard against. I want the trust companies of
the country to realize the dangers of the situation, and
as a means of doing that to rid the business of commercialism.
MR. KING: What are the charges?
Mu. MCCARTER: It is a maximum on the income of say
five per cent. and on the principal of an estate over
$50,000, the Court may permit, say, five per cent.; then,
as the estate goes up, the rate goes down, and so it
averages just under three per cent., I think that is about
our average rate in New Jersey.
If I may say just one word more, Mr. Chairman, so far
as our company has gone forward in this, they were appointed under the will of a prominent citizen of New
Jersey, An estate between one and two million dollars—I
don't remember the exact amount. It seemed to us to be
rather an attractive proposition, but I did not read the
.
will far enough. The last clause limited us to some
ridiculous fee, and we simply declined to qualify for it or
have anything to do with it.
MR. JACKSON: I am sorry to take up SO 1111101 of
the time of this meeting, but my own fear about this
matter of going to the legislature was that a state might
have legislation enacted that would confine the trust
company in its charges to so small an amount as to handicap it, I think. New York, for instance, in answer to
your question, as some of you probably know, has a
statute which provides that one can take on the first
thousand dollars, five per cent., and on the next ten
thousand two and one-half per cent., and on the amounts
beyond that, only one per cent., applying to income, as
well as to principal.
That does not seem to me to be at all adequate, cer-

tainly not in any moderate-sized estates. Would it not
be better really—Mr. McCarter suggests you do otherwise—but I was wondering whether the proselytizing
of trust companies to charge some adequate fee could be
carried out, and then we stop there, and not go to the
legislature for specific enactments?
Mn. MCCARTER: I think that would be much better.
Mu. HERVEY : Mr. President, another feature in that
connection is that the legislators have many lawyers
among their ranks, and if they tamper with fees, in my
state, they might cut the fees down so low that people
won't take it.
MR. KING: It seems that everybody in trying to
standardize this overlooks the fact that you can have several estates amounting to the same sum, and yet the
work in one is so much more difficult in regard to the
investments in connection with it, and the time that will
be required to carefully look after that, will be so much
greater that a certaih amount charged would be utterly
inadequate to take care of every estate; while another
one is twice that amount and would require very little
work.
MR. MCCARTER (President, . Fidelity Trust Company,
Newark, Chairman): Mr. Chairman, it is a difficult subject to know just what to do. Most of the'states
In the Union—I think most of them—have state banking
associations. I would suggest as the resolution to be offered here:
That this section disapproves of the commercialization
of:the personal trust busihess, and that it recommends
to the various state associations throughout the country,
that through their influence in their different localities,
they endeavor to reduce this competitive commercialization to a minimum.
That is a pretty long talk, but enough to go on with.
I suppose you know what I mean?
MR. JACKSON: I second that.
THE PRESIDENT: I understand you exactly. You have
heard Mr. McCarter's motion, which has been seconded
by Mr. Jackson. I might say that this Section has always followed the rule that it has never taken an active
part in any state legislation, but has used its infleuence
through the state associations, and the matter has always gone into their bailiwick, you might say. All in
favor of Mr. McCarter's motion will please say aye.
(The motion was carried, with one dissentient.)

Committee and Officers' Reports Trust Company
Section.
Report of Executive Committee, by Frank W. Blair,
Chairman
To the Members of the Trust Company Section of the American
Bankers Association.
Your Executive Committee In submitting its annual message Is
Pleased to report the maintenance by the Trust Company Section of
that steady growth in membership as outlined in the annual report
of the Secretary, which has marked the history of the Section since
It was organized twenty years ago; also an equally pleasing increase
of interest in the Section's affairs on the part of the members.
Three meetings of the Executive Committee have been held since
a report was made to you in Seattle. The first, immediately after the
adjournment of the annual meeting, the second, at Briarcliff on the
eighth day of last May, and the third, here in Kansas City yesterday.
The most important of these was the one held at Briarcliff, at which
14 of the members of the Committee were present. At this meeting
a communication was read from Secretary Farnsworth suggesting
an amendment of the by-laws of the Section as regards the election
of State Vice-Presidents. The Secretary of the Section was therefore
directed to prepare an amendment providing that each state should

be entitled to a Vice-President of this Section, and that such VicePresidents should be elected by members of this Section in attendance at the annual convention of their state associations, or in the
event of the failure of the delegates of any state to so elect, the
President of this Section shall be empowered to fill the existing vacancies. It was at this meeting that the decision was ' reached to
depart from former practice in making up our programme for the
annual meeting and do away with the set speech. It was arranged
to substitute for it a discussion to be led by one of our own number and participated in by others. Several subjects were proposed,
and after duo consideration the one you find named in your programme was selected. Mr. A. A. Jackson was asked and consented
to lead, and a number of others have agreed to take part. It is believed that those attending .this meeting will not only be well entertained, but out of the discussion will learn something which will be
of Value to them in the future conduct of their business.
At the same meeting the arrangement was made for the change re
,
eently put into effect in the New York office, which change is responsible for the presence here today of Mr. LeRoy A. Mershon as
Secretary of the Trust Company Section.
At each of the meetings much routine business was transacted and

TRUST 'COMPANY SECTION.
many reports received, details of which are too minute and voluminous to submit here today, and the ground has been prepared for much
constructive work to be accomplished hereafter.
Steady progress has been made in the prosecution of suits brought
to test the right of national banks to perform a line of business
heretofore confined to individuals or to corporations organized especially
for the purpose. In one state a decision has been handed down by
the highest court and in another by a lower court sustaining our
contention that the Federal Reserve Board had no authority to grant
fiduciary powers. Details regarding these decisions and the status
of other cases brought by the' trust companies of the United States
will be furnished you later by the committee having the litigation
in charge. We do not deem it improper to record here our surprise
that notwithstanding the probably grave consequences, the Fedrral
Reserve Board continues to grant in large numbers their so-called
permits to national banks to transact trust business.
After consultation with many of those who have attended the functions regularly, the date of the Trust Company banquet was advanced
from May to February. The change seems to have been justified, as
there were present at this year's banquet a considerably greater
number than ever before.
In July Mr. R. L. Rutter, because of press of other business,
tendered his resignation as a member of this committee.
The
resignation was accepted, and Mr. John W. Platten of New York
was selected to fill the vacancy thus created. Another resignation
was occasioned by the retirement of Mr. Thornton Cooke from the
trust company field to accept the presidency of the Mid-West National
Bank of this city. Since Mr. Cooke's term of office would have .
expired with this meeting, the place has not been filled.
In common with other financiers throughout the world trust company
men are being called upon almost daily to face new conditions and
new problems brought about largely by the European war. So far,
these changed conditions have been faced boldly and complicated
situations handled with skill. Therefore, while tile outlook for the
future seems complex and uncertain, we believe the achievements of
the past should give us confidence and courage to look forward with
optimism.
• Perhaps one of the greatest dangers with which the immediate
future is confronted is the speculative hysteria resulting from the
presence of too much money. More than ever before, wildcat schemes
are being developed and sold to the public, and it is a common sight to
see in the daily, weekly and monthly periodicals, advertisements of
stocks and bonds of companies for the existence of which • there is
no business justification. In addition to tile foregoing, investments
are being offered in certain existing industrial organizations the stocks
of which have been increased on the basis of present inflated earnings
without due regard to prpperty values.
As the investment by innocent persons in such speculative ventures
may result disastrously. it seems to us that unless all bankers turn
in and use the power which they undoubtedly possess to discourage
such promotions, there will eventually result an agitation for the
correction by law of the abuses arising therefrom, and in the endeavor
to legislate, the matter may be carried so far that deserving and
honest undertakings may suffer.

Report of Committee on Legislation, by Uzal H. McCarte
There has been little of active work for your Committee to engage
in since its last report, the matters in interest being mostly, if not
entirely, in the control and under tile care of the counsel employed
by certain of the trust companies in the country who are testing the
constitutionality of paragraph eleven, section K of the Federal Reserve Act, which, paragraph attempts to grant trust company powers
and functions to national banks. The practical result of the action
of the Committee in so testing this section has been to at least defer
any general attempt on the part of national banks to engage in this
business. It may be that some national banks are endeavoring to
do this business in smaller localities, but in the larger cities throughout the country there is no noteworthy instance of a national bank
undertaking this class of business, though. many have been granted
power so to do by the Federal Reserve Board.
The present legal situation is that in Illinois and New Hampshire
the courts have held that national banks cannot exercise fiduciary
powers in those states. In Massachusetts a suit by tile Attorney
General is pending and at issue and will be brought on for hearing in
time fall.
In Pennsylvania proceedings against time act have not been instituted
for tile reason that no national bank in that state is exercising fiduciary powers.
In New Jersey the Attorney General is unwilling to commence proceedings except upon the ground that to exercise the privileges
would
be in violation of the state law. Arrangements have been made
by
your committee to test in New Jersey the constitutionality of
tile
act through a friendly suit between a trust company anti a national
hank. Both parties to the issue joined in a petition to the
Attorney
General of the State, requesting, as is necessary in such cases,
the use
of his name to begin such action, but either for political or other
reasons he refused to grant the request, his
action being most unusual
and unheard of, when, as in our case, both parties joined in the
proceeding.
The question has been argued in Michigan before the Supreme Court,
and a determination thereof is expected at the opening of the fall term
of .that court, it having adjourned. for the summer without handing
clown a decision.
The expense of this litigation has thus far been borne by a few
of the trust companies which undertook the obligation in behalf of
the trust companies of the country, and while the contest for obvious
reasons has not been raised by time Trust Company Section but rather
by individual institutions that are members of the Section, nevertheless
the benefits that may be gained will be to time advantage of all the
trust companies of tile country. Your Committee is accordingly informed that a notice will shortly be sent to the trust companies
of the United States, requesting them to reimburse the committee for
the expense of the litigation in proportion to the capital of these

175

different institutions, and your Committee earnestly •recommends to
the trust companies of the country that they promptly respond to the
special committee's financial request to the end that the expense
may be met by those most interested in the results, so that through a
broad and general contribution the burden will be distributed in such
a way as to work a hardship on none.
The cases thus far instituted in the several states will, of course,
have to be carried to the Supreme Court of the United States for
final adjudication before your Committee's work is finished and considerable time must therefore elapse before this final result can be
reached. Your Committee, therefore, would suggest that it be continued in office and that the recommendations referred to in this .
report be given your favorable consideration.

Report of Protective Laws:Committee
During the past twelve months only eleven states have held
regular Legislative Sessions, so that opportunity for activity on the
part of the Committee has been limited.
Five of these States—Rhode Island, New York, Maryland, Kentucky and South Carolina, took no direct action either for or against
Trust Company interests, and a member of the Committee considers
this result to be something in tile nature of a victory.
Georgia authorized its State Banks and Trust Companies to transact
business in acceptances and passed a Usury Act, restricting the penalty
for violation to loss of the entire interest.
Mississippi finally passed the Uniform Negotiable Instruments Law
anti provided additional penalties for violation of its Banking
Laws
by officers and directors of Banks. Regulations were adopted
providing for the investment of the State Bank Guaranty Funds in
multiples
of $10,000 and the guaranty was extended to include Cashier's
checks,
certified checks and sight exchange.
In Louisiana a number of improvements were made in banking
laws
relating to reserves, authority and duties of State Bank Examiners,
etc. None of the legislation provided any new protection in Trust
Company affairs.
Massachusetts empowered Trust Companies to accept drafts and
issue letters of Credit, and also passed an Act permitting deposit
of
Trust Funds in Trust Companies and providing for a limit and increase in Capital Stock of Trust Companies. The Legislature of
this
State was willing to permit the appointment of National Banks
as
Trustees, Administrators and Executors, but the act was vetoed by
the Governor.
In New Jersey any corporation organized under the Act entitled
"An Act concerning Trust Companies" approved March 24, 1890,
is now permitted to take over and continue the business of any Bank
heretofore organized and may use the word "Bank" or "Banking"
as part of its Corporate title.
In Virginia an Act was passed which enables a Bank doing a Trust
Company business to omit the word "Trust" from its Corporate
name. Acceptances were authorized and regulations governing them
were provided.
The Committee has had correspondence during the year with the
membership of other Committees of this Association, and other
organizations asking its assistance in the passage of legislation in the
several States and at Washington. In a majority of these cases
your Committee has been pleased to give aid in the extent of its
abilities. The Chairman attended a joint meeting in Washington of
the Bill of Lading Committee of this organization and of the American
Bar Association, which meeting has resulted in the passage of
legislation advocated.
In view of the increase in our foreign trade—present and prospective
—it is suggested that Trust Company officials might, with profit
to themselves and their clients, give consideration to the establishment
of Branches in foreign Countries.
.
Respectfully submitted,
E. D. HULBERT,
J. C. DRAKE,
ISAAC H. ORR,
RALPH STONE,
LYNN H, DINKINS,
Chairman.

Report of Secretary of Trust Company Section
The Financial Statement from August 15, 1915, to August 31, 1916,
is as follows:
CumnTs
Sept. 0, 1915, By Appropriation of Executive
Council
$8,075.00
Received from Sale of Trust Company •Proceedings
60.60
Received from Postage and Stationery
40.00
Received from Sale of Trust Company Laws
1.00
$8,176.60
DISBURSEMENTS
Salaries
Book of Proceedings, 1915
Executive Committee Meetings
Convention Expenses
Rent
Postage, Stationery and Printing
Loving Cup for Retiring President
Gold Badges
Traveling Expenses
Express
Telegrams

$3,936.40
1,043.47
723.08
616.07
605.04
271.20
125.00
72.00
52.00
17.09
10.31
7,472.26

Credit

Balance

$704.34

Detailed Report of Proceedings.
Twenty-first Annual Meeting TRUST COMPANY SECTION, Held
KANSAS CITY, Tuesday, September 26, 1916.
John H. Mason, Esq., acting President, in the Chair.
Leroy A. Mershon, Secretary.
The President called the meeting to order at 2:30 P. M.
THE PRESIDENT: We will open our meeting with prayer.
(Invocation was said by the Reverend Charles R. Nisbett, the
pastor of the Central Presbyterian Church of Kansas City.)
THE PRESIDENT: The next order of business is the Annual
Report, which as your President, I will submit to you.

Annual Address of the President, John H. Mason
To the Members of the
Trust Company Section of the
American Bankers Association:
I look upon each meeting of the Trust Company Section of the
American Bankers Association as marking another milestone in our
banking progress, and today I extend a most hearty welcome to you all
upon the occasion of our Twenty-first Convention, and I know of no
more fitting place for our meeting than this progressive and beautiful
City. Since our last meeting held just about a year ago in Seattle,
complex and varied conditions have confronted the bankers throughout
this Country, however, the year has been one of marked progress for
the Trust Company Section, the details of which will be set forth
in the reports to be submitted to you by the Chairmen of the various
standing Committees, and I will, therefore, not detain you by reciting
them.
Yqu will no doubt recall that at the Convention held in Seattle
last Autumn there was adopted an amendment to the By-laws of the
Association whereby Federal Legislation was placed in the hands
of the Federal Legislative Committee of the American Bankers Association and the Sections were required to present their views to that
Committee. In a way there was practically no legislation enacted in
Washington that had a very vital bearing upon the Trust Companies.
However, as we are 'part of the Banking Fraternity, and a veil'
important part, there was considerable legislation enacted which at
least, in an indirect way, affected our interest and our clients, and I
take this occasion to most heartily commend the splendid work of Mr.
Charles A. Hinsch, the Chairman of the Federal Legislative Committee,
and I think that the Committee deserves our thanks for its activities.
To it belongs, certainly, considerable credit for the passage of the
Kern Bill amending the Clayton Act in its provisions in regard to
the Interlocking Directors. In addition it assisted in the defeat of the
Clark amendment to the Philippine Bill which, in my opinion, would
have jeopardized the investments of many of our Institutions, as well
as our citizens in approximately $16,000,000 of the Philippine Bonds.
Only recently, I think it was mainly through the Committee's efforts,
that the Special Tax of One Dollar per $1,000 on the capital and
surplus of all Banking Institutions of the United States, which was
provided in the Kitchin Revenue Bill, was amended and reduced to
Fifty Cents per $1,000.
I am one of those who believe that the future holds out great
promises for the Trust Companies of the United States. I think
they must broaden their field of endeavor and adapt themselves to the
ehanging conditions that are occurring constantly, so that they may
render the best possible service in their community, and in addition
they must take their part in international finance.
Insofar as the Federal Reserve Act is concerned, I have yet to
find in it any provisions sufficiently attractive to induce the Trust
Companies to enter. I do believe, however, that there is a field for
both the National and the State Banking Institutions, and there is
absolutely no reason why they should not work in unison and thereby
render the best of service throughout this Country.
I rather fancy that two of the most perplexing questions confronting the Banker of today are: "The Conflict Between Labor and
Capital" and the "Financial Position of This Country After the
War." Just prior to the European conflict, in my opinion, Great
Britain was losing its preeminent position in the trade world, and I
think, to a great extent, it was due to the Labor Organizations. No
organization can possibly make the inefficient efficient, but they may
legislate to bring the productive power of the efficient down to that
of the inefficient and thereby bring upon themselves calamity. There
is absolutely no argument on the point that Capital can get along
without Labor, neither is there any argument that Labor can get
alone without Capital, and yet it seems to me that both at times
forr• 'his truth. Then again, neither can get along without brains,
nor without due regard for the public interest and welfare. Capital
is organized and mobilized in this Country, and I believe that Labor
should do the same, but in addition, its organizations should be incorporated and held responsible for their acts, as well as the Industrial
and Railway corporations, and no legislation, either State or Federal,
should be enacted that favors either one or the other, and I regret
to say that such legislation has been enacted, and I trust the near
future will see such laws repealed. The laborer does not need
favoritism, all he needs is justice, and it behooves you and me to
use whatever influence we may have with both our State and National
Legislators that laws granting him justice shall be enacted and no
ethers.
What factor will the United States be in International finance when
the European conflict ends? It is only necessary to consider the
phenomenal figures that our export trade has amassed, and in addition
I:4e foreign credits and loans which we have made since the beginning

Kansas City, September 26, 1916..

of the War, to fully realize that this stupendous balance will constitute a gold reserve that for a long period will prevent an outflow of
the yellow metal. Since the war the United States has imported
$730,000,000 in gold and has paid back a considerable amount of its
previous borrowings, increased its foreign trade by $2,250,000,000
yearly, and loaned to foreign countries $1,500,000,000, "o that the
Dollar now has replaced to a considerable extent the old sovereignty
of the English pound.
Insofar as a default upon the part of England, France, Russia or
Germany on any of their external obligations is concerned. I do not
believe there is the slightest reason for any apprehension. With hardly
an exception, the Bankers who have made a special study, or are
in any way familiar with the vast resources of the warring nations,
unhesitatingly state that net one will become bankrupt, and I think
they are right.
Great as has been our export trade, it will yet be greater, and for
a year at least we must vastly increase our output of farm and factory
products. Every man today has new and larger opportunities. The
farmer and the manufacturer has a better market for his product and
the American Banker has an opportunity to become a factor in the
rehabilitation of the finances of the world.
However, upon the Banker rests great responsibilities and I hope
he will meet them, and Judging by the events of the past two years,
I think we have every warrant to believe that he will. It will require
continued labor, more efficiency and greater progressiveness. than ever
before, then the reward will surely be the reaching of a zenith of
prosperity in the United States that should carry us forward and
establish us as one of the dominant factors in international finance
for many years to come.
THE PRESIDENT: The next order of business is the report
of the Executive Committee, by Mr. Frank W. Blair, your
Chairman.

Report of Executive Committee
175.]

[This report is printed on page

THE PRESIDENT: Of course, the report of the Executive Committee will take the usual course, and be spread on the minutes.
It is not necessary to have a motion.
The next subject on our program is the Report of your
Legislative Committee, which will be submitted by Mr. McCarter, Chairman of that Committee.

Report of Committee on Legislation
[See page 175 for this report.]
Ma. MCCARTER : Mr. President, if I might say a word with
regard to that report, the question naturally arises—how much
is this litigation going to cost? We do not know. We have
expended thus far between six and seven thousand dollars.
We have not received our full bills yet for the Supreme Court
statement and arguments that have been held, and as it will
have to go before the Supreme Court of the United States, it
is probable that we will spend before we get through somewhere between $20,000 and $25,000.
It is thought by the Committee having this in charge, which
you understand is entirely separate from this Section, though
we are all members of the Section, that a notice should be
sent to each and every trust company, that is, trust companies
of a capitalization of $100,000, so much, and above $100,000 so
much, and by so doing, a fund can easily be raised to meet this
entire expense that a few of us who have underwritten the expense should not be subjected to the burden for the benefit of
all.

THE PRESIDENT: Fellow members, we have just had My.
Lynch, the President of the American Bankers' Association, pay
us an afternoon call, and I am sure you will all be very glad
to permit a break in the order of the program, in asking him
to say a few words.
JAMES K. LYNCH (President, American Bankers Association): Mr. Chairman and Gentlemen: It seems to me it would
be a little more politic to allow me to sit here a little while
and find out something about the trust companies; that is what
I will have to do, to receive some instruction.
THE PRESIDENT: Gentlemen, he knows all about it. That is
the way he always talks.
MR. LYNCH: My statement was correct. As you have allowed me to break into the program I won't consume much of
your time; but I wish to say that I am very much pleased
to learn now from the statement made by Mr. McCarter, that
the trust company authorities are going to take on new activities this year. This is a most important Section, probably
the most. It is the oldest and has done already a great deal
of valuable work. There is no question but that there is much
more that it can and will do.

TRUST COMPANY SECTION.
I certainly. have no instructions to give you and no information ad no advice, because my experience has been all along
the lines of commercial banking.
I am aware that the trust companies are doing a great deal
of commercial banking, nevertheless, I feel that the great trust
companies throughout the country will remain as they are,
as trust institutions, with the banking more or less supported.
It appears to me that in doing that they are more nearly
carrying out the purposes for which they are intended. When
the trust company becomes an active competitor in the business in commercial lines, it takes on a degree of hazard, which
it may be fully competent to care for; but nevertheless, I think
would have an effect on the minds of those people who are
. contemplating the bestowal of trusts. It seems to me it must
Inevitably follow that it should be so; so that I beliefte in the
end the trust company will find its greatest success by staying
pretty closely to the lines of conservative investors, I think,
and the handling of the trust company's business.
I certainly wish your Section a very great measure of success. It has already made for itself a name that is valuable,
and I have no doubt you will continue the same.
Ma. MCCARTER : I move that the Section report its appreciation of the compliment made to it by the President of the
general Association by a vote of thanks expressed by rising.
Tun PRESIDENT: The motion is unanimously carried as I do
not see anybody sitting down.
Mn. McCAirrna : Mr, President, due to the slight interruption we had from the routine business, I do hope that the
recommendations contained in the report of the Legislative
Committee will not be overlooked. I think that if the Section
records itself as approving of the plan which the Committee
made up of individual members, has in mind, it will assist
largely. that Committee in the collection of the expenses which
are necessary • for this situation.
I hope that the recommendations therein will at least receive
some attention and not be passed by without any.
Ma. WILLIAbi C. IInernminimna: I move the report of the
Committee be approved, and the notice sent out accordingly
to all the trust companies.

MR. A. A. JACKSON: I second that.
(The motion was carried.)
A Voico: Mr. President, I also have a motion that the Committee on Legislation be continued.

THE PRESIDENT: That will come up* in the regular order of
business. The next matter on the program' is the report of
the Committee on Protective Laws, to be submitted to you by
your Chairman, Mr. Lynn If. Dinkins, who I might say has
been the Chairman of that Committee ever since it has been
formed.

Report of Protective Laws Committee by Lynn H. Dinkins
[This report will be found on page' 175.]

TIZEI PRESIDENT: Gentlemen, I had intended after Mr. Blair submitted his report, as Chairman of the Executive Council, in which he
refers to the fact that Mr. Rutter retired from our Executive Com—
mittee, and that Mr. Platten was appointed in his place' by the
Executive Committee, that it is necessary under the By-Laws, if it is
the wish of this meeting, and I sincerely trust it is, to continue Mr.
Platten, for the unexpired term of Mr. Rutter, and that a motion
to that effect be made as that action must be confirmed at the meeting,
as he only continues for one year, and he was elected to take Mr:
Rutter's place, which does not expire until a year from now.
Ma. Ritoozs: I move that accordingly:
Ma. HorenNimptica: I second that. (The motion was carried.)
THE PRESIDENT: The motion is carried, and Mr. Platten will serve
for the unexpired term of Mr. Rutter. We have now the Report of
our Secretary, Mr. LeRoy A. Mershon.
TIIE SECRETARY: The financial statement from August 15, 1915, to•
August 31, 1910, inclusive, is as follows:

Report of the Secretary
THE PRESIDENT:

Gentlemen, you have heard the report of the
Secretary. What is your pleasure?
Ma. DiNiiiNs: I move it be received and filed.
A VOICE: I move that the Auditing Committee take up the account.
nis pnusiDENT: It goes through tile audit of the General Secretary's (Hike of the parent Association, and we are so well audited that
I might say that all we have left after the year is over—and I see Mr.
Lynch laughing at me, we turn back to tile parent Association, so I
think it is pretty well audited. All those in favor of the report of the
Secretary, that it be adopted and filed, will please say aye. (The
resolution was carried.)
I suppose we are all interested in expediting the business of this
Section as much as possible, and to accomplish that it would be
well for us to appoint a Nominating Committee whose duty it shall
be to lay before you gentlemen five names to be acted upon to till
the terms expiring at this meeting.
Ma. A. A. JACKSON: I move such committee be appointed.
(The motion was seconded and carried.)
Tits Palmtop:NT: The Chair will appoint on that Committee, Mr.
Jackson, Mr. Mardwald, Mr. Cooke, Mr. Rutter, and Mr. Rhodes.
The next business on our program is the discussion of the Standardization of Charges for Trust Companies' Services. Mr. Jackson, we
shall be very glad to bear from you.

177

"Standardization of Charges for Trust Company Services
[The remarks under this head by Mr. Jackson and others, as well
as the action of the meeting on the question, will be found on pages
170 to 174.]
ELECTION OF MEMBERS OF EXECUTIVE COMMITTEE
Tun PRESIDENT: I see that our Chairman of our Nominating Committee has returned from his consideration of the nominees for
the
offices that have been made vacant here, and I will ask him
if he is
ready to submit his report?
Ma. A. A. JACKSON: Yes, sir. Mr. President: Your Committee
in considering the names for presentation to this
convention gave
thought to the fact that it was the desire of all of us to
have men
of prominence and men of ability and men who would come and attend
our meetings, and they have come to the following conclusions—I
now present to you the following names, five in all:
Edward D. Hulbert, President of the Merchants' Loan and Trust
Company, Chicago.
William C. Heppenheimer, President of the Trust Company of New
Jersey, Hoboken.
John W. B. Bausman, President Farmers' Trust Company of Lancaster, Pennsylvania, and President also of the Pennsylvania State
Bankers' Association.
Seward Prosser, President Bankers' Trust Company of New York.
NV. T. Kemper, President of the Commerce Trust Company—of this
most beautiful and hospitable city of Kansas City.
That is the unanimous decision of your committee.
Ma. —: Might I ask for what offices those gentlemen are named?
THE PRESIDENT: They are notninated for the five vacancies occurring in the Executive Committee of the Trust Company Section to serve
for three years from their election. Gentlemen, you have heard the
report of your committee, what is your pleasure?
—: I move you that the report of the Committee be adopted,
and those members named on the Committee be elected. (The motion
was carried.)
REPORTS OF VICE PRESIDENTS
The next matter on the program is the report of the various vice
presidents from the different states.
[We omit these reports since after tt few responses it was arranged
to have such of the vice presidents as cared to make reports submit
them in manuscript to the Secretary.]
THE PRESIDENT: In arranging the program for our Section meetings
this year it was necessary to confine ourselves to one session. As a
rule we have met in the morning, and again in the afternoon, and
I do not know whether I will make myself very unpopular or not,
but I wish to say that time is passing rapidly and we have a long
program to carry out. If no one of the Vice-Presidents desires to make
a verbal report, we would be glad to have the reports submitted in
manuscript to the Secretary, but if anyone wants to make his report
verbally we would be glad to hear them, but we have a long list here
and If it meets with the approval of the meeting I think we had
better dispense with the reading of them and file them with the
Secretary.
METHOD OF ELECTING VICE PRESIDENTS
I have a few things here which I wish to bring to the attention
of the Section. At the Spring Meeting of the Trust Company Section
held in May, this bill was approved for action by the Kansas convention. The gist of it is that every State in the Union shall be
entitled to a Vice-President in tills Trust Company Section of the
American Bankers' Association whether they have one or one thousand
branches. That Vice President shall be elected by the State Association. If the State Association' falls to elect a Vice President then
the members of the State Association elect them, then the Vice President must be elected by the Trust Company men and not tile Bank
men. If they fail to elect, then the Vice President is appointed
by the Vice President of this Association. This is a long amendment.
I move we adopt it as written. (Motion to that effect made,
seconded and carried.)
The text is as follows:
September 15, 1916,
Colonel Fred. E. Farnsworth, General Secretary,
American Bankers Association, New York City.
Dear Colonel Farnsworth:
At the Spring meeting of the Executive Committee of the Trust
Company Section, held on May 8, 1916, the following amendment to
the By-laws of the Trust Company Section was approved for action
at Kansas City:
August Journal, 1916.
AMENDMENT TO BY-LAWS
In accordance with the resolution of the Executive Committee an
amendment to the By-laws of the Section will be presented at the
coming meeting in Kansas City. This amendment refers merely to
the election of state vice-presidents, and it is made to conform more
closely with the By-laws of the other Sections. If amended, the
By-laws will then read as follows: (The part amended is the part in
brackets, and the new part immediately follows.)
BY-LAWS OF THE TRUST COMPANY SECTION
Section 1. The administration of the affairs of the Section shall
be vested in a President and a First Vice-President of the Section
and an Executive Committee. [From each state from which there
shall be at the time of an annual meeting five trust companies which
are members of the American Bankers Association there shall be
elected a Vice-President of the Section. Any state having less than
five trust companies, all of which are members of this Section, shall
be entitled to a Vice-President. In states having trust company associations, a Vice-President of the Trust Company Section of the American Bankers Association shall be nominated and elected at the annual convention of such state association. Such election shall be
certified by the Secretary of the state association to the Secretary
of tile Trust Company Section.
In states not having a separate trust company organization, but having a State Bankers Association, a Vice-President shall be elected by
a majority vote of trust company representatives, whose companies
are themselves members of the Trust Company Section of the American Bankers Association, in attendance at the annual convention
of tile state bankers association. Such election shall be reported to
the state convention. Certification of such election shall be forwarded

BANKERS' CONVENTION.

178

to the Secretary of the Trust Company Section by the secretary of
the state bankers association within a reasonable time after said
convention.
Where a Vice-President for any state has not been named in either
of the above ways the election of such Vice-President shall be left to
the executive officers of the Trust Company Section.
Each state shall be entitled to a Vice-President of the Section. Such
Vice-President shall be elected by the trust company delegates, whose
banks are themselves members of the Trust Company Section of the
American Bankers' Association, in attendance at the annual convention
of the state bankers association of their state. In the event of failure
to so elect, the Vice-President shall be appointed by the President of
the Section. These Vice-Presidents shall hold office from the annual
meeting of the Section next following their election or appointment
until the next annual meeting of the Section. The state Vice-Presidents
shall act in an advisory capacity to the Executive Committee, but shall
not be entitled to vote.
The Executive Committee shall consist of fifteen members in addition
to the President and First Vice-President, who shall be ex-officio members of such Executive Committee, and ex-Presidents if still members
of the Association, shall also be members ex-officio for three years
after the expiration of their term of office.
The President, First Vice-President and members of the Executive
Committee shall serve until their successors shall be chosen or appointed, but shall not be eligible for re-election for the period of one
year after the expiration of their respective terms of office.
The Executive Committee shall elect its own Chairman from among
its members, and shall also select a Secretary of the Section, who may
or may not be a member of the Section.
The Executive Committee shall, as soon as may be after its organization, divide itself by ballot into three classes of .equal number,
designated as the first, second and third class, of which the first
class shall remain in office one year, the second class two years and
the third class three years, and at each annual election members of
the Executive Committee shall be elected for a term of three years
to fill the vacancies created by the retiring class.
The Executive Committee shall have power to fill vacancies until
the next annual meeting, and may adopt all necessary rules for the
business of the Section.
The President and First Vice-President shall represent the Section
on the Executive Council of the American Bankers' Association (adopted
October 13, 1914.)
In order that this amendment become effective it is, of course, necessary that it be approved by the Executive Council, after which it
will be adopted at the regular annual meeting of the Trust Company
Section.
Very truly yours,
SECRETARY.
ELECTION OF VICE PRESIDENTS
I have here a list of the vice-presidents.
I would suggest that they all be approved as written down here.
(Motion to such effect made, seconded and carried.)
TRUST COMPANY SECTION
Vice-Presidents elected by State
Bankers Associations
Alabama:
Arizona:
Charles G. Henry,
Arkansas:
President, Arkansas Bank &
Trust Company, Newport.
W. D. Longyear,
California:
Cashier, Security Trust & Savings Bank, Los Angeles. Associate Member, Trust Company
Section.
Colorado: J. V. Cockins, VicePresident, Central Savings Bank
& Trust Company, Denver.
Connecticut: W. P. Bryan, Secretary, Colonial Trust Company,
Waterbury.
Delaware:
District of Columbia:
Florida: H. G. Aird, Vice-President Guaranty Trust & Savings
Bank, Jacksonville.
Georgia: F. S. Etheridge, President, Atlanta Trust Company,
Atlanta.
Idaho:
Illinois:
Indiana:
Iowa: F. 0. Fisher, Vice-President, Security Savings Bank,
Cedar Rapids.
Non-member,
Trust Company Section.
Kansas: Sheffield Ingalls, President, Commerce Trust Company,
Atchison.

