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BANKERS' CONVENTION
SECTION
OF THE
COMMERCIAL & FINANCIAL CHRONICLE.
COMPANY,in office of Librarian of Congress.
righted in 1922 according to Act of Congress by WILLIAM B.DANA
00W-
Vol. 115.
NEW YORK, OCTOBER 21, 1922
Washington,DO.
No. 2991.
the American Bankers Association did high service
g
through defining the principles at stake, clearin
THE CHRONICLE.
the issues, placing beaway political perversion of
newspaper
The Commercial and Financial Chronicle is a weekly
mail every Saturday
hind the policy thereby indicated the full force of enat 144 to 160 pages, published in time for the earliest
its own corremorning, with the latest news by telegraph and cable from
lightened banking opinion, and thus bringing the
spondents relating to the various matters within its scope.
ts.
e comprises a number of added Sections or Supplemen
The Chronicl
matter so sharply into the foreground that public
valuable adjuncts of the
Issued periodically, and which form exceedingly
opinion generally could grasp the salient facts.
weekly issues.
a year. is furnished
The Railway and Industrial Section, issued twice
When that had been accomplished, action could not
the Chronicle.
without extra charge to every annual subscriber of
longer be postponed merely through ignorance, miscontaining the sworn
The Railway Earnings Section, issued monthly,
expenses, filed each month with the Inter-State
returns of earnings and
understanding or a disposition to let the matter
extra charge to every anCommerce Commission. is also furnished without
drift.
nual subscriber.
a year, is also furnished
The Electric Railway Section, issued twice
We are inclined to believe that this year's Bankers'
of the Commercial and
without extra charge to every annual subscriber
Convention has achieved this purpose in the matter
Financial Chronicle.
is also furnished
The State and City Section, issued semi-annually,
of the financial relations of the United States to
.
without extra charge to every subscriber of the Chronicle
Is likewise fur- Europe. The choice of that question as the central
The Bank and Quotation Section, issued monthly.
the Chronicle.
aished without extra charge to every subscriber of
theme of the Convention's discussion was wise; but
time to time, like
Besides these Supplements, others are published from
it was also inevitable if the traditions of the Assothe present Bankers' Convention Section.
are Ten Dollars
Terms for the Chronicle, Including all the Supplements,
ciation were observed. For that question is beyond
(which includes
within the United States, Thirteen and a halt Dollars
a half Dollars in Canada.
dispute the vital and outstanding economic problem
postage) in Europe, and Eleven and
WILLIAM B. DANA COMPANY, Publishers,
of the period; yet it is the problem of all others the
Front, Pine and Depeyster Streets, New York.
popular comprehension of which has suffered most
from unwillingness to grapple with facts, inability
INDEX TO ADVERTISEMENTS.
to understand their financial significance, and the
in the tendency to postpone through mere perplexity or
A complete index to the advertisements appearing
Convention Section will be inertia any decision in the matter.
present issue of the Bankers'
found on pages 93 and 94.
What the German reparations question is to Europe, the questions of the indebtedness of our recent
allies to our Treasury and of our general attitude
THE CONVENTION AND THE EUROPEAN toward Europe, are to the United States. Our GovPROBLEM.
ernment has got no further than to appoint a Debt
under the Act of last February,
The conventions of the American Bankers Associa- Commission, which,
refunding these *11,000,000,000
tion have in one particular aspect been notable occa- is to arrange for
obligations into loans maturing not
sions in the financial history of the times, in that Governmental
4
bearing not less than 41 % in.
each annual gathering has devoted its attention later than 1947 and
finan- terest. The questions whether all the eleven Governfrankly and unhesitatingly to the uppermost
time obligations our Treasury holds
cial problem of the day; listening to addresses on ments whose warLoan Act—including not only
that subject by the best qualified public or private under the Liberty
, Italy and Belgium, but Cuba, Ruexperts and in the end declaring through formal res- England, France
lovakia, Russia, Serbia and Greece—
olution the attitude of the great body of responsible mania, Czechos
able to meet even the interest payAmerican bankers on the question. The Bankers As- are financially
how that payment should in any case
sociation has thus in the past taken its position on ment, and as to
ed, was practically left unconsidered in the
the specie resumption controversy and the greenback be arrang
Congressional debate.
craze, on the controversy over free silver coinage and
It was not to be expected that the Bankers' Conbimetallism, on the question of reform in our later
a body, or any speaker at its meetings,
banking and currency system and on the project for vention as
would present the solution of the problems created
the Federal Reserve.
sequel to the war. It was not possible, in so
Each of these considerations was at the time the by this
rly complicated a question, that any one
foremost financial issue of the day; in publicly and peculia
propose, in advance of much closer study of
emphatically declaring its position on each of them, should
92
BANKERS' CONVENTION.
the matter in all its details, a concrete, comprehenIn the end, after other discussions of the matter
sive and uniform program for dealing with them. and a vote by the Nation
al Bank Division favoring a
The most that enlightened and experienced finan- conference betwee
n the United States and the Eurociers could reasonably do in approaching such a pean States regard
ing the general question, the Consituation was to set forth the facts, state the alter- vention itself adopte
d the following striking resonatives and enunciate general policies. To the dis- lution:
cussions of the matter in its various aspects, three
"We call attention again to the seriousness of the
notable speeches in the recent Convention were deforeign situation, especially of Europe, which is afvoted.
Thomas W. Lamont urged with great positiveness fecting detrimentally our own conditions and preand cogent reasoning, that we "decide which of these venting even those industries in our country which
are not dependent upon foreign trade from recoverdebtors are good in part but must be given ample ing
fully from the depression which otherwise would
time to pay—far longer, perhaps, than twenty-five be rapidly disappe
aring.
years." He urged the careful consideration of the
"There is no possibility of a healthy and normal
question whether insistence on early payment of situation in this country until•the nations with whom
these debts "is going to prove an asset or a liability we trade are able to pay us for what they import.
for American business." Mr. Reginald McKenna, As this can be done in the main only by the means of
late Chancellor of the British Exchequer and now exports to us, we trust that the President will not
Chairman of the London City & Midland Bank, be- hesitate to make use of the power granted him by the
new, tariff law to make such adjustments in the
gan by declaring frankly that England proposed to schedul
es as may be necessary from
pay her war debts to the United States Treasury. a restoration of our international time to time for
commerce.
That she "has the ability to pay," that "her deter"We believe that the time has come for the Governmination to honor her bond in full" can be positively ment of our country to formulate the principles on
asserted, and that the American banking community which it will be able to co-operate with other nations
may "treat England's debt to the United States as to bring about the needed rehabilitation of European
certain to be provided for," were statements which countries and peace in the world.
"To this end we urge the Administration to conthemselves cleared away much of the fog of suspicion
sider the advisability of promptly making its repreand misunderstanding created by the Balfour note sentative upon
the Reparations Commission an offiand its confusing suggestions that England might cial of that body we also recommend
to Congress
not be able to consider paying her Governmental ob- that there be granted to the Debt Funding Commisligations to America unless France paid hers to Eng- sion such further powers as will enable it to negotiate
more effectively with the foreign nations now debtors
land.
But Mr. McKenna also pointed out that England's of the United States."
ability to make these payments, through the machinIt will be observed that neither this resolution nor
ery of foreign exchange, was due to her comman
d- any of the speeches before the Convention recoming position as the largest European trading nation
mended a policy of cancellation. It is, in fact, the
and the largest holder of foriegn investment securiadvocacy of that somewhat sweeping policy, on
ties. What England could do in this regard might
grounds more emotional than economic or political,
be a matter of practical impossibility with other
which has heretofore served mostly to obscure the
States indebted to our Treasury which did not pos- true
facts of the situation. The speeches whicIP we
sess such facilities for the transfer of capital. None have
cited and the Convention's resolution are the
of them, he believed, is in a condition to meet that words
of practical men, dealing with the practical
indebtedness out of hand. "In the existing condition aspects of an
immensely important subject whose
of Europe a definite postponement of any payment consideration
cannot safely be deferred. That they
by them is desirable in the interest of all parties," outline no
specific policy, suggest no specific statute,
and while an attempt to force payment beyond such is recognition
of the fact that the case of each sepdebtors' power would be futile in itself, it would also arate debt and
of each separate debtor ought to be
inevitably be "injurious to the trade of the world." considered on
its separate merits, after favoring as
Looking at the whole problem in its larger aspects, a general princip
le the adoption of measures which
Mr. Thomas B. McAdams in his speech as President will deal with
facts as they exist and will distinguish
of the Association, asked forcibly if the time had not the economically
possible from the economically imarrived "for the United States to cast aside her pol- possible.
It is through the insisting on this commonicy of aloofness and throw herself whole-heartedly
sense program that the Bankers' Convention has
into the situation" which exists in Europe and as be- rendere
d a public service which we believe should
tween Europe and ourselves, in order that "a cure have import
ant consequences not only in its effect on
for social disorder and financial demoralization may
public opinion, but in the shaping of the Governbe speedily devised."
ment's future action in the matter.
INDEX TO ADVERTISEMENTS
Otis & Co
62
AMSTERDAM, HOLLAND.
de Bary (H. Albert) & Co
Rotterdamsche Bankvereeniging
81
75
ANTWERP, BELGIUM.
Banque de Commerce
74
ATLANTA, GA.
Fourth National Bank
55
BALTIMORE, MD.
Baltimore Trust Co
Continental Trust Co
Converse (A. D.) & Co
Fidelity Trust Co
Hambleton & Co
Leach (A. B.) & Co., Inc
Maryland Trust Co
National Exchange Bank
Redmond 8c Co _
Safe Deposit & Trust Co
52
34
40
53
7
14
54
52
22
53
BAYONNE, N. J.
Mechanics Trust Co
44
BIRMINGHAM, ALA.
Birmingham Trust & Savings Co
Caldwell & Co
55
54
BOSTON, MASS.
61
Allyn (A. C.) & Co
40
Bond & Goodwin
12
Brown Bros. 8c Co
26
Childs (C. F.) 8c Co
85
Coffin & Burr
40
Curtis & Sanger
Outside Back Cover
Estabrook & Co
84
Fourth-Atlantic National Bank
29
Goldman, Sachs & Co
40
Hathaway, Smith, Folds & Co
20
Hayden, Stone & Co
33
Hornblower & Weeks
84
Hotchkin & Co
85
International Trust Co
36
James (Thomas M.) Company
90
Kidder, Peabody & Co
14
Co., Inc
Leach (A. B.) &
2
Lee, Higginson & Co
84
National Shawmut Bank
62
Otis & Co
199
Stone & Webster
BROOKLYN, N. Y.
First National Bank
Kings County Trust Co
Nassau National Bank
42
42
42
BUFFALO, N. Y.
Harriman (W. A.) & Co
Leach (A. 13.) & Co., Inc
Marine Trust Co
23
14
82
CALGARY, CANADA.
Wheelwright (M. S.) & Co
69
CAMDEN, N. J.
Camden Safe Deposit & Trust
45
CANTON, CHINA.
86
Asia Banking Corporation
77
Bank of Canton
Chinese Merchants' Bank of Hong Kong 78
CHATTANOOGA, TENN.
Hamilton National Bank
Caldwell & Co
51
54
CHICAGO, ILL.
61
Allyn (A. C.) & Co
65
Ames (A. E.) & Co
60
Co
Becker (A. G.) &
40
Goodwin
Bond &
54
Caldwell 8c Co
26
Childs (C. F.) & Co
60
Cooper, Stitt & Co
Corn Exchange National Bank,
Cover
Inside Back
40
Curtis & Sanger
29
Co
Goldman, Sachs &
6
Hallgarten & Co
61
Hanchett Bond Co
23
Harriman (W. A.) & Co
40
Hathaway, Smith, Folds & Co
60
Holtz (H. T.) & Co
33
Hornblower & Weeks
14
Leach (A. B.) & Co., Inc
2
Lee, Higginson & Co
198
Sanderson 8c Porter
199
Stone & Webster
87
Tobey & Kirk
Page.
Page.
Page.
AKRON, OHIO.
CINCINNATI, OHIO.
Caldwell & Co
Dominick & Dominick
Otis & Co
54
39
62
CLEVELAND, OHIO.
Hathaway, Smith, Folds & Co
Leach (A. B.) & Co., Inc
Midland Bank
Otis & Co
40
14
62
62
COLORADO SPRINGS, COLO.
Otis & Co
62
COLUMBUS, OHIO.
Otis & Co
62
DENVER, COLO.
Boettcher, Porter & Co
Otis & Co
63
62
DETROIT, MICH.
Caldwell & Co
C tilds (C. F.) & Co
Hanchett Bond Co
Harris, Small & Lawson
Hornblower 8c Weeks
Leach (A. B.) & Co., Inc
National Bank of Commerce
Otis & Co
Union Trust Co
54
26
61
59
38
14
58
62
59
FORT WORTH, TEX.
Fort Worth National Bank
64
GRAND RAPIDS, MICH.
Michigan Trust Co
59
GUAYAQUIL, ECUADOR.
Banco de Descuento
79
HANKOW, CHINA.
Asia Banking Corporation
86
HARTFORD, CONN.
Outside Back Cover
Estabrook & Co
85
Hartford Aetna National Bank
HOBOKEN, N. J.
First National Bank of Hoboken
44
HOLLYWOOD, CAL.
Hunter, Dulin & Co
63
HONGKONG, CHINA.
86
Asia Banking Corporation
Chinese Merchants' Bank of Hong Kong 78
Hongkong & Shanghai Banking Corp'n_ 76
HOUSTON, TEXAS.
First National Bank
64
JERSEY CITY, N. J.
Commercial Trust Co. of New Jersey_... 45
43
First National Bank
. KNOXVILLE, TENN.
Caldwell & Co
54
LONDON, ENGLAND.
74
Anglo-South American Bank
80
Banco Commerciale Italiana
77
Bank of Taiwan, Ltd
73
Barclays Bank
12
Brown, Shipley & Co
66
Canadian Bank of Commerce
Chartered Bank of India, Australia &
China
78
74
Deacon's (Williams) Bank
68
Dominion Securities Corporation
Co. of New York
5
Equitable Trust
29
Empire Trust Co
6
Hallgarten & Co
2
Higginson & Co
87
Huth (Fred'k) & Co.
79
International Banking Corporation
30
LazArd Bros. & Co
72
Lloyds Bank, Ltd
& Midland Bank
73
London Joint City
71
Mercantile Bank of India, Ltd
9
Morgan, Grenfell & Co
70
National Bank of India, Ltd
72
Union Bank of Australia
41
Wood, Gundy & Co
76
Yokohama Specie Bank
LOS ANGELES, CAL.
60
Becker (A. G.) & Co
29
Goldman, Sachs & Co
63
Hunter-Dulin & Co
64
Staats (William R.) Co
LOUISVILLE, KY.
Fidelity & Columbia Trust Co
MANILA, P. I.
Asia Banking Corporation
54
86
MEXICO CITY, MEXICO,
Canadian Bank of Commerce
Equitable Trust Co. of New York
66
5
MILAN, ITALY.
Banca Commerciale Italiana
80
MILWAUKEE.
Allyn 'A. C.) & Co
First Wisconsin National Bank
61
62
MINNEAPOLIS, MINN.
Allyn (A. C.) & Co
Bond & Goodwin
Hathaway, Smith, Folds & Co
Leach (A. B.) & Co., Inc
61
40
40
14
MONTREAL, CANADA.
Ames (A. E.) & Co
Dominion Securities Corporation
Molsons Bank (The)
Royal Bank of Canada
Sterling Bond Corporation
Sutro Bros & Co
Union Bank of Canada
Wheelwright (M. S.) 8c Co., Ltd
Wood, Gundy & Co
65
68
69
67
65
87
65
69
41
MORRISTOWN, N. J.
Morristown Trust Co
44
NASHVILLE, TENN.
Caldwell & Co
54
NEW BEDFORD, MASS.
Outside Back Cover
Estabrook & Co
NEWARK, N. J.
Clark, Dodge 8c Co
National Newark & Essex Banking Co
10
43
Co
NEW ORLEANS, LA.
Caldwell &
Marine Bank 8c Trust Co
Whitney-Central Banks_
54
55
55
NEW YORK CITY.
41
Aldred 8c Co
61
Allyn (A. C.) & Co
35
Trust Co
American
65
Ames (A. E.) & Co
74
Anglo-South American Bank
86
Asia Banking Corporation
195
Associated Bankers Corporation
80
Banca Commerciale Italiana
81
Banco di Roma
30
Bank of America
77
Bank of Canton
86
Bank of Central & South America
17
Bank of Manhattan Co
11
Bank of New York & Trust Co
77
Bank of Taiwan, Ltd
42
Bank of United States
13
Bankers Trust Co
73
Bank
Barclays
39
Barney (Chas. D.) 8c Co
193
Barstow (W. S.) & Co
60
Becker (A. G.) & Co
39
Bertron, Griscom 8c Co
40
Bond & Goodwin
12
Brown Brothers & Co
54
& Co
Caldwell
66
Canadian Bank of Commerce
Chartered Bank of India, Australia &
78
China
34
Chatham & Phenix National Bank
89
Chemical National Bank
26
Childs (C. F.) 8c Co
Chinese Merchants' Bank of Hong Kong_ 78
10
Clark, Dodge & Co
37
Coal & Iron National Bank
85
Coffin & Burr
1
Coggeshall & Hicks
24
Commerce, National Bank of
40
Converse (A. D.) & Co
31
Corn Exchange Bank
40
Curtis & Sanger
25
Discount Corporation of New York
37
Doherty (Henry L.) & Co
39
Dominick 8c Dominick
43
Dunham & Co
29
Empire Trust Co
5.
Equitable Trust Company of New York
Outside Back Cover
Estabrook & Co
27
Ewen (Wm. Carnegie)
41
Farlee (J. S.) & Co
19
Farmers' Loan & Trust Co
38
Finch & Tarbell
35
Garfield National Bank__
29
Goldman, Sachs & Co
Guaranty Trust Company of New York_ _194
04
INDEX TO ADVERTISEMENTS—Concluded.
Page.
Hallgarten & Co
6
Hambleton & Co
7
Hanchett Bond Co
61
Harriman (W. A.) & Co
23
Hartshorne & Battelle
35
Hathaway, Smith, Folds & Co
40
Hayden,Stone & Co
20
Heidelbach, Ickelheimer & Co
31
Hongkong & Shanghai Banking Corp
76
Hornblower & Weeks
38
Huth & Co
87
Importers' & Traders' National Bank
200
International Acceptance Bank
32
International Banking Corporation
79
Irving National Bank
33
Italian Discount & Trust Co
81
James (Thomas M.) Company
36
Kidder (A. M.) & Co
41
Kidder, Peabody & Co
90
Langley (W. C.) 8c Co
3
Lazard Freres
30
Leach (A. B.) 8c Co., Inc
14
Lee, Higginson & Co
2
Maitland, Coppell & Co
195
McMillin (Emerson) & Co
38
Mechanics & Metals National Bank
21
Mercantile Bank of India
71
Metropolitan Trust Co
28
Morgan (J. P.) & Co
9
Munroe (John) & Co
32
National Bank of Commerce
24
National City Company
8
New York & Pennsylvania Joint Stock
Land Bank
37
Noiseless Typewriter Co
197
Otis & Co
62
Quincey (Chas. E.) & Co
4
Redmond & Co
22
Rotterdamsche Bankvereeniging
75
Royal Bank of Canada
67
Sanderson & Porter
198
Scholl (Wm.) & Co
39
Seaboard National Bank
15
Smith (Edward B.) 8c Co
1
Smithers (F. S.) & Co
33
Speyer 8c Co
18
State Bank
36
Stone & Webster
199
Sutro Bros. & Co
87
Tobey 8c Kirk
87
Underwood Typewriter Co
196
Union Bank of Canada
65
United States Mortgage & Trust Co
28
United States Trust Co
16
Winslow, Lanier 8c Co
200
Wood, Gundy 8c Co
41
NORFOLK, VA.
National Bank of Commerce
51
OAKLAND, CAL.
Hunter, Dulin & Co
63
OKLAHOMA CITY, OKLA.
Hanchett Bond Co
61
86
PHILADELPHIA, PA.
Barney (Chas. D.) 8c Co
39
Bertron, Griscom & Co
39
Bodine, Sons & Co
49
Bond & Goodwin
40
Brown Brothers & Co
12
Coffin & Burr
85
Commercial Trust Co
47
Converse (A. D.) 8c Co
40
Drexel & Co
9
Fidelity Trust Co
50
Fourth Street National Bank
49
Girard Trust Co
Inside Front Cover
Goldman, Sachs & Co
29
Guarantee Trust & Safe Deposit Co
48
Ham'Aeton & Co
7
Hanchett Bond Co
61
Harper 8c Turner
49
Harriman (W. A.) & Co
23
Hathaway, Smith, Folds & Co
40
Land Title & Trust Co
47
Leach (A. B.) & Co., Inc
14
Pennsylvania Co. for Insurances on
Lives, &c
Inside Front Cover
Philadelphia Trust Co
50
Real Estate Trust Co
46
Real Estate Title Insurance 8c Trust Co_ 48
Redmond & Co
22
Reilly, Brock & Co
48
Smith (Edward B.) & Co
1
Third National Bank
47
PITTSBURGH, PA.
Bank of Pittsburgh, N. A
Childs (C. F.) & Co
First National Bank
Hathaway, Smith, Folds & Co
Leach (A B.) 8c Co., Inc
Masten (A. E.) & Co
Redmond & Co
Union Trust Co
57
26
57
40
14
57
22
56
PLAINFIELD, N. J.
Plainfield Trust Co
PORTLAND, ME.
Coffin & Burr
Hayden, Stone & Co
Hornblower & Weeks
85
20
38
PORTLAND, ORE.
Canadian Bank of Commerce
Hathaway, Smith, Folds & Co
66
40
PROVIDENCE, R. I.
Estabrook & Co •
Outside Back Cover
Hornblower & Weeks
38
Kidder, Peabody 8c Co
90
81
ROTTERDAM, !TOLLAND.
Rotterdamsche Barilcvereeniging
75
63
64
ST. LOUIS, MO.
Becker (A. G.) & Co
Caldwell & Co
Childs (C. F.) & Co
Goldman, Sachs & Co
Hanchett Bond Co
Hathaway, Smith, Folds & Co
National Bank of Commerce
60
54
26
29
61
40
61
45
SAIGON, CHINA.
Chinese Merchants Bank of Hong Kong_78
75
5
30
32
9
63
64
SAN FRANCISCO, CAL.
60
Becker (A. G.) & Co
66
Canadian Bank of Commerce
29
Goldman, Sachs & Co
40
Hathaway, Smith, Folds & Co
Hong Kong & Shanghai Banking Corp- 76
63
Hunter, Dulin & Co
International Banking Corporation
79
Sanderson & Porter
198
64
Staats (William R.) Co
SANTA BARBARA, CAL.
Hunter, Dulin & Co
63
SCRANTON, PA.
Haper 8c Turner
Hathaway, Smith, Folds & Co
49
40
SEATTLE, WASH.
Becker (A. G.) & Co
Canadian Bank of Commerce
Goldman, Sachs & Co
Hathaway, Smith, Folds & Co
60
66
29
40
SINGAPORE, CHINA.
Asia Banking Corporation
86
SHANGHAI, CHINA.
Asia Banking Corporation
86
Bank of Canton
77
Chinese Merchants Bank of Hong Kong_78
SPRINGFIELD, MASS.
Estabrook & Co
Outside Back Cover
Hayden, Stone & Co
20
Springfield National Bank
83
Tifft Brothers
85
SYRACUSE, N. Y.
Harriman (W. A.) & Co
Salt Springs National Bank
23
83
TAIWAN, JAPAN.
Bank of Taiwan, Ltd
77
THE HAGUE, HOLLAND.
Rotterdamsche Bankvereeniging
75
TIENTSIN, CHINA.
Asia Banking Corporation
86
TOLEDO, OHIO.
Otis & Co
ROME, ITALY.
Banco di Roma
74
13
80
Page.
SAN DIEGO, CAL.
Hunter, Dulin 8c Co
Stoats(Wm. R.) Co
45
54
40
69
32
PEKIN, CHINA.
Asia Banking Corporation
RICHMOND, VA.
First National Bank
Hathaway, Smith, Folds 8c Co
63
PASSAIC, N. J.
Passaic National Bank & Trust Co
Munroe & Co
49
OTTAWA, CANADA.
Wheelwright (M. S.) & Co
PASADENA, CAL.
Hunter, Dulin & Co
Staats (William R.) Co
44
PAU, FRANCE.
READING, PA.
Harper & Turner
OMAHA, NEB.
Omaha National Bank
PARIS, FRANCE.
Anglo-South American Bank
Bankers Trust Co
Banque Holland-Americaine
Banque Francaise De L'Afrique Equatoriale
Equitable Trust Co. of New York
Lazard Freres & Cie
Munroe & Co
Morgan, Hanes & Co
Page.
PATERSON, N. J.
Paterson National Bank
62
TORONTO, CANADA.
Ames (A. E.) & Co
Canadian Bank of Commerce
Dominion Securities Co
Housser, Wood & Co
Union Bank of Canada
Wood, Gundy & Co
65
66
68
69
65
41
UTICA, N. Y.
Utica Safe Deposit & Trust Co
VANCOUVER, CANADA.
Union Bank of Canada
VICTORIA, CANADA,
Ames (A. E.) & Co
WASHINGTON, D. C.
Hambleton & Co
Redmond & Co
Washington Loan & Trust Co
WHEELING, W. VA.
Masten (A. E.) & Co
WILMINGTON, DEL.
duPont (E. I.) de Nemours 8c Co
WINNIPEG, CANADA.
Union Bank of Canada
Wood, Gundy & Co
WORCESTER, MASS.
Worcester Bank & Trust Co
YOKOHAMA, JAPAN.
Yokohama Specie Bank, Ltd
YOUNGSTOWN, OHIO.
Otis & Co
82
65
65
22
51
57
88
65
41
83
76
62
F
SCTION
HANKING/
4
AMERICAN BANKERS' ASSOCIATION
48th Annual Convention, Held at New York City, October 2 to 5, 1922.
INDEX TO GENERAL CONVENTION PROCEEDINGS.
The American Banker's Responsibility, Thomas W. Lamont_Page 95
Reparations and International Debts, Rt. Hon. R.
99
McKenna
The Responsibility of Government for Industrial Justice,
104
Governor Henry J. Allen
103
Public Health Assets, Dr. George E. Vincent
111
Industrial and Trade Conditions, Fred I. Kent
114
Annual Address of President Thomas B. McAdams
115
Report of Executive Council and Administrative Committee_
115
Report of the Committee on State Taxation
116
Report of the Committee on State Legislation
117
Report of the Committee on Federal Legislation
119
Report of the American Institute of Banking
119
Report of State Seck etaries Section
119
of the Clearing Houses
Report
120
Report of the Trust Company Division
120
Report of the Savings Bank Division
121
Report of the National Bank Division
Page 121
Report of the State Bank Division
121
Report of Committee on Public Education
122
Annual Report of the Insurance Committee
122
Report of Agricultural Commission
124
Report of the Commerce and Marine Commission
125
Branch Banking
130
Report of Committee of Five on Par Collections
130
Report of Membership Committee
130
Report of the Public Relations Commission
130
Report of Economic Policy Commission
131
Remarks of Myron T. Herrick, U. S. Ambassador to France
131
Telegram from President Harding
132
Greetings from Andrew W. Mellon, Secretary U. S. Treasury
132
Remarks of Sir Frederick Williams-Taylor
132
Report of Committee on Resolutions
133
Amendments to Constitution of A. B. A
133
Report of Nominating Committee
133
Installation of Officers
The American Banker's Responsibility
By THOMAS W. LAMONT, of J. P. Morgan & Co.
As Chairman of the local Reception Committee and in behalf of New York's bankers and citizens generally, I bid you
welcome to this city. We want you to feel that New York
City is your city—not for this convention week alone, but for
all time. For we would have you believe with us, once and
for all, that New York is not local to the Atlantic seaboard,
but is countrywide in its interests, in its achievements, in its
attachments. There exists in this country to-day far too
much in the way of sectional feeling—a feeling which if not
tempered by more intimate intercourse and common experience means disunity for our country. To prevent any such
unfortunate tendency is the part of all of us.
New York is not made up of a citizenship separated by
some mysterious distinction from the rest of the country. On
the contrary, it is composed largely of men and women from
every locality in the four quarters of America. Except for
its size, it might be any other great American city. Broadway is another name for Main Street. Let me tell you in a
word how we in New York feel. We feel that we have a
share equal with you all in the life and the ambitions of our
country from the Atlantic to Pacific. We have the same satisfactions, the same pride as you in the great manufactures
and the wonderful agriculture of the Mississippi Valley, in
the cotton fields of the South, in the wheat prairies of the
Northwest, in the rugged grandeur of the Rockies and Sierras, in the fertility, the color, the charm of the Pacific Slope.
These great resources, the common inheritance of us all,
which your boundless energy and capacity have developed
to the benefit of the world, command our admiration and
our gratitude.
In the same way do you all share.deeply in whatever this
City of New York possesses in the way of fine tradition, of
character, of enterprise and accomplishment. Whatever it
has builded for the stability and security of our country, you
have had a share in that building. Whatever it has accomplished in the less material things of life, in music, letters
and the arts, to such accomplishment, I say, you have contributed generously and in a portion that could never have
been spared. Therefore it is that we would have you feel
that New York belongs to the country and the country to
New York. Therefore it is that we would have you return
here, time after time, members with us of a closely joined
family, sympathetic in understanding, close in aspiration,
warm in mutual affection.
Domestic Business Conditions.
Our President here has asked me to say something about
American business to-day, both domestic-wise and as it is
affected by conditions abroad. As to the domestic situation
by itself, there would appear to be little cause for conflicting views. We seem to be well into the final stage which, as
the records of decades show, marks the end of one business
cycle or the beginning of a new one. I hardly have to recall
to you the successive stages of our business triumphs and our
trials. First, was the end-of-the-war phase of huge demands
for commodities of all kinds, of swiftly mounting prices, of
constantly expanding business and accompanying inflation.
Second, came the storm signals, namely, the heavy drop in
security values in the last half of 1919. Third, came the
swift fall in commodity prices, not in America alone but all
over the world—a fall that would have spelled disaster to
American business had it not been for the sagacity and cour.
age of you bankers here before me, backed up by the Federal
Reserve System with a fine common-sense Southern banker
at the head of it, Governor Harding of the Federal Reserve
Board! Fourth, in this cycle, came finally the ease in money
its
which denoted the flattening of prices with business on
summer
back. That easing of money became marked in the
cyof 1921, and now, as has been the case in other business
a twelv-month of easy money, begun
cles, we have, after
buffets
clearly to move forward again. We have had rude
But American business has at last, with
and deep wounds.
characteristic courage, bound up Its bruises and is slowly
moving on to new goals.
not
Yet, despite clearing skies and fair weather, we have
unbounded confidence. We must not forget
yet cause for
96
BANKERS' CONVENTION.
that, before the race is won, we still have some hurdles to
jump. What are some of these hurdles? Our farmers would
tell us that a chief one is the low price prevailing for farm
products. They say, "Yes, this is a big season for crops, but'
our net money gain will be small." You know what the figures show, but here is the estimated comparison between our
crops last year and this:
Wheat
Corn
Oats
7 cereals
Cotton
1922.
818,000,000 bushels
9,875,000,000
"
1,255,000,000
"
5,274,000,000
"
10,600,000 bales
1921.
795,000,000 bushels
3,080,000,000
"
1,061,000,000
"
5,195,000,000
"
8,000,000 bales
I shan't attempt to argue the point of lower prices; but I
never knew any country to "go broke" because of its abundant crops. So, even though our farmers suffer disappointment, I think the low price hurdle is the easiest one to jump.
The farmers had high prices in 1919 and 1920, but the aftermath was a serious one for them. In the long run they, like
all of us, will fare better on a moderate price scale, with
small fluctuations.
dent Harding's ringing veto of the bill has created such a
feeling of relief in the community.
The tariff measure is of a somewhat different order. We
shall be fortunate indeed if we do not find that in practice it
protects a lot of industries that do not require protection, and
cuts off from our farmers and manufacturers a lot of foreign markets that are ready to buy our commodities. Many
of our people still fail to realize that the word "trade"
means, in the final analysis, an exchange of goods or services. Many of us still cling to the idea that international
trade, as the term applies to America, means that we can sell
freely to all the markets of the world and in turn need buy
from them little or nothing. This theory, which seems to be
the basis of much of our tariff legislation, will, if pursued,
surely wreck a big part of our foreign trade. If there is any
one motto which American producers and legislators should
learn by heart, it is that oft-repeated one of the British merchants, who, over a century ago, declared that "He who will
not buy, neither shall he sell."
Now, let us cast our eyes across the ocean, and see if we
can derive any comfort from that situation. With war and
rumors of war, with the Turk—the "Sick Man of Europe,"
suddenly alive and kicking the Greeks all around the lot,
with Russia, Germany and Austria what they are, with Ireland still in a ferment, we may well wonder what end is in
sight. Yet, to say that Europe has "gone all to pot," or in
fact to give vent to broad generalizations about Europe, is
very dangerous. On the surface, yes, things look about as
bad as they could. But you bankers, when you are sizing up
a customer, look far beyond his mere written statement. You
take into consideration his character, his life-long record and
many other factors not plainly visible. So in any size-up of
Europe we must take into account the invisible factors. And
I say to you that these invisible forces are saving Europe today. Politically, Europe may be in the doldrums or worse;
but economically (though many people may disagree on this
point) I, for one, believe that Europe is on the mend.
The Problem of Labor and Capital.
What other hurdles have we to leap in our race for prosperity? Certainly our labor strikes form one, and a big one
at that, even though the worst may now seem to be over. We
all say that we deplore these wretched struggles, yet the extent of our regret must be measured by our endeavor to prevent their recurrence; by our attempt to reconcile the conflicting views. As bearing upon this situation, I ask you,
who are so influential in counselling large men of business,
to remember that in this country there are still traces of arrogance among employers, as there are manifest signs of arrogance in labor. Yet the employer has even less excuse for
arrogance than the laborer. The high wages of the war and
of the years just after had, not unnaturaly, a somewhat
"spoiling" effect upon labor. They gave labor the feeling
that it must always share in the prosperity—never in the adversity of business. I deplore that feeling; yet I beg to remind you here that that feeling of labor, in so far as it was
directed to the improvement of living conditions, to the gainInvisible Forces Saving Europe.
ing of a little leisure, and of the time to play and be happy,
What are these invisible forces that, I maintain, are so
was wholly right and to the advantage of the community. great as more
than to offset the visible and unfortunate facFrom such men as you, such ambitions on the part of labor, tors in the European
situation? The first of them is producmoderately and wisely directed, should have every possible tivity. Those forces
that for almost five years were given
encouragement.
over to the killing of men,are now being devoted to the growThe problem of capital and of labor will never be wholly ing of crops, to the making
of goods. Second, trade is on the
worked out. People talk as if it were an example in arith- increase; not only as to Great
Britain, the traditional mermetic, capable of a final solution. It is no such thing. It is chant of the world, which is
already well on her feet, but as •
a problem of human beings: therefore, of emotions, grop- to the whole continent of Europe, even
including Russia.
ings, longings and ambitions. We can meet it only little by England has, since 1919, paid off £275,000,00
0 of her external
little, and only then if we put ourselves in the other fellow's debt—an amount equivalent to one and
one-third of Amerishoes and get his viewpoint. Do you and I want to change ca's entire national debt prior to the World
War. Last year
our jobs of long hours, evening conferences, heavy and con- France reduced the trade balance against
her from an adtinuing responsibility, for the job of the man who has the verse figure of 23 billion francs to 2 billion
francs.
chance in his daily work to relieve his brains with the work
The third point is that the people of Europe are saving.
of his hands? Some days no doubt we all feel like It; but The war and its aftermath meant an orgy
of spending. Now
whether we would make exchange or would not, it is our re- saving is taking its place. Politicians may
disagree every
sponsibility to study more fully than we do to-day the condi- morning upon the settlement of the
reparations question, but
tions of labor and to be sure that, by and large, every compe- meanwhile the brave French peasant, day
by day, is growing
tent worker (be he in the office or in the field) has an inter- his wheat, is saving his centimes. What,
by the way, is the
val in the drudgery of work for that enjoyment of life that amount of savings that the French people
have invested in
will make him a more contented and better citizen. In this their own Government securities since
the war? One hunmatter you and I have a responsibility that we cannot dodge. dred million francs.
As to Russia, just as I was leaving London
early in the
Polities and Business.
slimmer, practical business men, familiar with Russian
conWhat other hurdles have we to jump? If I should answer ditions,
made this prediction to me: That there are
two
—politics—the response might well be that politics are always ways,
one akin to the other, in which the Russian situation
with us and must ever be reckoned with as a handicap upon will gradually
improve. One is that the Soviet Government
business. If that is true, it is our own fault in the men whom will begin to
persuade foreign engineers, manufacturers and
we select to legislate for us. The hurdles against business other technical
experts to return to Russia and take in hand
which politics set up are likely to be more formidable in the various units
of production and transportation. The second
continhed unsettlement which they threaten than in the is that foreign merchants
will open up more active trade—not
actual results of legislation. That is the reason that the direct with Russia.
which seems for the moment impossible
Bonus Bill, with its threat to tax sev,eral billions of dollars —but with
the buffer States, like Latvia, Esthonia, etc.,
more out of the American people and distribute the fund in whose merchants
(having formerly been a part of it) know
such a way that probably no one would receive real benefit, Russia.
perfectly ; and in return for shipments of goods into
has been a hurdle to business. That is the reason that Presi- Russia
can secure payment in kind or in some other way not
BANKING SECTION.
97
open to the ordinary foreigner. One of my friends described Ism that has led us, in five of the six wars that our nation
these two processes as to Russia as akin to the isolated skin- has waged, to battle for high principle—are we bringing
grafting operations that are sometimes undertaken upon a that same inspiration to our relations with the world at
bad burn on the human body. A lot of little patches of large? That is the question that, with searching earnesthealthy skin are stuck here and there, gradually grow, and ness, you and I may well put to ourselves to-day.
after a time, with good luck, come together and cover the
Inter-Allied Debt Problem.
whole burn. I was inclined to think this a pretty good metaprophecy as to Russia was not
In this connection, there is no concrete problem more vital
phor and to believe that this
onlikely of fulfillment, even though the time involved may for us to study with clear and generous vision than that of
the so-called inter-Allied indebtedness. From the purely
be long and weary.
American view there are certain points important for us to
Grievous Loss of Man Power.
bear in mind. It has been said many times in the last twelveGrievously as the Continent of Europe has suffered from
month that the one adjustment essential to the settlement of
the 'war, I would remind you that we are too apt to reckon
Europe is the German reparations question. I agree that
such losses in material terms—in the destruction of dwellthis has been, and is, a question of great importance, but it
ings, of mines and of means of production. Europe's greatseems to me that it has now become secondary to the general
est loss, one for which not only she but the whole world must
one of inter-Allied debts. Of course, in a way of speaking, it
suffer for generations to come, is the death of millions of
is simply a part of the latter question, because Germany's
her young men; vital, eager, ambitious; singers, painters,
indebtedness to the Allies is international in character. In
poets; men of imagination and of genius, upon whose ideas
our discussions of reparations over here, the American attia great portion of the world depended for its future progress,
tude has, on the wnol(!, been critical of the French for apfor its discoveries in science, for its inspiration in the arts.
parently not realizing more quickly the facts of the situation
Do you remember those lines of young Rupert Brooke, himand thus drastically scaling down the reparations payments.
self destined a little later to lay down his life in the great
In fact, many criticis over here have been advising France
cause:
to forgive a good part of the German debt. To these critics
These laid the world away; poured out the red
Frenchmen have not unnaturally replied: "It is easy for
Sweet wine of youth; gave up the years to be
Of work and joy, and that unhoped serene
Americans to advise us to forgive German debts due to us in
• That men call age; and those who would have been,
repair of the frightful havoc caused by Germany upon our
Their sons, they gave, their immortality.
homes and industries, but what about America, in turn, doAnd Europe's great tragedy has been the loss of such lives
her social structure, the restoration of ing a little of the debt-forgiving business, especially as the
and the upset of
which will require far more of time and patience than the debts that were contracted with the American Government
were made in order to enable us, in large measure, to do
repair of the material destruction wrought upon her. It is to
the firsuch spiritual repair that America can by thought, by in- America's fighting before her own soldiers got into
contribute even more than in material ing line." I am not going to argue this point. I simply bring
sight and sympathy
It up so as to ask you to give it your further thought and
ways. And upon us bankers and business men falls the reof encouraging in this country the education and study—whether there may not be some reason in the French
sponsibility
inspiring of our young men to high and generous ideas. For attitude.
The reason why I say that reparations has now reached a
it is our young men, trained in imagination and initiative,
that, in the next decade or two, must supply to Europe some stage secondary to the larger question of inter-Allied indebtof the vitality that lies stilled forever beneath the mud of edness is that, while no reparations adjustment has yet
been reached, nevertheless public opinion on the other side
Flanders,
Remember, too, that Europe cannot be restored by formu- has now advanced to a state where, when the reparations
las. No scheme can right the world. Neither statesmen, question comes up again next November, it ought not to be
economists nor bankers can devise a plan of salvation. Only Impossible to settle. In other words, over a year ago the
the people can save themselves, and that through the exercise British realized that the Germans could, or would, never pay
of the old-fashioned virtues of hard work, of thrift, of kind- anything like the reparations total fixed in the Versailles
liness and co-operation--coupled with wise and courageous Treaty. Later the Belgian Government became similarly
leadership. And that is the point that leads me to emphasize convinced, and now in France, as I have talked there with
the title which I have given to these scattered remarks of many classes of representative Frenchmen, there has come to
be the same recognition of the fact that Germany cannot pay
mine: "The American Banker's Responsibility."
the huge totals set forth. The French Government, however,
'
America's Good Fortune. •
has, not unnaturally, taken the position that it could make
First, I want to remind you of the great privilege it is to be no official acknowledgment of such a general fact until such
an American citizen to-day. This is still the country of great time as a possible settlement was offered. The French theopportunity. The great open spaces of this North American sis is that if Germany cannot pay what she has promised to
continent have given us justification for boundless vision, pay,let her come forward and state just why she cannot, and
for generous impulse, for glowing optimism, for helpful co- what and when she can pay. Up to date the French declare
operation in all directions. Just to be born an American, they have not received any clear-cut proposition from Gerfree from some of the clinging prepossessions of the Old many covering these points. They say that when they reWorld, is in itself an inheritance and a career.
ceive such a proposition, they will be prepared to act. I
• Are we to-day realizing our opportunities? As to our bring out this point of view, because I feel that while to many
purely domestic situation, I should reply, on the whole, yes! there may have appeared to be something "hard-boiled" in
Our people are generally working in a worthy way towards the French attitude, it is only fair to analyze that attitude
worthy ends. They are meeting most of our strictly home and see what it really is.
problems witll candor and good sense. If, as a people, we
The Sums Owing to America.
have a lack, it is that not often enough do we "pause in livFurther, when it comes to this question of inter-Allied ining to enjoy life." We are sometimes apt, in our eagerness
for quantity, to overlook quality. We let our days and our debtedness, suppose we put to ourselves, in all seriousness,
passing pleasures grow elaborate and complex, forgetting that point that the French have put to us, namely—"Is it
that moth and rust corrupt and that ideas and ideals are the fair for us, inasmuch as we seem to be urging France to foronly things that endure for the ages. America within itself give part of the German debt in order to effect economic
is, I repeat, a land of generosity and co-operation. Through- adjustments in Europe, to do a little forgiving ourselves?"
out our great and growing commonwealths from East to As we put this point to ourselves, suppose we spend a moment
West we see public spirit, eager and Intelligent; we see warm in looking at the amounts of Governmental indebtedness
hearts, fine impulses, directed toward noble ends. But are owing to our Government. Just for record, I will mention
we bringing this native American idealism—that same ideal- again the rough totals by countries:
98
BANKERS' CONVENTION.
.Armenia
Austria
Belgium
Cuba
Czechoslovakia
Esthonia
Finland
France
Great Britain
Greece
Hungary
Italy '
Latvia
$11,959,917
24,055,708
377,564,298
8,147,000
91,169,834
13,999,145
8,281,926
3,358,104,093
4,166,318,358
15,000,000
1,685,836
1,648,034,050
5,132,287
26,000
4,981,628
170,585
135,620,583
36,128,494
192,601,297
51,153,160
Nieaiegtia •
Poland
Rumania
Russia'
Serbia
• Total
•
$10,150,154,196
Now, as to this indebtedness, early last spring Congress
passed a law under which the President appointed a special
commission to negotiate with the foreign nations the handling of their indebtedness. The power of this commission,
however, was strictly limited by law. It must require the
borrowing nations to pay off their entire indebtedness within
,25 years and meantime to pay interest at an average rate
not below 41
/
4%. Of course, such provisions leave little room
for negotiation. Under that bill about all that the European
nations can do is to "sign on the dotted line," or else to decline to sign, on the ground that they know that they will
not be able to live up to the specified obligation and, therefore, feel it impossible to commit themselves to a promise
that they cannot carry out.
Now, being all, I hope, practical men, I think it behooves
us to scrutinize this situation and to look into the various
factors bearing upon it. Let us, by investigation, determine
what, if any, of these debts are in any event uncollectible,
and so should be written off in order to "quit fooling ourselves." Let us decide what others of these debtors are good
in part but must be given ample time to pay in—far longer
perhaps than 25 years. Emphatically, let us figure to see
whether the payment of these debts (which inevitably must
mean a great increase in our import and a heavy decrease in
our export trade) is going to prove an asset or a liability for
American business.
Do They Really Owe Us All the Debt?
Then, aside from these phases of the question, there is another one for us to study, which has practicality in it and
also some sentiment. It is based on the following fact,
• namely that about one-half of the total indebtedness shown
• in the foregoing table was contracted between April 4 1917
(when Congress declared war against Germany) and the
date a year later when the American army for the first time
got its soldiers into the trenches in any considerable numbers. Can it not, with much reason, be argued that whereas
during this period of one year we were wholly unable to furnish soldiers to fight our battles for us, at least we were able
to furnish arms and munitions? We did furnish these, but
not as a free contribution to the war, for during that period
• the Allies were purchasing these commodities in America
and were paying for them by contracting the debts just described. Ought, therefore, any part of this first half of the
debt to be canceled by the American taxpayers? I do not
attempt to answer that question, which, of course, has been
raised many times heretofore. I simply bring it up again
and urge you to think about it, and if, and when, you reach
a conclusion, express that conclusion out loud. One thing is
certain: if someone on April 4 1917 had been able to give us
our choice as to whether we should rather give up freely and
for all time five billion dollars in money or give up the lives
Of several hundred thousands of our sons, there would have
been no hesitation as to our choice. Fate, however, was the
one that determined that choice. It determined that Great
Britain and France should give up the lives during that first
year, and that we should furnish, not our blood but our
money; taking, however, in place of it the promises-to-pay of
• our allies. No other policy at the time could have been followed,I grant you, but now that the war is behind us and we
can take a long look back, is it wise for us, is it just, is it
generous to make some composition of this matter? What
is your opinion?
In making up our minds as to the proper answer,let us recall a phrase that of late years has been much used here,
and sometimes misused—"America First." What does
'America First mean? Does it mean that we shall strain
every nerve to make America first in wealth and prosperity?
If so, we have already attained that ambition. Already we
hold two-fifths the entire world's stock of gold. We produce
54% of its cotton; 45% of its grains; 60% of its copper;
more than half of its iron and steel. Is there any field of
material accomplishment that we are not pre-eminent in?
As to science, no ambition could be more exalted than to
have America first in that field. And we may well be glad
and proud that in so many lines of science, especially perhaps
medicine and pathology, this country is in the van;,its progress being manifestly due not only to the zeal and skill of
our scientists, but also to the boundless generosity of those
men who have used their wealth to relieve and to bless mankind.
In education, too, America is in the front rank, and even
though in systems for training the minds of our young we
may have much to learn, yet no one can deny that in our
scheme of general free schools for the youth of the land we
probably surpass any other country in the world. Likewise,
In our charity, America's record is a noble one. Who can
forget the colossal sums for relief that our people freely gave
during the war and after? Mr. Herbert Hoover estimates
these sums to have aggregated $1,204,343,000 down to the
summer of 1921. Of this amount approximately $200,000,000
was sent abroad after the armistice to feed the hungry and
clothe the naked.
Are We Doing Our Full Share?
Yet with all this splendid record of liberality and accomplishment, I again put the question whether you and I and
our fellow citizens generally are doing our full share to solve
the weighty, the tragic questions that are weighing upon the
world? Are we giving to the solution of those questions the
best that is in us—our constant study and thought, the willingness to sacrifice? I make no appeal to you for the immediate material aid of the world that lies beyond the Atlantic
and Pacific. I make appeal to you, and to myself, for something far more rare—for our assurance to them that we are
with them in mind and in spirit in the solution of their difficulties; that we are once again ready, as we were in the
Great War and as our forefathers have been for 150 years,
to suffer if need be, and to yield up something of ourselves
in the general cause of world justice and peace.
Concretely, may I digress for a moment to mention two
situations with which in the past two years I have become
somewhat familiar? One of these is the Far East. The
other is Mexico. Across the Pacific, Japan is our nearest
neighbor. Do not gain the opinion that the Japanese people
are a sharp, tricky nation, unfriendly to us and wanting to
get the advantage of us. It is not so. The Japanese nation
as a whole is exceedingly anxious for our good-will and
friendliness and will go far to gain and retain oui co-operation. Nothing, I believe to-day, is, in their own opinion, quite
so vital to them as an unbroken friendship with their neigh-.
bors of America. But it was upon the transcendent problem
of China that I particularly wanted your thought. There is
a great people—four hundred millions of them—a people
high in the arts and in civilization three thousand years before Columbus came to America. But in these modern days
their antiquated system of government has broken down.
And trusting America, these great people of China—sober,
peaceful, honest, industrial and intelligent—ardently desire
the guidance of America. Any question affecting the peace
and development of the whole Pacific basin must be of interest to us, and no task of greater magnitude and import
waits upon us than to assist in the solution of China's difficulties. That is why I regard the Pacific Four-Power Treaty
reached at Washington last winter as of such supreme importance to the Far East and as calling for the study and
loyal support of every American citizen.
BANKING SECTION.
The Situation as to Mexico.
The other concrete situation which I had in mind was
nearer at hand; our next neighbor to the south. To Mexico,
as to China and Japan, duties not of my own seeking called
me not long ago, and much time has been spent in an endeavor to assist Mexico in what I believe to be a sincere attempt by her present Administration to work out the problem
of her foreign indebtedness. Any such attempt, if carried
out in good faith and effectiveness by the Mexican Government, must be bound to impress the world. And what I ask
of you now is to give some little thought to this near neighbor of ours. Do not accept the "hard-boiled" opinion of your
neighbor that "Mexico is hopeless" or that "all the Mexican
people care about is to fight revolutions." No such opinion
is true. No such • opinion shows any scrutiny of the
facts. Study the situation for yourself and you will find
this to be true: That during the administration of Porfirio
Diaz, intelligent and high minded as he was in so many
ways, millions of the Mexican people had almost no opportunity to improve their position either by acquiring education or becoming, even in part, owners of the land which
they cultivated. So that the revolution which overthrew
-Diaz and the revolutionary movements that succeeded it
misdirected though some of them were—were, in general,
efforts to relieve and uplift the great mass of Mexican people. Remember this and you cannot fail to have more sympathy with the situation to-day. Of course, the movement
to reform, like all such movements in history, went too far.
The pendulum swung away to the left. Trying to correct
admitted evils the Republic created some new ones and
adopted a constitution which is subject to criticism, not so
much on the ground of its radicalism, as upon its unworkableness. The present Administration in Mexico is, I believe,
making an earnest effort to change the workings of that
1917 Constitution so as to give the country a sound basis to
work upon and its foreign investors adequate security. Because, however, the process is slow and halting, we have no
cause for despair. On the contrary, there is strong ground
for hope, always provided that you intelligent leaders of our
community take the trouble to study the facts, and never be
wearied in your patience and sympathy for that neighbor
whose frontier marches for sixteen hundred miles with ours
from the Gulf of Mexico to the Pacific.
To the problems, then, of these two neighbors of ours to
the south and across the Pacific, I ask you to give your per-
99
sonal thought and interest; pointing out to you meantime
that the situation of Europe is inescapably joined with that
of our own. In a material way we have made many nations, as Mr. Wickersham has said, dependent upon our own
surplus products, and ourselves, in turn, dependent in part
upon their markets. But, as I have said, the co-operation
that I ask first for them is not economic. It lies in understanding and in sympathy. The shot that was fired at Lexington in 1775 was heard around the world. At that moment
America set aglow a new beacon to light the way to freedom
and liberty for generations on both sides of the ocean. But
now that we have won so far on the way to a splendid na.
tional achievement, to well-ordered freedom, to prosperity
and contentment, have we no flaming torch of leadership.
that we can raise before the eyes of the many millions who,
since the armistice, have been looking in vain for it?
America at the Parting of the Ways.
Finally, do not forget that, as these nations of Europe face
great dangers, America, too, is facing a crisis, though of a
different order. We have gained great power. With the
power goes weighty responsibility. Have we discharged it?
For the period of the World War, my answer is yes, a thousandfold yes. For the period since the armistice, can any
one of us search his heart and answer yes? We have, it is
true, offered criticism to the nations of Europe. We have
shouted advice across to them. But we have been timid and
fearful of petty entanglement. Now we have, it•would seem,
come to the parting of the ways. Shall we meet the responsibility that has come with our power—or shall we fail?
Shall you and I give our mind, our understanding and our
sympathy to these problems or shall we stand aside and add
to our national stock of gold? Shall we urge upon our national Government active co-operation in the counsels of the
Mother Country and of the Old World? Or shall we keep
silent?
Nineteen hundred years ago it was that St. Paul said:
"For unto whomsoever much is given, of him shall much be
required." And a little before there was One who said:
"With what measure ye mete; it shall be measured to you
again." What shall we measure for ourselves? Shall it not
once more be the courage that is America's tradition? Shall
It not be the generosity as well as the Juktice that, among all
the nations of the earth, will' in truth and in name make
America First?
Reparations and International Debts
By The Right. Hon. R. MCKENNA, Chairman of the London Joint City and Midland Bank, Limited.
When I received the honor of your iniation, which I
greatly appreciated, I must confess I had many misgivings.
I knew it would not be a light task to address an audience
whose collective importance in the world of finance is unrivaled. I remembered, however, the cordial friendship
which has always existed between American and British
bankers, and as I realized that your invitation was a further
evidence of this friendship my hesitation gave way and I
gladly decided to come.
•
Let me begin with an explanation of my choice of subject.
I thought at first that some professiimal topic should be selected, but I soon - ame across a serious difficulty. There is
C
a much greater difference between the law and practice of
banking in America and England than is generally supbosed,
and I felt that I should be liable to be misunderstood unless
this difference were constantly borne in mind. This very
meeting will Illustrate the point. I understand there are
over 30,000 separate banks in the United States, a large number of which are represented here. In the whole of Great
- Britain we have only 39. But with us the branch system is
so highly developed that these few banks have no less than
9,650 branches, of which 6,800 belong to five banks alone.
The main distinction is that our banks are regarded by
the Legislature as ordinary corporations or companies,
while yours are subject to special legislation in regard to
nearly all their activities. You have a limit prescribed to the
amount of a loan to any one customer. Certain loans are
prohibited and others are restricted. Your investments are
regulated. You are subject to limitations in incurring contingent liabilities and you are bound to maintain minimum
cash reserves. We have none of these restrictions. Alone
amongst deposit banking countries the United States protects depositors, some of the States going so far as to prescribe a system of guarantee. We differ also in our central
bank policy. You have adopted the Federal Reserve System
under which there are 12 Federal Reserve Banks in 12 districts. In England we have a,single central bank of issue, a
joint stock corporation which deals with private customers
as well as with the Government and the banks. Your Federal Reserve notes are issued against. gold and self-liquidating commercial paper. Our Bank of England notes are issued against gold only, with a fiduciary issue of £18,450,000.
•The principles of sound banking are the same everywhere,
but our countries diverge ,in law and practice. This is natural. British social and political conditions differ so much
from yours that the same banking system could hardly be
appropriated to both: Perhaps we have each something to
learn from the other, but I am sure any hasty attempt to es-
100
BANKERS' CONVENTION.
tablish a common procedure in the two countries would be
unwise. As our development has progressed each nation has
adapted itself to its environment, and such changes as we
may make in the future must conform to the habits and traditions of our peoples.
With these thoughts in mind,I found it very difficult to select a technical banking subject for discussion to-day. However careful I might be I felt that,unless accompanied by much
tedious explanation, my language, associated with ideas related to English practice, would be liable to be misunderstood
by you whose associated ideas are so different. I resolved,
therefore, to pass over professional banking topics and to
look for a subject of general interest to the business community. What should this be? In their report to the Reparations Commission, the Bankers' Committee which sat
early this summer in Paris laid stress upon the need to resume normal trade conditions between countries and to
stabilize exchanges, and they came to the conclusion that
neither of these aims could be accomplished without a definite settlement of the reparation and other international
debts. Here, then, it seemed to me, was a subject for my
address. There will be general agreement that there is no
matter of more deep concern to the world's trade at the present time than reparation payments and international debts,
and I trust, therefore, you will not deem it out of place that
I have chosen this subject for discussion to-day.
There are two preliminary observations which I must
make. The first is that I speak as a banker expressing my
personal views. I have nothing to do with politics and I do
not appear here in any representative character. I approach
the question solely from the economic point of view and my
endeavor is to determine, so far -as I can, the limit of the
debtors' capacity to pay, and the effect of payment upon the
world's trade. Our duty is to satisfy ourselves on the financial possibilities of the case. It is not what the debtors may
Justly be called upon to pay, but what they are able to pay,
which we as business men, anxious to discover the conditions
upon which trade prosperity is founded, must consider with
the most careful attention.
My second observation is to meet a possible criticism. How
can I, a member of a nation which is one of the debtors of
the United States, speak freely to an American audience
upon international indebtedness? The primary and essential duty of a debtor is to discharge his liability, and, until
this is done, all observations on the origin of the debt and on
the economic consequences of international payments are
liable to be viewed with suspicion. A creditor may, if he
like, open up questions of that kind, but a debtor should admit his obligation without further discussion. I recognize
that these are objections which I must answer and I believe
that I can do so conclusively. In the course of my argument
I shall show that England has the ability to pay, and, once
that is established, I can unhesitatingly assert her determination to honor her bond in full. I believe I am justified
In asking you to treat England's debt to the United States as
certain to be provided for, and, if this be conceded, we shall
be free to consider the question of the remaining international debts as one in which America and England are
equally concerned and in which both have the same interest
as creditors.