Kentucky:
Louisiana:
Maine: E. A. Butler, President,
Rockland Trust Company, Rockland, Maryland: F. G. Boyce,
Vice-President, Mercantile Trust
& Deposit Company, Baltimore.
Massachusetts:
Michigan: Robert D. Graham,
President, Grand Rapids Trust
Company, Grand Rapids.
Minnesota:
Mississippi:
J. M. Hartfield,
President, Merchants Bank &
Trust Company, Jackson.
Missouri: E. W. Moore, Treasurer, Pioneer Trust Company,
Kansas City.
Montana: 0. W. Allen, Cashier,
American Bank & Trust Company, Billings.
Nebraska:
New Jersey: Bird W. Spencer,
President, Peoples Bank & Trust
Company of Passaic, Passaic.
New York: A. W. Loasby, President, Trust & Deposit Company
of Onondaga, Syracuse,
North Carolina:
Ohio: F. J. Woodworth, VicePresident, First Trust & Savings
Bank, Cleveland, Ohio.
Oregon: William Pollman, President, Baker Loan & Trust Company, Baker.
Pennsylvania: Montgomery Evans,
President,
Norristown
Trust
Company, Norristown.

Rhode Island: Aram J. Pothier,
President, Union Trust Company, Providence.
South Carolina:
South Dakota:
Tennessee: J. M. Fink, Cashier,
Banking & Trust Company,
Jonesboro.

Texas:
Virginia:
Washington :
West Virginia: B. T. Neal, Jr.,
Assistant Treasurer, Union
Trust & Deposit Company, Parkersburg.
Wisconsin :

GROWTH OF TRUST COMPANY RESOURCES
MR. PLATTEN : Mr. President, may I suggest that I have some information in regard to trust companies? We have statistics of all
the trust companies for 13 or 14 years. Mr. McCarter gave us
the figures last year and they were notable. This year they are more
notable. The total resources amounted to six billion, three hundred
million. This year it was $7,600,000,000, an increase of $1,300,000,000, in the total resources of the trust companies of the United States.
Mn.
: How does that compare with the national banks?
Mn. PLATTEN : I did not get it last year. We have 150 more trust
companies reporting; at the same time the increase in the various
states, and particularly in the West is noticeable. New York leads off
with $500,000,000 increase as compared with last year, and compared
with 1914 it is $1,750,000,000.
THE PRESIDENT: I am sure we are all glad to learn of these very
pleasing statements which Mr. Platten has just favored us with.
NOMINATIONS AND ELECTIONS
The next order of business is the Election of Officers for the Coming
Year, and the Chair is prepared to recognize anyone desiring to make
a nomination.
Mn. ZENN : I nominate for the office of President for the ensuing year
Mr. Uzal II. McCarter.
MR. JACKSON : It gives me much pleasure and great privilege to
second that nomination, as I have been associated so long with Mr.
McCarter, and I know so well his executive ability and his prominence
in every way, that I take pleasure in seconding tile nomination.
Tun PRESLDENT: The Secretary advises me that Ile has cast one
ballot for the Association in favor of Mr. McCarter, and I have the
honor to announce that Mr. McCarter has been elected President of the
Association: (Mr. McCarter is called to the rostrum.)
PRESIDENT-ELECT MCCARTER: I have been looking forward to this
for many years. It is an honor to be President of the Trust Company
Section of the American Bankers' Association, to which any man, regardless of his business association or relations in life, may honestly
aspire to; and if he receives it, he should be justly proud that he has
acquired it.
I particularly appreciate the nomination coming from my own state,
for they knew me best there; and the responsibility will lie with them
if they have made a mistake.
I have been engaged in the work of the Trust Company Section for
many years. It has been a great delight to me. I bespeak the full
co-operation of all with the Chairman of the Executive Committee
and with the other officers during the coming year.
Mr. Mason (addressing the retiring President), I believe you receive
a decoration here too. [The retiring President received a smoke box
and expressed his appreciation in a mirth provoking manner.]
Tun PausiDENT: The next order of business is the election of a
Vice-President of the Section.
Mn. DIXON: As first Vice-President of this Association I wish to
place in nomination a man who has been my friend for many years
a man whom I am sure everyone will be pleased to see in the office—
Mr. Frank W. Blair. (Moved, seconded and carried that the Secretary
cast one ballot electing Mr. Blair.)
Tun PRESIDENT: It has been my privilege to work alongside Mr.
Blair during the past year and for several years in the work of the
Association, and I am sure no wiser act could be done by the convention than to nominate and elect him as our First Vice-President.
Ma. FRANK W. BLAIR: I thank you, gentlemen, from the bottom of
my heart. I do not think there is anything more I can say. All I can
add is, I am going to do my best.
THE PRESIDENT: That concludes the election and installation of officers, gentlemen.
Is there any Unfinished Business to bring before the Section before we
adjourn?
I should like to notify the old and the new members of the Executive Committee that there will be a meeting in this room immediately on the adjournment of this meeting.
Meeting adjourned.

SAV-IINGS BANK SECTION
AMERICAN BANKERS' ASSOCIATION
Fifteenth Annual Meeting, Held in Kansas City, Mo., September 26, 1916

INDEX TO SAVINGS BANK PROCEEDINGS

Hundred Years of Savings Banking,E.L. Robinson
Social Aspect of Thrift, Graham Taylor,
Thrift and Human Nature, George E. Allen Centennial Campaign for Thrift, V. A. Lersner
Postal Savings, Carter B. Keen: Institution for Savings, William E. Knox

Page 179
Page 186
Page 188
Page 189
Page 190
Page 193

Business of Getting New Accounts, E. G. McWilliam
Vitalizing Dormant Accounts, H. A. Blodgett
Liquidity of Collateral Loans, F. B. Washbirn
Committee Reports
.
.
Detailed Report of Proceedings
Address of President Hawley

Page 193
Page 197
Page:200
Page 203
Page 207
Page1208

One Hundred Years of Savings Banking
By

EDWARD L. ROBINSON, Vice-President Eutaw Savings Bank of Baltimore.

The correct interpretation of a great movement is dewe call inferior cultivate that instinct with greater forependent upon a knowledge of the antecedent conditions
sight than we who have been made lords over created
which give it birth; one hundred years of savings bankthings; the animal kingdom by means of example—with
ing in the United States will be better apprehended if
a united voice—pleads with mankind to lay by in store;
we sketch briefly some of the processes of human enman alone is improvident and heeds not the warning that
deavor by which in the fulness of time man was brought
a day of reckoning and maybe a day of wrath is rapidly
to realize that he is his brother's keeper. Pauperism is
moving towards him; he alone is willing to trust to the
a picture in which the somber tones prevail but the
kindness of destiny and refuses to offer hostages to
Master Artist with a kindly hand has mingled lights
fortune.
amid the shadows—evil is being overcome of good.
Man must be persuaded to save; his complaCency must
To us the march of progress seems painfully slow; the
be disturbed; his social obligations must be made known
pages of history appal us with the record of social ills; to him; his thrift instinct must be stimulated and
a
the poor we have always with us; likewise the vicious, proper channel must be provided through which it may
the depraved and the unjust, all are in some degree find expression.
products of a perverted social order. What has civiliEARLY EFFORTS TO EXTEND SELF-HELP.
zation wrought to overcome these inequalities of fate?
Much in many ways and our task of recital takes us
It is difficult to do exact historical justice to those
who
through Elysian fields of conquest.
by common consent are associated with the origin and
The first recorded savings banks were government development of the savings bank idea;
efforts by the state
affairs; Pharaoh and Joseph were the executive officers; and by the individual to relieve the constantly
increasing
we read of them in Genesis, forty-first chapter; the seven
menace of pauperism in France, Germany and England
years of plenty were utilized for gathering together at
gradually brought forth many experimental remedies;
strategic centers Egypt's wealth of grain; when the
Daniel Defoe's brilliant imagination did more for the
specter of famine stalked to and fro the reserves of these
world than produce Robinson Crusoe; his biographers
banks were released to the markets of the world; the
believe that he has many other claims to stand in the
providence of Joseph brought blessings to the people and
gallery of the immortals; he was born in 1660-256 years
legitimate gain to the nation's treasury. In this event
ago—but his views upon political and economic queswe have an accurate illustration of the savings bank
tions would give him a respectable standing among
principle; with one hand it reaches down to help the
students of modern problems; he was apparently a
humble and the deserving and with the other it reaches
pioneer in advocating for women equal educational opup and bestows its largess upon the state.
portunities with men—consummated in this country just
History tells us little of the progress towards miti200 years after he was born; he was far in advance of
gating the many pangs of poverty, disease and distress
his day in advocating the abolishment of the cruel legal
until the latter part of the seventeenth century, when the procedure of imprisonment for debt; he wrote on this
dawn of a new day was just beginning to break; it is
subject feelingly, having himself failed disastrously in
true that much private and public benevolence have from
an extensive business venture; it must be said to his
the earliest ages softened the sorrows of the unfortunate, credit, however, that after effecting a compromise with
but these efforts were not directed to the sources of the
his creditors, he later on honorably discharged his old
trouble—amesthetics were administered to the effects—
debts in full; he urged the necessity of improved highthe causes remained without treatment; the axe had not
ways—the longest delayed, of all his visionary schemes;
yet been laid to the root of the tree. The thrift instinct
he drafted plans for a Mutual Marine Insurance Society,
Is heaven born; unhappy to relate, the creatures which
a friendly benevolent society, and what is of greatest

180

BANKERS' CONVENTION.

interest to us—he proposed a pension plan for the working classes so that a tranquil old age might be assured
to the industrious through systematic contributions to a
fund to be administered by the Government and drawn
upon by contributors in their time of need and in proportion to their previous savings. All of these theories
were advanced in a book produced by him in 1697 entitled
"Essays on Projects" another treatise on similar lines
;
was entitled, "Giving Alms no Charity and Employing
.
the Poor a Grievance to the Nation." He was a prolific
writer on many themes, a keen satirist, an enthusiastic
controversialist and naturally in constant trouble; for
one of his literary indiscretions he suffered fine and
imprisonment and was publicly pilloried for three successive days. •
It is, of course, true that the awkward pension plan
and for nearly six months there was no central governsition from the modern savings bank but the desideratum
of each is the same—the banishment of poverty through
a provident care for the future. Here at least is the
savings bank in embryo.
FIRST ACTUAL EFFORTS
The idea seems to have taken root first on the Continent
In Brunswick, Germany, where a bank for savings was
established in 1765; another was established thirteen
years later, in 1778, in Hamburg which is still in existence; following these came one at Oldenburg in 1786, at.
Loire, France, in 1790, at Basel, Switzerland, in 1792,
at Geneva in 1794, and at Kiel in Holstein in 1796.
FIRST EFFORTS IN ENGLAND
No serious attempt seems to have been made in England
towards forming a savings institution until 1797, one
bundred years after Defoe had published his "Essays
;
on Projects" in that year Jeremy Bentham agitated the
;
Inauguration of a system of so-called "Frugality Banks"
two years later, in 1799, the Rev. Joseph Smith put the
plan in action at Wendover, Buckinghamshire; the
Christmas Fund conception seems to have originated in
this parish; the minister circulated proposals to receive
sums on deposit from the working classes during the
summer .raenths when times were prosperous and to return the amounts at Christmas with the,addition of onethird, or thirty-three and one-third per cent., as a bounty
from the depositor's economy. To the Anglo-Saxon then
belongs the credit for first suggesting the savings bank
Idea and to the Teutonic race for first giving a practical
•
demonstration of its effectiveness.
We shall now follow briefly the fortunes of the new
institution in England until it waxed strong enough to
be sent across the seas to America. In 1798 Miss Priscilla Wakefield established at Tottenham High Cross a
Friendly Society for Women and Children, designed to
afford annuities upon the attainment of a certain age,
sick benefits and a burial fund; three years later its
functions were enlarged to include a savings bank and a
• fund for loans. Rather an ambitious undertaking even
"
for the modern"uplifter! Rapidly following the example
set by Miss Wakefield, savings banks were established in
London, Bath, Ruthwell in Dumfrieshire, Edinburgh,
Kelso, Hawick, Southampton and other places. It should,
of course, be borne in mind that the plans of all these
banks were crude and unscientific, depending too largely
upon the bounty of the benevolent people who organized
them; most of them failed to attain their high purposes,
but earnest and devoted minds were addressing themselves to a heroic, humanitarian problem; they were
working in the dark; but they had faith to believe that
there was light ahead.
Through the tedious processes of elimination and evolution there was visualized in 1810 a dream which long
had been the heart's desire of many who, like Abou ben
Adhem of old, dearly loved their fellow men. At Ruthwell in Dumfrieshire, Scotland, the Rev. Henry Duncan

put into active operation in that year a "Parish Bank"
upon which the modern self-sustaining savings bank is
patterned; its organization was simple and effective;
he publicly and privately exploited his plan with the
happy result of quickly and widely extending its beneficent principles; the "Edinburgh Society for the Suppression of Mendicity" learned of Dr. Duncan's work
and in 1814 the Edinburgh Savings Bank was organized;
this splendid institution is still performing a highly useful ministry to its community and ranks fourth in amount
of deposits among all savings banks in the United Kingdom. From this time on the banks began to multiply
until in 1817 Parliament took the system under its control and regulation; meantime the banks have been
voluntary philanthropic organization and abuses of
trusteeship had . naturally crept in. Suitable legislation
for their protection having been enacted, these trustee
savings banks were gradually established throughout
England, Scotland, Wales and Ireland; in 1818 there
were two hundred banks of this type in existence; all
with private management but under state control. The
system has always been kept under close governmental
scrutiny and continues to prosper in the farger communities, but in the smaller districts is giving way to
the post-office banks, inaugurated in 1861, which offer
greater conveniences to their patrons; notwithstanding
the diminishing number of the trustee banks, their resources continue to grow satisfactorily.
The development of thrift goes on unabated, and
through the several classes of banks ready facilities exist
almost everywhere for its encouragement. These numerous agencies for gathering the small savings of the industrious poor have done much to develop the character
of the sturdy and independent Briton and to make London the financial center of the world.
CONDITIONS IN THE UNITED STATES AT CLOSE OF REVOLU,
TIONARY WAR
We shall now pass to a consideration of the conditions ,
in our own country just prior to the importation of the
savings bank to America. The War of the Revolution, begun in 1776 and lasting through seven weary years, left
the colonies weak and impoverished. They had cheerfully yielded up their all and counted not the cost too
great for the freedom to work out their independent destiny; they then undertook to deserve the liberty their .
arms had won—but "tasks in hours of insight willed
through hours of gloom must be fulfilled."
At the close of the war in 1783 the public debt was
$42,000,000; continental currency was worth only two per
cent of its face value; Congress was actually impotent;
no power to levy taxes had as yet been conferred by the
states; the states themselves were unable to take care
of their own paper money which had been lavishly issued
to finance their local burdens; extreme poverty and the
rigid enforcement of the drastic processes for debt drove
the farmers of western Massachusetts into an insurrection which the state quelled with difficulty; in 1784 the
situation was desperate almost to the point of anarchy;
in fact there were symptoms of dissolution of the Union
and for nearly six months there was no central government; in 1780 interest on the national debt was in arrears
and Robert Morris, who financed the war, resigned his
office in disgust and despair. It is difficult to understand how any people could survive such poverty and
weakness as our forefathers endured at this period.
Added to these troubles there sprang up a looseness of
manners and morals, due to the long-continued army life
where home restraints and social conventions top often
lose their power over conduct. But God was on His
throne and was leading His people through discipline to
a realization of His purposes concerning them.
The ship of state began to right herself in 1790, at
which time the census revealed a population of 4,000,000
people. Trade, industry and finance were in disorder;

SAVINGS, BANK SECTION.
the country's resources were largely agricultural, but
manufacturing began to receive encouragement by state
bounty. Connecticut commenced to manufacture clocks
and tinware; Rhode Island and Massachusetts.established
cotton mills, secretly importing the necessary machinery
from England in violation of strict parliamentary prohibition; exports consisted almost entirely of foodstuffs
and imported manufactured articles wrought serious
hardships to home industries; other social and economic
problems were pressing for solution; new commercial
.alignments were made necessary by the fortunes of war;
readjustments were difficult and painful, but the spirit
of the people was "sufficient for all these things," and
with patient assurance they began to put their house
in order. In their zeal to cure social ills they applied
many unwise and unscientifie remedies; these experiments, while often futile, indicated the benevolent temper
of the people. As an evidence of this it may be mentioned that as far back as 1778, in the early stages of
the war, the New York Legislature passed "An Act to
regulate the wages of mechanics" in 1779 a bill was
;
introduced for "the relief and settlement of the poor,"
and in 1780 an act was passed for the general limitation
of the prices of commodities. Of course, such legislative
efforts to relieve the distresses of the people were abortive
•because they were wrong in principle, but the light was
beginning to break.
In 1792 "The Society of Mechanics and Tradesmen in
the City of New York" was incorporated for the purpose of protecting and supporting such of their brethren
as by sickness or accident may stand in need of assistance, etc."; in 1802 a "Society for the Relief of Poor
Widows" was formed; in 1803 a lottery was incorporated for "public improvements and charitable purposes." Many other societies with similar aims were
formed in the ten years following, probably the most
Interesting of these being the "Society of Tammany or
Columbian Order in the City of New York," incorporated
in 1805. The purposes of this society, as indicated in its
charter, were originally charitable—its creed is differently regarded to-day. Upwards of forty of these benevolent societies were given corporate life by the legislature of New York alone betWeen 1786 and 1817. Ofher
states were active in similar channels and their combined usefulness was a mighty factor in alleviating
human distress. Pauperism was then a mge engrossing
subject of discussion than to-day, indicating that in the
past one hundred years civilization has made progress
in healing this social disease, although.we are still conscious of its blighting influence.
Such then was the atmosphere existing in our country
during the latter part of the eighteenth and at the beginning of the nineteenth century. We have seen that our
forefathers had many battles to fight, but they did not
neglect their duty to those of their brethren to whom
fate seemed unkind; the time was ripening for the advent
of the greatest uplifting social agency which civilization
has produced.
SYSTEM TRANSVLANTED IN AMERICA
Earnest minds were in touch with the experiments in
•England and on the continent in the matter of frugality
banks and old-age pensions; the "Bank for Savings in
the City of New York" owes its origin to the influence
exerted by a London magistrate, Patrick Colquhoun,
upon the mind and heart of Thomas Eddy, a merchant
of New York City. Mr. Colquhoun had been advocating
savings banks upon a self-sustaining basis for the preceding ten years and Mr. Eddy was no doubt familiar
with their general plans and purposes through correspondence and contact with Mr. Colquhoun ; at any rate,
on November 20, 1816, a meeting of prominent citizens
was held, at which Mr. Eddy presided, the stated purpose of which was to form a savings bank. The principles of the proposed institution were.explained, a con-

181

stitution adopted and directors chosen; committees were
appointed to procure a location for the bank, to secure
.an act of incorporaion from the legislature and to
draft
an address to the public. It was deemed unwise
to begin operations without legislative authority,
and this was
not granted until March 26, 1819. Business did
not actually begin until July 3, 1819. On the opening
day $2,807
was received from eighty depositors; by
December 27
the deposits had grown to $148,372.27 and the
number of
depositors had increased to 1481. It is amusing to
note
that in its first six months' 'business it suffered
losses
aggregating $50.92—$27 in counterfeit money and $23.92
"losses in change," so called—or what is more familiarly
known in this day as "short cash." The president's first
report to the legislature is an able and interesting paper;
he expected the bank to "excite the enmity of those
whose emolument was the fruit of prodigal expenditure" in other words, he expected organized opposition
;
from the tavern keepers, proprietors of places of amusement, etc.; he was agreeably disappointed, however, and
reported that even several public tavern keepers had
"brought their money to the bank for safety and increase."
•
The trustees of the bank attended personally to its
affairs, a committee of three serving monthly in rotdtion,
coming in contact with the patrons of the bank, securing
their confidence and giving such advice to many of the
depositors as "they believed would tend to promote careful habits and moral feeling." Some of their depositors
confided to the trustees that they had suffered severe
losses through lending their savings to some plausible
friend with the promise of an extravagant return; such
losses were due to the lack of a "secure place of deposit"
and "ignorance of how to improve what had been laid
up."
This impressive extract goes to the heart of the savings
bank principle: "the effect on the moral habits is not
more certain than striking; he, who has _ learned to be
economical has first gotten rid of pernicious modes of
spending money. Every time he adds to his amount he
• has an additional motive for perseverance. In the provision he is making for futurity is associated all which
can gratify him as a father, a husband, a guardian or a
friend. The talent which heaven has committed to his
care he improves for the objects of his affections; this,
again, endears them to him, and thus the sum of human
happiness is increased and extended. It is impossible
for men continuing to act on such principles to be immoral."
Several classes of depositors are alluded to as particularly needing the friendly offices of the savings bank
—among these are seamen, "Who are proverbially improvident, not so much, perhaps, from a love of waste
as from a total ignorance of how to dispose of their
money" the clergy also comes in for generous recogni;
tion as "a body of gentlemen perhaps more entitled to
our gratitude and care than Any other in the community" allusion is made to the "large families" and
;
to the "small means" of these foes of Mammon, but it is
naively stated that most of them can save a little; some
of them at least accepted the invitation to lay up for
themselves treasures upon earth notwithstanding the corrupting influence of rust and moths. .
This paragraph is especially fine: "As parents, as
citizens and as men the trustees exult in the prospects
which the bank for savings holds out to this growing
city and state. The habits which a resort to it induce
hold out the best pledge for a reduction in the public
burdens, as they are connected with indigence and want.
They tend to inspire a spirit of independence, and in
their moral operation lessen crime, poverty and disease.
They teach man to depend upon his own exertions; encourage industry, frugality, cleanliness and self-respect
and effectually prevent those who are so fortunate as to

182

BANKERS' CONVENTION.

be influenced by them from applying either to public provisions or to private bounty for support."
In concluding this admirable report it is said that:
"The trustees are fully aware that they have undertaken
an arduous task; but in the approbation of the public
authorities, the countenance of their fellow-citizens and
the increasing comfort of the community they will have
a full reward."
The address to the public issued a few weeks before
actual business began is also an admirable document
and indicates that the new philanthropic institution had
enlisted the active support of the kindest hearts and the
most sagaciou's minds of the community; the following
short extract from the address shows that the organizers
knew how to put "punch" into advertising matter:
"The immense profit which arises from a rigid system
of economy, and from depositing even small savings at
interest probably exceeds the most sanguine expectations; the sum of one dollar deposited weekly for a
period of sixty years would amount at the end of that
time, with its accumulation of interest, to upwards of
twenty thousand dollars." This appeal to the higher instincts is also very good. "There are few spectacles
more truly gratifying, or more honorable to human nature,
thaii a poor man surmounting, by his own exertions, the
difficulties of his situation, and training up his family
In the ways of honor and virtue, of industry and independence."
All will agree that the new bank began its career under auspicious influences and it is gratifying to relate
that it still energetically continues its high mission of
propagating the gospel of self-help and from the modest
beginnings of 1819 has grown to enormous proportions,
having to-day approximately 150,000 depositors and assets of more than $100,000,000. The history of this bank
has been referred to somewhat at length because its experiences were typical of what was going on elsewhere.
SYSTEM INAUGURATED IN PHILADELPHIA
It has been shown that on November 29, 1816, the first
public meeting in the interest of establishing a savings
bank was held in New York City, but that the bank itself
did not begin to do business until July 3, 1819; three
days after this first public Meeting in New York, or on
December 2, 1816, the Philadelphia Saving Fund Society
actually began to receive deposits, but as a purely.voluntary association; it did not receive a state charter until
to Philadelphia, therefore, belongs
.February 25, 189;'
the honor of having established the first mutual savings
bank in America; in the beginning its growth was slow.
After operating two years and four months its deposits
amounted only to $45,114—when it was taken over by the
incorporated institution; to-day it is a monumental institution outdistancing all other banks in the country in
number of depositors (290,000), and is only slightly behind the leaders in amount due depositors ($125,000,000).
SYSTEM INAUGURATED IN BOSTON
Boston enjoys the distinction of having the oldest incorporated savings institution; "The Provident Institution for Savings in the Town of Boston," having received
its charter on December 13, 1816, eleven days after the
Philadelphia Saving Fund Society opened its doors. A
public meeting called by lion. James Savage was held
in Boston in December, 1816, and the following sentiment
endorsed: "It is not by the alms of the wealthy that
the good of the lower classe can be generally promoted.
By such donations encouragement is far oftener given
to idleness and hypocrisy than aid to suffering worth.
He is the most effective benefactor to the poor who encourages them in habits of industry, sobriety and frugality."
It appears that this is the first public act of legislation
recognizing and protecting savings banks; England did
not put them under the protection of Parliament until

the following year, 1817. The bank began to do business
in the spring of 1817 and declared its first quarterly
dividend of one per cent. in July of the same year; five
years later, in 1822, its deposits were $600,000 and its
surplus $6,200; this institution continues to enjoy the
confidence of its depositors and now has about 105,000
depositors and resources of $57,000,000.
SYSTEM INAUGURATED IN BALTIMORE
One other bank must be mentioned in connection with
the pioneer work of encouraging thrift in the United
States: "The Savings Bank of Baltimore" was organized as the result of a public meeting held January 1,
1818, "for the purpose of receiving deposits of such small
sums of money as are the profits of industry and economy" it began to do business March 16, 1818, and re;
ceived its charter from the Maryland Legislature in
December of the same year; this bank also stands in high
favor with its constituency, has 53,000 accounts and resources of $37,000,000.
THE MOVEMENT GROWS SLOWLY
These four banks were the vanguard of a mighty social
movement which has kept an even pace with the material
progress of our country; it is significant that they were
ushered into existence during the "era of good feeling"
with which, the administration of James Monroe is asso,clated and shortly after the War of 1812, during which
American manufacturing had received a strong impetus
because of the blockade which England had maintained,
preventing the importation of foreign manufactures;
there was a feeling of optimism—people began to believe
in themselves and in the greatness of their country. The
funds of the new savings banks were at first exclusively
invested in government and municipal securities but very
soon the law sanctioned first mortgage loans on fee simple
properties. Other communities soon began to follow the
example set in the large centers of population and the
movement slowly spread throughout the States. In 1820
ten banks were in existence with 8,635 depositors and $1,138,576 in deposits; twenty years later, in 1840, there
were 61 banks, 78,781 depositors and $14,051,520 in deposits; in 1860, twenty years farther on, there were 278
banks, 693,970 depositors and $149,277,504 in deposits;
from 1860 the movement gathered momentum and to-day
there are 2159 savings banks, 10,686,000 depositors, $4,700,000,000 on deposit.
TWO TYPES or SAVINGS BANKS
No uniform laws exist in the several states governing
the incorporation of savings banks nor in prescribing
standards of investment; the character and practices of
the banks therefore vary widely. The mutual savings
bank without capital stock is perhaps the ideal savings
agency where neighborhood conditions justify its establishment, but local needs are fully met in most of the
large communities of the West and South by the capital
stock bank. Of the total number of pure savings banks
existing today, 630 are of the mutual type and 1,629 have
capital stock; the average deposits in each class being
roughly $6,000,000 in the mutual banks and $500,000 in
the capital stock class. The mutual banks are not growing in number; in fact, there has been a net 1os of seven
banks in the last twenty-five years, but they are growing
enormously in resources, having trebled their deposits in
the same period; in this respect their experience is similar to the trustee savings banks in England, to which
reference has already been made.
CRITICISM OF STOCK SAVINGS BANKS
capital stock Savings Bank has been discredThe
ited in some quarters because of the admittedly commercial motive behind it. In 1873 Congress directed the
Comptroller of the Currency to investigate and to report
upon the general subject of State and Savings Banks.

SAVINGS BANK SECTION.
It developed that many of the so-called Savings Banks
were not legitimate, according to the interpretation of
Justice Davis of the Supreme Court of the United States,
who held that a Savings Bank was one without capital
and whose earnings inured exclusively to the benefit of
its depositors. The country has outgrown this narrow
conception of a Savings Bank and is to-day prepared to
support a bank of any sort which offers facilities for
conveniently receiving.small sums on deposit and which
affords absolute safety and,a reasonable rate of interest;
it is not concerned whether the motive of the management is philanthropic or selfish; it demands efficient service. Some states now forbid the establishment of any
Savings Bank except those of the mutual type and permit
no other institution to use the word "savings" in its
title.
It has been observed that the mutual Savings Bank is
not increasing in numbers. It is easy to discern the reason. It is not because the 'spirit of philanthropy is waning, but because the newly organized mutual Savings
Bank is an institution of such slow growth as to be unable to comply with the public demand of to-day as readily as the capital stock bank, whose principal profits are
usually derived from its commercial business.
There is, however, one criticism which justly lodges
against certain capital stock Savings Banks and other
institutions with savings departments, which is that their
savings deposits are mingled with their commercial deposits and subjected to the same investment risks. Many
states by law require a strict segregation of savings funds
and prescribe rigid standards of investment for them.
Public sentiment is leanipg strongly toward making this
requirement general and it seems to be a reasonable provision of safety. As an evidence of the public good will
toward Savings Banks with capital stock it may be stated
that in 1875 there were twenty-seven banks of this class
and to-day 1,529. This shows that they are filling a need
and that their business is prosperous.
THE MUTUAL SAVINGS BANK CRITICIZED
The mutual Savings Bank is also not 'without its critics,
and, strange to say, its crowning virtue is its distinguishing weakness—conservatism. Whether from tradition or from the very nature of its business, the fact remains that as a class these banks are not aggressive in
the sense of seeking new avenues of usefulness to their
patrons or of affording them modern financitil facilities
which trust companies and capital stock banks, with an
enlightened self-interest, are eager to furnish. It is not
within the province of this paper to suggest any remedies, but to point out that a heavy responsibility presses
upon the shoulders of those to whom this great trust has
been committed not only to maintain the magnificent
prestige of their institutions, but to pass them on to
their successors, equipped for the demands of to-morrow. To the experience of age should be linked the vigor
of youth.
METHODS OF ORGANIZATION OF MUTUAL BANKS
Brief mention should perhaps be made of the usual
methods employed in organizing a mutual Savings Bank;
the simple legal requirements remain almost unchanged
from the beginning of the system; the state legislature
or the general law recognizes a given group of men who
apply for a charter as a corporate body and clothes these
men usually with power to name their own successors;
the depositor has no voice In the management and membership in the corporation or an active trusteeship is regarded as a community honor; in some instances the
local court passes upon the qualifications of those nominated to .fill vacancies. It is, of course, not be assumed
that a charter is granted to any body of men who seek
one; in times past abuses have occurred in granting such
privileges and to-day most of the states clothe their banking departments with power to give or withhold permis-

183

sion to start a new bank. The departments are guided by
the character of the men making application and by a
canvass of neighborhood conditions to determine if a
public need for such an institution exists. Organization
expenses and the early costs of administration are usually
taken care of by a guarantee fund subscribed by the incorporators; in some instances a bond is required in
order that the depositors may not suffer from the collapse of the institution in the early stages of its existence.
ACCUMULATION OF A SURPLUS FUND
In oraer to take care of inevitable losses, the mutual
bank immediately begins to accumulate a surplus or guarantee fund to serve the bank in lieu of capital. Some
state laws now provide that a certain percentage of annual net earnings be set aside until a minimum surplus of
three or five per cent. of the total amount of deposits is
attained, the rate of interest allowed to depositors being
fixed at a low figure until the minimum surplus is reached.
The maximum amount of surplus permitted is fixed at
ten per cent. in Massachusetts, at twenty-five in New
York, while other states prescribe no maximum but allow
a wide latitude of judgment to the trustees. Considering
the high average class of investments held by these banks
it would seem that a surplus maintained at ten per cent.
of total deposits would be ample for all emergencies, but
in the system as a whole the average protection is much
less than this amount, and many banks are even struggling along without having reached the minimum prescribed by law. This weakness will no doubt work out in
time.
STABILITY OF MUTUAL SAVINGS BANKS
Errors of judgment have often occurred in establishing
banks where they were not needed, and most of these
have died a natural death without inflicting losses upon
their depositors, the organizers having kept faith with
the people whom they were anxious to help; there are,
however, instances on record where banks were organized
purely because their promoters were seeking some selfish
end, and such banks always constitute a grave element
of danger. Following the Civil War there occurred the
greatest activity ever experienced in the organization of
new Savings Banks; in New York State alone in the ten
years following the war their number doubled. All the
New England States had a similar experience. Those
banks which came into being during this period in response to a real need and which were sponsored by highminded and conservative trusteeship survived the severe
depression brought about by the panic of 1873. Many
others were crippled and some went to the wall. A survey of the wrecks reveals that the losses suffered by depositors were surprisingly small; many institutions with
careful liquidation paid their depositors in full, nearly
all eventually paid a generous percentage of the funds
entrusted to them. It is gratifying also to relate that
actual delinquency in handling these funds has been exceedingly rare; embezzlements by officers and employees
have occurred, of course, but failures have been nearly
always due to ignorant and stupid management, to excessive interest rates paid depositors and to the natural
sequence of assuming unwarranted investment risks in
order to swell the income of the bank. It should be said
to the credit of most of those who have assumed the high
office of trustee that they have been loyal, diligent and
efficient. It is doubtful whether in any sphere of activity
more zeal and intelligence have been displayed than in the
conduct of these banks.
LIMITATION OF DEPOSITS
has been pointed out that the original purpose of
the Savings Bank was to encourage those who by their
daily toil and by dint of self-denial could lay by small
sums for the proverbial "rainy day." It has always been
assumed that normally in times of employment a margin
It

184

BANKERS' CONVENTION.

exists between necessary expenditure and the actual income of the working classes; of course, no one can save
money who is unable to earn it. The appeal of the Savings Bank is therefore not to the desperately poor—they
must receive alms—but to the modest earner of his daily
bread, who is thus encouraged to manage his affairs with
prudence so that the narrow margin between income and
-outgo may constantly widen, the difference to be put.aside
as capital. Such a policy is preventive and serves to
control the increase of indigence, for it must be recognized that pauperism largely draws its recruits from
those who could have saved if the thrift appeal had
taken root; many cannot be reached by thrift teaching.
The instinct to squander and to vicious self-indulgence
has a strangle hold upon them, but it is often possible to
reveal his folly to the foolish and to save the profligate
to habits of industry, sobriety and self-control; the appeal of the Savings Bank is to a man's manliness, his
scorn of dependence and his ambition to lift himself beyond his surroundings. It is evident then that the call
to the higher impulses of men comes with the same accent
to all who gain their livelihood through their.own exertions, for that man is poor who is dependent upon the
fruit of his labors and who is accumulating nothing
against a possible future want; the clerk with a salary
of $500 needs the protection of the Savings Bank and so
does the professional man with an income of $10,000.
Happily all classes have claimed the privilege of using
the facilities which the. Savings Bank affords; and the
larger deposits of the more prosperous have multiplied
so rapidly that our law makers have been led to fix a
limit to the amount which any one Savings Bank might
receive from a depositor. The effect of such laws was
immediately negatived by the opening of new accounts in
fictitious names or accounts in trust for others and by
opening accounts in several banks; in the minds of many
such a regulation is injudicious as well as ineffective, and
discretion may safely be lodged in the hands of the trustees as to the maximum balance which a depositor may
carry. Granting, however, that regular deposits should •
be limited to a given amount during the month or during
the year, it is surely unnecessary to limit the total accumulations of the individual depositor; the ability to
invest money wisely is possessed by few; a hardship is
Imposed upon the self-denying depositor who reaches the
goal set for him by the law—$1,000 or $3,000—and is then
compelled to invest the further fruits of his industry; his
nature is not changed by magic as soon as Ile attains
the coveted end; he is still a mechanic or clerk or business man with the same investment limitations as before
and still needs the help of his bank. Most professional
men are so engrossed in their daily task as to be unable
to give attention to the principles of investment and their
earnings are an easy mark for the plausible vendor of
unsound securities; many good business men confess to a
similar ignorance; and the Savings Bank should offer a
safe refuge to all who desire its protection. LlIcewise,
the widow who receives a lump sum of life insurance
should not be compelled to divide her all into several
units if she prefers to entrust the whole to one bank in
which she has confidence, nor should she be compelled
to assume the risks of investing it. An incidental advantage of the large account is that it serves to reduce the
ratio of expense to deposits, and this inures to the benefit
of the small depositor; the element of danger is that in
times of panic withdrawals of large sums might necessitate the sacrifice of securities in order to meet the unusual drain; the general experience of the strong Savings
Bank is that in seasons of stress their large deposits usually remain undisturbed; this objection, however, if real,
may be overcome by a by-law provision grading the length
of notice required according to the amounts applied for.
It has in this way come about that the Savings Bank is
meeting other social needs than simply caring for the
modest savings of the humble daily toiler; it has become

a reservoir of such ample dimensions as to invite the accumulations of those who enjoy a moderate degree of
affluence.
THE SCHOOL SAVINGS BANK
The school Savings Bank was first inaugurated in
France in 1S34; it was believed that early training in the
principles and habits of thrift would yield handsome
dividends, not only in character but in subsequent material benefits; the venture met with great success and today France leads the world in the vigor with which this
work is propagated and in the results achieved. In the
United States it was introduced through the zeal and
energy of Mr. John H. Thiry of Long Island City in 1885
and is now firmly entrenched in the public school system
of several states. This work is purely philanthropic and
Perhaps can never be made to pay its own way, but it
renders a service to the community of inestimable worth
and the indirect advertising benefits to the participating
banks offer at least a partial compensation. Several
practical plans have been devised for introducing the system in almost any school and some of them provide that
the necessary clerical service be furnished by the scholars: a lively interest is being manifested by boards of
education throughout the entire country and its general
use would have a telling influence upon the next generation. Statistics have been gathered from which it ap•
pears that there are in existence 1,925 school Savings
Banks with approximately 400,000 depositors who have
$1,S00.000 to their credit—an average of about four dollars and fifty cents for each depositor.
THE UNITED STATES GOVERNMENT ENTERS THE SAVINGS
BANK FIELD
Toward the close of the Civil War—with the intention
of helping those who were about to receive their freedom
—Congress named forty men as incorporators of a new
bank to. be known as the "Freedmen's Savings & Trust
Company";, among these men were Peter Cooper and
William Cullen Bryant. Thirty branches were established in various parts of the country and the savings
of the nation's new wards were gathered into the maw
of this experimental institution, fostered under national
auspices. The charter contained strict investment limitations and was carefully guarded in nearly all other provisions for the safety of the fund and for the careful execution of the trust; little care, however, was given to a strict
observance of the charter requirements and amendments
were secured in 1870 which permitted the investment of
half of the bank's deposits in real-estate loans. Through
loose methods in the central office and crafty agents in
the various branches, the funds were soon dissipated and
the institution went to the wall with a crash, owing its
depositors three or four millions of dollars. The post
mortem revealed that the trustees had been too confiding
in their agents, who had loaned on worthless securities
and real estate which either had no value or was not
marketable. The honor of the nation was stained in
respect to a purely sacred obligation.
POSTAL SAVINGS BANKS
The marked success in Europe of the Postal Savings
Bank—which was apparently first inaugurated in England in 1861—naturally led our law makers to investigate
the possible benefits of introducing the system in the
United States; the party platforms in several successive
presidential campaigns were committed to the plan, but
Congress seemed loath to adopt it in the face of an almost
unbroken front of opposition from the banking interests
and of the uncertainty of the public need-of such an institution. It was claimed by those who opposed the measure that under our system of government a postal Savings Bank would quench private initiative, that the plan
was Paternalistic and un-American, and that our govern-.
ment should not enter the banking business in competition with the existing savings agencies. It was pointed

SAVINGS BANK SECTION.

•

185

out, on the other hand, that many communities had no savings are not to be discouraged but warmly welcomed
if the welfare of the depositors is not put in jeopardy.
savings facilities whatever; that a large element of the
Allusion has already been made to Savings Banks with
population hid their money, which was thus lost to circulation, and that the government owed this service particu- capital stock; it now remains briefly to refer to severaf
larly to its large foreign population who had been accus- other channels which are open to the use of the people
tomed to the use of the post-office banks in their mother in providing against the frown of fortune although the
country and would not trust our private Savings Banks. service rendered is primarily selfish.
After much delay a measure was framed and finally
By recent legislation national banks are permitted to
passed on June 25, 1910, providing a postal savings sys- operate special savings departments; many banks in the
tem which was designed to meet many reasonable objec- rural districts have been receiving this class of deposits
tions which had been urged to its adoption. In the rate for years but without specific authority. The latest figof interest to be paid (two per cent.), in the rigid and
ures furnished by the Comptroller of the Currency show
narrow limitations of the total accumulation permitted, that 4,793,670 savings depositors have $919,731,000 to
$500 at first, since increased to $1,000, and in the use their credit in the national banks; state banks have
made of the gathered funds—ninety-five per cent. to be 3,400,000 savings depositors with $600,000,000 to their
deposited in the local banks—much of the "sting" of the credit; loan and trust companies 2,500,000 depositors with
measure was withdrawn; its growth was at first disap- $1,053,000,000 in deposits; private banks have 100,000 depointing and it was at once evident that the system was positors and $1,800,000 in deposits. In this enumeration
not invading the territory occupied by other banks, but it should also be noted that there are 6,806 building and
was actually drawing money out of hiding places and loan associations with assets approximating $1,500,000,000
belonging to 3,000,000 shareholders; this class of instituwas making a strong and successful appeal, as was predicted, to the distrustful foreign element. Postmasters tion is more closely allied in type to the mutual Savings
Bank than to the commercial institution.
reported that the limitation of deposits to $500 .was a
serious hindrance to the usefulness of the system, and
WIIAT OF THE FUTURE?
after much difficulty Congress was persuaded to raise the
limit to $1,000 and gave the trustees discretion to receive
The figures which have been used to measure the extent
an additional $1,000 but without interest. The European
of our harvest of savings when combined reach stupenWar brought to a sudden stop the heavy volume of small dous proportions; in all classes of institutions there apremittances made by our foreign laboring classes to their
ear to be 25,000,000 savers who have at their command
dependent relatives abroad and these sums at once began
resources of $8,500,000,000, an average of about $340 for
to pour into the local postal Savings Banks; the chaotic each depositor. It is obvious, however, that a large numcondition of financial affairs then existing and the en- ber of people have several savings accounts, and it is perhaps safe to say that only one person in five in our counforcement by many Savings Banks of the rule requiring
try is using the resources at his Command for safeguardnotice for the withdrawal of deposits, influenced many
ing his future against want; this situation creates the opto avail themselves of the ready and secure shelter offered
by the Government Savings Bank; the result, of course, portunity and the privilege of the future. The price of
was a tremendous influx of new accounts and largely inprogress is effort; what a happy augury then that the
creased deposits in all the savings centers and particubanking conscience is now aflame with the new responlarly where the foreign laboring element existed in large
sibility which fate seems to have thrown across its pathnumbers; when the war began in August, 1914, the sysway. The devastation of Europe places the burden of
tem had deposits of about $44,000,000, the accumulations
financial leadership upon America; our captains of
of about three and a half years; during August, 1914, the finance must have access to the many streams of wealth
increase amounted to upwards of $4,000,000, and this ab- flowing from the remotest recesses of our land, and all
normal expansion continued throughout those weary
must help to keep the channels open in order that there
months of apprehension in the summer and autumn of
may be no lack in the central reservoirs. The banking
1914. The latest figures, July 31, 1916, show that there
world recognizes as never before its duty to those as yet
were 7,087 post-offices accepting deposits in the United
unreached by the call of thrift and the future is rosy with
States, Alaska, Porto Rico and Hawaii, and that 612,000 promise.
depositors have to their credit $89,700,000.
In a largely augmented army of savers we shall see a
wider distribution of the stores of wealth, a cheerful and
•
OTHER AGENCIES FOR SAVINGS
hopeful people and a country prepared to respond to the
It is evident that the prime function of the pure Savworld call for help. With increasing material possessions
ings Bank is educational and philanthropic rather than
we shall see the quickened pulse of power; in the release
gainful; the accent is upon an unselfish ministry and not
of a new-born energy of mind and body we,shall see the
upon the accumulation of profits; this theory, however, nostrils of men dilated with the breath of a new life; a
does not mean that a helpful and a welcome service can- mutual share in the world's work will create a real brothnot be rendered from a motive that is commercial and
erhood of man and bring to pass the reign of good will
largely selfish; many things of the greatest value are on earth.
oftentimes purchased at a heavy cost; barter and exIt is a high privilege to take part in lifting the veil
change involve reciprocal profits and benefits, and those
which hides the beautiful and in ushering in the golden
agencies which bid a price for the use of the people's
days when "man Is man and master of his fate."

186

BANKERS' CONVENTION.

The Social Aspect of Thrift
BY GRAHAM TAYLOR, Head Resident Chicago Commons Social Settlement, President Chicago School of Civics and
Philanthropy.
The prominence given thrift on this program is of more
than commercial interest. It has a prfound public significance, and should have far-reaching effect, not only
among the people individually, but upon the progress of
their public affairs. Through most of these hundred
years, one of whose great achievements we are commemorating, thrift has been proclaimed the American's
private god and Benjamin Franklin his prophet! But during the last half of the century the human situation has so
rapidly and radically shifted, that thrift can no longer
be regarded only as an individual habit or a personal
virtue, but must also be dealt with as a far more complex and public problem. The individual independence
of the pioneering and colonial Americans has become
more and more impossible, as craft has become dependent
upon craft, class upon class, country upon city, nation
upon nation, each one of us upon the many, in the inextricable interdependence of modern life.
While, therefore, thrift is still rightly to be considered
and encouraged as an individual habit and a personal virtue, yet this hour demands the interpretation of those
human situations which complicate and enlarge the single
and simple meaning of the term and impose thrift as a
public duty upon every group, community and nation.
Thriftless is the thrift that sacrifices the life to the
livelihood, the person to possessions, the family to its
heritage, the community to personal greed, and the national loss of the many to the gain of the few. In encouraging economy and "savings," the individual's own
interests should be safeguarded from a foresight which
becomes oversight, overlooking the further future in providing for the immediately impending needs and opportunities. For, have we not all seen far too much of the
waste of life and the stagnation of wealth when thrift
degenerates into the consuming habit of hoarding? The
failure of hoarding wealth luridly lighted its own warning beacon in the empty lives and the despairing cries of
two rich, old hoarders. One of them despairingly deprecated the approaching end of life by the lament over his
burdensome wealth, "It is so hard to let go." The other,
lying on his death-bed, which was littered with the certificates of his invested "savings," desolately complained
of the loss of his children's love and companionship, while
admitting that he had never taken time to pick them up
in infancy or play with them in childhood.
An individual's thrift is thriftless when it is at the expense of the group. The family has human rights which
the thrift of its individual members is morally and economically bound to respect. A father's savings often costs
the loss of the mother's health, the children's physical and
educational.equipment,and the success, even the very function of the home, are made impossible by the unfitness
of the house. Family thrift is a common feature of home
life among the laboring poor. Many a mother receives
the unopened pay envelope, not only from the children
of working age, but from the husband as well, all trusting
her to be the spender and the saver for the family. The
promotion of thrift by the encouragement of a family
savings fund is worthy of our best thought and effort.
The vacation and Christmas savings encouraged by savings banks, and still more by "penny savings" agencies,
are beginning to help the family to capitalize itself. And
yet the discouragement of a boy from withdrawing his
penny savings died away from one's lips, when the little
fellow explained, "Mother needs a new set of false

teeth." And the little hero's spendings proved thriftier
than his savings.
The community is put in many situations in which it is
found necessary to regulate and even restrict individual
thrift, in order to protect and promote the thrift of the
group from that of one of its members, the thrift of the
many from he greed of the few, the safety and progress
of town, county, state and nation from the exploitation
of thriftless thrifts. Thus laws restricting the hours and
conditions of women's work are enacted and declared
constitutional on the ground of public welfare, notwithstanding the objection of opponents against interfering
with the thrift of the woman who wants to overwork, and
that of the employer who profits by overworking her.
The very birthrate and birthright of the nation are thus
defended.
Compulsory schooling is now a prevalent public policy,
with penalties for parents who seek the earnings of their
children at the cost of their growth and education. Child
labor laws are firmly based upon the proven thriftlessness of robbing the child of its schooling, play, strength
and efficiency, for the sake of small temporary gains.
But it required the recruiting sergeant's rejection of so
large a proportion of men as unfit for military service, in
order to bear home the wanton waste of child labor as
the shame of modern industry and the folly of the nation.
But now many of our states are even pensioning dependent mothers, rather than to deprive their children of the
mother's care and of their right to free childhood, either
by being put away to be cared for by institutions, or by
the necessity of earning the livelihood of the home.
The sanitary inspection and condemnation of tenement
houses and shops have been found necessary, in order to
curtail the thriftiness of their owners at the expense of
their tenants and empolyes, as well as at the peril of the
public health and safety. The "new law" tenements of
New York City let sunlight and fresh air into the living
and sleeping rooms of a million people, who otherwise
would have lived and died in dark rooms whose only
opening toward the light and air was through other apartments. The abuse of property rights• in real estate by
renting houses for disorderly resorts has become such a
menace to the morals of the community and such a danger
to its youth, that the extraordinary interference of the
law in the "injunction and abatement act" has been
found necessary and declared constitutional on the
grounds of public safety and welfare.
The abuse of thrift by the few at the expense of the
many and at public cost has led to many legal measures
and governmental policies protecting and promoting national thrift. Thus parasitic trades are prevented by
minimum wage laws from making their profits at the
expense of other trades or of the body politic. Other people
is other trades and the taxpayers as well, are thus refusing to bear the cost of eking out the living of those at
work for less than a living wage and in seasonal occupations. Sweated industries are also being purged of their
blood sweat, both by the revolt of their organized workers
and by legal measures for their relief. The sweating of
tenant farmers by absentee "retired" landlords as
desperately needs to be dealt with. None kno*s better
than the rural banker how the retirement of farmers
thwarts the thrift and progress of many retired farmers'
towns.
"Safety first" is not only the nation's indignant pro-

SAVINGS BANK SECTION.•

187

other. No one in the community is so well situated to
test against the wanton waste of life, of which America
do this service. The bank itself is a clearing house of
has been more guilty than any other nation, but it is the
more common interests than those which we call comrallying cry'of a new national economy, conservation and
preparedness. The steadily decreasing railway dangers, mercial. It is the exchange where other than money
values change hands anethrough which other values than
the ever lessening casualties in factories and shops, the
commercial paper are cleared. As a community center
protection of life and property at sea by Plimsoll's water
for the exchange of such values, the bank shares and exline on freighters and by our own seamen's act, all show
ceeds the informational and inspirational function and inwhat is being done and can be attempted through private
and public measures alike to prove that dangerous econ- fluence of the country store, the village blacksmith shop,
omies are wasteful and death-dealing greed is thriftless. the lumber and building material yards in rural communities; and in town, it supplements the newspaper, the
Uniform safety legislation is still required to standardize
thrifty conditions, to protect progressive states and in- stock and other exchanges, the executor or guardian, and
it is often the substitute for one or all of them.
dustries, especially the mining interests, from the unfair
Few have a function to fulfill so vital alike to incompetition of those disregarding life and limb, and to
dividuals and to the local community as the banker. He
conserve the nation's greatest assets in the lives, the
health and the efficiency of its people. Even this fails is the trustee of Ao much confidence. His confidants range
to protect life from the most dangerous of all occupations. all the way from the widow and the orphan to the
treasurers of vast trust funds and of great public deFor, the death every year of at least 300,000 chilposits. The bankers' responsibilities are as serious as
dren under two years of age from preventable causes
still rates being a baby as the Most dangerous of his opportunities are inspiring to promote personal and
public thrift and make each advance the progress of the
all occupations. No national thrift is more fundamental
other. None so well as he knows, or can know, how necesthan the conservation of child life by the Federal Children's Bureau, the American Association for the Preven- sary the progress of the community is to the prosperity of
every one of the people living in it, and how impossible
tion of Infant Mortality, and the National Child Labor
it is for the community to prosper if its citizens are not
Committee.
progressive. Therefore bankers individually and colThe public ownership of some public utilities, and the
lectively are more and more inciting and • supporting the
public control of all others, is now recognized to be the
legitimate thrift of every community. The protection of
promotion of community interests through surveys, by
immigrant labor from exploitation is a national safe- agricultural, mercantile and manufacturing developments,
in providing better schools, more time and equipment for
guard, as well as justice to the immigrant. The tardy
recreation, good roads and transportation facilities,
recognition of unemployment as a problem far beyond
more participation in public affairs and greater efficiency
the capacity of the unemployed, or of private charity to
solve, is at last proving it to be public economy for the in the administration of public institutions, business and
city, the state and the nation to assume as the problem of local government.
Thrift is the point of contact between the multiutde
each and all of them, not only the relief, but the prevenwho know you not and you who should know them better.
tion of unemployment.
To interpret thrift from your point of view not only, but
The progress of mankind is measured by the multiplication of wants and by increasing the ways and means of to broaden your view of it by sensing the human situasatisfying them. As surely as the charity of today is the
tions of the greater multitude that are still strangdrs to
justice of tomorrow, so surely are the luxuries of today
banks and bankers, is the appeal and hope of this hour.
the necessities of tomorrow. This creation' of human • By virtue of your double function as the friendly, conwants, not their curtailment, is civilization. The thrift fidential counsellors of so many individuals, and as offithat spends as well as saves, is what makes the com- cials of an institution that is or ought to be under public
control, you bankers have a greater obligation and oppormunity a going concern.
tunity than any other citizens to protect both the inDifficult and delicate, therefore, is the task to define
dividual and the community from thriftless thrift and to
thrift so as to make it apply equally to the personal and
promote the thriftiness of both, by proving that neither
public values of the one human life each of us lives and
can succeed if the other fails.
the common life all of us live together. It is a good sign
Yours also is the patriotic trust to conserve the conof better times that industrial and commercial, professional and civic, educational and religious groups realize fidence of the people in the government and to safeguard
this to be their problem. Associations of Commerce are the financial honor of the state and the nation. For you
becoming schools of citizenship, training commercial men are so much regarded as representing the state's guardian
to trust their best service of the city in the long run to
care of its people's interests that you have the right and
serve their trade the most. Lumbermen's associations
duty to consider yourselves to be in the semi-official
discuss in their papers and in their conventions their op- service of your country. Either the state should have
portunity to be "community builders," especially in coun- such oversight and control of banking as will safeguard
try counties, where the lumber yards are the points of the people's confidence in the banks, or they should at
contact and distribution for the surrounding countryside. least be prohibited from using the name of the state in
The Retail Merchants' Association is linking up the coun- the title of the bank, or from posing as a public institutry store with the country town for the protection and
tion. When the Milwaukee Avenue State Bank in Chiadvancement of both. Country ministers recognize and
cago was looted, my poor foreign-born neighbors, who
had entrusted to it the scant savings of their hard toil,
utilize the country store as an exchange, not only for
could not believe that the state which loaned its name
commodities, but for the interchange of intelligence and
to the bank would not protect them from loss and justify
discussion and the creation of public opinion, so that some
their confidence in the state. Then I realized as never
of them are using the store to meet the men for religious
before what treason it is for a banker to play false to
and appeal. Manufacturers are finding it to
instruction
and an inbe good business to care for the human elements at least the people and what a bulwark of the state
spirer of patriotism a bank could and should be.
as much as for the raw materials and the finished products
Out of the appalling thriftlessness of this most destrucof their plants. Commercial establishments are becoming
tive of all wars, the banking interests of the nations will
like great households, holding employers and employes
be called upon to restore the financial bonds of a new
together best by promoting their community of interests. internationalism, and something of its spirit as well. No
world-wide exchanges of international credits have
But the question arising out of these human situations such
ever been negotiated as in America during the war. Perwhich we have been considering and that is put up to the
haps this necessity to which we have thus ministered
banks and the bankers to solve, is how to make private
may be the mother of invention adequate to establish
the thrift of international peace.
thrift and public welfare supplement and serve each

•BANKERS' CONVENTION.

188

"Thrift and Human Nature.
By GEORGE E. ALLEN, Educational Director, American Institute of Banking.
Mr. President and Gentlemen:
Thrift means something more than conservation of
dollars and cents; it means the conservation of manhood
and womanhood; it means furthermore the conservation
of human nature with all the perversities that human
nature possesses.
It is the fashion to say that all bankers are Shylocks,
that captains of industry are crooks, that trade unionists
are anarchists, that politicians are corruptionists and
that society in general is breaking the speed limit on the
highway to hell. The truth is bankers individually are
among the most popular of men; that captains of industry
are philanthropists in accordance with their limited light;
that the average trade unionists can be trusted with your
money, your life or your wife, and ninety-nine per cent. of
the politicians represent the moral and intellectual standard of their constituents with mathematical accuracy., The
criticism in all these cases is against the class and not
the individual that constitutes the class.
If class hatred could be used not in destruction but in
'construction it would revolutionize society. Here is an
'opportunity for some agency of research. Rattlesnake
venom has been found valuable in medicine, is it not
possible that class hatred can be used in some such way?
It is the fashion to point to Babylon and Rome as
precedents among nations in rising from poverty and
savagery and in falling from wealth and luxury to decadency.and deterioration. It is possible that the history
of Babylon and Rome is repeating itself in the United
States of America, but other history teaches that evil
tendencies can be forestalled. In the garden of Eden,
Adam and Eve were safe in overwhelming luxury. If the
garden of Eden could have been modernized, Adam would
doubtless have been a purchaser of paintings, painted
hundreds of years after the painter had died, and a creditory nabob traveling the world over in search of mineral
waters advertised to cure rheumatism and gout. He
would have doubtless been rather more or less skilled in
playing bridge whist and a liberal patron of every uplift
fad. He would have been a standpat politician until he
had learned the political game well enough to be a professional reformer. When Adam and Eve became decadent
the Lord commanded them to get out of the garden of
Eden and dig or die. They dug. And in digging recovered their physical, mental and moral vigor. And it is
the history of the garden of Eden and not the history of
Babylon and Rome that gives the precedence in economic
destiny.
There are hoboes at the top and bottom of society, as
society is usually classified, and it is the hobo problem
that civilization must solve or suffer the penalty of decadence and dissolution.
The idle rich are being busied by the income tax, but
the idle poor are yet a problem. In the early stages of
civilization where a wolf comes and goes in haphazard
fashion it is easier to keep the idle rich and the idle
poor in palaces and almshouses than it'is to provide them
with work, but as civilization crystallizes the economic
shoe begins to pinch.
- What to do with the idle poor is a question that the
"world has not yet solved. Various schemes have been de-vised but none of them have yet worked, but it does not
follow that they never will. In these days of airships
and submarines, difficulties are no longer difficult.

Charitable schemes have thus far done very little except
to make poverty a vocation and the relief of poverty another vocation, both parasites, and I am told the sixth
great financial industry of our country.
There is something that must be done. Now, the ideal
condition would be one where every adult man and woman must Le in one of three places: At work, in some hospital or in some jail. There would then be no charity as
the word is loosely applied, no panhandling, and a great
condition would be overcome.
And I wish somebody would figure what it would cost
to do that. As Mr. Robinson quoted from Daniel Defoe,
to furnish work for the unemployed is not a solution of
the problem. That is on the presumption that the work
Is competitive. If it is not competitive there is no objection to it.except the objection of cost, and what it would
cost to bring that condition is something worthy of investigation. It is not a problem for the sentimentalist, it is
not a problem for the agitator, but it is a problem for the
accountant, who judges all things and all men on the
basis of the balance sheet. But this idea of furnishing
public employment is not new, we have been doing it for
years and are doing it now. We will put in the public
service men, from ambassadors to tax collectors, for the
purpose of giving somebody a job, and not for the purpose of getting the most work for the price paid, and the
amazing thing about that is the comparative efficiency of
this class of men; it gives us hope in hobo humanity and
courage to try to work out some problem.
Mr. Robinson referred to Tammany Hall starting as a
benevolent society and now the largest employment agency
on the face of the earth. They get jobs for at least a
hundred thousand people in New York that would otherwise be a menace to that city; and I am not so sure that
Instead of being the devil-devised organization, it is better than thousands of others that claim some uplift pur-,
pose. These things are worth thinking about. Now, /
don't know enough to solve this question. If I did, I
would be running for President of the United States and,
Wilson and Hughes and all of you would be supporting
me. But the point I am making is these are things to
think about, they have got to be done. This question between capital and labor has to be solved and can't be
solved by the annihilation of one of them. They have got
to get together, and I don't see how they ever got so far
apart.
The original idea of the corporation, for example, was
where the king gave certain rights to his subjects to do
something he could not do, for the benefit of the sovereign
rather than the subjects. Our corporations have gotten
away from that and they ought to get back, and there is
no reason why they should not. Our greatest railroad today is practically socialistic in the division of its thousands of stockholders. The great Steel Corporation is getting more and more so every day, and it is perhaps
through the hated corporations we are going to get a degree of individual representation that the socialist dreams
of.
These are only ideas, but what can you gentlemen do
with them? The great movements in the history of the
worlud have come from the conflagration of some idea.
There is the idea which inspired the Exodus from Egypt.
There is the idea—it is the conflagration of ideas which,
has brought about every great religious and political reform in the history of the world, and perhaps you can stir-

SAVINGS BANK SECTION.
:round the idea of thrift with a fascination that will
bring to that common point all classes of people, as people
in the warring nations, the aristocrat, the noble and the
'poor, rally around the flag of their country. What you
want is some rallying point, some slogan, and if you can

189

get all classes of society in this country to rally around
the idea of thrift, if you can get the American people to
think thrift, to talk thrift, and to act thrift, perhaps you
have got the avenue that will start more than anything
else our country on the way to the millenium.

"Centennial Campaign for Thrift"
By VICTOR A. LERSNER, Comptroller of the Williamsburgh Savings Bank, Brooklyn, N. Y.
The example at Chattanooga is worth particular notice. •
and GENTLEMEN:
Here a very complete and efficiently conducted campaign
The origin of this Savings Bank Centennial dates back
was instituted resulting in an immediate gain of 23 per
to the Convention held at New Orleans in 1911, when gencent. in new savings accounts and of 70 per cent. over
eral approval was given to the plan for such a celebration
the record of the previous year.
In 1916.
The Chattanooga -Chapter organized the "Chattanooga
At each successive convention thereafter the subject
Association for the Promotion of Thrift and the Spirit of
was considered with increasing interest, and last year
Conservation" among their people, and is distinguished
at Seattle the plan was ready for definite treatment, a
for a number of suggestions which were gladly incorCommittee being appointed to care for the interesting and
porated in the nation-wide compaign of the Association.
appropriate celebration of the Centennial Anniversary of
To all these helpful factors this Committee offers its
American Savings Banks.
acknowledgment for their considerable co-operation, and
The gladly accepted task for this Committee was how
particularly to the National Committee of the Young
to fittingly mark the occasion.
Men's Christian Association, for this body has been a host
Rather than confine it to a Centennial Celebration of
whatever proportion it was deemed wise to give it a back- in disseminating the value of our principles through the
medium of Thrift Exhibits and lectures as well as adground of substantial activity.
dresses in every nook where audiences could be secured.
A nation-wide Thrift Movement to reach every section
No limit of praise is due the Young Women's Christian
of'the country was considered the most becoming in form
Association for their wide circulation of valuable direcand prospect.
tion to their 400,000 members, for the cultivation of thrift
The object of those who planned the first institution for
in the home is conceivable of large importance.
savings in this country was the amelioration of the conThe immigrant, so generally ignorant of American
dition of the poor and the inculcation of the princibles
of thrift in the mind of the public, making for better . ideals and customs is being taught the real value of our
savings institutions through the National Americanizacitizens and promoting greater efficiency.
tion Committee.
The result of this first century of campaigning reveals
Possibly the best of all, the youth of our country are
the savings in all of the banks of the country to total
being brought into the influence of thrift habits. The
some $8,500,000.00 and it became the ambition of this
broad growth of school savings banks and their unCommittee to conduct a movement for thrift which woult1
be in measure with the vastness of this sum and the im- doubted extension is certain to make for lasting good for
the coining generation.
portance of the institutions holding it.
The commendable efforts of the Curtis Publishing ComOur first efforts were directed to securing the co-operapany to encourage the boy to acquire a savings bank
tion of several organizations through which we could
account is well worthy of mention. •
effectively conduct propaganda.
These combined factors could work a wealth of inits seventy
The American Institute of Banking, with
chapters, was early enlisted, the International Committee fluence in their different spheres, but to carry through a
real nation-wide campaign, one which would be truly in
of the Young Men's Christian Association, the National
proportion to such a title, it was all essential that we
Board of the Young Women's Christian Association, the
secure some organized body, equipped for carrying on
National Americanization Committee of Immigrants in
such work for concerted action from the greatest number
America, and the Chamber of Commerce of the United
of points must be had. Desire had to be supplemented
States responded to appeal.
with well developed organizations. A movement both
It required vast correspondence to perfect such an
new and nation-wide required a vast and powerful maorganization. The task, while huge, was necessary for
the foundation work of the great movement which has chinery.
Lacking funds, facilities, and familiarity to cope with
grown into such real importance.
these needs the Committee sought the co-operation of a
In December, 1915, the Committee compiled a text book
entitled "Thrift—How to Teach It, How to Encourage thoroughly reliable and expert bank publicity company,
and in co-operation with them constructed a plan for a
It," and of the 6,000 printed copies, all but a few have
thrift campaign.
been distributed to those. bodies requesting them.
The product of our joint efforts seems capable of doing
The value of the publication was instantly perceived
that for which it was designed, i. e., to reach the inhundreds of inquiries from communities asking for
In the
dividual and impressively impel him to save and conserve.
further information concerning a local campaign.
It is proposed to serve 2,000 communities throughout the
An idea of the interest developed is shown in the fact
United States in conducting a Thrift Campaign either
that more;than 104,000 pieces of mail were sent out from
under this particular form or some other.
the Section's office for the fiscal year of 1916.
Our duty seemed to be one of suggestion and construcThe results accomplished by Chapters of the Institute
tive advice. Our earnestness was to create a great unified
are especially pleasing, particularly' has this been true
thrift action which would direct the public mind away
of Chattanooga, New York, Atlanta, Dallas, Macon, Ga.,
Baltimore, Jacksonville, New Orleans, Los Angeles, from waste and extravagance and to thrift and con'Spokane, San Francisco, Albany, Minneapolis and Denver. servation.
Mr. PRESIDENT

190

BANKERS' CONVENTION.