First, let us look at the magnitude of these international
debts. The greatest of all is that of Germany for reparations, a debt of which the United States declined to receive
any share. The amount was not defined by the Treaty of
Versailles, but subsequently by the London Ultimatum it was
put at 32 billion dollars, at which amount it stands nominally to-day. Of the remaining debts the liability of France
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1
to the United States and Great Britain is 62 billion dollars,
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1
and of Italy to the same two countries, 42 billion dollars.
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1
2
Russia owes these countries 3 billion dollars and a further
one billion dollars to France. These are the principal debts;
the others are all comparatively small in amount. Of the
creditors of the European Continental Governments England
Is the greatest.
We have no record in history of international claims of
this magnitude. The indemnity exacted by Germany from
France under the Treaty of Frankfort in 1871, in round figures one billion dollars, created the largest debt between
Governments ever known until the recent war, and is the only
precedent we have of a considerable international payment.
It is of interest to recall how the liability was discharged.
Payment of 150 million dollars was made in gold and silver
coin and in German bank notes and currency collected in
France and the balance in foreign bills, chiefly Germany currency bills. The precise form in which the payment was
made is, however, comparatively unimportant. For our
present purpose the significant question is how France procured the means of payment . She was bound to acquire
German marks or foreign currency exchangeable for marks,
and to do so she had either to find German or other foreign
buyers for such things as she had to sell or to obtain foreign
subscriptions to her loans. Very considerable sales were
made of foreign securities owned by French nationals, the
French loans were largely subscribed externally, and the export of French goods was so much increased that an average
excess of imports of 65 million dollars a year in the four
years 1868-1871 was converted into an average excess of exports of 46 million dollars a year in the four subsequent
years. By September 1873 the whole indemnity was paid,
and although France remained liable for the loans she had
issued, she was clear of any direct debt to the German Government, and indeed of all foreign debt payable in any but
her own currency.
Here we have an example of a very considerable international debt rapidly paid off without any serious disorganization of the world's trade. Now, what were the conditions
which made this possible? The war had been short, and the
amount of the indemnity was well within the capacity of
France to pay. Her nationals held large blocks of foreign
securities, which were realizable in foreign markets; her
credit was good, which enabled her to obtain foreign subscriptions to her loans ;and in her effort to increase her exports she was not hampered by high tariffs. She was driven
off the gold standard and although there was some decline
in the value of the franc, the depreciation never exceeded
5%, and, taking the whole period through, amounted to
barely more than 1%. But of the several factors in the
French ability to pay the most important lay in her accumulated reserve of wealth, the foreign securities owned by her
nationals.
It is interesting to note the Industrial condition of France
at that time. Employment was extremely active and production was on a great scale. She had to meet her external
liabilities, which compelled her to increase her sales in foreign markets, and she did so notwithstanding the competition
of other nations. The improved standard of efficiency in
production which was thereby forced upon her endured long
after the period of the indemnity. In Germany, on the
other hand, there was a very different experience. The receipt of a large amount of gold and silver had, with other
causes then in operation, a serious effect upon German internal prices, which rose rapidly. In 1872 there was a brief
trade and financial boom, followed in the ensuing year by a
crisis which was the beginning of a period of depression. It
would not be correct to say that the trade conditions in Germany were entirely due to the payment of the French indemnity, but undoubtedly it was a contributory cause of material importance. The comparative prosperity in France and
depression in Germany are remarkable and give color to the
story that Bismarck, in commenting upon the state of the
two countries, declared that the next time he defeated France
he would Insist on paying an indemnity.
Such is the only precedent we have for the payment of a
great international debt. The figures we have to deal with
to-day are on a far larger scale than the indemnity exacted
from France 50 years ago, but the problem in all essential
particulars is the same. We have to discover the capacity
of the debtors to pay and to consider the consequences of
payment. As the indemnity demanded from Germany is
much the greatest of the debts and is the one most urgently
in need of a satisfactory settlement, I place it in the front
of our discussion.
BANKING SECTION.
•
'101
The first question is, what is Germany's capacity to pay? trade figures show that the exports, long after the immediYou are perhaps expecting that I am about to give you an ate deficiency in essential foreign commodities due to the
inventory of Germany's natural resources and an estimate of war was made good, are still barely equal to the imports.
her productive power. All this has been done many times The conclusion seems irresistible that Germany has no presand much industry has been displayed in the inquiry. I have ent capacity to obtain a surplusfrom the export of goods.
I am not sanguine enough to believe that those who think
no doubt that the experts who advised the signatories of the
Treaty of Versailles that Germany could pay 120 billion they can extract from Germany enough money to enable
dollars had made many careful calculations of this kind. them to meet the internal liabilities, which they themselves
But what we have to investigate is not Germany's capacity have incurred in restoring devastated areas, will be satisfied
to produce wealth but her capacity to pay foreign debt. I with the statement I have just made. At the recent Reparacannot help thinking that we have here the source of the er- tions Conference of the Allied Powers held in London proror into which the Versailes experts seem to have fallen. No- posals were made of punitive measures to be taken with the
body has ever doubted Germany'simmense power to produce, object of compelling Germany to make immediate cash paybut production by itself is not enough. She must find a mar- ments, a policy which could only have been advanced under
ket for her exports, and the problem thus becomes one of de- the conviction that Germany really could pay. For my part,
termining the possible extension of German export trade. I do not believe that it is within her power to do so, but let
Nor is this the end. We must remember that an increase in us suppose for a moment that she can. We have then to conher exports will only provide funds for reparations if there sider what the effect of this enforced payment would be upon
is no corresponding increase in imports. Payment for her international trade, and whether it would be to the advanindispensable imports must be the first charge upon the pro- tage either of Germany's creditors as a whole or of the
ceeds of her foreign sales, and it is only the balance, the ex- rest of the world.
If Germany could pay what is demanded of her, the only
portable surplus, which is available for reparations.
In speaking of a nation's exportable surplus we must not method of obtaining the money would be by increasing her
is essenforget that other factors may contribute to it besides the exports. Now what are these exports to be? She
exports over imports. Interest received from for- tially a manufacturing nation. Her foreign sale of raw mabalance of
is obliged to
eign investments and payment for external services, such as terials is comparatively small. On balance she
may be contributory factors. Before the war Ger- import food, and in consequence of the loss of a large part
hipping,
iron ore
many possessed a very considerable exportable surplus de- of her mineral lands she is compelled to import both
all three sources, but mainly from the interest on and coal for the supply of her factories and furnaces. An
rived from
by exher foreign investments, which were probably worth not less increased exportable surplus could only be obtained
billion dollars. As regards the surplus from the tending her sale of manufactured goods. To do this in the
/
than 512
sale of her products and payment for services, it is safe to say teeth of the competition of other manufacturing nations she
that it never exceeded 100 million dollars a year. But what must work longer hours for less wages, she must cut profits,
is her position to-day? Most of her foreign investments have she must reduce her imports to the indispensable minimum.
gone. Some were sold during the war, others have been But her competitors will not consent to stand idle while they
seized as enemy property by the Governments of the Allied lose their trade. They will find themselves faced with growand Associated Powers, and most of what remain have lost ing unemployment and heavy trade losses. So far as German
their value, as in the case of the Russian investments. Her goods seek to invade their own domestic markets they may
shipping has been largely confiscated and she has been de- endeavor to exclude them by tariffs, but in order to retain
prived of some of her most productive areas—Alsace-Lor- their hold on neutral markets they, too, will be compelled to
raine, the Saar Basin and the Polish provinces. All the reduce wages and cut profits. And thus Germany's effort to
sources whence an exportable surplus might have been drawn extend her foreign trade must be confronted with the oppohave been greatly impaired if not wholly destroyed. At no sition of the whole manufacturing interest of the rest of the
time was Germany's exportable surplus sufficient to enable world, and could only be successfully countered by a general
her to make the annual payments demanded under the Lon- lowering of the standard of life.
den Ultimatum; it is entirely out of the question that she • I know it is frequently alleged that the collapse of the
mark with the accompanying disorganization of the world's
.do so to-day.
could
But let us get a little nearer to the problem of Germany's trade might have been avoided if the German Government
present capacity to pay from the surplus sale of her produc- had acted with firmness and good faith. It is said that Gertion. According to a recent statement by the Chancellor of many has intentionally depreciated her currency in order to
the Exchequer in the House of Commthis, she has paid money induce her creditors to abandon their claims. We are told
and delivered property altogether to the value of about two that her people are not adequately taxed and"that if they
billion dollars. Of this amount 1,645 million dollars repre- were subject to the burdens borne in some other countries the
sented the value of ships, coal, other payments in kind, prop- Government would be able to meet its liabilities. It is cererty in ceded territories and local payments to Armies of tainly true that in my own country far heavier taxation is
Occupation. The amount in cash has been only 375 million levied than in Germany, but I am inclined to think we are
dollars. And yet, with this comparatively small cash pay- overtaxed and that overtaxation so far from fostering cannot
ment, observe what has happened. The mark has declined fail to depress national production. But whether I am right
to less than one-seventieth of he value it had when the ob- or wrong in that opinion I fail to see how additional taxation
ligation to pay was imposed upon Germany by the Treaty of can stimulate foreign trade and provide a large exportable
Versailles. The means of payment has been found by the surplus. The taxes would be paid in marks, and whether the
sale of marks. After this experience it is difficult to believe marks are derived from avowed taxation or from concealed
in
that Germany has any surplus at the present time from the taxation through the use of the printing press, they are
neither case a currency which would be accepted in discharge
of her products.
export
There is a further consideration in support of this conclu- of foreign liability.
In the actual condition of Germany a foreign sale of
sion. It is beyond question that in the last three years Gert of the payment of repmany has made every effort to develop her external trade. marks is an inevitable accompanimen
whose industry and efficiency are arations. Except by such sale there does not appear to be any
The German workman,
the Government to obtain the necesgenerally admitted, has been fully employed and the facto- practicable method for
exacting it from exportactively at work all over the country. The sary foreign currency other than by
ries have been
been much ers as a condition of their receiving an export license. But
decline in the mark, which at every stage has
exporter, who often has external obligations, of his own
greater in the external than in the internal value, has af- the
German ex- to meet, does not want marks, but dollars or pounds sterling,
forded a very considerable advantage to the
case may be, and forthwith sells the marks paid him
porter, so much so, indeed, that there is hardly anywhere a as the
not com- by the Government for the currency he needs. If we add to
manufacturer producing goods for export who does
sale in the course of business the further sale by
plain of German competition. Nevertheless, the German this regular
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BANKERS' CONVENTION.
Germans who mistrust the stability of their own currency, nothing more than comparatively small annual payments
we have a sufficient explanation of the stupendous drop in can ever be made in this way. But it will be more convenient
the value of German money.
now to deal with an individual debt, and I will ask you to
Let me come back now to the question of what Germany consider the particular case of the debt from France to Engcan pay. Certainly she can pay something, though not in the land, which I can speak about with more freedom, as it is a
form or under the conditions it is now sought to impose debt in regard to which my own country is the creditor. We
upon her. Many Germans possess foreign assets, whether shall get a clearer view of it if we examine the circumstances
investments or balances in foreign banks, and it would be in which it was incurred.
a perfectly practicable proceeding for them to sell these
During the war France developed an immense demand for
assets to the German Government, who in turn could hand goods of foreign production. As an increasing proportion
them over to the Reparations Commission. But it is an es- of her man-power became engaged in her army, her capacity
sential condition of such a transaction that the owners of the to supply herself was progressively reduced. She had no
foreign assets should be willing to sell them; no Government abundance of foreign securities with which to pay for her rein the present situation of Germany could force a compul- quirements and she could obtain the war materials indissory sale. How, then, could this consent be obtained? I pensable for the maintenance of the fight in no other way
have no doubt that if these assets could be sold for an as- than by borrowing the money to pay for them. Before the
sured profit the holders would be willing to dispose of them. United States came into the war France had borrowed one
It must be remembered that to a considerable extent they billion dollars from the British Government, and this amount
are the proceeds of sales of marks which have been flung by was subsequently inc-eased to over 2y, billion dollars. The
Germans on the foreign markets under the well-founded ap- price of the goods bought by France was naturally high.
prehension that the pressure of reparations payments would Commodities produced to meet an urgent war need can never
rapidly depreciate their value. Relieve this pressure and be cheap. But France was obliged to have the goods, whatthe mark would immediately improve. It has still a far ever the price, and a great stimulus was given to American
greater value in Germany than it has outside, and the Ger- and British trade.
man holders of foreign assets would have a clear advantage
Let us now reverse the process and imagine France paying
in selling them for marks to their Government.
off this debt. She could only do so by producing goods and
It is impossible to give.any precise estimate of the total exporting them in very large quantities, far in excess of norvalue of these assets, but I believe it would be safe to put mal trade demands. If the general trade organization of the
them at not less than a billion dollars. Whatever the amount world permitted of the absorption of this additional French
may be, however, Germany could pay it, provided the fall in output, I have no doubt that her industry would be capable
the mark was arrested. More than that I do not think she of the effort necessary to enable her to pay interest and sinkhas the ability to find, at any rate for some years, and it ing fund on her debt. But would there be any willingness to
would be a condition of this payment that no more should be receive the goods? Neither England nor any other country
demanded of her for a long time to come. I believe that, is prepared to-day to pay for and consume goods on an exlooking merely at the amount to be received, the creditors ceptional scale. The immense demand created by the war
would gain by abandoning the attempt to obtain other money has no parallel in peace. And yet, how is France to pay unpayments for a period of at least three years, and I am quite less an exceptional demand exists? The truth is that her
sure the world as a whole would be an immense gainer in debt is far too great in relation to ordinary international
the general stabilization of exchanges which would ensue trade possibilities. It was incurred by the purchase of goods
upon an arrest of the fall in the mark.
required in war and bought at war prices. It could only be
Before I leave this part of my subject there is one observa- discharged by the transmission of goods, not wanted in peace,
tion I should like to make. I have no wish to minimize the and sold at no less high prices. We became accustomed in
just claims of the Allies against Germany, and I recognize war to talk in billions. Our language was suited to the cirthe serious political difficulties which stand in the way of cumstances of the time, but, if we carry our minds back to
their abatement. But no solution of the reparation is pos- 1914 and return to the ideas appropriate to peace conditions,
sible unless political considerations are subordinated to eco- we shall recognize at once that France has no trade surplus
nomic facts. What Germany can pay may not be a simple or reserves of accumulated and exportable wealth to enable
question, but it is a question capable of being answered. Un- her to meet her present external liabilities.
fortunately, the answer runs counter to popular hopes, popuThere are, of course, conceivable, though I trust improbalar passions, and, more formidable still, a popular sense of ble, conditions in which the French debt to us might be renatural justice which prescribes that the defeated enemy paid. If we were at war and the call upon our men to line
who planned the war should make good the damage suffered the trenches was such that many of our mines and factories
by the victors. And so no authoritative answer is given had to close down; and if France were at peace and at libwhile Europe slides into ruin.
erty to increase her output to the utmost of her capacity she
I have dealt at length with the reparations problem in an might pour upon our shores war material and stores equal to
endeavor to show that a nation, except in so far as it has an the whole amount of her debt to us. But in what part of the
exportable surplus, can only pay foreign debt out of the globe is there a demand for this additional output in time of
wealth it has accumulated outside its own country. If we peace? The mere endeavor to extend her foreign sales to the
pass now to the other international debts we have to recog- necessary degree would disorganize the trade of the world.
nize that the general argument is equally applicable to them We have seen the painful effect of an enforced competition by
all. Have the debtors an exportable surplus, and what are Germany; we should experience precisely the same results
their foreign assets? With regard to the latter question the from a similar effort by France.
only debtor possessing any large accumulation of such assets
The inevitable conclusion is that these international debts
is England. Notwithstanding her immense sale of securities are far too great for the capacity of any of the debtor counto the United States in the second and third years of the tries except England. She alone in her accumulated foreign
war, a sale which largely furnished the means of paying for Investments has adequate resources with which to discharge
the goods of all kinds bought by the Allies, England still her liability to the United States. Of the others, France has
owns sufficient foreign securities to cover her debt to the the greatest resources, but they are, I believe, quite insuffiUnited States two or three times over. But neither France cient to meet her obligations. The whole subject requires a
nor Italy has similar reserves of wealth, and I doubt whether rational reconsideration by the creditors, who must keep
either of them has sufficient to meet more than a trifling steadily in view the immediate effect of the payment of these
part of their foreign debt.
debts on the general trade of the world. The creditor counThere remains to be considered their exportable surplus in tries will obtain greater advantage from trade prosperity,
the ordinary way of trader I shall speak later of the circum- which will ensure full employment in their factories and
stances in which an exportable surplus from production workshops, than they can ever receive from the precarious
asually arises, and I shall give my reasons for thinking that payment of these debts. In the last two years we have had
BANKING SECTION.
103
able condition for such rapid repayexperience of the effect upon foreign trade of tumbling ex- rapidity. The indispens
inary demand for
own credit,and though the consequences ment is that there should be an extraord
changes and broken-d
demand which is a natural accompaniment of
may be more serious in England than in the United States, its goods, a
in peace. I cannot help thinking that
where foreign trade is comparatively only a small part of the war but does not exist
general, though very natural, misundertotal trade, they are still grave enough in the latter country there has been a
standing of the conditions under which international payalso to warrant the fullest and most careful consideration.
its present magnitude the subject is
It may be objected that my argument appears to lead to ments are made. In
disno nation, unless it has ac- new. In the past we have been accustomed only to the
the unpalatable conclusion that
ively small liabilities between nations
-cumulated resources in the form of foreign investments, can charge of comparat
partly by the remittance of gold,
discharge external obligations to anything more than a com- which has been effected
of export trade facilitated by a
paratively small amount. This is an objection which goes to and partly by an extension
not easy
of international loans and fall in the exchange of the debtor country, and it is
the very root of the question
from the ideas we have formed
forces us to a consideration of the real meaning of an ex- for us now to free ourselves
experience. Mistaken opinions on
portable surplus. I cannot do more than touch upon it in the course of our past
not surprising, but they are
briefly now without stretching your patience beyond the these economic questions are
causing grave disasters throughout the world. It is not
limit of extreme good nature.
my own recollection—that
It seems to me that the most compact form in which I can many years ago—it is well within
to the experience a want of understanding of sound principles of banking led
present the case is by calling your attention
which were then believed to be
of England as a creditor country. For over two centuries to repeated financial crises
countries. Year by inevitable. As they usually happened at intervals of 10 or 11
British capital has been lent to other
attributed them to the variayear England produced more than she either consumed her- years, many serious persons
other nations, and tions which occur in the spots on the sun. These spots may
self or could exchange for the products of
through the weather, the harvest,
she could not obtain a market for the surplus unless she gave affect the weather, and,
foreign issues but a wider knowledge of banking and of currency requirethe purchaser a long credit. Foreign loans and
how to escape their malign influence
of all kinds were taken up in England and the proceeds were ments has taught us
n. British facto- on credit. A better understanding of international trade
spent in paying for the surplus productio
limits of international payments will
ries and workshops were kept in good employment, but it was and of the possible
distheir output quickly enable us to find a remedy for the evils wh•ch now
a condition of their prosperity that a part of
of the Atlantic are beginning
on both sides
should be disposed of in this way. Taking the aggregate of tract us. The public
rational view than was possible three years
the transactions, British creditors have received a good re- to take a more
leaders of opinion direct our footsteps along
turn on their investment, but the ability of the debtors to ago, and if the
develop- the right path I believe the world is now prepared to follow it.
pay has been dependent, speaking generally, on the
To sum up: The conclusion to which I am driven is that
ment of their country being fostered by the receipt of further
pay now whatever she may have in forloans. If we take the whole field of British foreign invest- Germany can only
can realize
every year England has returned in eign balances together with such amount as she
ment we shall find that
of her remaining foreign securities; that this
loan more than she received in interest, and the balance of by the sale
payment is only possible if all other demands are postponed
the world's indebtedness to her has been steadily growing.
to ensure the stabilization
From this view of loans made to foreign countries they for a definite period long enough
n of
to be somewhat unremunerative. If of the mark; and that future demands at the expiratio
might seem at first sight
be limited to the annual amount of Gerthe creditor has to go on lending in order to be paid the inter- this period must
time. Further, that Engest on previous loans, a bad debt would appear to be the only many's exportable surplus at that
to pay to the United States interest
possible end to the business. But this is by no means the land has the capacity
the other debtors are
case. While this continuous lending has been true in the and sinking fund on her debt; but that
meet more than a small part of
past in the aggregate of foreign loans, it is not necessarily none of them in a position to
the existing condition of
true in any individual instance, nor does it follow that it their external liabilities, and in
payment by them is
be true of the loans as a whole. In our experi- Europe a definite postponement of any
will always
to corpora- desirable in the interests of all the parties. The actual
ence as bankers it is not uncommon to see loans
could ultimately pay should,
tions and finis justifiably increasing in amount. The bor= amount which the other debtors
case of Germany, be ascertained by inquiry into
rower may show by the growth of his business and expand- as in the
a full and frank conference being turnover that such advances are thoroughly warranted, their exportable surplus at
debtors.
and in spite of his greater total of indebtedness his credit tween creditors and
It remains only for me now to thank you for the patience
may be improving and his balance sheet may disclose an inme. I have strictly confined
creasing surplus. What is true of an individual or corpora- with which you have heard
of Reparabut on a larger scale and myself to a consideration of the economic aspect
tion may be true of a country,
Debts, how they are payable, the
viewed over a much more extended period of time. The life tions and International
to pay, and the effect of
of an individual or even of the most successful company is general capacity of a debtor country
convinced that an attempt to enas nothing compared with the life of a nation. Take the payment. If I have become
is injurious to the
case of your own country. The United States has been the force payment beyond the debtor's ability
whole world, lowers wages, regreatest external borrower in history. You required foreign International trade of the
unemployment, the concapital for your internal development and you took from duces profits and is a direct cause of
economic grounds and is uninEngland alone not less than three billion dollars. It is esti- clusion is founded solely on
any regard to the
mated that at the time of the outbreak of the war your ex- fluenced by any political considerations or
I know very well that
ternal debt had become stationary in amount, and that your moral obligations of the debtors.
pay the whole there are other considerations affecting these debts, but
exportable surplus of commodities sufficed
determined by the rulers
of the interest. Repayment of the capital, however, would these are matters of statecraft to be
your capacity for a very long period of the creditor countries according to their view of wise polhave been beyond even
beside!' those of trade and
had it not been for the opportunity afforded by the war. As icy, which covers many interests
itself
then an inexhaustible demand in Eu- finance. The fact that a debtor cannot Bay does not of
you know, there arose
n. The debt may become the subject
rope for American goods, which led to an immense increase discharge the obligatio
on and bargain by which if the debtor obtains reIn your exports. Payment for these exports was largely of negotiati
may still recover some advantage to which
made out of the proceeds of the sale of the stocks and bonds lief, the creditor
duty of
capital liability which had been he may be justly entitled. But I conceive it to be the
held in England, and thus a
so far as they can in forming a sound public
to help
growing for over two centuries was almost entirely dis- bankers
opinion upon the financial and commercial aspects of these
charged in a few years.
onal debts, and it is in pursuance of this duty that
We see, then, that a debtor nation may in certain circum- Internati
with remarkable ease and I have ventured to make these observations to-day:
stances pay off its foreign debt
BANKERS' CONVENTION.
The Responsibility of Government for Industrial Justice
By HENRY J. ALLEN, Governor of Kansas.
Mr. President, Members of the American Bankers Asso- remembering what I had
seen these wonderful chaps do in
ciation, Ladies and Gentlemen: It is a very great pleasure France without any cards I knew
that this mine leader was
to come here this morning, it is a delight to hear the generous in for a surprise.
words of the President. I am not entitled to so generous
I will never forget the morning they landed. All the mintreatment, but I enjoyed it very well.
ers were down to give them welcome. They were going to
I hink we are standing to-day, in reference to the indus- give them the sort of welcome
that strikers give to those who
trial panic, about where we stood 14 or 15 years ago in ref- interfere in the proceedings. They
were going to call them
erence to the bankers' occasional panic. To-day every man scabs and what-not and then these lads
got off their special
who thinks upon the situation of industrial problems, knows train, a lot of keen-eyed, kindly faced,
self-controlled young
there should be a remedy and many know what the remedy chaps. They were so obviously what they were!
They were
ought to be, just as 15 years ago we thought we knew the not scabs, but citizens come to offer themselves
for the deremedy for the banking ills that came out of the bad system fense of the public; but even the miners realized how inconof banking we then possessed.
gruous it would be to call them any of the things they came
I believe it is just as possible for the Government to lead to call them, so they received them in silence, and these boys
us into paths of stability and justice and righteousness in began to march up the i3treets of the city to the point
from
reference to the industrial problem, as it proved easy for the which they were to go to the mines.
Government to thus lead us in reference to the banking probI saw a striker come up to a lad in whom I had a personal
lem.
interest, and I heard him say, "Well, boy, you ain't going to
It is unexpectable that every time a new contract is to be the mines this morning."
made between the men who mine coal and the men who op"Yes, going to mine coal to-morrow."
erate mines, between the men who work in shops and the men
"Well, you can't turn a wheel out there; the pits are full
who are on the railroads, that that contract should be the of water. The thermometer is below zero, the machinery has
basis of a vicious and costly civil war upon the helpless been down for two weeks. We couldn't mine coal out there
public.
ourselves under the circumstances."
If we are going to get anywhere in this country in referThis lad never looked at him, but as he trudged along he
ence to the solution of this problem, then most assuredly we answered him out of the corners of his mouth, saying, "Did
will have to reach the remedy through Governmental power, you ever see any trenches in France?"
and through the pledge of a righteous and spoken tribunal.
That night, while we were throwing out the guard lines,
In my State we have reached a point where we now realize we began to pump water out of the pits. We sent along the
that it isn't right for the helpless public to bear the ills that regiment of the National Guard which we didn't need, since
come from that damnable thing they call "Economic Pres- we had it.
sure," and when we adopted a law providing an impartial
The next day, against obstacles that seemed insuperable,
tribunal before which cause8 might be brought in the essen- they produced at one of the mines a carload of coal. I have
tial industries of food, fuel, clothing and transportation, we never heard so much cackling over one egg in all my life.
didn't know how the matter was going to work. It came out They called me up all that night at the hotel where I was
of the coal strike of two and one-half years ago, in the win- staying to ascertain whether I had learned that they had
ter time, that our people, like most people who had coal mined a car of coal. The next day it was ten cars; the next
within their borders, weren't very prudent in getting into the day it was 30 cars, and in ten days these great chaps probins, so within two weeks from the hour the strike came, we duced enough coal to relieve the emergency in more than 200
were out of coal in the schoolhouses; we were threatened in Kansas communities, and our danger of freezing was over.
the hospitals and in the homes, industries were slowing down They did for us another thing in its fundamental value more
and there was threat of suffering in hospitals.
worth while even than the fuel we needed so badly at that
I went to the Supreme Court of my State and asked if hour, in that they taught us to realize this great truth: That
they wouldn't turn over to the State under a proper receiver- the State has the right to protect the public against anybody.
ship all of the coal mines in order that we might produce coal This law has been upon the statute books of my State two
under the direction of the State. I will never forget the look and one-half years. A certain type of employer and a cerof mild surprise that came into the face of our Chief Justice, tain type of labor leader unite in declaring that it doesn't
a great public servant, who has been upon our Supreme Court work, but in two and one-half years the court has found adbench for more than 35 years. He said, "Well, Governor, judication for thousands and thousands of men who labor in
upon what allegation do you want to take over these mines?" railways, in electric light plants, in packing houses, in mines,
I am a lawyer, and I said, "Well, Judge, whatever allegation In mills, 45 decisions, and of those 45 decisions, 43 of them
you think would work."
have been accepted without contest as being entirely satisMen have been kind enough to give me credit for courage factory by both parties to the controversy.
in reference to the coal mining operations of the State. I
A man said to me the other day, "Well, I liked your court
want to tell you that the first credit for courage belongs to when it was established, but I am not so sure I am for it any
the Supreme Court of my State which did not hesitate to do more." I said, "In the meantime what has happened to
a needful thing merely because it hadn't been done before.
you?"
Then, when they had turned over the mines, I became the
He said: "You know I am in the Wolf Packing Company."
greatest coal operator in the world without any miners at
I said, "Oh, yes, we have made some decisions for you."
work.
The last one I remember related to the working of women in
We issued a call for volunteers, and within 24 hours more one of the bureaus of that great industry. We discovered
than 12,000 citizens of the State sent me word that they that in one of the bureaus men and women were working
during the same hours, at the same task, with the same dewere coming to mine coal.
They weren't interested in the labor problem; they were gree of efficiency and the men were drawing one wage and
interested as patriots in the growing danger that attends a the women were drawing a smaller wage. The court, having
famine in fuel, and we took from this gredt offering many gone thoroughly into the situation, issued the order that
hundreds of young men who had been in the service of their thereafter in my State when men and women work at the
country. Alexander Howatt, as the President of the District, same task, with the same efficiency, they shall draw the
said that not a pound of coal had ever been produced in the same wage.
district since its organization except by union labor and not
I said,"What is the matter with that decision?"
a pound would ever be produced except by union labor, and,
He said, "Nothing is the matter with the decision."
BANKING SECTION.
105
of 90 days the men went back to work at the old wage, under
I said,"Then what is your plaint?"
I wish you could have heard him distend himself. He said, the old working conditions—they hadn't gained a dollar.
Then, when the industrial court was set up for business
"I resent the right of the Government to tell me how I shall
the car men came asking for a new award, pleading for a livrun my business."
That is the keynote of objection. I am glad to say that ing wage, and the industrial court took a survey of the costs
the Kansas Court of Industrial Relations does not exist for of living and gave a wage award; and the president of the
the purpose of telling a man how he shall run his business; court, in handing down the decision, called attention to the
it is an emergency measure; it relates only to the essential fact that the Legislature had not given to the court the power
industries of food, fuel, clothing and transportation, and it to fix a thing called "a living wage." The law says that
provides that when a quarrel in one of these industries has every such man shall be entitled to a fair and just wage.
reached the point where it threatens the welfare of the pub- What is the difference.? A living wage is a wage sufficient
lic, then that court shall take over the controversy and make to meet a cost of living; a fair and just wage is a living wage
awards, and in the meantime the industry shall continue to plus enough to enable a man to give to himself and to his
operate in order that the public may have at all times free family some of the benefits of modern life, plus enough to
access to transportation and to food and to fuel and to cloth- enable him through reasonable frugality to build a safeguard
against age and sickness.
ing.
That was the interpretation of the court—they gave it. The
It isn't a regulatory court, it is an emergency court, and
then we have gone rather far along the process of regulation men accepted it, the company accepted it, and peace came
by Government for anybody to be too nervous about it where ravaging strikes had prevailed.
Then, in a year the railway company came back to the
now.
the moment we are born to the court and said, "The wage you adjusted a year ago is out of
We are all regulated from
hour of the funeral. You men who live under constant regu- tune, costs of living have gone down, and if we are to meet
lation and have come to like it, realize that there are some the expectation for lower transportation rates, then we must
Instances in which the Government may tell you what to do. have lower wages."
Again the court made a survey of the costs of living in all
The Government has gone so far, every married man in
this audience is regulated. I mean in addition to that you cases where there was any room for doubt; they gave the
are thinking about. The Government has told him how he benefit of the doubt to the laboring man, as they should have
shall treat his wife. The most sacred relationship in the done, and then finally they handed down their award, and it
it as a fair
world is the relationship of the parents and the child, and was a reduction of wages, and the men accepted
it.
the Government has come to every parent and has said,"You and just decision and the company accepted
I have a letter with me from the general manager of that
shall raise that child according to a prescription of the State;
business in the Joplin
you shall keep it living in wholesome surroundings; you shall company who says"We are now doing
and employ the teach- Pittsburgh & Galena Traction Co. under the second contract
buy books and build the school houses
it is the first time in
ers," and in my State, thank God! it says that no matter how adjudicated by the industrial court and
your child you our experience when we look forward with assurance to peace
much you may think you need the labor of
and contentment," and both fhe men and the company have
shall keep it in school until it is 16 years of age.
life of his accepted the court as being the way to find just solution of
I do not care how potential he may be in the
community, under certain circumstances it will carry before affairs.
Do you mean to tell me that a court that is getting that
the bar of judgment, that the judge shall tell it, it shall be
sort of results is not working?
that he will have back his liberty.
I have a letter from the General Manager of the Illinois
Ali, my friends, if Government may find justice for all of
this, if it may find justice with which to prescribe the sacred Traction Co., which operates three or four railways in our
relations of the family, of the parent and the child, if it may State, several light and power companies, and in this letter
find justice for a man in relation to his property, and his lib- the General Manager calls my attention to the fact that his
erty, and his life; if Government may do all of this with just- company has had nine adjudications by the industrial court
tice, don't you think that Government might also find justice and that every man employed by them in a mechanical cafor the laboring man in his quarrel with his employer in pacity has had his wages fixed by the court in emergency
matters when a strike had threatened and said,"Not a single
these essential industries?
certainly
Men are always telling us what Government is for: that it complaint exists to-day on the part of the men and
literty, and in not on the part of the company of the functioning of the inexists for equality, that it exists for personal
had been made
these Volstead days, we hear much about the fact that it ex- dustrial court," though nine adjudications
the world which affect their entire personnel.
ists for personal freedom; that it exists to make
So I say to you, the court is working. Of course, we have
safe for democracy, but the finest definition of Government
had trouble. When the court was first set up for business
I have ever heard is that of President Adams, who said,"The
who is the
chief aim of Government is justice." That is the chief aim in we had to fight it out with Alexander Howatt,
President of the Miners' District in that State, District No.
every relationship of life, and God help us, as a free people
When
at any time when any considerable number of folk may rise 14. We don't have any more trouble with Mr. Howatt.
on the first of April the strike came in the coal fields, everyto question the capacity of Government to be just, because to
those who question, for them Government no longer exists. body went out. The court called the operators together and
It was Edmund Burke, proponent of our Anglo-Saxon foun- said, "There is no need of coal just now. Every bin is full.
dation, standing in the British Parliament, who said: "All Every coal car is full, but as soon as there is a depletion in
the powers of the Empire, including the powers of the King the supply which menaces the public, then you will have to
and of the Parliament, and of the army and of the navy, exist operate these mines or the State will have to operate
for the sole purpose of placing twelve honest men in a jury them."
In 30 days it was necessary for some of the operators to
box."
upon which we have builded in this open their mines to make up the reserve of coal. When they
That is the foundation
country, that is the foundation of the Kansas law, and God opened their mines men went back to work. On the day at
who were mining
help us at any time when that foundation may be questioned Herrin, Ill., there' were murdered 22 men
shaft
its efficiency, to find justice for all men in relation to coal in strip mines, on that day in Kansas 375 deep
as to
mines were operating without even an additional police
all quarrels.
Howatt and 12 of his titsYou might be interested in one or two of these types of force. Why? Because Alexander
out. Our first case, I remember, trict officers were in jail for violating the Kansas law.
cases that have been tried
In the recent railway strike, the general managers of the
was a railroad case. The Joplin Pittsburgh & Galena Railyear for five years. The last one Santa Fe and Rock Island have written saying that in Kanway Co. had had a strike a
chaps sas they have been allowed to carry on their iZustries at
was in 1918, continued for 90 days and cost these poor
millions, and at the end practically 100% because of the law in Kansas which guaranwho struck millions; and the public
106
BANKERS' CONVENTION.
tees to every man who wants to work the right to
work withHe said. "Oh, yes, Governor; the boys are going to put on
out molestation:
a little demonstration."
It is sometimes charged that we have taken
away from
What was the purpose of it? There were 50 or 60 colored
men their God-given right to quit work. That
is one of the men working in the round houses and they knew, every man
silly statements that Samuel Gompers makes
at times. And who was going to parade, that If they put on a Ku Klux Klan
friends, if we had sought to do this, then our law
would have parade in that town, there wouldn't be a colored man at
no business upon the statute book of any modern
State. We work the next morning.
have not taken away from any man his right
to quit. We
It would be like the colored man whose friend said, "Sam,
have expressly provided in the contention of
the Act that if you ever get a letter from these Ku Klux Klan people,
nothing within the law shall be interpreted
to deprive any what are you going to do?" Sam says, "I am going to read
man of his natural right to choose his own
employment, and it on the train."
to cease It at his w11. I said to this man and
to this group
So I called up the Mayor who had been bragging to me
of men,"You may quit work whenever you may
wish and go about his 100% Americanism; I said, "What about this paoff about whatever entertains you elsewhere
, but after you rade? Are you going to let them have it?"
have quit that isn't your job any more and
you shall not
"Oh, yes!"
come back. You shall not come back here
to-morrow with
I said, "You can't have it."
your pockets full of dynamite to keep these
men who want
"Well," he said, "I would like to know how you are going
to linger on the job from working." The law
holds that the to prevent it?"
right to work is just as sacred as the right to
love and that it
I said, "Fortunately, I don't have to prevent it; I am
Is the duty of the Government to protect
both men in their nothing but the Governor; you are the Mayor of the town—I
natural inclinations.
am going to require you to prevent It."
The statement from the General Manager of
the Santa Fe,
He said, "Hasn't a man a constitutional right to march in
one of the greatest systems of the Middle
West (the greatest a parade?"
system out there possible), where they have
centred in KanI said, "I am not discussing constitutional law with you;
sas great repair shops, says that their repair
shops in Topeka I am just telling you that you can't have the parade!"
employing several thousand men are 115%
normal. You
I said, "You can call me up at six o'clock and tell me
know that is plus. How does he get It? The
personnel is all whether you have figured out some way to stop it. If you
employed and the personnel that is now doing
business in can't stop it, I can !"
their shops Is 115% more effective than
the old personnel
He called me up and asked, "How are you going to stop
was. How does it happen? Every railroad
company has re- this parade if I can't?"
ported this: That in the employment bureaus
that have
I said, "It's easy. When you call me up at six o'clock and
made up the personnel for employment in the
place of the throw up the sponge and tell me you can't run your town,
shopinen who went out, one of their difficulti
es has been that then I will ask the Supreme Court to remove you from office.
all of the men who come seeking employment
want to be sent That is the first step. And then I am going to send enough
to Kansas. Why? Because the State has
pledged its own soldiers into your town to take the pillow-case off the head
order that every man who wants to work in
Kansas shall of any man who appears upon the street."
have that right under the protection of Governme
nt.
"Well," he said, "have you got a constitutional right to
Of course, we have had trouble about that, too.
We have do that?"
had a lot of discussion about whether it was
proper to guarI said, "I don't know, but I am in command of the soldiers
antee that a man should have the right to work.
They have and they will do what I tell them to do. Your remedy is in
even called into question our attitude toward
free speech. the courts, if you want to discuss constitutional law. I am
Oh, I hope no one will ever think that in Kansas
there is any merely an administrative officer; I am not a judge."
danger to free speech. We are still the freest lot
of talkers
He called me up at six o'clock and told me the boys had
in the world. I imagine that nothing in Kansas would
ever postponed the parade.
affect the God-given right of free speech in any degree
Now, he was a good citizen, but what was the matter with
unless possibly it might be a general epidemic of lockjaw—
that him? Why, he had found out a new way to violate the law—
might affect us some.
that was what was the matter with him.
It isn't free speech that is in danger in this country,
Ah, friends, of course we need laws to control the red
my
friends. It is the free right of a man to work. That is
what radical of foreign birth, but in addition to that we need
Is in danger. It is just as sacred as the right of
free equally a new baptism of respect for law upon the part of
speech.
these 100% American citizens!
The cunning manner in which these American strikers
I think I have just about exceeded my time, and the subcontrive to evade the law proves their superiority over any ject
I came here to talk about this morning I have not
other striker in the world in that respect.
touched on yet.
I have said a number of times that I would rather
We found another clever way in which they were violatdeal
with the red radical of foreign birth in a strike than
the ing the law. The strike leaders were getting together all the
American striker, because the red radical hates Governme
nt merchants who dealt in commissary supplies, who ran hoand fears it, but the American striker, like most
American tels, who ran restaurants, and making them pledge themcitizens, neither respects Government nor fears it.
selves that they would not sell anything to a man who
I remember at one of the towns in which we had
great rail- worked ill a shop. What was that? Why, that was picketway shops the Mayor of the town had appointed a lot
of the ing. And so the Attorney-GeLJral sal:. "Now, if you men
strikers to be special guards, t nd we found that the
police- want to sell, you have got to sell everybody; you can't picket
men were picketing. And a policeman was apprehen
ded who In this fashion"—and he broke that u
,
had been going to some of the men who liad remained
What happened then? Why, the strike leaders got out a
at
work and saying things like this: "Now, you know,
Bob, we window card which expressed 100% sympathy with the trikwill do all we can to protect you, but there are some
fellows ers. If there is a larger per cent of sympathy than 100%, I
here that we may not be able to handle,.and say,
Bob, we have that for these poor strikers, these chaps who were
would hate to have happen to you what happened to
those forced to leave their jobs, and to-day they are out of work
poor chaps at Herrin, Illinois."
with ruin staring them in the face. Oh, how I sympathize
Bob didn't turn up for work the next day. What was
that? with them! I sympathize with the men who are laboring
That was picketing. So we finally got them to stop it.
under the obsession that there is no other way to obtain
Then the next thing that came to my attention, that these Justice except by civil war.
100% Americans had arranged for a Ku Klux Klan parade
But this card was not fundamentally for the purpose of
on the streets of the city on Friday night. I called up
the express'ng sympathy; it was for the purpose of hanging in
Mayor and I said, "Mr. Mayor, what about this parade,
this the windows of those stores and hotels and restaurants that
Ku Klux Klan parader'
had refused formally to sell goods. It was getting at the
•
BANKING SECTION.
point in another way, it was picketing in a different fashion,
and so, the Attorney-General says, that is against the law.
What one man may do fora purpose many men in concert may
not do. It is a violation of the law because it is a conspiracy
to build an atmosphere of intimidation against the men who
are at work.
So the Attorney-General ordered the cards down. As the
cards came down around in the shop centres, my friend Will
White blew up in Emporia. And I have no criticism for him.
He is a wonderful chap, a great, solid man, but he became
confused as to what free speech is. As I said before, it is in
no danger in Kansas—there are a lot of things that you cannot do under freedom.
My fr:end White if he had the taste, could light a cigar
and go anywhere Ile wished in Emporia with it, except into
a powder factory. I wouldn't let him do that; I would curtail his liberty that much. And it wasn't free speech that
was in danger; it was the right,of a man to work without
intimidation that was threatened.
Take our friends in the packing strike. Those of you who
live in the Middle West are familiar with the fact that Kansas is the second packing centre in the United States. More
than 10.000 men work in the packing plants, and yet, when
the packers' strike came, though there were riots and killings and destruction of property in Chicago, in Omaha, in St.
Paul, in St. Jcseph, in Sioux City, in Oklahoma City, in Kansas the packing plants functioned with no disorder and we
didn't need to call out an extra police force.
Why? Because the law was there waving to every man,
"You don't have to work in this packing plant if you don't
want to; you can leave if you wish, or the court will adjudicate a wage for you to work under. But if you leave this
packing plant you shall not come back to molest those who
remain. The State has guaranteed that they shall work."
And they have worked.
In the mines of the State during the three months when
the strike gripped everybody else with loss of coal, Kansas
produced 900,000 tons of coal, more than enough for her domestic and industrial purposes.
And astonishing as it may seem, we have produced 50%
of the normal output with 25% of the personnel, showing
how tremendously the industry has been overmanned.
I wish we might have in the control of the industrial situation, wh:ch is to-day the greatest panic breeder in the
world, the wisdom of Government that has led the banking
profession into stabilization.
I am proud Of the fact that the President of the United
States recently, in delivering his brave message to Congress,
declared that the Federal Railway Labor Board should have
the power to enforce its own decisions; because I am only
sorry that after pointing out so courageously and so unerringly the need of this legislation he should have said that he
warned Congress against doing anything hasty.
Any statesman who thinks it is necessary to urge this Congress not to hurry has no idea of speed.
All, my friends, we find in this great land that the best acts
of legislation come out of the aroused demand of the public.
You hadn't guaranteed the creation in this land of the Federal Reserve System until the explosion of 1907 and the
aroused public said "We want something better than what we
have had !"
Government goes forward out of the same power that
sends forward the automobile engine—the power of its explosions, and it is the duty of Congress to make of the explosions a righteous public indignation direction, and it is the
duty of the courts to establish the speed limits.
I believe that out of the pressure of the tragedy of the last
year in the essential industries of transportation and fuel,
there is going to come a demand that we write into the
fundamental law of the land the sacred pledge that the Government shall protect the public.
That is the basis of our law, founded upo
man principle that exists in, organized sod
that was engraved as one of the 12 laws upo
Rome in the Greek language. Let the safet
be the supreme law.
You may write around that all the sermons
the right of the man to take a stick of dyna
his own war, but whenever the welfare of the
aced the public will come back to this broad p
the Government for its protection.
Fifteen years ago we didn't know how we c,
the banking profession so as to stabilize it, and
Aldrich and his confreres began the study of a'
serve System, we still questioned the propriety
ment to take over an institution like banking in
and the was the old voice pleading with us again
zation, and then came the wonderful accomplisht
Sixty-third Congress, giving to us the fundamenta
that underly this growing Federal Reserve Syste
All, it IP not surprising that there should be in
its administration some things that cause discom
am gratified as a citizen who knows very little
ing, to stand here this morning and express this
fication, that in the Federal Reserve System ther
of confidence which all men .feel, and the compla
it are the details of administration. They do nk
underlying principles.
Out in my State, we complain about the Fede
System in very much the same spirit that me
about the weather. We haven't anything 'Jett(
And when Kansas can't offer a new remedy that
the present remedy is all right.
We expect fair weather and foul weather, b
learned that under this system the prudent ma
ample shelter.
I think one of the most frequently misundersto
of the law is in relation to the fact that thes
really individual banks, functioning in their se
tricts according to the localization of the conditi
We had a charge made not long ago that the
serve Bank had contracted credit, and the
friends of the farmer (God bless them, how comf
are to him) were out preaching against the Fede
System for having contracted credit. I have jus
trouble to gather some figures and I find that in
City Disrtict we haven't contracted agricultural
from Jan. 31 1920 to July 1 1921 Kansi.e City ha
its agriculture and live stock paper from twentydollars to thirty million. Minneapolis had mere
period from nine and one-half millions to fort
Dallas, from four and one-half millions to thi
lions; St. Louis from three hundred thousand to t
half millions; Richmond from four hundred t
eleven millions; Atlanta from seven hundred t
fifteen millions. All of the banks of the system h
period increased their agricultural credits from
million to two hundred and thirty-four million.
So, when we know the figures we realize that,
complaint, despite the fact that the farmer does n
the Federal Reserve System has not been guilty
ing his credits. I am glad to stand as a citizen of
West to pay tribute to the enduring thing we hasthis great country, through the establishment
tern; in some fashion guaranteed by Government,
will always remain; that the currency shall be f
that the reserve shall be real, and it is because o
system that we have gone through the rigors of tl
even the greater test of the reconstruction perio
followed the war.
I thank you very much. I didn't intend to tak
time.
BANKERS' CONVENTION.
Public Health Assets
By Dr. GEORGE E. VINCENT, President of the Rockefeller Foundation.
it and Gentlemen: In the older days when a
sed a body of bankers, he always introduced
the very beginning and that epithet was one
smiles of satisfaction; you could almost hear
of contentment. That epithet was "hard. there is anything the American business man
an banker likes to be considered, it is hardhat does it mean to be hard-headed? To be
means to have the kind of cranium into which
e idea cannot be inserted when its owner is not
'o be hard-headed is to have one entrance to the
to be always on guard, examining, analyzing and
voluntarily those ideas which seem to fit into one's
of life. You like to be considered hard-headed
cy, but there is another quality that I believe is
important to every individual who acomplishes
n this world, and that is imagination.
e listened to the addresses this morning, I have
sted, as an outsider, to see the degree to which
tion has been appealed to. Mr. Lamont was apstantly to your imagination, to your imagination
anted expanded to include not only the large inhis nation, but expanded o include a vision of the
d, of which we are only an organic part, which
consider apart from the rest of this great, quiverted whole.
.sident, in that inspiring address of his, was conealing to your imagination, as American citizens,
-esponsibilties.
peal for a little while to your imaginations and to
eadedness in the interests of one of the most dismbjects that has ever presented itself to a public
I am going to talk about "Health." How we disscussion of health! We are in perfectly vigorous
What we like to do is to violate the laws of
have not the slightest doubt that almost all the
sent before me will violate the principles of per..ne at luncheon. I haven't the slightest doubt that
ake pleasure in this. We talk about the pathetic
omen in the slums who boast about the ability of
ren at three and four months to consume pickles
with apparent immunity, but after all, every hulikes to boast about the marvelous capacities of his
It is only when we become the victims of our inthat we then go to a sanitarium, where we enjoy
symptoms with other people who have been com,
isit the same place.
so much pleasure out of ill health that we don't
r about health. Moreover, it is the obvious things
-Id that tire us. All the important things are the
hugs. All the fundamental things are the things
ow all about and hence to which we give almost no
In the development of science man began with
t stars and only in recent decades has he arrived at
nd his mind. Our knowledge about ourselves is
ntary that the extraordinary condition of society
-ibuted in no small degree to our ignorance of what
ignorance of ourselves, ignorance of other'people.
't apologize, I simply have the opportunity to imyou and I am taking advantage of it. I want to
interest in behalf of this tiresome subject of pubbut you say that there is no such thing as public
ou are outstanding individuals. You don't believe
your health with anybody, but after all, there is
ea as public health.
you know you are well or not? You can't be sure
ebody has taken your temperature and then, when
is announced, you can't be sure that you are well
discover that that temperature practically coincides
temperatures of millions of people that have been
over the world. You can't tell whether you are well
until you have compared yourself with the rest of society.
"Oh, yes," you say, "you have internal evidence." Yes, to be
sure, you have what is called a symptom. You have a pain.
But if you were to discover in every individual with whom
you came in contact precisely the same pain in the same spot.
then you would know you were perfectly well, because, after
all, the standard of health is the average condition of the
community.
We have been getting new ideas of health. We began by
the idea that if you were up and around (I suppose you
have heard that expression when you asked someone in the
old days,"How are you feeling?") you were well. Of course.
now we have such interesting conversational subjects that
we no longer resort to these shameless devices, but in the
old days we used to say,"How are you feeling?" and the reply was often,"Oh, I can't complain."
What an inspiring conception of full, vigorous health that
was! Or, "I am so as to be about." There is something
stimulating and Inspiring!
The idea that the difference between health and disease is
horizontal and perpendicular or vice-versa! We can't get
very far with that, but the first idea of health is freedom
from actual limitations, freedom from pain—we are getting
a long way from that. We are going on to the next stage.
when we regard health as something which involves a sense
of full vigor, full vigor of body, and inevitably full vigor of
mind. What we are holding up (those of us who are interested in this field of public health) is an enlarged conception
of public health. Public health not only as a means of importance to the individual, but public health as fundamental
to the stability, the prosperity, the progress of a nation.
We are interested in stocks and bonds, in the material
things for which we stand. We boast about plants and machinery, but after all, the most important machinery in this
world is the machinery of that complicated mechanism
known as the human body, because inseparably associated
with this physical body is this sort of termination at the
upper end which we by courtesy call the brain and with
which we associated certain ideas, certain capacities, certain
abilities to bring things to pass. There can be no sound
thinking except among a body of people who On the whole
are in sound physical condition. I don't mean to say that
now and then an invalid can't be of very great importance.
because the history of literature, the history of art, shows
that there are exceptionally diseased individuals who have
made great contribution, but the moment you begin to generalize disease into millions you are confronted by an entirely different situation, and it is a sound and safe principle that only in a great nation which is physically sound can
you expect to develop the right spirit, the right sanity, the
right loyalty, the right coherency, to make a nation truly
strong and truly great.
Things have been accomplished in these last few decades.
They have been accomplished by two things. They have been
accomplished by medical science and medical discovery. We
know a great deal now that 50 years ago was unknown about
disease. We know that the great menace to the vast majority of individuals comes from bodily parasites that are invisible, but bodily parasites which exist just as truly as though
they could be encountered in the public streets as obstacles
to public traffic.
There are some people in this world who imagine that just
because they cannot see things with the unaided eye those
things do not exist.
There are people in this great and enlightened country of
ours—and when we talk about how great and enlightened
we are, let us not look too closely at the patent medicine advertisements in the newspapers or listen too credulously to
the constant absurdities that are floating through every community with regard to the nature of the human body and
the nature of the parasitic diseases which play upon it.
BANKING SECTION.
109
You live in communities where you exercise a good deal
If you need hard-headedness in banking business you need
of Influence. You are willing to admit it privately; you are
hard-headedness when it comes to medical facts.
Don't, I beg of you, give way to any of the absurdities of too modest to admit it in any other way. Use your imaginathe day; if you want to get the facts, appeal to those who tions for a moment. There have been pleasant things said
represent scientific authority and prestige, just as you do in to you this morning about the power which you exercise and
the responsibility which goes with it. As I have been sitting
every other department of business.
If you are engaged in looking up a bond issue with refer- here, looking on in a kind of an objectve way, I have let my
ence to a public service corporation, do you send around to imagination play with the situation. I know a good many
somebody who is interested in esthetics and who would like parts of this country, and I can imagine myself being up in a
to look at such a wonderful thing as the plant, and then balloon or an airplane and looking down upon this broad
comes back and tells you it is all right? No; you employ a land of ours to-day in this autumn sunshine. My imaginatechnically trained engineer, and you base your business tion has played with you and with the great system which
upon what that engineer tells you. Are you going to be fool- you represent. How it ramifies to every part of the country!
I can see the little banks up there in North Dakota awl in
ish enough to play fast and loose with this delicate mechanism of your body on the strength of popular magazine arti- northern Minnesota, where I used to be at home. I know the
cles, or what somebody else tells you? Use your hard-head- two banks there and how the town is pretty well divided beedness not in a specialized way but in a general way in life. tween the influence of those two banks and the two bankers.
That Is one of the great difficulties. You can be awfully How Interesting it is to interpret a community in terms o
hard-headed about one thing and absolutely gullible about the social, economic and political influences of the two banks
everything else ing,the world. Hard-headedness is a special- I even know of places where there is only one bank, but,
ized quality, and what we need very largely in this country then, of course, there is another bank over yonder that be
is the development of hard-headedness with regard to all the longs to the same group, and there is a still further ba
yonder. And then, in the large places I can see more of th
essential Intricate and technical things of life.
Until we recognize our own ignorance, and then, at least banks, and as you get toward the centres they grow thic
have the ability to pick out the technical experts whom we and thicker, and the spots that represent them grow big
can trust, our hard-headedness will be of very little service and bigger with their capital and influence; and then,
to us, for it is very likely to develop into the close-minded- they are all held together by these delicate lines which
ness, which is a very different thing, into obstinacy, ignor- resent the radiating influences which are exercised thr
ance and prejudice, which are absolutely fatal to intelligent this great system. What a marvelous system it is! It
most like health. We are so used to it that we don't
action of the Individual and wise policy in the community.
So I urge upon you the Importance of verifying medical any more about it. But if you detach yourself from it,
facts; when you hear that somebody has been given up by a marvelous thing it is! Is there anything comparabl
all the leading physicians, ask for the names of the leading in all the invention of human mechanism? Is there a
physicians, ask for their addresses, ask from medical author- comparable to this banking system, which not only p
ity whom you trust, whether this is a leading physician or in our own country, but with its ramifications and ne
not. That is the sort of thing you would do in business. If covers almost the entire globe?
How much influence you exercise! Oh, you are
anybody turned up with a check and told you that he was all
right and had a large account and would you please cash his about it, but you give advice to people; and you haN
check, you have (I think it is called good banking) princi- ence in your communities and collectively you ha
ples by which you attempt to identify him and learn some- ence. What a tremendous influence it is! There
people who are unkind enough to say that you don
thing about his probable resources.
Are you cashing cheeks for a lot of people on their own exercise it in the public interest. You have heard a
faces and saying that they know this or they know that with- but it is hard to be misunderstood. Actuated, as yo
out finding out what their standing is in the scientific and the noblest motives, you find it difficult to believe
technical world which they profess to represent? Hard- one could traduce you in this way. You have to
headedness is an admirable trait to allow to spread over all that is a test of your character; your ability to en
understanding from your fellow citizens, but you
of life when we come to deal with fundamental facts.
This progress in public health, tAen, has been brought acknowledgment of your power. If you did not b
about by a very remarkable development in scientific inves- power and if you could not exercise any of it tii,.
tigation, and in medical research. These scientific men are have, people would not be afraid of you in the slightest degong back to Pasteur as one of the great leaders, in France, gree ;. they would make the most pleasant addresses to you
and Koch, in Germany, as leaders in this great modern move- that you could possibly imagine.
Sometimes arousing a little misunderstanding on the part
ment in bacteriology, the result of which is that the parasites, the tiny microscopic parasites for the most part that of your fellow citizens is an acknowledgment on their part
are the cause of contagious diseases have been identified, of the extraordinary power you possess, but as Mr. Lamont
and means of combating them have been discovered, vac- and as your President both said, there goes with that power
cines and sera have been elaborated, and by these devices it responsibility, and I want to bring home, if I can, to each
is now possible (and it is being employed in all leading coun- one of you men in your own community first of all that you
have a responsibility for public health. What do you know
tries) to limit the spread of contagious diseases.
Every community has a fundamental responsibility for the about the health conditions of the community in which you
control of the environment and for the control of contagious live? Do you know what the death rate is; that is, how
diseases, and there has been developed another group of men, many people per thousand die each year? Do you know how
men whose business it is to apply the practical results in a that compares with other cities of the same size as your city
practical way, the results of scientific investigation. So we or of your town? Do you know how you compare as a State
with other States? Do you have the bookkeping of public
have developed public health officers.
There are in the United States a very considerable num- health in your minds? You are great on accounting. Vital
ber of these public health officers. Many of them have ex- statistics are the accounting of the public health interests of
cellent training, many of them have trained themselves be- the communities.
Do you know what the infant death rate is in your communicause they have a fundamentally sound medical education,
and through experience they have made themselves good ty? Do you know what is being done in your cothmunity? Do
you know what the characteristics and qualifications are of
public health officers.
One of the most important things that now has to be ac- the public health officers in your community? Is there a doccomplished in the United States is to make careers for men tor that gets a little extra for being a public health officer
and women who devote themselves to public health, and and who has never had any experience, who has a little pull
there we are at once confronted with the difficulty of local with somebody who has political influence? Is that the kind
of public health officer you have?
polities.
110
BANKERS' CONVENTION.
Until the natural conditions close in upon you, you may
not know what the results are, but sooner or later, unless you
put your public health activities under the right sort of control, unless you stand for these things steadfastly and courageously, you will find that the assets of your community, in
'vitality, in energy, in loyalty are being sapped, Just because
you are not using modern science, and not using the skill and
technique which are available if you have the right kind of
,perSonnel.
• I listened with much interest to the distinction which your
President drew between paternal government and the initiative of the individual. Certainly no one who has seen anything of the development in the United States can afford to
_minimize the value of individual initiative. But we must
remember that when it comes to the fundamental aspects of
public health Which involve the police power, it becomes a
overnmental function, and every community must see to it
hat up to that point, at any rate, the control of water supAy, sewage disposal and the control of contagious diseases,
s in the hands of People who are competent to manage
em.