The country needed such a movement and very much
continues to need it. The success that has even now
attended the plan gratifyingly attests to the sense of our
conclusions.
The fact was all too obvious that upon the humblest
as well as the highest rested the future progress of this
country.
The stability of our economic and social life rests in
the main on the spirit of independence in the individual
member through the practice of thrift.
To definitely change public thought from extravagance
to frugality is possible in two ways.
Adversity is an unfailing medium, but all too summary
to accept, if avoidable.
—Education resulting from a nation-wide thrift campaign
• could be quite as efficacious, but it must have for its
sole aim something more than the mere harvesting into
banks of dimes and dollars, however much this result is
to be desired.
Rather should it seek to acquaint the people with the
real potential purchasing power of money. To spend it
wisely by getting the most for it; to make it earn more
for them—but everlastingly avoid the lure of the
swindler; preaching the principle of sound investment,
or what to do with their precious funds after saving
them.
Summarized, it is to have our people gain a mastery
of their wills and give direction to their purposes; to
iiindle new ambitions in our hundred million citizens;
to cultivate a closer intimacy between public and banker,
ilsupply our youth through our education systems with improved means of approaching their life work; to instill
new ideals of thrift in the home, a money sense in the
future burden bearers of business; to forestall the dire

circumstances of old age from lives unguardedly spent;
to furnish constant impulse and inspiration to all classes.;
to have all thrift in time, energy and material, and not
the least of these develop a broader vision in the banker
of his duty to the public and need of his more generous
spirit and action in gratuitous public service.
In a word, to help people find themselves. To make
thrift a popular individual habit and a national trait.
In spite of the natural difficulties and arduous work of
blazing new trails, our Committees sees bright prospects
of thrift in this Nation.
Optimism must flow from the zeal and enthusiasm
which has been so far realized, and surely augers well
for the new century of savings banks in the United
States, which in turn spells prosperity for all banks.
The Centennial celebration at this Convention which is
intended as a climax to the campaign was proposed at
Seattle last year and planned for New York City.
Due to a very successful celebration and savings bank
centenary in that City during May of this year under the
direction of the New York State Savings Banks Association it was thought well to bring this celebration to this
City during the American Bankers' Association Convention.
Such plans as have been conceived to make the celebration appropriate to the occasion have been the result
of most splendid co-operation, under the direction of Mr.
W. S. Webb, from the bankers of this beautiful city,
whose hospitality we meet so constantly and abundantly,
and to them we very much desire to express our deep
appreciation.
In closing, the Committee feels called upon to confess
Its sense of honor in having the supervision of the campaign and arranging for this celebration of American
Savings Banks.

Postal Savings
BY CARTER B. KEENE, Director of Postal Savings, Washington, D. C.
Gentlemen of the Savings Bank Section of the American
Bankers Association:
Let me say at the outset that I count it a signal honor
to participate in the exercises of today, and my appreciation of the honor has increased as the importance
and meaning of this centennial of savings has grown
upon me. I have watched with interest the campaign
of thrift that the Savings Bank Section has conducted
during the past year. No period of our national life
could be more opportune for such a campaign than these
days of peace and plenty. No propaganda could have
been more ingeniously contrived, more effectively conducted or more fittingly climaxed. Postal savings has
felt the force and inspiration of your efforts, and I trust
we have done something in our appointed field in advancing the great crusade you Ikave carried on. We
were glad when your secretary, Mr. Harrison, invited
us to join with you. Government and private savings
ugencies must necessarily run in the same general direction, and they need not cross or collide. It is infinitely better for both that they continue on terms of
cordial co-operation. The plan of salvation is broad
enough for the brightest and darkest places in all the
world; for every race, every creed; the banks are the
churches of savings, postal savings is the "Salvation
Army" of thrift. As Admiral Schley said at Santiago
when others were vainly contending over honors,
"There's glory enough for us all."
When I discussed postal savings before the American
Bankers Association at Boston three years ago, I was

a mere novice in my work, and therefore compelled to
rely largely upon the experiences and conclusions of
those who had been identified with the service from its
Inception. How well I remember calling my chiefs about
me to get stuffed with facts and figures for the gruelling
ordeal I foresaw if the minutes of earlier conventions
portended my probable fate. Big the warmth of your
welcome and the candor of your discussions soon dispelled my apprehension, and I went away with the
cheerful assurance that there would never be any controversy or conflict between Government and private
savings institutions. Three years have passed, memorable years, trying years, and in all this time we, in postal
savings, have tried to look above and below the balance sheet out into the wider field. I am particularly
glad of this opportunity to tell you gentlemen what
postal savings has done, and what I, speaking for my1
self alone, believe should be its future course.
The Postal Savings System has been in full operation
a little over five years. The glamour of novelty has
worn off, and it has had time to settle into a well-defined
field of activity. We can now look backward and forward with a large degree of assurance. Of course, it
would be easy to contract or expand that field, but contraction would abridge the reasonable expectations of
the public, and expansion—I do not mean growth—
might lead to unwarranted invasion of the,domain of
private enterprise. The range of postal savings activity
will never,suit everybody. We are constantly receiving
complaints that we have not gone far enough, others

SAVINGS BANK SECTION.
'charge that we have gone too far. Some want the Government to do almost everything, others want the Government to do almost nothing. But it seems to me there
is a golden mean. I do not believe the Government has
a right to compete with private activities, if those
activities be adequate, nor do I believe that the Government should shrink from any urgent nation-wide undertaking when it alone has the power and agencies to
make the enterprise a success.
Many prominent men in banking circles conscientiously opposed the establishment of a Postal Savings
System in the United States. They regarded it a dangerous and unjustified departure from our national policy. But I believe, in the light of five years' experience,
that their objections and apprehensions have been'
largely overcome and dissipated. I feel sure the verdict
today is almost unanimous that postal savings has filled
a neglected niche in our social and economic systems
which this country could no longer afford to ignore.
America was one of the last of the great nations to
adopt postal savings. Spain, Portugal and the Argentine
Republic have since fallen in line, so today practically
every large nation in the world has a Postal Savings
System. Germany, which still adheres to a wonderfully
successful system of Government supervised municipal
savings banks, is the one conspicuous exception.
While the deposits in this country are still small when
-contrasted with the enormous savings in private institutions, or when compared with deposits in some of the
foreign postal savings banks, still we get a glimpse of
the important part our service is destined to play in
fiscal affairs when we consider that the postal bank of
England has a billion in deposits, the accumulation of
sixty-five years. Yet the growth of the American postal
savings bank in the first five years of its history was
more than double that of the British bank in the like
period.
Another encouraging feature develops in the constantly
Increasing average postal savings account. On July 1,
1913, it was $102; three years later it was $143, far exceeding that of any other nation of the old world.
Japan, with the largest number of individual depositors
—more than 13,000,000—has an average account of only
$7.81.
On July 1, 1913, when Postmaster General purleson
effected a reorganization in the practice and personnel
.of our System, the deposits amounted to $34,000,000,
standing to the credit of 331,000 depositors. Today we
have approximately $100,000,000 on deposit, owned by
.625,000 depositors. What has brought this gratifying
Tesult? War, publicity, prosperity and liberalizing legislation. Growth was steady and healthy until August,
1914, when the European war utterly demoralized business and made the highways of the sea uncertain and
:hazardous. Our net receipts quadrupled in that month.
Gradual decline in abnormal gains followed as the nation caught its bretah and business and international
-communication improved. January, 1915, found deposits
again normal, and we began to feel the rising tide of
prosperity. Demand for labor increased; wages soared.
'Postal savings deposits kept step with the industrial
•march.
We in charge of the Postal Savings System saw early
the importance of bringing the service to the attention of
'hundreds of thousands who never heard of it and stood
in urgent need of its facilities. Our publicity has been
-widespTead and persistent, but it has been our constant
purpose to so direct it as not to discredit or weaken private savings institutions. We do not want a dollar any
.solvent bank can get. We have reached out after the
'hidden savings of those who will patronize our institution and no other. But in all our search for tarnished
.coin and fusty currency we have been scrupulously careful not to press our publicity at a time and place where
IR might aggravate disturbed local conditions.

191

We are proud of the record our service has made in
deposits and in the number of depositors, but we take
infinitely more satisfaction in the sources of the money
we are getting than in the amount of it; in the type of
our depositors than in the number of them. While we
have endeavored to increase our business through proper
channels, we have kept in full view the important fact
that the Postal Savings System is a Government Institution for the promotion of the general welfare and that.
It would be an unpardonable abuse of power were we to
swell our figures at the expense of legitimate private savings institutions. The United States is concerned alike in
the welfare of the depositor in a private institution and in
the timid foreigner who hides his savings in mother
earth. We have not rejected deposits brought to the
post office in time of local financial stress and in isolated
instances our receipts have temporarily been increased.
But the point I desire to emphasize is, that we have not
taken advantage of these unfortunate instances to exploit
postal savings. We are entitled to and claim no credit
for this attitude, for it would be almost criminal to
knowingly contribute to public alarm at a time when
the savings of thousands in local institutions might be
jeopardized.
Our publicity has been along two lines—the insertion
in newspapers and periodicals of news items dealing with
the growth of the system, and the distribution through
the post offices of general information on the service in
English and twenty-three foreign languages. You bankers know full well that the desire to economize and save
will never be spontaneous. Saving is an acquired and
cultivated habit. Upon you and upon us rests a large
duty in the Promotion of that habit; and the crowning
triumph of your thrift campaign lies in the forceful assault it has made on improvidence and waste, an awakening that will be felt of its own velocity in years to
come. But it would be unfortunate indeed if this great
public service were to end to-day. Let it be the beginning and not the end of concerted action. Postal savings would continue to increase if not another word were
spoken or printed about it, but there are still thousands
in our country who ought to be reached and brought
within its advantages, and they can be reached only by
persistent publicity. For ifs to falter in this direction
would be palpable neglect of duty.
When I came to the Postal Savings System in 1913,
legislation was pending looking to the acceptance of
$1,000 from a depositor which would be interest-bearing
and the acceptance of any amount in excess of $1,000
on which no interest would be paid. Strong opposition
against the proposed statutory change developed at Boston and was further pressed before the committees of
Congress by your representatives, Mr. Knox of New
York, Mr. Robinson of Baltimore, and Mr. Saul of Washington. The fate of the bill is well known to you. I
am particularly pleased, however, to commend the fairness and frankness with which these gentlemen conducted their work, and I attribute to them large Credit
for the era of good feeling now existing between Government and private savings institutions.
On May 18th last, a bill was approved by President
Wilson which has greatly enlarged the usefulness and
possibilities of postal savings. It is a safe and satisfactory Act, and I am pleased to add that the report of your
committee on postal savings legislation, at Seattle last
year, was friendly to the law under which we are now
operating. It is a serious matter to change established
postal savings legislation, and no step should be taken
in that direction without the most careful and unselfish
thought. I believe that the new law meets the reasonable requirements of the Post Office Department and the
public, and will continue to do so for years to come, if
not indefinitely. As you know, a depositor may now
have $1,000 to his credit upon which interest will be paid,
and the Board of Trustees has discretionary power to

192

BANKERS' CONVENTION.

accept an additional $1,000, which shall be non-interestbearing. The $100 monthly limitation is abolished. The
interest-bearing increase was put into effect at the signing of the bill, but the Board of Trustees has not thus
far accepted the non-interest-bearing accounts.
That the old stifling restriction on deposits kept millions in hiding is shown by comparison of the gains in
deposits in the first three months under the new. law
with the gains in the corresponding months of last year.
The net gain in June, 1915, in round numbers, was
$1,000,000; this June it was $3,800,000. July, 1915,
showed a gain of $350,000 (not taking into account $365,500 withdrawn by depositors for purchase of postal savings bonds); this July it was $3,700,000, despite withdrawals of $900,000 for bond purchases. August, 1915,
netted $1,600,000, August just passed, $5,000,000—by far
the largest increase in the history of postal savings and
surpassing the phenomenal increase of August, 1914 (the
first month of the war), by nearly a million. Another
Interesting feature of the enormous inflow of savings
during the past three months is the fact that a very large
per cent of the increase has come from old depositors,
who eagerly seized upon the long deferred opportunity
of increasing their accounts.
You will recall that prior to the installation of the
Federal Reserve System in 1914, any bank under national or state supervision was eligible to receive postal
savings deposits if it qualified to accept them. The Federal 'Reserve Act Malted depositories to member banks
only. This resulted in the elimination of hundreds of
state banks. In many instances it was necessary to send
funds long distances to places where eligible banks were
located. This worked embarrassment in the expeditious
and 'safe administration of the service, and at the same
time defeated the dominant thought that controlled the
framers of the organic Postals Savings Act, that the deposits brought out of hiding should be released for commercial purposes in the identical localities where they
Originated. The new law meets and solves these difficifities'by giving preference to member banks, but in the
event there be no local bank or it fails to become a depository, then a state institution may qualify for the
funds. Thus a preference rightfully belonging to member banks is accorded without disturbing the sound principle that the funds should be distributed in channels of
trade where they are brought to light. Hundreds of
state banks formerly dormant are now active depositories for postal savings.
I am not going to burden you with detailed statistics
on postal savings. This is a day for felicitation rather
than a day for figures. It is enough to say in passing
that every state in the Union showed remarkable gains
during the last fiscal year except four, and the decreases
there were trivial and due to easily discerned local
causes. Seventeen states, New York, Pennsylvania, Illinois, Ohio, Massachusetts, California, Michigan, New
Jersey, Missouri, Washington, Minnesota, Connecticut,
Wisconsin, Colorado, Oregon, Indiana and Montana, hold
90 per cent of all the deposits. Ten cities, New York,
Brooklyn, Chicago, Boston, Detroit, Pittsburgh, San

Francisco, Philadelphia, Portland and Milwaukee, have
each more than a million dollars on deposit. Pittsburgh,
Philadelphia and Milwaukee were the last to join the
million dollar class.
Post offices in Greater New York today hold over onequarter of the total deposits. More than $90,000,000,
brought from insecure and unprofitable hiding places, are
now on deposit with the 5,600 depository banks, and these
funds are secured by bonds of a face value of $125,000,000.
The most striking and gratifying story of postal savings is disclosed in the fact that 375,000, or 60 per cent
of the total number of depositors, were born outside of
the United States, and that this provident army owns
$75,000,000, or three-quarters of all the deposits. How
much these mute figures mean! What a tribute of confidence the foreign-born have paid to the'nation of their
choice and adoption.
In discussing postal savings here I would fail in fair
dealing if I did not remind you that back of all our
efforts to develop the service along sound lines; back
of all our endeavors to better the conditions of our depositors, especially those born under another flag; and
back of all our efforts to deal equitably with National
and States banks, has been the guiding genius of a
great Missourian, born within 75 miles of this place—
Governor A. M. Dockery, Third Assistant Postmaster
General, and in direct supervision of the Postal Savings
System, as well as the other great fiscal affairs of the
Post Office Department. Happy is a service that can
enlist a man so ripe in executiVe and congressional experience and so responsive to the sane requirements of
the high and the lowly. I speak of him here in no
thought of adding to the affectionate regard in which he
Is held by his native state, but I speak of him that his
unstinted generosity towards his co-workers may not
obscure his own achievements in the service that I am
now representing.
The story of postal savings when told in figures is a
simple one. But if you want to see the real service that
It is, go into the post offices in industrial and mining
centers and witness the patient line of barefoot children,
toiling women and begrimed laborers as they entrust
their humble savings to Uncle Sam. Then come with
me to the Post Office Department and delve into the confiding letters that report better and happier lives.
Time and again I have used the pronoun "we" in
the economy of time rather than attempt to enumerate
the Departmental officials who are concerned in postal
savings. Wonderfully potent, too, has been the activity
of postmasters throughout the country. They have
caught up the true spirit, and new burdens are new
pleasures. But the pronoun "we" in a still wider sense
Includes you gentlemen and every other American citizen. The success of our service is your success. We
are all stockholders, and our dividends are no less certain,
no less valuable because they come in a higher standard
of citizenship among the thousands and thousands who
can trace their first real forward step to a savings deposit.

SAVINGS BANK SECTION.

193

Institutions for Savings.
By Wm. B. KNOX, Comptroller, Bowery Savings Bank, New York.
The Savings Banks have reached a point in their history where they may pause for a moment to cast a backward look over the past with its record of splendid
achievement, and to contemplate with honest pride their
present condition. But there are problems to be faced in
the future upon the solution of which the continued welfare of the Savings Banks depends. It is time that we
gave some thought to the future stability of our railroad
investments. As trustees for ten million depositors for
whom we hold eight hundred millions of railroad bonds,
it is not only our right but our duty to see that the railroads receive just and fair treatment at the hands of
those whom we have delegated to make and enforce the
laws for us.
And it might be just as well to impress it upon the law
makers and executives that, before passing any law or
taking any action that shall affect the interests of the
people (of whom the Savings Bank depositors are a very
considerable part) it is their duty to consult all the
parties interested.
I would suggest to the convention that the Savings
Banks, being interested parties, should ask, through the
Federal Legislative Committee of the American Bankers'
Association, for a hearing before the passage of any laws
which may in any way have a bearing on the value of
railroad securities. This is our plain duty and a duty
we should not shirk.
Recent developments involving action by the President
and Congress of the United States force us to the conclusion that the most serious problem confronting the railroad to-day is that of regulation. In common with every
other business they have to deal with many economic

issues. They alone, however, have to contend with a. most
bewildering and confusing (I had almost said system),
only it is a lack of system of control, exercised by fortyeight States and one Federal authority. From Congress
and from the legislation of all these states comes each
year an ever increasing number of laws affecting railroads. Dealing not only with matters of general regulation, but in particular relating to matters of railroad
operation, the effect of this legislation is tci make difficult
the task of experienced railroad •executives upon whose
discretion and judgment reliance must be placed, and to
add tremendously to the cost of railroad operation and
maintenance. To comply with the various state decrees
In 1914, railroads operating more than 204,000 miles were
compelled to spend the equivalent of a 5% dividend on
$574,000,000. This sum would have paid one year's interest at 3 % on the $800,000,000 bonds held by the Savings
/
1
2
Banks.
It would seem that the rational way and the only way
to end the evils of the existing system of regulation is to
substitute a Federal system of supervision, for the vary.ing, conflicting and inconsistent rule of forty-eight uncoordinated states. To serve the needs of the country,
to strengthen railroad credit, and to attract to the iailroads much needed capital, we must substitute a rational businesslike and comprehensive system of Federal regulation to replace the present sectional and burdensome rule.
In the task of securing this consummation devoutly to
be wished, the Savings Banks of the country, through the
Savings Bank Section of the American Bankers' Association, should have a part.

The Business of Getting New Savings Accounts
BY E. G. McWILLIAm, Manager, Department of Publicity and New Business, Security Trust & Savings Bank,
Los Angeles, Cal.
Mr. President, Members and Guests of the Savings Bank
Section:
It is impossible for me to express in words my very
deep appreciation of the honor you have conferred by
inviting me to appear before you today. I look back
upon the three years during which it was my privilege
to serve you as the most pleasant years of my business
experience, and I shall always be proud of the fact that
I had some little part in beginning that great work
which, under the splendid direction of Mr. Harrison
during the past year, has found its culmination in the
Centennial Celebration which you have held here. I
can only say that if anything which has come within
my experience, or any service which I can render will
be of value to you, individually or collectively, it is
yours for the asking.
Two PROPOSITIONS.
In order that neither of us will be disappointed, I
desire tc; lay down two propositions before beginning
this discussion. First, that I dosnot expect any one here
to agree with all that I say,—and second, that I am
not here to tell you the most efficient method of getting
new savings accounts in your respective communities.

The first will become self-evident as I proceed. The
second is prompted by my firm belief, after close observation, that the same methods are not equally efficient
everywhere, and that after • all is said and done, while
it is imperative that we keep ourselves informed as to
methods employed elsewhere, no one is in a better position to judge of their efficiency in your particular towns
than you yourselves, with your intimate knowledge of
the local conditions under which you operate and of
your own organizations.
SYNDICATED ADVERTISING.
In this connection I am continually amazed at the
amount of so-called syndicated advertising matter which
is purchased by bankers. This matter is generally prepared in some large center without reference to the
local conditions of any particular community, and is
offered as being equally effective for the large city bank
or the small country bank. And bankers continue to
"fall for it "—to use a slang expression.
I contend that a man in New York, Boston or Chicago, without an intimate knowledge of local conditions,
cannot write effective advertising for San Francisco,
Denver, Kansas City, or rural communities, any more

BANKERS' CONVENTION.

194

than a man located in the latter places can do so for
the former. Of course, syndicated matter has proven a
boon to small banks in many localities where it happened to fit, and it will prove a boon in many others if
the authors will but divide the country into zones, study
the general conditions under which banks operate in
each zone and prepare advertising especially for such
banks, instead of taking advantage of bankers' lack of
time to devote to such matters by selling them something wholly inappropriate.
Bankers who continue to purchase such matter without careful analysis seem to me to present as fine an
Illustration of "the triumph of hope over experience"
as did the man who married his seventh wife.
MUST MAKE IT A BUSINESS.
am very glad that our Secretary stated the subject
of my talk as he did. To be successful in getting new
savings accounts we must make a business of it. And I
believe both the mutual and the stock savings banks
should enter heartily into the business. The mutual
banks because they were organized solely for the pur.
pose of promoting thrift, and the stock banks because
of a duty to their stockholders in addition to the Moral
obligation they have assumed as savings banks to promote thrift.
I

MUTUAL BANKS AND ADVERTISING.
Right here my first proposition becomes evident, for
I know that many of my mutual banker friends feel that
they have no right to spend any of their depositors'
money for anything which savors of advertising, furthet
than the law requires.
However, in my own mind I have always felt, as
some one has expressed it, that mutual savings banks
perform a function second only to that of the church,
and as churches do not hesitate to advertise in order
to aid them in saving souls, it seems to me that mutual
banks quite as consistently might advertise to aid them
In saving people from the evils of improvidence, so long
as such advertising is confined to a reasonable amount.
Naturally, this matter must be approached from different angles by mutual and stock banks. Competition,
as the word is generally understood, should have no
place among mutual banks. Their publicity efforts
should be purely educational, while, as I have suggested,
It is the duty of stock banks to attract depositors to
those banks in addition to educating the public in thrift.
THE PROBLEM.
There is always a temptation to drift into platitudes
when speaking of inducing people to become savers.
However, we are today considering the matter as a business, and as such it presents a problem which has occupied all of my days and part of many nights since leaving your office in New York. During that period I have
had every conceivable advertising plan presented to me,
varying from a needle-book to the offer of an _enterprising theatrical man to perform certain stunts on the corner of our roof for the purpose of attracting a crowd;
and it may be that some of our deductions in the light
of practical experience will prove interesting, if not especially profitable to you.
Almost in every locality the problem must be approached differently. The large city bank has its especial problem, the small country bank has its problem,
and the bank in between still another,—each complicated by conditions peculiar to each individual bank.
However, while each banw has its individual problem, there are some general principles upon which all
may proceed and some mediums which sooner or later
are tried by many, if not all, with varying success, according to the degree of intelligence with which they
are used.

A COMMON STARTING POINT.
Whether banks be large or small, city or country, there
is one point where all must begin if they are to be successful in getting new savings accounts, or any other
kind, and that point lies within the bank.
A teller or a cashier with a grouch will waste a whole
year's advertising appropriation. What does it avail if
you advertise that the man with a dollar is as welcome
as the man with a thousand, if the man with the dollar
finds that it is not so? Every teller or other person
who comes in contact with the public should be made
to feel that he is an important member of the new business department. He is in a position through his daily
contact with your customers to offer valuable suggestions and should be encouraged to do so. Above all, he
and every other member of your force should be impressed with the fact that the success of the bank depends fundamentally upon its service, and if you have
a man who is not enthusiastic in that service, he should
be encouraged to hunt another job speedily.
Being satisfied that your service is in condition to
back up all you may say about it, your next probleni
is how to tell the public about it and to awake in them a
desire to save money and to save it in your particular
bank.
VALUE OF A SPECIAL DEPARTMENT.
Thus. it will be observed that the problem divides itself naturiilly into two parts—the first being what may
be termed "Internal publicity" and the second, "external publicity," and banks throughout the country of sufficient size to warrant it, are more and more coming to
'realize the advantages in maintaining a special department for the handling of their publicity problems.
Again my first proposition becomes evident, for I know
that many bank officers, even in large banks, feel that
a publicity department is a luxury without practical
value. However, in the development of internal co-operation alone such a department may be worth many
times what it costs, and some time I hope to have an
opportunity to discuss that feature at length. Again,
in the intelligent direction of publicity expenditures
such a department may effect large economies, as well
as in the preparation of copy for newspapers, booklets,
etc., which at the same time may be given a distinctiveness and a local atmosphere impossible to. get in any
other way. Also, such a department may save what it
costs in the time it saves officers of the bank by relieving them of numerous interviews with solicitors and
salesmen, and last, but not least, such a department may
be a decided asset as a developer of good will. If the
vast army of advertising salesmen which besiege a large
bank, particularly, are received courteously, given all
the time necessary to a proper explanation of their propositions, and if not accepted given good reasons why,
I have yet to see one of them who did not appreciate
such treatment and would boost for your bank whether
he did business with it or not.
So that, unquestionably, the first step in entering upon
the general business of getting new savings accounts
should be to place the matter in the hands of a department or, if the bank is not large enough for that, in the
hands of an officer who should be relieved of other duties
sufficiently to permit him to give the problem careful
study. Whether such a man should be a bank-man or
an advertising-man is a mnch discussed question, bankmen and advertising-men naturally taking opposite sides,
but in my opinion the bank publicity man should be a
student of both banking and people, in order to be able
to get a point of contact with the public and tell it the
things it wants to know about banking.
• • WANTED BY FEW.
We must always bear in mind, however, that what we
.wanted by very few of those who
have to offer is really,
,

s•

•

195

SAVINGS BANK SECTION.
have not already got it, and that in the last analysis it
is only by appealing to the selfish instincts of people
either by holding out the hope of a comfortable old age,
the ownership of a home, the possession of future luxuries, etc., coupled with the higher ambition to provide
for those who may be left after death or for the education of children, that we may hope to offset the tremendous inducements to spend which are offered on every
side.
We must also bear in mind that the value of our advertising in any medium depends upon three things;
namely, the number of people it reaches; whether it is
read; and whether it makes an impression. We must
also remember that the best advertising medium in the
world will be rendered valueless to us if our story is
not presented therein in an attractive manner.
THE MEDIUMS TO USE.
As a medium for reaching the public with our story
we naturally turn to the newspapers, and so great an
advertiser as John Wanamaker is recently quoted as saying that "the only advertising of direct and instant
daily
benefit to both merchant and customer is in the
newspaper of known circulation. All other is vanity
and vexation of spirit." However, while unquestionably
the newspaper will always inaintain its prestige as an
advertising medium, there are many other products of
printers' ink in which millions of dollars are spent for
advertising each year, and through the courtesy of the
Pacific Railways Advertising Company I am enabled to
give you, not my opinion or other people's opinions, but
the actual facts as to where people see the most advertising, stated by the people themselves in nine important
cities of the United States. This has been obtained
through straw votes which were conducted by firms of
the highest standing and, in some instances, by advertisers themselves.
For instance, in Chicago the vote was conducted by
the Audit Company of New York; in Cincinnati by an
advertiser, the Schulze Baking Company; in Pittsburgh by another advertiser, the S. Hamilton Company,
Pianos; in Minneapolis by Touche Niven & Company,
Public Accountants; in Washington by an advertiser, G.
G. Cornwell & Son, Grocers; in Milwaukee by MarwickMitchell-Peat & Company, Public Accountants; in Kansas City again by the Schulze Baking Company; in Los
Angeles by Price, Waterhouse & Company, Public Accountants; and in San Francisco by Klink-Bean & Company, Public Accountants.
In every city but one a communication was sent to a
list of men and women selected at random from the
telephone book, requesting them to indicate upon a return postcard in which of the following mediums they
-billboards,
noticed advertising most frequently, namely,
electric light signs, magazines, newspapers, painted signboards, signs painted on buildings, street cars and theater programs. In Pittsburgh the results were obtained
by personal solicitation of a representative of the S.
Hamilton Company. The number of letters sent out by
-as many as ten thousand being sent
the others varied,
out in Chicago.
The results of these votes are as follows:
TEST VOTE IN CHICAGO
Made by the Audit Company of
New York, N. Y.
per cent:
83.27
For Street Cars
23.19
Newspapers
17.24'
Magazines
13.79
Electric Light Signs
6.73
Bill Boards
3.36
Painted Sign Boards
Buildings 1.04
Signs Painted on
.78
Theatre Programs
TEST VOTE IN CINCINNATI
Made by, Schulze Baking Co.
per cent.
28.9
For Street Cars
Newspapers
22.7

Magazines
13.8
Bill Boards
11.1
Electric Light Signs
10.2
Painted Sign Boards
6.5
Signs Painted on Buildings 4.6
Theatre Programs
2.2
TEST VOTE IN PITTSBURGH
Made by the S. Haniilton Company, Pianos
per cent.
For Street Cars
34.
Magazines
23.4
Newspapers
21.6
Bill Boards
7.1
Electric Light Signs
5.0
Theatre Programs
4.2
Painted Sign Boards
2.9
Signs Painted on Buildings. .5

TEST VOTE IN MINNEAPOLIS
Made by Touche, Niven & Co.,
Public Accountants
per cent.
35.27
For Newspapers
25.73
Street Cars
19.56
Magazines
8.14
Bill Boards
6:89
Electric Light Signs
3.17
Painted Sign Boards
Signs Painted on Buildings .68
.56
Theatre Programs

TEST VOTE IN KANSAS CITY
Made by Schulze Baking Company
per cent.
For Street Cars
22.2
20.4
Newspapers
Electric Signs
16.8
Bill Boards
13.9
Painted Sign Boards
8.2
Signs on Buildings
6.4
Theatre Programs
6.1
Magazines
6.