:f you will only stand for that sort of thing in the commu- es in which you live, you will build up these ideals- in the
te. you will build up these ideals in the country, and you
help to contribute these ideals to the world movement
ublic health.
is a very interesting thing to see how much has already
accomplished. In England, the death rate has dropped
years—I saw the statistics only yesterday—from 28
musand in 1900 to 13.1 In 1921. We have made equal
,ss In this country. Of course, there are various parts
country that are so healthy that the death rate is
good, anyway. We sent a man up into one of the
rn States to see if they needed any help up there, and•
e back and said, "Don't do anything. They have a
ate so low that if anything was done, it would put it
analyzed statistics, you must remember that in the
where the average death rate is low, the people are
• engaged in agriculture or other outdoor pursuits of
sort, so you will inevitably have a lower death rate
would have if you had all the age groups reprethe normal distribution of groups through the ages
inary community.
Is important for us to remember that there is no
which can be counted upon in the rural districts.
you have come from small communities and have
lug and saying, "Oh. It is all very well to talk to
who come from towns and cities, but as for our
reg!on. we live in the country where everybody is as well as
possible."
Do you know that the statistics show that in almost every
respect during the last 20 years there has been a relatively
rapid gain in public health in the cities at the expense of the
rural communities and there are many rural communities in
this country which from the standpoint of death rate and
sickness, morbidity, the condition of children's health, are
below the corresponding slums in great cities. In the city of
New York, for example, the Public Health Administration
has been extraordinarily efficient. The infant death rate
In the city of New York has come tumbling down during the
last 30 years, and now represents one of the best figures to
be found in any large city of the world.
The Public Health Administration in this city, in the socalled "East Side," the slums district in which you would expect the very worst conditions, the public health measures
that have been adopted, infant welfare procedures that have
been followed, have shown what remarkable things can be
accomplished when a community organization secures expert
service, takes advantage of improving the knowledge of public health and then applies that concretely and effectively
with the right sort of administrative machinery.
But public health has other aspects to which I call your
attention for a moment. There has been a good deal said
about the international situation, and I am glad to say, that
while turmoil has been going on and while I didn't know
3
that you neglected your duties to the extent that you have
apparently, I have the testimony of two eminent bankers to
the effect that you have neglected your obligations to the inteepational situation. It may relieve you to know that some
of your fellow citizens, interested in public health, while you
have been deciding just what to do and in what splendid and
magnanimous and generous way you are going to show your
lit in desire to set straight the world, have been for the
last five years doing a good deal in this international field.
For example, there has been a League of Nations in Central and South America that has been engaged In eliminating yellow fever from the world and has almost succeeded.
Mexico recognized us long ago and work In yellow fever has
been .carried on there under the most favorable conditions
and with the best sort of feeling.
Public health work is being carried on by 51 nations that
are organized under the League of Nations. Far be it from
me to suggest anything about the League of Nations. I have
no knowledge about politics, or what knowledge I have takes
the form of an ignorance which I should not wish to expose
in public, but this I know: that 51 nations are banded 'to(
gether and they have a Public Health Committee, and that
Public Health Committee has a sanitary cordon stretching
along from the Baltic down toward the Caspian. to hold back
the tide of typhus and of plague that otherwise might easily
have spread through the Central Empires In to Western Europe and Great Britain itself.
This is an actual fact that has been accomplished. and I
am proud to say that there has been American contribution
of money and of personnel to the work of that committee in
order that that work which needs to be done immediately,
even while you are dec:ding what should be done economically, the typhus fever and the bubonic plague have singularly failed to wait for these conferences and other matters,
but go on Just as though they were not being held. In fact,
they remind you almost of other conferences that have been
held in Europe.
Work has been done and work is now being carried on in
the way of interchange of information. Every week I get
a
bulletin on my desk which reports the conditions of publle
health through the League of Nations Committee, the conditions of public health in Europe, very prompt reports,
prompter reports than we have ever had before, (Inc to
the
co-operation through this great international organization,
and I am glad to say that in surreptitious ways the United
States Government Public Health Service is able to co-operate in this same enterprise without committing itself definitely to any world organization. Apparently it can be done.
This ought to gratify you to know that while you are waiting there has been a little something going on.
This idea of public health on an International basis has led
to the establishment of public health centres for medical investigation. It has led to the migration of people who are
interested in public health.
Yesterday I attended a luncheon at which thirteen men
representing nine different European countries who had
come to this country to study public health conditions were
present, and who after a year will go back. That sort of
thing has been going on. There were nearly 200 of them last
year, 150 the year before. If this continues for a few years,
don't you see there will not be only bankers spread all over
the world in relations of good-will to each other, but there
will be public health sanitariums and research workers who
will in their modest way supplement your efforts to patch
this old world together again.
But I would not lay too much stress upon the international
aspects. I want to come kick, in conclusion, to the responsibility of all good American citizens for preserving the
fundamental and most important asset that we have, namely
the physical health, the sound spirit, the loyalty of the great
mass of the American people.
Fundamental public health work is absolutely essential.
It must be done in local communities. The Federal Government may co-operate in various ways, but after all, it has got
to be done in local communities, and it must be done first by
the locality organized in its political capacity to exercise po-
BANKING
lice power in the interests of public health administration,
and then by voluntary agencies of all kinds.
The American lied Cross, the National Society for the Prevention of Tuberculosis, and innumerable other voluntary
agencies that co-operate with public authorities, help to create public opinion and translate that public opinion into wise
community action, into sound State policy, into fundamental
national procedures which, combined with all that voluntary
u
effprt ought to bring about and will inevitably bring about a
sounder physical basis for the people of the United States.
A great deal has been accomplished. Industry has done a
great deal. You are familiar with the safety movement.
What wonderful things have been accomplished by the great
American industries, and now they are beg'nning to introduce what is called industrial hygiene, which means looking
after the health of the industrial population.
I was the other day in one of the greatest of these out in
Ohio, a splendid organization, one of the most inspiring that
I have ever seen, an organization in which there has not been
a strike for 20 years. an organization in wh'ch the officers
of the company and the men employed seem to be in the most
satisfactory relations of mutual good-will and mutual confidence.
When I found that they had one of the most elaborate systems of industrial hygiene that I had seen anywhere, I asked
the President to what he attributed the success of the scheme.
He answervd this.a lid it seemed tome that he showed himself
not only hard-headed, but a man of imagination: "Whenever
we take on a new man, we explain this whole health service
to him, and then we say,'We do this not because we want to
be benevolent to you: we do this not because we are patronizing you: we do this because we think it is sound business.'"
A man always went away, he said, happy.
We are always afraid somebody uses flimflamming when
there is too much profession of generosity and solicitude. I
have even been susceptible of that. When somebody is too
fond of you, you begin to have to exercise your protective
SECTION.
111
powers because you are afraid that something may come
Up.
American industry has done a great deal and is setting an
admirable example, and the time will come when en enlightened American industry will think that it is just as important to see that the industrial population is properly cared
for, properly safeguarded, as that the machinery is properly
looked after. But, vastly more than that, if we are to accomplish that solidarity, that national good-will, that common
loyalty, it must be on the basis of a wholesome fundamental
life in every connnunty and that means not only health protection, but it means positive exercise of every kind, it means
playground movements, it means the spread of athletics, it
means good housing, it means popular entertainment, it
means all the things that go to make up a full, well-rounded
life for the individual.
You are hard-headed business men and you have imaginations. I appeal to your hard-headedness to protect us against
fad. Do not accept everything that is urged upon you in.tlie
interest of public health. I am sorry to say that there,are
people in the field of public health, just as in ,every other
field who are carried away by their enthusiasm, who without
proper and careful study of the fundamental conditions are
sometimes committed to far-reach!ng programs, the economic
and social consequences of which have not been carefully
thought out. I therefore make no appeal to you to surrender
your critical faculties. Whenever a public health proposal
is presented to you. examine It carefully, look into it with solicitude, ask expert opinion about it, but when once your
hard-headedness is convinced that there is an enterprise
which ought to be undertaken, which has a distinct and definite bearing upon the health and welfare of your community,
then let your linaginaron play with it, yet your sympathies
be loosened and with generosity and with loyalty, and with
courage and conviction stand for public health as a fundamental asset of'the community, of the nation and of the
world.
Industrial and Trade Conditions
By FRED I. KENT, Chairman, Commission on Commerce and Marine.
The peoplc. af the United States of America from time to time are going
to be obliged to render decisions through their Government upon many
phases of the great problems which confront the world to-day. If proper
judgment is to he exercised, It Is going to be necessary for the people to
be able to follow contemporaneous economic history with more or less
intelligence.
The banker; In the country will naturally be called upon in the future,
as they have been in the past, to explain and interpret values of various
economic phenomena because the nature of their business naturally fits
them to understand such matters more readily than the average of the
public mind. With the hope of being able to place before the bankers a
picture of the general world conditions as they exist to-day. the Commerce
& Marine Commission of the American Bankers Association. In co-operation
with the National industrial Conference Board, has had a series of charts
prepared covering some of the principal economic movements which show
the reason for the difficulties which now stand in the way of rational living
in many countries and normal trade and commerce throughout the world.
(These charts were hung in the lobby in order thlt the hankers might
have an opportunity to study them at their le,sure, hut a few of principal
importance were reduced to lantern slides for special presentation as they
formed a base from which the economic difficulties of the moment might
be studied.)
Chart I—Money Cost of World War.
The first chart, "Money Cost of World Var." is based on the table on
page 11 of French Public Finance which was quoted by Lloyd George in his
speech at the Conference of Finance Ministers held in London on August 7
1922, where the estimated costs of the war expressed in dollars at par of
exchange for foreign currencies is placed at $223,471 million, pro-rated
among the different nations as follows:
Inaml
1914-1919.
At Par of
At Par of
Currencies.
Central Powers—
Currencies.
Ontente Allies—
$37.585 Germany
$49.362
France
14.794 All other
33.985
Italy
20.500
Russia
Total
45 944
$83.347
United Kingdom
33.456
United States
$223.471
Other active participants___.. 8.500 Grand total
Divided between the two war parties it shows that the cost to the
Powers was $53,883 million and to the Central Powers $30.162
The red lines on the chart also show how these costs were divided
the Powers including the amcunts Which each advanced In los, 66 •
nations. The total loans, If paid, would reduce the total
the point shown entirely In red. Of the Allies, the expen.
United Kingdom at par of currencies and also on the gold bal.
in total amount.
The United States stands second in actual expenditure, but In per-capita
expenditure she comes third.
if the Inter-Allied loans were all paid the war would have cost the United
Kingdom the largest sum, France next and the United States third.
The war cost the Entente Allies and the United States nearly 70% more
than it cost the Central Powers. although the Central Nwers expended
more per-capita, $215 as against $112, while the Central Powers also expended a larger part of their pre-war wealth, 25j4% as against junta shade
over 12% for the Allied Powers.
This cost does not Include the propety losses of Prance or other countries, nor the losses to England on account of her merchant shipping, due
chiefly to German submarines, which latter amounted on the 1913 price
basis to $1.300 million.
The total figures representing the cost of the war, $84.000 million,carry
very little meaning In themselves because they are so huge. Reduced to
terms of the total exports of the United States, this amount represents our
trade for the past 37 years. and in terms of the total worli trade figured one
way based on the figures of 1913, it represents the entire world commerce for
4 full years. It must be borne in mind that these figures of total trade
cover full values and not profits, and it is only from profits that savings
can be made with which the Indebtedness incurred by the war can be extinguished. Some of these expenditures were met by taxes as the war
went on as will be shown in another chart. This brings us naturally to a
consideration of the Inter-Allied Indebtedness due to the war.
Chart 2—Inter-Allied Indebtedness.
Chart 2 has been prepared to show the interlacing of the Inter-Allied
debts.
These debts aggregate at par of exchange about $25.000.000.000. 45%
$163.782
Total
of this amount is due to the United States, about 39% Is due to the United
Kingdom, about 12% Is due to France and tbout 4% is due to other naDeduct inter-Allied loans_ _ _ _ 23.658
tions. The United States and Great Britain are net creditors while Prance.
$140,124
Italy, Russia and Belgium are the principal net debtors. The greatest
Net total
she owes Great Ftfita In
The chart is prepared from these figures. but after they have been reduced debt of Prance Is to the United States although
nations has been materito pre-war price basis by dividing the cost for each country for each year three-fourths as much. Her indebtedness to other
reduced since the Armistice. Practically all of the indebtedness of
of the war by the wholesale price index number based on 1913 as 10C%. ally
The gold or pre-war cost of the war thus arrived at Is $84.045 million. of the United Kingdom is to the United States and she has also largely
112
BANKERS' CONVENTION.
paid down her indebtedness to other nations. Italy owes the most to
Great Brtitain and about three-fourths as much to the United States and
a comparatively small amount to France and other nations. The indebtedness of Russia is in great part to Great Britain although she owes France
about one-third as much.
In the table is included accrued unpaid interest which for the United
States amounts to $1,423,000,000. The figures of interest for other
countries are not separately given in their statements.
States Grain Corporation, the War Department,
Navy Department
or the American Relief Administration) arising outthethe
of
bonds or other obligations of such foreign governments in World War into
substitution
the coupons or other obligations of such government now or hereafter for
held
by the United States in such form and of such terms, conditions, date
dates of maturity and rate or rates of interest and with such security,or
if
any, as shall be deemed for the best interests of the United States; provided,
that nothing contained in this Act shall be considered
to authorize or empower the Commission to extend the time of maturity of any such bonds
or
other obligations due to the United States by any foreign government
beyond June 15 1947, or to
INTER-NATION INDEBTEDNESS IN 1922 DUE TO THE WAR OF 1914-1918 annum; provided further, thatfix the rate of interest at less than 434% per
when the bond
government has been refunded or converted or other obligation of any such
Converted into dollars at exchange parities (in dollars-000,000 omitted).
ity of the Commission over such refunded oras herein provided, the authorconverted bonds or other obliDue from
United
gation shall cease."
U. K. Other
to
Bel- Dcmzin- NaKingThe authority of the Commissioners ends at three years
United StatesFrance. dom. Italy. Russia. gium. ions. lions. Total.
from the date
Direct loans
2,934 4,136 1,648
188
347
-__
133. 9,386 of the passage of the Act, that is on February 10 1925.
Surplus war supplies
407
30
--_
138
575
Relief
_
The Members of the Commission.
5
79
84
Grain Corporation
--57
57
Secretary of the Treasury Mellon, who serves as Chairman.
Secretary of State Hughes.
Total principal
3,341 4,136 1,648
193
377
407 10,102
Interest accrued
430
611
243
Secretary of Commerce Hoover.
35
51
53 1,423
Senator Reed Smoot of Utah.
Total
3,771 4,747 1,891
228
428
'460 11,525
Representative Theodore E. Burton of Ohio.
United Kingdom
Direct loans
2,844
___ 2,450 3,190
44
732
462 9,722
Reparations.
Relief
103
103
Bank loans
This leads up naturally to the question of Reparation payments which
after all represent nothing but governmental indebtedness.
Total principal
Without
2,844
--- 2,450 3,190
44
732
585 9,825 analysis, the possible desirability of cancellation
France
of the indebtedness of
186 1,092
'73'7
--- 1,107 3,122
Other Nations
Germany for reparations might seem to apply with the same force
252
522
34808
as in
connection with the Inter-Allied indebtedness. Actually, however,the
y
Grand total
6,867 5,269 4,561 4,510 1,209
732 2,132 25,280 do not apply because the loss and suffering caused by
the devastation
wrought by Germany must be borne either by the Allied nations,
Annual Interest Payments Required for Inter-Allied Debts.
where
Estimated at 5% the total amount required to pay interest
Inter-Allied debts the devastation occurred or by the people of Germany. Cancellation of
would be $1,190 million. Of this amount there would be dueonall reparation payments would merely transfer the loss and suffering caused
to
United States
$505 million France
$155 million by the devastation from the German people to the French people and
United Kingdom
490 million Other nations
other
40 million Allies. If the devastation wrought by
German could be fully restored
Involving an increased
and due fromthrough the wave of a magic wand, the world would be better off if all
annual burden of, say.
France
$320 million
reparation payments were canceled, except such as might, be said to
10%
United Kingdom
230 million
7%
represent a proper penalty for wanton destruction. Unfortunately the
Italy
215 million
20%
Russia
conditions are such that the cost of the devastation must be met either by
225 million
Belgium
60 million
Germany or by the Allied countries in which it occurred, and, as between
11%
United Kingdom Dominions
36 million
the two, under the circumstances, there is only one choice and Gen:luny
Other nations
104 million
--must pay. Admitting this, the next element that enters into the situation
In spite of the controversies which have been carried on
in connection is the question as to how much Germany can pay, and regardless of any
with the Inter-Allied indebtedness, there would seem to be no
question but desires which may exist as to what amount should be paid, there is unquesthat there is the will to pay on the part of the principal nations
concerned tionably some certain point beyond which payment is an impossibility.
which carries with it more force than is popularly supposed
to be true. It must be admitted that it is difficult or impossible for the Allies to ascerOn the other hand, even where there is the will to pay,
a strong feeling tain what this figure may be while Germany is in her present chaotic
exists that actual payment will be extremely difficult for all
nations involved condition.
and that it will delay the satisfactory working out of the present
The morale of all of the peoples of Europe, and it might be said of the
complex
economic situation. It is admitted by all sound thinkers that
there should world, is so broken from the war strain that there is a natural disposition in
be no repudiation of the Inter-Allied loans, but there is a
growing feeling every country to feel that every other country is wrong in its attitude.
on the part of many that there should be a cancellation
of the loans in such This condition can only be corrected as greater sincerity is introduced
in
part as the war conditions, under which they were spent, would
justify.
the negotiations between nations and politics are thrown into the backThere are only a few ways in which a nation can pay or obtain
foreign ground.
exchange with which to pay a foreign debt. These may be summarized
as
Chart 3
-German Reparations.
follows:
The chart headed "German Reparations" shows in the first column
1. The surplus of the value of exported goods over inported goods.
the
claims filed with the Reparation Commission by the various
2. The sale of foreigners of foreign securities (bonds and shares)
nations, and
already in the
second column the gross amount allotted by the Commission,
in the debtor country.
proThe sale ofjewelry, works of art or other property, bank balances, &c., rated as per the Spa Agreement.
It is important in considering the question of reparations clearly
abroad by citizens of the debtor State.
to bear
The sale to citizens of foreign States, against foreign credits, of irre- in mind the fact that they do not include reimbursement for the costs of
ble property of any kind-real, personal or mixed-held within the the war.
By the terms of the Treaty of Peace signed at Versailles on
r State.
June 28 1919.
he sale of bank notes, State currency of State or municipal or cor- Germany was obligated to make reparation as follows:
To civilians for damages to person or property due to all
securities of the debtor State in foreign countries.
operations of
war by the
eight or passage money paid by foreign countries for transportation for in full. two groups of belligerents wherever arising, to be compensated
ships of the debtor country.
To prisoners of war for mlltreatment and to allied governments
for cost
et Insurance premiums or foreign exchange profits from any other of assistance to prisoners of war and dependents.
To members of the armed forces, victims of war and to their dependents,
xtended the nationals of foreign countries including expenditures
pensions capitalized on the basis of the French army scale.
To families and dependents of mobilized persons-separation allowances,
ge created by remittances from foreign countries to the nahe amount for each year to be capitalized on the basis of the French
army scale.
tonals of the debtor country.
•
9. The delivery of goods created (grown, produced, manufactured, &c.)
In additions to reparation payments proper, Germany is obliged
to pay
within the debtor country to the creditor country against merely a book
All costs under the armistice and treaty.
For food and raw materials furnished by the Allies.
credit.
For costs of the amy of occupation.
10. The creation of public or private works within the creditor country
These payments to be a charge prior to that for reparation.
by nationals of the debtor country supported by the debtor country
Reparations fall under three heads:
against book credit by the creditor country.
First: Restitution of objects removed but still in being.
11. By shipment of precious metals.
Second: Reparation in kind for property destroyed.
From a study of these items in connection with the foreign trade of the
Third: Financial restitution.
nations concerned in the Inter-Allied indebtedness, together with the
(This last is the form of restitution generally spoken of as "reparations.")
various services which they ordinarily are able to render the nations of
The determination of the amount of the cash payment to be made
was
other countries, it is easily seen that if full payment of all the Inter-Allied deferred
to May 1 1921, and was devolved upon the Reparation Commisindebtedness is to be demanded, we may find that we are asking the impossi- sion, except that Germany
was required before that date to pay 20 billion
ble which if true will tend to hold back the ecnomic recovery of all nations gold marks,
to be credited against the amount finally assessed.
for an indefinite period.
On Feb. 12 1921 the Allied Powers claiming reparations filed claims
with
The Swiss delegates at the Genoa Conference said:
the Reparation Commission aggregating about 197 billion gold
marks
"There is no hope of restoring the currencies and re-establishing the
economic well-being of Europe until the problem of international debts ($46.890 million).
In June 1920 representatives of the Allied Powers met at Spa and
has been boldly faced. . . . One country alone is purely a creditor,
agreed
namely, the United States of America. The majority are both creditors upon a percentage basis for the distribution of the gross amount to be
and debtors. Taking into account the reparation debt Insofar as payments assessed against Germany by the Reparatiorf
Commission. These perhave been made, certain countries have balances in their favor while
others have a debit balance. The most heavily charged country is Ger- centages were as follows:
many. Many American financiers and business men have realized that if France
52% I Japan
0
Portugal
22
America is again to find in Europe a customer with whom she may effect British Empire
0% 0
10 o All others
exchanges on a broad basis as in the past, the European financial situation Italy
63i 0
will have to be stabilized. This process would be greatly facilitated and Belgium
8%
Total
accelerated by the reduction or by the complete remittance of the debt
100%
owed to the United States by her war associates."
On May 6 1921 the Reparation Commission assessed the total amount to
The Swim seem to have struck the key-note of the whole situation in be paid at 132 billion gold marks ($31,416 million). When the percentages
the above sentence, "If America is again to find in Europe a customer with allowed the Allies in the Spa Agreement were applied to the reduced
total
whom she may effect exchanges on a broad basis as in the past,the European of reparations finally demanded from Germany, it resulted in an
increase
financial situation will have to be stabilized."
of 1-15 to the amount to be paid France,a decrease of 5-15 to Great Britain,
a decrease of 4-15 to Italy, and a decrease of over 5-6 of the original claim
United StatesiDebt Refunding Commission.
of all others. It must be borne in mind that these figures are only approxiThe Debt Refunding Bill was signed by the President February 10 1922. mate,as they had to be converted at varying exchange
rates, but they show
The Bill provides as follows:
the situation in principle.
"Subject to the approval of the President, the Commission is authorized
to refund or convert and to extend the time of payment of the principal or
-Germany's Obligations.
Chart 4
the interest, or both, of any obligation of any foreign government now held
by the United States or any obligation of any foreign government hereafter
The chart headed "Germany's Obligations under the Peace Treaty from
received by the United States (including obligations held by the
United Armistice to Dec. 31 1922" shows (a) the amounts required to reimburse
BANKING SECTION.
113
-Government Receipts.
Chart 8
to Germany acadvances made by the Allies, (b) the amounts chargeable
to meet the
These total expenditures by the four Governments were met with funds
of the armies of occupation, and (c) the amount required
count
bonds for the last obtained from loans and revenue, the relations between which are shown
charge for interest and sinking fund on the reparation
shows the amounts in the chart on Government receipts, which also covers the United States.
six months of 1921 and for the year 1922. The chart
unpaid and the Great Britain, France and Germany. It will be seen that promptly after
due under each head, the amounts paid, the amounts
. There entering the war the United States increased its taxation in tremendous perdeferred by permission of the Reparation Commission
amounts
but as yet un- centage in addition to the huge amounts which it borrowed. The total
is also shown for the record (the yellow line) the estimated
in ceded territories for revenue of Great Britain was raised every year from the opening of the war,
realized value of former German State properties
Commis- and its borrowing peak was reached during the war. In contrast to the
which the new owners are obligated to account to the Reparation
on reparation action of Great Britain, it will be seen that both France and Germany obsion, amounts finally received will be credited to Germany
tained their funds to carry on the war entirely from borrowing, as their
account.
31 1922 revenue decreased after the declaration of war. Since the Armistice, the
The.chart shows that out of the $3,199 million due to Dec.
payments has been revenue in France received from taxation, based on 1913 prices, has been
$2,288 million has been paid and the blue covering the
which such increasing annually in large percentages, whereas in Germany it has redivided in the blue lines below the circle to show the purposes to
materials mained practically stationary. In both the United States and Great Britpayments were put. The largest amount paid went for food and
the cost of ain there has been a reduction of the national debt and revenue has overwhich had been advanced by the Allied nations. Then comes
amounting taken borrowing, whereas in both France and Germany borrowing still
the armies of occupation, for which payments have been made
million to the continues and in large percentage through increases in the floating debts.
to $850 million, and there is still due on this account $254
on, and the
While there is no question but that the methods pursued by the United
United States. Only $414 million is available for rehabilitati
States and Great Britain in filling their war chests were vastly better for
application of all of this sum for that purpose is doubtful.
Commis- those nations than the methods of France and Germany, yet it must be
There will be no more cash payments this year, the Reparation
gold marks borne in mind that war is no respecter of economics and that practically
sion having indefinitely deferred the payment of 830 million
marks ($64 throughout the war there were in the hands of the enemy 6,000 square miles
($197 million), while the payment of a further 270 million gold
for six of the north of France,from which normally large amounts of taxes could
million) on which Belgium has a prior claim has been deferred
it is have been obtained. Before the war there came from this section 74% of
-say to February or March 1923. As to this latter amount,
months
but that the coal mined in France and 92% of the iron ore, and there was manufacunderstood that Belgium will be paid at the end of the six months,
and a tured 81% of the iron,60% of the steel, 80% of the woolen goods. and 70%
Germany has arranged with the Reichsbank, the Bank of England
in eighteen of the cotton goods produced in France.
Dutch bank to advance the amount against her notes, payable
gold.
months, the foreign banks to be secured by ear-marked Reicbsbank
-20 Countries.
-Foreign Trade
Chart 9
of 1,512
There is still due on 1922 account, payable in goods, the sum
As the difficulties of carrying on foreign trade that have developed since
payments in goods which may
million gold marks ($308 million), less any
the war have played such a tremendous part in the economic troubles of
already have been made this year but not made public.
claim Europe, and as such troubles must be worked out largely through the reFinally the Reparation Commission has the already mentioned
formerly establishment of a natural trade between the countries, no study of the presagainst the nations which received physical additionsfrom territory
in these terri- ent world economic situation can give a clear idea of the porblems involved
belonging to Germany for the value of the State properties
a realizable without a study of foreign trade. A chart has therefore been prepared of
tories. These properties are very roughly estimated to have
the world foreign trade covering twenty countries.
of 2,504 million gold marks ($596 million).
value
be carried out at
In 1913 the aggregate value of international trade as reported by the
While the rebuilding of the devastated regions should
be made to reduce United States Department of Commerce was approximately $41,392 milthe expense of Germany, yet every effort possible should
costs of the Armies lion, of which the imports were valued at $21,540 million and the exports
the total payments which Germany must make. The
this item. at $19,852 million, the difference being due to the C.I.F. valuation of imare tremendous and much saving should be made in
of Occupation
payment of reparations ports and their stricter control. For the years 1920 and 1921 complete
If a new and final plan should be agreed upon for the
actually exist, and data are available for twenty countries, the combined trade of which in
on a basis possible to meet under conditions as they
pay, there is reason to 1913 was valued at $31.593 million, representing 76.3% of the total world
Germany accepted such plan with full intent to
might be rapidly reduced trade. In 1920 the trade of these twenty countries reached a value of $55,believe that the costs of the Armies of Occupation
718 million, an increase of 70% over 1913. In 1921 it declined to $31,634
and finally eliminated.
indebtedness and million, or approximately to its pre-war value. The figures of trade for
Consideration of the cost of the war, the Inter-Allied
of the taxation which the first two or three months of 1922 show that the world is still suffering
the German reparations leads up to the vital question
which still remains from the effects of the war.
is necessary to meet that part of the cost of the war
obligations of the
A comparison by value shows that international trade in 1921 was about
unpaid and which is shown in the internal and external
Not all countries register the weight of goods imthe same as in 1913.
governments involved.
ported and exported. However, the figures available for some of the leadto warrant the conclusion that the physical volume of
United States.
-Taxationing countries appear
Chart 5.
the United trade in each of the two post-war years shown was only slightly larger than
The first chart on taxation shows the growth of taxation in
over 1920
of the Federal, one-half the volume of trade in 1913 and that the increase in 1921
States from 1913 to 1920, and also the proportionate growth
taxation was insignificant. As stated by the Department of Commerce:
State and local taxes. It will be noted that the increase in Federal
art still abnormal, being still under the shadow
"The present conditions
in State and
due to the war was almost immediately followed by an increase
A return to normal can hardly be expected until Europe
of living of the World War. the recovery will probably be slow. During the years
has recovere., and
local taxes. Such increase was caused partly by the higher cost
expenditures from 1910 to 1913 Europe furnished on the average 49.6.9', or nearly one-.
and partly from the psychological effect of huge Federal
their half, of United States imports and took 61.7%, or more than three-fifths,
which naturally induced State and local governments to increase
do not adequately
on the of United States exports. These figures for by taking 60% ofexpress the
the exports
budgets beyond what was actually necessary and without objection
to our foreign trade,
country. importance of Europe Europe enabled those countries to purchase in our
of all other countries
of the people because spending had become rife throughout the
part
s own markets. In 1920 our trade with our North American neighbors and
Before the war, taxes levied by national, State and local government
t figured to with the Far East incrused relatively much more than our trade with
amounted to $2,229 millions, in which the Federal Governmen
in our trade declined, although it has
to $8,918 Europe, and the share of•EuropeIn the nine months ended March 1922
the extent of 30.6%; by 1919-1920 the national tax bill had grown
proved somewhat since then.
with 64.3% of Federal origin. In 1920-1921 the total tax burden Europe supplied 32.7% of our imports and received 54.5% of our exports.
millions,
revenues; State and Europe is still our best customer, but our imports from European countries
fell to $8,489 millions, due to the decline of Federal
ago.
the preceding are both absolutely and relatively smaller than eight yearsour competitors.
local burdens showed, however, an increase of 12.8% over
The European market is likewise of great importance for
constitutes a very European countries took 76% of the German exports in 1913, 82.4% In-_
year. This expansion in State and local expenditures
-`
1920 and 79.6% in 1921. The trade of the United Kingdom with Russia
real danger against which this country must be on its guard.
and Germany in 1913 was valued at $1,016.491,000, representing 14.9%,
In 1921 British trade
or more than one-seventh, of the total British trade. Danzig, Germany and
-Taxes and National Income Per Capita-United States.
Chart 6.
with Russia, Finland, the Baltic Republics, Poland,
the Luxemburg was only $359,539,000. or 4.9% of the total and 30% of that
s
The next chart shows taxation in relation to national inconie also in
re-exports of foreign merchanand total trade was represented by transit goods and merchants lay so much stress
United States. The variations in both the national income
dise. These figures explain why the British
cover the period from the beginning on the economic rehabilitation of Russia."
taxation are on a per capita basis and
of the World War. While the national income has been growing, the tax
WORLD FOREIGN TRADE OF TWENTY COUNTRIES.
burden has increased much more rapidly, with the result that in the latest
in 1921; in percentages of total trade of the twenty
year taxes (national, State and local combined) represented 14.7% of the In order of importance
countries ("Commerce Reports," May 22 1922. p. 504).
national income, as compared with 6.4% in 1913-1914. In view of the fact
of exchange)
(Figures for 1920 and 1921 converted into dollars at average rate
that the bulk of governmental expenditures paid out of taxes constitute a
1913. 1921 % 1913,
1920.
1021.
-such as the main107
21.62
diversion of national funds into unproductive channels
23.60
23.08
United Kingdom
164
13.54
25.14
22.11
tenance of the military and naval establishments, interest on the war debt, United States
114
9.35
10.06
10.63
created is a serious one France
-the situation thereby
pensions, soldiers' relief, &c.
39
15.72
5.43
6.07
129
from the standpoint of national welfare, although in so far as pensions and Germany
3.55
4.39
4.57
Canada
204
2.15
4.02
relief for soldiers are concerned, it is an expense that the nation willingly Japan
4.37
96
4.37
4.45
4.17
bears.
British India
80
5.05
2.99
4.05
The value to the United States of the President's veto of the bonus bill Belgium
43
8.87
3.23
3.84
Netherlands
97
is clearly shown in this chart4
3.10
3.14
3.02
Argentina
127
2.34
1.94
2.97
Australia
10.34
11.41
s.
11.12
-Government Expenditure
Chart 7
Nine other countries
--100.00
100.00
The expenditures for which taxation has already been raised or must be
100.00
British Dominions,
levied in the future are given in the next chart, covering the United States,
129
3.55
4.39
4.57
The chart on national in- Canada
96
the United Kingdom, France and Germany.
4.37
4.45
4.17
British India
127
the part of these expenditures which still Australia
2.34
1.94
debtedness in the appendix shows
2.97
161
0.66
0.73
1.08
remain to be paid. The increase in the proportion of the total expendi- New Zealand
131
0.94
1.34
1.22
tures made necessary by the war loans shown in the "debt chafge" (that is Egypt of South Africa., 0.94
91
1.04
0.96
Union
interest on the public debt) in blue, which in all four countries practically
12.90
expenditures for civil purposes, is a real
13.81
14.93
equals the present Government
107
21.62
23.80
the United Kingdom
23.08
object lesson in the viciousness of excessive Government borrowing and
way it increases taxation. It will be noted that the present "debt charge"
34.52
37.61
38.01
British
Total
in all four countries is more than double the civil expense before the war.
the
It is interesting to note from this chart the wonderful showing of
The expenditures of France for reconstruction which she hopes to recover
United Kingdom, which in 1913 had 21.62% of the world's trade, in 1920
One
from Germany, have also nearly equalled her civil expenditures.
which wfie
States
s lies in the fact 2.3.8% and in 1921-23.08%. The trade of the United
exceptionally unfortunate phase of the German expenditure
but dropped
chart, only 1334% of the total in 1913 increased in 1920 to 25.14%
that the amounts expended under the Peace Treaty, as shown in the
to 22.11%. France also shows an increase in its proportion
of back in 1921
so far accomplished practically nothing toward meeting the costs
have
and again in
part toward of the world's trade from 9.35% in 1913 to 10.06% in 1920
reconstructing devastated regions, but have gone in such large
1921 when it was 10.63% of the total. The trade of Germany, on the
meeting the costs of the armies of occupation.
114
BANKERS' CONVENTION.
other hand, fell off from 15.72% in 1913 to 5.43% in 1920. hut increased great boom
in world trade, together with vast purchases by European
slightly In 1921 to 6 07%
The trade of the Netherlands fell off propor- countries of food
and raw material required because of the devastion of
tionately as its trade is normally made up in large part from the trade of war
until the peak of their ability to buy on credit was reached in 1919.
Germany which passes through it. Japan shows a slightly better condition Then for
a time they could only buy as they could find goods to pay for
both in 1920 and 1921.
their imports which brought the not export total down inimsdiately until
The dependence of the United States upon its foreign trade to take care the break
in commodity prices In 1920 reduced the tote, values of both
of its surplus capacity to produce and manufacture is so great that in exports
and imperts, resulting, of course. in a Trutt smaller net export
addition from the standpoint of our need to humanity. Is the very positive total.
The inertia of our export trade
such that it continued for a
need to America of the prompt restoration of the buying power of Europe. time
after 1920 in large value than our imports Meet' were Immediately
curtailed because' ref the lack of markets wh'ch develyped in this country.
Chart 10—Foreien Trade—United Slates.
This condition naturally lasted only for a shell time and the balance
of
The fleet chart on our own Foreign Trade covers that of the United States trade In favor ef
the United States immediately worked to lower levels
by grand dividions. Particular attention is called to the growing increase until now it is
back to pre-war figures.
in Imports from European countries. It is very doubtful if the people of
the United States realize the tremendous proportion of our exports which go
Chart 12—Values of European Currenries.
to Europe which is shown so clearly in the red lines under exports.
One of the principal difficulties against which foreign trade has had to
The relative importance of Europe is found to he going (lown, however, contend is the
fluctuating foreign exchanges. These fluctuations have
because of her loss of buying power and whereas 55% of our total trade was been caused by
unbieia need foreign trade and inflation. and in order to•obtain
formerly with Europe, It was In 1921 under 45%. The North American a picture of
inflatioq as it exists in Europe, a chart has been prepared in
Group, which was next In importance before the war and produced about the form of a
map of Europe in which the countries whose currencies at 75%
24% of our total trade has gone up to nearly 27%. Trade with the South or over of the mint
par are in white, those between 1% and 75% In different
American group has held unchanged at 8% of our total trade. On the other shades
of red or pink, and those under 1% in black. , Great Britain is the
hand, our Asiatic and Oceanic trade has considerably increased, going up only one
of the European countries which were at war whose currency is
from about 12% of our total trade to nearly 19%.
over 75% of par, the other countries in this class being the neutral nations
The decrease in value of exports and imports since 1920 was duo to de- of Europe with
the exception of Norway where the depreciation is a little
crease in prices as well as decrease In actual volume.
greater. Prance and Italy have controlled their currency inflation extremely well. a itheaigh their floating debt has increased to refficuit proporChart 11—Value of Exports and Imports—United States.
tions The comartee tinder I % include the Central Powers. Germany
This chart shows that since August, 1914, exports have at all times and Austred awl their allies,
together with Poland, Rumania and Russia
exceeded imports.
and the independem countries which were formerly included within the
The total value of net exports of merchandise from July. 191.1, to June, boundaries of Russia.
1922. inclusive, was about 21 billions of dollars. This amount has been paid
With these charts in mind a more comprehensive understanding of the
for by loans of the United States Government to Foreign Governments. by economic situation on Europe and the United
States, together lsith their
Importation of specie 'gold and silver) and by the so-called Invisible items— trade relatiens can be obtained from study
a
of she additionat charts (hangmoney sent home by foreigners In the United States money spent by Ameri- ing In the, lobby,.
can tourism abroad, payments for shipping on foreign vessels Ac. The
A careful analysts of the economic forces which have resulted in the conbalance which has not been paid for—the "Unfunded Balance"—has been ditions which the charts portray
carries with it the stern conviction that
roughly estimated by the Federal Reserve Board as approximately $3,400,- It Is the deity of the people of the United
States to Identity themselves with
000.000 on .fanuary 1 1922. but Professor Williams of the Harvard Economic the problems of reparations through representation
upon the Reparation
Service believes this to be too high an estimate, lie places the amount Commission, to use the trading force which they hold
Oireugh the Indebtdue on balance fur 1921 as under SI billion.
edness of the Allies to the United States, to cc-operate with foreign GovernIn this chart it is interesting to note the gener-1 parr:Mel trend which ments in helping them control the destructive forces
being exercised upon
shows as it does the tremendous force which the necessity for our exports them because of the broken morale of all peoples
that has resulted in unexercised to hula up our imports in spite dl the almost insurmountable balanced governmental budgets and inflation
that would otherwise have
difficulties with which the nations of Europe were confronted In preduning been unnecessary
and at the proper time at the request of the Allies to
a surplus for expert. This was also shown in the previeus chart. The extend such credit to Germany on a basis of
priority to reparations as
effect upon foreign trade of the crash in prices if commodities in 1920 will enable her to balance her budget,
• stop inflation and help her meet
is clearly shown though an almost perpendicular drop in exports and reparation payments. The time
for such action on the part of the United
imports during a perh d of a few months.
States has not yet arrived as It is necessary for European statesmen to
The history of the war and its effects are wonderfully shown in the por- bring their countries into better
agreement with each other and to eliminate
don of the chart envering "net exports and Imports." It first shows the the many needless sources
of friction which still exist before credits can
demand of the Allies for goods before the United States entered the war, safely be extended.
But, if the United States has the will to do its part
together with the increasing difficulty which they had In making payment when the misunderstandin
gs in Europe have been sufficiently cleared up to
for such Imports with their own exports until in spite of their necessity warrant and this
attitude is positively made known In Europe it will have
their imports from us dropped just before the United States declared war, a tremendous influence
in accelerating the development of conditions
after which there was an immediate increase In our exports made possible which will lead with
certainty to the return of normal trade between the
througa the loans which we made the Allies. After the Armistice came the nations with its many
blessings to all peoples.
COMMITTEE AND OFFICERS'REPORTS-BANKING SECTION
Annual Address of the President, Thomas P. McAdams,
Vice-President Merchants Nat, Bank, Richmond.
Mg merely selfish motives, there comes the distinct call for its to use
our
abundant resources, the strength of our isolation, and our inherent ability
to lead and inspire.
Permanent prosperty for the United States can come if this country
"It may be that Europe is not yet ready to have us participate
or to
uses her "resources In brain and money to help bring about a practical accept conditions which necessarily must be laid down as a bests
for our
solution of the chaotic situation now threatening to destroy the economic co-operation, but even so this does not relieve us of the
obligat, to offer
on
life of Europe." declared Thomas B. McAdams. President of the American to assist and so soon as possible to outline, as we see them, the
essentials
13ankers Association, speaking this morning before the general session to an ultimate solution of the situation."
of the annual convention.
These essentials. In the opinion of Mr. McAdams. must be the further
Isolation and selfishness are not qualities of the true American asserted reduction of armaments the balancing of the French budget,
realization
Mr. McAdams, anti then added: "I do not believe there Is anything by France of the unlikelihood of new German military
aggression, and
In the history or ideals of our people which can justify our failure to help the prenaration by all countries for a readjustment of
reparations and
In a situation where our counsel and assistance are so essential to tho Inter-Allied debt "upon a basis which fully recegnizes the rights
of the
restoration of world order."
creditor and which will relieve the immediate burden of the
debtor
Mr. McAdams summed up existing conditions in the world, four years countries."
after the Armistice, "while we stand Idly by. neither ,fferIng assistance
"England in discussing her indebtedness." slid Mr. McAdams.
"should
nor making a suggestion." England, he said. despite the susnicion cast not overlook the some four hundred thousand square
miles of new terupon her motives, must be regarded as a stabilizing influence "in pro- ritory she gained through the war and It must be remembered
that America
tecting the wrecks of Eureopean Statehood from further demoralization." settled upen a basis of receiving nothing except the
ultimate repayment
France cannot be blamed entirely for refusing "to assent to Germany's of money advanced.
reconstructing her world trade at the expense of French industry," de"Complicated as the situation appears, it should bo possible,
through
clared Mr. McAdams. "butt, even so, the Allied nations, If they would makine a fair analysis of assets and liabilities, to
prepare a readjusted
maintain the civilization for which they fought, must throw aside unneceee balance sheet which will prove acceptable and furnish a
proper starting
saey prejudices and reach an agreement as to modifying reparation payments point for the re-awakening of international trade.
which will fairly care for the needs of France and at the same time not
"Though often deliberate in action, we have never failed to respond
utterly demoralize the industriai life of Germany."
'
and render the maximum of service when once convinced of our duty.
After expressing the optimism he felt for the success of the November Such an opportunity is the present emergency. . . . The
determinaconference, suggested for discussion of world problems. Mr. McAdams tion of our International policy, whatever it may be. should
he based
said:
upon the broadest possible conception of service and should not be re"Has not the time arrived for the United States to cast aside her policy stricted or hamnered by party platform or political expediency."
of aloofness and throw herself whole-heartedly into the situation, that a
Speaking of the internal problems of the United ,States. Mr. McAdams
cure for social disorder and financial demoralization may be speedily declared that the two tendencies of the day which require the most
careful
devised? We may picture for ourselves all the prosperity which is in diagnosis and handling are the following:
our grasp to-day so far as our international situation Is concerned, but
Class movements--"the outgrowth of social and economic unrest,
we must realize there can be no permanence in it unless a sound foundation which tend to advance the interests of one group at the expense of the
can be laid upon which the structure of future international commerical nation as a whole."
relations may be safely built."
' Paternalism in Government—"the assumption that Government fa
Considering the case merely from the selfish point of view, said Mr. the final resting place for all the trials and tribulations of the people."
McAda me—the need for world markets for excess products of our farms
Mr. McAdams. in taking up class movements, admitted that many
and factories—' there must come a realization of the need fer our be- changes which have been made at the behest of the working men in the
coming aggressively active, rather than passively submissive. Transcend- last quarter of a century have benefited not only the men themselves
BANKING SECTION.
115
n
certain activities of the Treasury Department in connectio
his fear at certain of the tendencies • It referred
and
but employers. but he further declared
with the sale of Treasury Savings Certificates to the Trust Company
labor, lie said:
organized
;
of the day among the leaders of
incidents as the recent massacre Savings Bank Divisions
the Special Committee
"Americans will not condone such
Conf:rmed the appointment by the President of
work
were ruthlessly murdered because they dared
to be known as the Banking and Curat Herrin where men
. Consultation, of the Economic Policy Commission
ed by others. . .
In positions voluntarily surrender
e;
contrasted with commercial warfare are rency Committe
on of the
co operation. arbitration., as
Appointed a committee to outline plans for a suitable celebrati
ents,
effectively solve our industrial disagreem
means which can most
y Fiftieth Anniversary of this Association in 1925;
ative machiner
to confer with a similar
be difficult to devise a piece of administr
and it should not.
Appointed a Committee on Canadian Relations
in dispute and be clothed with the
•
which will fairly determine questions
of the Cangdian Bankers' Association: •
all people, to enforce its conclusions. committee
Secretary of
authority, based upon the interests of
Confirmed the appointment of the Secretary and Assistant
de
a local incident. but- through nation-wi
"The 4trike is no longer
should he made the Commerce and Marine Commission; to the Brazilian International
become a menace to the public welfare and
agreement has
Confirmed the appointment of delegates
people against other combinations in
subject to the laws protecting the
Industrial difficulties are not Centennial Exp.isition:
ral Credits;
restraint of trade; . . . Our present
Cord'rmed the appointment of the Committee on Agricultu
-worn fight between labor and capital as
to act as Assistant
so much Incidents In the .time
Designated Deputy-Manager Edgar E. Mouatjoy
labor, organized and unorganized."
Federal Legislation;
e on
between
employment of capital and Secretary of the Committe
ity of consolidating
Enccuragement of individual effort in the
Appointed a committee to consider the advisabil
who, while on this subject said:
to•form a central financbrains was advocated by Mr. McAdams,
the Associatian library with other financial libraries
of the
on of savings deposits by departments
York;
"The active solicitati
downtown district of New
field of private institutions ial library In the
the direction of the
Government is an encroachment upon the
Authorized the preparation and pubilcation. under
pulley. . . .
wholly out of accord with an ideal national
Policy Commission. of a booklet setting out the lundamental
a distinct service in relieving Economic
"The War Finance Corporation performed
or money and banking;
. but the permanent operation principles
to cover reserve
a temporary but mule the less acute situation
Directed that interest earned on securities, set aside
would establish
on would lie economically disastrous and
repective funds;
of such a corporati
of a Government funds. be credited to their
of the ideals
ding
e
a precedent in class legislation destructive
And approved the report of the Finance Committe recommen
August 31 1923.
of, by and for all .the people."
Ger- appropriations for the fiscal year ending
cf the French RevoIntion, Russia.
an outline. much of which
Mr. McAdams Cited tile cases
The report of the Administrative (70nunittee.
what happens when the Governwas received by the Executive conned. The Council
many and ancient Rome as illustrations of
great control of industrial has just been given,
Committee for
stifles individual initiative and assumes too
Mont
at its Spring Meeting approved the report of the
the Ctimmit tee en Memand social activities.
additional appropriations and filled a vacancy on
he said,"we have not yo gone so far as
contained In the address of
"From a national standpoint,"
to the recommendation
toward paternalism is suf- bership. Pursuant
e of twenty-five, representing all 'lasses or bankto be in imminent, danger, but the tendency
t effort to determine the l'resident. a Committe
in evidence to justify us in making an intelligen
sections of the United States, was appointed to conn.: all
ficiently
perform and how far the ing institutio
the American ['tankers
just what activities the Government should
sider the question of removing the headquarters of
oppertunity."
on and instructed to report, at a
individual shall be accorded freedom of
on, Mr. Association from New York to Washingt
and accomplishments oft. he Associati
On recommendation of the Administrative
In outlini g the history
future meeting of the Connell.
ion of bankers In all phases
and the maximum
McAdams pleaded'for more active participat
Committee, the fly-laws of the Association were amended
of their community life:
dues to Canadian banks fixed at 6250.
in American finance is the banker
increasing the membership
"The most pusillanimous figure
The ("outwit also amended the By-Laws
the recomconvictions upon a public question
of the Agrieuli twat Commission from seven to twelve: approved
who is afraid to express his honest
agree with him." said Mr.
regard to the princihe fears some depositor may not
mendation of the Special Committee on Taxation In
because
nded the
ple underlying Section 5219 U. S. Revised Statues: reetimme
McAdams.
ion as presented by
amendment to Artiele IX. Section I. of the Constitut
and disapproved the proposed amendment
e:
Administrative
Administrative theArticle X of the Committe ion.
Constitut
to
Report of Executive Council and
Committee.
These amendments and the recommendation of the Council requiring
your confirmation are not recited here for the reason that they will be brought
ent of the last convenon in regular order.
Executive Manager Shepherd: Since the adjournm
held meetings before this Conventi
Committee has
tion of this Association. your Administrative
Springs. Montreal and New
in Los Angeles, Washington, White Sulphur
of the Committee on State Taxation, by Ernest
York.
four rommis.sions. comIt confirmed the President's appointment to the
members of the Executive
mittees. Territorial Vice-Presidents and the
Council at large;
ded by the Finance
Approved the salaries and appropriations recommen
Committee:
House to hold the flex t
Accepted the invitation of the New York Clearing
convention in the City of New York;
the Protective DepartDisposed of routine business in connection with
Opinions, and the investment, interest on bank balances, Digest of Legal
ment of temporarily Idle funds;
as Executive Manager
Accepted the resignation of Guy E. Bowerman
and elected F. N. Shepherd as his successor:
various national business
Authorized the President to invite executives of
ii era of this Atanciation:
organizations to meet in conference with the off
regarding the sedurtion of
Appointed a committee to draw a resalutIon
ion to the Federal Reserve
foreign balances in figuring reserves, for presentat
Finance Committes;
Board and the Chairman of the Senate and Rouse
concerning A. B. A.
Approved the report of the Special Committee
Report
J. Perry, Chairman, President First Fond du Lac
National Bank, Fond du Lac, Wis.
Your Committee on State Taxation has the following rept irt to make:
The Virginia Bank Taxation decision has had a farreaching effect
throughout the country with reference to the taxation of all bank stock.
While the decision itself only affected the taxation of national bank stock,
the fact that there is no State that has one system of taxation for national
banks and another for State banks makes this decision of vital Importance •
to both national and State hanks alike.
Taxing conditions in many of the States are somewhat In a chaotic condition, due to the fact that there has grown up, over mu period of years, a
total disregard for Section 5219, U. S. R. S., by many State Legislatures,
who have raised the assessment of bank stock, while the assessment of"other
moneyed caplal In the hands of individual citizens" in some States has
totally disappeared, while in others the tax has become nominal.
'This inequality has been borne by the banks for many years, the taxing
in many
authorities raising assessments and rates from time to time until
to resort
States the taxes imposed became onerous, and it was necessary
Travelers Checics
relief, which came by a decision of the United States Sue with the National to the musts for
" which
Referred to the State Bank Division for conferenc
preme Court in what. is known as the "Virginia Bank Tax Deesion,
resolutian of the latter relating to branch 'banks:
national bank stock should not be called
Bank Division the
um of 10% decision made it imperative that
honorari
capital in
Voted the General Counsel and Assistant Counsel an
upon to bear a heavier burden of taxation than other moneyed
banks.
of the net profits of the Digest of Legal Opinions;
the hands of individual citizens competing with national
decision they
e Committee;
Adopted new rules of the Protectiv
When the' several State Tax Commissions learned of this
Division Edge Law Corby having introduced
Automatically assigned to the National Bank
immediately asked Congress to amend the present law
which are members of this Association;
porations
McFadden Bill. H.R. 9579, which provided that
e and Marine Com- what was known as the
Referred the bill regarding free ports to the Conunerc
as.sess national bank stock as they might elect,
necessary action to the several States could
than that imposed
mission and the Committee on Federal Legislation for
with the onty provisa that the rate should not be greater
a validating clause
bring about its enactment:
upon State banks and trust companies and also asked for
immediAnd, adopted a resolution expressing the desirability of making
and collected.
Association to validate all back taxes assessed
which bankers from
ately effective the machinery for closer contact between this
At a conference held in Washington on Feb. 6 last, at
was followed by a
and Governmental agencies.
some twenty-five different Stater: were present. wh'ch
a referendum vote taken in January, the Administrative Committee hearing before the House Committee on Banking and Currency, a counterBy
e
unanimously approved the compromise made by the Special Committe
which maintained Section 5219 subn. amendment was offered by the bangs,
Court,
on Postal Savings In regard to the proposed postal savings legislatio
as it had been construed by the deesion of the Supreme
e appointed to meet with the representa- stantially
income basis in the
The Special Protective Committe
and further provided for the taaxtion of banks upon an
of the Pinkerton National Detective Agency to ascertain the character States that had income tax laws.
tives
the
sub-committee of
of its service and Investigate the charges made by It. reported that
These amendments were under consideration by the
nt, finally recomcharges against the efficiency of our protective service were not substanti
the House from February to June, and the amendme
that no change in agency be made.
ated and recommended
and passed by the House on June 14, provided
d mended by the committee
The plan for bi-weekly conferences of the headquarters'staff as submitte
bank stock by the several States "should not be at
to that taxation of national
by the Executive Manager was approved. The proposed amendment
assessed upon other moneyed capital in the hands
is
to make loans upon a greater rate than
the Federal Reserve Act permitting national banks
of such State, coming into competition with the business
bank members of the Federal of individual citizers
a tax in lieu of a property
real estate upon the same conditions as State
of national banks," and "that in any State where
System was approved. The principle involved in Senate Bill 3531 tax is assessed upon the net income derived from such other moneyed capReserve
as
In the Federal Reserve System
relating to the membership of State banks
may in lieu of a tax on the shares imposed upon the hank
Chairman of the Banking and ital, such State
of the bank, but such tax shall
presented by letter from Senator McLean,
an income tax assessed upon the net income
e of the Senate. was approved, contingent upon its
is assessed upon the net income of such other moneyed
Currency Committe
A resolution not be greater than
with the wishes of the Federal Reserve Board.
meeting
only
ntal interference with private capital.
difference in the amendment passed by the House and the
was passed protesting against Governme
The
and Post Office Departments to
words "coming into
business and requesting the Treasury
amendment offered by the bankers was the added
advertisements and similar publicity likely to result in competition with the business of na/Umal banks," and it added a retroactive
discontinue paid
conservative banking institutions
1 1917. but only to the exthe transfer of accumulated savings from
provision legalizing back taxes levied since .lan.
of the amendto the Government.
that such taxes would be in accordance with the provision
Administrative Committee handled various tent
At Its summer meeting the
ed law.
was passed by the House and sent to the Senate,
relating to the Association;
routine business
About the time this bill
the Digest of Legal Opinions to
is known as the Kellogg
Confirmed the sale of 6,053 copies of
there was introduced by Senator Kellogg what
Thomas B. Patont
116
BANKERS' CONVENTION.
Bill, S-3695, which took the House bill as a basis and struck out the words
Payment of Stale Checks.
"in the hands of individual citi ens of such State coming into competition
,
with
At the spring meeting of the Executive Council your Committee recomthe business of national banks," and substituted the words, "employed
in mended that a draft of statute be prepared in technical form by the General
the business of banking." The Kellogg bill thus became a menace
to the Counsel, the essential feature of which is to give a bank the
option to ,refuse
banks, for it simply wrote back into the amendment in no uncertain
terms to pay a check when presented after one year from its date and that the
enactwhat the Tax Commissioners had been clamoring for, I. c., an amendment
ment of such draft be urged upon the State Legislatures through State bank
which would accord to the States the right to tax national banks as they
organizations. This recommendation was approved by the Executive Council.
might see fit, with no other proviso or safeguard except that national
banks
should not be taxed higher or at a greater rate than State banks. Your
Legal Effect of Check Certification.
committee feels that this would be absolutely no protection at all to national
A decision of the Supreme Court of Illinois rendered in October 1921 in
and State banks alike,for the reason that State banks receive their
charters National City Bank of Chicago vs. National Bank of the Republic of Chicago,
from the various States, and they can be taxed by the States in any manner
Is to the effect that under the Negotiable Instruments Act, a bank which ceror at any rate that the State may see fit, and if the Kellogg bill
should tifies a check upon which the payee's name has been erased and the name of
prevail it would be in the power of the States to pass such legislation as they
the forger inserted as payee, is responsible upon the check to a subsequent
might choose governing the taxation of State banks, and apply such
taxa- holder in due course who acquires the check through indorsement of the paytion direct to national banks.
Your committee would reiterate that it is firmly of the opinion that every ee's altered named by the forger. The effect of this decision is to place upon
bank, whether it be a State bank or a national bank, is vitally intereted in the bank which certifies a check that has been altered after issue with respect
to payee or amount or in any other particular, the responsibility to make good
maintaining the principles laid down in the Virginia Tax Decision.
The the check as altered, to a subsequent innocent purchaser. There is danger
that
banks of this Association are not looking to secure favor or benevolence
at the Negotiable Instruments Act may be construed in like manner in
the hands of Congress, but they are asking that the law governing
other
the taxa- States. To safeguard against this, banks quite generally
have adopted limited
tion of bank stock be so safeguarded that they be accorded fair and
equita- forms of certification under which the certified check is not
payable if altered
ble treatment, and not be subjected to the whims of the radical,
or the ca- in any respect since issued by the maker. In adopting
such limited form in
prices of a State Legislature.
any State consideration should be given to its possible effect upon the negoIf Section 5219 is continued substantially as it is in its presentform,
with- tiability of the check. At the spring meeting of the
Executive Council yourout the injection of any insidious amendment as proposed by the
Kellogg
bill, it will prove a safeguard to national and State banks alike, for every Committee recommended an amendment of the Negotiable Instruments Act
which would relieve banks from the risk of loss in the certification of checks
Legislature in revising its bank taxation laws must take cognizance of the
in cases covered by the Illinois decision. This recommendation was approved
Virginia Bank Tax Decision.
Your committee, therefore, urges State banks and bankers to join with by the Executive Council. A tentative form of amendment of the Negotiable
Instruments Act was at that time prepared by the General Counsel and agreed
national bankers in lending their influence, to the end that no amendment
to, but this was subject to revision and the General Counsel now has in mind
shall be made to 5219 which will not be fair and equitable, thereby
safe- a technical amendment in somewhat different form to better
accomplish the
guarding their own interests.
object desired. The recommendation of an amendment to the Negotiable InRespectfully submitted,
struments Act to safeguard banks from risk of loss in the certification of
ERNEST PERRY, Chairman.
checks placed upon them by the Illinois decision and to urge the enactment
of such an amendment by State Legislatures through State organizations as
Report of the Committee on State Legislation,
will change the rule of that decision has been adopted, and the technical form
by Craig B. Hazlewood.
of such amendment is left in the hands of the General Counsel.