TEST VOTE IN WASHINGTON
Made by G. G. Cornwell & Son,
Grocers
per cent.
30.37
For Newspapers
29.50
Street Cars
25.16
Magazines
10.19
Electric Light Signs
2.39
Bill Boards
.87
Theatre Programs
. Signs Painted on Buildings .87
.65
Painted Sign Boards

TEST VOTE IN LOS ANGELES
Made by Price-Waterhouse & Co.,
Chartered Accountants
per cent.
For Newspapers
37.86
Street Cars
23.88
Magazines
13.87
Electric Light Signs
11.50
Bill Boards
8.12
Painted Sign Boards
3.27
Signs Painted on Buildings. .90
Theatre Programs
.60
TEST VOTE IN SAN FRANCISCO
Made by Klink, Bean & Company,
Certified Accountants
per cent.
For Street Cars
30.54
Newspapers
26.90
Magazines
12.77
Bill Boards
14.43
Electric Light Signs
8.93
Painted Sign Boards
3.43
Theatre Programs
1.45
Signs Painted on Buildings 1.45

TEST VOTE IN MILWAUKEE
Made by Marwick-Mitchell-Peat
& Co., Public Accountants
per cent.
For Street Cars
30.49
Newspapers
29.11
Magazines
16.83
Electric Light Signs
11.59
Bill Boards
6.76
Painted Sign Boards
2.89
Signs Painted on Buildings 1.65
Theatre Programs
.68

It will be noticed that in almost every instance, while
their order varies, the first three mediums selected are
the same and that with one exception nine cities are
unanimous in their choice of the first two, five actually
agreeing as to first and second choice. Hence, with the
results of these votes before them, advertisers by a simple process of elimination in the light of local conditions
should be able to make a pretty close decision as to the
most effective mediums to use in their particular cities.
Time will not permit of it, and with these results before us an analysis of each of the mediums hardly seems
necessary. The votes speak for themselves and prove
conclusively that the two most effective mediums for
reaching the public are newspapers and street cars.
However, even in view of the fact that six of the nine
cities place street cars first, I believe that neither street
cars nor newspapers should be used by banks to the exclusion of either, but that banks should both at
some time, the one supplementing the other. Again I
would remind you, though, that our judgment must be
governed by local conditions, although the banker located
in a town where there are both street cars and newspapers and who desires to place his bank before the public
most effectively, may be sure that in using both of those
mediums he is doing so; and the banker located in a
town where there are no street cars may spend his money
for display advertising in the newspapers with the assurance that he is spending it where it will do the most good.
Soucrroas.
In addition to display advertising there are many direct efforts in the getting of new savings accounts which
bankers are induced to make, either by clever salesmen
or through their own study of the public they serve, and
some of these efforts have proven very effective, although again we must consider our individual problem
carefully before attempting any of them. There is one
of these efforts, however, which in my own mind I have
never been able to reconcile with the ethics of banking,
and that is the employment of solicitors for savings accounts.
It is human nature for a solicitor, no matter how high
a type he may be, in order to get the accounts upon which
his living depends, to sooner or later, even though unintentionally, say something derogatory to some other bank,
and I believe that no reputable banker cares to be
placed in that position. On the other hand, I believe
thinking people will look askance at any bank which

196

BANKERS' CONVENTION.

sends men after their small savings and offers a premium for them.
LETTERS AND LISTS.
Letters to selected lists are used by banks in some
localities with great success, especially by banks in small
communities, where a close pergonal touch is possible and
the element of duplication may more readily be eliminated.
No list should be used by any bank until it has been
checked back with the depositors' list, for sending a
letter soliciting business from one with whom you are
already doing business is an unpardonable error. In
banks having many thousands of depositors this involves
a labor which makes such an effort almost prohibitive.
I believe that for large banks, located in large cities
and having a number of departments, the most economical and effective list which can be used is that of its
own customers who are not patronizing the savings department. Such a list, which I understand is used by a
number of banks besides ours, is what I call an interdepartment list and may be kept on cards having tabs
Indicating in which departments the customer is now
doing business. Through daily reports of closed and new
business from each department the new business department is enabled to keep such a list up to date and by the
use of metal tabs is enabled to measure results. Of
course a certain amount of business in every department
will come from your customers automatically; but it has
been demonstrated that this effort is prolific of results,
and in any bank, a person who is already interested in
one department is the most natural prospect for business
in some other department.
HOUSE ORGANS.
Another direct effort of especial value to banks located
in comparatively small or rural communities is an attractive monthly house organ which is distinctly local in its
composition. However when a bank acquires more than
a certain number of depositors the use of a house organ
as a developer of co-operation among depositors becomes
prohibitive because of the cost, and its use is restricted
to developing new business among a certain class or for
certain departments.
BANKING BY MAIL.
Banking by mail is a development of recent years and
where confined to a bank's logical territory may be profitably engaged in. However, after some investigation I am
convinced that in view of the long and expensive educational campaign necessary and the possibility of antagonizing banks in other cities, to enter into banking
by mail nationally for the purpose of getting new cavings
accounts is unwise for most banks.

generally considered more as part of a bank's equipthent
than novelties. I refer to the various forms of home
savings banks and the small pocket banks for dimes and
other coins. Many a child has been started on a successful career through the home savings bank given .it at
Christmas, and these banks furnish an excellent followup medium.
The pocket banks appeal to all classes and ages and
whether brought into the bank or not, are an effective
advertisement wherever shown. They also furnish one
of the very few mediums to which a bank may trace
direct results.
WINDOWS.
Many banks are overlooking the tremendous value
their windows possess as an advertising medium.
Through the display of home or pocket banks with appropriate reading matter, or the display of bonds (mortgages, money or pictures, it is possible to, in a meaSure,
give to a bank that value from its windows which the
merchant gets from his, without in any degree lessening
the dignity of the bank, and banks are rapidly coming
to a realization of this fact.
GOOD WILL.
There is one thing which apparently is overlooked by
many banks in the business of getting new savings accounts and that is the value of good will, especialiy in
cities where competition is most keen.
Frequently We are all solicited for advertising In Various publications of church societies, fraternal societies,
labor organizations, etc., and our first impulse may be to
turn them all down as possessing little or no advertising
value. However, if for instance by giving a woman three
dollars for an advertisement in the cook book Of the
Ladies Aid Society of the Squeedunk Methodist Church
you can develop the good will of a hundred women, it is
money well spent and organizations such as I have men.
tioned appreciate that kind of co-operation and talk
about it. I believe every advertising appropriation should
contain an item for good will advertising and the keener
the competition, the larger should be the item.
APPROPRIATION.
I have frequently been asked by banks in various localities what percentage of their earnings should be appropriated or advertising, and to all I have given the same
answer—that no definite percentage can be established.
Each bank must first determine what it desires to accomplish. It must then decide upon the best means for
accomplishing that end in the light of competition and
other local conditions. It must then decide whether or
not the accomplishment of the desired end would justify
•the expenditure the means selected requires. If in his
judgment the expenditure would be justified by such a
result the banker may then "go to It" and trust in the
Lord for the result. Advertising appropriations of banks
cannot be made by rule.

NOVELTIES.
Much money is wasted by banks in novelties. Most
novelties remind me of the remark of the Irish janitor
of a bank I was with for many years. The old fellow
was pouring ink from a bottle with a patent stopper:
FIGURING THE RESULT.
The ink came very slowly and after fruitless attempts
to improve the flow he said: "Faith and there's more
However, in figuring your result ,at the end of the
Ingenuity than utility to that dom thing. It's like the
year it may be found that you have accomplished' what
curl in a pig's tail." And so it is with many novelties. you set out to do and yet the net result is disappointing.
The value of any novelty lies in its ability to create
For instance if you set out to bring ten thousand new
good will for your bank. This in turn depends upon
people into your bank during the year and you open that
the choice of the novelty and its distribution. In small number of brand new accounts, yet your net gain for the
banks novelties may be used to advantage but in large
year is but one thousand, don't blame your advertising.
banks, where many thousands of an article would go to
It has accomplished what you wanted it to do. The fault
the banks' savings depositors before reaching outsiders, lies elsewhere. All advertising can do for merchant or
such efforts are apt to prove extravagances and should be
bank is to bring the customers in. It is then up to
used solely for the development of commercial business "Service" to hold them.
In connection iwth selected lists.
It must also be borne in mind that a large bank with a
great number of depositors cannot he expected to grow
HOME AND POCKET BANKS
in the same rapid proportion that a small bank does.
There are, however, two very effective novelties for the
The natural law of growth applies to banks as to,other
development of new savings accounts, although they are things in this world.

SAVINGS BANK SECTION.
CARELESSNESS OF BANKERS.
have read that upwards of fifty millions of dollars
I
a year are spent in financial advertising, and I'll venture
to say that if the majority of bankers made their loans
as carelessly as they spend money for advertising, their
banks would speedily be in the hands of receivers. However, I am inclined to believe that it is better for them
to advertise even as they do rather than not at all, for
certainly nothing is accomplishing more toward a closer
co-operation between the public and the banks than advertising.
THE FALLACY OF DIRECT RETURNS.
How often though we meet the banker who still does
not believe that advertising is worth while because he
cannot trace direct returns and believes that his own
customers would send him just as much business if he
did not advertise.
In "Printer's Ink" of July 13th appeared an editorial
upon the "Fallacy of Direct Returns," which I wish all
such bankers could read. This editorial concluded as
follows: "Direct, traceable returns are still looked upon
In many quarters as the one conclusive test of the value
of advertising"—"We are advertised by our loving
friends" was a grand good slogan because its friends
were never allowed to forget it. A satisfied customer is
the best advertisement only so long as he stays satisfied
and bears the product in mind. Oftentimes there is no
greater service advertising can do than .to keep the
friendly spirit alive in those who already know the
merits of the goods."
ADVERTISING PSYCHOLOGICAL.
in banking. The effect of advertising is
SO It is
psychological. Probably not one depositor in a hundred
will admit that he has come to you because of your advertising. As a matter of fact he may not know it, but
it may be so just the same. For instance, what prompts
us to ask for a certain brand of collar or garter when
we go into a store to purchase such articles? And so it

197

is with depositors' efforts in our behalf. As a rule depositors are not going out of their way to solicit business
for us. If friends ask them what bank is a good bank
to do business with and our service has been satisfactory, naturally we are recommended. On the other hand
depositors like to be identified with a bank which by its
advertising indicates that it is a progressive and going
institution and undoubtedly through the reminder of continued advertising, in many instances a recommendation
will be volunteered before it is asked for.
CONCLUSION.
I have tried in this little talk to deal with some of the
practical phases of the business of getting new savings
accounts as they have come within my experience—not
with the idea of presenting anything new upon the subject, but rather in an endeavor to give some information
and to offer some suggestions which might be of assistance to those who have not had time to give this subject
the study it deserves; and I would like to close with a
little story: Two ball teams composed of colored boys
from rival towns in the South, were to play a game upon
a certain afternoon, and the colored boy who worked in
the Sheriff's office in one of the towns asked to get off
. play. The request was granted, and the boy left at
to
noon of the eventful day as the game began at two
o'clock. Along about five o'clock the Sheriff drove out to
see how the game stood, and seeing his boy out in the
center field, called to him and said, "Mose, who's winnin'?"
"I dunno, Massa John, I dunno! replied Mose.
"
"What do you mean you don't know," said the Sheriff,
"how many runs have the other side got?"
"Thirty-six, Massa John," replied Mose.
"Well, how many have you got?" asked the Sheriff.
"Well, Massa John," said Mose, "you see we all
haven't been to the bat yet."
And so my closing word is just one of advice to the
banks who do not advertise, and that is to "go to the
bat."

Vitalizing Dormant Savings Accounts
BY HARVEY A. BLODGETT, President, Harvey Blodgett Company, St. Paul.
The question of re-vitalizing dormant savings accounts
Is one of profound significance to our nation. It touches
more than the matter of clerical labor or of bank
ledgers. It concerns more than bank profits. It reaches
down through the destinies of millions of human beings
who are shut out of their Eden because their aspirations, once alive, have been smothered.
It is of great moment to our nation because we are
heading fast toward conditions for which we will be
woefully unprepared unless the dormant energies of our
people are vitalized, and individual efficiency becomes
a national watchword.
Every inactive savings account is latent energy going
to waste. One need only witness the wonders that savings accounts have worked in countless lives in order
to imagine the potent possibilities which lie abeyant, in
countless others.
It is a matter which calls for constructive thought and
vigorous action. There will never be a readjustment
'of conditions while the owner of the dormant savings
account is left to work out this own salvation, unaided,
uninspired.
In assuming its proper place at the head of a nationwide movement to encourage thrift the American Bankers Association has begun a constructive work which

will have a fathomless influence on the nation, little
realized I believe, as yet, even by its own membership.
Not only will this movement, auspiciously begun in
commemoration of the centennial of savings banks mark
the beginning of a million or more new savings accounts,
but, what is of greater importance; it will put the breath
of new life into more millions now lying dormant.
I said a moment ago that this is a question which
calls for constructive thinking. If it were proper for
me to remark upon the methods which many banks employed in acquiring new savings accounts I would be
tempted to hint at a lack of constructive thought, of
proper consideration of cause and effect, in their effort
to put new savings business on their ledgers.
Before we can determine on the best means of revitalizing dormant accounts we must attempt to discover what causes them. We will come to a better understanding of the matter if we study the mental processes of the individual which induce him to open a
savings account and then leave it stranded for lack of
incentives to keep it growing.
Some human beings are creatures of impulse. Others
are creatures of habit. There you have the dividing
line between your active and inactive savings accounts.
A new savings account is witness of the birth of a

198

BANKERS' CONVENTION.

new aspiration. New aspirations are very ephemeral
things. They must be nurtured carefully lest they die
In infancy. A healthy savings account is a grown-up
aspiration and it's a long, .hard struggle from birth to
sturdy maturity.
Now, in developing your savings business you bankers
have employed various and multifarious methods of
kindling human aspirations, but in too many instances
the fire has flickered out, like the flame that splutters
on the end of a match and burns out before the wood
Ignites.
Here is a young person whose heart responds to a
suggestion, received from any one of numberless sources,
that the future will hold much more for him if he becomes a regular money saver. He sees visions and
dreams dreams. He hies him to the receiving window
and comes into the possession of a bank book, perhaps
his first one. He expects that bank account to do much
for him but he isn't, as yet, aroused to the need of
doing much for the bank account. His ideas are altogether vague as to what he must overcome or how to
overcome in order to make that new bank account a
success. His plan of saving is unorganized. Perhaps his
whole plan of life is unorganized.
The bank's advertisement in the newspaper had promised him that when he "opens an account, if only with
a dollar," he will be on the high road to fortune. But
as he deposits his second dollar, and perhaps his third,
he begins to realize that he has not arrived, and that
the way to his cherished hope looms long and dreary
before him. And so he succumbs. The bank which
invited his account offered him no encouragement and
he isn't as yet strong enough to fight the battle alone.
Here is another who is approached by a solicitor with
a nice, shiny auxiliary bank in his hand. The solicitor
must see many people today and is in a hurry. A cut
and dried talk on saving issues forth. The little bank
and a dollar change hands, and the solicitor hurries
back to headquarters to collect his $2 commission. The
new savings depositor comes back to earth, and thinks
that he is an incipient capitalist. But instead of having
had his footsteps firmly set toward high goals, he has
been merely taken off his feet. Of such is the kingdom
of quiescent money savers.
And still this person is an excellent prospect, fit to
go on the bank's mailing list. He has, at least, identified
himself with a bank. The work of making him a depositor worth while has begun, but alack, in most banks
it ends right there.
Let us examii.e some savings ledgers and throw light
on a few other incentives which prompted the opening
of large numbers of now dormant savings accounts.
In doing so perhaps we can discover what chloroformed the laudable impulses under the spell of which
they were opened. '
We notice that a large number of these somnolent
savers appear to have made their debut about a certain
date. We go farther and discover that, under the spell
of the oratory of a skillful salesman, the bank bought
a quantity of premiums—never mind whether they were
flags, cameras, safety razors or jack knives—and these
were offered as inducements to open savings accounts.
The bank became, for a time, a purveyor of merchandise.
• The appeal to the public in this exploit was a certain tangible reward NOW for opening a _savings account. It made a hit because, ordinarily, it takes time
for a savings account to yield its reward, and if there
is anything that appeals to mortals a little more than
anything else it is getting paid in advance for being
good.
But it is hard to conceive how a serious-mipded banker
can reason that a savings account induced under such
circumstances can have back of it sufficient stamina to
make it valuable. Perhaps he reasons that, after mak-

lag one deposit the subject will like the bank so well
that he will keep coming. Or perhaps he trusts vaguely
that the bauble which is offered will suggest other
worldly prizes that a seriously maintained savings account will bestow.
Whatever the solution, herein lies the source of
many, too many, dormant savings accounts.
It might be well to go farther and examine the public
utterances of banks calculated to secure new savings
accounts. Will we not find that they lack real inspiration, and that they dwell too much on the opening of,
accounts and too little on building on them after the
start has been made?
Do not too many bankers take it for granted that
the Alpha and Omega of developing a savings business
is the securing of first dollar deposit?
And have not banks been prone to invoke which will
introduce accounts in wholesale numbers by methods
which are not intensive, and occasionally border on the
sensational?
Bankers have an inherent dread of stampedes when
they portend the withdrawal of many accounts, simultaneously, but some lend themselves willingly to methods
which are designed to bring new accounts in with such'
alacrity as to savor of a stampede, and in consequence,
secure many with skin-deep purposes.
I trust that it has not seemed as if I had trespassed
too much upon the matter and the manner of getting
new savings depositors, assigned to another. But if we
are to attack the problem of re-vitalizing dormant savings accounts, the logical place at which to begin is at
their inception.
And so we conclude that the reason bank ledgers contain such a large proportion of dormant savings accounts
Is that large numbers of accounts are started upon a fleeting fancy. Those which succeed are the survival of the
fittest.
An officer of a large city bank told me not long ago that
his institution has over • thirty-five thousand savings
accounts. I asked him what was being done to develop
them. "Not a blessed thing," he replied.
And yet that bank has a commercial department, a
trust department, an investment department and a safe
deposit department, each seeking the business of people
who have become possessed of more or less means and
who were graduated from the savings department of
some bank.
Nor is this an isolated case. It is the rule, rather than
the exception for banks to overlook the possibilities which
lie in their savings accounts, after they are opened, and
to permit many of them, through inattention, to die a
natural death.
One of the foibles of present banking methods is
disinclination to make sufficiently serious effort to develop business already on the books. This applies .to
the commercial department as well. Every bank is entertaining many angels unawares. The great opportunity
for cultivating the potential possibilities of depositors
begins when accounts are opened, but in too many banks
manifestations of interest end at that crucial point.
I have known many bankers to manifest a willingness,
nay, an eagerness to pay a fee of $2 or even $3 for bringing in a new savings account, and then gasp at.the idea
of spending a few cents a head for cultivating that
account so dearly bought.
A savings account is an out-and-out expense to the
bank until its owner becomes thoroughly imbued with the
thrift habit.
A bank's greatest opportunity for developme.nt lies in
the accounts it has already opened, rather than,in those
it is going to get.
To develop a savings depositor into a good one costs
but a fraction of what it does to get him on the hooka
in the first place.
Why a banker will beat around like all possessed to

SAVINGS BANK SECTION.
secure new accounts from a lot of people who have never
taken the trouble to look him up, and utterly neglect
those who have picked him out as their banker, who
have come in and hung up their things, so to speak, is
a matter that remains unexplained.
And the banker knows from his own experiments, that
large numbers of his new depositors will turn around
and walk right out again unless he does something to
make their saving effort interesting and to help turn their
impulses into life ambition.
'The education and the inspiration of the savings depositor should begin, not end with the opening of his
account. That is the moment when he stands at the
threshold of his new world. He should be encouraged
onward.
Consider those active, growing savings accounts of
yours. There are many that have doubled, trebled, multiplied in a short space of time. Now ask yourself what
would be the result if a large proportion of your dormant
accounts were stimulated into similar activity.
This brings us directly to the question of how to do it,
without answering which there would be little excuse for
taking your time
Obviously the name of a depositor who has indicated
his choice of your bank, even though his account is dormant, is a better prospect than the name of one who has
no account at all, who doesn't even know where your
bank is, or may be already a depositor with some other
bank.
The attitude of the banker toward the accounts on his
books• should be the same as that of the enterprising merchant who assiduously cultivates the business of customers he has already won.
Inasmuch as the owner of the dormant account has
ceased to come to the bank, the bank must go to him.
On the method of the approach hangs the fate of its
success.
It is a golden maxim to cultivate the people and the
amounts which they deposit will take care of themselves.
Every depositor is entitled to receive some form of
encouraging suggestion from his bank at frequent intervals. This will renew the interest of those whose zeal
has begun to lag and will keep those whose accounts
are active from falling from grace.
The work that lies ahead is to rekindle slumbering
aspirations and to demonstrate the value of the savings
account.
The bank's publicity methods should be overhauled.
There is something wanting in them if there•are an undue
number of dormant accounts on the ledgers.
The newspaper publicity should be looked to first. If
it is a continuous appeal for making that illusive," first
dollar" deposit, the policy should be changed at once.
It isn't the start that makes the goal, and if consistent
saving is made more attractive in bank publicity it will
help more people to form the saving habit.
While many incline to the view that the aim of newspaper advertising is to secure new accounts, I feel sure
that good publicity has an excellent effect on present
depositors and, if rightly considered, does much to encourage the growth of their accounts.
I am constrained to believe that too much stress is put
upon the'necessity of saving for old age as a motive for
maintaining a savings account. One cannot overstate the
need of this kind of forehandedness, but ordinary folks
are more concerned in what saving will do for them
right now.
Few people in the full flush of youth are given to
worrying about old age, but everyone is interested in
what he may gain today and tomorrow.
While it costs from two dollars upward to secure a
new savings account, which at its inception is of unknown value, a series of subsequent approaches at
monthly intervals would cost but from three to five cents
each. Surely if it is good business to spend a consid-

199

erable sum to induce the opening of an account, it would
be worth while to spend a little more to cultivate it.
It is clearly evident that such attentions will do more
to fix the saving habit than did the first one which suggested the opening of the account.
These approaches, of whatever nature chosen, should
be clear expositions of the value of a savings account in
carving one's future. This is a theme of a thousand
variations.
All we need to do in order to make one's savings account attractive to him is to imbue him with the simple
truth about it.
There are so many simple truths about the advantages
of a savings account over other methods that it would
require a series of approaches in order to present them
all in orderly and convincing fashion.
There are many routes to affluence—short and perilous
and slow and sure. Few people get rich by merely saving, but anyone will be kept poor by spending all he gets.
Many people "arrive" by saving and investing, and
they become the better investors as they become better
savers.
The best way to re-vitalize a dormant savings account
is to keep its owner's enthusiasm at high pitch. There
are many things about a savings account that everyone
doesn't realize.
The savings account pays compound interest, while
bonds, mortgages and stocks pay simple interest. People can't add dividends, if they get them, to the face of
a stock certificate, nor interest to the face of a bond.
And so the savings account is a necessity even to the
investor in securities, if he is to get compound interest
on his investment.
But interest is automatically aded to the savings account, even in small, odd amounts and thus it excels, in
the long run, many forms of accumulation which on their
face pay larger interest returns.
And we might go on and say an endless number of
interesting things which would increase the depositor's
attachment to his bank pass book. Exhortation will not
arouse the interest that pure salesmanship will, and
after all, good bank publicity is nothing if not good salesmanship.
One great drawback to this procedure in these flush
times is the banker's own attitude. When the bank overflows with money and the outlet is insufficient, he hesitates at incurring the cost of cultivating the business he
already has. He is often unwilling to lay out money for
results timed far ahead. And yet he knows that it is a
long stretch from seedtime to harvest.
One need not overwork his imagination to realize on
how much better a footing any depositor Will come with
his chosen bank, if he receives frequent attentions from
it. He came to the bank a stranger. He has recurring
evidences that his bank is interested in his success. He
also receives suggestions which spur him onward. He
has t6nders of the bank's counsel in his financial affairs.
He begins to realize that a bank is more than a place
to merely deposit small coin. His relations become established, and he is on the way to the fullest co-operation
with his bank. There is little prospect of his account becoming dormant if he is encouraged and shown how to
make the most of it.
While continuing their quest of new accounts, banks
should greatly increase their effort to develop accounts
already opened. I believe fully half the advertising appropriation should be expended on the intensive cultivation of business from within. Certainly such a course
would increase profits and intensify results from publicity.
Trace the mighty stream to its source and you find
little rivers, brooklets and springs. Trace any fortune to
Its source and you find the patient industry of the money
saver. If the America of the future is to fulfill its

200

BANKERS' CONVENTION.

promise the little streams of wealth must not be allowed
to lose themselves, and their sources dry up.
What you bankers need now, and always will, is to tap
the little springs at their sources and encourage their
flow into the larger channels from which the mighty
stream comes forth.

No one will say that this country does not need to
conserve its sources of wealth right now. It wotild be
the height of folly to await the need before providing
for it. Every argument which has been advanced for
national preparedness is a vital one for stimulating into
activity every savings account in the land.

The Advantage of Personal and Collateral Loans in
Providing Sufficient Liquidity for Savings Ban k
Investments
BY FREDERIC B. WAsnnusN, Treasurer of the Worcester Five Cents Savings Bank, Worcester, Mass.
Mr. President, Members of the Savings Bank Section of
the American Bankers' Association, arid Guests:

We are gathered here from far separated sections of
this great country of ours to exchange 'ideas regarding
the conduct of savings organizations.
Conditions differ, so in the many sections of the country that, of necessity, such organizations develop along
varying lines. Even in single sections where the "savings idea" has been most highly developed you find different types of organizations and effort.
The northeastern section of the United States, being
older than most other sections, began first to provide
machinery by which the individuals as units could pool
their savings and obtain the services of men more or less
trained in finance to invest for them. It is with that section of the country that I am most familiar and Massachusetts in particular, so my paper will treat with conditions as they exist in my home state.
Without doubt, all of you know that our first savings
organizations were mutual and the Mutual Savings
Banks of the old Bay State have made a record of which
any institutions may well be proud.
Of late years our Trust Companies and National Banks
have established very lively savings departments and
have, in many localities, become serious competitors of
the mutual banks.
Perhaps, however, I had better immediately avoid that
subject and proceed with the particular topic .allotted to
me. It is often as dangerous to mention the development
of Savings Departments in National Banks and Trust
Companies to a Massachuetts Mutual Savings Bank man
as to wave a red flag in a bull's face.
I have been asked by our very efficient secretary, Mr.
Harrison, to speak to you regarding
"The Advantage of Personal and Collateral Loans in
Providing Sufficient Liquidity for Savings Bank Investments."
The laws of most states permit savings banks to invest
in such loans, though some, notably New York state, do
not. In Massachusetts, we may invest not over onetheir of our deposits and income in loans so designated
and more particularly described as
1. Loans to three or more individuals.
2. Loans to Corporations with one substantial surety;
3. Loans to Massachusetts Public - Service Corporations;
4. Loans to Railroad Corporations;
5. Loans secured by Miscellaneous collateral.
Loans in these classes are considerably safe-guarded
by restrictions; for instance,—loans can only be made to
Corporations under Class 2 whose books are audited by
a Certified Public Accountant. His report, not over
eighteen months old, on a form prescribed by the Bank
Commissioner, must be filed whenever such a note is

taken. Only notes of Public Service Corporations, meeting certain dividend requirements and doing a gross
business of not less than $100,000 per annum are legal
to purchase, etc.
The Mutual Savings Banks of all states are permitted
to buy certain bonds more or less select and invest in
notes secured by first mortgage of real estate.
Now what are the advantages of loans on personal
security over other forms of investment? No one will
argue that they are more sure of ultimate payment than
municipal and railroad bonds legal to purchase or notes
secured by mortgage of real estate, though I will, later,
consider at more length the question of their safety.
Their particular value is that every such loan must
mature within twelve (12) months. That permits you
to invest a substantial percentage of your deposits to
mature at regular or especially selected intervals.
For instance, a bank haVing deposits of $10,000,000.00
and a personal loan of $1,500,000.00 can arrange such
loans to mature $125,000.00 each month or $750,000.00
at each dividend period. A very tidy sum to be assured
of having in hand for any moderate emergency. You
have established a reserve of inestimable value, a secondary cash reserve.
The above advantage is dependable only when you
have made your loans to individuals or corporations of
such financial strength that they can meet their obligations at maturity whether general financial conditions be
fair or foul.
There is, ordinarily, a little advantage in this class of
Investment from the rate standpoint, as compared with
bond investments, though not much of late as shown by
the record in Massachusetts. The following from the
report of the Bank Commissioner shows the rates obtained by the Combined Savings Bank of Massachusetts
as of October 31st, 1915; the net column is an estimate
with the tax off:
Net Rate—
Average Rate. Tax Off.
4.91
Loans on Real Estate
4.91
4.31
4.
Bonds, Securities, etc.*
4.72
4.22
Loans on Personal Security
The discussion of this subject requires a careful survey of certain functions of a savings bank and its obligations:
First—Are its liabilities sufficiently "demand" to require the carrying of a substantial amount of liquid
assets in addition to its cash balance in vault or banks?
Second—How much latitude should be allowed a board
of investment in selecting the investments?
It might be well to recite that our Mutual Savings
Banks may receive on deposit from any person not more
*Perhaps one-third tax exempt.

•

SAVINGS BANK SECTION.
than one thousand dollars; and may allow interest upon
such deposits, and upon the interest accumulated thereon, until the principal, with the accrued interea, amounts
to two thousand dollars; and thereafter upon no greater
amount than two thonsand dollars, so no individual demand for payment can be of sufficient size to cause
serious anxiety.
While savings banks can demand sixty or ninety days'
notice of intent to witlldraw deposits, as a matter of
fact, however, every officer plans to so conduct the affairs
of his institution that he will never have to invoke for
his protection such a clause.
Every well managed bank, therefore, carries either a
very substantial cash balance which, of course, is earning only nominal interest, if any, or arranges to have
frequent, early bond maturities, or, in Massachusetts,
a good-sized loan on personal security.
One, and usually two, of the three above plans is essential and universally practised.
While loans secured by mortgage of real estate are
an excellent investment and our best revenue producers,
no one would think of claiming they were quick assets.
In times of fair weather, it is true that if a "run"
occurs on any single bank or a single community is adversely effected and withdrawals excessive, that bank or
banks in that community can either borrow from some
large coMmercial institution or sell some of their bond
Investments.
In my experience, however, those occasions have not
been the most frequent and trying. It is when the whole
country is disturbed and nervous; when panicky conditions exist in most communities, including the big centers. Then, if you have failed to provide early ,bond
maturities and you have an abnormal demand on account
of withdrawals, unless you have a well selected personal
loan, you may be embarrassed to say the least.
Perhaps you believe that our new "Federal Reserve
System" will entirely protect us in the future and no
more panics occur. I hope that will be true. However,
most banks will not entirely rely on a new and more or
less untried organization.
It is true you can always sell high grade bonds at a
price, but usually the price • in times of financial disturbance is considerably less than the cost value, and
it hurts to have to sell at such a period; hurts the bank
officer's pride and more particularly his Profit and'Loss
Account.
I believe that the officers of most savings banks endeavor to manage their investments so that they can
meet on demand not only all ordinary request for payments, but all extraordinary ones.
That being so, are loans on personal security efficient
for that purpose and are they a sufficiently safe class of
investment to permit the average board of investment of
a savings bank to buy?
In my own personal experience, the institution of
which I am Treasurer, has never been obliged during
the last eleven years to sell a bond in any period of disturbance or to meet unusual withdrawals.
We have always had a sufficient amount of personal
loans maturing so that by requiring the payment of a
small proportion of such loans we have kept ourselves
In funds to comfortably provide even for abnormal payments during our wost.financial situations.
My experience is not exceptional; all of our savings
banks whose officer8 have kept their personal loans
"quick" by loaning only to the strongest borrowers and
who have Carefully planned their maturities have had
the same success.
The satisfaction of seeing maturing loans paid in full
just when you are most in need of funds is beyond words,
particularly when the banks in your neighboring state
are sacrificing thousands of dollars by selling high grade
bonds at a heavy sacrifice. But they had to—they

.201

needed the money and had no other way of raising it.
You may ask how can such borrowers pay during a
period of severe financial stringency. The answer is
that if you always insist on buying only notes signed
by borrowers of particular strength, secured by the
highest grade of listed collateral or notes of the strongest
and best managed corporations, you will have no difficulty.
The temptation during easy money periods is to buy
notes of the smaller and less solvent concerns, or loans.
secured by the "slower" collaterals in order to obtain
the higher rates they offer. However, if you have had
your "experience," you will waive the additonal rate and
buy only paper of the highest grade.
In Massachusetts the individuals or corporations who
make it a practeice to carry large loans with' savings
banks, if they are conservatively and wisely managed,
often, in easy times, use their commercial banks little
or none for borrowing purposes. They will, however,
have previously established a line of credit with such
banks which they may call for at any time. Now when
the stringent period arrives, perhaps several of the savings banks feel the need of funds and ask to
-have loans
paid that are ordinarily renewed at each maturity. Then
the borrower goes to his regular commercial bank, knowing he may obtain the credit previously promised and so
satisfies the call of the savings banks.
It was a practice of several large Boston Savings
Banks, for years, to write this clause in their personal
notes—" Should this Savings 'Bank require the sum
loaned for the purpose of paying its depositors, this note
shall, thereupon, become due and payable on demand."
I think that few or none now incorporate the above
clause in their notes. That the banks could get borrowers to make notes with that proviso, is a pretty good
Indication of the desirability, from the borrower's standpoint, of establishing a line of credit with savings banks.
The banks rarely, if ever, took advantage of said clause
and the borrower knew that having one placed his loan
in a savings bank, barring accident, it could probably
be renewed annually for years to come.
Now let us for a moment consider the question 'of
opening up that field of investment to the average board
of investment of a mutual savings bank.
Are such boards discriminating enough to trust with
so broad a field of investment?
It has always been the practice for legislatures to
_limit the list of bonds from which savings banks may purchase, and many have thought their limitations excessive.
In Massachusetts our laws were for years so conservative
that investing boards were called upon to discriminate
very little, as almost any bond legal to purchase was
absolutely sound.
Recent events, perhaps, make that appear a little
strong, but it is substantially true. Legislative bodies
apparently took the attitude that many investing boards
would not wisely discriminate in their selection of investments and so limited all boards for the protection of the
more inexperienced or untrustworthy.
I personally believe that many of the officers and investing committees, particularly in the larger cities,
would invest the deposits of their institutions more wisely
and to better advantage if entirely unhampered by legislation, though such freedom from control would, of
course, be impossible of practical consideration.
As a result of all this paternalism, you will find that
many country savings bank officers assumed that if a
bond was legal to purchase it was sound and investigation unnecessary.
Then again, no leoan secured by mortgage of real
estate could be made to an amount in excess of 60% of
the estimated vale—if on improved property, or 40% of
the value if unimproved property. That law would
appear to be sufficiently conservative. An easy going
Investing board or one particularly optimistic would