To the General A. B. A. Convention, 1922.
Protection of Innocent Purchasers.
Your Committee has been active during the past year in conjunction with
At the spring meeting of the Executive Council your Committee recomthe State Legislative Council, in urging through State banking associations
in the various States wherein the Legislatures have held sessions, the enact- mended an amendment of the Negotiable Instruments Act to protect innocent
purchasers of checks and other negotiable instruments which, under the statment of bills recommended by the American Bankers Association.
The Legislatures of only 11 States have held regular sessions during 1922, utes of some of the States, as construed by their courts, are avoided where the
consideration is based on a gambling or an usurious transaction. This recomalthough there have been special sessions in a few of the States.
The A. B. A. measure punishing the issuing of checks without sufficient mendation was adopted by the Executive Council and such an amendment will
funds has been passed in a modified form in the District of Columbia and a be urged upon State Legislatures through State bankers associations. The
supplemented,statute, also in modified form, has been enacted in Mississippi. proposed amendment as drafted by General Counsel is as follows:
The A. B. A. measure authorizing the payment of deposits in two names has
Amend Section 55 of the Negotiable Instruments Act to read as follows:
been passed in Arizona as a part of a complete banking code adopted by the (New matter in italic),
Section 55. The title of a person who negotiates an instrument is defecLegislature at a special session, but limited to deposits by husband and wife.
tive within the meaning
Act when he obtained the
In South Carolina the A. B. A. measure punishing derogatory statements any signature thereto, byof this duress, or force and fear or instrument, or
fraud,
other unlawful
affecting banks, known as the Bank Slander Bill, has been passed, although means, or for an illegal consideration, or when he negotiates it in breach of
faith or under such circumstances as amount to fraud. For the purpose or
the phraseology of the law is different from the recommended bill.
determining the rights of a holder in due course or of a person who derives his
In Mississippi a law has been passed which authorizes banks to invest in title from a holder
in due course of an instrument in form negotiable
stock of Edge Law corporations, but it omits the detailed provisions con- any statute, is made void because based upon a gaming consideration which, by
or usurious transaction or for other reason, not disclosed upon its face, such instrument
tained in our Association's measure.
The new Banking Code of Arizona includes a provision relative to member. shall be deemed obtained for an illegal consideration within the meaning of this
Section and shall be enforceable by a holder in due course or a derivative from
•• ship of State banks in the Federal Reserve System and also a provision author- such holder as provided in Sections 57 and 58.
izing minors to maintain bank accounts the same as adults.
Uniform Fiduciaries Act.
Among the bills of importance which became law in Mississippi is one
At the meeting of the Executive Council on May 19 1919 the following resowhich relieves a bank from the duty of inquiry as to the power of any corporate officer or other fiduciary because of the fact that he executes a check lution, presented by the Committee on State Legislation, was unanimously
or other instrument in his representative capacity payable to himself. The adopted:
"Resolved, That the General Council of the Association be instructed to
subject of the necessary protection of banks in connection with the personal
draft and the Committee on
use of fiduciary checks is now completely covered in the new draft of Uniform In the various States where State Legislation to recommend for enactment
needed an amendment of the Negotiable InFiduciaries Act, recently approved and recommended by the Commissioners struments Act or other form of statute which will make it reasonably safe,
on Uniform State Laws. The matter of approving and recommending this for banks to receive on deposit or to pay checks drawn by officials of corporations or other fiduciar es to their personal order
Act will be taken up later in this report.
"Further, That the General Counsel endeavor to procure the recommendAnother law passed by the Legislature of Mississippi concerning which it is ation of such legislation by the Commissioners on Uniform State Laws."
In August 1919 our General Counsel presented the above resolution to the
worthy to take note is one which provides that a bank need not recognize an
adverse claimant to a bank deposit unless it is restrained by court in an ac- Committee on Scope and Program of the Commissioners on Uniform State
tion in which the depositor is party or unless such adverse claimant executes Laws at the time of their annual conference in Boston, which Commmittee
a bond of indemnity to the bank, with a proviso that the bank must recognize referred the matter to the Committee on Commercial Law of the Commissionsuch a claimant where he shows by affidavit that the depositor is a fiduciary ers to consider (1) whether legislation was necessary, and (2) if so, to draft
for him and includes facts showing reasonable cause for belief that the fidu- it and make report at the next annual conference.
The subject was given extended consideration by that committee and in
ciary is about to appropriate the deposit. It is not infrequent that banks are
placed in a dilemma, when confronted with an adverse claim to a deposit, June 1920, upon invitation of the committee, a brief for the American Bankwhether to pay the depositor or recognize the adverse claim. The common ers Association in support of a proposition for a uniform statute to regulate
the personal use of fiduciary checks was presented to the Committee and Comlaw does not sufficiently protect the bank.
A complete summary of State legislation affecting banks passed during missioners on Uniform State Laws. This brief set forth at length the various
conflicting decisions and called upon the Commissioners to remove the exist1922 has been printed and is available for reference.
ing uncertainty in the law and recommend for State enactment a uniform
Recommended Legislation.
statute which would adequately regulate the subject in the interest of cerYour Committee has recommended for uniform enactment by the Legisla- tainty of the law and in justice to all concerned. Thereafter a draft of Unitures of the different States, to be urged through the State organization of form Fiducairies Act was prepared by Professor Scott of Harvard University
and presented for the consideration of the Commissioners on Uniform State
bankers, legislation as follows:
Laws at their annual conference in 1921. This draft was recommitted to the
Time Limit on Stop Payments.
Committee on Commercial Law, and after a year's further consideration the
draft was presented to the Commissioners at their annual conference in
The Legislature of Oregon in 1921 passed an Act (Chap. 37, Laws of 1921) final
this year and approved and recommended for State enactment. The
fixing a 90-day time limit upon stop payment of checks unless renewed. The August of
object of the Uniform Fiduciaries Act thus recommended is, as stated in the
full text of the law is as follows:
report of the Committee_ on Commercial Law,"to relieve persons dealing with
An act, fixing limitations on revocations, countermands and payments and
stop-payment orders relating to the payment of any check or draft against bank a fiduciary from the heavy responsibility of a constructive burden of inquiry
into the good faith of the fiduciary. In practice such inquiries are impossible
accounts.
Be it enacted by the people of the State of Oregon:
in the ordinary course of banking and commercial transactions; and there is
Section 1. No revocation,countermand or stop-payment order relating to involved a risk which should be eliminated, except in cases of knowledge of
y
the pament of any check or draft against an account of a depositor in any
remain in effect for more than ninety days after the service thereof fraud or personal advantage to the payee or recipient."
bank
Your Committee on State Legislation recommends the approval by the
on the bank, unless the same be renewed, which renewals shall be in writing,
and which renewals shall be in effect for not more than ninety days from American Bankers Association of the Uniform Fiduciaries Act as drafted and:
date of service thereof on the bank, but such renewals may be made from recommended by the Commissioners on Uniform State Laws and that its entime to time.
Section 2. All notices affecting checks upon which revocation, counter- actment be urged upon State Legislatures through the State bankers associamand or stop-payment order have been made at the time of the taking effect tions in the different States.
of this act shall not be deemed to continue for a period of more than ninety
Adverse Claim to Bank Deposit.
days thereafter.
Your Committee would also recommend, for uniform State enactment, theAt the spring meeting of the Executive Council, May 12 1922, your Committee recommended this law for uniform State enactment, and such recom- law passed by the Legislature of Mississippi at its recent session, relative b.,
mendation was approved by the Executive Council.
adverse claims to bank deposit. This law provides:
BANKING SECTION.
117
1 1922, the Revised StatNational Bank *Charters. By Act approved July
n a national bank is
utes were amended so that instead of a 20-year limitatio 1922, or from the
July 1
given power "to have succession until 99 years from
1 1922, unless it shall be
date of its organization if organized after July
two-thirds of its stock, or
sooner dissolved by act of its shareholders owning
of violation of law, or
unless its franchise shall become forfeited by reason
hereafter enacted." The law
unless it shall be terminated by Act of Congress
extension acts are repealed.
applies to all existing national banks and prior
progress of this legislation,
Our Committee was active in the promotion and
for unlimited charters
seeking, however, to have the law amended to provide
the best that could
of national banks. The 99-year limitation was, however,
be procured.
approved June 3 1922 the
Membership of Federal Reserve Board. By Act
is increased from 7 to 8,
number of members of the Federal Reserve Board
instead of five appointed
the Board now consisting of two ex-officio and six
ation of the fi, to be selected with due regard "to a fair represent geographical
members
interests and
nancial, agricultural, industrial and commercial
simply for a representadivisions of the country." The former law provided
geographical divisions of the
tion of the different commercial, industrial and
was, therefore, specificcountry. Financial and agricultural representation
that "at least two shall
ally added, while the requirement of the former law
is omitted. The new law conbe persons experienced in banking and finance"
of authority to contract
tains a provision depriving a Federal Reserve Bank
without previous consent
for the erection of a building in excess of $250,000
require.
to the mem- of Congress by excluding buildings now under construction from the applicaSubsequent to the spring meeting, a questionnaire was issued
during the progress of this legise Council in all the States designed to bring out the ac- tion of the law. Our Committee was active
bers of the Executiv
ons in the different lation, and especially in opposition to an amendment, which was at one time
tual conditions with respect to building and loan associati
commissions allowed proposed in the Senate, to require the President to appoint a farmer to the
States. This questionnaire made specific inquiries as to
charters were as diffi- first vacancy on the Federal Reserve Board.
to promoters of building and loan associations; whether
the President approved
any, reserves were reEquality of Rediscount Privileges. On July 1 1922
cult to obtain as charters for savings banks; what, if
required against a bill amending the provision of Paragraph 10 of Section 9 of the Federal Reagainst deposits, and a comparison with the reserves
quired
to become share- serve Act so as to provide that no Federal Reserve Bank shall be permitted to
deposits in savings banks; whether depositors were required
money on mortgage discount for any State bank or trust company paper of any one borrower who
holders; whether such associations were permitted to loan
office; whether the oper- is liable for borrowed money to such institution in an amount greater than
upon lands more than 50 miles away from the home
or by could be borrowed lawfully from such State bank or trust company were it a
ons were governed by the State banking laws
ations of such associati
any, power of regulation national bank. This is designed to place State bank members on an equality
special building and loan association laws; what, if
as to the respective rates with national bank members with respect to rediscount privileges, which
and control %yap vested in the Bank Superintendent;
associations and by savings equality was not provided in all cases under the former law as interpreted.
of interest paid to depositors by building and loan
associations and stock savings Our Committee was active in promoting the passage of this law in the interbanks and the respective dividends paid by such
associations are virtually est of our State bank members in the Federal Reserve System.
banks; in what States deposits in building and loan
July 1 1921 the Secredemand accounts; the exGovernment Aid to Agriculture. By act approved
payable on demand; in what States they advertise such associations and by
l Government deposits
estate by
tary of the Treasury was authorized to make additiona
tent that deposits can be loaned on real
and
capital of the 12 banks
any State are permitted to
in Federal Land banks until such time as the paid-in
savings banks; whether such associations in
as to localities should be $50,000,000 or more, the amount of such deposits not to exceed the
; information
do issue certificates of deposit for large amounts
associations for the successful difference between the aggregate paid-in capital and the sum of $50,in which there are'too many building and loan
on in any State is pending or contem- 000,000.
operation of all; whether State legislati
Land banks up to
ons an unfair advantage
By Act approved Aug. 13 1921 bond issue of the Federal
plated that would give building and loan associati the present laws of the
Act approved Aug. 24
2
/
June 30 1923 may bear 51 instead of 5% interest. By
savings banks; a request for opinions whether
over
and loan associations to 1921 the powers of the War Finance Corporation were extended to afford adState should be changed so as to restrict building
ral products. Printed
prevent abuses.
ditional relief to producers and dealers in agricultu
their proper functions, safeguard the people and
from about two-thirds
s of this law. By Act apA considerable number of replies have been received and showing varying Digest No. 1 is referred to for detailed provision
ion to make adion
proved June 10 1922 the powers of the 1Var Finance Corporat
of the States which convey much valuable informat
to and including May
and suggestions received
vances and purchases of paper were further extended up
conditions. These replies with recommendations
to this report.
Jan.31 1926. By
from different States have been digested and are appended building and loan 31 1923, and its power to issue notes or bonds was extended to
15 1922, Federal farm loans were authorized on farm lands
In a considerable number of States it would seem that
n Act approved May
ent
no further regulatio
conditions are satisfactory to the banking interests and
United States reclamation projects notwithstanding the Governm
call for correction. under
are otherwise
is required. In some of the States there are abuses which
has a lien for construction or other charges, provided such lands
problem is one which calls for local eligible for loans and the amount and date of maturity of the Government's
The conclusion seems to follow that the
dation can be made
for loan
regulation in particular States and no general recommen
be given due consideration in fixing the value,of such hinds
d that the matter lien shall
g
which will apply to all the States. It is, therefore, suggeste
Act approved Feb. 18 1922, farmers' co-operative marketin
on, working in co- purposes. By
be continued in charge of the Committee on State Legislati
associations were authorized.
y of the
es as may be interested, with
Secretar
operation with such Divisions and committe
Foreign Depositories. By Act approved June 19 1922, the
as the local situamoneys in forpower to make such recommendation for particular States
Treasury is given authority to designate depositories of public
on, of the Government's business,
transacti
tion may call for.
work- eign countries, necessary for the
Committee the
e
The data received would suggest to the minds of our
ns which he may prescribe and must give preferenc
g lines, which, how- under terms and conditio
the institution is
ing out of reforms in particular States along the followin
to American financial institutions wherever in his judgment
to facilitate
not as final, recommendations.
ever, are only presented as tentative, and
the service required. This Act is intended
the particular needs' safe and able to render
The following recommendations are suggested to fit
the operation of Edge Law corporations.
l hi having a number
of the States affected:
Revenue Act of 1921. Your Committee was successfu
s.
under
1. Forbid employment of'promoters and professional organizer
s included in the Revenue Act of 1921. Working
manner as now exists for of beneficial provision
an important amend2. Restrict the granting of charters in the same
its auspices, representatives of the Association secured
9
of stock, are perbanks.
paid taxes upon their shares
not
savings, are accepted ment by which banks, which
3. Where demand deposits, whether styled demand or
paid in computing Federal income where
as is exacted of mitted to deduct the amount so
n was never heretofore allowed
general public, similar reserves should be required
from the
reimbursed by the shareholder. This deductio
the saving of millions of dollars to
banks.
on by the Treasury Department, and it means
4. Draw a sharp distinction between a true building and loan associati
of the country.
ordinary savings bank. The latter is not en- the banks
procured in the new Revenue
and one using methods Of an
The insertion of a number of provisions was
accordingly.
. Among these are (1) pertitled to tax exemption and should be forbidden to advertise
Bill of special benefit to trust company members
ty
5. Restrict loans on real estate to a radius of 50 miles.
deduct from gross income gifts to communi
over banks. Give mission to an individual to
char6. Insure equally effective supervision as is now exercised
e or individual trustees for the benefit of specified
worthless
discretionary powers to regulate and trusts and to corporat
for deduction of
the Department Officer in charge broad
itable beneficiaries; (2) extension of provision
debts; (3) limitations of time of
control associations under penalty of revocation of charter.
, high debts to include partial write-off of worthless
7. False and misleading advertisements in regard to demand accounts
estates tax where amended return is
liability of fiduciaries under income and
rates of interest, etc., should be forbidden by law.
called for after settlement of an estate.
opposition to a proviOur Committee were active but unsuccessful in their
which as finally adopted exempts from
Report of the Committee on Federal Legislation, sion inserted in the new Revenue Bill and loan associations. Many of these
taxation $300 of income from building
is class legislation
Mr. A. E. Adams, Chairman.
institutions compete with savings banks and the exemption
exGentlemen: The activities of a most vicious type and unsound in principle. A bill to remove this
Mr.A.E. Adams: Mr.Chairman, Ladies and
n (IL R.
varied.
emption has been drafted and introduced by Congressman McFadde
of the Committee on Fedeal Legislation have beenlmany and
Our CommitFederal Leg- 9950) and is now in the House Committee on Ways and Means.
Pursuant to the By-Laws of the Association, the Committee on
pending in the tee have made repeated attempts to procure a hearing on this bill, but so far
islation has had in charge all subjects of Federal legislation
Association, and without success. Since this law was passed, the Federal District Court in
•67th Congress which have been favored or opposed by the
Association and Ohio has decided it only applies to building and loan associations that are
has kept close watch of all bills affecting or of interest to the
of the Fed- mutual in character. The court said: "It may not be possible to define preits members. A close working touch has been kept with members
of the cisely how far a building association may go in extraneous activities without
by telegrams and letters and the activities
eral Legislative Council
subappearance before Congres- losing its essential character; but it seems clear that when it ceases to be
Committee and Council have included personal
arguments and plans to indi- stantially mutual and adopts as its chief business dealing for profit with the
sional committees as well as the presentation of
it is no longer a
That portion of our member- general public by the methods of an ordinary savings bank,
vidual members of Congress by mail and wire.
been kept informed of building and loan association entitled to be exempted from income taxation
ship especially interested in Federal legislation have
indirectly affecting banks by under the statute in question."
the progress of all Federal legislation direitly or
the
which digests (Numbers
Time will not be taken to specify other subjects of laws passed during
the publication from time to time of prinfed digests,
digest of allselese
67th Congress which are of interest to banks, as a complete
1, 2 and 3) are attached to this report as exhibits.
may be especially interested.
subjects is available for any who
Bills Passed.
Bills Pending.
law in which
in detail all bills which have become
The printed digests show
The second session of the 67th Congress adjourned Sept. 22. A brief resume
Only a few will be alluded
bankers have a more or less direct interest.
of some of the more important pending bills which affect the
of the subjects
to in this report.
a
deposit standing
recognize said adverse claimant uoless said adverse
to cause said bank to
restraining order, injunction or other apclaimant shall also either procure afrom a court ofcompetent jurisdiction in a
propriate process against said bank
wherein the person to whose credit the deposit
cause therein instituted by him
, or shall execute to said
stands is made a party and served with summons bond, indemnifying said
to it a
bank, in form and with surities scceptable
loss, damage, costs, and expenses for and
bank from any and all liability, adverse claim or the dishonor of the check
on account of the payment ofsuch
deposit stands on the books
or other order of the person to whose credit the not apply in any instance
Section shall
of said bank; provided, that this the deposit stands is a fiduciary for such
the person to whose credit
where
relationship, as also the
adv.eTse claimant, and the facts constituting such of said claimant that the
the
facts showing reasonable cause of belief on saidpart
deposit, are made to appear
fiduciary is about to misappropriate
said
by the affidavit of such claimant."
Building and Loan Associations.
Executive Council
Your Committee reported at the spring meeting of the
was undertaking the
that in conjunction with the State Legislative Council, it
s of building
investigation of the laws governing and regulating the activitie
of ascertaining the
and loan associations in the various States for the purpose
as mutual institutions
extent to which they depart from their true functions
same methods as
for home building and engage in business for profit by the
e legislation may be
ordinary savings banks, to the end that such correctiv
as the situation may
framed and recommended and such other measures taken
doing business in this State of
pw "Notice to any bankbooks to the credit ofany personan adverse claim to
shall not be effectual
on its
118
BANKERS' CONVENTION.
banking interests is all that will be given in this report. For more
complete
Consolidation of National and State Banks. H. R. 10,878. Mr. McFadden.
,
Information, reference is made to the printed digests.
of Pennsylvania, March 13 1922 (reintroduction of H. R. report with alteraBranches of National Banks. Nine bills have thus far been introduced
in tions). This bill makes minor changes in the law relating to consolidation of
the 67th Congress on this subject, but none have advanced out of committee.
national banks with each other and also provides for consolidation of State
Some of these bills authorize the establishing of branches with specified
limi- institutions with national banks located in the same place in the same manner
tations and seine prohibit branches. A group of four bills were
introduced as is provided for the consolidation of national banks. The detailed proviearly in the session, namely in April and May 1921, by representativ
es from sions of the bill will be found in Digest No. 1. It has not yet been reported.
New Jersey, Pennsylvania and New York, all having for their
object the auSavings Departments of National Banks. Identical bills were introduced in
thorizing of branches of national banks; then, after an interval
of a year and the House by Mr. Elston of California (II. R. 176, April 11 1921) and by
a quarter, representatives from Missouri and Kansas in August and
September Senator Calder of New York (S. 1836, May 17 1921) authorizing savings deof this year introduced bills prohibiting branches, while the
representative partments of national banks with apportionment of capital and surplus and
from Pennsylvania, Mr. McFadden, introduced a further authorizing
bill. The segregation of assets. These bills have remained in the respective Commitfollowing is a brief synopsis of the bills introduced:
tees on Banking and Currency and have not been reported. A similar bill in
S. 93. Senator Frelinghuysen of New Jersey, April 12 1921, would
author- the 66ht Congress was opposed by the American Bankers Association.
ize branches of national banks in cities, dependent upon population,
maximum
Safe Deposit and Other Stock. Identical bills were introduced in the Sennumber 12, with increased capital for each branch.
ate and house by Senator Wadsworth of New York (S. 2653, Nov. 1 1921)
H. R. 6257. Mr. McFadden of Pennsylvania, May 16 1921, a similar
bill and by Mr. McFadden of Pennsylvania (H. It. 9403, Dec. 9 1921) authorizing
in substance to S. 93 except that number of branches net dependent upon
pop- national banks to purchase stock of safe deposit companies doing business on
ulation and branches not limited to cities. Requires approval
of Comptroller the premises. A further provision of this bill requires a national bank which
of Currency and Secretary of Treasury and vote of two-thirds of capital
stock. acquires corporate stock in satisfaction of debt previous!) contracted to dis,
It only applies to States which authorize branches of State banks.
When a pose of it as soon as it can be sold at a price equal to the amount of the debt,
State bank with branches converts into a national bank, it requires
specified the stock in no event to be held longer than two years. Our Association is
capital for each branch.
in favor of these bills in the main, but concerning the stock provision it apS. 1835. Senator Calder of New York, May 17 1921, authorizes,
subject to pears to be inadvisable to set a two-year limit at the end of which a national
approval of Federal Reserve Board, branches of national banks in cities
where bank must dispose of the acquired stock. This point has been called to the
State institutions may lawfully have branches where capital of
the parent attention of those in charge of the bills. They have not yet been reported.
bank is at least equal to that required if branch was an independent
bank.
Qualifications of National Bank Directors. A bill introduced by Senator
H. It. 6419. Mr. Fairchild of New York, May 21 1921, permits member
Nelson of Minnesota, April 13 1921 (S. 658) amends Section 5146 Revised
banks in cities where State institutions are authorized to have branches,
to Statutes relative to the qualifications of the directors of national banks so as
have not over 10 branches subject to rules of Federal Reserve
Board.
to require that four-fifths, instead of three-quarters, of the directors must
H. It. 12,415. Mr. McFadden of Pennsylvania, Aug. 23 1921, empowers have
resided in the State in which the association is located for one year conComptroller of Currency to authorize branches, offices or agencies where
State tinuously immediately preceding their election and must be residents therein
institutions are permitted so to do and not elsewhere.
during their continuance in office. The bill strikes cut the provision which
Further empowers Comptroller to authorize a national bank to do
all things mould enable a director to hold office if he resides within 50 miles of the locaand acts permitted to be done by State banks and trust companies
necessary tion of the bank, although his residence may be outside the State. The bill
to meet competition, except such as are specifically prohibited by National also
increases the requirement of stock ownership where the capital is over
Bank Act; further permits national banks to continue existing branches,
of- $50,000 by requiring the director to own 15 shares, where the capital is befices or agencies.
tween $50,000 and $75,000, 20 shares, where between $75,000 and $100,000,
S. 3941. Senator Capper of Kansas, Aug. 24 1922.
and 10 additional shares for each additional $100,000 of stock. This bill is
II. R. 12,414. Mr. Dyer of Missouri, Aug. 23 1922.
objectionable to the banks. It has not been reported.
S. 3981. Senator Reed of Missouri, Aug. 23 1922. These are identical
State Taxation of Vatzonal Banks. The various bills relating to this subject
bills
prohibiting national banks from having branches where State banks have
no are set forth in the printed digests. A special committee of the Association
express power to establish branches. Existing branches of national
banks in was appointed by President McAdams to oppose the efforts of tax commissionsuch States must be discontinued in 30 days under penalty of forfeiture
of ers of certain States to procure an amendment of Section 5219 Revised Statcharter.
utes so as to permit the States to tax national banks in any way they pleased
H. It. 12.528. Mr. Millspaugh of Missouri, Aug. 31 1922, prohibits member provided only
State banks were equally taxed. Our Committee on Federal
banks of Federal Reserve System from establishing or operating
branches, Legislation has co-operated with the Special Committee on Taxation of Nabranch offices or branch places of business. Permits continuance of branches tional
Banks and will leave to that committee the making of a report on the
established prior to July 1 1922.
subject.
Qualifying Oaths of National Bank Directors. Companion bills have
Federal Reserve System. It will be impracticable within the limits of this
been
introduced in House and Senate (II. R. 12,236) by Mr. McFadden of
report to recount all the various bills which have been introduced relating to
Pennsylvania, June 30 1922 ; S. 3840, Mr. McLean of Connecticut. July 18 1922, the Federal
Reserve System, the Federal Reserve banks or to member banks.
which provide that the qualifying oath of a director of a national bank
shall These bills include the subject of "division of earnings," "paper eligible for
not be taken before a notary or other officer who is an officer of
the bank. rediscount," "discount rates" and a variety of other topics, to which reference
The McLean bill passed the Senate Aug. 4 1922 and was referred to the
House will have to be made to the printed digests which are attached to this report.
Committee on Banking and Currency Aug. 16 1922.
Specific mention may be made of a bill introduced by Mr. Luce
of MassachuReports of National Ban!s. A bill was introduced in the House on Nov.
3 setts (H. R. 6040, May 10 1921) to enable member banks, in figuring their
1921 by Mr. Lawrence of Missouri (II. It. 8996) which amends Section
5211 reserves to include amounts due from foreign banks in foreign currency, subRevised Statutes by providing that national banks shall make to the
Comp- ject to regulation of the Federal Reserve Board. This bill, if enacted, would
troller of the Currency not less than three, instead of five, reports during each remove a serious
impediment to foreign trade and it has been urged by our
year. This bill passed the House June 3 1922 and was reported to the Sen- Committee, but
has not been reported. A bill has also been introduced by
ate by it. Banking and Currency Committee Sept. 16 1922.
Senator Harris of Georgia (S. 3531, May 1 1922) which
would allow State
Interest and Usury. A number of bills relating to interest charges and pen- banks having a capital
in excess of $15,000 to become members of the Fedalty for usury by national banks have been introduced in the 67th Congress. eral Reserve System
where the capital is at least 60% of the amount required
A bill by Mr. Blanton of Texas (II. It. 225, April 11 1921) substitutes for the to become a national bank,
with a specified annual increase until the capital
penalty for usury now provided by Section 5198 United States Revised Stat- required under the present
law is reached. This bill passed tire Senate or:
utes (I. e. forfeiture of interest and the recovery of double the interest paid) July 8 1922. with an
amendment giving the Federal Reserve Board the authe penalty which is prescribed by the laws of the State where the bank is lo- thority to fix the time within
and the method by which the capital shall becated; or if the State has no usurious rate a bank loaning in excess of 7% shall increased with a proviso that the
bank must set aside each year at least 20%
forfeit all interest ; the guilty bank officer also to be imprisoned not exceed- of its net income for each preceding
year. This bill is now in the House Coming one year. This bill also permits a minimum charge of $2 50 on small mittee on Banking and Currency.
loans. This bill has been opposed by the American Bankers Association and
Uniform National Bank Notes. A bill was introduced by Senator
King of
has not been reported. Further bills which would provide maximum rates of Utah in May 1921 (S. 1833)
to provide for the redemption of the existing
interest have been introduced by Senator Harrison of Mississippi (S. 553, circulating notes and for the issuance in
their stead of circulating notes which
April 12 1921) fixing 6% on loans and 7.3% on discounts and overdrafts; "shall not bear the name, charter number,
or any other distinguishing mark
and by Mr. afeSwain of South Carolina (H. R. 8841, Oct. 25 1921) fixing 5% indicating the bank to which they may be issued."
This bill has the support
as the maximum rate for Federal Reserve banks and 8% for member banks. of the Association, but it has not yet been
reported by the Senate Committee
A bill was also introduced early in the session by Senator Owen of Oklahoma on Banking and Currency.
(S. 510, April 12 1921) which would amend the Federal Reserve Act by limBonus. At the Los Angeles Convention, the Association adopted
the foliting the rate of interest chargeable by member banks on call loans to 6%. lowing resolution:
Senator King of Utah, in a bill introduced Aug. 3 1921 (S. 2350) would pro"Economy in government demands the elimination of all
unnecessary
hibit Federal Reserve banks from rediscounting paper for any bank guilty
of expenditure which would further increase our national debt or
Usury under penalty of fine and imprisonment of the guilty officer. More re- of taxation. We are, therefore, opposed to the Soldiers' Bonus the burden
bill, which
would provide compensation without regard to disability. For
cent bills on the same subject have been introduced by Senator Capper
our soldof Kan- iers who are disabled as a result of the war, we urge the
fullest compensation
sas (S. 3512, April 25 1922) which would prohibit a national bank
in any and care on the part of the Government."
State where there is a Depositor's Guaranty Fund, from allowing
The Fordney Bonus Bill (II. It. 10,874) was vetoed by the President
interest on
on
deposits greater than that allowed to be paid by State banks; and
a further Sept. 19 1922 and on Sept. 20 the veto was over-ridden by the house but susbill by Senator King of Utah (S. 4002, Sept. 16 1922) which
would prohibit tained by the Senate.
rediscount by. Federal Reserve banks of paper for member
Tax Exemption of Securities. At the Los Angeles Convention .in
banks unless ac1921 the
companied by a certificate of a member bank showing both
the rate of dis- following resolution was adopted:
count and rate of commission does not exceed by more than
2% the discount
"A question of great importance in the economic and financial life of
rate of the Federal Reserve bank. None of these bills have
our country has arisen through the continued creation of new tax exempbeen reported.
Guaranty of Deposits. A bill was introduced early in the
tions and tax exempt securities,
session by Mr. and to lessen the initiative of which tend to remove capital from industry
investors. No further tax esemptions should
McClintic of Oklahoma (H. It. 2174, April 11 1921) which
provides for the be authorized and no further tax exempt securities should
be Issued by
creation of a National Depositor's Guaranty Fund in each
Federal Reserve the Federal Government or by the States, municipalities_ or quasi-public
District to be used for the protection of non-interest-beari
ng deposits in na- corporations."
tional banks, and to be supervised by the Comptroller of
A number of resolutions have been introduced in the House and Serrate prothe Currency, whenever the national banks in any district vote for the creation
of such a fund. posing amendments to the Federal Constitution which, while differing in
This bill has been opposed by the American Bankers Association
and has never form, have each the object of precluding the further issuance of tax-exempt
been reported. The same bill was reintroduced by Mr.
Smith of Idaho on securities by public bodies. In a formal communication to the Chairman of
Sept. 15 1922 (II. R. 12.659).
the House Ways and Means Committee, the Association has placed itself on
Embezzlement by National Bank Examiners. On Dec. 9 1921 Mr. McFad- record as approving the principle underlying these measures,
as declared in the
den introduced a bill (H. R. 9409) which would amend Section 5209
Revised resolution adopted at the Los Angeles Convention, without committing itself
Statutes by punishing embezzlement, misapplication, etc., by national bank to any particular form.
examiners and their assistants. This bill passed the House
Fraudulent Securities, Our Association has co-operated with the Investon June 7 1922
and was referred to the Senate Committee on
Banking and Currency ment Bankers Asscciation in supporting the bill introduced by Mr. Denison
on June 8.
to supplement existing Blue Sky laws and to provide for Federal co-ouaratis.
BANKING SECTION.
119
that the-Inand with your permission. I will read them. I want to show
stitute is serious minded.
the power
Whereas. In a democracy such as ours, where the people control
be based
of rule, where public opinion dctninates and where. If public opinion
principles, disaster
weir' falacious and unsound conceptions of economic
democracy will flow only in so
surely follows, and where the blessings of a
and cultured
far as Its government represents the rule of the intelligent
prople,
that there is a definite
Be It Resolved. That we as citizens take the position
of the immutaand vital need of appreciation on the part of our citizenship
the adopble fact that economic laws will in the end have their effect, that
development
tion of punitive or arbitrary methods will in reality retard
are opposed to class group
and contribute to waste. That we as citizens
an economic
interest or sectional d mends. Fut hermore. that the world is
and pledge
unity, that we stand four square for economic statesmanship
comprehenourselves individually to co-operate to bring about a broad
country nor any other can
sion on tte part of the people that neither this
of its citizenbe safe in the hands of democracies unless the great majority
proteems.
ship is capable of giving intelligent consideration to economic
of the
The whole scheme of progress is based upon the development
the task of living a life.
Individual and the application of his powers to
the broadBe It Resolved, 7'herefore, That as an organizatin we stand for
thinking In the
est possible study of economics In our classes, for straight
the wealth
public forum, for the full appreciation of Ruskin's view—"that
but by the
of a country Is not to be measured by the material possessiors
powers and qualities of its inhabitants."
Association,
.
President McAdams This child of the American Bankers
If we
born twenty-two years ago. Is Indeed a credit to the organization.
Institute, the A. B. A. would
had never done anything else but create the
tine past year
have been worth while. When we stop to realize that during
has either gradupractically one out of every six members of the Institute
what an effective
ated or secured an elementary certificate, we may realize
among the bank
factor it is becoming in creating sound, economic thought
employees of the country.
Agenwith the States in suppressing the use of Federal Interstate Commerce
The original Denicies in the promotion of the sale of fraudulent securities.
The original Benison Bill (IL It. 7215) was not favored by our Committee.
time was
practicable restrictions upon legitimate business, and support for a
7868), which provides for the appointment
given to the Volstead Bill (II. R.
duty it would
by each Federal Reserve Bank of a Securities Committee whose
within the disbe to keep informed of the securities sold or offered for sale
later a new
trict and report fraudulent practice to the Attorney-General. But
of reguDenison Bill was framed and is being supported as the best method
to the
lating the subject. This bill (II. R. 10,598) was favorab'y reported
Foreign ComHouse on March 2 1922 by the Committee on Interstate and
Commerce and passed the House on April 28. The bill is still in the Senate
mittee on Interstate Commerce to which it was referred.
Congressman McFadden of Pennsylvania introduced a furOn Sept. 14 1922
in the
ther bill (II. R. 12.649) prohibiting the misuse of the word "Federal"
advertising. as Federal Farm Loan bonds, of bonds not issued under the Farm
in advertising or ofLoan System, and also prohibiting the use of that word
fering for sale any securities not issued by the Government or under the provisions of some Act of Congress; further prohibiting the unauthorized use of
the words "Federal" and "reserve" as part of the business name of persons
engaged in the "banking, loan, building and loan, brokerage. factorage, insurance, indemnity or trust business." This bill has been referred to the House
Banking and Currency Committee.
Bank Slander. A bill has been introduced by Congressman McFadden (IT.
R. 11,217, April 7 1922), based on our Association measure, to punish derogatory statements affecting banks, which was designed for State enactment.
The bill provides punishment for any person who willfully and maliciously
makes a false or untrue statement, oral or written, derogatory to the financial
condition or standing of any national bank or other member of the Federal
Reserve System, or which is subject to the supervision of the Comptroller of
the Curreney. It has not, as yet, been reported from the Committee on Judiciary, to which it was referred. A similar bill has been introduced by -Mr.
Gensman of Oklahoma (II. R. 11.296, April 13 1922).
State Ban!s as Government Depositories. Our Committee has been urging
a bill introduced by Mr. McFadden (II. R. 2815, April 21 1921 ; reintroduced
as H. It. 12.240, June 30 1922) to amend Section 9 of the Federal Reserve
Act so as to enable the Secretary of the Treasury to designate member State
banks or trust companies as depositories of public money or as financial
agents of the Government. This bill has not yet been reported.
Postal Savings Rants. Your Committee opposed before the Committee on
Post Offices and Post Roads the Steenerson Bill (II. R. 8334). This bill as
reported to the house would amend the Postal Savings Law by increasing the
maximum deposit to $5,000 and the rate of interest to be paid to depositors
from 2 to 3%; also increase the rate of interest to be paid by banks on deposits of Postal Savings from not less than 2% to not less than 3%% per
annum, and make other minor amendments to the law. While the bill has
been favorably reported, the present indications are that it will not be passed
by the House of Representatives. There is no corresponding bill in the Senate. At a meeting of the Committee on Federal Legislation. in conjunction
with the Federal Legislative Council at White Sulphur Springs, May 8 1922,
the following motion was unanimously carried: "Moved that it be the sense
of the Federal Legislative Council that we oppose any increase in the powers
of the Postal Savings System including the rate of interest which they wiz
and disfavor any ,compromise with the proponents of the Steenerson Bill by
which the existing powers of postal savings banks be in any respect enlarged,
and we recommend to the Executive Council the adoption of a resolution to
this effect.
"We also recommend to the Executive Council the adoption of a resolution
disapproving Governmental advertising ainted to expand the business of the
postal banks and disapproving also the character of the advertising campaign
now being conducted in Seattle and two other cities to sell the Government's
41 4% Savings Certificates."
,
There are numerous other subjects of pending legislation which have had
the attention of our Committee, buf to mention all these wou'd be to unduly
prolong this report. The printed digests which accompany it will give the
subjects and status of' all such pending legislation. The Committee on Federal Legislation has endeavored during the past year to conscientiously perform its numerous duties in connection with the large number of bills which
have been introduced in the 67th Congress and to adequately represent the
interests of the banks as defined by the Association.
Report of the American Institute of Banking, by
President Robert B. Locke, Federal Reserve
Bank, Detroit, Mich.
Report of State Secretaries Section, by Andrew Smith,
Secretary Indiana Bankers' Association,
Indianapolis.
Bankers
Mr. Smith: Mr. President and Members of the American
Secretaries
Association: I am pleased to make the following report for the
Section.
Secretaries
A very noteworthy achievement this past year for which the
to the
Section is largely responsible was the passage of an amendment
of
Revenue Law permitting banks to make deduction from net income
effort
taxes paid for shareholders. Our Section has made a very earnest
simplified
again this year to induce the Treasury Department to provide a
sucIncome tax return for banks. Thus far, however, we have not been
cessful, but hope in the near future to announce that a desirable simplified
Treasury
Income tax return for specific use of banks has been adopted by the
Department.
Association
Very close co-operation has been given the American Bankers
reEducational Committee by the Secretaries Section, and through our
laid for
spective associations very difinite constructive plans are being
Sedretaries have
the furtherance of this important movement. Our State
given valuable assistance in regard to Federal legislation affecting banks,
National
particularly in helping defeat an amendment to Section 5219 of the
Bank Act regarding taxation.
rates
Our Committee on Insurance is striving to hold bank insurance
down to a just and fair basis. We have requested the A. B. A. Insurance
Executive
Committee to report the findings of their investigation to the
.to
isa
Council regarding the question of rates. This information in turn
be given to the State Secretaries.
The State Associations are co-operating with the Protective Department
happy when
of the American Bankers Association enthusiastically and are
they can serve the A. B. A. in any way.
to testify
President McAdams: Permit me to take this opportunity
been rendered
to the wonderful effectiveness of the co-operation which has
Associations
the American Bankers Association by the various State
we may fairly
through their Presidents and Secretaries. I believe that
close co-operasay that during the past year we have seen more evidences of
has over been
tion and more practical results from this Association than
true in the past.
not solely in our
The growth of the power of American banking lies
working relationAssociation, but also in developing the closest possible
ship with our State organization.
The report will be received and recorded.
Mr. Robert B. Lock-: Mr. President and Gentlemen of the Convention:
The Institute welcomes an opportunity once a year to have five minutes
in which to tell you all about it. This year we will divide this report into
of the Clearing Houses, by James Ringold
about three one minute sections, one concerning figures, one an appeal Report
Vice-President United States National Bank,
and third a declaration of principle.
A year ago we reported to you a membership of 44,903. This year we
Denver, Colo.
report to you a membership of 50.692, an addition of 5,789 members.
sixteenth year of service
The Clearing House Section has just chased the
We also report to you that there are at the present time approximately
successful in its history. Fstlowing
22,000 bank men in this country pursuing our educational work. We also to its members, which has been the most
Section has, since its inception,
report that during the year we have added 22 new city chapters, making a the principle laid down by the officers, the
of tint country by promoting the
total of III chapters now in operation. We also report that during the endeavored to be of service to the banks
with unusual success.
year we have issued 636 standard graduation certificates, making the total clearing house Idea; in this it has met
and seventy-four
At the Los Angeles Convention last year, two hundred
number of instituted graduai es at the present time 4.391.
that
associations held membership in the Section. Since
We have also is.sued Ulla year to the younger man 2,657 elementary bank- clearing house
have been organized—thirty-three active
ing certificates, making total outstanding elementary banking certificates time thirty-six new associations
hundred and tee
and three inactive, increasing our membership to three
4.867.
history of the Section.
The appeal: From my observation it is my firm conviction that the the largest in the
special efforts have
In addition to furthering the clearing house idea,
greatest problem the Institute has at the present time is that of insuring
house
to interest as many cities as possible in the clearing
men of suffielent ability to administer its affairs. It is no boy's job to run been made
so successfully in many of our
which has been operating
cities spread all over examiner system,
an organization of 50,000 members divided into 111
Angeles last
cities. Prssident Crane in his annual report at Los
this country There Is too much tendency in some quarters for bank( Ulcers, latseer
examination in
stated that twenty-three cities had such a system of
especially senior officers, to discourage their better men from taking an year,
number to thirty-one,
operation. During the year we have increased that
active part in the institute.
make special
gain of eight. In this connection, I feel that I should
We want your best men. It Is only natural that the institute in casting a
which after
mention of the Portland, Oregon, Clearing-House Association,
about for men to hold its offices, both national and local, that they should
This I believe
a lapse of five years. has reinstalled the examiner system.
want ycur best men and none other, and it is also natural that your best
cities that are without it anti who are
the best recommendation to those
men are the men you can least spare, but the Institute is something more
contemplating installing it during the coming year.
than the individual. We don't care how much sacrifice it takes upon your
been advocating
As a step towards the examiner system, we also have
Credits Idea.aeIt
part to give those men to us, we must have them because the Institute
to the associations throughout the country the Bureau of
Is doing more for you than it is for any individual.
and has
has taken hold in many cities and operating most successfully
Now the deciara ion of principle: That is best given In the closing
proved a most valuable aid to the members.
words of our resolution as adopted at Portland. Oregon,In July of this year,
120
BANKERS' CONVENTION.
Our Numerical Committee, which has rendered such valuable service in
the past in promulgating the use of the Numerical System, is now working
out a plan which will provide for a uniform method of designating branch
banks by a numerical number in cities where banking institutions have one
or more branches.
At the present time we are co-operating with the Federal Reserve Board
to the end that a uniform amount for the no-protest symbol may be adopted
and we are hoping that they may be in favor of the $20 minimum which was
adopted and advocated by the Section in 1916.
At this time I feel that I should make special mention regarding the conferences which will be held by the clearing house managers and examiners
on Tuesday and Wednesday afternoons of this week. These meetings will
be in the nature of a round-table discussion, where ways and means will be
discussed to the end that the experiences which have proved so successful in
many of our larger cities having well-organized associations, can be brought
to the attention of all the clearing houses throughout the country.
I wonder if you all realize what the year's accomplishments of the Section
mean to better banking. We,the officers, feel gratified over the number of
new clearing houses organized as well as the number of cities adopting the
examiner system and are looking forward to the coming year, believing the
Section will be able to render as great if not greater service to its members.
I trust you will read the reports of the Chairman of the Executive Committee, the Acceptance Committee and the report of the Secretary, which
will appear in the annual proceedings.
Report of the Trust Company Division, by J. A. House,
President of the Guardian Savings & Trust Co.,
Cleveland.
of States which require no segregation by law and thousands of banks
therein would be unable to furnish the desired information. The amount
of savings deposits officially reported for all States, with the exception of
Kansas and Nebraska which are estimated, is summarized by geographical
districts as foil,ws:
Total Sayings Deposits June 30 1921.
Certificates of
Savings
Deposit
State—
Deposits.
30 Days and Over.
New England
$15,549,000
$2,731,586,000
Middle Atlantic
5,747,122,000
263,691,000
Southern
890,324,000
411,246,000
East Central
3,087,719,000
1,219,806,000
West Central
206.107,000
532,058,000
Pacific
1,353,029,000
96,046,000
Total
State—
New England
Middle Atlantic
Southern
East Central
West Central
Pacific
$14.015,887,000
Postal
Savings.
$2,808,000
43,830,000
1,702,000
9,567,000
1,553,000
4,852,000
$2,538,396,000
Per Capita
Savings Dept.
Total.
1920 Census.
$2,749,943,000
$371
6,054,643,000
247
1,303,272,000
45
4,317,092,000
145
739,718,000
89
1,453.927,000
212
Total
$64,312,000 $16,618,595,000
$157
The number of savings accounts (which approximates the number of
Mr. J. A. House: Mr. President and Members of the American Bankers savings depositors) is more difficult to determine but without reports from
Association: My report will be brief. It has been prepared and written many States in some of which the savings business is highly developed by
and handed to the Secretary. The work of our Division this last year has competition, we are able to give the following aggregates:
followed along pretty much the same lines as those in previous years. We Mutual savings banks (18 States)
9,654,989
have extended the scope of our work and the service to our members very Other "States" banks (13 States)
6,180,337
materially, however. Legislation both national and State continues to Trust companies (8 States)
2,713,808
occupy the attention of our committees. We have a committee known as Private banks (New York only)
72,961
the Committee on Standard Federal Legislation. We also have a committee "National" banks (all States)
8.015.736
known as the Committee on Co-operation with the Bar, and this subject is
Total accounts reported
26,637,831
becoming increasingly more important as trust companies realize that they
In addition to the above compilation, the Division had planned to make
must have the friendly co-operation of the lawyers in their business, and we
a monthly report on tendencies of savings deposits, but this plan was
believe in co-operation rather than in fighting them.
abandoned when the Division of Analysis and Research of the Federal
This is increasingly important because of the fact that so many State and Reserve
Board undertook a similar task. Advance publication of the
national banks are now taking on trust power, so that it bebooves all of
Federal Board's figures appear in our department of the "Journal of the
those who do a trust business, whether they are trust companies, State
American Bankers Association" from month to month. This monthly
banks, or national banks, that they cultivate the friendly co-operation of
table represents savings deposits of over five billion dollars. over one-third
the members of the bar.
of the aggregate of all savings deposits in the country. as reported by
One of the activities to which I want to call your attention, that the trust
representative savings institutions.
companies have been engaged in the last two years,is through the Committee
2. Mortgage Loans from Savings Deposits.
on Publicity. We have been conducting a national advertising campaign.
We urge as a fixed policy that mortgage loans for housing shall have
The members of our division have paid in in the last two years something
over 3115,000, which has been expended in national advertising, using the priority in the loans of savings deposits, and that amortization be religiously
national magazines. We have received very satisfactory results from that enforced.
The banks and their officers are by far the largest investors in mortgage
activity. There has come in to the New York officer over then thousand
inquiries from that publicity alone, and that does not take into account at securities, a fact which is frequently overlooked. The Comptroller of the
all the inquiries that have come in to the local companies throughout the Currency reports aggregate bank holdings on June 30 1921 as over $4,750,000,000, of which over $4,000,000,000 was secured by other than
country.
The resources of the Trust Company Division are something over twelve farm land. The Mutual Savings Banks held a total of $2,460,000,000 of
this total, of which $20,000,000 was secured by farm land. But this
billion dollars. We haven't the latest figures for this last year—we expect
them later in the day. There are twenty-six hundred and forty-three active total of over $2,000,000,000 of mortgage loans held by other than Mutual
and associate members in our Division. When we say our resources are Savings Banks can, and we believe should, be increased substantially in
twelve billion dollars, we don't take into account the resources of our times of scarcity for housing funds according to local needs. The adoption
Trust Departments. They would be many, many times this figure without of such a policy would not only assure a service to savings depositors which
they can properly demand, and therefore result in a larger increase of such
question if those figures were available.
The work of our Division is going along very quietly, smoothly and very deposits, but it will also minimize the arguments of ardent uplifters to
nationalize and even to use the nation's credit on a matter which is essentially
efficiently.
local because of the relation between the economic progress and the housing
needs of all established communities.
Report of the Savings Bank Division, by Raymond R.
The actual activities of the banks in mortgage finance in a large proporFrazier, President Washington Mutual Savings
tion of the country is far in excess of the amounts reported on hand on
particular dates of call. There are States in which the only responsible
Bank, Seattle, Wash.
forces in the mortgage business are the banks and trust companies.
Mr. Frazier: Mr. President, the Savings Banks Division realizes that
Some banks have voluntarily adopted a policy of investing either 50%
its chief duty is its great privilege, namely that of devising and promulgating of time deposits or of holding about 10% of all
loans and discounts in
approved methods of popularizing the savings habit among all classes and mortgage securities. The Division has prepared a
more detailed statement
all agents. We set out this year to find a basis for a little more joy in on this subject. (See report of our Division's
committee on Mortgage
thrift work. For many years tong-faced teachers and preachers have been Loans at this convention.)
telling us that only 100 out of every 1,000 of Americans have savings ac3. School Savings Banking Projects.
counts. We know that this was wrong, and because we believed in the
1.304.941 school children participated in school savings banking projects
efficacy and in the value by way of inspiration of reliable statistics, we set
out to find out what the facts welv, and we are reporting for the first time during the last school year. as compared with 666,478 during the previous
that instead of there only being about 100 out of every 1.000 of our people year and 462.651 during the year before, which was the first year of this
with savings accounts, as a matter of fact when you consider the national Division's specialized activity. The majority of these pupil participants
and State banks and trust companies, we have 250 out of every 1,000 had their own bank accounts creating a businesslike relationship with
Americans with savings accounts, and it is said that the savings deposits the bank.
Total pupil deposits for the three years respectively were $5,720,471
aggregate only about $7,000,000,000, but they actually aggregate some18,
thing like $14,000,000,000, which is 40% of all the deposits in all the 30,000 53,475,867 96 and $2,800,301 18.
The goal of a standardized system which can be recommended
banks of America.
by the
Division has not yet been attained, although our studies have
Following is the report of the Savings Banks Division:
made very
The Savings Banks Division reports another year of increase in both substantial progress. Our list of operating systems is now 394. as comthe number of inquiries received from all types of banks as well as in the pared with 156 the previous year, the increase being very largely accounted
scope or variety of subjects which demand attention, as will be shown by for by new installtvions. These figures speak for themselves.
The Division's office is prepared to advise with any member
the following summary:
bank
which contemplates the installation of a school system, as we urge
caution
1. Extent of the Sarings Bank Business.
and full investigation before it accepts any plan which may be presented,
About half of the country's total bank deposits are now known to be
Industrial Savings Banking.
savings deposits and the number of depositors exceeds 26,000,000 according
Joint promotion by employers and banks in promoting systematic
to this Division's recent tabulation.
No branch of the banking business has been supplied with less adequate savings by employees is being encouraged with the resumption of business
figures than that for savings banking, yet such statistics have been needed activity and the Division will be prepared to assist in the installation
for use not only in considering general economic problems but as a guide and operation of a standardized plan.
Based upon wide investigation and experience, the Division's committee
for planning of business extension projects.
The following summaries are taken from the detailed tables which the on savings has made a selection from among the various plans which
have developed locally in many cities and institutions. While we can
Division can supply to member banks in detailed form.
Our definitions harmonize with those which appear in the regulations of announce a decision in favor of the principle of pay-roll deduction, the
exact details to be incorporated in the material and the method by which
the Federal Reserve Board. The statistics are based upon those appearing
in Federal and State reports for June 30 1921, followed by correspondence the plan will be made available to members has yet to be determined.
with both public officials and bankers to exhaust all sources of information
Federal Legislation.
short of direct inquiry to each bank. It is doubtful if such direct inquiry
The Division continues to urge that the welfare of the thirfty and
saving
would add substantially to our information because of the large number shall not be jeopardized by legislation to
satisfy selfish claims of noisy
BANKING SECTION.
minorities. We therefore urge adoption of the constitutional amendment
to abolish tax exemption of securities and we advocate strict adherence
to the principle of equitable taxation by Congress and the Treasury Department in advante of its formal incorporation in the constitution. It
is unnecessary to again outline the evils of special privilege through tax
exerpption, although both the enormous expansion in municipal indebtedness and the added burdens upon private finance have supplied a great
volume of new evidence as to the need for serious and prompt attention.
We were amazed with the announcement that Congress consented to
allow certain exemptions from the personal income tax as a subsidy to
those who invest in shares of and deposition building and loan associations,
not with a view to the advantages accruing by reason of association activity
among those to whom its facilities ordinarily appeal but to attract taxable
depositors from savings banks. This exemption was allowed without
specification as to the kind of plan or regulation under which the association
operated and apparently will be of most value in those States which
authorize their associations to invest in real estate mortgage loans without
establishing adequate reserves for withdrawable funds.
The activities and scope of the United States Postal Saving System have
been the subject of much study and discussion, but legislation to place
the Government more actively or directly in the savings bank business
is not now anticipated.
State Legislatton.
We urge that all States give legislative recognition of the judicially
recognized trusteeship for savings depositors which rests upon savings
bankers. We oppose resort to paternalism in lieu of the development
of individual ability. We are to-day confronted with another wave of
lottery schemes which succeed only so far as the economic basis for banking
Is disparaged. We will mention but two items:
First, savings deposits in banks are a distinct class which should not
be handled as are demand deposits. In the first place, savings depositors
should as a matter of policy be protected against every probable investment
hazard, as their primary demand is for safety of principal. Such depositors have the influence and votes which will secure that safety and
such demagogues as have arisen in various parts of the country would
obtain a verdict for nationalization even though they thereby abandon
community control and personal service. The immutable laws of economics
make it impossible to develop personal ability and the advancement of
the public interest wihout some sacrifice.
We therefore, while perceiving an increasing public demand for savings
fund legislation, recommend strict adherence to those principles of savings
banking which have been developing through a century of international
experience, disapproving of any resort to actual or pretended guaranty
of bank deposits by or through Governmental agency.
Second, we are confronted with one of the periodical plagues of alleged
co-operative credit institutions which to-day are generally known as
"Three Percent Loan Contract" concerns. There are so many elements
of chance and even of fraud in the operation of such concerns that we
demand absolute prohibition of their operation. Not only is the interest
cost to borrowers much more than the quoted rate in the average case,
but even the allotment of loans is by lottery methods.
These two points have been established repeatedly before court and
administrative tribunals and warrant prohibition without reference to
many other objections which we deem to be equally important. Both
the "National Associations of Local Building and Loan Associations"
and the "National Association of Supervisors of State Banks" adopted
resolutions of condemnation at recent conventions and we recommend
that the American Bankers Association take action on a resolution similar
to that adopted by the Supervisors of State Banks, which reads as follows:
"Be It Resolved that it is the sense of the members of this Association
that the public should be and hereby is warned against the purchase of
that class of contract commonly referred to as 3% loan contracts. We
believe that this form of contract is productive of unjust inequalities
among contract purchasers, and in many cases of absolute fraud."
With the approval of the Executive Committee of the Savings Bank
Division.
6 I
undoubtedly fully appreciated.
It is, therefore, but natural in view of such responsibilities that this
Association should augment its conception of service, discarding the comparatively inconsequential policies of am interior organizational nature.
and fastening their aims to the more vital purposes of banking and commun.
ity benefits—a course leading, through mighty initiative and corresponding accomplishment, to unlimited influence.
To this end the National Bank Division pledges its undivided ,ime and
whole-hearted support.
Report of the State Bank Division, by H. A. McCauley,
President Sapulpa State Bank, Sapulpa, Okla.
.
Mr. H. A. McCauley: Mr. Chairman and Members of the Association
Mr. Hecht could not be here at this hour and he asked me to appear and
present merely the salient features of the report as rendered to the Executive Council which are as follows:
For the past year the State Bank Division has directed its activities
more particularly in legislation to the securing of uniform legislation for
the banks throughout the many States, 48 States in which we have to
operate. That applies merely to the State legislation for State banks.
For national legislation our efforts have been directed toward securing
that which would give to State banks as well as all banks a longer time
commercial credit and for the use of more particularly and more extensively land credits.
In addition to this the question a co-operative marketing has had our
attention and we have but bagun to work on that and that will take up
our time more specially for the new year.
Our membership is practically intact, about 12,000 members, and our
assests may have depreciated some during the year just past due to consolidations and to the general depression.
I believe this in substance is Mr. Hecht's report, and what I desire to
submit to you at this time. At our meeting yesterday afternoon the
report of the Committee on Exchange was made and that will be found in
phamplet form and peraaps be given later by Mr.Claiborne. In addition
to that our Section went on record as opposed to branch banking.
This, I believe, Mr. Chairman, represents the main features of Mr.
Hecht's report.
Report of the National Bank Division by Col. John G.
Lonsdale of St. Louis.
Col. John 0. Lonsdale: Mr. President and Members of the American
Bankers Association: There are 8,197 national banks in this country
with combined resources totaling more than $20,700,000,000. This total
is constantly on the increase even amid varying economic conditions.
indicating the steady and healthy growth of the members constituting the
National Bank Division of this Association.
There are 1.595 national banks with trust departments, and 5,785 national banks with savings departments, representing 8.875,088 depositors
and total savings of $3,046,647,000. Attention to the interests of member
banks, including specialized service pertaining ts these new departments,
and the increasing popularity of the Washington office as the bankers'
point of contact at the national capitol, are responsible for an ever-expanding program in the Division.
The extension of national bank charters over a period of 99 years instead
of 20 years has been one of the prominent features of an exceedingly active
twelve-month in legislative affairs.
In keeping with the principles of this big association, the national banker
as an individual has tried to lend himself to the solution of problems affecting the community and the nation. In tribute to the banking fraternity
as a whole,let it be said that this participation has been with credit.
As far as Divisional policies are concerned, considerable attention has
been given to seeuting equal privileges for national banks. We are fully
appreciative of the wide importance of this subject. The National Bank
Division believes that an epochal point was reached when the administration of the American Bankers As.sociation, acceding to the demands of
members and the press, placed for consideration the year's most pertinent
It is
banking question before this, the bantdng parliament of the nation.
no jeopardy to a cause to have it frankly discussed among fair-minded
rather
men. To meet fairly and squarely the real issues in banking life,
than editing them out of our sessions, is a praise-worthy departure.