202

RANKERS' CONVENTION.

rarely slip in judgment far enough under this law to
occasion many or very serious losses in this class of investment, particularly as re-appraisals are required at
frequent intervals.
How then about allowing so wide a latitude in judgment as a law permitting loans on personal security?
The answer of those who advocate and believe in this
class of investment is:
First—The value of such loans has been time and again
proven in Massachusetts, particularly in unusual periods,
as they have quickly filled up the empty cash drawer at
no expense to the Profit and Loss Account.
Secondly—They are a far better income producer than
short-time bonds and a bank must provide one or the
other if efficiently managed.
While Massachusetts publishes no statistics from which
we can determine the relative percentage of losses as
between the various classes of investments, it is believed
by good judges that the vale of personal loans as a class
of investment considerably outbalances the rather higher
loss rate which I expect their class has shown.
Perhaps an absolute comparison of losses as between
the classes of investments is an unfair way to prove
their worth. We must remember that even now the
market value of the bond investments of the Combined
Savings Banks of the country is without doubt millions
of dollars less than their value on a cost basis, though,
doubtless, most of the bonds will be paid in full at
maturity. That maturity, however, may be ten, thirty
or fifty years hence. If you compare the losses taken
in personal loans with the shrinkage in value of bonds
below purchase basis, your personal loans will not come
off a loser. This latter comparison is, of course, somewhat unfair, but not so much so as at first appears.
In Massachusetts the Bank Commissioner has power
to direct a management relative to the collaterals it may
receive. Such power is, of course, of no value if your
Superintendent of Banks happens to be an unfortunate
selection. If, however, he is a strong, able man, he can
be of inestimable value to banks in the smaller communities who have not the opportunity to know the value
of collaterals as well as the officers of larger city institutions, nor the gift of wise discrimination.
You will please remember that every such loan must
mature within one year. If such investments were permitted for a longer period without greater restriction, I
should believe them to be an unsafe class for investment
for trust funds.
In the early days the country savings banks loaned
considerable money on three named notes. It was believed that money accumulated by a community should
be loaned whenever possible in the same community. I
think we will all subscribe to that principal, but I believe no savings bank deposits should be invested except
In such manner and in such securities as trust funds
should be invested in. The ordinary three named notes
of local business and professional men do not, in my
opinion, come under that category. They should do their
borrowing at commercial banks unless they can pledge
suitable collateral.
We, in Massachusetts, who have had the opportunity
to put the X-Ray on the Savings Banks—that is, study
their operations from the vantage point of an examiner,
know that they have made losses in such investments
which should not have been made. In comfortable times
when rates are low there is often little call from the
borrowers for loans. Then is the time when the temptation to get the money invested has led banks to take
loans which they would never have considered when the
stronger loans could be bought. Those also are the times
when they reach for better rates and take fourth rate
paper for the additional income when their better judgment told them it was probably too risky.
However, in spite of these lapses, and I know from
experience they are growing much more infrequent than

formerly, these loans, as a whole, have been an excellent
Investment for the Massachusetts Savings Banks.
The evolution of the Mutual Savings Bank in New
England is a very interesting study. They began small—
one here, one there in little communities, inconspicuous,
but slowly developing. They helped the communities in
many ways, teaching thrift, broadening out in an educational way by experience their trustees and returning to
local circulation by way of mortgage loans, etc., quite a
proportion of its deposits. They have now, most of them,
grown, even those still in small communities, to considerable magnitude.
As you study this evolution, you note that a class of
investment which was much in favor with one management, becomes quite unpopular with the next. It is to
be expected that the later board, having the experience of
the earlier board to assist them, should have improved
ideas. It is amusing to find that personal loans in one
period would be high in favor, then low in the next.
Mortgages for years were only moderately popular and
bonds the only things to buy. Why did they buy bonds?
Because they, thought a decade ago that the United
States was working toward the European income rate.
They argued that unless to-day you put all the money
2
1
/
you can raise into long municipal or railroad 3 s at 115
to net 3.05, you will next year have to pay 125 for them
and they will only net 2.75. However that bubble burst
and most of us here can produce in our bank vaults at
home some of the goods to prove it.
Mortgages are now the popular investment in many
communities and bonds take second place.
Each Savings Bank officer, however, is having to decide
what proportion of his deposits to invest in the various
classes permissible.
That there should be a variation between the City
bank and 'the Country. bank in this particular,is reasonable. The figures of the combined Savings Banks of
Massachusetts are interesting and are as follows:
Percentage of Investments to Total Assets, October 31,
1915.
Bonds and Securities
Mortgage Loans
Personal Loans
Cash, etc.

32.91
48.88
14.52
3.69

These figures are quite different from those shown in
1900. The percentage in bonds is a little less to-day;
that in personal loans near 30% less and the percentage
in mortgages correspondingly more.
Personally, I am a believer in mortgages as a Savings
Bank investment and the fact that they carry the larger
part of the burden of earning the dividends does not hurt
them in my estimation. Conservatively made and frequently re-appraised, they are the best friend the depositors have.
Situated as my home institution is in a city of considerable size, having a large diversity of industry, I advocate Investing about 60% of our deposits in carefully
selected first mortgages of real estate. We earn on
these about 4.98 per cent. tax free. As conditions exist
to-day, I am content to invest 25% of our deposits in
municipal, railroad and street railroad bonds. Of the
balance, I would invest about 12% in carefully selected
notes of the strongest borrowers and 3% cash and in
banks. I believe those proportions make a well balanced
group of assets.
Conditions, of course, vary in the several states and
many communities without doubt do not have the opportunity to obtain in sufficient amounts such high grade
notes as are available in Massachusetts. The demand
from our banks for such paper has gradually increased
and in turn the borrowers have appreciated the value of
Savings Bank year loans, so the supply has usually kept
fair pace with the demand.
Experience has taught the investing boards that they
must use particular discretion when investing in this
class of asset, and I believe that, as a whole, they have
proven fully equal to the task.
I do not believe in such a class of investment, however, unless the officers, recognizing the particular value
of its liquidity, confine their loans to borrowers of the
strongest character.
In conclusion, gentlemen, I thoroughly believe that
when conditions exist comparable to those in Massachusetts, and loans to borrowers so strong ancl sure of
payment during all conditions can be obtained, savings
Institutions will find loans on personal security an exceedingly safe and useful asset, a secondary cash reserve
of unequaled value.

Committee and Officers' Reports Savings Bank
Section.
Report of Savings Bank Centennial Committee
Mr. President and Gentlemen:
At the New Orleans convention in 1911 the Secretary's report contained mention of future plans with reference to "the proper celebration
of the Savings Bank Centennial in 1910, for which due provision should
be made." Each year thereafter the same matter was brought up. It
was not until the Seattle convention last year, however, that this Committee was appointed for the interesting and no mean task of appropriately celebrating the anniversary of American savings banks.
A suggestion was made several years ago to gather material for a
volume detailing the history of savings banks in the United States; but
a mutual savings banker of Albany, New York, had undertaken the collection of data for such a purpose. To take advantage, therefore, of the
suggestion would perhaps merely lead to a duplication of work.
How to fittingly mark the event was the problem. What would accomplish this object more effectively than the inauguration of a nationwide thrift movement which would reach every section of the country?
One hundred years ago those who planned the first institution for savings had for their purpose the amelioration of the condition of the poor
and the inculcation of the principle of thrift in the mind of the public,
thereby making better citizens and promoting greater efficiency. After
a century of campaigning the savings in the banks of the country total
over $8,500,000,000. Hence, it was the desire of this Committee to
conduct a movement for thrift which would be at least commensurate
with the vastness of the amount of savings in the United States and
the importance of savings institutions.
One of the first things which was done was to secure the co-operation
of several organizations through which we could effectively conduct
propaganda. The American Institute of Banking, with its seventY Chapters, was enlisted. The International Committee of the Young Men's
Christian Association, the National Board of the Young Women's Christian Association, the National Americanization Committee of Immigrants in America and the Chamber of Commerce of the United States
came to our assistance. It took considerable correspondence to perfect
such an organization. The task was big, but necessary for the foundation work of the great movement which has become of such importance.
In December, 1915, your Committee compiled a text-book entitled,
"Thrift—How to Teach It; How to Encourage It." Six thousand
copies were printed and to date 5800 have been distributed to interested parties at their request.
From many hundreds of communities, both large and small, requests
were received for advice and suggestions on how to conduct local thrift
campaigns. The extent of this correspondence is evidened by the fact
that more than 104,000 pieces of mail were sent out from the Section's
offices for the fiscal year 1910.
Tile results accomplished by the chapters of the Institute are highly
gratifying. Particularly has this been true of Chattanooga, New York,
Atlanta, Dallas, Macon, Baltimore, Jacksonville, New Orleans, Los
Angeles, Spokane, San Francisco, Albany, Minneapolis and Denver.
For example, in Chattanooga a very complete and efficiently conducted
campaign was instituted, tile results of which were an immediate gain
of 23 per cent in new savings accounts and an advance of 70 per cent.
over the record of the previous year. The Chapter organized the
Chattanooga Association for the Promotion of Thrift, the purpose of
which was "to promote the spirit of conservation among our people."
Credit should be given to Messrs. A. W. Taber and T. It. Durham for
their. splendid efforts in this work. The Chattanooga campaign was
responsible for a number of suggestions which were afterward incorporated in the Nation-wide Thrift Campaign of the Association.
In New York 110 new school savings banks were organized; several
contests for the encouragement of thrift were conducted through the
daily papers and more than 150 addresses on thrift were given by
Chapter speakers. The excellent work accomplished in New York City
undoubtedly produced splendid results. The report of the Thrift Committee of the American Institute of Banking details the work of each
chapter in the conduct of the thrift campaign. Your Committee acknowledges with considerable appreciation the co-operation of the American Institute of Banking and the chapters thereof. The chapters are
In a large measure responsible for the wide scope of influence which
the movement has attained.
Another factor of considerable importance has been the International
Committee, Young Men's Christian Association. About two years ago
arrangements were made with the Y. M. C. A. for the construction of a
thrift exhibit. Seven hundred and fifty dollars was appropriated from
the Special Fund of the Savings Bank Section for this exhibit. The
Y. M. O. A., meeting with success in the showing of the exhibit, constructed several others, thereby extending their work of thrift. Since
the first of October, 1915, they have shown these exhibits In 144 cities
throughout tile country. Simultaneous with these exhibitions addresses
on thrift were given in mills, factories, churches and on street corners.
Literature was distributed and the people were taught the value of the
savings habit.
•
Through the distribution of budgets and literature the Young
Women's Christian Associations, with their 400,000 members, have
learned much of the value of thrift. The field secretaries of tile National Board, Y. W. 0.A., report marked interest in the thrift campaign
throughout the United States. This work amongst tile women is assuredly important. There is no field which needs cultivation greater
than the home, and this work of the Y. W. C. A. should be encouraged
in every possible way.
The immigrant, not understanding American ideals and customs, is
being taught' to place his savings in our savings institutions, through
the co-operation of the National Americanization Committee.
The boy is being encouraged to earn and to save, to become a decent

and reputable citizen by the efforts of the Curtis Publishing Company.
It would be a rather difficult thing to gather statistics of the results
of the Centennial Thrift Campaign. It is sufficient, however, that we
are convinced of wide-spread interest in our work.
The success of any great movement depends largely upon the preliminary work, the foundation which is laid before the movement is definitely launched. Great care was observed in this respect in the inauguration of the nation-wide thrift movement instituted in celebration
of tile one hundredth anniversary of savings banking in America. The
work done by the organization hereinbefore detailed had the effect of
creating a demand for a concrete plan of action which would effectively
reach every section of the United States.
In March of this year there was created an Advisory Thrift Commission with Myron T. Herrick as chairman. Some of the most important
and influential citizens in the United States accepted membership.
There were no available funds, nor had we tile organization for
supplying the material for local campaigns. In order to obtain results
and secure real action it was necessary for us to contract for the furnishing of literature and copy which would make up the plan of campaign. Effective thrift campaigning cannot be accomplished by fits and
jerks, by spasmodic newspaper articles or occasional advertising. Interest and enthusiasm must be aroused, and when aroused must be maintained for an appreciable length of time. There must be well-written
articles of an interesting and instructive nature in the press, discussion
of ways and means and exchange of ideas. Thrift must be made the
general topic of conversation. In the last analysis, it is only by directing the thought of the individual on ways and means .to eliminate
waste that individual conservation and saving is effected. Moreover,
as the individual builds for himself a competence and a home, he is
also building and strengthening his character, broadening his vision
and contributing to the welfare of the community in which he lives.
The plan was for the local communities to finance a six months' campaign. That is to say, a meeting of bankers was called, the campaign
explained and subscriptions to the proposition made for the conduct of
the local movement. To do this it required much persistence. A number
of bankers, thinking that it was a mere advertising scheme for savings
accounts, would have nothing to do with it. One hundred and fifty cities
and more were prsonally visited by representatives of the plan. It
seemed as though this great amount of work would go for naught.
However, after four months of such intensive effort, communicating
regularly with upwards of twenty-five hundred hankers in over twentytwo hundred communities, finally brought real results and the immediate
future of the campaign assuredly looks as though it would be truly
nation-wide.
The Harvey Blodgett Company of St. Paul, Minn., were contracted
with and in collaboration with this Committee the plan of campaign was
completed. It is the product of the highest standard of publicity effort.
It is well rounded and effective. The copy contained in the plan is
strong in character and distinctive in quality. It gets to the individual
and effectively induces him to save and conserve. It is our object to
secure two thousand communities throughout the United States to conduct this campaign or some campaign of their own choice. It is our part
to suggest and constructively advise. It is obvious that this cannot be
accomplished without a definite plan of action, which, adopted by communities throughout the country, will be a great unified thrift movement
which will obtain definite results and turn the mind of the public from
waste and extravagance to thrift and conservation. If ever America
needed a movement of this kind it does at this time. If there were not
the demand for the nation-wide thrift campaign in the United States it
is manifestly ridiculous to assume that the success which we have had
would not have been attained. From the humblest in society to the millionaire it is realized that the future progress of this country, the
character of its people, the stability of our economic and social life
depends in the main upon the spirit of independence in the individual
brought about through the practice of thrift. This is assuredly economic
truth.
There are but two ways to effectively change the thought of a people
from extravagance to thrift. First, adversity. The fundamental reason
of French frugality which exists most in the peasant class is the
result of adversity. From an investigation made by your Committee
through consuls general in France and other countries of Europe establishes this fact. The second way is through a nation-wide or countrywide campaign of thrift education. This campaign must be definite,
efficient, of sufficient length of time for the people to thoroughly understand it. And lastly, the avenues of approach to the public must be
utilized continuously.
The nation-wide thrift campaign which your Committee has adopted
"has very definite aims in view." Certain goals of accomplishment have
been set, and clear-cut, direct, efficient and economical means have been
developed for reaching them. The sole aim of the campaign is not the
mere gathering into banks of pennies, dimes and dollars. One aim, it is
true, is to attract to the nation's banks a million new savers and ten
million better ones. To put renewed purpose behind those millions of
accounts already started, too many of which are inactive. To acquaint
show, by example and
people with the purchasing power of money.
precept, how to handle money wisely—to encourage better habits with
money. To encourage the people to get the most out of their money;
how to make their money earn more money. Through education to make
the get-rich-quick promoters' efforts barren of results. To teach the
cardinal principles of sound investments—what to do with money after
saving it. To help people gain a mastery of the will, give direction to
their purposes, conserve their energies and follow the safest route to
success. To stir new ambitions in a hundred million human breasts and
kindle the fires of achievement. To bring the people on closer terms of
intimacy with the banks. To supply, in a measure, what is sorely lack-

204

BANKERS' CONVENTION.

ing in our educational system that the youth of the land•may approach
their life work better grounded in the rudiments of finance. To establish
new ideas of thrift in the home. To cultivate money sense in the
potential, the future bearers of the burdens of business. To forestall
in a great measure dire circumstances in the lives of Millions who are
treading their way toward their destinies. To help people who have a
leaning toward thrift to make a life habit of it. To bring the prosperous
into more intimate relationship with banks. To inspire owners of indifferently managed savings accounts with a new and lasting zeal. To
increase buying power by adding interest income to personal earnings.
To make the renter a home owner. To furnish constant impulses and
Inspirations, not to any class, but to all classes. To prompt those who
are prospering to save against adversity. To teach people to conserve
waste, to be saving of things that cost money as well as money itself;
to be thrifty with time, energy and material—everything that enters
into the daily life. In a word, to help people find themselves, to make
thrift a habit with the individual and a national trait in America.
Although the work of your Committee has been difficult and the
blazing of new trails an arduous task, neverthless the bright prospects
of a thrifty America have been ever before us. It has been pleasing to
us to know that the zeal and enthusiasm with which all interested
parties have worked means a fitting celebration of a great event and
the eminently proper beginning of a second century of American savings
banks.
At our instigation the Canadian Bankers Association have become interested in our plan of campaign and are now considering a dominionwide thrift campaign based upon the movement inaugurated by us in
this country .
In tile plan proposed at the Seattle meeting a celebration was provided
for to be held in tile City of New York in November of this year. Last
May the New York State Savings Banks Association independently conducted a successful celebration of the centennial In New York City,
which was attended by bankers from all over the country. Your Committee considered it inadvisable to hold a second celebration at the same
place. Hence, it was concluded to hold the celebration of the centennial
at the time of the Kansas City convention. Plans were laid for appropriate commemoratory exercises as well as an entertainment feature
hereinafter referred to. Mr. W. S. Webb, cashier of tile Missouri Savings
Association Bank, kindly consented to act as chairman in arranging tile
details of the celebration in Kansas City. In this respect Mr. Webb has
been very valuable and your Committee appreciates his splendid cooperation.
As an entertainment feature of the celebration it was planned to
exhibit a five-reel motion picture, which was produced by tile Vitagraph
Company of America under tile auspices of the Savings Bank Section.
The Story "The Dollar and the Law" has been written by Irvin S.
Cobb. The picture brings out tile thrift idea very strongly; it contrasts
economy with wastefulness—good and bad management of personal resources. It vividly tells the story of thrift in a manner which will convince one of the necessity for the practice of thrift. It describes in several scenes the operation of the nation:wide thrift campaign and shows
the campaign in actual progress. Tile film will be given wide circulation
and will certainly produce greater interest in the thrift movement.
In conclusion, we desire to give you some idea of the organization
which has been effected through systematizing the thrift movement.
General propaganda is conducted from headquarters in New York City.
The institution and direction of local campaigns is handled entirely front
the office of the section. All of the detail work is under the direction of
the Secretary of the Section. Nothing is done with respect to the campaign without the Section's approval. The IIarvey Blodgett Company
has an office in New York, in the vicinity of the general offices of tile
Association, which is at the entire service of the Section for the pro.
motion of tile campaign. State-wide propaganda is conducted by a number of state associations through the secretaries thereof. It is hoped
that before long every state bankers association will be enlisted in support of the movement. This work of state-wide campaigning is also
under tile direction of the Savings Bank Section.
Your Committee deeply appreciates being given the honor of arranging
for the celebration of the centennial of American savings banks.
Respectfully submitted,
V. A. LERSNER,
Chairman.

Report of the Secretary of Savings Bank Section
KANSAS CITY, Mo., Sept. 26, 1916.
Mr. President and Gentlemen:
The Sections of the American Bankers Association are established for
The purpose of rendering constructive service to its members in the
various branches of banking. This fact has become increasingly evident
in the work of the Savings Bank Section.
Throughout the past year we have been in constant touch with our
3,533 members—serving them in every possible way. Through the
Nation-ide Thrift Campaign conducted by our Section, we have brought
the name of the Savings Bank Section and of the American Bankers
Association into most every city, town and village in the country. The
people have heard more of the American Bankers Association than of any
other like association. Through the propaganda literature which we
have distributed, tile bankers have been assisted to a better understanding of pank publicity; they have been encouraged to co-operate with each
other, which they have found to be more profitable than bitter competition.
Nine hundred and thirty-nine new members have been enrolled since
the Seattle meeting, twenty-seven more than the combined total number
enrolled for 1913, 1914 and 1915. Over 104,000 pieces of mail matter
have been sent out front our office, 92,000 of which were sealed letters;
5,050 letters have been received in the office of the Section since the
Spring Meeting of the Executive Council, most of which have been requests for information from members, evidencing the wide scope of
service rendered. To care for this amount of work and to facilitate its
completion, systems have been installed which have been and are being
carefully kept up to date.
Your Secretary has visited forty-three cities in the interest of the
thrift movement and other work of the Section, and forty-four addresses
have been given.
The past year's appropriation to tile Section's work amounted to

$13,888.25, inclusive of $3,500 appropriated at the Spring Meeting and
$45.96 miscellaneous receipts. The expenditures for the year aggregate
$13,542.34, leaving a credit balance of $391.87 in accordance with the
attached statement.
The splendid co-operation received from the other Sections and departments of the Association, as well as General Secretary Farnsworth,
acknowledged with considerable appreciation, and the kindly relationship
which has existed between the officers, members of tile Executive Committee of the Section and your Secretary during the past year has
been one long to be remembered.
Respectfully submitted,
M. W. HARRISON,
Secretary.
FINANCIAL STATEMENT SAVINGS BANK SECTION
From August 15, 1915, to August 31, 1916, Inclusive
CREDITS
September 9, 1915, by appropriation
$10,388.25
May 9, 1916, by appropriation
3,500.00
43.80
Received refund a/c thrift propaganda
2.16
Received a/c express overcharge
$13,934.21
DISBURSEMENTS
Postage, stationery and printing (including
Thrift)
$4,793.40
Salaries
3,971,82
Convention expenses
1,226.98
Proceedings, 1915
1,525.73
Rent
604.92
527.06
Traveling expenses
240.66
Extra help
93.99
Telephone and telegraph
80.20
Express
55.00
Gold badges
18.22
Books
Supplies
28.05
Flowers for Mr. Meakle
5.25
302.56
Executive Committee meeting
Picture frame
2.50
$13,542.34
Credit Balance

$391.87

Report of the Methods and Systems Committee
Kertsns CITY, Mo., Sept. 20, 19T0..
Mr. President and Gentlemen:
Since tile Seattle meeting our committee has co-operated with the
Savings Bank Centennial Committee in the conduct of the Thrift Campaign. At meetings called by Chairman Lersner of the Savings Bank
Centennial Committee, we have been represented.
Of the one thousand copies of the Book of Forms, 135 remain unsold.
Since our last meeting we have sold 117 copies. It will be remembered
that the Section's Special Fund of $2,367.63 was used to pay for the
publication of these books, which cost $3,041.01. There has been
received to date front the sale of the Book of Forms $3,357, wliieh is
.
$315.99 more than the cost of publication. In the event of our
selling the remaining copies (135) tilere would be to our credit the sum
of $24.06 in excess of the amount originally in the Special Fund, after
deducting the $750 appropriated to the Y. M. 0. A. for the Movable
Thrift Exhibit, or $2,400.03.
Immediately following the Seattle meeting our office sent a questionnaire to a number of schools operating savings banks. Two hundred and
five replies were received. An analysis brought out the following interesting observations:
1. Suggestions in favor of the system used:
Pass book and pass card method—
Simple, inexpensive, avoids mistakes, develops more permanent accounts, practical training for children, real banking practice, teaches
thrift, little time necessary, secures co-operation of all the teaehers,
secures interest of community, children operate the bank themselves and
take an interest.
Stamp Method—
Makes young children realize value of money, good practical trainihg,
allows deposit of the smallest amount, simple, very attractive to' children, develops thrift, easy for teachers, children can do a lot of the
work, produces rivalry of deposits between schools.
2. Do you advertise your school bank, and how?
Placards, leaflets, circular letters, blotters, souvenirs, calentlark pencils, notice to parents, statements, school paper, weekly report, rulers,
talks, prizes, newspapers, pencil boxes.
3. The banks are exerting a good influence and tile children are taking
a real interest. It is not necessary for the teacher to resort to any
special means to keep up their interest. Objects for which the children
save are: clothes, college education, building up bank account, vadatibn,
travel, bicycles, graduation expenses, home improvement, books, ponies,
shoes, gun, medicine, coal. Evidences of the promotion of thrift among
pupils by the school bank are found in "not so much money spent for
candy, gum, moving-picture shows "—knowledge of the value of money,
care of personal property, continue to save after leaving schtfol.
4. The vocational features are valuable.
5. The following suggestions were made concerning improvements in
the plan or method employed:
Would like the childdren to do more of the work.
Difficulty of finding money to pay expenses of starting bank is a
preventative to the installation thereof.
Each state should adopt it. The teachers would then realize that it
was a regular schedule, not an added burden.
Largely on account of the Centennial Thrift Campaign a great number
of school savings systems have been installed. Last fall tile schools of
Albany, New York, instituted a savings system and recently report
twenty-four school banks, 1,552 pupils with regular savings bank books,
and an aggregate sum deposited of $6,073.17. Last January the New
Jersey legislature passed a statute making legal tho installation of a
"system of school savings banks."

205

SAVINGS 'BANK SECTION.
What we consider the most important work of the year with reference
to school savings, and entirely to the credit of the Savings Bank Section,
is the adoption by the schools of the City of New York of a uniform
school savings system. There are 549 schools in New York City and
before the campaign thirty-five of them operated school savings banks.
So far as the system of doing business was concerned, they were in a
deplorable state.
Through the co-operation of the Board of Education and Amzi N.
Clark, the originator of the "Brooklyn System of School Savings," the
Section came into close contact with the schools of the city. The
savings banks, at our instigation, agreed to pay for the initial supplies
in sets sufficient for one thousand accounts. for each school. Arrangements were then made with a printer to make up one hundred sets of
these initial supplies containing all necessary paraphernalia for the
installation of a school savings bank. We circularized the schools several times and used every means at our command to show the school
principals the desirability of a school bank. A slogan was adopted,
"One Hundred New School Savings Banks in 1916." The newspapers
were enlisted. The Board of Education detailed Mr. Clark to the special
duty of properly installing the new banks. By the close of the school
year 116 school banks had been installed, thus more than reaching our
goal. There is no doubt that the total will approach 300 or more before
the,. year has been completed.
A number of commercial agencies have been organized for the purpose of furnishing school savings systems to banks and to schools in
order to meet the growing demand. The office of the Section has received
a large number of inquiries for information concerning school savings
which have met prompt response.' The Texas Women's Bankers Association has begun a state-wide campaign for the establishment of school
savings throughout Texas. The growth in savings in the Minneapolis
schools, as the result of President Hawley's work, is worthy of notice.
From 9,712 children depositors in .1909, the number has grown to 32,295
in 1916; and deposits at the end of the school year in 1909 of $14,178
amounted to $43,372 in 1916.
The Detroit banks also perfected a system of school savings which is
being successfully conducted. Paterson, N. J., through the efforts of
W. R. Meakle, has instituted a school savings system.
The list of those who received Thrift Talks each month has grown
since the Seattle meeting from 1,200 to 6,000. About 2,300 sets are sent
out from the office; 850 are distributed by the Michigan Bankers Association; 1,250 by the Minnesota Bankers Association and 1,600 by the
Missouri Bankers Association. Each month the Secretary has sent out
a letter with the Talks encouraging the addressed to further the thrift
campaign, and suggesting ways and means for so doing. The Thrift
Talks have received much favorable commendation, and have accomplished considerable good. Banks are using them for monthly house
organs, as copy for newspaper advertising, or, in a number of instances,
they are put in pamphlet or circular form and distributed to depositors. Y. M. 0. A.'s and kindred organizations have used them to excellent advantage in encouraging the habit of thrift among the young men
of the country. The small country newspaper has devoted much space
each week to the publication of these little articles. So they are read
by all classes, aiding the thrift propaganda in effectively reaching the
individual in towns of 250 as well as in cities of more than a million.
Respectfully submitted,
W. E. Krtox,
Chairman.

Report of the Law and Segregation Committee
KANSAS Crric, Mo., Sept. 26, 1916.
Mr., President and Gentlemen:
The Nation-wide Thrift Campaign has taken up most of our attention
since the Seattle meeting. The affairs of this committee, however, have
not been neglected.
Constant watch has been given to Federal legislation affecting savings
banks. It was through the efforts of your committee acting in conjunction with the Federal Legislative Committee of the Association that
a Section of the present Federal Farm Loan Act, providing for savings
departments in connection with the then proposed Federal land banks,
was ,withdrawn.
While the passage of the Federal Farm Loan Act does not give us any
cause for fear of government encroachment upon the business of savings
Institutions, still its successful operation would assuredly supply a most
desirable means for receiving the deposits of tile people. It is for us
to promote the establishment of savings departments in commercial
banks and trust companies throughout the United States. If this is not
done, the inevitable law of supply and demand will call for the creation
of other kinds of institutions for saving.
Would it not be fair for us to assume that when we consider the aggressiveness of the postal savings system and the tendency of the government, evidenced by the passage of the Federal Farm Loan Act, to offer
to the public more adequate means for the deposit of savings, that a
serious condition arises? Only one-half the banks of Illinois have savings departments and a similar condition exists in other parts of the
country. is something of this kind is not done it will be necessary
for the government to go into the savings business to a greater extent,
with the consequent impossibility on the part of the banks to compete
successfully.
Simultaneous with a, movement to create savings departments, it
would be well, perhaps, to distribute literature promoting safety first in
investments and greater uniformity in state banking laws.
On May 17, 1916, Congressman Hill introduced a bill in the House of
Representatives which was referred to the Committee on Banking and
Currency. Up to the present date it has not been reported on. The bill
provides for the investment of deposits of savings bank departments of
national banks, and reads as follows:
"Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That an Act entitled
'
An act to provide for the establishment of Federal reserve, banks, to
furnish an elastic currency to afford means of rediscounting commercial
paper, to establish a more effective supervision of banking in the United
States, and for other purposes,' approved December twenty-third, nineteen hundred and thirteen, be, and the same is hereby, amended by adding section twenty-four of said Act the following paragraph:
National banks conducting savings departments, with savings ac-

counts segregated, and with the five per centum reserve maintained
against them, as required for time deposits under the Federal Reserve
Law, in addition to making loam! and investments heretofore authorized
by law may invest the whole or any part of the deposits in such departments according to the laws regulating the investments of savings banks
in the states in which such banks are located: Provided, That the state
law shall have been approved for that purpose by the Federal Reserve
Board.'"
This seems like a step in the right direction toward the segregation
of savings deposits. It would be well, however, for the Section to accomplish the objects of this committee in securing segregation of savings
deposits by conducting an educational propaganda rather than a definite
campaign for the enactment of laws pertaining to segregation. The
main object is to safeguard savings deposits, and nationally, the conditions are so varied relating to the classes of investments, that it would
require considerable study of these conditions before any definite plan
of action could be offered.
Last October a course in savings banking was introduced in the pages
of the JotatiAL-BuLLETIN, with a view to promoting a better understanding of the segregation principle. Mr. E. L. Robinson contributed a
very valuable paper on the investments of mutual savings banks, which
the committee assuredly appreciated, and suggests the printing of the
paper in pamphlet form for distribution to members.
Your committee reports progress on the question discussed at the
Seattle meeting with reference to a means by which a mutual savings
bank may secure currency from a Federal reserve bank in an emergency.
Respectfully submitted,
GEORGE E. EDWARDS,
Chairman.