Division creates no
In striving for business justice, the National Bank
impartiality.
precedent. It is the cu.stom of freedom-loving people to seek
bankNo matter how divergent the immediate interests of various classes of
ing might appear, the nation's financial practices, in soundness, are one.
representing the combined
and this association should always he supreme as
A. B. A.
progress of American banks. It is at once apparent that the
must proudly husband such a privilege and warrant this affluence of author-
121
ity in the future as in the past by courageously and fearlessly meeting the
paramount banking issues.
We are just finishing one of the most eventful and interesting years in
banking history; a period during which the banker, per haps of necessity,
has gotten closer to the actual trend of affairs than ever before.
The fact that to-day we stand upon the treshhold of what is generally
conceded to be the beginning of an era of sane business expansion is due to
the fortitude and sagacity with which the banker assisted in the salvaging
of the American business.
In these adjustments, the public gained a more enlightened viewpoint
of the necessity of banking and the importance of tee banker in
the economic scheme of things. The public, in consequence, has
learned to expect wholesome leadership from this seasoned source and
it becomes a solemn duty to respond. On the other hand, the banker
has become a man of many parts. He is better equipped than ever, because experience with his varied foster children acquired of the depression
have enlarged his capacity and extended his horizon of interests.
Banking has become a dominant wsrld factor in the process of restoration. It takes a truly great and active organization to represent such interests. No course of vacillation, postern policies or recumbency will suffice in such a contingency. The prudent inclination to meet this ever-increasing opportunity for service on the part of the Associ4,tion is
Report of Committee on Public Education, by J. H.
Puelicher, President Marshall & Ilsley Bank,
Milwaukee, Wis.
The life and prosperity of a State depend upon the equitable distribution
assured
of its opportunities among its people. So long as fair rewards are
condition
to him who labors, so long will there be progress. for under such
most men find life's happiness in life's work.
middle
This will insure the growth of that sound, sane, conservative,
and poverty.
group, the intermediary body between the extremes of wealth
the safety
These two extremes, existing alone, are too far apart to insure
of either, and the consequent safety of the State.
strongly supTherefore, the large middle group must continue to be
support of safety
ported and constantly expanded, or a nation loses its
and its power as a democracy.
material growth of
Upon the mental, spiritual, as well as upon the
material strength
this group, depends largely the mental, spiritual and
of the nation.
There is no substitute for inThere is no substitute for character.
a substitute for
tegrity. There is no substitute for work. Nor is there
is no substitute
thrift. There is no substitute for knowledge. There
citizenship, each
for religion. These a nation cannot legislate into its
Individual must gain them for himself.
freedom
America's opportunities are bringing greater rewards and more
use of these
to her workers. Unless there is knowledge for the proper
—dissatisfaction growing,
rewards, there will be continued dis.satisfacticn
meaning
not out of the lack of the means of living, but out of the lack of the
of life.
and
The greater the percentage of owners in any land the more permanent
contented its citizenship. "He who forgets this elemental fact, builds
farm.
his theories upon the sand." The moderate home, the successful
of
and all they mean to the happiness of family life and to the integrity
ownership
national life, must continue common possessions. Pride of
in public affairs.
fosters conservatism in public ideas, urges participation
He
In this industrial age, man early reaches his economic majority.
must in youth have the knowledge of those laws which help him to live.
school room—
Therefore, our program has been directed first to the
the students of the 7th and 8th grades of the grammar schools, the High
bringing
schools and the colleges. This does not preclude the banker from
his message whekever possible to the grown-ups.
Those communities
The results of last year's work are self-evident.
It is with
are most enthusiastic which were most zealous in its support.
year. The
fullest assurance of the need, that we proceed into a new
attempted to embody
many things learned in our year's experience, we have
in our material and plans for this year.
is not
Some of us knew, and some of us have learned, that the banker
is a leader.
a teacher. He is not versed in pedagogical principles. But he
122
BANKERS' CONVENTION.
He knows how theory can be applied. The greatest achievements
in
this work have come, and will come, through the serious and
earnest
co-operation of the teacher and the banker.
0 Many bankers, with a fund of knowledge, willing to give of their time
and service, felt they could not attractively tell the story to the young
student. You will now find nine talks prepared for these bankers,
and
for the bankers who prefer, outlines upon which to build their own talks,
pertinent to conditions In their communities.
11$ Then. so that the teacher may not be uninformed as to the plan
and
the work, an outline upon the entire course, together with an explanation
of the plan and a list of reference books, has been printed in pamphlet
form, which any teacher, in whose classes the talks are given, may have
upon request.
Many educators welcome the banker's help in augmenting their work
because tbey realize that upon the knowledge of fundamental business
economics, rests much of the happiness, the prosperity, the stability
of this democracy.
Whatever the ills of America, education is the means of accelerating
evolution, of abolishing revolution.
Annual Report of the Insurance Committee,
by Oscar G. Foreman, Chairman.
Premiums and Losses on Bankers' Blanket and Fidelity Bond Business and
Question on Reducing the Rates on Blanket Bold.
The Committee has taken this matter up with Mr. R. R. Gilkey, Secretary of the Surety Association of America, and he advises that he will
take the matter up of reducing the rates on the Bankers' Blanket Bond
with the Towner Rating Bureau, and the question of furnishing the Committee with the statistical experience on premiums and losses in the Bankers'
Blanket and Fidelity bonds will be submitted by him to the Surety Association at their next meeting for their consideration and action.
Premiums and Losses on Bank Burglary and Robbery Business..
The Committee has been endeavoring to get the premiums and losses
of the Burglary Insurance Underwriters' Association up to date, but
we are advised by Mr. H. W. Cluff. Secretary of the Association, owing
to the delay of some of the companies in submitting their figures it will
be impassible to furnish the information in time to be embcdied in this
report, but they will be glad to furnish the information as soon as available.
It will be noted in last year's report they furnished the information up
to that date.
Burglar Alarm Systems.
The Committee has been endeavoring to get the report of the Bureau
of Laboratories at Chicago, who have been making an exhaustive investigation and tests of the various alarm systems with a view of determining their value and arranging a rate of discount. We are advised by
Mr. H. W. Cluff, Secretary of the Burglary Insurance Underwriters'
Association, to the effect that the Bureau of Laboratories have not completed their tests as yet, but as soon as they do and the rate of discount
is arranged, he will notify the Committee as to all the alarm systems that
have the approval of the Bureau of Laboratories and also the rate of
discount.
We have received some very complimentary letters from the banks that
we have aided and also from a number of the State Secretaries where we
have been called on and assisted them in insurance matters.
From the letters received from the banks they realize that the Committee has been of great service to them during the past 12 months in
advising them on insurance coverage and adjustnig cases where necessary
with the insurance companies, and every case, with one exception, that
was taken up with the Insurance Committee where there was a question
between the bank and the company, has been settled by the companies
on the recommendations made by the Committee, which has been entirely •
satisfactory to the banks.
• Relative to the particular case still pending, our Secretary has held
several conferences with the company and presented the bank's side of
the case anti the matter has been taken under consideration by the attorney
for the company, but at the time of writing this report he has not made
final decision.
We take pleasure in advising that our Secretary has received the hearty
co-operation of the insuranse com'panies in bringing about adjustments
in various cases, and they have without any hesitancy submitted their
entire file for inspection, and, in a number of instances, have consulted
with our Secretary relative to adjustment before any question arose
between the company and the bank as to settlement.
Reciprocal or Inter-Insurance.
As a result of a flood of telegrams from business interdsts in all parts
of the country regarding a rumor that the Insurance Committee contemplated going on record as being opposed to reciprocal or inter-insurance.
apd were to submit a report to the Executive Council, the Insurance
Committee of the Association issued a statement to the press denying
that the question of reciprocal or inter-insurance would be considered in
any way by the Committee.
The Committee does not know the source of these rumors, but it can
be said unequivocally that the Committee does not consider it within .
the province of the American Bankers Association to take any stand on
the question of reciprocal or inter-insurance. The Insurance Committee
has not received any report or prepared any report on the subject, nor
have they contemplated taking any action upon it. h.
Respectfully submitted,
INSURANCE COMMITTEE
Oscar G. Foreman, Chairman F. F. Johnson
Andrew Smith
Giles IL Miller
C. W. Carey
L. W. Ganunon. Secretary.
During the period covered by this report. 12 months, Sept. 1 1921 to
Aug. 31 1922, the Insurance Committee has veen very active, owing to
the number of burglaries, hold-ups and defalcations. The banks generally
also have increased their Insurance coverage and have submitted their
various burglary, fidelity and blanket bonds to the Insurance Committee
. for inspection, opinions and coverage.
Every member that has been burglarized or held up has been written to
regarding its loss, with the suggestions that the policy covering same be sent
by registered mail to the Secretary cf the Committee for inspection so that
the Committee can advise the membdr of the liability of the insurance company. In several of the replies from the banks they have advised that they
carried burglary and hold-up insurance, and in a number of instances they
stated that their policy did not cover the loss. Our Secretary pointed out
to them in a number of cases where the policy did cover the loss, with the
result that the banks made claim against the insurance companies and the
insurance companies paid the claim.
The Committee has likewise written to all non-member banks, pointing
out to them the advantages they will enjoy by becoming members of the
American Bankers Association, and advising them of the services that your
Committee may perform for them in the adjustment of claims and advice
as to policies. Through the efforts of the Committee, a number of these
banks have joined the Association.
In the year 1915 the surety companies got out a bankers blanket bond,
which covered fidelity as well as burglary and held-ups. The same was
submitted to the Insurance Committee and, after some changes suggested
by the Committee, the form was approved. Owing to the changes brought
about by the increase in crimes and questions arising from time to time as
so the coverage. the Surety Association submitted to the Insurance Committee for approval certain endorsements to be used in connecticn with
the form that would clarify the bond and remove certain ambiguities and
state more specifically what was covered by the bond. These endorsements were examined very carefully by our Secretary and the General
Counsel and submitted to the Insurance Committee for their action, and
the Committee approved of the endorsements.
These endorsements do not take away any of the coverage that was
originally'given under the approved form.
The Surety Association also submitted what is known,as their Form
No. 2 for approval, which is not as broad as Form No. 1, but the rate is
very much !ems. The Committee approved of the form but with the understanding that if their approval was to be placed on the bond, the same
was to state that it was as to form only, but they recommended Form
No. 1 in preference to Form No. 2.
Mr. W. E. Meier), of J. F. Hayden & Company, Montreal, Canada.
submitted, also for the action of the Insurance Committee, certain amendments to the "Han-C"form of Lloyds Blanket Bond. These changes first
were carefuiy considered by both our Secretary and the Generai Counsel
and then transmitted to the Insurance Committee, by whom they were
approved, as it was found that they not only broaden the form but clarify
certain ambiguities.
The United States Guarantee Company of New York submitted a blanket
Report of Agricultural Commission
bond which they are now writing. This form is identical with Lloyd's
"HAN-C." It also submitted the financial statement of the Company, By Joseph Hirsch, President Corpus Christi National
Bank, Corpus Christi, Tex.
together with the names of its officers and directors. These were examined
by both our Secretary and the General Counsel and then transmitted to and
When American agriculture this year began to show signs of recovery
approved by your Committee. This particular form is much broader in its from the depression, there was a noteworthy quickening
of co.operative
coverage than the Bankers' Blanket Bond issued by the American com- work ny bankers' associations and individual banks.
Previously it had
panies. In particular it covers the payment, whether received over the been a matter of course that various ambitious plans
for banker-farmer
counter or through clearing house or by mail, of forged or raised checks or activities should be deferred in execution while associations
and individual
(genuine) checks bearing forged endorsements, or the establishment of any banks struggled with the pressing problem of how best
to assist the American
credit to any customer on the faith of such checks.
farmer in the great emergency.
The Company will underwrite only 20% of each risk and the balance
The policy of the Commission, which realized the futility of seeking genwill be pieced by Mr. Mellon through Messrs. James Hartley Cooper eral banker interest in any other subject than that of the
immediate cirsis,
& Co., Ltd., at Lloyds.
was to continue its campaign of education, constantly urging whole-hearted
Mr. Mellon has arranged for the issuance of a bond for $25,000 at a co-operation for the welfare of the basic industry of the
nation.
mimimum rate of $600 where the number of employees is five or less;
Conference at Washington.
$700 where the number of employees is 6 to 10; $800 where the number
A national conference on the situation in agriculture, called by the
of employees is 11 to 15; $900 where the number of employees is 16 to 20;
Secretary of Agriculture at Washington, in January, proved to be the most
$1,000 where the number of employees is 21 to 25; for the benefit of the
representative gathering of the kind ever held in the United States. On
small banks where the number of employees is less than 25.
At the present time the American companies' minimum rate is $1,250. the suggestion of President McAdams the Commission met at Washington
and covers 25 employees. In other words,if a bank only had five employees during the conference, receiving valuable Information and inspiration.
they would have to pay the same rate as if a bank had 25 employees, The chairman of the Commission was selected as a delegate to the conference by the Secretary of Agriculture and served on the committee on agriwhich is not equitable. On the minimum bond the American companies are now writing, they cultural credit, insurance and taxation. Mr. W. G. Edens was also a delehave doubled their rates since 1915. On the larger bonds the increase gate and served on the comn.ittee on transportation. Mr. E.J. Bodrnan of
has been more. The companies have never submitted the premium the Commission was selected as a delegate but was unable to be present.
income and losses on this particular bond to the Insurance Committee, It was very gratifying to have the Commission thus rec,ognized as there
but the Burglary Insurance Underwriters' Association, as you know, was necessarily a restriction upon the number of delegates.
Reports of conditions in agriculture presented to the conference were most
have submitted both the premium income and losses on the bank burglary
and robbery business. With the United States Guarantee Co. in the depressing. The chairman of the Commission, however, said at the Unit)!
field we hope that other companies will meet the coverage that Lloyds
"A solitary ray of sunshine ligntened the black cloud of gloom o'reand this company are giving and also reduce their rates. The Committee spreading the conference. It came from California, the land of sunshine.
has been infarmed that there is no connection between the U. S. Guarantee With practically every part of the country reporting a paralysis in the
0o. and Lloyds.
farming industry resulting from the sale of products at prices far less than
BANKING SECTION.
123
those which plan their programs
g Associations of the The most successful State committees are
relations are being established
the cost of production, the Co-operative Marketin
e national in consultation with their colleges. Closer
as a beacon of light pointing the way to a profitabl
West were
between the bankers and these institutions.
•
agriculture."
was aroused, this being the
Conferences at State Colleges.
National interest in co-operati ee marketing
colleges which were
e. Its deliberations remain as an
one outstanding result of the Conferenc
Conferences between bankers and farmers at State
State associations
interesting textbook to every banker and farmer.
increasing In number and influence, were given up by
held its third
ce were of great importbecause of conditions. The Texas Association, however,
. Believing that the proceedings of the Conferen
of the "Bankerissue
re met at the State
ance and should be studied by every banker, a special
conference. The Michigan Committee on Agricultu
ce and sent to every member of the College of Agriculture during Farmer's Week.
Farmer" was given over to the Conferen
justly proud that this
State college leaders
AmericausBankers Association. The Commission is
Other State committees held conferences with their
Secretary of Agriculspecial issue evoked a letter of commendation from
to map out programs.
Activities by States.
ture Wallace.
Marketing.
associations, whose
The Commission Is glad to repoit that many State
looking
is that
dormant are making
The most significant movement of to-day in agriculture
committees on agriculture have been mo:v or less
Commission addressed
view.
to better marketing. When the Chairman of the
for organization with constructive programs In
that pro- plans
as a bar to genuine
the banker-farmer conference at Washington in 1919, he declared
A number ofcommittees assign lack ofsufficient funds
g of crops was just as essential as the produetion of the crops work that would be of part benefit to the agriculture of the State.
fitable marketin
generally
outstanding work
themselves and said that it was a lamentable fart that. bankers,
It is worth while to briefly summarize some of the more
speaking. had paid little attention to this vital problem.
by State committees on agriculture.
ons and
seventy-five agricultural
The situation is different to-day. Bankers, both by associati
Arkansas has made a survey of each of its
g and
of farmers,
individuals, are making careful studies of the problem of marketin
be the inspiration for county organizations
training counties which will
and
farms of the State selfthe plans of farmers to solve them. The business experience
bankers and merchants which will seek to make the
ions which have deexist and is valuable
of bankers is needed by the co-operative organizat
g. The survey shows deficiencies where they
have pros- sustainin
ive work.
veloped so rapidly and widely. Many of those organizations
red foundation for constsuct
some kind of club
notably the U. S. Grain Growers. Inc., have encounte
pered, others,
At least half of the hanks of Colorado are engaged in
that
girls at the State
pitfalls. The Commission at Washington by resolution declared
work. The association is host annually to boys and
co-operative marketing
it was heartily in accord with the principle of
stock show.
plans of the
have been awarded
and recommended that bankers make careful study f the
Ten scholarships In the State College of Agriculture
extension of
various co-operative organizations with the view of the
lines. by Florida.
sound
Bankers' Association
adequate credit facilities to associations functioning along
Georgia bankers in co-operation with the Country
their interest
Is believed to be a
Again, the Commission commends to bankers the necessity of
organized the Georgia Farm Market Federation which
e.ontinued its loan
in this remarkable development.
practical plan to develop sate farming. Geoigia has
hag also been
fund for students In the State College of Agriculture. There
Rural Education.
•
an Increased interest In dairying.
pins and awards
subjects which the Commission for
Marketing is one of three major
Idaho has co-operated in club work by furnishing
ce to American
several years has believed to be of the greatest importan
of merit.
farm tenancy.
on on many
re. The other subjects are rural education and
agricultu
Illinois co-operated with the State Agricultural Associati
education for
subjects as reduction
There Is no argument regarding the necessity for better
matters of mutual welfare. Time was given to such
Banker-Farmer" a constant cam- of corn acreage, rural credits, taxation of farm lands, club work. improved
farm boys and girls. Through "The
l consolidated schools
paign has been waged, calling attention to successfu
farm-t.,market roads and reduction of freight rates.
work.
Indiana bankers .have been doing noteworthy things in club
and other plans to Improve rural schools.
live-stock imKentucky is cooperating in the organization of a State
Tenancy.
membership 400 banks.
to include in its
number of farm owners provement association which expects
will
it was natural that any efforts to increase the
a county agent in each county and
e
of the abnormal con- The Kentucky Committe seeks
in the country would fall into abeyance because
club work for boys and girls.
e
however, should loom large in the encourag
the establishing
dition of agriculture. This subject,
Louisiana bankers, who played such a leading Part in
nt of Agriculture
e
future work of the Commission. The U. S. Departme
now seek to insure sufficient legislativ
and more light on the of a State college of aviculture,
is making a careful study of tenancy and its effects
ate a program of safe farming,
the institution and contempl
to quote a recent utterance support of
problem will soon be available. It Is worth while
and plant diseases and better roads.
his home or his better livestock,elimination of animal
of John H. Puelicher, who says, "The man who owns
Maine's Interest has been largely directed toward soil fertility. group
each
owned by his home or farm."
farm is in a measure
Michigan Is organized with a committee of ten, one from
of Agriculture.
e in club
Dr. 0. L. Stewart of the United States Department
and eighty-three county chairmen. Its program urges assistanc
loan
makes this statement:
work, co-operation with farm bureaus, organization of Federal farm
,
countrS may be lulled to indifference by
the needs
of
"There is danger that the
associations in counties where they are needed, careful study
the rate of increase of farm tenancy in the United States of each community so as to anticipate essential requirements for loans,
reports that
tenant farmers per
is rapidly diminishing. It is true that the number of
of 5%, whereas better schools, marketing and roads.
extension
thousand grew from 353 in 1900 to 370 in 1910, an increase
Missouri, which heretofore had been chiefly interested in the
3%. When
turned
from 1910 to 1920 it grow from 370 to 381, an increase of only
of county agents and better roads, with these protects well along,
on the basis of acreage value, however, the number of rented its attention to dairying awl urged greater interest.
measured
per
rented land
bankers.
acres per thousand and the number of dollars' worth of
Montana believes that club work offers a great field for
preceding basis,
Markets*
thousand was not only higher than that shown on the
New Jersey's committee c anferred with the State Bureau of
fruit
faster rates during both of the decades and
but has been growing at much
worked out a sound plan for financing packing houses for the
wer
during the decade just ended. While the proportion
since 1900. especially
w
n
the proportio
work of
of rented farms increased by 3% between 1910 and 1920,
New York's activities have been confined to support of the club
11%."
schools
of leased property values and of leased acreage increased
the State Cellege. Five scholarships for boys and girls in rural
light of this analysis, the tide of tenancy
Dr. Stewart holds that in the
are provided.
its upward flow with little or no abatement.
Family a Good Milk
Is shown to have continued
North Carolina adopted the slogan, "For Every
posters
Cow," and pu,hed a campaign for more and better cows through
Agriculture at White Sulphur.
and speakers at group meetings.
by bankers
your other officers
In North Dakota a sweet clover growers' exchange inspired
Due to the loyal interest of President McAdame and
of the Executive has been an object lesson in constructive co-operation for better marketing.
an Agricultural Symposium was held during the meeting
feature was the attendance of Better stock is headlined on the North Dakota program.
Council at White Sulphur Springs. The
a better underFederation. After
Ohio's committee issued a series of bulletins to bring about
President Howard of the American Farm Bureau
States as to their standing between farmers and bankers. These were reprinted In many
hearing statements from representatives of various
and club work fosnewspapers. Many farm accounts were distributed
past work and future plans, Mr. Howard said:
felt for many months tered. The Association sends the boys' and girls' champion stock Judging
"I feel better at present on this subject than I have
bankers are devoting yourselves to the matter. team to the national contest at Atlanta in October.
as a result of the way you
courses for farmStates."
Oklahoma has arranged with its State College four short
It promises a great deal for better agriculture in the United
ers to which bankers will see that representative farmers come. program.
Roaas.
comprehensive
Pennsylvania has made an excellent start on a
ent of better
ing to funds for
The Commiesion. naturally intereeted in the developm
Several counties have been organized with banks contribut
.
with county
highway situation
roads, has continued to keep In close touch with the
aggressive campaigns for better agriculture in co-operation
with the State
in continuing
agents. Pennsylvania'sleaders have sustained close relations
At its Spring meeting it endorsed the action of Congress
Is fostering
and farm-to-market C
Federal aid for the building of inter-State and postal
allege of Aericulture and with the county agents. This State
urged that this policy better livestock, with the famous Grove City as an example of what It means
highways under the Department of Agriculture and
to a community.
be continued for a definite period.
other States
Rhode Island has made a survey of banker-farmer activities in
Club Work for Boys and Girls.
and will seek to put a program into effect.
marketing asClub work for boys and girls in the latter part of the present year has
South Carolina assisted In the organization of co-operative
ons are
received a wonderful impetus. Many bankers' State associati
sociations and campaigned for diversified farming.
in co-operation with the
hens and alawarding scholarships, emblems and other prizes
South Dakota has urged the increase of corn, hogs, cows,
l
extension departments of the State colleges and courtless individua banks falfa,
dairy industry
club work. The National Committee
Tennessee's committee is encouraging club work and the
are engaging In various kinds of
is receiving the co-operation of the Com- among other protects.
on Boys and Girls Club Work
to extend the scope of this activity.
e at the State College.
mission In its laudable program
Texas held its annual farmer-banker conferenc
ce as in previous
ble activities conducted by indiClub work is only one of Innumera
although conditions militated against as large as attendan
banks. There has been aroused a great interest in better livestock years.
vidual
fund of $1,000
In increasing dairying In their
prominent
Vermont banks have been the majority contributors to a
and many banks have been
which has been u •:ed to promote club work.
Communities.
the bankerU. S. Department of Agriculture.
Wiscoriein's chief activity continues to be the conduct of
the farmers of the State and other States as
to sustain close and friendly relations farmer exchange, by which
in the sale and purchase of stock and
The Commission has continued
assistance
Agriculture. Secretary Wallace in mahy well are afforded valuable
State College monthly bulletins have been
with the U. S. Department of
importance of the banker as an seed. In co-operation with the
by the award
ways has shown that he recognizes tne
, farm account books sold and club work encouraged
published
which to roach the farmer. Other leaders In the Department
agency with
of the ban ers of the of pins.
potentital influence
ing of interest in
have continued to recognize the
Wyoming has concentrated on club work and encourag
as an avenue by which to use it.
country and to use the Commission
production.
urged upon bankers the importance of obtaining livestock
chronicled.
The Commission has
There.4re other States whose activities might well be
and State College of Agriculture authorities.
the counsel of the United States
124
BANKERS' CONVENTION.
"The Banker-Farmer."
nations of the other Allies have been partly collected by them
through the
The "Banker-Farmer" has carried on its two-fo
ld program of chronicling clearing houses established under the Treaty
of Versailles. These collecdevelopments in the field of banker-farmer activity,
by associations and tions have been made on the basis of the gold mark
as the German mark was
individual banks, and by publishing such articles of
a general nature as close to par when the war broke out in August
1914.
seem likely to be helpful and inspiring. Authoritat
ive messages from leadAmerican holders of pre-war mark balances in Germany have never
ers in the U. S. Department of Agriculture and the
State colleges of agricul- been able to obtain payment even though their
rights under the two treaties
ture have appeared. The single purpose of the publicatio
n is to arouse and mentioned are clearly defined. Individual efforts
to effect a settlement,
strengthen the interest of the bankers of America in
agriculture and country flaying failed to bring results, the Commerce
and Marine Commission took
life.
up the matter and advised interested bankers that they would
make a
During the 12 months from September 1921 to August
1922, 156,290 presentation of the whole situation in principle covering such total amount
copies were published, of which 66,425 were distribute
d to banks through of mark balances as were filed with the Commissio
n for this purpose.
State associations. Of the remainder, 89,865, the greater
portion was obBankers generally throughout the country responded to this
tained by banks for distribution among their farmer
offer and
customers, believing mark balances amounting to many millions
of marks were registered with
that this would create a better understanding on their
part of the ambition the Commission.
of the banker to do his part for agriculture.
In order to make a proper presentation of the matter the
State Departto
ment,it was found desirable to have the advice of an attorney.
The Future.
The Commission was particularly fortunate in obtaining the services
If is the belief of the Commission that no class outside
of one of the
of the farmer him- best
international lawyers in the United States, Mr. Chandler
self can do so much to bring about a permanent, safe,
P. Anderson,
profitable system of who, realizing
abriculture and a contented country life, a goal which
that the Commerce and Marine Commission represented a
must be reached for
voluntary organization which had taken up the matter on principle,
the welfare of the Republic. At no time has the
and
Commission lost sight
without any possible pecuniary advantage to itself, agreed
of the fact that the farmer himself must produce efficiently
to co-operate
and
and that unless he does no legislation or marketing facility economically with the Chairman of the Commission for the good of the Associatio
n
will insure his without
remuneration.
property. In the question of credit, marketing and other
fields, however,
A brief was prepared by Mr. Anderson and he accompani
there is a rich opportunity for the banker to give assistance
ed the Chairman
and his interest of the
Commission to make a presentation of the matter to the Secretary
will be rewarded in the general prosperity of his region.
of
State, who took the question under advisement. Certain decisions
There is every sign that the time is ripe for more concerted
have
action by bank- been
rendered and Mr. Anderson is now in Europe where he expects
ers' associations and for a widening of the influence on
to conthis great Associatinue the negotiations, which, it is hoped, may open the way to
tion.
the collection of the pre-war balances due American interests as soon as the
To the officers of the American Bankers Association
economic
and State Associa- situation
makes it possible to do so.
tions and to the countless individual bankers who have
co-operated with it,
It is essential that all sources of friction between the nations that
the Commission wishes to express its gratitude.
were
caused by the war be removed as rapidly as possible and the Commerce
and Marine Commission, in taking up the question of the pre-war
mark
Report of the Commerce and Marine Commiss
ion, balances due American banks, and others, had this thought in mind,
feeling that a successful settlement of this question would be of value
by Fred I. Kent, Vice-President Bankers
to
Trust
all American citizens as well as to those directly concerned.
Co.,
New York.
Gentlemen: The large number of important matters
which were presented to the Commerce and Marine Commissio
n for its consideration,
and that naturally came before it in connection
with the purposes which
brought about its creation, were such that it, became
necessary to divide
the work among several sub-committees whose
reports will be brought into
this general report.
Liaison With the Department of Commerce.
The Department of Commerce ofthe United States
is constantly in receipt
of cable and mail information from its various
agents in the United States
and throughout the world which could be
made of tremendous value to
bankers and business men throughout the country
if placed before them in
some systematic and simple manner. With the
idea of accomplishing such
distribution of information. the Honorable Herbert
Hoover, Secretary or
Commerce, instructed his heads of departmen
ts to
Commerce and Marine Commission of the American co-operate with the
Bankers Association
in every way possible. As a result, a liaison
has been formed between the
Department of Commerce and the Commerce and
Marine Commission
which has been functioning most satisfactorily and
that has already brought,
and is going to continue to bring, most excellent
results.
"The Commerce Reports" which are published
by the Department of
Commerce are being studied carefully by a sub
-committee of tne Commerce
and Marine Commission in conjunction with Dr.
Klein and his Assistant
Directors in the Department of Commerce, and it
is rapidly becoming of
very great importance as a carrier of up-to-date
and essential business information. It would be impossible to overstate the
enthusiasm,and general
desire, to be helpful in this work that has prevailed
with Secretary Hoover
and all of his department heads.
Study on Conditions in Russia.
Observing the need of more definite information concerning
economic and
political conditions in Russia and the variety of unreliable
information
current among American business men and commercial organizati
ons on the
subject of Russia, your Commission concluded to publish a
document
which would give as much accurate information as could be made
available.
Accordingly during the month of August the Commission published
a
brochure entitled "Russia, A Consideration of Conditions as Revealed
by
Soviet Publications." The material was gathered from tee files of
the
Department of Commerce and is based upon numerous translations from
Soviet sources. It was at first proposed to print enought booklets for
general distribution to all members of the American Bankers' Associatio
n,
but we later concluded not to broadcast them in such fashion due to the expense involved. We, therefore, had a quantity printed which, it was considered, would cover the demand created by announcement of its publication. They were first distributed to members of the Commission and to a
selected list of individuals known to be interested in the subject. Copies
were sent then to the larger general and economic libraries throughout the
country and then to university libraries. Since then, such institutions as
the University of Chicago and Harvard University have requested further
copies for use in classroom work in business administration courses.
Copies were also sent to the secretaries of fifteen hundred business organizations in the United States and elsewhere, including the largest organizations of each industry in America. We have had numerous requests
from members of the American Bankers Association for copies and we still
have a sufficient number on hand to cover a reasonable demand. A digest
of the pamphlet has been prepared by the Office of the Secretary and has
since been published in the September number of the "Journal of the American Bankers Association." This study is unique, being the first work on
the subject prepared with care from basic data divorced from propaganda
of any sort, and the Commission has been widely commended for its publication at an opportune time.
Austrian Balances.
The President of the Austrian Bankers Association advised the Commission that Austrian bankers are willing to make a settlement of pre-war
Austrian balances due American bankers on a basis of 10% of their prewar value (about 10 cents each when the United States entered the war)•
although they are not bound to do so by treaty or otherwise. This sue
gestion has now been made by letter direct from the Austrian bankers to
each individual American depositor. Even though this means the payment
of a sum many times larger than the present value of the Austrian krone,
the Austrian bankers felt that an offer on their part of settlement on this
basis would so serve to show their good faith that they would be warranted
in making payment on this basis even though the Austrian finances are in
such a deplorable condition.
Whether American bankers interested care to accept this offer of the
Austrian bankers is entirely a matter for their individual consideration and
the Commerce and Marine Commission did not feel warranted in making
any recommendation, although they have acknowledged the letter of the
President of the Austrian Bankers Association and expressed their appreciation of the attitude of the Austrian bankers.
Cable Codes of Hungarian Correspondents.
A number of institutions having reported the loss of cable codes
which
had been lodged with their correspondent institutions in Hungary by reason
of their having been confiscated during the Bolshevik regime, your Commission undertook to enlist the assistance of the State Departmen
t and the
Department of Commerce in the recovery of these codes which, besides
being highly confidential, are also of considerable replacement value.
The
efforts being made have not yet borne fruit, but we expect to obtain
the
restitution of these codes.
•
Exchange of Banking Representatives
At the meeting of the Commission held on May 8th, it was resolved
"to
appoint a committee of three to investigate and report upon a plan
under
which an exchange of banking representatives between the United States
and South American countries might be undertaken for the purpose
of
bringing about a closer commercial understanding." This
report
will not be presented at this meeting by reason of the fact that it
has not
been found possible to complete the work upon the plan. We are,
however, in communication with certain of the South American
governments
and hope to present a report at a later meeting of the Commission
which
will treat of this matter at length. As the plan is presently
unfinished,
it would be premature to go into details thus far developed.
Re: Charts Prepared By National Industrial Conference Board.
In co-operation with the National Industrial Conference
Board, the Commerce and Marine Commission have had a series of charts
prepared aimed
to bring together in a concise and graphic manner the principal
elements
in the economic problems which are before the world to-day
for solution.
It was felt that a much clearer understanding of the
fundamentals of the
present situation could be obtained by bankers throughou
t the
this means than in any other manner of presentation possible. country by
It is hoped
that it may be found practicable to reduce the charts to
phamplet form for
distribution to bankers desiring them and the Natilonal
Industrial Conference Board has agreed to work with the Commerce and
Marine Commission in developing such a phamplet. The notes which
accompany the
charts, which have been placed in the lobby of the conventio
n hall, are
only leaders to enable a start to be made in their study, but as the charts
carry within them a tremendous amount of valuable information,
it is
hoped that bankers generally may be interested in going over them carefully.
Financial Statement of the Commission.
THE MATTER OF PRE-WAR BALANCES.
The financial statement of the Commission is covered in full detail
in
German Balances.
the Treasurer's report and therefore nothing need be mentioned here except
When the United States entered the war many American interests, to say that the cost of the work carried on
by the National Industrial Conbanks, corporations, firms and individuals had cash on deposit with banks ference Board in connection with
the preparation of the financial charts
in Germany. These funds were in German marks, which were quoted at already referred to in the report, could not
be ascertained in time to have
the time around 17qc. each.
the bill go against this year's appropriation, and it will , therefore, have
to
Under the Treaty of Peace between the United States and Germany and be paid out of funds to be allotted the
Commision this coming year.
in connection with the Treaty of Versailles, as referred to in such Treaty The large credit which
the Commission was able to turn back to the Treasof Peace, these mark deposits are clearly a prior lien to reparations. The urer, as shown in the Treasurer'
s report, will, therefore, be reduced by this
Allies have admitted such prior lien in effect and mark balances due the amount in determini
ng the cost of the work of the Commission for 1922.
BANKING SECTION.
125
later meeting, when the final plan, which has the approval of these comREPORTS TO CHAIRMAN OF SUB-COMMITTEE OF THE
mercial organizations, may be submitted."
COMMISSION.
The Commission authorized the committee to carry out its recommendation.
Report of the Sub-Committee On American Merchant Marine By
Milton E. Ailes.
of "Transit Zones" in the
Marine Report of the Sub-Committee on EstablishmentWing.
"Under date of July 12 1912. a Committee of the Commerce and
United States—By Daniel G.
report upon the subiect of
Commission was designated to consider andAmerican Merchant Marine,
on Commerce and Marine, held
"At the last meeting of the Commission
granting reasonable government aid to the
May 8 1922 at White Sulphur Springs, a resolution was adopted providing
and to co-operate with the Chairman of the United States Shipping Board for the appointment of a committee to consider the estanlishment of'free
in such manner as developing conditions should justify.
ports' for the re-export of commodities from the United States.
"This Committee now has the honor to submit the following report:
"The committee appointed, in pursuance of this resolution, has given
vessels
"The United States finds itself in possession of a large fleet of United study to the matter and the following report, being its conclsions in brief,
built as the result of war time emergency. With these vessels the under is submitted for your consideration:
is now maintaining adequate transportation
States Shipping Board
"Briefly stated, the institution known as a 'free port' is'an isolated, enthe AMerican flag, but with disadvantages as to types of vessels employed closed and policed area, in or adjacent to a port of entry, without resident
and only at great cost to the public treasury. has reached a point in its population, furnished with the necessary facilities for loading and unloadStates
"It is well recognized that the United
ing, for supplying fuel and ships' stores, for storing goods, and for reindustrial and commercial development where increase in foreign trade is shipping them by land and water; an area within which goods may be
essential to the marketing ofsurplus agricultural products and manufactured landed, stored, mixed, blended, repacked, manufactured and reshipped
on demestic consumption, it
goods. If producers were to depend altogether
without payment of duties and without the intervention of castoms officials.
is believed that there would be a recurring demoralization of prices, due to It is subject equally with adjacent regions to all the laws relating to public
prosover-production. To a considerable extent, therefore, a stabilized inter- health, vessel inspection, postal service, labor conditions, immigration,
against
perity depends upon adequate transportation guaranteed
and, indeed, everything except customs.'
ruption by the carrier under our own flag of the greater part thereof."
"History presents very clear evidence that the development of the great
'Government ownership and operation of the fleet, in the opinion of commercial nations of this and the preceding century has been due to a large
of this
your Committee, is impracticable, as well as costly. A recognition
the institution of 'free ports.' British ports, for example, are
the
fact has led to the policy of attempting to sell into private ownership has extent to market places and clearing houses for distribution of the diversified
counters,
vessels which constitute the Government fleet. No ready market
products of the entire world. Cargoes are brought to England and then rebeen found for these vessels because of the high cost of operating ships under shipped to every. port on the globe. There are also a number of ContiAmerican registry, and besides it is generally recognized that the war nental cities, such as Bremen, Hamburg, Lubeck, Copenhagen and Antbuilt fleet, although large, is not adequate for the proper carriage of our werp,
owe their wealth and importance, after geographical location,
foreign trade, through lack of many important types of vessels; nor does to thewhichof 'free ports.'
idea
this fleet assure to the United States the possession of vessels suitable for
"It is entirely feasible for us to compete with these long established
that there
use as naval auxiliaries in time of war. It is further recognized
by the extension of our present warehousing system and
is need of such types because of the action taken by the nations of the world European ports of a series of such ports on our seaboard. This would
in limiting their naval strength, and these desirable types of ships are not the establishment
the
mean that the United States would then be in a position to supply and
now being built because of the cost of construction in American shipyards.
which our South American, African
much
"Your Committee believes, therefore, that as a necessary step in the Asiaticdesired mixed cargoes
customers and prospective customers require, rather than simple
national prosperity the
development of our foreign trade essential to
bulk too much of one or two commodities.
Government fleet should be sold to private operators, and that such steps ones which Port' program in the United States has nevertheless developed
"The 'Free
should be taken as would lead to the building of those types of vessels which considerable bitter opposition, some of it of a most uncompromising nature.
with a view
our merchant marine now lacks, and which should be built
The chief antagonism, however, appears to lie in nothing more serious than
to use as naval auxiliaries in case of war.
of the term 'free' as applied to ports. It has
"Your Committee believes that these national needs can be fulfilled an erroneous interpretation construed as being in some way related to the
cost of apparently been frequently
only by extending national aid sufficient to equalize the higher
doctrine of free trade and has consequently found itself with a ready-made
constructing and operating American ships. The United States Shipping phalanx of opponents at the very outset. With this in the mind the term
Board, after a thorough study of the situation, has drafted, and the Presi- 'free port' should be dropped as misleading and the more precise appelladent of the United States has approved, a ship subsidy bill, a summary of tion of 'transit zone' be adopted.
which is attached to this report.
"'Transit zones' in this country could be established with a very minimum
"Your Committee highly commends this bill to the American Bankers' amount of enabling legislation. Their creation .would measurably hasten
of the
Association, and urges that it receives the full support not only
merchant marine; they would
as individuals, and that as individuals the re-establishment of a healthy American Africa and Asia by trade conAssociation but of all of its members
their efforts to link the United States with South America,
the members of the American Bankers' Association lend the bill into law. nections which would tend to promote friendly relations, supply an easier
educate popular opinion to the end that Congress will enact Shipping Board outlet and stimulate demand for American goods. They would enable
"Your Committee is advised that the Chairman of the
Commerce merchants to meet the trade needs of other countries by supplying mixed
will be pleased to communicate to the Association through its developing cargoes. They would facilitate and cheapen re-exportation and by elimiand Marine Commission, suggestions from time to time which
nating passage of material through the Customs House (unless actually for
conditions may warrant."
report sale or use in the United States), the handling of goods intended for reThe sense of the Commission regarding this matter was that the
expedited.
Committee 'with approval in principle, exportation would be greatlythe contrary, notwithstanding, the financial
should be given to the Resolutions
"Our many assertions to
bill that
but without recommendation at the moment as to any special
centre of the world will never have been transplanted to the United States
be placed before Congress.
might
until we can show facilities to compete with London as the consignment
by market and the 'middleman' of the world. The establishment of our own
Report of the Sub-Committee on Value of the United States Warehouse Act
Robert F. Maddox.
'transit zones' will bring to us an increasing share of international commerce
our banking and trade relations with other
"Realizing the great importance of enabling the farmers to market their and exchange will reinforce is confirmed in its belief that in order to deconsuming needs of the countries. Your committee
crops more orderly and in closer relation to the
it is desirable and necessary to
country, your Commission has deemed it appropriate to consider and velop foreign trade of the United States
and in conclusion your committee recomof
comment briefly upon the U.S. Warehouse Act passed by Congress in 1916. establish a seriesby 'transit zones'Bankers' Association of a resolution to be
cotton, mends adoption
the American
"This Act was passed to give to warehouse receipts covering
public interest and to the
grain, wool and tobacco Government sanction and supervision, and pre- presented to other bodies of influence in the
scribed rules and regulations under which they could be issued to give Congress of the United States, as follows:
American Bankers' Association that
'Whereas, It is the opinion of the
these receipts added value as collateral. Thus permitting the farmer to
the United States would
more easily secure loans from banks and to hold his product until he wished the establishment of a series of 'transit zones' in country, and,
to sell. Very little was accomplished by the Act until the early part of tend to greatly increase the foreign trade of this
"'Whereas, This increase in trade will bring added wealth and prosperity
1921, but since then, the Act has been better appreciated, and proven to
to the people of the United States, and
be of great help to both banker and farmer.
"'Whereas, The friendly relations betweenythe United States and the
"Up to Sept. 1922 there were 687 warehouses in all parts of the country
d be greatly strengthwhich had accepted the provisions of the Act and were issuing warehouse South American. African and Asiatic countriesiwoul
the U. S. standards and bonded ened, now therefore be it
receipts showing weights and grades under
Association should urge before
"'Resented, That the American Bankers
as the law required, divided, viz.:
the Congress of the United States the advisability of legislation to provide
Capacity
Kind of Warehouse.
Number—
"
our coasts.'
1.895,000 bales for the establishment of a series of 'transit zones' along
cotton
369
14,507,747 bush.
grain
The recommendations of the sub-committee were approved by the
248
24,130,250 lbs.
wool
19
Commission.
225,000,000 lbs.
tobacco
51
Report of the Sub-Committee on
for the most part are located directly in tne producing
"These warehouses
"Cancellation of the War Debts of the Allies" by John McHugh.
areas and therefore directly serving the farmer and giving the receipt local
value, as well as making it more desirable collateral in the money centres
Mr. McHugh developed a general discussion as to the whole European
asefulness.
and providing a wider field for its
of the Commission were seemingly unanimous
"The rapidity with which the co-operative marketing associations are situation. While members
would be of tremendous
being organized throughout the country and the variety of products which in the belief that cancellation of the war debts
plan is making it necessary to economic value, yet there was a difference of opinion as to the advisability
are now being brought into this new selling
give the warehouse receipt more careful consideration by both banker and of making any statement regarding cancellation just at this time. The
farmer.
McHugh's statements, which showed con"The U. S. Warehouse Act is just now coming into its own and the pro- Commission, in view of Mr.
will with
dacer, the banker and the public generally win be materially benefited by clusively the serious conditions which now exist in Europe which
it has opened a great deal of credit to certainty be reflected in the business of the United States unless they
tnis piece of legislation. Certainly
the producer which he would not otherwise have had, and it also guards • change for the better soon, instructed Mr. McHugh and the Chairman to
the interests of those who make loans with warehouse receipts covering
prepare a statement for the Resolutions Committee expressing concern
agricultural products as collateral.
Your committee wishes to commeno the Act to your consideration and over the present European situation and giving importance to the position
many advantages will be of growing benefit to the country."
believes its
the inter-Allied debts hold in the commercial relations between the naThe sense of the Commission, after hearing Mr. Maddox's report and his
Congress extend the powers of the
further remarks concerning it was that the United States Warehouse Act tions concerned and recommending that
has developed a system of real value to the country and the Commission Debt Funding Commission so as to enable them to negotiate with better
recommended that action be taken aimed to extend knowledge of the sys- effect.
tem to bankers generally.
Except for minor matters that constantly come before the Commission
Memorandum on Thrift Plan for Consideration of Commerce and Marine for ccnsideration that are not of sufficient importance in themselves to
Committee, A. B. A.
warrant covering in detail in this report, no further matters are before the
"The sub-committee appointed to consider and report on a plan to encourage thrift among employees of industrial institutions has had before it Commission at the moment.
many plans which have been in operation in industrial concerns throughout the country. There can be no doubt that a tnrift plan approved by
Branch Banking.
the banks of the country will be welcomed by employers generally and the
sub-committee feels that it is highly important that a well considered plan
of
should be worked out and distributed among industrial depositors by bank- Discussion Opened by Andrew J. Frame, Chairman of the Board
ing institutions. In order, however, to avoid any fe:ling that the banks
the Waukesha National Bank, Waukesha, Wis.
actuated by self interest in putting forward a thrift plan, the sub-comare
President Adams: The question now before us for consideration is,
mittee believes that before any action is taken by the A. B. A. the co-opertheir
ation of national organizations, such as the Unhed States Chamber of Com- "Shall national banks be prevented from establishing branches within
National Manufacturers' Association, shoaid be secured, so home cities where this privilege is exercised by State banks?"
merce and the
that the final plan can be advanced as the joint product of banking and
offered at the opening of its session yesUnder the terms of the resolution
principal classificabusiness. Thrift plans now in opezation fall into twoprovides for the colbe introduced during this distions. The first utilizes the facilities of the employer,through deduction terday, it will be in order for resolutions to
cashier
lection of savings each week by the company separate accounta the bank cussion under the terms of Article IX. of the constitution. We regret exin
pay check, and gives each employee a
from the
ceedingly that more time than an hour and a quarter cannot be devoted to
where the thrift savings are deposited. employers themselves the responsi- this important question, but I am sure you will appreciate the fact that in
the
"The second plan places uponthrough some designated representative,
condensing our activities into three days, by assigning one-eighth of our
bility for collecting the savings
account. The employers'
which savings are then deposited in a single designated representative total time to it, we realize the importance of the question to every member
contribution under this plan is to allow the hours.
only
of this Association.
the institution during working
..
to operate o
Marine
The discussion will be opened with two addresses of fifteen minutes each
ommittee
-committee recommends that the Commerce andnational Comcom- and will afterwards be followed by speeches of not over five minutes from
with
the sun committee to get in touch or the
mittee authorize
other of the
their approval of one
subject; the total discussion finally
mercial organizations to secure
your sub- those wishing to be heard upon the
many plans which have been under consideration, to the end that
at a terminating at 1 o clock. It will be absolutely necessary to ask every
committee may report back to the Commerce and AVIarine Committee
1213
BANKERS' CONVENTION.
speaker to limit himself to the time referred to and at the conclusion of the
Official statistics clearly show that failures of banks and losses to depostime without any respect to individuals, or without desire to hurt anyone's itors in
Canada, compared with our national banking system, exceed ours
feelings, the gavel will rap and the floor will be accorded his successor.
several times over. These facts are confirmed by at least one eh-amanger
The first speaker is the dean of all those who have opposed branch bank- of a big central
bank in Canada, in testimony before the U S Senate Coming in America for FO many years. I present Mr. Andrew Frame of Wis- mittee,
as shown in the monetary commission report:. Be says losses are
consin.
five to one in our favor. Canada has 3,000,000 square miles of territory.
Het banking power is less than little Massachusetts alone. She is asleep
Remarks of Andrew J. Frame.
compared to our progress.
Mr. Andrew J. Frame: As I do not wear the ermine I leave the law to
As to monopolization putting "credit under trade and the Empire,' I
take its own course. I speak only to upbuild the nation at large.
respectfully quote briefly from a long article some years ago in the Toronto
To our mind the paramount question before the American people to-day
"Star":
seems to be, Does the doom of the 30,000 independent banks of the U. S.
CANADIAN BRANCH BANKING SYSTEM.
impend? The proofs seem conclusive that these banks have done more to
upbuild this powerful nation than all the cream skimming monopolistic
"Monster banking monopoly a leech at Canada's throat, killing loca
banks have done for other nations. If so, this nation's greatest progress Industry, depopulating rural districts. Centralization of almost entirr
is at stake. Let us brief the case.
financial power in the hands of a few capitalists has resulted from oue
From an earnest study of the "IIIstory of Banking in All Nations," as much-vaunted banking system. Almost total extermination
of local banks.
well as other reliable authorities; from a practical banking experience in Planting of a 'oraneh' to suck out local
earnings," &c.
the U. S. for more than sixty years, wherein I have seen wildcat currency
"To this accursed system of concentration of credit, the Dominion of
and wildcat banking expunged from all the States tolerating these ex- Canada stands indebted for a contracted population
of 7,000.0011 in place of
crescences. In fact, in Wisconsin as one of the chiefsinners, I was chairman 25,000,000 rightfully due it under decentralized systems of banks, designed
of a banking committee that drew the statute which, thanks to our splendid to sustain, to breathe the breath of economic
life throughout the remotest
bank commissioner s administration of the law, has resulted in but three as well as the most insulated of its parts,"
&c.
small failures in nineteen years wherein a depositor has lost a dollar of his
May I add. In a letter to me from the Chairman of a Canadian Royal
capital. I have also seen Old World banking recede from some independent Committee appointed to investigate branch banking,
saye: -The great obbanking freedom, to monopolistic banking, colossal failures and appalling jection to the Canadian banking system is that
it concentrates the banking
losses to depositors, which should be object lessons to warn our statesmen profits and influence in two large cities,
Montreal and Toronto
This also
to pause before handing over our destinies to the tender mercies of any applies to all business—manufacturing, traaing.
insurance ana mortgage
autocratic banking power. May we ask, Has not autocracy and oppression loans." His address before the Iowa State convention
last June Is very
wrecked the equilibrium of the whole world? We might concede some
small advantages may accrue to a favored few under Branch Banking but
This indictment seems to be confirmed by Waiter L. Baker of Toronto.
In the language of the immortal Lincoln "the greatest good to the greatest Canada, who has long been in practical banking
in Canada. and who lately
number" would be practically eliminated. There are some natural mon- published a nook entitled "Money
Monopoly vs. the Community Dollar."
opolies. Surely Branch Banking is not one of them.
I commend its reading to anyone desiring light.
As space forbids, we forbear further quotations, except to say as the
SPECIAL LEGISLATION.
independent banking system of the United States has sustained her wonderSince 1916, when the American Bankers'Association, after a full discussion ful development; has
floated in the briefest time the most colossal loan camwith but two dissenting voices "condemned branch banking in any form," paign (nor
known: has upheld the credit of the groat nations of Europe in
which resolution has never been reversed by the Association, the propa- the world
struggle to the extent of eleven pillions of dollars, to which we can
gandists in the press have flooded the nation with such sophistical preach- add five
b'llions on private account; our pre-war debts of say five billions
ments as these:
are also paid, and to-day we dre a creditor nation for some si..teenbillions of
"Ist. That branch banking serves the people better.
dollars, therefore may we not fairly assume that it is not necessary to
"2d. That under branch banking, failures and losses to depositors are nonopolize,
to "prevent panics and failures and put credit under trade and
lessened.
the Empire"?
"3d. That, because a few of our States have granted to State banks
Evidently, an occasional twig cut from an Independent system, but
argely in cities the special privilege to have branches, therefore, the national
strengthens that system, whereas under branch banking, when the tree
banks should have some of the pork."
and all its branches fall. then a gloat public calamity follows.
In answer to Nos. 1 and 2
I here leave to an intelligem, public to draw Its own conclusions as to
Let us quote from the world's history some
whether or no branch Drinking is better and failures and losses are loss
than ours. Now let us take up
ASTOUNDING FACTS.
QUESTION NO. 3.
Without going back to the destructive panics in Great Britain under
its branch banking system from 1836 to 1839-1847 and 1857, where accordShould special legislation be permitted to favor a few monopolists which
ing to Henry Dunning MacLeod, "private banks stopped discounting would but drive the wedge in further and later Canadianize our whole
altogether. When universal ruin was at last impending," &c., permit me banking system?
to quote by way of comparison in later years: In 1866. when Overend
We answer most emphatically. Not
Gurney & Co. failed for £10,000,000 the bank failures in Great Britain
The U. S. Comptroller of the Currency is quoted as saying. "If if had
aggregated the stupendous sum of £50,000,000.
been my duty to make laws of the various States of the Union. I should_not
In 1878 three banks in Scotland with some 200 branches failed for have permittea branch banking."
£20,000,000 with a deficit in assets about equal to the total losses to all
Again while most State laws absolutely prohibit branch banking and7a
the depositors of all the national banks of the United States since 1863. few permit it in cities only, two or three States have opened the door wide.
Our banking power averaged 100 times these three banks.
A MENACE OR NOT?
In 1890 the Barings failed for £21,000,000 but was liquidated by the
London banks for fear of a general upheaval.
California.
Thus in 1866. 1878 and 1890 liabilities totaled £91.000,000. According
California has 280 branches out of 000 in the State. The Bank of
to the report of the Comptroller of the Currency in 1901, the total liabilities, Italy has some 60 in various eections of the State and the end seems not
1863 to 1901 of failed national banks was
£37,000,000 Yet. The First National Bank of Los Angeles has absorbed some 25
1863 to 1898 of all other banks in the United States
44,000,000 branches and the independent banks throughout California are in a state
of panic over coercive measures that seem to say "sell out to us or we
Total
£81,000,000 will drive you out of existence."
Michigan.
This is $50,000,000 short of British failures in the panics of 1866-1878 and
In Michigan, the law prohibits branch banking except in cities. In
1890 alone, not counting intermediate failures for forty years.
London's last bank failure with branches occurred in December 1920, Detroit there are 168 branches of ten State banks. The president of the
First National Bank there pleads that because State banks have this
with estimated losses of $14,000,000.
The American "Encyclopedia" for 1893 says of Australia: "Out of special privilege, therefore, national banks should also. Ile says "As
28 banks with 1,700 branches, 13 of them with 800 or 000 branches failed a matter of tact, branch banks ate nothing more in effect than 'branch
in 6 months for X90.000,000." A moratorium of' five years was given in offices, to receive deposits'—for the branch as a rule makes no loans. The
which to recover. Iler banking power approximated one-sixth of ours. branch manager has authority to loan up to $500 or $1,000 but 'applications above this Omit go before the head office," largely miles away. A
. Are failures and losses less than under our system?
beautitul and enticing picture for the suburban resident who has spent
Again.
Edward II. Holden in 1919, then Chairman of the Board of Directors his life in upbuilding his section through community banking trade, manu• Sir
of the Amalgamated London Joint City and Midland Bank, which had facturing, &c. In short, give us power to skim the crea:m from the suburbs
1,300•(now 1,600) branches and $1,600,000,000 deposits (now $1,800,000,- and leave the skim milk for those who produce lb.
000) pleaded:
Missouri.
•
1. "These banking amalgamations have prevented panics and have
Branch banking is not permitted under her laws. The suburban banks
put credit under trade and the Empire.
of St. Louis became alarmed because the First National Bank there took
• 2. "Large and powerful banks are indispensable to raise £300,000,000 steps to open "offices' in
South St. Louis miles away, in competition
sterling to restore the industries after the war," &c. .
with the several strong banks there which had borne the heat and burden
Permit me to say, the not profits in 1918 were 54%, on the capital or of decades
developing local industries, &c.
in
say 27% on capital and surplus, therefore is branch banking philanthropic
Wisconsin.
or what? The average profits of all national banks since 1863 approximated 8 or 9% per annum. The 1,600 branches itibmit for head office
At the 1922 State Bankers Convention, the following appeal was broadconclusions, all loans over $500 before action thereon.
casted, 'Are you awake and ready to combat the new 'branch bank'
Some thirty years ago over 86% of Great Britain's banking power was menace which is threatenieg to 'wipe out' the independent city and country
subject to say eighty central banks, which now through amalgamation is banks of Ametica?" The reply with a full house unanimously thundered
approval.
reduced to five.
Resolved. By the Wisconsin Bankers Association in 1922 convention
Less than ten great banks practically dominate the whole banking power
avoidance?
assembled that we are unalterably opposed to branch banking in any
of France and Germany. Are these not object lessons for our
form in the State or nation, and that we deplore their recent growth in
CANADA.
some other States and be it further
Resolvea, That we will regard the establishment of branch banks In
In Canada some seventeen central banks (reduced more than one-half
through amalgamations and failures in less than thirty years) now skim this State as an act unfriendly to the banks of Wisconsin.
leaving only the skim milk for the rural
the cream from over 4,600 branches,
Ohio and Michigan.
and suburban populations. Branches have no local stockholders, no presComptroller Crissinger says, to illustrate: "In my own State of Ohio,
idents, or cashiers They loan no money to farmers on mortgages. They
practically -pay no taxes and have figureheads for managers,subject to alien we have a bank in Cleveland, operating under a State charter, with 46
officers' orders. The most serious objection is practically no profits are branches In that city, and is now extending its operations throughout
distributed !wady where they arc made, thus impoverishing the nation at large the State and has absorbed—practically put out of business—all the big
national banks in Cleveland. Take the city of Detroit, with only thrti
for the sole benefit of monopolizers in the great cen.res.
BANKING SECTION.
127
out of business of a branch bank maintained by any of its members, irrespective of what
national banks (all rather husky) the rest having been put
the law will permit. If, on the other hand, it believes that the resolution
by 185 State banks and branches"
Con- of condemnation passed at the Kansas City Convention was too sweeping
Parallel conditions might be multiplied in Illinois. Minnesota,
and that there are circumstances under which,branch banking is conservanecticut and other States.
its peril or tive and justifiable, then it should lend its hearty co-operation to securing
With such conditions before us will this nation awake to
under such conservative and safe conditions the right of a National bank
sleep at the switch?
can "put out of to establish branches along with those of State banks.
Query: If a few big State banks, having branches,
The question has become very acute during the past few years through
are endowed
business" all other competitors and the big national banks
t State the establishment of branches by State banks in all parts of the country, in
with like powers, how long will it take to put all the independen
direct competition with the National banks in that same locality and with
and national banks out of business?
no power on the part of the latter to retaliate. Now, when a National
Have the smaller banks of this nation no rights which the monopolist
bank finds itself confronted with such competition and finds that it is
is bound to respect?
t banks losing its business through its inability to take the same step as its comIf it is a slow poison that is eating out the life of the independen
upon the petitor, what possible courses of action are open to it?
in a few States, is that a sound reason for grafting the cancer
First, it can supinely sit down and lose its business to its competitor.
great national banking system?
to Surely no red-blooded man will approve of this, and the A. B. A. cannot
The honeyed transparent suggestions that are being freely used
for like afford to endorse it.
convince Congress, to permit branches of national banks in cities,
door to
Secondly, it can surrender its National bank charter and become a State
reasons as are now given, if granted would surely open wide the
half bank. Such a course, if generally followed, would lead to the destruction
Oanadianize both our banking systems. "This nation cannot live
of the National bank system, and seriously threaten to disrupt the entire
slave and half free."
for Federal Reserve System of which the National Banks form the back-bone.
The National Bank Act apparently prohibits branch banking, yet
be an admission that the formation of a
sixty years, though bills to amend the law permitting it have repeatedly Furthermore, such action would
of branch is good banking, but that the Nat'onal Banks are not to be perbeen presented in Congress, according to the Chairman of the House
to the mitted to be progressive.
Representatives Banking Committee, "It has not been possible, up
Thirdly, it can temporarily surrender its charter, become a State bank,
present time to get a bill in any form whatsoever through Congress that would
absorb a bank with branches, or form branches of its own and renew its
authorize national banks to have branches."
In view of these facts, is it not amazing that any comptroller of the National charter.
of
banker
Fourthly, it can establish branches and call them "offices." Both
currency should approve of branches? Is it not amazing that any
ways of doing what the bank believes to be
should, defy this record and proceed to drive the wedge further toward these last two plans are indirect
of the law, and
States right, but they are apparent evasions of the possible intent
monopolizing our independent banking systems? Because a few
a if they are right the law should be RO changed as to make the bank's right
permit the cancerous growth to eat out the vitals ofsome localities, is that
clear and unequivocal and to establish the proper restrictions and limitasound reason for grafting the cancer upon the nation at large?
Do these banks, claiming the congressionally denied right, need to tions.
our
Fifthly, it can endeavor to deprive a State bank of its unfair power.
absorb other banks to keep them from starvation? We all glory in
in fair This latter, however, is practically impossible. Branch banking is pergreat central banks' success when they stand on their own legs,
selfish- mitted in 17 States, prohibited in 16, and in the other 15 and in the District
competition with the independent banks of the nation. Is supreme
of Columbia there is no specific provision on the subject. In a number
ness to override justice toward all?
my main of the latter State branches exist, and even in many of those States which
Permit me to quote from a few eminent authorities to sustain
of the
•
prohibit branches those branches which were in existence at the time
contentions:
States
passage of thelaw are permitted to remain. So that the number of
The "American Banker," New York, says:
not to have in which branches do not and cannot exist is very small. It is manifestly
"We believe with Mr. Crissinger that the best thing is
the preservation of impossible to change the laws of so many States or to interfere with the
branch banking in any form, and we also believe that
the preservation charter rights of banks having the privilege.
our independent banking system is more important even than
is
r instead
It is self-evident, then, that the only solution of the problem which
of our national banking system. Let us hope, that the Comptrolle
any fairbranch banking from a defensive cpen to any reasonable defense and which can commend itself to
of encouraging national banks to go into
national banks, at
of branch banking minded person is such a change of law as will permit
viewpoint will co-operate in legislation to stop the extension
least in those States which permit branch banking to the State institutions,
in the Slates."
the
York:
to establish branches within the corporate limits of their city. Now,
The "Commercial & Financial Chronicle," New
preserved only possible objections that can be urged to such a coursi may be divided
"We would have our individual free and independent nationals
banking is not conbanks preserved. into two classes: the theoretical objection that branch
from this encroachment just as we would have our State
servative and that proper supervision cannot be kept over a banking business
We are far from believing in a vast, sinister 'money power'.
supervision, we think our spread out among various "offices:" and a second objection based entirely
With permitted small capitalization under
will spring up for on a question of policy and the fear that, however conservative and proper
community wealth and prowess is such that a bank
spot in this country such a course may be from the standpoint of good banking, it is against
intimate service, sustained by popular regard, in every
public policy in that some of the large banks in the chief money centres might
which needs or might to have a bank."
eventually extend over the country to the injury and possible extinction
"Barron's Weekly," Boston.
of the small p.ivately owned banks.
Mr. Barren is also President of the "Wall Street Journal."
us will share
Let us look at these two objections for just one moment. First, as to the
"The question is a highly interesting one, and most of
merger of twenty-five objection that it is unconservative banking. Experience answers this
,Andrew J.. Frame's well grounded distrust of a
wing of the First immediately by pointing out that branch banking has existed for years,
banks in Southern California, all under the protecting
people this not only in foreign countries and in Canada, but right here in our own
National Bank of Los Angeles. For the needs of the American
country, and even the Federal Reserve Act gives the National banks the
merger looks uncommonly like a step in the wrong direction."
privilege of opening branches in foreign countries and a number of such
The "Manufacturers Record." Baltimore.
and the time to branches have been opened up. Even the most rabid objector to branch
"There is a new snake crawling in the financial domain
national banks is banking cannot possibly assert that the banks Which are to-day operating
scotch it and paralyze it is now. In branch banking by
insolence of lawlessness, such branches are not in general strong, conservative banks and well manthe seed or arrogance, the promise of tyranny, the
the less developed com- aged, and if they can properly supervise branches in Europe and South
a conspiracy for centralization and the yoking of
financiers." The editor America there can be no difficulty in supervising branches within their
munities to the juggernauts of metropolitan
independent banking own city. In other words, there can be no objection on the score of unpleads for "that intimate personal knowledge" under
conservatism or of danger to depositors, customers or stockholders of the
which is so essential to our greatest progress.
bank in question, but the objection must be limited to the question of
REMEDY.
public policy.
quotations except to say, the true remedy lies in
Time forbids further
On this ground of public policy the objectors claim with loud shouts and
Special legislation in favor
cutting out the cancer from State and nation.
banking-will be that the large
clearly un-American and clamor that the result of a policy of branch
of the rich as against the progressive many is
in the great money centres of the country will establish branches
of constitutional liberty. Let us not banks
directly antagonistic to the spirit
privately owned bank. This
"grab all, lose all" error. thraughout the land and drive out the small
dry up the streams of progress through a mistaken
to establish branches everyseduced into political argument presupposes an unlimited power
seems impossible that our statesmen can be
It
where. Such a course is not advocated by the National Bank Division.
destructive fallacies.
as well as economic suicide through endorsing such
of our best financiers and most thoughtful
abounds, may we not well exclaim, nor would it have the approval
In this land where great prosperity
men.
Rats
under the Stars and Stripes"? Our only dark clouds
"Thank God we live
The National banks are asking only for the same right that the
The object lessons
emanate from the preacher of the gospel of discontent.
the power confined to the
decade in the Old World, banks have and are perfectly content to have
of monopoly,arrogance and oppression of the past
had the pawer or the
be superseded by any city in which they arc located. In such cases if they
without
should warn us that American freedom should not
desire to drive the small bank out of business, they could do It
is a calamity to any city. State or nation.
to exist
oligarchy. Branch banking
branches. If such a power or desire did exist, it is just as likely
as in those of
banks
President of the National Exchange in the minds of the management of the large State
Address of Waldo Newcomer,
all their
the National banks. Have the State banks in this country with
Bank. Baltimore, Md.
have
branches driven the small banks out of existence? They have or they
for mo to use all of even the limited time at my
for assuming that
It will not be necessary
it requires not. If they have not, what possible reason is there
-day, for, when a cause is that of justice and right,
National banks
disposat•to
how would the
sustain it. If the decision National banks would do no? If they have,
very few arguments and very little oratory to
the resolution passed at the
partisan vote, we know that the change the situation? I have not overlooked
of this question were to be decided by a
in Kansas City by a divided vote, when the Association went
convention
the National Banks by an overwhelming majority,
State Banks outnumber
any form. In the ftrst place,
the granting to National on record as opposed to brancn banking in
and they can by force of might refuse to sanction
of the body;in the second place,
enjoy and a debate on the that was by no means a unanimous opinion
Banks of the privilege which many of them
that the resolution does not prevent
might does not make right, and I conditions have so changed since
question would be a waste of time. But
not and cannot have this effect. Branch banks
of the members of the American branch banking. It does
have•enough confidence in the fairness
exist and are multiplying. It merely prevents the Association from taking
Association to believe that the average man in it wants to do active part in securing to its National bank members the same rights as are
Bankees
convinced that a thing is right and fair
what is right and, provided he is
the State bank members.
e, he will vote for it and that that average enjoyed by
to an
and at the same time conservativ
It seems to me, therefore, that the question narrows itself down
vote and control the action of this
of this Assoman is numerous enough to carry the
extremely simple proposition of plain honesty. It is the duty
members and it must
Convention.
the interests of all classes of its
National Bank Act it has been assumed ciation to protect
Ever since the inception of the
question.
no power to establish branches. It now face this
and believed that a National Bank had
believe that branch banking is conservative and safe under limited
If you
into any technical or legal discussion as
strongly a
Is not my purpose to-day to enter
conditions. it is your absolute duty to get back of and support
seVe:al locations or whether an "office" is
that right to National banks, which
to whether "a locat'on" means
of ordinary move to grant under those conditions
to a very simple proposition
on the other
will put them on a parity with your State bank members. If.
a branch, but to confine myself
as it stood
honesty and fair, play.
hand, you believe that the Kansas City resolution is still correct
banking in all shapes and under all
ces is bad banking, then
If the Convention feels that branch
app:ove and that all branch banking under all circumstan
tive and bad banking, then it should not
conditions is unconserva
128
BANKERS' CONVENTION.
you must not only refuse to support the National banks in what they believe
Is it fair to have the thirty-two States of the
Union granting a privilege
to be their rights but must immediately demand that every member bank,
to State banks and denying, in those States (because
whether State or National, which to-day has any branches or offices
that is the subject of
other the resolution) precisely the same
privilege?
than its main office must forthwith close those branches and
offices or
I do not believe, in fairness, that the
immediately resign from membership in this Association, as doing
American Bankers Association can
an unconservative business not approved and supported by the American Bank- so go on record. I thank you.
Mr. West (Illinois):—On behalf of 140 State and national
ers' Association. There is no alternative; there is no other horn
banks in the
to the city of Chicago and the County of
Cook, and as a stockholder and director
dilemma; there is no middle ground.
in national and State banks in Chicago
and down-State, I speak for the
Mr. Jeffries (Missouri): Mr. President, Ladles and Gentlemen: I
resolution and I second the motion to adopt the resolution.
only have five minutes in which to make the few remarks that I
shall
Mr. Watts (St. Louis):—Mr. President, Ladies and Gentlemen: For
make, and I want to say that Mr. Newcomer was entirely fair in
his
position. The opponents of branch banks accept the challenge which more than a quarter of a century I have taken part more or less actively
in the affairs of the American Bankers Association and
he has made in the statement that they are either right or wrong.
never until I came
If the branch banking system is right, let it be extended to every State to this convention have I been accused of being a trouble maker. Because.
Mr. President and gentlemen, in he study of the
in the Union. If it is wrong, let the American Bankers Association
situation as it exists in
go one ofthe larger cities of this
country,I concluded that it was quite necessary
on record as opposing the system anywhere and everywhere.
The American people, as a nation, and from a national standpoint, to find some way of carrying the banking service throughout the city in
have always stood opposed to the branch banking system. They have, which we were located—I was seeking some indirect way and in doing
in such capacity, always favored and demanded the time-honored Amer- so, I thought I discovered a way which it might be done directly.
The solution of that problem now is a Judicial
ican system composed of locally owned and locally operated
one and I believe the
individual institution with which I am
connected will do a service to all the banks of
banks.
And the question which is before the American Bankers Association the country if theyfinally determine what the rights ofthe national banks are.
This subject has brought out some interesting
to-day will present itself in the political situation of this country before
sidelights. I see here
many months have passed away, as we shall see if further attempts be to-day St. Louis bankers who have never seen a bankers' convention held
outside of the city of St. Louis.
made to break down this individual system of banking, of forcing the
It seems to me we should not decide upon this subject
entering wedge in order that a revolution in the system might take place.
in the limited time
One of the most potent reasons for defeat of the measure in Congress at our disposal, because a subject decided wrong is never decided; however
temperate and considerate our deliberations may be, this subject
to extend the life of the Charter of the United States Bank, which eApired
will never
in 1836, was the right of the bank to establish branches in the various be settled until it is settled right, and if I were following in the Chair of the
States of the Union. Senator Benton from Missouri, who for a period American Bankers Association for this and subsequent years, I think I
of eight years led the fight against the institution, addressed the Senate, would keep this subject on the program. I think that it would tend to
and in the course of his masterly argument may be found the following, keep the interest in this Association at the pitch which you have seen it
which I believe, ladies and gentlemen, is applicable to the conditions in., to-day.
I sincerely hope that my friend from St. Louis will be continuing,
the United States, though practically one hundred years have passed
in their
interest, in the American Bankers Association.
away. Ile said:
My friend the astute lawyet from St. Louis—and I would not
"The Charter gives the bank the privilege to ertablish branches in
have told
that he was an astute lam yet if he hadn't told you himself by
different States without their consent and in defiance of their resistance.
addressing
you as the Bar Association—I hope his interest may be a continuing
No one can deny the degrading and injurious tendency of this provilege,
one.
I hope the gentleman who seconded the resolution. who, I
understand, is
monopolistic in its character. It is the interrogation of the sovereignty
an attorney-at-lhw, I hope that his interest may,be a continuing
one.
of the State; it tramples upon her laws, opens her Government to the
But, gentlemen, this subject so far as the American Bankers
Association
attacks of centralism. It impairs the property of her citizens and fastens
is concerned, must be settled by the American bankers, however
this vote
a vampire upon her bosom to suck out her gold and silver.
may be to-day—and I daresay the vote will be favorable to this
particular
"My friends, what was true of a nation is now true not only of the nation
resolution. But the question will not be settled then, gentlemen.
but also as to each and every financial and industrial centre."
It seems to me in this discussion there is one factor that has
been overThe Constitution of the United States makes no reference to banks,
looked, a factor which is too often overlooked in discussions in this country;
but my position is this: Shall we now because a few States have chosen
that is, the ultimate consumer, that is, the man who uses bank
service.
to disregard this long established and closely guarded policy of the people,
I would like to ask if there is a man within the sound of my voice,
if there
ask Congress for the right to permit National banks to do violence to the is a
citizen of the city of New York, who would say that the consumer of
traditions of our country as regards this branch banking system? A
bank service would not be served better through the medium
of additional
few other States may follow those already offending.
offices, or service stations, on the part of your great banks
in this city, as
My fellow-citizens, until the whole nation, speaking through its reprecompared with any other form of service?
sentatives in Congress, degree otherwise by general law, the policy should
I ask that question of the bankers of the city of Cleveland,
or Detroit,
stand inviolate.
or the bankers of other cities.
Rather than commit an invasion of fundamentals, would it not be
I may say in conclusion, Mr. President, that I hope at
other conventions
better, my fellow-citizens, to stand loyal to the precepts of the fathers
of this Association to have the privilege of discussing this
subject until it
and spend our patriotic energies in prevailing upon offending States to
may be settled in a manner that is sound and for the best
interests of all the
return to the altar of our country?
people, and therefore for the best interests of the banking
business of this
country.
RESOLUTION AGAINST BRANCH BANKING.
Mr. Prince (Hartford): Mr. President, on behalf of our Connecticut
I would like to offer a resloution which has been prepared for introduction banks and bankers, I want
to add the second of the Association for the
at this time.
adoption of this resolution.
"Resolved by the American Bankers Association that we view with alarm
In order that my motion may not be misunderstood as that
of usurping
the establishment of branch banking in the United States and the the power of Connecticut banks and bankers,
I want to say that two or
attempt to permit and legalize branch banking; that we hereby express three weeks ago, realizing that this
question of branch banking would be
our disapproval of and opposition to branch banks in any form in our a very pertinent one and an important one for
discussion at this convention,
nation,
a regularly called meeting was held at which this question was very
care"Resolved, That we regard branch banking or the establishment of fully and thoroughly debated, and a resolution
similar to the one which is
additional offices by banks as detrimental to the best interest of the people now before us was practically unanimously
adopted.
of the United States. Branch banking is contrary to public policy,
It therefore is not only my own personal privilege but my duty to second
violates the basic principles of our Government and concentrates the the motion which is now before you.
credit of the nation and the power of miney in the hands of a few."
President McAdams: Me. Lonsdale, President of the National Bank
I move the adoption of the resolution.
Division.
President McAdams: Without debate, the vote is upon the question:
Mr. Lonsdale (St. Louis): The National Bank Division believe in
Shall the resolution be considered by the convention?
promptness of action with a due regard to all whom that action may affect.
The motion was carried.
I therefore desire, in order that this issue may be met squarely, to propose
President McAdams: As there are 200 votes in support of the resolution an amendment to the resolution and that is, after the word "uniform,"
it is now before the Convention for discussion and action.
that there be added: "by the State or national bank."
Mr. Preston (Chattanooga. Tenn.): The question of branch banking
It is proper that a fair-minded discussion be brought before this, the banking parliament of the nation, and the National Bank Division have asked
is such a large one, we are very apt to drift from the real subject.
I agree with my distinguished friend from Wisconsin in most of what for equality for that great American privilege, and therefore I offer that
. he has said. He is often right, but whether right or wrong, we will all amendment to the resolution.
admit that he is very vigorous. I am opposed to branch banking in any
Mr. Jeffries: I am willing to accept Mr. Lonsdale's amendment.
President McAdams: Mr. Lonsdale moves an amendment to the resoform that will destroy the independent banks of this country.
But is it fair and right to permit one class of banks a privilege and deny lution proposed by Mr. Jeffries, and the amendment, as I understand, is
that to another class? For instance, in the city of Detroit, according to accepted by Mr. Jeffries, the original mover, making the first part of the
the Comptroller's figures, there are 185 banking houses or banking points resolution read as follows:
"Resolved, by the Ame:ican Bankers Association, that we view with
in that great city. One hundred and eighty-two of them are represented
by State banks and their branches, and only three by national banks. alarm the establishment of branch banking in the United States, and the
fairness,fail to grant,or fail to endorse the proposition attempt to permit and legalize branch banking; that we hereby express our
Can you,in a spirit of
granting these national banks precisely the same privilege as the State banks? disapproval of and opposition to branch banking in any form by State or
As Chairman of the Executive Committee of the National Bank Division, national banks In our nation."
The amendment is now before you for consideration.
I have had an opportunity to bear this question discussed, and I think it
Mr. Bonynge (Los Angeles, Calif.): Mr. President and Members of
only fair at this time that I read to you this declaration upon this in the
convention in California. I will only read one paragraph. This, I think, the American Bankers Association: It seems to us that the question
clearly defines the position of that Association, as expressed in its organized that is now before the house is one that has passed beyond the jurisdiction
of this organization. It seems t me that it is a question that can be
capacity.
"Therefore be it Resolved, That the National Bank Division of the controlled only by the individual State legislatures. It seems to me that
Association requests the Congress of the United States the motions before the house, while they may give you a certain gratificaAmerican Bankers
to so amend the National Bank Act as to permit the national banks to tion to express your feelings, are totally inadequate to do you any good.
maintain and operate branches within the corporate limits of the cities in What are you going to get from it? Is the Legislature of the State of
which the head offices of such banks are located; to be confined, however, New York or the State of California or of any other State, which perto States in which State-chartered institutions are authorized to have mits branch banking, going to be influenced by this resolution here?
Cries of "Yes."
branches."
Mr. Bonynge: No, they won't in California. It has taken too firm
That, I believe, ladies and gentlemen, covers the subject before us.
Some one asked Abraham Lincoln what he thought of it. His reply was a hold there and it is too popular.
Now, gentlemen, I don't believe personally in branch banking. While
that the farmers were no better and no worse than other people. The same
impulses that moved others, move them. I believe that that applies to I am President of a National bank that is operacing tnree agencies under
the national banks of this country. They are no better and no worse than the written consent of the Comptroller of the Currency, I want to say
that I am still not in favor of branch banking.
other banks, and the same impulses that move others, move them.
BANKING SECTION.
It was only under the pressure of the State banks surrounding us with
a ring of branches all around us and taking-our business from us, that we
felt compelled to take that course.
I can see the possible menace of the concentration of capital in a few
hands if branch banking became a national affair, but I do not see the
same menace if that branch banking is kept down to the States and to
such States as want it.
I have prepared here a resolution which, if I am in order, at the proper
tihie I will offer. I will read it to you, if I may. I will offer it as a substitute to the motion and the amendment. This resolution, I belleve1
will suit a great many people who would otherwise be opposed to branch
banking. It reads:
"Whereas, A number of the States either allow( or have provided by
legislation for the maintenance of branches by their own chartered banks.
and
"IVhereas. It is now being contended that the present National Banking
Laws permit toe operation of branches by national banks."
The best of lawyers differ on this question, but you must remember
that the most important question that was ever decided by the Supreme
Court of the United States was decided by seven votes—you all know
what that is.
"Whereas. If such contention should be sustained it might result in
the establishment by national banks of branches, not only in States where
branch banking is permitted by the laws of such States, but also in States
that do not permit the operation of branches by their own State banks;
or even further, it might be maintained that national banks have the
right to establish branches not only in their own but in any number of
States."
Many of you here are aware that the State of New Jersey has two
branch national banks operating in the city of Philadelphia for over forty
years, and it has never been interfered with. I have that from the
authority of the Comptroller of the Currency.
"Therefore, The American Bankers Association in convention assembled
hereby resolves, first, we acknowledge the right of every State to regulate
the business of banking as conducted by their own State banks through
such laws as they may see fit to enact."
I want to know: Is there anyteing wrong about that? Does anybody
challenge it?
"Second, wherever the laws of any State provide for the operation of
branches by their State banks, we believe that similar privileges should
be provided for by Federal laws to enable national banks to compete
on equal terms with the State banks."
Gentlemen, is that fair or not?
"Third, we are opposed to any law or construction of a law that would
permit national banks to establish branches in any State where branch
banking is not authorized by the laws of that State.
"Fourth, we are opposed to the establishment by any bank, either
State or national, of branches in any other than their home, State."
I move the ad vption of those resoltions as a substitute to the motion
and the amendment.
President McAdams: Does the substitute meet with a second?
President McAdams: The question is now upon the adoption of the
substitute, Is there any discussion?
Mr. Daniel F. Gina (Pennsylvania): In rising to address this convention,
the uppermost thought in my mind is to conclude by offering a motion to
lay this substitute on the table. My purpose in discussing the question
is that it evades an issue which should have a free discussion before the
members of this Association. It has been offered by the advocates of the
resolution against bank btanthes, that a monopoly is created and this
monopoly endangers the public interest and the public welfare.
That argument has not been met by any of the advocates of national
bank branches. We have alleged that in so much as an evil has been
committed by State banks, that two evils are bettet than one, and for that
reason they wish to invade the same field and absoro banks in their respective
communities.
It has been argued by the first speaker for national branches that the
Federal Reserve Act does permit branches for national banks in foreign
cities or foreign countries. In that they have our good wishes and Godspeed for then they do us no injury.
Beneath the queston there is one question, of who shall make the money
in the banking business. Whether it is the large bank of the big city, or
the small bank, is but a trivial and insignificant question con.pared to the
Influence that it has on the public interest and the punlie policy.
I am reminded in the dis..ussion by the celebrated English talket this
morning, when he brought home to you one telling fact, that in the United
Kingdom there were only thirty-nine banks and nine thousand branches.
Do you believe that thete is a relation between credit and the power centralised In government?
In that I must go back and remind you that during the time of the
United States National Bank which expired by the veto of Andrew Jackson,
he offered one argument which should live in the mind of every man whole
going to vote on this question. lie was approached by Andrew Biddle
after that legislation had passed both the House of Representatives and the
United States Senate. And Andrew Biddle said to him, asking him to
endorse the perpetuation of the United States National Bank. and the
centralization of power. "Do you know what power this United States
Bank has; do you know that It has branches in every State of the Union?
Do you know that it has branches in every city of every State of the Union?
Do you know that it can name the Governor of any State in the Union?
Do you know that it has power to name the next President of the United
States?"
And Andrew Jackson, stern advocate of the puhlic interest that he was,
said, "If the United States Bank has all the power that you claim it has,
then It has more power than anything in a free country ought to have and
by the living eternal it shall be destroyed.'
So he vetoed it and the centralization of power went away from the
national banks.
To-day it is revived in the absorption of the State banks in the different
States and you see the evil influence where thirty-ni ne bank,in the Kingdom
of Great Britain have the power over nine thousand banks in the same
Kingdom.
President McAdams. It Is moved and seconded that the substitute
motion be laid on the table. That cnotion is not debatable.
Member. I rise to a point of order. By laying the sub,titute upon the
table you lay the whole question upon the table, and throw the question
berme the house.
Pr(sident McAdams: The gentleman 's entirely correct. The question
Is upon laying the substitute upon the table
All in favor will say "aye,"
129
opposed "no." The motion is lost and the question is now upon the substitute as offered by the gentleman from California.
Mr.Latta (Alinneapolis): Mr.Chairman, I had no Intention of intruding
upon the time of this convention, but I feel that in one point at least it is
my duty to express what I know by natural knowledge as to the working
of a certain kind of branch banking.
For many years I lived in the city of Detroit. The city of Detroit has,
as has been frequently mentioned here, a large number of so-called branch
offices, conducted by State banks. The State banking law of the State
of Michigan permits those branches. Thore branches were established
many years ago in many instances, where so fat as I know the law gave no
permission and on the othet hand expressed no dissent. What legislation
has occurred since I am not familiar with, but I know those branches
and continue.
The gentleman who last spoke raised the question as to the real merits'.
of the situation, meaning. I believe, the service to the public. There are
many within the sound of my voice who, I ant sure, would second what I
say in stating that in the city of Detroit the best banking service is available
to every citizen, and I have never heard one objection in any way, shape
or form to branch banking as conducted in the city of Detroit, but what
have you got? You have there three national banks of this great system
of ours, only three in the city of Detroit with a million people, one of the
largest industrial cities in the United States, where the interests of thousands
and thousands of workingmen are in the savings which they put into the
banks.
Those national banks are not permitted to serve in the same way that the
State banks are. Why should they not be, particularly when we know
that the service that has been conducted by the State banks has been
safe, sound and satisfactory?
Gentlemen, I live in the city of Minneapolis where we have already established two additional offices of our own bank. There has not been the
slightest objection and we believe that we are serving the interests of the
public. We have not the slightest desire, we are absolutely opposed (and
I think I voice the sentLeent of every national banker in the city of Minneapolis and probably in the State of Minnesota) to branch banking as extended beyond the corporate limits of the city, but we do believe that we are
sound in being able to offer to our customers over on another street or some
blocks away the facilities which they find they cannot readily avail themselves of if they are compelled to go to the main office. The peaking
question of automooiles to-day, while It is a little thing to bring before this
convention, is a menace to the business of the downtown banks. Many
of our customers are not able to get into our banks without leaving their
cars at a long distance and bringing their money through the streets in
danger of being held up.
Gentlemen, I don't believe that sound banking for one moment will ever
be interfered with by permitting national banks to have additional offices
in their own cities, but I do not believe in extending those facilities beyond
that city.
President McAdams: Just one second, gentlemen, the time has come for
closing the debate. I will recognize one more speaker on each side.
Mr. Pineh'll (Mankato, Minn.): I believe that the delegates thoroughly
understand this question and I rise to move the previous question.
President McAdams: The motion is carried.
The question now is upon the substitute as offered by Mr. Bonynge.
The "no's" have it and the substitute is lost. The question is now
upon the amendment as offered by Mr. Lonsdale and accepted by
Mr. Jeffries to the original motion. Are you ready to vote upon the
amendment?
Mr. Wm. Alden Smith (Michigan): I want to say one word about this
resolution and it will only take a moment. I live in a city of 150,000 people. Fifty thousand accounts number the accounts in the bank of which
I am President. We have twelve branches and have carried community
service into every one of those twelve branches, and while most of the banks
in many of the States were losing deposits in the trying period through which
we have just passed, our institution augmented its deposits nearly one hundred fold. We take our service to the community, to the laborer in the
vicinity of his factory, and from Jan. 1 to Sept. 1 our little bank at Grand
Rapids opened over 8,000 new accounts among the laborers and the humbler
citizens who believe in thrift, but who had to have these privileges carried
to their immediate community.
I voted for the Federal Reserve Law. I represented our State in the Senate at that time. I voted for every sound principle that has suggested itself during a career of upwards of 25 yeast*, but I say to you that if you believe in the thrift of which this convention has over and over again asserted
itself, if you believe in the thrift of the individual citiezn as the proper basis
for good, constitutional, safe citizenship, then I assure you you are taking
a step to-day which may cause you some embarrassment.
Under our laws we have examinations the equal of the national examinations, and our State banking system has no peer, either in the Federal or
other State fields. You know and I know that when the Federal Reserve
Bank Act was passed, they had to threaten the rational banks to get them
to become members. Their charters were to be forfeited, but the State
banks, with patriotic valor and sound judgment, have augmented the Federal system voluntarly.
You are determined to outlaw branch banking. Be very careful that you
don't outlaw sound, conservative thr:ft banking.
President McAdams: Gentlemen, the time for the vote has come. I
think we all agree that while all of us would like to have something to say
upon this question, that both sides have had an opportunity to fairly present their views. The vote is now upon the amendment as offered by Col.
Lonsdale, and accepted by Mr. Jeffries, to the original motion. I will
read the motion as amended:
"Resolved, by the American Bankers Association, that we view with
alarm the establishment of branch banking in the United Statos and the
attempt to permit and legalize branch banking; that we hereby express our
disapproval of and opposition to branch banking in any form by State or
national banks In our nation.
"Resolved, that we regard branch banking or the establishment of additional offices by banks, as detrimental to the best interests of the people
of the United States. Branch banking is contrary to public policy, violates
the basic principles of our Government and concentrates the credits of the
nation and the power of money in the hands of a few."
All in favor of adopting the motion as amended will vote "aye";opposed
"no." The "ayes" have it and the motion as amended Is now before
you.
I would ask, of course, gentlemen, that only those who are regular delegates from their respective banks will vote, and no bank is entitled to more
than one vote. All in favor of the motion as amended will vote "aye";
opposed "no..' The motion prevails.
130
BANKERS' CONVENTION.
Report of Committee of Five on Par Collections,
by Charles deB. Claiborne, Vice-President
Whitney Central Nat. Bank, New Orleans.
Mr. Chas. deB. Claiborne: Mr. Chairman and Members of the
A. B. A.: Your Committee of Five recommends the endorsement of the
McFadden Bill as amended by your Committee. Individually members
of your Committee have attended a large number of bankers' conventions.
We have discussed this subject from every angle. We have studied
carefully the fundamentals and principles as laid down by the Supreme
Court of the United States, as well as the Federal decision in the Atlanta
case and that of San Francisco. We believe that the best and wisest
course, therefore, would be the endorsement of that McFadden Bill which
makes the charge optional on the part of the bank.
• The McFadden Bill as amended simply carries into effect Section 13
of the Act, but omits the last few lines of that Section, and instead of
the words "but no charge shall be made against the Federal Reserve"
we have added that whenever a charge shall be made, in that event the
Federal Reserve Bank shall charge back that charge to the depositing
bank; but the charge is optional.
Your Committee alFo suggests the continuation of the Committee
of Five until the passage of that bill, if you so approve it.
Report of Membership Committee, by Harry J. Haas,
Vice-President First National Bank, Philadelphia.
Mr. Harry J. Haas: Mr. Chairman, and members of the American
Bankers Association, Ladies and Gentlemen: At the Los Angeles Convention, at the last meeting of the Executive Council, Mr. McAdams made a
very strong plea for the Council to assist the Membership Committee in
their efforts for this year. The convention was held the early part of
October and it was the middle of October before we returned to our homes
and it was the last of November before we could get started on a membership campaign.
We would like to have the country organized into districts or States and
counties. We would like to have had a man in each State in charge of his
State and a man in each county in charge of his county, so that not a
single bank in the United States would be ignorant of the activities of the
American Bankers Association, and he would be solicited to become a
member. But the constitution provides that if a bank does not pay its
dues within thirty days. that it only enjoys the privileges of the Association:
and if they do not pay their dues within ninety days, they forfeit their
membership and have no privileges in the Association; and should they
become members after that period, after having been a member and delinquent in their dues, they must pay their dues back to the close of the last
fiscal year.
Werealized that if you asked the bank to pay dues on, say. January 1st
back to August 31st, we would have a difficult time. They would prefer
to wait; if they were delinquent banks, they would have to pay their
arrears, and if they were not a member or had not been a member, they
cauld come in the second six months on payment of six months dues.
So, under the circumstances, we felt the best thing we could do was to
get busy right away, and we o:ganized the members of the Executive
Council, the efficers and members of the Executive Committees of divisions
and sections, tne State Secretaries, with tne help of the official force at the
New York office of the Association.
At the start of the campaign we had 4,255 delinquent banks or a loss in
membership. including the failed banks, merged banks and delinquent
banks, of 4,255. This was 18% of the total membership of the Association.
Eighteen per cent may seem like a large percentage, but it was no larger
than similar organizations in this country, and we were faced with conditions in the agricultural sections which were unfavorable. For instance, a
man from Iowa. Kansas. or Nebraska, whose dues were $20,if he were asked
to pay $20 to the American Bankers Association, figured at that time that
$20 was 80 bushels of corn, and he could not see the advisability of paying
80 bushels of corn for his membership in the Association. If those agricultural conditions bad been different and he would have had to pay 20
bushels of corn, no doubt we would have had greater success in our efforts
In the agricultural districts.
We are happy to report that the eighteen per cent decrease was reduced
to one and four-tenths per cent. We not only had the agricultural conditions, but, unlike other organizations, we were required to raise the dues
of the Association, so considering the increase in dues, and the agricultural
conditions, we felt that we had a pretty hard job to tackle. The result
on August 31 showed an increase of membership of thirty-four hundred and
cost
one the total dues received for these members being $76,870 on, a a
of seventy-two cents per member, or three and two-tenths per cent of the
dues received.
In this work I would like to mention the gentlemen who have participated
In it and have given so generously of their time and effort, but that would
mean the reading off of the entire list of the rnembe.s of the Executive
Council officers and divisions, sections executive committee, and the
officials at New York.
But the detailed record of the Membership Committee's report will be
published. You can analyze that and find the States where they have
shown large increases and you know that the members of these committees
in those States have been doing some work.
Thera is still some work to be done. We have 10,324 non-members in
this country. We can't all be generals, we can't all be colonels, or majors
or captains or even lieutenants; we have to have some privates, but we can
all be volunteers. and I hope that every man in this hall will volunteer to
be a committee of one and when he goes back home, if he will make it his
business to get in touch with the Secretary at New York, he will very gladly
give him a list of the non-members in his county, and if he will see those
non-members. I am sure that when another year has passed around that
we will have a much larger membership than we had last year.
mediums—our own journal and the daily newspapers to which we give out
news releases from time to time.
For your information in regard to the work of the journal of the year
I would briefly report that we received them subscriptions during the year
$44,428 00 and from advertising $40,298 00, making total receipts, including some miscellaneous receipts, of $95,291 00. Of that sum we returned
to the Association 322.959 00.
This, you bankers might quickly reckon, would be equivalent to a 6%
earning power cn something like $350,000. If we were to capitalize that
earning power, which as business men we may perhaps be entitled to do.
it would show an increase in the earning power of the journal during the
past year, on a capitalization of about $250,000, or an increased value, if
you please to put it that way, for the journal of a quarter of a milion
dollars through the program of improvement and expansion that we have
undertaken.
We believe that we have taken but a step forward in the improvement of
the journal and in its devotion to your service. We have tried to be
economical and careful in all the work of improvement that we have undertaken, but, thanks to the liberal attitude of the officers of the Association
and the Executive Council, we hope during the year following (whoever
may be the commttee in charge) to improve still further both the content
and the appearance and the powers of service of that already useful paper.
The typographical appearance we have improved, but we hope to add to
it more by illustrating it more and by making it more graphic and more
attractive.
Already the newspapers and magazines of the country have taken cognizance of the improvement that has been made in our journal and it is
being very broadly quoted and somewhat more liberally subscribed for than
ever before. A considerable number of our banks have found it worth
while to subscribe for extra copies of the journal. to send not only to members
of their staff but to their important clients who are interested in keeping
up-to-date with banking and business affairs as we have presented them
through our pages.
We believe that the bankers of to-day are realizing more and more that
in order to do well,they must know more,they must keep abreast of banking
thought and keep abreast of business thought, if they are to realize the
full possibilities of their own institutional pow_ers of service. So we have
dedicated the pages of our journal to that end and hope that is rendering
a service which you will value.
We have also, by reason of that enlarged service, made it more attractive
to advertisers, and a constantly increasing volume of business is corning
to its pages, without interfering or competing with other banking journals
or other mediums which are occupying something of the same field.
It is our purpose to make the journal a clearing house not only of Association activties, but of banking and business thought, an interpreter of business conditions through those who think intelligently and clearly on those
subjects and are able to transmit that thought for the benefit of others.
So, to that end we will use a larger proportion of the appropriation that
has been allotted If the plans that have already been formulated are carried
out), to securing articles from representative interpreters of thought and
from those who are qualified to present business problems in a serviceable
and useful way for you.
If we could only inspire the banking community with the intellectual
ambition to know more accurately, to have facts instead of guesses at their
disposal, to be able to review the business world clearly and sanely and
accurately, as a part of the service we are rendering, we would feel that our
efforts had been more than worth while, for perhaps never before in the
history of the world, or our own immediate world, has the premium upon
clear thinking been so great or has it been so necessary that we should know.
So we hope to be able to dedicate the journal to that ideal more and more
effectively and to make it more and more a serviceable agent to improve
banking, to better business, to greater prosperity, and I hope to better
citizenship.
Another branch of the work of the Public Relations Commission is that
devoted to publicity. Through our Committee's work and the small
organization which we have, we release to the public from time to time,
the findings of our three great Commissions on Agriculture and Commerce
and Economic Policy, and also the important Association activities as
they may occur from time to time.
We have been able to give to the public, through the daily press, accurate
reports of Association proceedings, interpretations of Association Comm.
don findings, and illuminating economic facts from time to time, which have
received a very cordial reception on the part of the daily newspapers.
If we were to reckon in terms of dollars the return we have received from
these news releases and their broad acceptance we would show a substantial
sum.
However, I hope the day will come when we don't reckon the returns in
such a way entirely, because in time this work must have far-reaching value
to the banking business and to all American business.
So we are striving to expand from time to time the activities of that
branch of our service to the ends that the journalistic and periodical world
may look to us as an authoritative expression of banking and bush'es
thought from whom they can at any time secure valuable material, informative and useful articles and real interpretation of economic conditions.
The Executive Council have granted us a somewhat larger appropriation
for that work during the next year and I hope that a constantly expanding
usefulness may attend that service whoever may have it in charge, and that
we may realize that we have a great opportunity there to help guide the
thought, to help improve the status of the Association and to help the
business community with informative and useful facts for their immediate
use.
We will be delighted at any time to have suggestions from any of our
members, either as to the improvement of the journal or as to news matter
which we can give to local papers throughout the country which they might
use profitably.
We are rather feeling our way in this work and we know that if the
Association members as individuals or in State associations will take cognizance of the splendid opportunity which this medium affords them and
the machinery which we have already set up. that we can move on to a
constantly expanding usefulness and a greater, greater service.
Report of the Public Relations Commission, by Francis
Report of Economic Policy Commission, M. A.
H. Sisson of New York—The A. B. A. Journal.
Traylor, Chairman; Walter Lichtenstein, Secretary.
Mr. Francis H. Sisson: Mr. President and Members of the American
Bankers Association, Ladies and Gentlemen: The Public Relations
Commission is a commission of service and not of creative effort. And
therefore I can very simply and briefly present a record of the year's work.
Our business is not creative in itself but to transmit to the public the
creative work of others, and through that activity we have the use of two
The Economic Policy Commission has held two meetings, one in New
York on February 17, which was attended by eight members out of a total
membership of twelve. The second, at which eight members were aiso
present, was held at White Sulphur Springs on May 8. In addition, the
Commission has considered, by means of correspondence between members,
BANKING SECTION.
many special problems referred to it. It offers at this time the following
report, summarizing and supplementing its previous reports.
131
Conclusion.
The Commission calls attention to articles prepared under its general
direction by its economist, and published in various numbers of the "JournGovernment and Legislation.
The Commission makes note of the fact that it has not changed its opinion al" of the American Bankers Association. These articles have been copied
in regard to the Soldiers' Bonus Bill. It believes firmly that the National by numerous newspapers and magazines: especially the investigation in
Government should do everything possible to relieve the soldiers who are regard to our international balances has been of importance.
The Commission likewise, continuing the work of Mr. John S. Drum of
suffering from disabilities incurred in the service, but it does not approve
the giving of a bonus to all the soldiers regardless of their present condition. last year, has published an investigation of the economic situation in the
By the appointment of the President of the Association, the Chairman country, which was prepared by its secretary. The Commission believes
and Secretary of the Commission were made members of a special committee that, while it may be questionable whether this work should be continued in
which has been actively co-operating with the President of the American so elaborate a form as that in which it has been carried on, nevertheless
Farm Bureau Federation and the executive officers of other similar organ- scientific investigation conducted under the direction of a responsible body
izations interested in legislation affecting facilities for agricultural credit. of the American Bankers Association makes the pronouncements based
The Commission congratulates the country upon the breadth of vision and upon such research more valuable and authoritative than if they were
the soundness of judgment which has characte:ized the attitude of the merely haphazard expressions of opinion.
majority of the leaders in agricultural activity with respect to the fundamental problems confronting that industry. The Commission believes
that the steady improvement In agricultural conditions is a reflection of Remarks of Myron T. Herrick, U. S. Ambassador to
France and Former President American
increased demands for the farmer's products resulting from the re-employment of labor in the United States, thereby proving the correctness of the
Bankers Association.
position of those who have contended that the demoralization in prices
President McAdams: In 1900 there presided over the American Bankers
of farm products was due not so much to a lack of credit as to a lack of Association,
a banker from Ohio, who has since that time, attained world
markets. Assuming that this contention is measurably correct, tne Comprminence. Ambassador Herrick will sail to-morrow for Paris and I am
mission would oppose the hasty enactment of any ill-advised credit schemes. sure
that we will be glad at least ofseeing him and having him say "goodbye"
which, while possibly resulting in a temporary, artificial stimulation of
to us. Ambassador Herrick.
agricultural prices, would in the end react seriously on the entire industry.
Ambassador Myron T. Herrick: Mr. President, Ladies and Gentlemen.
The Commission again reiterates the stand which it has made public Fellow
-members of the American Bankers Association: After many years
on several occasions in regard to tax-exempt securities. It advocates a I assure
you it is a privilege to stand for a moment before you, if for no
constitutional amendment permitting the taxation of securities issued by
other purpose than to say "good morning" and to greet you and to exFederal Government, the States, municipalities, other political sub-divis- press
my friendship and to say "goodbye."
ions, or quasi-public corporations. It is opposed to the feature in the presI shall carry to my post the picture of this splendid audience this morning.
ent Income Tax Law which exempts from taxation $.300 income annually for
I assure you my friends that you are not in the least conscious yourfor moneys deposited in building and loan associations. This clause
selves how these years of turmoil and trouble growing out of the war have
in the present law works a great hardship on all banks and makes it impossi- finally
resulted in giving not only to your own country but to the people
ble for them to compete on an even basis with these associations which do abroad,
the confidence in the business men, the economists and the
not offer to their depositors the safeguards and securities which banks are bankers
of the world.
compelled to furnish.
For I believe, firmly, that the problem which we have tried to solve
Transportation.
and which seemed in the crisis, in the intense moment in the war, beyond
The Commission welcomes the end of the present strike of the shopmen the solution of the human brain, that that solution now has come to you.
on the railroads, but recognizes that a further adjustment between the cost We have spoken of yesterday. We have quarreled over the past. We
of railroad transportation and other expenses of production is necessary. know the mistakes of our own country only too well in these years. We
It still believes that the present high wages of railroad employees must be are not out of this this, Mr. President, not because we did not know, but
readjusted and that such readjustment with accompanying reduction ofrates because we fumbled in these years.
But it is to-morrow of which we speak and I return to my post with all
will pave the way toward greater business activity. The processes of our
economic life cannot proceed in an orderly fashion when wages of labor that is ahead, with a feeling that back here the Oroblem now reaches the
prices of commodities are seriously out of adjustment, and the interest banker and business man of the re-organization of this broken world,for
and
of labor in a proper adjustment should be just as keen as that of the pro- we cannot build ideals upon anything but a firm financial and commercial
foundation.
ducer and manufacturer.
It is going to be solved in the next year. I am not one of those without
The Commission desires to express its belief in the value, for the best
development of trade and commerce, both domestic and foreign, of a com- hope and it is going to be solved by the level-headed, steady business man
prehensive transportation system in which should be included not only the and banker of these different countries, who meet calmly, without political
railroads but also the canals and highways, particularly the plan for a barge prejudice to consider as you consider on your bank boards, the hard, praccanal connecting the Great Lakes, the Ohio and the Mississippi, and a canal tical questions of the day. That is where the settlement is going to come
in my opinion and the world turns to you instinctively now.
connecting the Great Lakes and the St. Lawrence.
I didn't come before you to make a speech, but I came simply
The Commission advocates the development and maintenance of a merto say this:
chant marine, and recommends the repeal of those sections of our shipping My associates and friends, the people who are not emotional
are the people
who have expressed themselves once in a crisis in
Jaws which make it impossible for American ship owners to compete on an
this country when all
equal basis with other countries. It believes that an American merchant our country seemed set on fire, swayed by political
parties. It was the
marine is not only vital to the commerce and industry of the country, but bankers who came together and forgot everything
except the economic
Is also a necessary adjunct to our naval forces in time of war.
question and saved our country from financial disaster
and ruin.
So when we meet these problems of to-morrow,
I am sure that when
Industrial Conditions.
you make your own decisions, when you decide
how this reconstruction
The Commission believes that with the passing of industrial unrest the will take
place (and your President has well said that it cannot take
place;
country is in a fair way to resume normal business activities but at the same the balance
cannot be redressed without America and America does not
time regards with the greatest apprehension the continual recurrence of wish it to be
done without her) when that time conies, I am sure that the
strikes in fundamental industries and believes that plans should be care- one great
practical problem will always be recognized by you outside of
fully considered for a permanent method of settlement of questions which political party,
national interest for the adjustment which is necessary for
arise between capital and labor. In the case of those Industries, like trans- the world to go
forward.
portation and coal mining, upon which the very life of the nation depends,
We are like a great express train on a railway, ready
to move and carry
It ought to be possible to devise means to adjust disputes without recourse the express, the
freight of the world, but there are three or four bridges
to industrial warfare. A sharp distinction should be made between the out and they have
got to be put in and America has got to help to do it.
right of workers to leave their employment whenever they desire to do so America is willing
and is now making the plan and making the way.
and their attempts to hinder others from working and taking the positions
I beg your pardon for saying so much but when your President so
kindly
which they have left. The fact is that working men going on a strike do asked me to come
here for a moment and face my old associates and friends,
not regard themselves as having left the service of their employers, because I could not resist,
but I go back, as I said in the beginning, with the feeling
otherwise, there would not in the case of every strike appear the demand that assembled
in this room this morning is the ability, the patriotism
for reinstatment N:rithout loss of any of the privileges or rights acquired and the desire to
make a plan together with other strong men who are outas the result of continued service with the corporation in question.
side of the political influence, to make a strong reorganization
plan that
will carry us out of the difficulty and enable us, after the loss
Tariff and Foreign Trade.
of the millions
The Commission calls attention to our international trade relations of men, enable the world to reap the fruits of that victory which we shall
which are suffering from vari us causes. The delay in the rehabilitation very soon lose unless this is done.
,
It will be done, Mr. President, and I have high hope in the
of Europe has made it impossible for our farmers to dispose of their profuture. We
ducts at prices which will give them adequate return for their labor. The are realizing now that this is the only way that it can be accomplished.
I thank you very much. Mr. President, and I bid you a very
United States, however, has done little to relieve this situation. The
affectionate
Commission feels very strongly that our position as a creditor nation will goodbye. I ask you all to come over,(I see a great many of you over there.)
make it increasingly necessary for us to accept payment from foreign coun- and spend a week end with me.
tries to a large extent in the shape of goods, and that only in this manner
Telegram from President Harding.
will it be possible for us to maintain and develop our export trade which is
so necessary if labor and capital in this country are to be fully employed.
THE WHITE HOUSE,
The Commission fears that Congress, in its desire to protect the country
Washington, D. C., October 3 1922.
Thomas /3. McAdams. President American Bankers Association,
from the danger of so-called "dumping" may create a situation which ultiHotel
Commodore, New York.
mately will be contrary to our best interests.
My dear Mr. McAdams—Public duties and personal cares seem
Federal Reserve System and Currency.
to have
combined to render impossible once more my acceptance of the
invitation
The Commission again calls attention of bankers throughout the country to the annual gathering of the
American Bankers Association. My reto the danger of the continued attacks made from various quarters upon grets are the more poignant, because I
hoped to be able to say some few
the Federal Reserve Board and the whole Federal Reserve System. The things to your members on this occasion.
Commission believes that if bankers have confidence in the system, they
I have so many times expressed my admiration and appreciation
of the
should say so, for the principle of keeping the system free from politics part which the banking interests played during
and following the war.
is of vast importance. Closely related to the attacks upon the Federal that I do not need to remind you of my sentiments in that
regard. Rathei
Reserve System are the attacks upon our r-esent currency system. Unless I wish to appeal to your great organization in
behalf of my conviction that
we wish to travel the road of Russia and the Central Empires, it behooves another, a more inclusive, and perhaps a more difficult
opportunity of
those'most directly in charge of the financial interests of the country to service is to-day presented to you.
Ism
repel the attacks and refute the arguments, no matter what the seurce
To the patriotism, steadfastness and right thinking of its financial
leadmay be, which would substitute for the present gold standard untried and ers, the country has owed very much in connection with financing
the war,
chimerical schemes. It is highly desirable that the people generally should and later in restoring stability, confidence and security
throughout our
understand the follicles involved in many of the plans that have been sug- economic structure. The banking community has
always co-operated
gested within the last few years.
splendidly in dealing with these problems. But to-day our
country. the
BANKERS' CONVENTION.
132
world, all human kind, are demanding that this co-operation be extended
to wider realms; to those social, moral, ethical problems which are crying
for understanding attention. They cannot be denied; they grow increasingly insistent. They call for an application of the same spirit of wise and
willing co-operation which is the very basis of the bank.
I have often thought of the bank as first among modern institutions of
social unification. On the basis of a complete confidence in its integrity
and dims, it aggregates together in vast, available masses, the scattered bits
of credit and resources which otherwise would be unavailable for great undertakings, and makes possible the huge producing organizations which characterize the modern industrial community. We have come to times which
require a like aggregation of the social sense, the ethical ideals, the moral
Inspirations and the best intelligence, in order to promote the true welfare
of men individually and in communities. This I have come to regard as
the most pressing requirement of our day: and to its accomplishment I
invite the assistance of you men who have been foremost among social cooperators. The world is not given to rewarding those who serve it, with
opportunities for ease and pleasure. Instead,on those who have been tested
and found useful, it is wont to place yet greater burdens. To full share in
these obligations I am now urgently inviting you. By experience, knowledge and alms, you bankers are pecuttarty equipped to render largest service in this wider sphere. It has long been my observation that the leadership of the banking forces in the local community is ever effective and devoted to community welfare; and the same helpful relationship must be
maintained throughout the nation, and in the nation's outside relations.
Therefore in recommitting our people to sane expenditures, to ways of economy and thrift, to the consideration of municipal and national probtems
In that conscience which builds the temple of confidence, the banking forces
must lead, and we must have the widest commitment to the prudence, the
deliberate understanding, and the preference for useful service, which make
for the security of our people as a whole.
The banker in extending credits looks not alone to the schedule of his
customer's tangible assets. He gives thought also to moral considerations,
to those elements of character which constitute the most commanding of
all securities. So he is concerned to help develop these qualities throughout
his constituency. Every good citizen aspires to the same end, and therefore it is permissible to impose a special obligation on the bankers, organized and trained as they are in such affairs, to take a very special part in
this work.
There is everywhere a disposition to scrutinize, to question, to examine
minutely into social and economic institutions: to interrogate methods of
human integration and procedure which have been so long accepted as to
have seemed axiomatic. We shall gain nothing by charging that this spirit
proceeds from malevolence and testified a disordered state of mind. We
ought to recognize that it largely represents sincere wish to improve conditions. History teaches that blind effort to obstruct such movements has
often produced momentary disaster, but never prevented ultimate advance.
The world Ls too old,and ought to be too wise, to resort to such tactics now.
Rather, its best intelligence should be given to open-minded co-operation
in every earnest project of inquiry and analysis which looks to the general
betterment. Thus will its most capable waders help guide society away
from pitfalls and dangers, while keeping it moving on the upward path.
I count the men of your profession as among such leaders; and I know that
whoever can effectively impress you with the full importance of the duty
lam suggesting will find satisfaction in the prompt and eager response which
will come to him.
Most sincerely yours,
WARREN G. HARDING.
Greetings
from Andrew W. Mellon, Secretary of the
United States Treasury.
Gentlemen, as I tell you, this Is an unexpected pleasure and I haven't
the slightest intention of making a speech. I have only one very clear
thought in my head, and that is to thank you, Mr. McAdams, and you.
gentlemen and ladies,for your kindly reception. IfI were making a speech,
there are one or two subjects that I might touch upon—one that was dealt
with very fully by a gentleman yesterday under the title or text of "Branch
Banking." A delicate subject, it seems to me.
I haven't the slightest intention, nor would I have the bad taste, to tell
you gentlemen and bankers whether or not you should adopt a branch
banking system in this country, but I do say to the gentleman who spoke
yesterday that I question his—what shall I call it'•—for telling us whether
we should have a branch banking system in Canada or not.
To that, gentlemen, if he is here present, I would apply to his criticisms
of our Canadian banking system a word that is only used in diplomacy—
Abracadabra. Let him look up his treasured dictionary. It is pronounced
"Abracadabra"—a very excellent word. I would advise those of you who
are not acquainted with it to look it up. That is my answer.
I am not going to make a speech, Mr. McAdams; but take our Northwestern Provinces, Alberta: Saskatchewan and Manitoba. of which you
have all doubtless heard—there we have an area some 800 miles in width
by 200 or 400 miles north and south, fit for cultivation. We have in that
district a very small population, under 2,000.000, and we have there nearly
1.300 branches of powerful banks, able and eager to supply to that community any banking facilities that they may require; and I may tell you
that there is no banking district in the whole wide world where the agricultural community and the business community enjoys such admirable
banking facilities as in those three provinces.
It may interest you to know, as a direct bearing upon any criticism that
may be leveled at our branch banking system (I am not talking about yours).
that we continuously advanced to people of the Northwest of Canada, and
particularly to the agricultural community, many millions in excess of the
sum that they have honored us with deposit. Those deposits are accumulated in every hole and corner of Canada. In little hamlets and districts in
Ontario, where for one reason or another the soil may be fertile but the
opportunities for developing commercially and industrially are meagre,
there the funds are accumulated and automatically they find their way
out of the Northwest to produce—I almost said the best wheat in the world.
Gentlemen, I am highly appreciative of the very cordial reception that
you have given me to-day.
Report of Committee on Resolutions.
I.
The Forty-eighth Annual Convention of the American Bankers Association, composed of upwards of eleven thousand delegates and guests.
representing every part of the United States and every legitimate type
of financial institution of the United States, met in the City of New York
from Oct. 2 to 5 1922, to study the various problems confronting the
nation, especially those affecting the financial interests of the country.
As a brief statement of the conclusions reached from consideration of
the addresses and discussions at the various sessions, we submit these
resolutions and commend the opinions and recommendations herein expressed to the thoughtful attention of the Government and the people
of the country.
II. Legislation—Disapproval of Government Commissions.
We continue to urge upon our Government the elimination of all unnecessary expenditures in order that taxes weighing heavily upon business
may be still further reduced.
We disapprove of the continued attempts to establish further Government commissions which tend more and more to hamper the industrial
and commercial development of the country and in an unnecessary way
increase the cost of doing business. For like reasons, we recommend
the discontinuance of such existing commissions as expereince may prove
unnecessary.
We reiterate our position in regard to tax-exempt securities of any
type, believing that it is highly undesirable that further tax-exemption
should be authorized by the Federal Government of any of the political
sub-divisions of the country.
•
President McAdams: I desire to read the following letter:
"Office of the Secretary of the Treasury, Washington.
"Please extend my greetings to the members of the American Bankers
Association in convention in New York, and express to them my appreciation of the way in which they have worked together to bring the country
through this difficult period of post-war adjustment. It has been the
fixed policy of this Government since the war not only to balance its
budget at the end of each fiscal year, but to provide for the gradual liquida- III. The Foreign Situation—President Urged To Hake Adfustments in
tion and funding of the war debt. In order to avoid spectacular refunding
Tariff Schedules, and To Grant Official Powers to Americas* Repreoperations, disturbing to the country, the Treasury has offered, at consentative on Reparations Commission.
venient intervals during the last eighteen months, short term notes which
We call attention again to the seriousness of the foreign situation,
were used to retire Victory notes and other early maturing obligations. The
response with which these offerings have met on the part of banks and the especially of Europe, which is affecting detrimentally our own conditions
Investing public has been reassuring, both as regards the Treasury's plans and preventing even those industries in our country which are not defor the refunding of the early maturing debt and also as regards the sound- pendent upon foreign trade from recovering fully from the depression
which otherwise would be rapidly disappearing.
ness of financial conditions in the country at large.
There is no possibility of a healthy and normal situation in this country
"It leads me to believe that a foundation has been laid for an early and
until the nations with whom we trade are able to pay us for what they
healthful revival of business along normal lines.
Import. As this can be done in the main only by the means of exports
truly,
"Yours very
to us, we trust that the President will not hesitate to make use of the
"A. W. MELLON, Secretary."
power granted him by the new tariff law to make such adjustments in
-Taylor, President the schedules as may be necessary from time to time for a restoration of
Remarks of Sir Frederick Williams
our international commerce.
Canadian Bankers Association.
We believe that the time has come for the Government of our country
President McAdams: We were entertained in Montreal, as you know, to formulate the principles on which it will be able to co-operate with
Our host not only appreciated other nations to bring about the needed rehabilitation of Buropean countries
by the Canadian Bankers Association.
the importance of our visit but the need for caring for us in a most hospitable and peace in the world.
To this end we urge the administration to consider the advisability
way. Ile was kind, courteous and considerate and he has responded to our
Canadian of promptly making its representative upon the Reparation Commission
visit by coming here to attend our convention to show that the
in a closer affilia- an official of that body; we also recommend to Congress that there b.'