Report of Membership Committee
KANSAS CITY, Mo., Sept. 26, 1916.
Mr. President and Gentlemen:
With regards to its membership the Savings Bank Section stands in
a rather peculiar position compared with the other Sections of the Association. A number of banks enrolled in other Sections as voting members are also enrolled in the Savings Bank Section as associate members.
Last year when the National Bank Section was organized, 450 national
banks, which had been voting members of this Section, enrolled as associate members. Hence, as each new Section is added to the Association
our list of voting members decreases, and the associate membership proportionately increases. The other Sections serve but one class of banks,
while we serve all classes in a particular branch of the banking business.
Whereas a year ago we had 226 associate members, September 1, 1916,
showed 1251 non-voting or associate members enrolled, 844 of which are
national banks.
Co-operating with the General Secretary, Secretary Harrison and the
committee have been active in their endeavors to increase the membership roll, both active and associate.
The large increase as noted in the following detailed statement is, I
think, mainly due to the vigorous manner in which we have been promoting the Thrift Campaign, and the intense interest which has been
aroused to the real value of such propaganda.
The following table will show the growth in membership since 1910:
September 1, 1910
1773
September 1, 1911
1888
September 1, 1912
2066
September 1, 1913
2378
September 1, 1914
2217
September 1, 1915
2559
September 1, 1916
3479
You will note there has been an increase of about 100 per cent. since
1910 and 36 per cent, since last year.
The detailed report appended hereto shows our membership as of
August 25, 1916, a summary of which is as follows:
Total membership August 25, 1916
3479
Total membership August 14, 1915
2559
Gain since 'August 14, 1915
Lost by failure, liquidation and merger

920
42

Net gain since August 14, 1915
ASSOCIATE MEMBERSHIP
National Bank
Trust Companies, etc

878

Also enrolled as associate members to
literature, etc.:
State Secretaries
Chapters, A. I. B

receive

844
311
- 1155
thrift
49
47
---

Total Associate members
Gross Membership
Delinquent

1251
3479
42

Net Membership
Associate members (banks)

3437
1155

Voting members
Non-voting members (including Chapters and State Secretaries)

2282
1251

3533
Grand Total
Tile Committee submitted a preliminary report to the Executive Council at its Spring Meeting at Briarcliff Manor in May; 1916. The Committee at this time desires to express its hearty appreciation of the generous support and valuable assistance it has received from tile General
Secretary and Secretary Harrison in connection with this substantial
Increase in membership of the Section.
Respectfully submitted,
•
H. P. BECKWITH, Chairman.
HENRY SCHACHTE.
JAMES DINKINS.
CHAS. S. NORRIS.
J. H. EDWARDS.

206

BANKERS' CONVENTION.

Report of Committee on Postal Savings Bank Legislation
KANSAS CITY, MO., Sept. 26, 1916.
Mr. President and Members of the Savings Bank Section:
Our report of a year ago indicated that the present Congress would
in all probability raise the limit of interest-bearing deposits in the
postal savings system from $500 to $1,000 and that the trustees of the
system would be clothed with discretionary power to receive an additional $1,000 without interest. Legislation to this end was finally
effected on May 18, 1916.
The amendment also provides that postal savings funds may be deposited in banks which are not members of the Federal reserve system,
provided no qualified member bank is available. Under the Federal
Reserve Act depositories must be member banks, and this amendment is
obviously to our advantage.
In June, 1916, the month following the passage of the amendment, the
increase in deposits was $3,800,000, four times as great as in the corresponding month of 1915. At the end of July, 1916, the system had total
deposits of $89,700,000 and 612,000 accounts. These deposits were gathered in 7687 postoffices; seven-tenths of the total is credited to the 87
offices having more than $100,000 on deposit; nine offices now hold
42 per cent. of all deposits, each having upwards of one million dollars
to its credit; these offices are in New York, Brooklyn, Chicago, Boston,
Detroit, Pittsburgh, San Francisco, Portland, Ore., and Philadelphia.
On July 31, 1915, the system had 532,000 accounts with aggregate deposits of $66,150,000, the year's gain being 80,000 accounts and $23,550,000 in deposits.
Complaints from some of our members have reached your Committee
that the Postoffice Department was unduly active in exploiting its business; particular exception was taken to a card widely circulated by the
Department giving information about the system in seven terse sentences, the first of which reads: "Savings deposited at the postoffice
are absolutely safe." We think this complaint is justified and your
Committee has been in communication with the Director of the System,
Mr. Carter B. Keene, protesting against the use of this sentence in the
card referred to. We are advised that the various postoffices are stocked
with this printed matter, which has been in use sinee 1913, and the
Department disclaims any desire or intention to reflect upon the safety
of other savings institutions. Inasmuch as no good purpose is served
in accenting the safety of funds deposited in the postal savings banks
and as this advertising matter in its present form carries with it in the
minds of many an unjust reflection upon other agencies for savings, we
hope that when a new addition of these cards is issued the sentence objected to may be eliminated.
One item of interest must not be overlooked. As passed by the
Senate, the rural credits bill contained a provision permitting the investment of postal savings funds I farm loan bonds; this provision was
strenuously opposed on many sides and we have reason to think that the
active opposition of the postal savings authorities had much to do with
eliminating this feature of the bill when it reached the Joint Conference
Committee for final action. We gladly voice our approval of this effort
to maintain the integrity and the liquidity of the postal savings system.
Your Committee is in constant touch with the officers of the system
and is glad to report that the present administration is not disposed to
invade the terriory occupied by the privately managed savings institutions, but to co-operate in every way which will help the people of our
land in developing habits of thrift.
Respectfully submitted,
EDWARD L. ROBINSON,
WILLIAM E. KNOX,
B. F. Sew,
Committee on Postal Savings Legislation.

Report of Special Committee of Nation-wide Thrift Cam
paign Among Colored People—John Mitchell, Jr.
"Let every man be occupied and occupied in the highest employment
of which his nature is capable, and die with the consciousness that he
Sidney Smith.
has done his best,"
Mr. President:
proposition offered by you and promulI am of the opinion that no
gated by your remarkably efficient and energtic Secretary, Mr. M. W.
Harrison is fraught with more benefit to the people of the South-land,
irrespective of race or color than is the one which has for its purpose the dissemination of practical methods for the cultivation of
thriftness among the masses of colored people of that section.
For more than ten years, sir, I have witnessed the steady developing of plans for the financial betterment of the nation and the information gleaned here has been transmitted to those people by whom I am
surrounded. The opportunity to live and learn and to learn and live
has been afforded to me by the cheerful co-operation of the southern
white men by whom I am surrounded and who have not placed even
so much as a straw in the way of the financial advancement of myself or those, whom I represent.
Although a very busy man, I did not see my way clear to decline the
call to duty and at some personal expense, I have enlisted the support of some of the leading colored men in the country. I hope that
this movement may be encouraged and unanimously endorsed by this
honorable body. The better class of white men and the better class
of colored ones have a great task before them in this movement. The
lifting up of ten millions of people from the degradation of poverty and
thriftlessness can best be accomplished through the agency of that class
of far-seeing colored people, who will glory in the task and who will
not get weary in well-doing.
Still there are thousands, who have learned this lesson of thrift under
the tutelage and encouragement of their southern white neighbors. Our
People at the close of the Civil War were penniless,. but with a
determination worthy of the cause, the estimated wealth of the colored
people is seven hundred millions of dollars. In my own State, noted
for its gallant gentlemen and beautiful ladles, and where the expression, "The ladles, God bless 'em" passes current among the
multitude, the progress of the colored people has been so noticeable that
it was decided by the legislature of the Old Dominion to keep separate
statistics concerning the same.
Hon. C. Lee Moore, one of the ablest if not the ablest Auditoi of the
Public Accounts Virginia has ever produced in his annual report under
date of December 27, 1915, which report was made to Ills Excellency,

Henry C. Stuart, Governor Of Virginia says that the colored people of
the commonwealth own 1,074,823 acres of land, valued at $10,365,377.
This, sirs, is the result of fifty years steady accumulation and shows
that a small proportion of our people are practicing thritt and are
preaching by their actions the gospel of economy.
The colored people of Virginia own land, town-lots and buildings
valued at $28,772,199. They own personal property to the value of
$9,076,774, making the grand total in valuation of the propetty of the
colored people of my own state, $37,848,973.
In my home city, Richmond, where the, five story white brick bank
building, with its polished steel round door vault, the Mechanics Bank,
of which I have the honor to be President, is located, the colord people
own real estate valued by Auditor Moore in his report at $2,841,111.
Their personal property is valued at $531,963. The total value of their
property, both real and personal is $3,373,074.
We have two savings banks in Richmond, the Mechanics Savings Bank
and the St. Luke Penny Savings Bank. The gross assets of these
institutions are four hundred and fifty thousand dollars. We have three
insurance companies in the fraternal and industrial class with admitted
net assets of ($294,404.37) two hundred and ninety-four thousand, four
hundred and four dollars. They all have colored officers and they are
not any white agency affairs either.
The Southern Aid Society, Inc., The Richmond Beneficial Insurance
Co., Inc., and the American Beneficial Insurance Co., Inc., are the ones
to which I refer. I am not through with this kind of information. Mr.
President, I deemed It proper to call the attention of this honorable
body to a partial statement of the producing power of these colored
people of this country, to the end that I might show that in making
the suggestion and in "calling me to the colors," you "builded better
than you knew."
I base the following statistical information upon the percentage of
production of the colored population of the United States as set forth
in Census Bulletin No. 8 and the productions upon those as late as the
year of 1914.
1911
Corn
1914
Wheat
1914
Oats
Rye
1914
1914 • Rice
Hay
1914
.1914. Potatoes
1914
Sweet Potatoes
1914
Ctitton
1914
Tobacco
1914
Cotton Seed

Quantity.
98,893,748
5,346,102
4,564,240
85,558
2,198,613
350,355
3,653,289
11,937,114
5,961,063
105,537,258
2,795,354
Total

bushels

tons
bushels
bales
lbs.
tons

Value
$94,937,967
5,346,102
2,282,120
106,947
2,031,057
3,895,340
1,787,481
8,713,034
220,936,225
10,343,922
39,102,644
$389,543,739

This represents the partial producing power of the colored, people
of this country for just one year. The value of the live stock of
the colored people on their farms according to the census figures of
1900 was $84,936,215. The number of banks and trust companies
operated by colored people are estimated to be 45 with a combined
capital of $1,600,000 and an annual business estimate at $20,000,000.
If these people can do this upon the initiative of their own,
cordially supported and encouraged by the far-seeing white men of the
South-land, what can they do when the thrift movement has behind
it the impetus and encouragement of this great financial organization,
where the North and the South are working haml in hand in lifting
from the chasms of financial degradation and discouragement one of
the most industrious races of people upon the face of the globe.
This movement among our people will be cordially supported by the
bankers in the section from which I hail. In this connection, the
Hon. Oliver J. Sands delivered an address in the city of Richmond
at the Fifth St. Baptist Church Thursday evening September 14th,
1916. In this connection, he showed that the percentage of savers to
the population was as follows:
60%
31%
17.7%
5 4%
24.8%
4%
This showing in the Southland is largely attributed to the colored
population. Certain it is then that it must have been the divine power
of inspiration reinforced by an investigation of the fact that led President N. F. Hawley, our able presiding officer to decide to inaugurate
this campaign specifically among the colored people. The bulk of the
money of the colored people and I might say practically all of it is now
on deposit in the banks owned anti controlled by members of this Association in the Southland.
Money in this country, Mr. President, was created by the white
man, its home is with him and I violate no secret when I say that
it may perambulate in every direction and pass through the hands
of the ten million colored people for various purposes, but that
It will eventually return to its creator, while softly humming,
" Mid pleasures and palaces, though we may roam,
Be it ever so humble, there is no place like home."
I hope then that a way may be found to enable me and ngy associates to prosecute this work, which will result in piling up
millions of dollars in the white institutions of the Southland. As I
have before stated much of this will find its way to the colored banking
institutions, which by the way are but the entrance doors to the palatial
banking houses in the sections where my people reside.
Permit me to thank you and yours for the consideration extended to me for more than ten years. I am here for information
and I have tried to profit by the wealth of information which I arid
here on every hand. I was born in Virginia, on those hills I have
played and longed for days, which to me shall never come, again.
"Man is his own star; and the soul that can
Render an honest and a perfect man
Commands all light, all influence, all fate.
Nothing -to him falls early, or too late.
Our acts our angels are, or good or ill,
Our fatal shadows that walk by us still."
New England
Eastern States
Middle States
Western States
Pacific States
Southern States

Detailed Report of Proceedings
Fifteenth Annual Meeting SAVINGS BANK SECTION, Held at Kansas City, Mo., September 26, 1916
on a more stable foundation that they will correspondingly increase.
Kansas City, Mo., September 26, 1916.
" Now, Mr. President, on behalf of Kansas City, I want to extend to you
The meeting was called to order by Mr. N. F. Hawley, Presiand to your association a very cordial welcome. We want to do
dent Savings Bank Section, in the ballroom, Hotel Muehleeverything that we can to make your stay here pleasant and profitable.
bach, at Kansas City, Missouri, Tuesday, September 26, 1916, . We know that we will be the gainers for your having been here, and
we want in some small measure to return to you something for that
at 10 :30 o'clock A.M.'
Invocation by Right Reverend S. C. Partridge, Bishop Dio- , which you give. I thank you.
PRESIDENT HAWLEY : Mr. Mayor and the citizens of this
cese of Western Missouri.
city whom you represent, I assure you that it is a pleasure to
PRESIDENT HAwLEY : The Hon. George H. Edwards, Mayor of
us to hear a hearty welcome from your city,—a city with the
Kansas City, will deliver the address of welcome:
vigor that pulses through the business offices and that incites
us to work from the activity that we see not only in this
Address of Welcome by Hon. George H. Edwards,
district, but also in the city's beauty and city's activity. It
is true, this branch of the association is most interested in
Mayor of Kansas City
saving, and if we can pay some return for the welcome that
Delegates, ladies and gentlemen, this is rather an unusual occasion
you have given us by inspiring you to greater economy, greater
for me. I have been talking to bankers a good many years, but it
savings, and to something that is better than either of
is usually one at a time, and it is in the private office, and frequently
these, the building of the character that is necessary to save,
rather annoying questions are asked. I come up here today with
the distinct understanding that there will be no questions. I am
we shall perhaps• make some small return for the kindness and
going to say what I have to say and you may accept it or not as
courtesies that you have extended to us, and we hope in that
you please.
•
way, that there may be a double gift from you to us, which
We have here at Kansas City a city of nearly five hundred thousand
we are enjoying in the kindness that we meet on the streets
people, about 450,000 people in two states—Kansas City, Kansas,
and in all the places that we go, and that we in turn may
and Kansas City, Missouri, are separated by a street which runs
give to you some inspirations that may be of use to you, and
along the state line. We have a market here for wheat, for hay,
for corn and for agricultural implements which is the largest in
we certainly appreciate most highly the welcome that you
the United States. We are second as a primary grain market. We
have given us, and the courtesy that you have extended to us.
are second as a live stock market. We are second as a packing
(Loud applause.)
center. We are sixth in bank clearings, and a good part of the
PRESIDENT HAWLEY : The first address of the morning, entime this spring we have been fifth—I do not like to mention that
titled "One Hundred Years of Savings Banking," by Mr. Edreally, I don't want to mention it because our good friends of St.
Louis do not like to have us talk about that in public. We are
ward L. Robinson, Vice-President Eutaw Savings Bank, Baltitenth in factory production, having twelve hundred factories and an
more, Maryland.
output of over three hundred million dollars annually.
Were we not so modest, Mr. President, we would tell you we are
one of the most beautiful cities in America, but we are going to
let you judge that, and look us over, and if you do not coincide
with that view you will very much lower yourselves in our estimation
as a critic of municipal beauty.
My experience with bankers is that they are intensely interested
in financial statements. To give you a few figures in regard to the
financial condition of Kansas City: We have an assessed valuation
for taxation purposes of $210,000,000, that is in Kansas City, Missouri,
alone. We assess that value at about one-third to forty per cent.,
so that the real value exclusive of municipal property and of church
property, and property used for purposes of that kind, the real
value is something over $525,000,000. The total of our bonds issued
and outstanding are $5,902,000, and we have in our sinking fund, in
bonds and cash $700,000—so our net indebtedness is $5,202,000—about
one per cent. of our real value.
We own our water works system, which is paying an interest of
five per cent, on a valuation of $11,000,000. I Would like to have
you bankers analyze that statement, and when you have done that I
believe you will conclude that we are good.
You gentlemen represent that branch of the banking business which
comes most closely in touch with the common people. You are in a
large measure responsible for the cultivation of a spirit of economy and
thrift among the wage earners. You are perhaps the most important
branch of the banking business, and I am glad to be here and talk
to you. Kansas City has in the past perhaps not come up to other
cities of our class in the way of savings deposits. I do not know
why this is true, possibly because we are a new city. You know
fifty years ago, Mr. President, the first railroad train entered Kansas
City, and today we are the second railroad center in the United States.
Within a very few years these streets where you see these skyscrapers
and large retail establishments were rocky bluffs. I am by no means
an old man, but I can remember on Walnut street and on Main street
great bluffs, running up into the air one hundred or two hundred
feet, where now are placed large buildings and it has taken money,
and it has taken effort, to build a city under such conditions. Perhaps
we have been too busy to give the attention that we should to the
cultivation of the tendency to save and possibly you people can aid us
in that regard, and I believe you can. I believe that your meeting here
and your thrift campaign, which I understand you are launching,
will aid us in impressing upon our wage earners the necessity of
saving and economy. They say that the surest way to cure a man
of tendencies to anarchy is to make him earn something and own
something. They say that the possession of property, if it is not
too much property, has a tendency to advance civilization. If this
is true, the work that you men are doing, while perhaps your primary
object is not ilong those lines, the work that you are doing is
advancing the welfare of the whole country, and in that respect we
all look up to you, and we honor you for the work you are doing.
There is another reason why perhaps our people have not been able
to accumulate so much in savings deposits as they might have. We are
building a new city. Our wage earners are applying their wages
and paying for them, and when you go over the town you will find
that we are a city of small and moderate homes. Our people own their
ouw property they take a pride in keeping it in order, and they
have invested all their surplus earnings in that way, rather than in
putting them in savings. However, our savings deposits have more
than doubled in ten years, and we believe as we grow older and are

"One Hundred Years of Savings Banking," by

Edward L. Robinson
[The reader will find Mr. Robinson's paper in full on pages
179 to 185 of this publication.]
PRESIDENT HAWLEY: We are exceedingly fortunate to have
a history of the savings bank institution so happily written
at this centennial celebration of savings. It will become a
history to those who wish to seek information and inspiration
regarding savings. On account of another engagement which
Dr. Graham Taylor of Chicago has, it will be necessary for
us to change our program, and he will at this time address
us on "The Social Aspect of Thrift." Dr. Taylor.

"The Social Aspect of Thrift," by Prof. Graham Taylor
[Dr. Taylor's address will be found on pages 186 to 187.]
PRESIDENT HAWLEY : We wil make on other change in our
program and ask Mr. George E. Allen to address us at this
time on "Thrift and Human Nature." Mr. Allen.

"Thrift and Human Nature," by George E. Allen
[Mr. Allen's paper appears on pages 188 to 189.]
PRESIDENT HAWLEY: It is quite appropriate that the gentleman who has aided the committee that has had in charge
the Centennial Thrift Campaign should address you, and I
will now ask Mr. Victor A. Lersner, Comptroller of the Williamsburg Savings Bank of Brooklyn, New York, to address you.

"Centennial Thrift Campaign," by Victor A. Lersner
[Mr. Lersner's address appears on pages 189 to 190.]
PRESIDENT HAWLEY: We have just received word that the
speaker on the program is unable to be with us, Mr. Irvin S.
Cobb. Now, this has been a celebration of a century of savings, and yet, as you will perceive, the real celebration is
not in this room at this time, it is rather in the impulse
which we are endeavoring to give to thrift and to the building
of character throughout this nation, and we solicit not only
the assistance of the members of our own Section, but the
help of the citizens of our country that in this time of prosperity we build up a system and a character for saving that
will last us and that we will need most of all in the time to
come..
I will ask the secretary to make some announcements.
SECRETARY HARRISON: On Wednesday evening at 8:30
o'clock an entertainment will be held in Convention Hall in
celebration of the Centennial of American Savings Banks. A

BANKERS' CONVENTION.

208

large crowd is expected to be present. It is therefore suggested that those wishing to attend be there early at the session.
Motion pictures of the nationwide thrift campaign,
the production of which was completed last week, will be
shown. There is a section reserved for • delegates. The afternoon session of the savings bank section will be held at 2:30
o'clock today in the assembly room of the Muehlebach Hotel,
which is just diagonally across the hall. There will be three
very important discussions: "Government and Private Institutions for Savings," "The Business of Getting New Savings Accounts and the Vitalization of Dormant Accounts," and "The
Advantage of Personal and Collateral Loans in Providing
These
Sufficient Liquidity for Savings Bank Investments."
discussions are of great importance to savings bankers, and I
would suggest that as many as possible be present.
The National Bank section meets this evening at 8 o'clock
in the Francis I Room at the Baltimore Hotel. Honorable
John Skelton Williams, Comptroller of Currency will address
the meeting on "The Soul and the Dollar."
It is hoped members of the section will not fail to visit the
exhibit of the thrift campaign at Convention Hall.
PRESIDENT HAWLEY : Ladies and gentlemen, we stand adjourned until 2:30 o'clock this afternoon.
AFTERNOON SESSION.

The meeting was called to order at 2:30 o'clock P.M. in the
Assembly Room of the Hotel Muehlebach by President Hawley.
PRESIDENT HAwr,Ex: Gentlemen, we have been living in
the hope we might reduce this noise, but I am afraid we will
not accomplish that object. I hope you can hear me. If we
find it impossible we may have to adjourn to some other place.

Address of N. F. Hawley, President of Savings Bank
Section
In this centennial year it is fitting that as we mount the summit
that divides one century from the other we should first look back
over the road that we have come, note the causes of our broadening
way and the events that have marked our varying progress and then
turn to the future and try if we can to find whither our road should
now lead us and if possible shape our course and not go hither and
yon as shifting events may by chance compel us.
The history of banking in this country furnishes a number of significant guide-posts which if correctly interpreted will rightly direct us
on our future way; wrongly read or left unnoticed, we may wander
far from the best trail and be compelled sometimes to return and
again get our bearings.
Let us, however, at this time consider but one aspect of banking.
How can the banks of this country make themselves most useful?
Are we as bankers doing all that we may to serve the financial needs
of the people?
The foundation of usefulness on the part of the banks of the
country must rest upon the confidence they inspire, not merely the
assurance which people feel in the solvency of a particular bank or
banks, though of course that is absolutely necessary, but also confidence in banking institutions and methods generally.
For some reason ever since and before that unfortunate incident
in banking hi-story between Andrew Jackson and the United States
Bank, sometimes justly and sometimes without cause, there has
been a lack of confidence on the part of people generally in banking
institutions and in the motives of those who operated them. Men of
high honor, filled with patriotism, ready for service and sacrifice to
the utmost have filled positions in banks. Bankers have again and
again" made sacrifices for their communities, have lived long lives
of usefulness and have been an inspiration to the people among whom
they lived.
Yet have banking institutions always commanded the fullest confidence
of the people in the disinterestedness of their business methods and
motives? If not we should ascertain the facts, acknowledge them and
find the reason why. Otherwise our progress will be retarded and
,we cannot reach our highest usefulness.
It may be that a banker who is generous and public spirited
personally when he comes to looking out for the interests of his
stockholders and his depositors, his deposits and his dividends feels
either instinctively or consciously the necessity of safeguarding what
has been intrusted to him, of resisting appeals for co-operation, innovations in banking and in banking methods or suggestions of new
lines of endeavor. And for his institution he becomes thoroughly
conservative, insisting, while protecting the moneys intrusted to him,
upon every right and advantage which his bank can legitimately claim
and thus makes his bank seem hard and even grasping in its dealings
with the people.
Or this distrust may be the result of a number of unfortunate failures
on the part of bankers to support forward movements for the financial
betterment of the country. They may have done this with upright
motives, yet sometimes in mistaken judgment. A few illustrations
will be cited.
Did the bankers of the period of the Civil War with whole hearted
endeavor support the establishment of national banks and the effort
on the part of the Government to create a means for disposing of
.
bonds to.meet the emergencies of a great war? Although many individual bankers came to the patriotic support of the government, yet
as a whole the banks fought the inauguration of the national banking
system.
Again when state bank currency was discredited and when the
national government attempted to create a sounder national currency
by levying a tax upon the issue of tile state banks in order to eliminate
it, did the bankers approve of tills step and forward its consummation? On the contrary they fought the law and its enforcement to
the United States Supreme Court. Were they right in opposing the
establishment of a single national currency that would circulate

equally throughout the whole country or were they right in preferring
a depreciated state currency? We know well enough now which
was the better. Did they have no sound judgment as to what was
best? Undoubtedly tile banks of the country had particular interests
and investments at stake which this law affected. But their protection
of those interests and investments and tile performance of what they
deemed their duty failed to inspire confidence because of their failure
of good judgment or their motives.
In most of the commonwealths of the Union state supervision of
banks is now accepted as a niatter of course and is in fact being in-'
slated upon by bankers with laws and enforcement more and more
drastic. Bankers have come to realize, if they did not always know,
that repeated examinations and publicity insure safety and mutual
protection and that tile public knowledge of absolute security brings
success to• their own interests. Why have bankers not always viewed
such supervision with favor?.. It is true that politics sometimes has
violated the quality of such supervision. But if the bankers had
unanimously insisted upon rigid state supervision and complained
when it was poor, would they not at least have satisfied the people
of their good faith as well as secured better supervision?
One of tile greatest states in tile country has no banking law that
prevents anyone who will from setting himself up as a banker, practically without supervision, adopting the name of a bank and Soliciting
deposits from those who are too ignorant to know tile difference
between a private banker and a corporate and publicly inspected bank.
In such a state it would seem that there must be some banking interests
that are opposed to laws that will prevent such banking. Otherwise one
would think that if the bankers of that state would unitedly ask for
laws such as other states have for the Protection of the poor and
ignorant no legislature would deny them. Again it would seem' true
that insistence by the bankers upon proper laws and their enforcement
would tend to increase confidence in them.
When the Government came to the time for • framing the Federal
Reserve Act, although the bankers of the country had done much
and wisely towards getting tile facts and submitting the plans for a
sound financial system, yet it was said that in our endeavors to be of
assistance we were handicapped on account of lack of confidence in
bankers or their motives. , Whether justified or not the suspicion deprived us of being to the greatest degree useful in one of the most
important financial incidents of the country.
May not the one thing more than any other which through all
these years has thwarted us in attaining the highest results and whith
has often engendered a lack of confidence, not in the soundness ,Of
particulai banks but in tile disinterested motives of banking institntions, been our own mistaken, often misguided self interest? - Self
interest in itself. is not necessarily improper. No one expects banks to be charitable 'institutions. But if our insistence upon our own
interest results in blinding us to the welfare of others, and particularly
to that of the whole people, the broader view is lost sight of; we
lose the good will and confidence that we should have if the. greatest
ultimate success is to be attained.
For illustration, a good rate of interest may be wise. Too high a
rate is a blunder. A man may insist upon too high a rate because
his eyes are glued too closely to the profit that he sees his bank
will gain in the particular transaction. A wiser man will see farther.
He knows that such a short sighted policy cannot bring his bank the
greatest prosperity. Ile knows, that the welfare of his customer
is bound up with his own.
What is true in the detail of interest is true in all banking affairs. •
The banker stands so close beside the arteries of business, is related
so nearly to the flow and ebb of life through them that it would seein,
that he more than anyone else should realize that in taking toll of
the traffic passing through his gateway he must be mindful not only
that he does not exact too much but also that it is absolutely esetitial
that he finds means to give full service to those who pasS. Call it
philanthropy if you will, but the proper name is compensation if a
banker renders to his• community and his country in return .
for his
profit the best effort of his hand and mind.
The ethics of medicine require tile physician to spare, no time or
pain or effort for the sake of his patient whatever the compensation
may be or whether there be none at all. Must tile banker always
take a less exalted position? When he can stand in the community
beside the physician, the people will have confidence not only in the
safety of his bank but also in tile wisdom and disinterestedness of
his advice on public as well as private questions.
But if he would be most useful, the banker must' not only make his
interests square with that of tile community and inspire ail with
assurance of his high purpose, but he must also extend to the utmost
the facilities which his intelligence is aide to plan. Have we in tile
past afforded all the financial conveniences which we might for the use
of the people and are there not many which we may in the future
extend, some slowly, some rapidly but with increasing usefulness
as experience shows the way?
Have the banks now allowed some very important functions to slip
through their fingers which they ought to have retained to themselves
but which they have permitted other persons or institutions to take
over, it 'may be because we have been too busy or because —we did
not see to it that laws were framed to enlarge our powers or be6anse
•
precedent seemed against it or prejudice opposed it?
It will be understood that I am not speaking in derogation of the
interests of any financial Institutions. But frankly is . there any
good reason in the nature of things why banks, at least those Of ,a
proper size and under proper legislation, should not have been ,giveli
all the functions of trust companies? There are many reasons why
they'should have reached out or rather followed tile natural course of
events and taken those functions over. The hanks' were already in
many respects equipped for it, their organization was complete, overhead charges would be less, their • reputation well established and the
confidence of the community assured. This formed the best basis
for the taking on of an added usefulness.
That such a course would be wise is attested by the fact that in
California just that process is in operation and has succeeded. It is
further supported by the fact that many banks have affiliated themselves with trust companies- as fully as if the two were one institution
and have done so to the mutual benefit of both. If the two can
operate together successfully, yet as separate corporations, they cer-

SAVINGS i3ANK SECTION.
tainly could, if the law permitted them under proper safeguards, carry
on business as one corporation and if such permission were given there
would be many communities and people accommodated to the extent
of all that a trust company can do, when now they must seek those
conveniences at a distance and at an expense of time and money.
No one will understand that this is meant as an argument for or
against the mere legality of the trust provisions of the Federal Reserve
Act.
Again in offering to the public financial conveniences is there any
good reason in the nature of things and if proper laws were framed
why banks should not perform all the functions .of investment companies, whether it be in finding securities for purchase by their
customers or in finding funds to finance municipalities and industries?
The same reasons for the performance of these offices exist as for
doing the business of trust companies, namely the familiarity of
bankers with financial problems, their organization and the economy
in overhead charges.
Nor is there any reason why a local bank, whether in a large city
or in a small town, should not act as guardian, administrator, executor
or trustee to carry out the wishes of deceased persons. They are
usually better equipped to do the business safely and economically
than the nearest relative, especially if the estate is large. They
would be more easily subject to supervision by the courts and could
more readily render financial assistance in handling estates than
private individuals. This is especially important where the surety companies and trust companies are not in business. Such a suggestion,
however, presupposes that local banks should in time demonstrate as
they could their ability to do such business with small expense and
strictly in the interests of the heirs, devisees or beneficiaries of
the estate.
It is to be regretted that Congress in seeking a means for carrying
on the business of a Federal Farm Loan System did not turn to the
local banks of the country and enlist them in some way in the service
—a service that is already very largely performed by the local banks
in the farming communities throughout the country. The government
would then have been able to have used an immense number of men,
intelligent and trained for the loaning business, and could have greatly
economized in the expense of carrying on that business and at the same
time secured all the benefit of lower rates, if any there shall be.
And It is to be further regretted that when we found that such a
law was inevitable we were either not disposed or not possessed of a
reputation for disinterestedness such as would have enabled us to have
suggested this and other useful provisions in the Act which was
adopted. Even yet it is believed that on the one hand the Government
must turn to local bankers in farming communities and on the other
that these bankers can make use of this system, provided it is
found that the plan is not handicapped by conditions that would not
favor its successful operation.
May there not be other ways in which the banks might develop
functions which would serve the people? For illustration in industrial
insurance, which is already in operation by the savings banks in one of
our states, the financing of co-operative associations, both in country
and city, which has already been to a slight extent inaugurated, the
carrying on of a savings and loan business, encouraging the building
of homes and the amortizing of mortgages upon homes, the establishment of savings banks as departments, which is receiving a strong
Impetus at this time, and many other like things.
Speaking of savings banks brings us to the question as to whether
the usefulness of the savings bank cannot be with safety and with
profit greatly broadened. We are of course familiar with the foundation of the mutual savings bank, with its purpose, with the carefulness
with which the one function of savings has been surrounded and the
assiduity with which all other functions have been excluded. But
the rise of the savings departments of commercial banks and the
rapid growth of trust companies in states where such savings departments are prohibited raises the question as to whether mutual savings
banks can and ought to remain single to the one purpose for which
they were organized. The Inquiry is raised whether if they are
going to serve the people to the greatest degree they should not add
instrumentalities for such service.
These considerations will .not appeal to those trustees of mutual
savings banks who feel the performance of their duties is a burden
and that more functions and even more deposits are undesirable
because they bring more care and work. These suggestions can appeal
only to those trustees who are anxious to serve most.
ely
Are there not some things which mutual savings banks can saf
and properly add to that of merely receiving and investing savings
funds, provided of course that the proper change in the law is made?
It is suggested for illustration that such banks should be given
authority to buy and sell exchange, at least for the benePt of their
customers. Many of the banks of this sort are prohibited from
performing even this simple thing.
Again is there any good reason why the mutual savings bank should
not adopt at least some of the methods of the savings and loan,
association, with the prime object in view of encouraging the building
of homes and the gradual payment and amortization of mortgages
thereon and thus enable their customers to employ one of the wise
and successful methods of saving money?
Still again where school authorities, either through prohibition of
the law or disinclination, do not inaugurate and carry on school
savings in the public schools of the community Is there any institution
better equipped to do the work or whose purposes is more nearly
in line with the educational purposes 'of the school savings system;
and could any more beneficent object be undertaken by a savings
hank irrespective of whether ultimately it or its depositors might
greatly profit thereby?
There are many good reasons, too, wily a savings bank ought to be
permitted to sell mortgages or other securities to its customers, many
of whom know no other bank and are utterly at a loss to kneW
what to invest in or even how to find out what to buy. The savings
bank may have been the depositor's sole friend and advisor for many
years and when tile limit of his deposit has arrived could there be
any counselor who would be more wise or more solicitous for his
best interests than the bank which has safeguarded his funds while
he has been accumulating them?
There will be reasons why this or that particular thing in various
Places should not be undertaken by banks. There will also be

200

general reasons urged against the enlargement of their scope and functions. It will be suggested that what has been is good enough; that old
methods have proven safe; that departures are attended with danger
for in multiplicity of purpose there is opportunity for mistake and
that the safer course lies in not attempting experiments.
Of course there is truth in the theory that what has succeeded
forms a good precedent for what will succeed In the future. Must we,
however, make the admission that our intelligence and capacity is sb
limited that we cannot adapt ourselves to new conditions, cannot take
on new functions when called for by the necessities or convenience Of
those we serve? Are we so limited that we cannot maintain seek
and at the same time multiply activities? As a matter Of fact the
distinguishing feature of the present time is our ability in business
to retain the fundamentals such as integrity, faith, mutual confidence
and at the same time multiply in almost unlimited complexity the
agencies through which we carry on our work. The up-to-date business man in the line of his activity stops at no bridge that will
carry him over into new endeavor. He finds in himself and those
whom he associates with him in management the ability to do all
that the exigencies of his business call for, or at least to increase
Ills capacity for doing it, and at the same time he maintains his
standing and his reputation for efficiency. If he can do this, why
cannot the bank?
•
If the little country cross roads bank can not only receive and
pay out the deposits of its customers, but make loans, buy and sell
real estate, do a fire and tornado insurance business, look after estates
and attend to tile affairs of the widow and give advice and assistance
to the unfortunate, say nothing about his part, sometimes a dominant
one, in tile affairs of his community—if the country banker can do
all this and do it honestly, safely and with ability, then why should
there be anything to limit the city banker doing likewise unless it
be his capacity or the laws which partly through his own fault fail
to give him the necessary authority to do?
But whatever may be our theories or opinions about the matter,
we must wake up or we will be standing still while others pass us.
We may be still doing our duties at the old stand but othere may
find wide and useful fields to cultivate. On the one hand the national
government may be taking over functions which we did not seize or
others which we did not efficiently perform and on the other, • new
agencies may come into being to fill the want that we failed to
supply. We should not only be alive to the trend of events, to the
new demands of the times, to the increasing agencies for carrying on
business, but we must make ourselves able to meet the new issues
and willing to undertake what may be necessary.
PRESIDENT HAWLEY : We will now listen to an address on
Postal Savings, by the Hon. Carter B. Keene, Director of Postal
Savings.