Bankers Association recognizes the wonderful passibility
granted to the Debt Funding Commission such further powers as 'len"
tion with our organization.
of that enab'e it to negotiate more effectively with the foreign nations sow'
I simply want the privilege of introducing to you the President
of debtors of the United States.
Association, Sir Frederick Williams-Taylor, President of the Bank
Montreal.
IV. Labor—Organized Strikes in Essential Industries Should Be Deemed
Sir Reginald McKenna
Mr. Taylor: President McAdams,Mr. Governor,
Against the Welfare of the State.
unexpected pleasure. You seem quite pleased
and Gentlemen: This is an
see
We are glad to note an end of the recent strikes in fundamental indushere to-day. I can assure you you are not half so pleased to
to see me
reception. I can tell tries, and we hope that the period of peace in industrial life will be used
me as I am to see you, and I am delighted at your
and it strikes me, for the purpose of careful investigations to serve as a basis for a permanent
you that T feel perfectly at home in this good company,(another reason in method of adjustment of the questions arising between employer and
as I look around, that there may be two reasons for that
the same worker.
addition to the obvious one): The obvious one Is that we are all of
It is our belief that in those industries whose continued operation is
may be
blood and stock, and the second is following the first—that there
essential to the well-being of the whole people, organized strikes should
a good Canadian or two in the audience.
Mani- be regarded as against the welfare of the State. We make a sharp disCongress in its wisdom has put thirty cents a bushel on No. 1 hard
have tinction between the right of the worker to leave his employment and
toba wheat, but they put no embargo on Candian manhood. You
attempts made by the intimidation to compel those employees to
had a goodly supply of that in this country from Jim Hill downward and I the
leave their posts, who otherwise would be willing to work.
don't think the mixture of the strain has done you one single bit of harm.
BANKING SECTION.
V. Transportation—Merchant Marine Should Be Improved Through Individiaul Initiative—Shipping Laws Should Be Modified.
We again urge upon the Government and the people to support in
every way possible any measures which tend to improve our transportation
systems, either on land or on sea. We believe that our merchant marine
should be developed through individual initiative and not be placed under
Government management, and we approve of the efforts of the President
of the United States to bring about such a development as is necessary
order that our merchant marine may serve our commerce in time of
le .
peace and be a protection to our country in time of war.
Therefore, we recommend the modification of those sections of our
shipping laws which make it impossible for our ship owners to compete
on an even basis with ship owners of other countries.
VI. Agriculture—Solution of Farmers' Problems Should Be Sought Through
Private Enterprise and Not Through Government Aid.
We are glad to note a steady improvement in the condition of the farmer,
and we congratulate the agricultural community upon having organizelions generally led by men who are showing marked breadth of vision
and soundness of judgment in respect to the problems confronting this
most important of our industries.
We can assure the farmers and livestock producers of the country that
the bankers will continue to lend them their best aid in the solution of
their manifold problems, which solution should be sought through private
enterprise and not through Government aid. We, therefore, approve
of the various endeavors being made by the farmers themselves to increase
the facilities for the orderly marketing of their products.
VII. Federal Reserve System—Disapproval of Attacks Upon It.
We disapprove emphatically the attacks made upon the Federal Reserve
System and the members of the Federal Reserve Board individually.
We believe that there is no surer way of hindering a return to prosperity
than by attempts to undermine our banking system, which has proved
its value through an unprecedented time of stress and strain.
VIII. Currency—To Be Sound Must Be Based Upon Gold.
We regret to see that some of our people have not learned from the
experience of Russia and the Central Empires of Europe that a sound
currency system based upon a gold standard is absolutely essential not
merely for the orderly conduct of the business of the country but even
for the maintenance of civilized life.
IX. Clearing House Examinations—Their Importance to Sound Banking*
We recognize the importance to sound banking of examinations conducted under the auspices of the Clearing House associations of the country'
l
and we recommend the extension of this system of examinations to al
communities of sufficient size.
X. Education—Sound Thinking Along Economic Lines Recommended.
We pledge our support to the incoming President of the American
Bankers Association in the campaign to teach sound thinking along economic
lines. We regard such education as necessary for the safety of our great
democracy. We believe that the universities, colleges and other educational institutions of this country should co-operate to further this work.
We recognize the splendid educational accomplishments of the American
Institute of Banking, and we recommend its future possibilities to the
active and intelligent interest of the members of this Association.
133
Mr. M. A. Traylor: I move the approval of the expressions of the Committee.
The motion was seconded and carried.
President McAdams: The next order of business is new bus'ness Under
this head there is one resolution, and two proposed amendments to the
Constitution. The resolution, which comes to you with the unanimous
approval and recommendation of the Executive Council that it prevail
is as follows:
NO DISCRIMINATION AGAINST NATIONAL .BANKS N
TAXATION BY THE STATE.
"In the interests of fairness and as a necessary protection to the national
banks and all other banks against excessive and discriminatory State
taxation, your Comittee urges adherence to the principle underlying
Section 5219 U. S. Revised Statutes, that the taxation of national bank
shares by the State shall not be at a greater rate than is imposed on other
moneyed capital of individual citizens of the United States, as construed
by the Supreme Court of the United States, and opposes the enactment of
legislation which involves departure from that principle."
The question is upon the adoption of this resolution which is submitted
by your Executve Council.
The motion was seconded and carried.
Amendments to Constitution of A. B. A.
President McAdams: The next is an amendment to the Constitution
which was recommended unanimously by the Executive Council at White
Sulphur. I will ask Mr. Shepherd to read the proposed amendment.
Executive Manager Shepherd: The proposed amendment to Article IX
Section 1 of the Constitution submitted at the meeting of the Executive
Council held May 12 1922 and approved.
"Omit the last sentence of Section 1 of Article IX as follows:
two hundred of the
"'if the question is determined affirmatively by resolution or subject
members present at the convention and voting, the
and acted upon
matter shall be in regular order and shall be considered to any proposed
accordingly: provided that this section shall not apply
amendment of the Constitution.'
"and substitute therefor:
of the
'If the question is determined affirmatively by two hundred subject
"
members present at the Convention and voting, the resolution or
and referred to a
matter shall be in regular order and shall be cotisideredExecutive Council
special meeting of the Administrative Committee or the
to be immediately called for recommendation of approval or disapproval.
Upon report of recommendation by the Administrative Committee or the
Executive Council, the question shall be acted upon by the convention:
Provided, that this section shall not apply to any proposed amendment
of the Constitution'."
President McAdams: The question is on the adoption of this amendment
which has been presented in regular form and endorsed by the Executive
Council.
The motion was seconded and carried.
President McAdams: The second is an amendment proposed by Mr.
Oliver J. Sands of Richmond.
Executive Manager Shepherd: This is an amendment to Article IX of
the Constitution providing a new section:
"Section 3. Questions which relate particularly and exclusively to either
one of several classes of banks represented by divisions of the Association
shall not be acted upon by the convention or by the Executive Council,
XI. Retiring President—Appreciation of His Services. '
but only by the particular division to which the question solely relates
The American Bankers Association desires to express its hearty appre- In case of dispute whether any question presented under this rule relates
ciation of the statesmanlike administration of Its affairs by its retiring particularly and exclusively to any one division, the Administrative ComPresident, Thomas B. McAdams, and it commends especially his success mittee shall have full power of decision. Whenever such dispute arises
in co-ordinating the work of this Association with that of similar associa- at any session of the general convention or at any meeting of the Executive
tions in this country, and his continued effort to make available the re- Council, the question shall be referred to a special meeting of the Administrative Committee for immediate consideration and report."
sources of this Association for our Government and people.
President McAdams: Gentlemen, the question is upon the adoption of
Mr. McAdams's administration has marked further progress in the
merely to its members but also to the the amendment as proposed by Mr. Sands, Do I hear a motion?
usefulness of the Association not
Mr. Puelicher: Mr. Chairman and Gentlemen of the Convention:
country.
After a very careful consideration of the proposal by Mr. Sands, it is
XII. Executive Manager—Commendation of His Work.
disapproved. I, therefore, move
We congratulate our Executive Manager, Fred N. Shepherd, upon unanimously recommended that it be
the successful conduct of his °Mee and wish to express our appreciation it be tabled.
The motion was seconded and carried.
of the loyalty and faithfulness which he is showing to the interests of
the Association and its members.
XIII. Guests—Praise for Reginald McKenna and His Address—Also for Report of Nominating Committee, by R. C. Stephenson
Other Speakers.
of Indiana.
The American Bankers Association desires to record its appreciation
Mr. Stephenson: Mr. President and Gentlemen of the Convention:
and his willingness at such
of the visit of the Rt. Hon. Regina' McKenna
The Nominating Committee met yesterday afternoon, selected Raymond
a crucial time as the present to deliver his Important and inspiring message. Frazier of
Seattle as its Secretary, and I have the honor, as Chairman
We regard his address as giving the clearest and most exhaustive picture of
the Committee, of making the report to the Convention this morning.
of the international situation and his suggestions for the solution of the
The Nominating Committee recommends to you the names of the
problem are worthy of the most careful consideration.
to fill the offices of the Association during the ensuing
to express our thanks to the Hon. Herbert following gentlemen
We also take this occasion
year:
Hoover, Hon. Henry J. Allen, Mr. Thomas W. Lamont and Dr. George
FOR PRESIDENT
R. Vincent for their brilliant addresses and their readiness to give advice
John II. Puellcher, President Marshall & Ilsley Bank. Milwaukee.
and counsel upon the great questions confronting the nation at this time,
FOR 1ST VICE-PRESIDENT
and we are also grateful to the gentlemen who addressed the various
Walter W. Head, President Omaha National Bank, Omaha, Neb.
separate Divisions and Sections of this Convention.
Interest.
XIV. The Press—Thanks for Its Courtesies and
FOR 2D VICE-PRESIDENT
'To the press, we express our thanks for the courtesies and interest in
William E. Knox, President Bowery Savings Bank of the City of New
and for the full and fair comments with which they have York.
our proceedings
favored us in their various publications.
Mr.President,it is my pleasure to move that the report of the Nominating
X7'. Hosts--Gratitude to Those Who Made the Convention Such a Brilliant Committee be approved by the Convention.
Upon motion, duly made and seconded, it was voted that the Executive
Success.
The members of the American Bankers Association find it is Impossible Manager cast one ballot for the convention.
thanks and gratitude to their
for them to express in adequate terms their
New York hosts for the courtesies and kindnesses which have been shown
Installation of Officers.
them. They recognize that it required unceasing labor on the part
President McAdams: Is there any business which needs to be presented
of many for a long period of time preceding the Convention to have made
of officers? If
the meeting such a brilliant success. Unable to name every one who has to the convention before we proceed with the installation
contributed to the success of the Convention and the pleasure of those not, I will appreciate it if Mr. Knox will come forward.
Mr. Knox, you have been chosen by your associates and friends in the
attending, it would convey to Seward Prosser, Chairman of the Committee
as its Second Vice-President. Not only is
of One Hundred; Mrs. Dwight W. Morrow, Chairman of the Women's American Banke_ts Association
the years of service you have rendered this Association.
Reception Committee; Welter E. Frew, Chairman of the Executive Com- this a recognition of
have always taken in its welfare, but of the fact
mittee, and Guy Emerson, Executive Manager, and through them to all and the deep interest you
through the savings institutions of this country,
members of their committees and any others who may have assisted in that thrift as represented
is fundamental if finance in America is to remain sound.
their work an acknowledgment of gratitude and appreciation.
So this honor not only comes to you because of our confidence in you
M. A. TRAYLOR, Chairman,
personally, but as a representative of the great Division over which YOU
FRED I. KENT, Vice-Chairman,
preside with such distinguished ability.
WALTER LICHTENSTEIN. Secretary.
134
•
BANKERS' CONVENTION.
I take pleasure in placing upon you the badge of Second Vice-President,
and congratulate both you and the Association upon the wisdom of their
choice.
Vice-President Knox: Mr. President and Ladies and Gentlemen: This
is no time for speech-making. Even If! wanted to make a speech I couldn't
do it under the circumstances. I will just make you a promise: knowing as
I do that you have over-estimated my ability, I assure you you have not
over-estimated my willingness to serve, and I shall in the future as I have
n the past, without any distinction as Pa sections, or districts, give the
best service that is in me to the American Bankers Association, relying upon
all my friends to help me, to eke out my shortcomings with their help and
their wisdom and to stand behind me loyally as they have ih the past.
I appreciate the election.
President McAdams: Mr. Head, you have been again honored by your
associates in the American Bankers Association and it having been my
privilege to serve with you during the past year, in both an official and
an intimate personal relationship, I can testify to the members of the
Association that never have you had an officer more devoted to his work
or more zealous to serve than in Walter W. Head. You have done the
wise thing in advancing him, and I take a personal interest in having the
privilege of placing now upon him the badge of First Vice-President,
and hope that it may be exchanged a year hence for a more suitable
token.
Vice-President-Elect Head: Mr. Chairman, Ladies and Gentlemen of
the American Bankers Association: The great honor which you have conferred-upon me is thoroughly appreciated from every standpoint. My
aims and efforts and ambitions during my term of office will be devoted to
the upholding of the arms of my chief, Mr. Puelicher, whom you have
elected as President of this great Association. During that time I shall
keep in mind the one thought, that of rendering a service to the membership
of this great Association.
President McAdams: Some of you don't know John Puelicher. Some
of you don't, I am sure, appreciate what kind of a man he really hi, and the
reason I say that is because many of you have not had the privilege of
coming in as close personal contact with his vibrating personality as to
give you a real insight into his nature and his spirit.
That has been my privilege since I have been an officer of this Association.
I knew him but slightly when he was elected Second Vice-President, but in
these two years, not only have I learned to recognize his ability to think
wisely and to plan courageously and to work assiduously, but I have
learned to love him for the great big soul that is in him.
You may be safe in the assurance that during the year to come, nothing
will be done in the name of the American Bankers Association which will not
reflect credit and honor upon every man and every woman interested in its
welfare.
President McAdams: Mr. Puelicher, I present to you the gavel of authority, recognizing fully well that it will be wielded in a manner worthy of the
best of the traditions of our Association.
Mr. Bartlett (Wisconsin): In appre.ciation of the honor conferred by
this convention upon one of the active and esteemed bankers of our State.
the Wisconsin Bankers Association, consisting of every national, every
State. every savings bank and every trust company in Wisconsin, desire
to tender our appreciation of your selection and our assurance to your newly
elected President, Mr. John H. Puelicher, of Wisconsin, that he has the
active support, co-operation and best wishes of every banker in the State
of Wisconsin.
Mr. Bartlett presented President
-Eject Puelicher with a bouquet of
flowers.
Cheers were given by the Wisconsin Delegation for Mr. Puelicher.
President-Elect Puelicher: My friends, ever since the result of yesterday's election became known to me, I have been swallowing lumps as big
as my fist, and there is one in my throat now, that I have got to get down
before I can say a word.
You have given me the greatest opportunity for service in the interest of
our profession that can come to one of us. I approach the great honor
very humbly. I appreciate the token from my friends in Wisconsin. It is
there that I started my activities in Association affairs. My home has
always been there and their good wishes, as do yours, mean much to me.
I want first of all, in accepting this office, to express my appreciation of
the privilege of having been associated with our retiring President. In
addition to the intelligent consideration of every question that rightly came
before him, he gave a loyalty, and a devotion, which will always leave the
Association his debtor.
Mr. McAdams put into his work his big, warm. Southern heart and
gave of his great, generous soul.
Much of his planning will be carried on in the coming year. Many of the
things that he has instituted we will continue to further: many of the
problems, the solution of which he has undertaken and that need further
caring for will be carefully cared for.
We approach the year with many of the world's problems still unsolved.
As we learned from Mr. McKenna's speech yesterday, the international
situation in which we by force of circumstances are vitally interested is
still without a solution, a solution in which the American banker must take
a prominent, if not the most prominent, part.
The industrial situation is one which continues to give cause for worry.
and there in conjunction with other national associations, we may be able
to serve, as Governor Allen, who addressed us so eloquently this morning,
found the solution. Think of it.
The agricultural situation is one to which special attention has been
devoted. It has been the endeavor of the American Bankers Association to
bring about a better understanding between the agricultural and the financial interests. The banker has learned that the farmer has a real problem
which differs cansiderably from the credit problems of manufacturer and
merchant.
On the other hand,the farmer realizes that his interests will not be served
by furthering and promoting schemes which will benefit him temporarily,
but will work permanent injury to the rest of the country.
In no field, however, can the banker be of greater service than in protecting the integrity of our banking and currency systems.
We have the terrible example of Russia before us. Russia deserted the
gold standard. As so many of the world problems rest on the application
of sound economics, the work of the Committee on Public Education, to
make that knowledge more general, will continue to become more and more
important.
The year will bring with it many new problems and in the solution of all
of our problems I rely upon your active support and assistance.
Now, as I said in the beginning, you have given me great opportunity
for service.
I pray that I may have the strength and the wisdom to render acceptable
service.
Life is service. In serving we live. I go to serve. Thank you.
CLEARING HOUSE SECTION
AMERICAN BANKERS' ASSOCIATION
Sixteenth Annual Meeting, Held in New York City, October 2, 1922.
INDEX TO CLEARING HOUSE PROCEEDINGS
Labor Unions—Their Power and Irresponsibility, L. F. Loree Page 135
137
Looking Ahead—The Bankers' Responsibility, John McHugh
Annual Address and Report of the President of the Clearing
143
House Section, John R. Washburn
Report of the Executive Committee, Clearing House Section,
143
Francis Coates. Jr_
Page
Symposium on Clearing House Examiner System
Report of the Secretary of the Clearing House Section,
D. A. Mullen
Report of Resolutions Committee
Report of the Nominating Committee, Irstallation and
Remarks of Incoming President, Jos. Ringold
140
144
144
145
Labor Unions —Their Power and Irresponsibility
By L. F. LoaE.E. President of the Delaware & Hudson Compa
On August 18 the President of the United States, in the
performance of his constitutional duty of addressing the
Congress on the state of the nation, advised:
. . the
. . . The simple but significant truth was revealed that,
country is at the mercy of the United Mine Workers.
If this land, where as Lincoln said at Gettysburg—
. . . our fathers brought forth a new nation, conceived in liberty . . .
has passed under the yoke of bondage, if we must indeed now
bend the knee and bow the head to tyranny, we may well consider all other matters for the time of minor importance. It
is unthinkable that this couutry, where all have had equal
opportunity, where the individual energies of man have been
uncramped by oppressive social institutions or absurd distinctions of caste or class, is to have the powers of the more
highly gifted as well as the general welfare stifled by this
monstrous growth.
What is the Labor Union, and what is the meat on which
it feeds, that it has grown so great?
n
The modern labor organizations rest upon their separatio
of the manager, the capitalist and the workof the functions
their exeman, of the direction of industrial operations and
the brain worker and the property
cution in detail; of
on the other.
owner on the one hand and the manual workers
or another for perhaps 200 years, it
Existing in one form
great financial
Is only since 1860 that it has acquired
of membership, through a combinastrength and permanence
with the
tion of the functions of a trade protective society;
the dominant spirits upon the
calculated pressure brought by
transfer of the leadisolated, unprotected individual; and a
to a class of
ership from the casual enthusiast and agitator
permanent salaried officials.
s about
The total membership of these unions aggregate
n and 8% of those engaged in gainful
3% of the populatio
ce is their massing
occupations. What gives them significan
element of the industrial world in
so as to form a powerful
the textile, buildcertain industries; mining, transportation,
ing and machinists trades.
and the vital eleThe skeleton of the trade union world,
the permanent salaried officials.
ment in its politics, are
rests exclusively in the
some 20,000 or more. Its government
the great associations, numbering
hands of the officials of
are dominated by an
less than a thousand, and these in turn
Inner circle of a few score men.
condition of "organized
We seem to have passed from the
of "labor professionally, organized,"
labor" to a condition
from above, exwhere the great mass responds to pressure
By.
ploitivig and being exploited for the benefit of its rulers;
our
whom President Harding suggests have now become
rulers.
For the most part their avowed policies are rank economic
by
heresies—the creation of an artificial scarcity of labor
limiting the number of apprentices to one for four or five
Journeymen and extending the term of the apprenticeship
over an absurd length of time, by enforcing a limitation of
handy men, by limiting their progression in the trade, by
keeping out aspirants by large initiation fees or other penalties, by restricting output; while opposing as a deadly curse
all labor-saving devices whether of mechanical tools, power
development and transmission, or the effort of management
through piece work, bonuses or other skillful arrangement
of organization.
Mr. Frank Tannenbaum. a radical unionist, saying publicly what he claims the others say in secret, states in his
recent book,"The Labor Movement":
Unless we see the labor movement as an irresistible coming together of men
in terms of the tools and the industry which they use in common, for purposes of greater security by more effective control of them, we cannot and do
not understand the labor movement at all. . .. The struggle of the worker
and the employer is an inevitable one until either worker has been reduced to
an impotent tool or the profit motive in industry has been displaced. . . .
To do this it is necessary also to control the State.
The method of the labor movement is to make the function of an industrial
group a conscious group function, . . . to transfer the power of the community, its actual power and knowledge, its control and discipline, from a
political
political to an economic affiliation. . . . Power shifts from the
grouping to the industrial, as the workers organize.
ons
With these frank statements of the aims and implicati
of organized labor there go equally frank statements of its
practices.
The eight-hour day serves many purposes. But the one which is predominant in the minds of the workers is the belief that it will make more work
and will make what work there is last longer. . . . Next to the hours of
labor that a man may work is the amount of work a man may do during those
hours. Limitation has become a general policy for the worker. . . . The
an
theory of the survival of the fittest has no economic implications within
organized group of workers. . . . It works by cumulatively reducing economic incomes, economic ambitions and economic incentives to a common
and the
denominator, wiping out the differentials between the unskilled
skilled.
As to the future, Mr. Tannenbaum's attitude is happy-goincenlucky. He posits the question "what will happen to
tive?" and his own reply Is:
it will
The easiest and probably the best answer that can be made is that
take care of itself.
vital
In all these things they war against society, whose
increased production, an interest, could they but
Interest is
see it, especially vital to labor, unionized or free.
the
What can we say of wages? When business is brisk
very formalism of organized labor prevents the rise in the
136
BANKERS' CONVENTION.
wages of its members from being as rapid as that of free
la- ments, governments of their own making, and a press of
bor, while when business is slack their efforts to retard
the which they are proprietors. Perhaps it is historically true
decline in wages affects the nominal rather than the real
that no order of society perishes save by its own hand."
wage, the pay check rather than the purchasing power.
This
Capital has no reason to be abashed by any analysis of the
benefits no one since the level of wages is reflected in
the part played by it in civilization. It has made that civilizalevel of prices, while refusal to adjust wage rates diminishes tion
possible. It has given to every hour of honest toil more
earnings by preventing continuous employment. Everyone than
it could have obtained under any other system. At their
is interested in seeing that the workman gets a liberal
wage. worst our times because of it are better than what went beIt insures a high standard of living, of the first importan
ce, fore. Every capitalist ought to understand this, to make it
not only to the individual and his family, to the community his living
faith, and to be by it inspired with courage. Let
and State, but to the future of society and the race. If you us
recall the saying written upon the front of our great public
were moved only by selfish interests you would have to bear
library, "For verily truth beareth away the victory."
in mind that wages are the most rapidly flowing of all the
In the Holy Bible that was for our forefathers their suffistreams of money and so the source of the largest profits to eient
guide of conduct, the question is put "for what is a man
the traders.
advantaged if he gain the whole world, and lose himself or
Just as you are interested in a liberal wage scale so are be
cast away?" In one aspect you have this question before
you interested in the effort to set a proper limit to the dura- you
every working hour. In your every transaction you have
tion of toil. But this question is to be resolved not by apto consider the security of the principal and the rate of repeals to sentiment or emotion, but by the dry light of reason.
turn, and always the first is the primary consideration. Can
What do we know about hours of labor? Only this, that if you
not carry that practice into the larger affairs of life?
we all stopped work the last survivor would be dead in
18 Can you not for the immediate future be content with
months, and that formerly working 10 hours per day we were smaller
returns to make safe the accumulations Of the past,
all in a high state of advancing prosperity. The eight-hour both
material and spiritual? You give up to the Government
day and the six-hour five-day week have never been subjected
a substantial part of your income. Can you not add to this
to the test of experience. What we can say with confidenc
e outgo a fraction more as a matter of insurance, and what is
is that the spread between eight and ten hours is sufficien
t of greater moment, a substantial portion of your time and
to take up if properly utilized all the fluctuation of good
and thought?
bad years; to stabilize labor and insure continuity of emHow may this be applied in the matter I have been disployment; and to avert the growing demand that we again
cussing?
open the doors to a flood of unrestricted immigration.
I would not have you think that I am unsympathetic with
The assertion that "the right to organize is denied" is
a labor. It is because I am sympathetic with it that I venture
man of straw set up to be knocked down. What is of
mo- on these suggestions. Labor needs help from the outside.
ment is the implications of the organization whether it It
needs to be rescued from an organization that has become
lacks the ability to maintain itself unless, as set up in
the its tyrant and which the President says has become ours.
recent proceedings of the Attorney-General at Chicago, it
reIf we bring about that orderly arrangement of our ideas
sorts to "murders, beatings and sluggings, shooting of men
that alone gives value to the human mind, and utilize that
at work, poisoning their food, beating and terrifying their
foresight which gives its greatest value to science, we may
wives and children, and destroying the property of employgreatly benefit the laborer in his safety and comfort without
ers"; rising from misdemeanor to criminality, from
abusive in any way failing in the equally important object
of benelanguage to the bombing of the Los Angeles "Times" or
the fiting him intellectually and spiritually. I would, then, for
massacre at Herrin,
; whether the attack upon the indi- the preservation
of society and for labor's direct and immevidual, the use of the organization to close-the-shop to all
diate benefit, make these provisions in our laws:
not of its membership, condemning the others to a living
1. That any voluntary association of seven or more memdeath; whether the incessant attacks upon the police power bers
may sue or be sued in the name of the association, serof the State, the condemnation of the State's constabulary, vice of
process upon any officer, manager or business agent
the State's militia, the injunction power of the State's courts of
such association to constitute service upon the association.
and 'all other of its instruments of power, evidence the pur2. That such associations shall keep their records in form
pose to set up the supremacy of the union over and above the prescribe
d by public authority, that their accounts shall be
law of the land.
at all times open for inspection and audit, that annual report
No society or State may regard with unconcern the growth thereon
shall be made, and that the use of the funds of
within its midst of "secret societies." The "Order of the the associati
on for political purposes shall be a criminal
Illuminati" and the "Jacobin Club" of the French Revolu- offense.
tion and of the "Terror" have their logical successor in or3. That the authority of the designated officer of the State
ganizations which in our time seek to overthrow the Govern- to deal with
labor disputes shall include the duty to make
ment and grasp the reins of power. Only the entire citizenry inquiry concerning
matters in dispute with the right to subcan be loyal to a form of government. A particular class will paena witnesses
, examine them under oath and require the
attach itself to the Government only if the Government con- production of books
and papers In order to enable him to
fers benefits upon it. It is to the interest of every citizen ascertain
all facts material to the dispute and to furnish the
that we should have, as our fathers contemplated, a common- public and every
employer and employee entitled to vote
wealth founded upon industry and frugality and recognition upon the questions
of strikes and lockouts involved, with a
of the rights of those who save and invest, wait and lead, copy of his report,
and that notice of the intention to strike
take risks and responsibilities, as well as upon those who or lockout must
be made to such officer at least 14 days beobey and work with their hands.
fore the date fixed for such action.
What has made possible this growing menace? Is it that
4. That every ballot cast for strikes or lockouts shall be
we have lost faith in ourselves and in our work?
so safeguarded as to preserve the freedom of the voter and
John Maynard Keynes writing on the "Economic Conse- the decision at which
he has arrived, and to that end that the
quences of the Peace," says."we are . . . faced in Europe designate officer
d
of the State shall be charged with the
with the spectacle of an extraordinary weakness on the part duty of supervising the
vote so as to insure a secret ballot
of the great capitalist class. The terror and personal timid- free from intimidation or misrepres
entation, and its honest
ity of the individuals of this class is now so great, their con- count. The vote should be the definitiv
e action and not be
fidence in their place in society and in their necessity to the subject to the veto or use of the chief officer.
social organism so diminished,.that they are the easy victims
The labor unions cry to Heaven that they have the "right
of intimidation. . . . Now they tremble before every in- to organize." No one denies it—but let them
in the exercise
sult, . . . and they will give you any ransom you choose of the right assume the responsibilities it entails.
If they
to ask not to speak of them harshly. They allow themselves would benefit by organization let them also,
as does capital,
to be ruined and altogether undone by their own instru- bear the restrictions and burdens of organizat
ion.
CLEARING HOUSE SECTION.
137.
Looking Ahead—The Bankers' Responsibility
By JoaN McHum!, President of the Mechanics and Metals National Bank of New York.
banks. They promote a closer personal and business acquaintance among the members, secure co-operation upon
matters affecting their interest, and facilitate the free discussion of subjects of importance to the banking interests
of the community.
As a stabilizing force in any community, the clearing
house association proceeds about its business with so little
visible effort that it is hardly reckoned as one of the guiding
powers until the storm comes. In times of financial stress,
the identity of the banker is sunk in the action of the group,
and the group has never failed to act promptly and with wisdom. The achievements of the clearing house associations
in the panic year of 1907 as well as the months following the
outbreak of the World War, need not be related to you. It
was in these periods that through the well directed use of
the equipment and machinery of the clearing houses of the
country, untold financial losses were averted.
The Clearing House Section of the American Bankers Association is constantly and industriously endeavoring to promote this character of co-operation and uniformity of community action. It not only urges and promotes prudent and
constructive banking, but the most modern and effective
methods to insure the greatest measure of service. It is
needless to say that it should have, does have and will continue to have, the whole-hearted approval and support of
the bankers of the country.
Looking away from our own immediate affairs and taking
the wider view, most of us are at times a little bit bewildered
by all that is going on about us. At every preceding convention of the American Bankers Association and its Sections.
Interesting and pressing problems have been the subject of
discussion. But I wonder if at any previous convention there
was opportunity for discussion of more important problems
than those which confront us to-day, problems, I mean, that
in every aspect have a tremendous and unavoidable bearing
on the welfare of every community and every individual
within the United States. We came long ago to see that the
war had brought a great turn in the tide of our affairs. The
four years that have elapsed since the war was terminated
have brought still another, and, I believe, greater, turn in
the tide of affairs. This turn has not been marked with the
vividness of the war, nor by such soul-stirring events as
those of the tragic days which preceded the armistice. But
it has brought us into an epoch that is altogether new, and
we are to-day face to face with problems that, as I have just
said, bear tremendously and in every aspect on our welfare.
I shall not, right off, present a pessimistic recital of these.
Indeed, before I come to mention a single one of them, I wish
to go on record in regard to their outcome that I am unqualifiedly optimistic. History has no record of civilization having collapsed under problems such as these we now face. On
the contrary, its pages relate the fact that mankind not only
faced such problems, but overcame them, and went forward
In spite of them. So far as this country is concerned, I am
optimistic because, after all, the initiative for overcoming
existing difficulties and for attaining true prosperty lies in
the hands of the most resourceful body of thinkers and the
most constructive body of workers in the world—the American people.
What impresses me so profoundly, and what causes me to
look so confidently to the future is the way in which America
has progressed in the past few years, despite every ominous
cloud that has overshadowed the country, despite every
blunder that has been made—and there have been many of
them—and despite the waste that has attended all our national difficulties. Dating from the outbreak of the war,
one cloud after another has darkened our progress. Deflation has been a trying experience. Wealth, and what was
banks in a given county.
Active clearing house associations in our smaller cities and thought to be wealth, in many instances has been wiped out.
towns promote the general welfare and usefulness of the Costly mistakes have been made, alike in business, finance
I consider it a very great privilege to address this annual
convention of the Clearing House Section of the American
Bankers Association and I am not unmindful of the honor
conferred in asking me to do so. I rather hesitated, however, to accept the invitation for the reason that I would
very much prefer to leave speech-making to those who like to
make speeches, but as I was several years ago officially connected with this Section of the Association and as I am
heartily in favor of the good work it has done and is doing, I
did not find it easy to decline. Then, too, I appreciated hat
this occasion furnished an opportunity to meet old friends
again here in the nation's financial metropolis and see how
time and fortune have treated them. To please Mr. Washburn, Mr. Ringold and others connected with the activities
of the Section, I therefore accepted the invitation, and now,
not to displease you, I shall impose on your patience only
long enough to convey my cordial greetings and good wishes
and to present a few thoughts which I hope will prove to be
worthy of your attention. These I have reduced to writing,
Inasmuch as notes will keep me from rambling too far over a
large number of subjects and will as well strictly limit my
time, all in your interest.
The Clearing House Section of the American Bankers Association is, in my opinion, not only one of the most valuable
divisions of the Association, but one of the most valuable
avenues for the advancement of sound banking doctrine in
the country. It has to its credit the development and fulfillment of many constructive ideas, and will undoubtedly continue its good work with good results for many years to come.
Time moves so rapidly and the Clearing House idea seems to
be of such recent development, that many of you will be surprised to learn that the New York Clearing House Association, where the Clearing House idea had its inception, will
have rounded out 70 years of useful service within a few
months. It was in 1853 that the New York Clearing House
Association was organized, without, I dare say, a single one
of the bankers responsible appreciating in even the smallest
degree the future importance to the whole country of what
they were doing. Upon the success of the New York experiment, Clearing House Associations were established in practically every large city of the United States, and to-day even
the small cities and towns have come to recognize the advantages of the system and to this end the indefatigable efforts
of the Clearing House Section have been most helpful. Experience has proven beyond all question that there is no form
of organization among banks that is less expensive to maintain and yet more effective and valuable than that of the
local clearing house association. It serves as a medium
through which the banks of the community may co-operate
to strengthen and protect themselves, and at the same time
better their facilities in order that they may render greater
and improved service to the public.
Every sign would seem to indicate that the time is not far
distant when all towns and cities having three or four or
more banks will have a local clearing house association. Our
small country banks have far more to do with the administration of our country's affairs than many of us realize. With
approximately 30,000 banks in this country, 20,000 have a
capital of $50,000 or less and a major portion of them located in towns of 10,000 or less. These are an important
factor in our future welfare, and this fact, reduced to its
lowest term, means that these banks, because of their number, location and influence, must co-operate locally in the
same manner that the city banks have done through their
local clearing house association. This idea is already being
earned out by the successful organization in many instances
of a county clearing house association, taking in all the
138
BANKERS' CONVENTION.
and politics. Strikes haxe followed one another and have
It will be remembered that the Genoa Conference and the
brought loss to employers, employees and the public gener- Hague Conference failed and the Paris Conference of the
ally and have seriously checked business.
past summer disbanded without success because of the hosAgainst all this, we have gone forward. More, we have tile and unbending attitude which statesmen bore to one angone forward so far that as a people we have come to occupy other. For the moment, matters continue for the most part
a place of world leadership which is as undisputed as it is in the hands of those same statesmen. They are showing,
unparalleled.
however, a marked change in their attitude toward one anA brief review of our condition shows that we enjoy a other and in their point of view. Tolerance and a capacity
strong banking position, an ease of money rates, a large in- to work out problems from now on must be essentially the
dustrial output, an abundant harvest, and a large buying attributes of those entrusted with the practica lsupervision
power among the rank and file of the peoples. It shows an of existing affairs, if those affairs are to work out properly.
upward course of security values that reflects a large degree
The fundamental remedy for the plight of Europe is what
of confidence in the future. Money and credit for all legiti- may be called, in a general term, stabilization. We have
mate purposes are plentiful and will continue so indefi- heard time after time that stabilization cannot be artificially
nitely. Crops have been good in the great agricultural sec- hastened, but that it must come as a result of the remorsetions of the country, the yield is abundant and far in excess less working of economic laws. But as a matter of common
of our domestic requirements, and the value of the harvest sense Europe's leaders cannot permit chaos to dominate
is $1,250,000,000 more than that of last year. according to their acts without some intelligent and co-operative effort to
Government estimates.
put matters right. The economic weakness of every country
It may" be thought that this optimistic view is somewhat abroad springs from the destruction of international confinarrow because it is national; that while we have made dence. It can be swept away only as international confiprogress other people have gone back; that eventually mis- dence is restored, and as the interchange of credit, on a firm
fortune abroad must tell on us. It is true that our happiness basis, is renewed.
bears a contrast with that
other people. Europe in parThis means that international obligations must be adticular is weighted down with difficulties, and its peoples justed in a way that will permit individual nations to proare blocked at every turn from attaining true comfort and gress. It means a balancing of national budgets, an ending
prosperity. But even with regard to Europe, none of its dif- of the orgy of inflation and a return of currencies perhaps
ficulties have kept the world from moving, and what should with the help of our gold—to a fixed standard.
offset pessimism is the repeated measure in which the diffiA unity of ideas among the nations regarding credit is a
culties of that continent, which were thought by every one prerequisite of any constructive action with respect to their
too heavy to bear, have been tided over.
most pressing problems. Hence, before gold begins to flow
•
Go back to 1919, the first year after the war, and recall back to Europe, before disordered currencies are taken in
the extreme pessimism which pervaded public opinion re- hand, and before international exchanges are regularized, a
garding the then existing business and social conditions. real basis for peace-time relations must be adjusted, and
That pessimism was not warranted. The public judgment then made fixed and certain. The huge debts due by nations
was wrong, just as it has been wrong every time that an im- to one another must be compromised where necessary and
minent social collapse or financal crash has been predicated then funded. New long-term credits, for the purpose of
for one or another European country. Europe has not by any stabilization, must be granted.
means overcome its terrible war legacy, and at times, it is
These problems are primarily for Europe to determine, and
true, it does seem destined to go down under its weight. With perhaps it behooves us to refrain, as we have been advised
certain exceptions, however, its countries, have borne up for to do, from giving too much "smug advice" for solving them.
four years under that legacy,and have made headway against But they are related very directly to the trade and prosperity
terrific odds. So there is every sound reason to believe that of the United States, as we have already learned, hence it
socially and economically Europe will eventually recover.
cannot be considered bad taste on our part to give voice to
Europe, by its present suffering, is paying a part of the the hope that these problems will soon come to settlement
price of the war that destroyed ten million lives, wiped out through negotiation and conference and in a spirit of tolerthree Empires, warped all conceptions of right and wrong, ance and good-will.
and dissipated the wealth accumulated over three generaSome of us perhaps feel that we have no interest in the fixtions. Russia is to-day poverty-stricken and isolated. Aus- ing of the German reparations. As a matter of fact, this
tria is no longer even a shadow of its former self; Germany particular proposition has a very significant interest for us,
bears a burden that drags heavily upon her. The misery of not only because of its fundamental relations to international
people in those countries which are the greatest sufferers trade and finance, but because of the extent of America's
from the war finds its reflection everywhere. It underlies, contribution thus far to the payment of the reparations.
or at least directly affects, virtually every problem that conThere are no exact figures available, but it is conservative
fronts us.
to say that several hundred million dollars of American
Yet there is ground for confident hope regarding the future money has been invested (with the hope of profit on the part
of Europe, and I believe that this hope will be increasingly of the individual buyer, it is true) in German marks, at
realized. I am especially inclined to say this because Eu- prices ranging.from 8 cents downward. The Comptroller of
rope's chief difficulties are at last crystallized, and have the Currency has estimated the total of all foreign currenforced an increasingly sympathetic treatment on the part cies bought by Americans at $500,000,000; the bulk of this
of those men whose hostility to one another, until recently, outlay, in all likelihood, was for marks. In addition to the
and whose bitter jealousy and misguided national ambitions paper marks actually owned and held here in the shape of
kept them from coming to any common agreement.
currency, there is also a large amount of marks purchased
A notable sign of change abroad is the recognition of the through regular banking channels and held within Germany
dominance of economic forces over political forces. The Itself, on deposit in banks.
great mistake of those who drew the Peace Treaty of 1919
In this manner American funds, with the funds of people
was that they set political forces over economic forces and of other countries outside of Germany, have been placed at
established borders and dictated policies on a basis of polit- the disposal of Germany, so that instead of Germany itself
ical expediency without proper regard for economic relation- making the full payments for reparations, nations that were
ships. This mistake was carried forward, and so long as victorious in the war have made a very considerable contriEurope's point of view was primarily political, no economic bution.
stabilization could be looked for. "Indeed," to quote from
The process has been simple enough. Germany has no
a recent letter from one of England's leading banks, "it may favorable foreign trade balance out of which to meet its forbe said that the present sorry position of Europe is due to eign obligations, and has been unable to secure outside loans
the refusal to face facts, a policy which seems to have dom- for that purpose. Hence, those in control of its finances
ina ted statesmen since the war was brought to an end."
have turned out billions and tens of billions of paper marks,
CLEARING HOUSE SECTION.
selling them in large part in outside countries for whatever
gold value they could obtain, and turning that gold value
over in payment to Germany's creditors. By selling marks
the German interests have established balances in New York
and alsewhere, against which they have drawn to apply on
their reparation payments.
In brief. then, America has contributed handsomely,
although unintentionally, to the payment of Germany's war
penalty. How costly the operation has been may be judged
when it is pointed out that at current quotations, the marks
for which an American paid. let us say, $100 are worth less
than $2. This difference. multiplied by as many times as
there are Americans who bought marks. measures our present loss through Germany's violation of every sound rule of
finance, by which, when all is said and done, so many of
our people have been victimized.
The German mark has ceased to be the attractive investment it was heretofore thought to be by Americans who had
confidence in German thrift and industry, hence the volume
of American dollars that was going into marks has greatly
decreased. And it is safe to assume that this same attitude
has been taken in other countries where the public heretofore
bought heavily of marks. The result has been a greatly reduced addition to Germany's credit balances abroad. With
its marks unable to establish large foreign balances, without
a substantial foreign trade balance, and without credit
against which it can borrow, Germany is hard set to meet
the reparations terms, hence, we have every reason to believe that an early understanding will be reached which will
avert utter chaos with respect to Germany's financial affairs.
From a trade viewpoint, our interest in all of this is very
direct. Germany as an industrial nation has always occupied a large place in the trade of the world. Although an exporter of finished goods in competition with ourselves, it
has been a large buyer of our raw products. We look for
Germany in the future to buy heavily from the United States,
and we have, therefore, more than a passing interest in the
terms that are fixed upon Germany by which its obligations
are to be permanently established, and by which its future
place, economically among the nations, is to be determined.
With regard to international financial relations generally,
it is an intolerable situation that we contemplate at present,
no matter what the angle of our view. As for the part we
have to take in mending matters, that must,of course, depend
upon how Europe's statesmen rise to their opportunity; it
must be governed by their plans. When it is seen that the
point has been reached where America can be really helpful
In working out the solutions, I have no doubt that we will
change our present inclination to stand aloof, and will, both
with our counsel and tangible aid, intelligently directed, do
our proper part in solving the major difficulties which beset
the world.
Though this may still be a time for "watchful waiting," it
would be helpful to ourselves as well as others were we officially represented abroad on the commissions which are
striving to settle controversial questions and aid recovery.
Our representatives would not need to have the power to
involve the United States in tangible commitments, but they
could have a voice in the settlement of disputes and in the
consideration of these measures which affect the destiny of
nations which are debtors to the United States and are the
principal oversea buyers of our products.
I have seen copies of cartoons appearing in foreign newspapers which show Uncle Sam, sleek and satisfied, seated at
his door comfortably enjoying a cigar, while across the water
from him Europe is shown burning up, its miserable people
helplessly looking on. To make their point, cartoonists exaggerate their subjects; still, there is enough in the pictures
which are appearing to make us ask ourselves seriously
whether Europe's condition, which is a result of its war calamity. has not a larger bearing on America's destiny than
some of us are still willing to recognize.
I am not going to offer criticism of American isolation.
Nor shall I plead for less absorption in our own affairs. If
we are blessed with courageous and clear-sighted leadership,
we are bound eventually to go beyond our isolation barrier
139
as far as we should go, and in any case, time is bound to
widen our vision and adjust our absorption in domestic affairs. Our own affairs must, of course, always come first;
your home and family, and mine, mean more to you and me
than anything else in the world. Then, too, there is so much
for us to do at home; opportunity was never greater. Sir
Auckland Geddes, the British Ambassador to the United
States, showed his understanding of this when he said last
July in a speech made in London:
"America has given to the world the riches of a continent
which but yesterday was a wilderness. Of course, she is absorbed in her own affairs. How could she be otherwise?
Her thought is in that tremendous structural and industrial
work which has made her one of the greatest nations on the
earth. That is a problem as close to her as our problems are
to Europeans."
Our tremendous structural and industrial work, however,
have been built up not in relation to our own markets alone.
They have been built up to gain as well the benefits of the
broad markets of the world. Our civilization is tied up very
closely with the civilization of other people, and this means
that our standard of living is dependent in a arge degree
upon the standard of living in other parts of the world.
Therein lies our interest, beyond the common human interest
in our fellow man, in hastening the recovering of Europe.
The time, then, has come to determine upon a definite policy with regard to the Allied debts to the Treasury of the
United Sin tes. Other speakers during this convention week are
to make this theme their topic, and I will not therefore presume to anticipate what they are to say. At the same time I
feel that my discussion would be incomplete without reference to these debts, which next to Germany's reparations obligations, comprise the world's greatest and most complicated single problem of international finance.
To date these debts amount to approximately $11,700,000,000, adding accrued interest to principal. The debts are
fairly due. At no time were they considered in the nature
of a free gift. On the contrary, they have been recognized
and acknowledged as the solemn obligations of individual
sovereign States, and there has been no suggestions from a
single one of these of repudiation. At the same time, circumstances have arisen so far beyond the control of those concerned that the proposition is seriously made to cancel these
debts in whole or in part. This involves compromise, not
repudiation. Compromise is prompted by the abnormal state
of international exchanges, the difficulties of the world's
credit problems and the circumstances under which the obligations to us were contracted.
With respect to the debts of other Governments to us,
growing out of the war, the determination of the question
whether they should be canceled in full, in part, or not at all,
should be given careful study by the American people generally, for the reason that we can progress to a solution only
when and so far as public opinion and understanding approve. By dealing in a large visioned and liberal manner
with the debts due us, and exercising our credit power wisely,
we can go a long way to mitigate the circumstances which
keep Europe in turmoil. If any portion of the debt be canceled eventually, a direct benefit may result to us even
though at first it would look as though American taxpayers
were being penalized for the benefit of others. A partial
cancellation would be a contribution to world stability on
our part if it served the purpose of compelling an adjustment of the difficulties which now serve as a curse on Europe. Such a partial cancellation could readily be made contingent upon agreements as to the balancing of budgets, the
curtailment of inflation, the reduction of armaments and the
elimination of Governmental waste.
There is to be considered in connection with the compromising of foreign Government loans, the extension of new
loans to those very interests who are relieved from existing
obligations. As time goes on, new loans will be called for;
measures will be taken abroad to secure our surplus gold;
loans will be negotiated in the interest of trade. With a capacity for production beyond our own immediate requirements. we shall continue to look to foreign markets for an
140
BANKERS' CONVENTION.
outlet for that over-production. Our cotton, wheat, copper
and oil, to mention only a few raw products, and a large
number of manufactured materials, are produced in greater
quantity than we ourselves can use. Whether we will go on
with the over-production in the future depends on whether
foreign markets absorb our surplus, and that, in turn, depends in large measure on whether we can and will adequately finance our foreign trade.
This will continue to be one of our national problems for
some time to come. But do not misunderstand me in this:
It is not my purpose to maintain that the United States
should henceforth indefinitely turn over every year a great
surplus of goods to consumers abroad, piling up endless
credit balances until they grow so arge as to destroy all hope
of their settlement. Europe, indeed, needs gold, goods and
credit, and we are in a position to furnish them. The increase of our investments in foreign securities would enable
foreigners forthwith to increase their buying power, and in
that degree would enlarge our exports. This would mean
shipping goods abroad on credit, and everyone familiar with
the history of the past few years recognizes that to-day's
economic maladjustment between Europe and the United
States traces its cause to that practice. Europe gave its
notes for billions of dollars worth of American goods, and
the result has been an unbalancing of the international scale
pans to a degree that would have been regarded as inconceivable before the war.
Additional foreign investments by the United States will
not constitute a permanent remedy for Europe's malady except on one condition; that is, if they are followed by a vast
increase in Europe's productivity, resulting in large annual
payments to us against the charges accruing on these investments. If we receive such payments in the form of goods,
can we hope, other things being equal, to Maintain a permanent large excess of exports over imports? The answer
quite obviously is "no." Our commerce needs to be carried
forward on the primary principle of an exchange of goods;
imports of those things which we do not produce cheaply
should balance as far as possible the export of those things
which we produce in abundance.
Where credits are from now on granted to finance a surplus of exports over imports, they should be granted with the
utmost care, with a full appreciation of their proper relation to the primary principle of foreign trade, and with a
definite understanding regarding their payment.
In considering all these things, we must look forward to
the time when Europe recovers its place in trade, and we
must prepare ourselves for the inevitable adjustments which
are to occur. We shall not always be coincidentally the
world's greatest creditor and export nation on balances.
Nor, I take it, would any of us want to be.
The moral and financial power of the United States is
greater than has ever been known of any nation in civilized
history, and in considering this in connection with all our
international problems, we should keep in mind that we, as
the great creditor nation of the world, occupy a position directly opposite to that which we occupied prior to the war,
and it is well to have in mind, too, that by helping others to
help themselves we shall indirectly help ourselves, and reflection will be found in improved domestic conditions and
values.
American can afford to look forward with assurance to its
future, not only because of its supreme strength and the intelligence and adaptability of its people, but because every
lesson of its history teaches that in overcoming its crises it
has always given a new and firmer direction to its prosperity. The amazing thing about our complex civilization
is that every situation, supposedly unsolvable, has been
solved, and that through it all our civilization has gone forward to higher levels.
I have confidence that if our important problems receive
the careful thought and study they are entitled to, on the
part of the public generally, the correct solution of all of
them will be found. But let us face them and not temporize
with them. I say this because I feel that the civilization of
the future rests in no small measure on American manhood.
That it will go forward is a conclusion which none of us will
question for a moment. But to carry it forward, direction
and guidance are needed. This means leadership. "Time
and nature," wrote Ralph Waldo Emerson in one of his
famous essays, "yield us many gifts, but not yet the timely
man." Let us believe that what Emerson wrote 50 years ago
will not apply now: this truly is a time, more than ever, for
"timely" men.
COMMITTEE OFFICERS'REPORTS-CLEARINGSHOUSE DIVISION
Symposium on . Clearing House Examiner System.
Led by Charles H. Meyer, Chief Examiner Chicago Clearing House
Association, Chicago, Ill.
Mr. Charles Meyer: Ladles and Gentlemen of the Convention. I just
want to make a few remarks, and I don't think it will take over seven or
eight minutes, as an introductory prelude to this symposium of ours. I
have made a few notes. I am like the fellow who was asked to say something
at the demise of a friend. He hadn't a very good memory and he kept
on putting down notes. When he spoke, he told about his birth and a
few points in his life and then his death, and then he said,"Now gentlemen,
we all hope that our dear departed friend has gone to He- Heaven."
Well, getlemen, once more the cycle of time has brought us to the season
when this great organization known as the American Bankers Association
meets to discuss the financial problems of the day and play golf. In this
particular Instance possibly we will see some World Series games.
At this, the forty-eighth annual convention, we are guests of our New
York friends and we pay them homage in recognition of their hospitality,
which is in evidence on every side. in the short time we have been in their
midst, and I trust when we bid them adieu our short sojourn will leave
with them fond memories of good fellowship, instructive interchange
of ideas affecting 00 great responsibilty of the guardianship reposed in
the bankers of this country.
I want to say just a few words by way of introduction to our Symposium
minto Clearing House Examiners here assembled and will take only a few
utes of time in doing th,s, as the various subjects on our program to be
discussed will fully absorb the time assigned to us.
Although this is the forty-eighth annual convention ofthe American BankHouse
ers Association it is only within the last few years that the Clearing
examiners, by
Section has recognized the work you men are doing, you
feamaking the subject of clearing h use bank examinations an impotant
ClearingHouse
ture of discussion at each annual convention, and the various
feature
Associations of the United States register their approval of this
of
by the number of examiners they have sent here on the earnest appeal
our worthy Secretary Mr Mullen.
I want to digress, gentlemen, just long enough to express my sincere
appreciation of the wonderful work Mr. Mullen has done in the past few
years in bringing this Clearing House Examiner proposition up to the
different Clearing House Associations, and I think I w-uld be making a
mistake if I did not include in that our good Men], Mr. Coates from
Cleveland, Clearing House Examiner or Cleveland.
Now as Clearing House Examiner for Chicago,the city which first adopted
this system in June 1906, sixteen years ago, I believe I am entitled to evidence a pardonable pride and enthusiasm in lauding its merits, for in the
eight years that I have held this position I have become more and more impressed with the great results obtained in the practical application of this
method of bank inspection.
Suffice it to once more call attention to the fact that not one dollar has
been lost to a Clearing House bank in the city of Chicago since this system
was inaugurated.
And also that nearly all the large cities and many of the smaller ones have
followed our lead and established this method in recognition of the practical results obtained.
I could elaborate at great length in placing before you the various illustrations as to why, in my estimation, this system is so practical in
application, but this I believe is not necessary, for you examiners,
having had experience in this line of work, recognize the logic
of this observation. The system, I believe, receives its maximum
We now have 120 banks under Clearing House
test in Chicago.
supervision, where we had only seventy odd in the beginning of
1921.
This increase is a reflection of the recognition by our banks that it is one
of the greatest assets they have in being able to advertise to the public
that they are under Clearing House supervision.
The results obtained by our Clearing House Association through its Department of Examination, have finally attracted the public's attention and
the progressive bank is quick to recognize this.
Now, gentlemen, in closing these few introductory remarks, I ask your
indulgence in quoting just a few references to this system by some of our
Chicago bankers at a dinner given at the Drake Hotel last December, at
which portraits of Mr. James B. Forgan, Mr. Mitchell and Mr. Hamlin,
retiring members of the Clearing House Committee, were unveiled with
appropriate ceremonies and which portraits now adorn the walls of our
committee rooms.
Speeches were made and telegrams read which made reference to accomplishments by the committee during the incumbency of these men, extending over a period of between eighteen and twenty-five years, and I ask you
to note the voluntary praise of the examination feature which was established by these men.
This was gotten up in printed form, and General Charles G. Dawes, who
as Director of the Budget at Washington, was unable to attend that
ceremony,sent the following telegram, which read in part as follows:
CLEARING HOUSE SECTION.
141
wait and reach the centre of authority one thousand miles away. You
"I greatly regret that my work here prevents my attendance at the
Bankers Club banquet in honor of Messrs. Mitchell, Forgan and Hamlin. are not governed by any political preferment in appointments of your
and to
As the years pass and the appreciation of the benefits to our city leader- examiners. The men on that force are appointed for their ability and they
the Middle West in its banking and commerce, which we owe to the
are kept there as long as possible, because the longer a man is on an examship of these men, will constantly increase, they have at all times stood
courageously for conservative principles and sound banking. In times of ining force tne more valuable he becomes. Therefore,they are not changing
stress their initiative has been mvaluable, and in more tranquil times their
with every administration.
steadying influence has kept the feet of our banking interests on the ground.
The point that I want to make on the title of this subject is Just as briefly
assoTheir system of Clearing House examinations, which they and theirother
has been adopted by so many
as possible to explain to you how we handle that feature in Chicago.
ciates gave to our city and which
cities, has placed their names high in the banking history of the United
The examiner, in the first place, is not allowed to show his report of
States.
examination to toe Clearing House Committ ee.He is a sort of a poobab:
address by Mr. Solomon Smith, President of the Northern Trust in other words, he is made the goat.
In an
Co. and also President of the Chif-ago Clearing House Association, and
At the completion of each examination he hands a report in full to the
ex-offioio a member of the Clearing House Committee, Mr. Smith made President of the bank, each director receiving a notice that the examination
the following observation:
of that bank has been made as of a certain date and that this report is in the
"During the years that these gentlemen were serving, critical situations hands of the President for his perusal. Attached to this letter is a receipt
have arisen in this country, and city, which have called for calm and
which he must sign, stating that he has received the examiner's notice.
cool judgment and prompt discussion. These men have always quickly
At any future time, should the question come up and he would say,"Well.
risen to the occasion and by their good judgment have guided the Clearing
House Banks safe and well. The high standards which they have set has I didn't know the czndition the bank was in," this receipt would be pushed
been a splendid example for the bankers of Chicago and other cities, and under his nose, so to speak. That receipt is never allowed to be signed by
my sincere hope is that the future committee swill follow their same
his secretary; it must be signed in person.
standards.
"Upon the recommendation of the Clearing House Committee, the
The examiner prepares a short letter of what he calls his "committee letAssociation. in June of 1906, inaugurated tne system of clearing house ter," in which he simply hits the high spots, telling the committee what he
examinations which, as you all know, has been copied by New York, Boston, Philadelphia, and other important cities in this country. The value has accomplished while in the bank. They don't want him to come there
of these e.caminations has been found to be a most important safeguard to and say that "I recommend this and that." They believe there should be
the banks and their depositors and has proved the farseeing wisdom of the enough intelligence on the examiner's side and also in the bank that when
men who originated the system."
these problems come up, that they can get on common ground in a short
Next, Mr. James B. Forgan in the course of his address to the bankers while and settle them.
assembled there made this statement: "On an occasion of this kind, one
Therefore the fear that a lot of these banks have that you are going to
naturally becomes reminiscent and retrospective and is liable to become take your entire loan list and lay it before your Clearing House Committee,
prosaic."
and that the prime object they are going to stand to get an account away
Hoping to avoid the latter, may I recall to you some of the incidents from you or a loan that belongs to a good account, is absolutely something
connected with the work of the Clearing House Committee during the past that I hope you Clearing House Associations who have not adopted this
twenty-five years, which I hope may prove as interesting to you as they system and have bad that back in your heads will look into it carefully.
are to me. There are many such incidents but I would only refer to a few
If you will give your examiner the proper authority, you will never have
of them. The first important event of interest was the inauguration of the any fear of that. In all my eight years' experience as examiner for Chicago
Examination in 1906.