"Postal Savings," by Carter B. Keene, Director of
Postal Savings Bank
[Mr. Keene's paper is given on pages 190 to 192.]
PRESIDENT HAWLEY : This discussion will be further participated in on the subject of "Institutions for Savings" by
Mr. William E. Knox, Comptroller of the Bowery Savings Bank
of New York.

"Institutions for Savings," by William E. Knox
[The paper of Mr. Knox may be found on page 193.]
Mn, KNox : Mr. Chairman and gentlemen, there ain't going
to be any discussion about this matter at all. After listening
to Mr. Keene's very admirable and very illuminating address
and seeing the spirit in which the postal savings bank authorities are going about their work, I think every one of us will
agree that there is plenty of room for them in their chosen
field, as there is for us in our chosen field, and we have no
desire in any way to enter•into any discussion with them, except the friendly discussion as to how best we both can serve
the people. After Mr. Robinson's address this morning, which
I am sure you will agree with me will be a classic in savings
bank literature for many and many a year, there isn't anything that I can say about mutual savings banks, or about
their growth, or about their service to the people, or about
them in any way that will add in the slightest degree to what
Mr. Robinson said, so that I am going to cut out that part of
it absolutely and entirely. We all know what the mutual saving banks have done, we know what they are. We are all
actuated by the savings bank spirit, whether mutual savings
banks or stock savings bank or the saving department of a
commercial bank. There is work enough for all of us in the
future. There is work enough for us in the immediate future,
every one of us, in carrying forward the thrift campaign which
our thrift committee has started and which is meeting with
such wonderful success all over the country. But there is one
matter I do want to bring to the attention of this convention,
a matter I think we should all think about. We have been
think about it for a good many years, and I think that the
time has come when, instead of sitting idly by and thinking
and talking, we should take some definite action. The time has
come in the history of the savings bank when we must stop for
a minute to look back over the one hundred years of splendid
achievement that have gone by, to take stock of what we have
as a result of that achievement today, and to look forward
a little bit into the future to see what we ought to do in the
interest of our depositors, of the ten or eleven million people
who have confided their money to our keeping, and for whom
we are the stewards, and so that I shall get what I want to

BANKERS' CONVENTION:

210

say as briefly as possible and not wander away from the point,

which is a fault that I have, I have written down here Just,
two pages that I want to bring to the attention of this convention, and I will be most happy if the convention sees fit
to take action along the lines that I shall suggest.
There are problems to be faced in the future upon which
the continued welfare of the savings banks depends. It is
time we gave some thought to the future stability of our railroad investments. As trustee for • ten million depositors, for
whom we hold eight hundred million dollars of railroad bonds,
it is not only our right but our duty to see that the railroads
receive Just and fair treatment at the hands of those whom
we have delegated to make and enforce the law for us, and it
might be Just as well to impress- it upon the lawmakers and
the executives that before passing any law, or taking any action
that shall _affect the interests of the people, of whom the savings banks depositors are a considerable part, it is their duty
to -consider all. parties interested.
1. would suggest to the convention that the savings banks,
being interested parties, should, through the legislative • committee of the American Bankers Association, have a hearing before the passage of any laws which may • in any way have a
bearing on railroad securities. That is our plain duty and a
duty. we should not .shirk. Recent developments, involving
action by, the President and the Congress of the United States,
force us to the conclusion that the most serious problem confronting the railroads today is that of regulation. In common with every other party, they have to deal with. new 'economic issues. They alone have to contend with the .most bewildering and confusing,—I had almost said system, oialy it
is a lack Of. system, of control exercised by forty-eight states
and Gine federal authority from Congress and from the legislature the law of these states come every year and ever increasing number of laws affecting railroads, dealing not only
with matters of general regulation but in particular relating
to matters of railroad operation. The effect of this legislation
Is to make difficult the task of the experienced - rallroad,.executive, upon whose. discretion and Judgment reliance must' be
placed, and to add tremendously to the cost of railroad operation and maintenance. To comply with various state decrees
in 1914, railroads operating more than two hundred thousand
miles of railroad were compelled to expend the equivalent of
a five per cent. dividend on five hundred and seventy-four million dollars. That sum would have paid one year's interest at
three and a half per cent, on the eight hundred million dollars
of bonds held by the savings banks.
It would seem that the rational way and the only way to
end the evil of the existing system of regulation is to substitute •a . system of supervision for the badly complicated and
inconsistent laws of forty-eight uncoordinated states. To
serve the needs of the country, strong railroad credit, an attraction to the railroad of much needed capital, we must substitute a rational, businesslike system of federal regulation to
replace the present burdensome laws. In the determination of
that solution, doubtless to be wished, the savings banks of the
country, through the committee of the American Bankers Association, should have a part.
PRESIDENT TIAwLEY : The next order of business is "The
Business of Getting New Accounts and the Vitalization of Dormant Accounts," by Mr. E. G. MeWilliam of the Security Trust
and Savings Bank of Los. Angeles.

"The Business of Getting New Accounts," by
E. G. McWilliam
[Mr. McWilliam's paper appears on pages 193 to 197.]
PRESIDENT HAWLEY : The next paper on the program is
"The Vitalization of Dormant Accounts," by Harvey • A. Blodgett, of St. Paul, Minnesota.

"Vitalizing Dormant Accounts," by Harvey A. Blodgett
[Mr. Blodgett's paper is printed on pages 197 'to 200.]
: The next topic is "The Advantages of PerMn.
sonal and Collateral Loans in Providing Sufficient Liquidity for
SaVings -Bank Investments," by Frederick B. Washburn, Treas-

urer of the Worcester Five Cents Savings Bank, of Worcester,
Massachusetts.

"The Advantages of Personal and Collateral Loans,"'
by Frederick B. Washburn

etc.,

[Wo give Mr. Washburn's paper on pages 200 to 202.] •
PRESIDENT HAWLEY : IS it your desire to discuss any of
these papers?
RELATIVE TO THE COLORED PEOPLE.
Mtreffsm,, -Ju.: I hope you will pardon me, I have been
with you I think some eleven years and I think this is the first time
in ten years I have said a word, but I could not let the opportunity
pasS Without saying a word about our white friends-in the South. As
you well know, you specify that I should take charge' of -a 'movement

ma. .rmim

among the ten million colored people of the United States with the Idea
of promoting thrift among that great body of our 'body politic.
the- preBefore • proceeding, however, I wish to pay a compliment to:
siding officer of this savings bank section. I have never during
the entire experience here among you • gentlemen witnessed •a better
working team than the one consisting of the 'Hon. N. F. Hawley 'and
that magnificent young man, M. E. Harrison; who is. secretary Of this
section.
Just before leaving Richmond on Friday,.September. 22d, I approached
His Excellency Henry C. Stewart,' Governor of Virginia, witIP;a local
delegation at Richmond,. Virginia, and he assured'ate that' he endorsed
the movement and - he was happy to know that this great organization
had taken cognizance, of ' the colored people of the' Southland.• He
promised to send me a letter; and when that letter is Sent I- shall file
it among the archives of this association.'
You probably do not know that the colored people of the. United
States own seven hundred million dollars' 'worth' of property: In my
own State it is a remarkable fact, and that this has been - done under
the tutelage and support of the better class of white men; of the South.
I .ain standing here today in a humble 'capacity representing- the
Mechanics' • Savings' Bank of Richmond, and, by -time way; One of our
morning contemporaries placed ins in the State of Indiana,- and' -I, am
,
unable to state how I shall ever' get hinne. TheY also-Pliteed our
deposits at-seventeen thousand dollars when, as-a matter of- fact, they
seventeen thousand dollars and our,gross 'assets
uFere two }Mildred'and
two hundred and fifty-six thousand dollars.
Honorable Alden J. Sams addressed a very large Part of-' the colored
people in"the city of Ilichtnond 'on September 14th in advocarY of this
great nationwide thrift -movement; and, gentlemen, the progress of the
South is being worked out by the better class of white men and by the
better class of colored men, and very few people understalut•whht is
going' on there. It' is supposed 'that the hobilitim" element,- the 'ne'erdo-well element, represents. that element, but it is' all 'a mistake. We
are piling up millions of dollars there in property; perstmat and real,
under the' tutelage of the • White. men of the' Southland, and I thought
I would file with the secretary, with your kind pernlission,—I don't
want to detain you,—a detailed statement of 'really' what is going on,
in order that 'you might get at least some'idea as to how the-progress,
•of which you 'know nothing, is actually progressing.'
The general feeling is that there is • an antipathy existing i'n the
very best clasS of
* Southland; when; as' a matter of fact, the
gentlemen I have met since I have been there are front the StateS of
Texas, Louisiana, Mississippi, Georgia and Florida and South'and North
Carolina and the great State of Virginia, and -it iS vell understood
when you speak of the thrift movement you will'have the cdrilial cooperation of every white men . whO resides north of *the Mason and
Dixon -line.
I therefore thought I would say just this word so that' it might go
back there and they would understand what you are doing and what we
are trying to do. In conclusion I would remark that yon • knniv' that
money was created by the white men of this country, but it goes
among the colored "men and it goes among" the Indians, but it will
naturally•return tO its creator. 'This thihg'"ls known and it' is ,known
just in proportion as the citizen, regardless of" race Or color, Makes
himself of financial 'benefit to' the community,' he- iniproves- the 'Community that much.
I have enlisted . the support of 'some of the leading men Of' the
United States. Dr. Booker T.' Washington died 'just ate I was abOut • to
get him interetsed, and his succeSsor has promised to vb.:operate.'
I thank you very much,' and 'in' ordet not to 'detain you 1 will tiend
this up to be spread upon the minutes, in order that I need'not'at 'this
time take up valuable time in commenting upon' • a • .subject" that
is too well known by .all gentlemen - who live in 'the floutlr.1
PRESIDENT' HAWLEY: Unless' objection is made the ,cominunication
Will be received and placed

Report of Committee on Thrift Among Colored People
[This report is published on page 206.]
PRESIDENT HAWLEY:. If there are-no further discussions of.the topic
of the afternoon we will proceed , to • the• next .order of business, which
is that of unfinished business, Is there any unfinished. business,- Mr.
Secretary, that you are .aware?
.
.
SECRETARY HAIonsoN : None.
PRESIDENT .11AwLEY: Under the head of new -business, there • are
some recommendations coming from the Executive Committee., The
secretary will' please report some -of the recommendations 'made by .the
.
•
'
Executive Committee' to the section:
RESOLUTION ADOPTED CHANGING ALL COMNIITTE0
SECRETARY HARRISON.: The Section •has at'the- present time five cominittees;• namely Methods and Systems Committee,: five. members; Law
and Segregation C,ommittee;•4Ive menlbers ; Membership Committee, five
members ; Postal Savings Legislative Committee, three. members;
Saving Bank Centennial • Committee, seven members,•. The 'Savings
Bank Centennial C,oininittee was appointed for, this year , alone.' The
other committees are more or less. permanent, As :endorsed at our
spring meeting, the name of the Methods and Systems Committee might
be changed: to' • Publicity and Systems Committee. 'However, I would
,
propose a radical. reorganization -of • all • these committees, primarily to
simplify the organization of • the Section and produce. greater efficiency
in the committee work. I would therefore Suggest, that the following
committees. should. constitute the committee-organization'of the section;
Membership Committee, five members; Committee on, Savings Legisla,
tion, three members;, Committee on 'Propaganda, • three: members.
The functions of • the MeMbership Committee need 'not be detailed,
as they are -well known,l• 'The Committee - on Savings,Legislation. would
take over 'the work which has:been. done by, the Law and Savings Committee. The,Conunitee on -Propaganda would take over • the work. of
the Methods and Systems Committee, and be responsible:for 'the thrift
,
campaign. • With 'respect to, the Committee on, Savings Legislation I
would propose -that • the-vice-presidents' for each State net 'in an , advisory capacity and be notified accordingly. •
,
PRESIDENT HAWLEY: There ought to be an amendment to the by Inws
to carry that out; isn't that so?,

SAVINGS BANK SECTION.
• SECRETARY HARRISON: No.
PRESIDENT I-Jewelry : Are the committees appointed by the by-laws?
SECRETARY HARRISON: Not by the by-laws; no, sir.
ENT HAWI.EY: Then it requires n resolution to change these
PRESID.
committeee.
SECRETARY IrmuusoN: It requires merely a resolution of the Section.
' PRESIDENT HAWLEY : Have you the action of the Executive Committee 'to report?
SECRETARY IraintisoN: This was unanimously approved and recommended at least by the Executive Committee in session yesterday to
the session meeting to-day.
PRESIDENT pAWLEY : Gentlemen, what will you do with ,the recommendations of the Executive Committee with reference to shnplyfying
and changing the committees?
BEOKWITH: 1 would move you that the recommendation as
adopted yesterday by the Executive Committee of this association relative to,changing these committees be approved by this section.
Thereupon, the motion having been duly seconded was .unanimously
•
'
carried.
PRESIDENT HAWLEY: Is the Committee on Resolutions ready to report?
'

THANKS TO MR. WEBB.
MR. STEPHENSON : I have a report of the Committee on Resolutions
ready .to present.
Whereas, At the request Of the officers of the Savings Bank Section,
Mr. W. S. Webb, Cashier Missouri Savings Association, organized a
committee, of which he was made chairman, and satisfactorily arranged
the details of the Savings Banks Centenniel Celebration 'in Kansas
•:
City, and
Whereas, Such details so well arranged have added much to the success of this celebration; and
Whereas, The success of our own meeting has largely depended upon
the speakers .who have so generously given of their services; be it
therefore
Reeoltred, That this Section extends to Mr. Webb and his committee,
as well as to the gentlemen who have addressed us today, its sincere
thanks and hearty appreciation for their Successful efforts and the excellent 'Services performed:
Ro'ste C. STEPHENSON,
i.OUIS BETZ,
.1. P.. MATTHEWS,
Committee.
•
A MEMBER: I -move that the resolutions be .adopted.
Thereupon the motion having been duly seconded was duly carried.
PRESIDENT HAWLEY : Will the secretary please report another recommendation. which I think collies from the Administration Committee
of the Association. Will you please make the report?

211

Connecticut that are members of the American Bankers' Asscciation.
There are six trust companies who have designated their interest in
.vote in. tl e
the saving bank section, so that I imagine they Sold their,
trust company section. They are members of the Conneeticut Bankers'
and expect the Savings
Association. If this section should recognize
Bank Association of Connecticut to nominate the vice-president it
would be of course a most representative way to do. I don't know
that the situation in Connecticut should stop this resolution as king
as it does not apply to forty-seven other States.
PRESIDENT HAWLEY : Suppose for any relhon you lid not elect a vicepresident, this contains the clause that in the event of failure to so
elect the vice-president he shall be appointed by the president of the
section. In fact it goes back to our present method in case for any
reason a State does not elect a vice-president,
MR. STRONG: I think it can be worked out satisfactorily, I think
probably the Savings Bank Association could advise you they have
nominated a vice-president and there would be no objection. I thipic
we can work it out.
PRESIDENT HAWLEY: The secretary desires to speak on the matter.
SECRETARY HARRISON: The vice-president in each State, mind you,
is elected by the members of the Savings Bank Section in attendance
there at the State Bankers' Association Convention and that would be
entirely regular to have them elected in that way, I should think.
PRESIDENT Haweev : Does this not afford a means of the vice-president being appointed? If one method does not work the other will.
Ms. SrsoNo: Oh, it can be worked out. On further thought I think
the best thing to do is to let it go through and let Connecticut solve
its own problem; we can do it all right.
The vote having been taken the motion was unanimously adopted.
PRESIDENT HAWLEY: Mr. Edwards has a matter to report from the
Executive Committee.
RESOLUTION IN FAVOR OF UPHOLDING RAILROAD CREDIT.
MR. EDWARDS: On behalf of the Executive Committee of the Association who have unanimously adopted a preamble and resolution, I
present the same and rather than repeat the remarks that were made
by Mr. Knox during his speech, which would be a fitting preface to
the introduction to this resolution, for the purpose of saving time I
will present this resolution now.
"Whereas, The welfare of the nation's commerce and industry requires at all times adequate and efficient transportation facilities; and
Whercas, With more railroad mileage in bankruptcy at the present
Hine than ever before, and with less new mileage built last year than
.
in half a century; and
Whereas, These results are due in a large measure to the impairment
of railroad credit because of the enforced haste which has arisen in
consequence of the confusion and waste in tile supervision of railroads
by Congress and at the same time by forty-eight States; and
Whereas, Railroad securities are a source of investment by a large
portion of the savings of this country amounting in the aggregate to
nine hundred million dollars, and ten million eight hundred sixty-eight
thousand dollars deposited in savings banks, both stock and mutual,
and whatever affects railroads similarly affects the securities and the
•
owners of securities; be it therefore
Resolved, That we, the Savings Bank Section of the American
trusteeship imposed in us.
Bankers' Association, because of the
through our investment in. railroad securities, of savings entrusted
to us, favor a system of railroad regulation which will enable Congress exclusively to exercise on behalf of all the States its -constitutional power to control Interstate Commerce in the genera! interest; awl
be it further
Resolved, That the attention of Congress be called to the vital importance of upholding railroad credit and that the Committee on Federal Legislation of the American Bankers' Association be requested to
send a copy of these resolutiens to the Joint Committee of Congress,
which is about to undertake an investigation of. the railroad problem
,
and to ask that r. presentatives of the savings banks be heard before
the passage of any law affecting the value of railroad securities.
Presented on behalf of the Executive Committee and I move its adoption.
Tie motion having been seconded was Unanimously carried.
PRESIDENT HAWLEY : Is there any ether business? If not we will
hear the resport of the Committee on NonrinatiOns. Mr. H. P. Beckwith, chairman.

CHANGE IN BY-LAWS.
•
SECRETARY HARRISON: This %COMBS from the Executive Committee
of the Section and has been approved. It was a suggested change in
the by-laws which has been approved by the Executive Council and
recommended, to this meeting, as well as having been approved by the
Executive Council- of the association, which is- necessary under the
by-laws of the association. The 'present section , 9 of the 'by-laws of
the Savings Bank Section reads: "Each State having not less than
five saving bank institutions, members of the American Bankers' AssociatiOn, shall be entitled to a vice-president of the Section. Such vicepresident shall be appointed annually by the president and shall act
generally in an advisory capacity to the Executive Committee.
This is to be changed as follows, or suggested to be changed as follows, and recommended to be changed: "Each State shall be entitled
to a vice-president of the Section. Such vice-president shall be
elected by the delegates in attendance at the annual conv.ention of the
State Bank Association of each State, whose banks are themselves
members of the saving bank section of the American Bankers' Association. In the event of failure to.so elect, the vice-president shall be
appointed by the president of tile Section. Tile vice-president shall
hold office from the annual meeting of the Section next following the
election or appointment, until the next annual meeting of the Section.
The State vice-president shall act in an advisory capacity to the Executive Committee, but shall not be entitled to vote at any -meeting
thereof."
In -other words, instead of tile president of the section, as heretofore,
appointing the State vice-president, or vice-president for the various •
NOMINATIONS AND ELECTIONS.
States, tie y will be elected at the meeting of the State Banker's' AsoMR. BECKWITH: Mr. Chairman and gentlemen of the Savings Bank
•
elation.
Section in behalf of the Nominatiing Committee, after going over the
PRESIDENT flawhey: Gentlemen, what will you do with the recom• situatiod as laid before us and sifting it down from all angles, we beg
to the itmentiment'to..the by-laws?
mendation as
to submit the following report:
A MEMBER: I move its adoption. For president for the ensuing year, Mr. G. E. Edwards, President
of the Dollar Savings Bank, New York City.
A MEMBER: I second the motion.
For vice-president, J. R. Noel, President Northwest State Bank,
PRESIDENT HAWLEY : It has been moved and seconded that we adopt
Chicago, Illinois.
•
the amendment to the by-laws. Any remarks?
For a member of the executive committee to fill the unexpired term
Mn. BECKWITH : Understanding, as I do, the motive for this 'proof 0.•E, Edwards, to be elected to the presidency, we want to suggest
posed amendment, I have learned recently that the tiling .will become
the name of Mr. Victor A. Lersner, Comptroller of. the Williamsburgh
inoperative entirely in some of our States as the language of _this
Savings Bank of Brooklyn,- New York, who is at present a member of
•Mr. Strong, from Connecticut, informs me
amendment is designed.
the Executive Council of the 'committee, for the reason that Mr.
that there are no savings'banks in 'the State of Connecticut that are
Lessner has done yeoman and great work in connection with our thrift
members of the State Bankers'. Association. In other words, in the
campaign, which work is not yet completed, and it will require another
State of Connecticut the banking body there will only be 'privileged to
year or two to complete that work, and we feel he should be placed
elect somebody to our body who is not a savings banker. That might
in this position to succeed Mr. Edwards on the council, to fill out
occur in some other States. As a matter of fact in New York State
his unexpired term, rather, and in order to further handle the work
we only have about twenty-five or thirty per 'cent, I think.
which lie has so earnestly done. And I might add Mr. Lersner has been
Mit. STRONG: The situation in Connecticut is probably somewhat difone of the most untiring workers we have had in the section, and he deferent than in any other State,' We have two banking associations,
'serves all the credit and commendation that thiii section can give him,
the Savings Bank Association of Connecticut and the Connecticut
'and we want him to continue it along Tor these reasons 90 that he can
Bankers' Association. The Savings • Bank Association of Connecticut
complete the work he started.
numbers about seventy-two out of eighty mutual banks of the State.
For the other member for the three-year term we suggest the name
None of them are members of the Connecticut Bankers' Association.
of W. S. Webb, cashier of the Missouri Savings Association Bank of
There are forty-three members of the Savings Bank Association of
Kansas City; John It. Havens, cashier of the First State Bank of

212

BANKERS' CONVENTION.

Denison, Texas, and our splendid E. L. Robinson, vice-president of
PRESIDENT EDWARDS: Mr. Webb, I want to congratulate you on
the Eutaw Savings Bank of Baltimore, Maryland.
your election and present to you the insignia of office as a member of
the Executive Committee.
PRESIDENT HAWLEY : Gentlemen, you have heard the report of the
Nominating Committee, what will you do with the report?
MR. WEBB: In delivering an impromptu speech it is usually curl .
:
tomary to advise the speaker long enough before hand so that he
Mn. JOHNSON: I move that the secretary be instructed to cast the
might prepare his speech. In this case, like my predecessor, I
vote of the association for the gentlemen named in the report. Before
didn't know until a few minutes ago that I was re-elected to this
putting the motion please give every member present an opportunity
office. I certainly appreciate it. In making my speech I feel a good
to make any additions, corrections or amendments.
deal like a colored man who was walking down the street and met
A MEMBER: I second the motion.
his employer, and he says,"Sambo, give me change for five dollars ;
PRESIDENT ILiwLzy : You have heard the motion and it is seconded.
he says, "Boss, I ain't go no money, but I sure do thank you for
Are there any other nominations? If not are you ready for the questhe compliment."
tion?
I feel that way about you gentlemen. I have no speech to make
The vote being taken the motion was unanimously carried.
except to thank you for the honor you have bestoled upon me, and
PRESIDENT HAWLEY : The secretary will please so cast the ballot.
assure you I shall do everything in my power to fill the office to the
best of my ability.
SECRETARY HARRISON: The secretary has cast the ballot.
I hope each of you will enjoy yourselves here, and if not I hope you
PRESIDENT HAWLEY : In accordance with the ballot I declare the
will come to headquarters and let me know, because I feel in this case
gentlemen named by the Nominating Committee as elected to the offices
I am the host and you are guests and my whole object and aim is to
of president, vice-president and to the executive committee, and at
make all of you have a good time and if you don't I will say right now
this point my trouble ends.
it is your own fault, because you don't let me know.
Mr. Edwards, this is wholly a matter of pleasure to me and to the
PRESIDENT EDWARDS: Mr. Havens is not present. Mr. Robinson.
section probably the pleasure is greater than mine, and I hope you
(Mr. Robinson comes forward.)
will enjoy as much as I have the co-operation and services which
PRESIDENT EDWARDS: I congratulate you OD your election and I
the other members of the section of the association have rendered,
appreciate the honor of presenting to you this insignia of office.
and I wish you the greatest joy and pleasure.
Mn. ROBINSON: Mr. President and gentlemen of the Savings Bank
Ma. EDWARDS: Mr, Hawley and members of the Savings Bank SecSection, I am sure you have heard enough from me to-day to excuse
tion of the American Bankers' Association, I appreciate beyond words
me from making any further remarks and delaying the proceedings any
the honor that you do me to-day In electing me to the highest office in
further at this time.
the gift of this body. My pleasure in the past has been in coI want to say I had no intimation whatever until a very short while
operating with Mr. Hawley and others in connection with the execago that I would be thought of in connection with this honor. I have
utive department, as you might call it, of the section. I approach the
already enjoyed the highest honor that you are able to give,• and I venwork only with confidence provided I have the assurance of the coture to say that no man who has had the honor bestowed him that I
operation in the future that has been given in the past, and which
have enjoyed at your bands, has any higher appreciation than I have
has been evidenced today by the absolute and unanimous support of
of the many kindnesses I have received at your hands.
every recommendation that has come to you from the ExecutiveComNow, gentlemen, it is one thing to do a given job that has been
mittee. I thank you.
assigned to you properly. It is one thing to believe you have done
MR. HAWLEY: I call for a speech from Mr. Noel.
your best in connection with a piece of work that has been assigned
PRESIDENT EDWARDS: Will Mr. Beckwith please escort Mr. Noel forto you, and I think a man's conscience is perhaps sufficient reward
ward.
for having done his best, but really when I consider from so many
,
Mn. BECKWITH : I am sorry I 'don't ii;eiti• giasies
that‘I. Could " anqies the'persOnal esteem and affection in which I am held, I confess
to an inability to express proper appreciation or really an underbe as dignified as Mr. Noel.
standing of why you should so honor me. I have had sufficient reward
PRESIDENT EDWARDS: Mr. Noel, I want to make you vice-president.
from the work that I have been doing, but this additional mark of your
The insignia of office I have pinned upon you is the first official duty
esteem and affection I can assure you is exceedingly gratifying.
I have performed as president of the section. The next one is to conI want to say that the other day I came across a little piece of
gratulate you upon your unanimous election as vice-president of the
poetry that stuck in my mind and it came upon me in such a forcible
section.
way that I want to pass it on to you as my own life's philosophy.
Mn. NOEL: Mr. President and gentlemen, if I ever was unprepared
They were just a few lines that were written by that humble Hoosier
to say anything, I am at this moment. While I am and have been
poet who recently passed away and nothing that he has said is sweeter
quite aware of the policy of the association of rotation in office, I
to me, it seems, than this:
didn't know until five minutes ago that I was chosen for this honor.
I had no intimation of it at all.
"For the world is full of roses
If I had been consulted, gentlemen, I assure you my preference
And the roses full of dew,
would have been for another gentleman, whose work in behalf of this
And the dew is full of heaven's love,
association is conspicuous and is infinitely greater than mine. There
That is dripping for me and you."
are considerations which have guided the nominating committee
PRESIDENT EDWARDS: Gentlemen, there is DO further business scheddoubtless, of which we know nothing, which has chosen me as the one
uled for the afternoon session except that the announcement will be
in line. I shall try and carry through the trust reposed in me with
made by the secretary in regard to the meeting that is to be held,—
dignity, although I confess to some lack of confidence in myself in view
the Executive Committee meeting.
of what my predecessor has done, especially in view of this the best
program in my experience that has been given us. Never before have
SECRETARY HARRISON: Immediately following this meeting a meeting
I been so sensible of the honor that it means to be vice-president of
of the Executive Committee of the Savings Bank Section, including the
this section of the association and with a realizing sense of the dignity
new members, will be held in this room. If you will stay here it will
and honor of this situaiton I shall do my best, and I thank you very
be very good.
heartily.
PRESIDENT EDWARDS: A motion to adjourn Is in order.
PRESIDENT EDWARDS: Are Mr. Webb and Mr. Havens in the room?
A MEMBER: I move we adjourn.
The new members elected on the Executive Committee. Will Mr.
Webb please step forWard?
The motion having been duly seconded was unanimously tarried.
(Mr. Webb conies forward.)
The meeting then adjourned.
•

Your Patronage Is Solicited
by this, the largest Institution of its kind in New Jersey. It has deposits of $22,000,000,
resources of $31,000,000 and a capital, surplus and undivided profits of $6,000,000. It
conducts banking, savings, title, bond, trust, mortgage and safe deposit departments.

Fidelity Trust Company
Prudential Building, Newark, N. J.
OFFICERS
UZAL H. McCARTER, President
FREDERICK W. EGNER.
Vice President
EDWARD W.CAMPBELL
JEROME TAYLOR
Vice President
CLARENCE G. APPLETON
EDWARD A. PRUDEN
Vice Pres. and Trust Off.
CHARLES G. TITSWORTH
FRANK T. ALLEN....Vice Pres. and Publicity Mgr.
SIMON P. NORTHRUP
LOUIS HOOD
General Counsel
FRANCIS LAFFERTY
PAUL C. DOWNING
Treasurer
THEODORE HAMPSON
JAMES H. SHACKLETON
Seccetary
HERBERT R. JACOBUS
HENRY SCHNEIDER
Ass't Sec'y-Treas
EDWARD E. FELSBERG

Ass't. Seey-Treas.
Comptroller
Title Officer
Ass't Title Officer
Solicitor
.Ass't. Trust Officer
Ass't Trust Officer
Sup't of Vaults

DIRECTORS
AARON ADAMS
FRANK T. ALLEN
HENRY M. DOREMUS
FREDERICK W. EGNER
JOHN C. EISELE
LOUIS HOOD

HENRY M. KEASBEY
JOHN L. KUSER
THOMAS N. McCARTER
UZAL H. MoCARTER
EDWARD A. PRUDEN
P. SANFORD ROSS
WILLIAM SCHEERER

JEROME TAYLOR
EDGAR B. WARD
WILLIAM J. WILSON
THEODORE M. WOODLAND
ARCHIBALD M. WOODRUFF
C. EDWIN YOUNG

Full text of Commercial and Financial Chronicle : October 14, 1916 : Bankers' Convention Section, Vol. 103, No. 2677

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