Bureau of
I have not once seen the least intimation, direct or indirect, of any member
Passing without comment the cause for this act, let me say that we were of that committee trying to find out the business of his neighbor.
pioneers in the organization of this kind of service and that our lead has
Gentlemen, I hope I have left the thought with you on that that any one
since been followed by similar associations in New York as well as in most who may be here representing a Clearing House Association which is holdof the country. The Clearing House Committee was ing back on that account, will just simply bear in mind that that is up to
of the large cities
instructed by a resolution of the Association, to establish an Examination
your organization, and the powers you delegate to your examiner, and you
Bureau and employ the necessary staff for its official operation.
will never be bothered by that feature. That is the least of all, but among
has since functioned to the entire the banks I think they consider it the most serious. That has been my exI think you will agree with me that it
satisfaction of all the banks connected with the Clearing House Associa- perience every time I have talked to any committee that comes outside
tion. Its work and its aims have always been constructive and the result of Chicago to look into the system.
has been the maintenance of the highest standards of efficiency, conservaMr. Wilson (St. Louis): May I say a word in behalf of the banks entism and business ethics among our clearing house banks.
joying the benefits derived from Clearing House examination. I am sure
I just want to call attention to one more and then I will close. Mr. George
you will pardon me for being a close second of Mr. Meyer when I tell you
M.Reynolds, Chairman ofthe Board of Continental & Commercial National that we were a close second to Chicago in establishing the system. We
Bank, in his address that evening made the following statement: "I don't are always glad to follow in the lead of a great city and when Chicago esknow whether people really appreciate what they have been to this com- tablished that sytem,they took away from our section James B. McDougal.
munity. (Speaking of Mr. Forgan, Mr. Hamill and Mr. Mitchell.) I now Governor of the Federal Reserve Bank, and made him examiner for
think I can safely say that the standard of banking in Chicago is at the very the clearing house banks of Chicago. We very shortly thereafter establishtop so far as banking in this country and any other is concerned. I am ed the system in St. Louis.
going further than Mr. Forgan did. and I am going to say that frequently,
I have always been very much interested in helping in whatever way
In answering letters regarding the effect of the adoption of the examination that I could to advance the system. I feel that I have the right to talk
of banks, I have said that I confidently believed that the standard of about it because I spent some five years as an examiner myself, following
banking in Chicago is at least thirty-five per cent higher than it would have which during my period as an officer of a bank I was a member ef the Clearbeen without the Chicago Clearing House examinations. As Mr. Forgan ing House Management Committee which committee as you know l'as
has said, Chicago was the pioneeer in that work."
under its direction the examination system. I want to say to you, especiNow, gentlemen, in closing these rew remarks, I simply want to leave ally to those of you who may not yet have the system in your own city,
men who are that there can be no other plan in my mind which
this thought with you in reading those extracts: That these
affords such a splendid
national in reputation are impressed by the safeguards thrown round the " measure of protection to the depositor, to the stockholder, and to the
depositors in our Chicago banks through this system, and bear in mind, general public as well.
their impressions are first-hand, for its practical application in their own
Before sitting down I do want to pay a tribute to those who have been
city is fully understood and appreciated.
mentioned: Mr. Francis Coates, who has worked so earnestly all these
our Symposium, I trust euch clearing house
With this introduction to
years for the advancement of the system, to men like McDougal and his
associations as have not yet adopted this system, will give it their most spendid successor, Mr. Meyer, Mr. Hanna, Mr. John W. Wilson out in
careful consideration and in adopting it, join with us in building up the best Los Angeles, our own man in St. Louis, Mr. Claiborne, and others, because,
machinery yet devised to protect the banks in their great guardianship after all, It is the examiner who has much to do with making the system
a success or a failure. You must have a strong man and strong men have
of our funds and the public in the safety of its deposits.
Mr. Chairman and Gentlemen of the Convention: We have, as you see certainly been selected in these cities which I have mentioned and many
on the folders on your chairs a Symposium. We are going to discuss in a other cities as well.
I simply rise, Mr. Chairman, more than anything else to earnestly recomsort of an open forum various items of interest, various details that touch
mend to every city which has not adoptad the clearing house system of
on our work as bank examiners, and it is unnecessary for me to read these
have them printed before you.
examination that they do so at the earliest possible moment.
subjects as you
Mr. Hart (Philadelphia): I would like to say first to the people who
I want to personally just make a few remarks on one of these subjects for
discussion, as I suggest ed it myself. We have various subjects suggested have honored us (I am speaking as an Examiner) by their presence to-day,
I suggested to the Chairman, I attended the first meeting in the interest of the Clearing House Section
by the different examiners, and the one that
Mr. Coates, was the fifth subject, which is "Limitations as to the informa- a few years ago, at a simllar convention, and we had about ten people in
attendance. I had gone to considerable trouble to prepare what I thought
tion Clearing House Committees should receive from their Examiners."
I bring this question up for the simple reason that in all of my reviews was a very able address. I think about five listened to it, and there was
Chicago to look into the one gentleman who was very much interested, but he was deaf and had a
with the various gentlemen who have come to
examiner system, they have at all times given me the impressien that the big ear trumpet, then I had to turn around and repeat my speech to him
- through the ear trumpet.
greatest stumbling-block in organizing clearing house examination depart
To-day there are probably a couple of hundred people here, and tbat
relents consists in the fact that the banks in the particular community don't
bankers, all competitors in the indicates the growth of interest in this system.
like the idea of four or five or six fellox
Mr. Chairman, I don't think that we ought to consume much time to-day
sitting around a table and mulling over their business.
community,
I can't blame any of you for having that impression because theoretically in passing compliments or claiming credit, but I think Philadelphia was the
that is what is done, but practically it is not. Right there, the point comas second city in the country to establish a Clearing House Examination.
up that in the organization of your Clearing House Examination Depart- That was in 1909. I am going to claim a little personal credit. I served
ments, the greatest factor of success or failure lies in the man you will eighteen years as a National Bank Examiner under six Comptrollers. I
select fur your clearing house examiner, and the latitude you will allow have been connected with the Examination Bureau, as Chief of the Philahim, or rather the responsibility you will place upon him in finally coming delphia Clearing House Association for nearly fourteen years, and among
to your Committee and assuring you whether or not that bank is being a few things that they credit me with, and which I claim some credit for,
operated along conservative lines; in other words, that the depositors' was the fact that I had the pleasure and the honor, through the suggestion
of one of our comptrollers, of approaching Mr. McDougal, who became
money is at all times safe.
I have always believed that if this work is done properly, with the the Examiner for Chicago and finally the Clearing House Examiner. I
wonderful co-operation we get from local men, sitting around a table in a have been conversant and acquainted with nearly all the Examiners in the
particular city, that long before a bank can plow through its capital and service.
To the point under discussion. I agree with Mr. Meyer, and it is uniits surplus, into the depositors' funds, it will stop them.
As we have always said in Chicago, in the sixteen years that that sys- versally conceded that the greatest objection to the Clearing House Examare ination System is the question of secrecy. He anticipated me when he said
tem has been in force we have succaeded in doing that. Of course, we
human, like any one else, and we don't know when we will fall down, but that (and this Is a little immodest) the right man should be gotten in the
it comes nearer being the greatest piece of machinery to insure guranteeing first place, but let the man so deport himself that he has the confidence
of bank deposits—the dream of the banker's life—than anything that has of the banking community as well as the confidence of the Committee.
Then there is another side to it. The Committee ought to merit the
yet been devised. I don't believe legislative enactment can ever come
anywhere near being as practical in application as the Clearing House Confidence of the examiner. There is a Clearing House Committee, that Is
problems are local. You don't have to one element, the banks themselves are another element, and the conscience
System. The reason is that all
142
BANKERS' CONVENTION.
of the examiner is the third element in this alliance. I make only two
The suggestions for discussion have come to me from all sections of the
characters of reports to our Clearing House Committee after I have examUnited States from examiners, and some from bankers. I am going to
ined a bank. It is just like an egg—it is either good or bad. Then I report read them briefly for you that haven't got them—I see you all have copies
that I have examined such and such a bank and I find the same in a satis- of them.
As our time is passing very rapidly, I will close and on behalf of the
factory condition. If it is not in a satisfactory condition. I say so.
Now when I say it is in a satisfactory condition they never question
Section I will extent to you all a very cordial invitation to attend and
that. If I say it is not in a satisfactory condition I can indicate what participate in our meetings. Give us the benefit of all that you can give
Is wrong, but under the contract between the management and the com- and we will try and do our part in return.
I thank you.
mittee, the committee has a right to call upon me for any information
Mr. Marsh (Newark, N. J.): Newark has never had a clearing house.
contained in that report. But primarily, I must assume the responsibility
of saying there is an unsatisfactory condition in some department of that
You men that have spoken seem to be proud of the fact that you were the
bank.
first to represnt the clearing houses of the country. I think I am safe
Then the Clearing House Committee can call the officers of that bank in saying that Newark probably tried to have the first clearing house in
or they can refuse to call them. They can analyze the question and
the country.
decide upon action, whether remedial or otherwise.
About twenty years ago she tried, and has been trying ever since until
On this point, I would just like to repeat or read to you one thing showing, March of this year. The clearing house was definitely organized and I
I think pretty concisely, my stand. But in the f rst place, as to the am very proud to say every bank in the city is a member of the clearing
system, I would like to say this—and I say it pretty frankly and un- house, and last Thursday they cleared for the first time.
Right here I want to extend thanks to Mr. Mullen and this Section for
hesitatingly: I claim nothing more for the system than the standard.
I claim that in the last thirteen years, since it was introduced, all species the help given in organization this clearing house. It was inestimable.
We never could have done it if they had not helped us as they did.
of bank examination have been raised to a very high standard. We have
Being a baby, we have problems that we are trying to solve, and we are
blazed the way. I am not reflecting upon either the national Government
or the State, because I served under the national Government. And right square up against this examiner system. One of the questions is.
if the examinations then were not as good as we claim to-day, and as I "How do you go about getting your man? Do you find a public accountclaim they are making, it is the fault of the Government and not the ant?" This is to the bankers, not to you examiners. "Do you go to
your public accountants?"
examiner. Hence, I am not reflecting upon any individual. But the
We have a great many of them come to us. Do you go out and scout
examinations, in my opinion, made throughout tne United States by any
for him? If you really want to help the baby of your Associatiion, you
class of examiner, are far better and higher than ever before.
bankers can tell us on the quiet how you find your man and you will help
I think when I read this you will get an idea of what I concede to be
the relationship between the examiner and the bankers whom he examines. us very much. Thank you.
It is almost unbecoming to me to make this statement, but I do it as a
Mr. Brokaw (Kansas City): I just want to reply to the suggestion of
compliment to the bankers. In my experience with the Government, I secrecy. Our examiner is here. I don't think we value anything more
never had a letter of criticism from the office. I never knew of a banker than the fact that our detailed statement with every single investment in
complaining of my treatment of him under examination. But that didn't it is laid before the Clearing House Committee. They are a set of men
we are glad to have see it. We are glad to have their suggestions. I
mean that I was not efficient, exacting and positive. but I always took the
banker into my confidence, to such a degree that he understood exactly can't understand how anybody would be afraid to have their detailed statement laid before the kind of men that would be selected as a Cearing House
where I stood, and the Government understood it.
That is all included in the atmosphere of what I call my introductory or Committee, because they are the kind of men who can be trusted and their
preface to my long report which I submit in each case to the banks under suggestions are of inestimable value. I don't see why that should deter
any one. We went into the system in Kansas City in 1908 and there
examination and the previous report to the committee.
The examinations conducted under the direction of a Clearing House never was a greater thing done for the Kansas City banks than the adopassets and liabilities and promote tion of the Clearing House Examination System, as we rather copied it.
are designed to prove the accuracy of
safe and sound banking in administration and methods. The force em- I think, from Chicago. It is the biggest thing we ever did in that section.
Mr. Meyer: I want to answer Mr. Marsh first. The matter of selectployed is capable and experienced in work of this character. The examiner
treats orally with the proper persons, minor criticisms or suggestions, but ing your examiner or the party to take that position is very difficult to sugincluded in detail in his report to boards gest. You said a public accountant. I find that the beat practice is to
all matters of higher importance are
get a man who is thoroughly familiar with bank practice. No matter how
of directors.
,
"This examination has been thoroughly made and it embraced the fis a1 good a public accountant you may have, he is sometimes in detail not a
all bank man at all, and I don t want to be misunderstood in that as casting
examination of all tangible assets, the verification of other resources and
liabilities, analysis and appraisement of value. Comprehensive statements any reflection on the public accountant. It is just simply a matter of years
and exhibits follow, giving full details of the affairs of your institution of experience, and being familiar with bank practice. However, I think
(this is to the board), revealing its excellent condition and giving evidence if you ever get to that point where you want to select a man, Mr. Mullen
of successful management. The excellent organization system of internal is in a position possibly to help you in that direction.
Answering Mr. Brokaw, of course, your observations there are a matter
audits and morale of the force generally warrant commendation. Your
of personal observation, and it does not change one bit the fact that that is
careful perusal of the entire report is respectfully suggested."
Mr. Francis Coates: The question of secrecy is one of the very impor- the most serious problem or one of the most serious problems we run into.
tant questions that we have to discuss. As Mr. Meyer has outlined the If we go before the Clearing House Associations of the country with that
procedure in Chicago, Mr. Hart in Philadelphia. In my own city of Cleve- thought in mind, as you expressed it there, I am very much afraid we won't
land, if the examiner finds the bank in good and satisfactory condition, un- get very far.
In the large cities that does not hold so good as it does in the smaller
der the terms of his contract he can only report to the Clearing House Committee that single fact, that he finds the bank in good and satisfactory con- towns. In the small town everybody's business is the other fellow's
business. I am absolutely aware of the fact that you bankers who come
dition.
If be finds it in other than good and satisfactory condition, he reports to from country sections will say, "Oh, yes, you fellows from the large cities
the Clearing House Committee in such manner as he deems best. The in- like Chicago and New York and Philadelphia can stand up there and
do a lot of hollering and talking, but you don't know what we are up
tention is that none of the innermost secrets of any of the banks shall be
against in this place where everybody is leaning over the back fence with
disclosed to any member of the Clearing House Committee unless a condition
his hand up to his ear listening to what you are saying."
were to arise that would be alarming, in which case, at the request of the
member
I recognize that thoroughly. Those are conditions you most meet.
members of the committee, unanimously, with the exception of the
happens to be represented, then the I am absolutely going to differ with you. Mr. Brokaw, in laying everyof the bank under examination, if he
thing before the Clearing House Committee. The great principle of
with the unanimous call of each memter, can demand such
committee,
examination is to protect the depositors' money. You and I by legisinformation as they may consider necessary.
I am glad to say that we have never had a bank taken before our Clearing lative enactment are allowad to put a certain amount of capital into a
been any di closures made except
bank. That capital is so insignificant as regards the guardianship of
House Committee and there have never
funds that are brought to you through the powers delegated to you by
to the extent that the examiner deemed best and wisest.
While secrecy is one of the stumbling blocks to the adoption of the the Government at Washington or in your respective States, that they
must surround your guardianship with safeguards of inspection.
examiner system in some of our cities, there are other considerations, I
Now, the broad principle of bank inspection is best brought about by
find. During the past few months I have talked with a good many bankers.
having the proper man in charge of that examination, and you must rely
of bankers, and I have corresponded with them. It
that is communities
on his judgment to a great extent. In other words. as Mr. Coates said,
has brought out some of the important stumbling blocks that are deterring
he only brings it up before his committee in case of absolute necessity
some of the cities from adopting the examiner system at the present time.
clearing house examiners, there
or in case the "egg" is bad. If the bank is good, he simply goes before
We have at this convention twenty-two
his committee and in a brief way tells them, "Gentlemen, I have comin the United States. There will be representatives from
are twenty-seven
pleted an examination of that bank and you have my word for it that
the banks of all of these cities from which the examiners come. In addition
to that, we have extended a formal invitation to some thirty-eight cities the bank's depositors are absolutely protected and the bank is being run
during the past few months the estab- along safe lines." If not, we discuss the various details, the policies
who have had under consideration
lishment of departments of examination. I don't know how many of those that that hank is pursuing that are wrong.
In that respect. I think it is a big mistake to take a long list and lay
cities will have representatives here, but there will be a rnajoirty.
it out there and say. "This bank has this and that bank that."
In my discussions and in my correspondence, the four vital stumbling
is, the amount of
The examiner may have private records there and if anything is hapblock. I have found are the question of seer cy—that
pening. a duplication of lines in the various hanks, the examiner will
Information that shall be imparted to the members of the Clearing House
know that and can tackle that subject intelligently far better than laying
Committee—the question of expense, the question that a clearing house
It before a committee of five or six gentlemen who have their troubles
examiner in his intimate examination into our affairs acquires too much
But every day in the year running their own bank and they come to you and
knowledge—he knows too much about the banker and his affairs.
say, "We are too busy with our banks. That is why we employ you
tbe final stumbling block in these cities that are considering the proposition
to do this work and if you do it properly we believe you ought to protect
is that they are trying to consider something and to decide upon something
the responsibility cast around this committee,and if you don't do it properly,
that they know nothing about whatever. They don't know what a
we don't think we have struck the rignt man."
clearing house examiner is.
Mr. Brokaw (Kansas City): I am sure in fourteen years there has never
We have arranged for a special meeting of examiners to-morrow afterbeen the first complaint on the part of any bank of the (71aering House
our problems. We have invited the
noon, when R e are going to discuss
Committee's knowledge of the intimate details of every bank, not the first
representatives from these thirty-eight outside cities to come in and join us
I don't think there ever has
in our discussions. We want to help them. We want their assistance compalint. Has there been. Mr. Cockerel'?
been.
and their co-operation. We want them to come in and satisfy themselves
differentiated
Meyer: I know. Mr Brokaw, but practically that has not been
Mr.
as to exactly what a clearing house examiner is. He is being
taking place. But theoretically, in the mind of the man who has not establfrom a State examiner and a national examiner.
We have arranged a program. Our meeting is to be held at '2:30 to- ished this system that will stick just the same. I'll be darned if you felmorrow afternoon at No. 15 West 37th St., in the New York Chapter lows are going to paw over my business around that table; every one of you
are competitors.
rooms. It is an open discussion on important subjects of interest to
You will never get over that hurriedly unless you assure them that the
bankers generally. We have sent out the message that all bankers are
examiner is going to handle that subject intellignetly and tho best way.
Invited to attend and participate In the program.
CLEARING HOUSE SECTION.
In your case. I don't say (don't misunderstand me) that it is not working
practically there, but you will keep an awful lot of cities from adopting
the system with that thing in mind.
Mr Hart (Philadelphia):In answer to the remarks just made, it is an
an exceptional case. unusual. I feet almost as if those people must live
in heaven. We would never have had the Clearing House system in Philadelphia if we has expected and altowed the full information to be submitted.
I want to emphasize this fact, (that is why I am on my feet): That I
..have a boy in the Clearing House under my own supervision, where my
copies are kept. No one has the key to them. The directors get the original report: I keep the copy. The committee never sees those reports
except in cases where I have found fault with the management. While
I am on the floor I want to answer the Newark man and It may answer
some other questions in selecting an examiner—get the man with the managing instinct.
That is pretty hard to define. You might say, banking experience,
if you please, hut there is something more than that in the successful examiner. He must have intuition, which is almost genius. A man may be a
good accountant and a very bad appraiser. A man may be a good accountant and nit know how to handle other men. Try to get a man with what
I term the banking instinct, then you are starting right.
Annual Address and Report of the President of the
Clearing House Section, John R. Washburn, VicePresident of the Continental & Commercial
National Bank of Chicago.
143
tunity of getting together and discussing the many problems confronting
them in their daily work. Some of the questions which will be discussed
are as follows:. Relations of Clearing House organizations and their
Individual Member to Non-Member banks; how they are differentiated to
the general public; how their checks are treated; how their competition
Is met and regulated; what, if any, measure of supervision has the clearing house over them; how the public can best be advised of the aims and
Ideals of the clearing house practice; standardization of rules and regulations and forms; the use of a standard certification stamp: the handling
of return checks and return items; clearing house emblems and their use:
proposed tr msit numbers for branch banks, &c.
A special Committee of twelve, consisting of a representative ban'oer
from each Federal Reserve District, has been appointed to perfect a plan
which we hope will prove of lasting benefit to many banks throughout the
country. The duty of this committee will be to help make ereetive a
uniform method for the calculation of interest on deposit accounts in the
United States, if it be possible, making due allowances for the time required
to collect certain deposits. The accomplishment of this would mean a
vast saving to the banks of this country.
The Numerical Committee of the Clearing House Section at the present
time is giving a great deal of thought and attention to the matter of finding a uniform way of designating branches by number, in cities where
banking institutions have one or more branches. This Committee
is also co-operating with the Federal Reserve Board in trying to suggest
a plan under which district numbers would be used on all checks of member
and non-member banks.
The reports of the Secretary, the Chairman of the Executive Committee
and the Chairman of the Acceptance Committee, covering the year's work
will be found in the annual proceedings, and! hope that all who are interested in the work of this Section will read them.
This report would not be complete without expressing my appreciation
of the hearty co-operation given me by the officers and members of the
Executive Committee ofthis Section,the State representativee, the members
of the official staff and especially our very competent and tireless Secretary,
Mr. D. A. Mullen.
I crave your indulgence a little longer while I make a brief resume of
what I have attempted to convey to you as the two principal objects
toward which we have been striving the past twelve months and toward
which we hope unremitting effort will be directed hereafter. One was the
°stabil hing of Clearing Houses. This Section has persistently endeavored
to encourage the formation of such organizations wherever and whenever
opportunity offered; they have been found to be most helpful agencies for
insuring real co-operation among the bankers of the country. The other
,
was the extension of the system of clearing house examination' in the belicf
that they are highly benef'cial to the banks directly concereed and of
very great importance to the community. Originally started in Chicego,
the system has proved in that city, and in many others where tried,
that it is one of the best safeguards that can be thrown around the banks.
Many concrete illustrations could be cited, b it suffice it to say that the
employment of high grade clearing house Examiners has resulted in the
prevention of tremendous losses to depositors.
After a careful canvass your officers have reached the conclusion that
the interests of the Association and its member banks can better be served
by this Section through adhering to the policy of concentrating upan the
two objects,—the establishment of more clearing houses and the employment of more examiners by clearing houses.—than in any other manner.
We trust that our successors in office will pardon the earnest recommendation that they also set up these two objects as their goal. We sincerely
hope that they may come even nearer to their attainment than have we
who retire.
In this city, sixty-nine years ago, the Clearing House had its inception
in this country. The idea originated in England. where, especially in
London. clearing houses had been operated most succekssfully since the
latter part of the Seventeenth Century. After a very short trial here the
merits of the clearing house were recognized and the bankers of New York
City found in it a system that not only met their needs but offered great
possibilities of service to its members. Later, similar organizations were
formed in Philadelphia, Pittsburgh, Chicago and many other of our larger
cities. The New York Clearing House has always been very influential,
it has assumed leadership in many emergencies, and through the courage
and sagacity of its management, frequently has been a potent factor in
averting disaster which threatened the entire country.
With the constant development of industry and banking and the resultant
growing importance of clearing houses, the number of which increased
rapidity from year to year. it became apparent that their usefulness could
be augmented by binding them together in an organization. In this manner united effort could be secured in putting into practice more expiditious
methods governing the details of local and country-wide clearings. But
of more consequence than that, in considering the formation of a body
of national scope, was the opportunity to obtain quick and joint action
on various questions pertaining to the broader principles of banking and
finance. Therefore, at the annual convention of the American Bankers
Association held in St. Louis in 1906, a resolution was adopted creating
the Ciaring House Section, which is to-day one of the important branches
of the Association. As the larger and more influential banks throughout
the copntry are members of the clearing houses of the cities in which
they allp lacated, there is hardly a question affecting any part of the banking
business, whether it pertains to savings banks, trust companies, National
or State banks, that does not in some way interest particularly the Clearing House Section.
Permit me here to tell you something of the work that has been done
during the past year, also something of what is planned for the coming
year. This section has unceasingly advocated the adoption of the examiner
system by the larger clearing houses of the country. The efficiency of
the plan is shown by the highly satisfactory results attained in the many Report of the Executive Committee, Clearing House
cities which already have it in operation. The examination by the clearSection, Francis Coates, Jr., Chairman.
ing house examiner is not merely a verification of the assets and liabilities
Following the Annual Convention. the Executive Committee of the
of a bank, but a careful scrutiny of the operation of every department.
In the report special mention is made of all loans,either direct or indirect, Clearing House Section held two meetings in Los Angeles last year. and
to officers, directors or employees of corporations in which either officers has also held two meetings at the Spring Meeting at White Sulphur Springs
or directors of the bank are interested. The report is kept in the ries of in May of this year. The Committee was formally organized at a Los
Angeles Meeting on October 6th 1921 by the election of a Chairman and
the eaxaminer and a copy sent to the President of the bank for the use
of the directors, as well as to each member of the Clearing House Commit- Secretary, the latter office being continued by Mr. Donald A. Mullen.
whose services had proven so eminentiy satisfactory during the year just
tee, and the result is most wholesome.
At the Los Angeles Convention, the President of the Section reported closed.
During the past year, careful attention has been given by the members
cities had put the sysstem of examinathat clearing houses in twenty-three
of Clearing House
tion into effect. During the past year. eight additional cities have done of the Executive Cammittee to the various problems
work and procedure, and it is believed that marked progress has been made
likewise, making a total of th'rty-one. A convincing argument as to
throughout the country
its inestimable value, one which I should like to emphasize, is its rein- in bringing the various Clearing House Associations
stallation by the Portland, Oregon, Clearing House Association after a into closer touch with the work of the Section. This has developed a genuine spirit of co-operation and interest that is very gratifying, and has
lapse of six years.
made possible a material widening of the scope and the value of the work.
The idea is taking root fast and the Executive C,onunittee of this section
The monthly bulletin issued by our Secretary has continued to prove a
feels that before the end of the year, in at least eight more cities, clearing
very interesting and valuable feature. In addition to topics of general
house examiners will be employed.
From October 1 1921, to date, we have been instrumental in increasing news and procedure, many special features have been introduced. I menthe number of clearing house associations from 274 to 310. or a total gain tion Bulletin No. 17. "The Examiner System—a alltAtit11`41 for Guaranty
for the year of 36; 33 being active and 3 inactive—the largest number ever of Deposits." and Bulletin No.18."How we consider the Examiner System."
as examples that have done much to promote the Clearing House Examiner
organized in any onnyear since this Section was created.
To keep ow' members informed on whatever would seem to be helpful movement, and are proving a strong argument in those cities which now
to associations in different actions of the country, we have issued a monthly have it under consideration. The records show that eight cities have adoptbulletin which is proving a real medium of information to clearing house ed the Examiner System during the past year, and to date, twenty-nine
other cities (large and small) have the qtrstion up for consideration and
scretaries and managers.
In a spirit of encouragement, let me say to you that this year has been final decision. We are assured it will be installed in several of them in the
the greatest in the history of the Section, and your officers and committees near future. Our Secretary and also members of the Executive Committee
various
believe that many cities, large and small, are just beginning to realize have given tneir personal time to the movement, in meeting with
t*at this
the signifcance of the Clearing House and of the Examiner System. The Associations and corresponding with others, with the result
work of the Section is being strongly and directly felt in important cmtres
smaller cities are evincing greater interest than heretofore and we think
Many Associations not employing an Examiner,
the time is coming when the clearing house system of examination will all over the country.
Bureaus of Credit. Literature explaining the organization
become operative in our country clearing houses as well as in groups of have installed
and operation of these Bureaus have been prepared and made available
borne by one city.
cities where the expense is too great to be
number of Associations, and in this manner likewise, his the
* Many of the cities having the examiner system operate a bureau of cred- to a larger
the work of the Section and its value been extended, and its inits. These bureaus proved invaluable to member banks during the critical scope of
as a constructive organization felt in all lines of banking over a
period which has just passed. Other cities without the examiner system fluence
broad section of the country.
are operating similar bureaus, the results being most gratifying.
During the year a comprehensive campaign to increase the number of
A special feature covering the activities of the Section this year will be
Clearing House Associations has been carried on, with the result that thirtythe conferences to be held by the clearing house examiners and managers
six new Associations have been formed—the banner year in the histroy
Tuesday and Wednesday afternoons of this week. On Tuesday afternoon
the work.
at the Examiners' conference, topics pertaining to the fuller development of
The distribution of forms of borrowers financial statements by the Secof the examiner system will be discussed.
tion has progresssd along satisfactory lines, and their use has been widely
Wednesday afternoon a meeting of all clearing house managers will be
extended. This has enabled the smaller banks and small communities
held at which time all formality will be put aside; giving them the oppor-
144
BANKERS' CONVENTION.
to secure practical up-to-date forms at a minimum of cost. During the
Standardization of Checks.—Requests for information pertaining to the
past two years this service has grown into a very valuable feature of the standardized form for checks and drafts are being received
from time
Section's activities.
to time, showing that our members are more than willing to co-operate
A most valuable contribution to the work of the Section is represented with the State Secretaries Section and
this Section in bringing about a
by a 17
-page pocket size brochure recently prepared by our Secretary, uniform size for checks and drafts.
In which is reproduced a series of six short articles on "The Clearing House
Report of Bank Clearings and Total Debits.—Our Section is co-operating
Idea and the Examiner System," published in October 1921 by the Chicago with the Federal Reserve Board in an effort
to have all clearing houses
Clearing House As.sociation. This merits the broadest possible distribution, report to the Federal Reserve Bank of
their district, their total debits
not only among banks and bankers but to bank patrons and the public to individual accounts weeky,
so that it will be possible to build up a
generally. It clearly defines the status of the Clearing House and the record of statistics which may
in the future be used for comparative purClearing House Department of Examination, and recites in telling terms poses. It was the sense of the
meeting of the Executive Committee at
how through their perfect functioning in times of severe stress, Chicago White Sulphur Springs last May
to ask the clearing houses to report not
and our country as a whole, was saved from serous financial collapse. It is only bank debits to the
Federal Reserve banks of their district but to
a testimonial to "Safety First" that should be in the hands of every banker give their weekly bank
clearings to all financial publications wanting
and every bank patron, and might well be recommended to Clearing House them. In addition we have
asked the clearing houses to compile their
associationsfor general distribution over the counters of their member banks. total debits to banks and bankers
for their own use.
Other important activities may be mentioned as follows:
Universal Numerical System.—Our Numerical Committee at the present
•IA—Arrangement with all Clearing Houses to re-report not only their total time is endeavoring to work out a plan which they hope will provide for
debits to individual accounts to the Federal Reserve Bank of their a uniform method of designating branch banks by a numerical number
district, but also to give total clearings to newspapers and financial in those cities where branch banking has become so popular.
publications requesting same. In addition, the Manager of each
District Numbers.—Our Numerical Committee at the present time
Association to tabulate and retain for his own use the total debits has under consideration the matter of providing district numbers for all
to banks and bankers. This in order to preserve the comparative checks of member and non-member banks which would facilitate the
figures of total clearings over a period of years, during which time handling of them by the Federal Reserve banks and their members.
figures of total debits are being compiled for comparative purposes.
No Protest Symbol Plan.—At the present time we are working in conIB—Continued effort to effect the adoption of a no protest minimum
junction with the Federal Reserve Board in an effort to adopt a uniform
acceptable to the Federal Reserve Board and the American Bankers No Protest Minimum Amount. The Section has advocated the $2&
Association.
minimum which has only partially been adopted by the banks of the
10—To enlarge the Numerical System whereby branch banks may be country. A campaign is about to be started in an endeavor to have the
given transit numbers. The mater now rests with the Numerical institutions in favor of the $10 minimum, adopt the $20 amount.
Committee,in whose hands the decision lies.
Finances.—The appropriation granted the Section for the year 1921-22
D--To have district numbers printed on all checks so as to facilitate was $9,600. During the year $110 was received from the sale of our
.
the handling ofthem by the Federal Reserve banks and their member s condensed financial statement forms and $116from the sale of our numerical
in their respective districts. This now rests with the Numerical keys, making a total of $9,826 for the year. The disbursements for the
Committee for action.
year amounted to $9,257 22, leaving a credit balance on hand at the close
E—Extension of the idea of County Unit Clearing Houses.
of the fiscal year of $568 78.
F—Extension of the use of Clearing House symbols.
The following activities are recommended for the coming year:
0—Assisting in the adoption of standard sizes of checks and drafts.
That as a Section we again encourage in every was possible the organizaH—Working on a plan for the adoption of a uniform method in the tion of new clearing houses, city, county and country, with special efforts
calculation of interest on deposits, making proper allowance for time on the county organizat on plan.
,
required to collect certain items. This is in the hands of a comThe every effort possible be made to further the extension of the clearing
mittee composed of one member from each Federal Reserve District. house examiner system which is working to the satisfaction of the bankers
The full usefulness of the Clearing House Section cannot be exerted in those cities where it is now in operation.
To co-operate with the State Secretaries Section in every way possible
other than through the co-operation of the Clearing House members, and
our experience this year has convinced us that the strongest co-operation to bring about a standard form of check and draft.
To co-operate with the American Acceptance Council In the further
comes through the personal contact of member with member. The actual
work of the Clearing House is initiated by its individual members, its development of the Acceptance idea.
To co-operate with the Federal Reserve Board to the end that a uniform
officers, its Manager or its Examiner, and a strong effort has been made
to bring these active elements of the various Clearing Houses of the country amount for the no-protest symbol may be adopted.
To bring about a uniform method in the calculation of Interest on detogether at this year's Convention for a real "get together." To this
end we have arranged,in addition to our usual Convention program,a special posit accounts in the United States.
To bring about if possible a uniform plan of numbers which can be
meeting of Clearing Hcuse Examiners and a separate special meeting of
Clearing House Managers. The officers of the Section have made a adopted by the banks of the country in designating their branches.
To bring about a system whereby all banks will be given district numbers.
personal canvas of each of the Clearing Houses in the country and of
Monthly bulletin.
their members, and also of all Clearing House Managers and Clearing
House Examiners and have extended a pressing invitation to each to attend
these meetings. They are to be entirely informal "get together" sessions,
Report of Resolutions Committee.
at which will be submitted and openly discussed (no set papers or speeches)
Mr. McNally: "Whereas. The Chicago Clearing House and its member
the various phases of the work of the Clearing Houses and of the Examiners,
as they are conducted in the many sections of the country. Suggestions of banks have prepared an excellent series of articles setting forth the relations
of banks to each other and to the public in Clearing House Co-operation
topics for discussion have been invited from all Sections, and the results in
sight are indeed gratifying. We expect to have the best attended meetings and Regulations, which articles are of very great value in informing the
In the history of the Section, and the discussions will be along practical con- public on these subjects, and
"TVhereas, The Clearing House Section has printed these articles in
structive lines, participated in by Examiners, Managers and Bankers, and
we hope through this means to insert the entering wedge to a field of larger pamphlet form for ready distribution; therefore be it
"Resolved. That this Section recommend to the various Clearing Houses
activity and larger usefulness, and to bring about a feeling of co-operation
in the country and to their member banks, that the circulation of these
so close as to make each member feel that this Section is his Section. and
that he has available a service that will respond promptly and competently pamphlets be made as wide as possible, and the depositors thus informed of
the protective functions of the Clearing House.
•
to his demand on any question of Clearing House procedure.
"It Is Further Resolved, That this meeting extend its very sincere thanks
Respectfully submitted,
and appreciation to all those who, by their interest and efforts on behalf
(Signed) FRANCIS COATES, Jr., Chairman.
of the Section, have contributed so largely to the success of this meeting.
"Be It Further Resolved, That this Section extend to the State representative of Clearing House Sections its hearty thanks and appreciation for its
Report of the Secretary of the Clearing House Section. co-operation which it has given the Section during the year.
"And Be It Further Resolved. That its special thanks be extended to John
D. A. Mullen.
R. Washburn, its President, under whose direction so much constructive
Following the annual convention held in Los Angeles last year, your
work has been accomplished during his tenure of office.
Secretary endeavored to carry out the wishes of the members of the Exec"And Be It Further Resolved, That the spacial thanks and appreciation
utive Committee, by carrying on a strenuous campaign to interest as of the Section be extended to D. A. Mullen, its Secretary, througn
whose
many of the smaller cities as possible in establishing clearing house asso- intelligent interest, conscientious efforts and hard work the objects of
ous
ciations as well as endeavoring to have those cities which are contemplating
Section have been carried forward with the result that the Section closes
the installation of the clearing house examiner system, adopt it. Our its work for the fiscal year with a record of still greater accomplishment
than
efforts have been quite successful due to the hearty co-operation of the ever before in its history.
officers and members of our Executive Committee and the State Repre"We desire to express our sincere appreciation to the Committees in
sentatives of the Section.
charge of arrangements for the courtesies extended this Section. All the
New Clearing Houses.—During the year thirty-six new clearing house details of the meeting have been looked after in the most painstaking
manassociations were organized and admitted to active membershpi in the ner and we would expecially thank those New York bankers
who have
Section, increasing the active members from 274, the number reported
been assigned to look after the arrangements on behalf of our Section. We
cannot let the occasion Pass without thanking Dr. Burrell and Messrs.
at the Los Angeles Convention, to 310.
Clearing House Examiner System.—During the past year, a special McHugh and Loree for their timely and inspiring addresses. We feel
that
effort was made to not only increase the number of clearing house asso- work of this Section should not stop with matters of particular concern
ciations but to interest as far as possible the associations that had under to the banks in our respective lccalities, but that in addition it is for us to
consideration the installation of the examiner system. Our efforts have address ourselves as best we can to the solution of problems, both national
and international, that are confronting the world to-day.
met with a large degree of success, as eight cities have installed this system
of examination this year, increasing the number to thirty-one. At the
Respectfully submitted:
0. HOWARD WOLFE,
present time twenty-nine cities have this under consideration and I believe
CARL W.ALLENDOERFER.
to those
JNO.R.DOWNING,
before the end of the next year a goodly number will be added
R. F. McNALLY, Chairman.''
The resolution was adopted.
operation.
cities which already have it in
The pamphlet that Mr. McNally referred to may be had at that table.
Acceptances.—The Acceptance Committee which functions through
the Clearing House Section, has been operating with the American Ac- at the right of the centre door, I hope every one of you will take that
ceptance Council in its campaign for a better understanding of the accept- one and read it.
Mr. T. H. Brougham: I think, Mr. Chairman, that the resolutions
ance practice and has without a doubt performed a real service to the
are especially in order. The Clearing House Committee, the clearing
banking fraternity of the country.
Condensed Financial Statement Form.—Interest in the condensed financial house examiners pay more attention, and do the people more good than
statement form recommended by the Section has been increasing during the all the examiners outside. I know something about banking, and not
past year. Your Secretary has received hundreds of requests for these so much about clearing houses, but I know that when the clearing houseforms, which are becoming more widely used by the banks throughout the examiner goes to a bank to examine it, he examines the whole bank, and
he will not only tell you and give you suggestions, but he will come back
country.
CLEARING HOUSE SECTION.
out and ask you how
in a week or two, if it is necessary, and help you
notes.
you have succeeded in collecting some of those delinquent
the banking business
If there is anything in America that operates against
the gentlemen have been talking
It is neglect. The stumbling block that
and some
about here for some time is negligence. A bank is organized
He suggests
man with more stock than others is elected president of it.
men running that
the cashier. The cashier is elected and there are two
learn somebank; the directors get around once a month. Some of them
consequently
thing about the proceedings of the bank and others don't, and
get nearly all
the friends of the president and the friends of the cashier
or friendship in
the loans, which is not right. Friendship in banking,
in banking you are not there for love,
anything, is hard to overcome, but
that
you are there for business, to look after the interests of the people
to be
are your customers and to take care of the money deposited, and
in shape at all times to pay it back, if they want it.
if
I am not a very old banker. I would have been an older bank
men
it wasn't for the troube that they had forty years ago. I have had
come and say to me. "Mr. Brougham, come down to our bank and buy
some stock."
I would say, "Well. I would be glad to do so but I haven't more than
four or five thousand dollars that I can invest in stock, and I would like
to get ten."
I later saw one of those men come out in front of his bank and shed
tears, asking the people to go away, lie said. "If you insist on drawing
all your money out now, this bank will break and you will break. But
to pay
if you will be a little bit sensible and give us time, we will be able
every cent. The bank is in fine condition, better than many of you think,
but we can't cash our notes at present."
Thank the Lord, with the new system of currency, the sectional banks
have placed things in a little different position and now if a man will Just
be careful and get notes that are good, there is no need of his breaking
at all, there is no need of a panic, and no need for begging the people to
go away.
take
Instead of getting them out there and begging them to go away,
the
your notes and go up to the bank and get the cash on them—and
every careful institution anywhere
bank progresses as it ought to, and as
would progress.
145
Thank you, gentlemen.
President Washburn: I know that a number of the points suggested
by Mr. Brougham are going to be thoroughly discussed then.
-morrow afternoon will the discussion
Mr. Coates: In that meeting to
be purely clearing house examination matters or clearing house matters?
President Washburn: They are going to try to divide the matters
between clearing house examination on Tuesday afternoon, and clearing
house management on Wednesday afternoon.
on Wednesday?
Mr. Coates: Clearing house matters will be discussed
President Washburn: Yes.
Report of the Nominating Committee—Installation
and Remarks of Incoming President, Jos. Ringold.
report as follows:
Mr. Crandall: The Nominating Committee begs to
, Francis Coates,
For President, Jos. Ringold, Denver; for Vice-President
, terms expiring 1925,
Jr., Cleveland; for members of Executive Committee
ia; for memJohn Downing, Louisville, and 0. Howard Wolfe, Philadelph
E. MacGregor, Minbers of Executive Committee, term expiring 1923, R.
neapolis.
that the report of
Upon motion made and duly seconded, it was voted
y.
the Nominating Committee be accepted unanimousl
ballot for the ticket.
The Secretary was authorized to cast a unanimous
tireless workers we
President Washburn: One of the most energetic and
of Denver.
have in this Section is our next President, Mr. Jos. Ringold
and no one is more
No one is better fitted to be President of this Section
He is so well known
entitled to it than our good friend, Jim. Ringold.
brief. I will introduce
to you all that I will make this introduction quite
Mr. Jos. Ringold, your new President.
much. This is
President-Elect Ringold: I certainly thank you very
This Association is
one of the honors that I cannot express in words.
I have been connected with it in some way
very near to me in every way.
s have done
or other for a number of years and I know that my predecessor
it is my
a wonderful work. With the aid of our executive committee,
future. I thank you, gentle
hope that we shall progress very greatly in the
men.
NATIONAL BANK DIVISION
AMERICAN BANKERS' ASSOCIATION
Seventh Annual Meeting, Held at New York City, October 4, 1922.
INDEX TO NATIONAL BANK PROCEEDINGS
The Future of American Business, James S. Alexander
Page 146
Problems of the Hour, Frank A. Munsey
149
Remarks of Pr sident John G. Lonsdale of the National
Bank Division
152
Report of President of the National Bank Division
Page 153
Report of Executive Committee of National Bank Section_ _
154
Resolutions on Branch Banking, &c
154
Report of Nominating Committee—Officers for New Year
155
The Future of American Business
By JAMES S. ALEXANDER, President, National Bank of Commerce in New York.
This is the fourth annual meeting of the American BankWhile there are many factors that would have to be
ers Association that has assembled since the close of the weighed in any complete appraisal of the present situation,
Great War. At the time of the first meeting we had entered I must limit myself to a consideration of the three factors
upon perhaps the most extraordinary and abnormal period that throw most light upon our present outlook. These are:
of business activity in American history. When the second
1. The readjustment that has recently taken place in our
meeting took place the crisis was already upon us. At the domestic financial conditions and in the volume of internal
time of the third meeting, namely that of a year ago, al- business transactions.
though we believed that we had passed the worst aspects of
2. The labor situation.
the depression, there were still many maladjustments to be
3. The condition of affairs across the water.
corrected. Since then some very marked changes have taken
Let us look at each of these factors in turn.
place in our domestic business situation and we now have,
For many months we have been watching every evidence
for the first time since the war, a condition of affairs that of changing financial and business conditions
with great
gives us some substantial basis for a consideration of what care, and month by month the experts in many
branches of
may be called the normal trend of American business in the industry and finance have been reporting the evidences
of imfuture.
proving conditions. The larger facts contained in these reWhen I refer to the normal trend of business, however, I ports may be summarized as follows:
do not mean to suggest the precise condition of industry that
From the financial point of view the credit stringency has
prevailed before the war. We have many new factors to passed and frozen loans to an important extent
have been
consider, some of which are favorable and some of which thawed out. Inter-bank accommodation among
Federal Reare not. We have a banking system that is much superior to serve banks, which stood at 267 millions on Oct. 22 1920, deour pre-war system; and we occupy relatively a much more clined to nil in December 1921. The amount of Federal Refavorable position in the world's capital market. On the serve notes has been substantially reduced. From about
other hand, we are to carry on business under a load of taxa- three and one-third billion dollars in December 1920 the agtion that in our pre-war days would have appeared unbearable. gregate amount of notes in actual circulation had been reThere are other factors, some of which, perhaps, have both duced to a little over two billions in the early part of Sepfavorable and unfavorable bearings, such as the existence of tember 1922, a decrease of 35%. The Federal Reserve ratio
our great public debt, the influence of treasury financing is now above 78%, whereas in May 1920 it was below
upon the money market, the possession of nearly one-half of 43%.
the world's stock of monetary gold, many new aspects in the
For more than a year and a half up to quite recently, interrelation between labor and capital, and by no means the least est rates were declining. From the abnormal interest rates
in importance, the removal from the world's market, perhaps prevailing for some time after the culmination of the crisis,
for many years to come, of the buying capacity of many mil- rates fell until they attained comparatively low levels. The
lions of people.
renewal rates for call loans, which ranged from 6 to 10%
These factors must have a very great•bearing upon the fu- less than two years ago, have ranged within the last few
ture of American business, and it may be that not within a months from 2% to 5%. At the former date, also, 60-day
considerable number of years will business return to the time loans were made at 7 to 8% as compared with 3% to
same relative conditions that prevailed before the war. We 4% during August 1922.
shall probably work into an industrial and trade position
In the security market there has been a more or less steady
that may be called our new normal. Whether that new nor- rise in the prices of stocks and bonds since June 1921, movemal will be represented by a volume of business relatively ments which have been accompanied by a large increase in
less than our pre-war volume (after, of course, allowing for the volume of trading. In one list of 40 bonds, the price adgrowth of population), or whether it will be represented by vance has been about 25%, and in a list of 40 stocks, the price
the same or indeed by a relatively greater volume, will, I be- advance has been about 50%.
In the field of commodity prices the general level of wholelieve, depend upon whether we shall broaden our outlook
commensurately with the size of the great problems and the sale prices, while still uncertain, has become decidedly less
great opportunities before us.
unstable and the maladjustments existent at the culminaHowever that may be, I believe that the facts of the situa- tion of the price rise in May 1920 and at the end of the price
tion, although exceedingly complex, are now more definitely decline in May 1921 havd now been in important part corbefore us than at any time since the close of the war, and we rected. Of importance in this connection is the situation
are in a position to take a long view to the future.
with regard to the prices of farm products. Although the
NATIONAL BANK DIVISION.
147
And lastly, many maladjustments due to the war or the
price of wheat and some other agricultural prices are lower
to agricultural immediate post-armistice period have already been corthan a year ago, the price level with regard
The large stocks of special types of goods that reproducts as a whole shows a substantial improvement, as rected.
especially noteworthy im- cently caused stagnation in the markets have been largely
compared with a year ago. An
distributed or consumed, and the disproportionate developproVbeinent is seen in the prices of metals.
of business, although ment in our capital equipment is being steadily corrected.
With regard to the general volume
In short, we have made much real progress in recent
the coal and rail strikes have tended to reduce car loadings,
in the loadings of merchan- months, and in many ways we are in a position to handle
there has been reported a gain
a much larger volume of business.
dise and miscellaneous freight, and in the total car loadings,
Having recognized these facts, however, we are still left
over the corresponding period of a year ago. Employment
have we of a furincreased, and, in isolated lines, there has been reported with the question: what sure indications
has
for the ther advance? In reply to this question, our attention has
an actual shortage of experienced men. The indices
striking developments in
general volume of business indicate a rise from 25% below frequently been called to several
in July 1922. special branches of business, such as the very active stock
normal in July 1921 to about 10% below normal
industry and
This growth in the volume of business has also been reflected market, the large turnover in the automobile
the first six the extraordinary activity in building and other construcin an increased volume of bank clearings during
tion, which in turn has brought an abundance of business to
months of this year.
noted. In the lumber, cement and other allied industries.
In special industries particular activity has been
These activities have, without doubt, contributed very
steel, the output of ingots increased markedly during the
the most
first six months of this year, and the unfilled orders of the much to the present improved condition and for
Corporation at the end of August part they have represented sound business and financial deUnited States Steel
conditions,
amounted to nearly six million tons, as compared to about velopment. As barometers of future business
February 1922, the low point. Railway however, some of them ought not to be interpreted in just
four million tons in
to interpret siminet earnings have shown some increases, especially during the same way as we have been accustomed
and improved earnings have been lar activities when recovering from former depressions.
the first half of this year;
in part by the same
noted in numerous industrial lines. Throughout this same While the present activities are caused
has enjoyed marked activity. factors of progress that have stimulated similar activities
period the automobile industry
are caused by
There has been a building revival—one of the most note- on previous occasions, in no small part they
ally with regard to residences extraordinary and temporary factors that cannot with conworthy in our history—especi
in proportion to
and public construction. As a consequence, the condition of fidence be said to reflect general prosperity
especially the cement in- the volume of activity. While all of the present forms of unthe building material industries,
usual activity cannot be interpreted in the same way, it is
dustry and the lumber.industry, has been favorable.
contributed to comparatively possible to indicate the difference between normal and abSeveral other factors have
optimistic indications. The forecast of good crops has been normal activity by reference to one industry, namely conIn most cases justified by recent reports, and finally, not- struction.
During the recent months we have been witnessing one of
withstanding labor difficulties, there has been noted a denumerous quarters in the course the most marked periods of activity in construction in our
velopment of confidence in
history. An activity of similar volume in normal times
of recent months.
These, then, are the facts that have been gathered by many would be rightly interpreted as an indication of a considerinvstigators in the various branches of industry and finance, able prosperity. It would probably mean the extension of
and that have been set forth as the leading indications of the the plants of industrial companies in response to, or in antitrend of business toward a better level. On the basis of cipation of, a marked advance in the demand for their prodthese facts just what are we in all due caution justified in ucts in excess of present capacity; preparation for increased
transportation facilities to carry the increased volume of
concluding?
In the first place, the financial situation which some time business; enlarged warehouse and other business capacity;
ago was causing no little concern, has unquestionably and finally, it would mean new residential construction
cleared. In general, banking conditions in this country are made possible, in part, at least, by new earnings or reasonexcellent, and we have every reason to believe that what- ably anticipated increases in earnings. In short, it would
ever sound business may be developed in the future can be indicate for the most part an expansion relatively beyond
properly financed. This clearly presents sound reason for our earlier development. The construction activities of today are no doubt in some part stimulated by these so-called
optimism.
extreme price dislocations which normal factors of growth. To an important extent, however,
In the second place, the
up to very recently obtained in some branches of industry they are a reflex from the unusual conditions of under-conhave, to an important extent, disappeared. We still face struction left by the war and post-armistice period.
Just how much this activity is the result of municipal and
uncertainties concerning the future of the general price
the final effects of our other public work rendered imperative by the void left by
level, and until we know more about
huge gold supply, the final effect of erratic European com- cessation of normal building during the war, and just how
petition and the trend of specific wage levels, we cannot feel much it is stimulated by the tax-exemption of municipal
complete confidence with regard to general price movements, and State securities, it is impossible to say. It is also imor, indeed, with regard to some special price movements. possible to know just how much of it is stimulated by the
Nevertheless, we are justified in saying that the price situa- foresight of business men who are preparing for enlarged
business in the future, and just how much of it, on the other
tion offers hope for business improvement.
In the third place, the volume of business, which, acoord- hand, represents nothing more than an extraordinary effort
ing to one of our best estimates, usually drops less than 20% to make good the housing and other construction shortage
below normal in businses depressions, but which dropped left by the war. It is clear, however, that a sufficient num25% in the recent depression, has now gradually increased ber of unusual factors enter into the present building boom
until at present it is only 10% below normal. Here again we to caution us against attributing to it the usual significance
in times of ordinary business recovery.
are upon substantial ground.
Before we can with full confidence interpret unusual acfourth place, there has occurred a considerable reIn the
of returning prosperity, we must
adjustment for the better in the great basic industry of tivities as sure indications
namely agriculture. It is true that the prices of find such activities springing principally from the general deAmerica,
for increased productive capacity and not largely from
some products are very far from satisfactory, and that mand
situation there exists uncertainty as to the urgent demand of absolute necessity caused by previbecause of the foreign
retarded growth in normal lines of industry. Of
the outlook for some of our farmers. The position of agri- ously
however, has undoubtedly improved over course, an extraordinary construction activity, whether it
culture, as a whole,
springs from destruction by war, flood or fire, or from dethat of a year ago.
148
BANKERS' CONVENTION.
layed industry due to war, may be a very wholesome sign. It
may be considered perhaps as the growing pains of the
It helps to correct the maladjustment and to fill in the unindustrial world.
fortunate gaps in our equipment. The activity, however,
But these more or less chronic and for the most part
relasprings from a past loss—not from a new gain.
tively less important difficulties are not what I have in
While, as I pointed out a moment ago, no two of these ex- mind.
I refer to the extraordinary problems arising from the
amples of extraordinary activity recently developed can be belief
of certain laboring groups that they can permanently
interpreted in the same way, it is to be noted that back of exact
from the community something approaching the unmost of them are to be found factors of such extraordinary usual
wages rendered possible by the confusion of wartime
or temporary character that in part at least differentiate and
the immediate post-armistice conditions.
them from apparently similar activities in normal times.
We now know that the feverish activity of the post-armisUntil we know more about the final effects of these ex- tice period
was abnormal. It brought huge profits to some
traordinary activities, I believe that we are justified in ex- enterpris
es and speculators and extraordinary wages to
ercising due caution against reading into them a meaning many
laborers. These wages and profits were possible
that may not be there.
largely because of the crying needs of European countries
Properly interpreted, however, these examples of extraor- following
the war, and because of the confusion in this coundinary activity do point to better conditions. In addition to try during
the same period. But in many ways this activity
these special factors there are numerous other indications was not
a healthy condition for business and it is to be
of a very considerable activity that do suggest a readjust- doubted
whether in the main it brought permanent benefit
ment more nearly to normal capital relations and in many either
to the employers or to the employees. In any case,
wises to a more or loss steady improvement in the volume of that time
is gone and there is no chance of its returning. As
business. In looking over the whole field of domestic activ- a permanen
t policy it is impossible to pay such extraordinary
ity, therefore, I believe that we are justified in saying that wages
unless labor efficiency is to be increased correspondthe outlook for business is clearly for the better.
ingly.
To recognize that fundamental conditions are right for a
We have had some important wage readjustments,
but
considerable further recovery, and to say that we are well there must
be further readjustments before the wages of
on the way to something approaching a normal volume of some can
bear a more nearly normal relation to the quantity
business is not quite the same as saying that we are assured and quality
of the service rendered. Wage earners cannot
of a speedy return to one of our pre-war periods of pros- permanen
tly receive more than they produce and all temperity. It is this second question, I take it, that is of most porarily
successful attempts to gain excessive wages serve
Interest to all of us. Into it, however, enter many special only to
deprive other workers in the community (through
factors, the most important of which are the outlook for the the means
of high prices) of part of their justly earned
labor situation and the condition of affairs across the Income.
water.
But the present labor problem is by no means one-sided. It
The immediate effect of the coal, railroad and other strikes is equally
disastrous to the community for employers to take
undoubtedly has been to present serious obstacles to current advantag
e of the slack business periods to reduce the wages
business development and the most serious consequences of and working
conditions below those justified by the condition
them are perhaps yet to be met. It would be a mistake to of the
industry. There is much readjustment still to be made
underestimate the evils of these difficulties. However, the in the
labor situation and I think that we must admit that
aspect of the labor problem that appeals to me as of greatest the
outlook for our domestic business prosperity will depend
significance, is the question as to how much more labor dif- in
no small degree upon the breadth of view with which
ficulty we must face before we can finally settle down to both
employers and employees face the coming and necescomplete recovery.
sary readjustments.
The present labor difficulties are in large part the result
The labor situation, however, is right at our door and
we
of the effort of industry to readjust itself in the face of the have
the dire significance of its continuation borne in upon
many complicating factors arising from the war, the post- us
daily. Our chances of giving this queston the earnest
armistice boom and the depression. In these difficulties we attention
which it deserves are much greater than the
are not alone. Since the war such problems have had to be chances that
we shall give adequate attention to other great
met in every great industrial country. Indeed, industrial questions
which, although no less serious in their bearings
unrest has caused such great concern in some countries as upon our future
trade, appear more remote and less direct.
seriously to raise the question in the minds of industrial I shall turn,
therefore, for a moment to some of these indirect
leaders and bankers whether those countries could hope in factors, namely
those arising in connection with the Eurothe future to compete in world trade as effectively as before pean situation.
th war. In this respect England has probably suffered more
Gentlemen, the time has passed when any one looking to
than any other country, and there appears no doubt that the future of the business of
America can ignore the rest of
much of her present difficulty is quite as much due to her the world. I know that
there are those who advocate rerecent unfortunate labor problem as to other extraordinary stricting our attention very
largely to our own affairs, and
conditions left by the war.
who believe that the future prosperity of America is
largely
But England appears for the present, at least, to have locked up in our own domestic trade.
The home market arsolved part of her most serious labor difficulties. At very gument, advanced 100 years ago,
may have had much to supgreat cost, to be sure, both to English industries and to the port it at that time. Even then, however,
it was the subject
laborers themselves, the latter at last have learned that the of much debate. But conditions have
changed since the year
Industrial efficiency necessary to England's recovery of her 1820.
previous position in world trade cannot be maintained in
For many years before the war the whole trend of
Amerithe face of constant labor difficulties.
can business had been away from the development of a
selfIn this connection the question arises whether we shall sufficient state. The developments of the war
and the
also have to go through such a costly series of labor difficul- changed economic and financial status of other
great industies before we can settle down to real recovery. There is trial and capitalistic nations, have added tremendo
us impemuch evidence that many laborers do not yet understand the tus to a movement that has extended our lines of
economic
conditions necessary to a return to a more nearly normal activity farther and farther into other countries. To
my
business development.
mind this movement has now been carried so far as to leave
I would not wish to suggest that complete industrial peace the importance of a world-wide economic policy no longer
a
is essential to our prosperity. We have had strikes and lock- debatable question.
outs ever since this country became a great industrial nation.
But when I mention our dependence upon the rest of the
At times we have had very serious labor difficulties and yet world I do not refer only to the volume of our export
trade.
for the most part we have prospered. A certain amount of To be sure, the volume of that trade is a matter of great
conlabor controversy and readjustment is apparently inevitable. cern to us. It must increase; and I hope we are
going to
NATIONAL BANK DIVISION.
149
our in France, and important capital readjustment has occurred
take the steps that will cause it to increase. Any view of
in several other countries. Excessive surplus stocks of goods
foreign economic relations that would attempt to appraise
ed and abof that trade, in many parts of the world have been liquidat
their importance solely in terms of the volume
financial liquidation has occurred, and the
sorbed; private
however, must be singularly lacking in a comprehension of
public finances of some States have been put upon a sounder
the many important foreign factors entering into our own
basis. After all of the evidences of improvement have beeen
business welfare.
there exist
into a dom- enumerated, however, the fact still remains that
As an outgrowth of the war we have been lifted
readjustment necessary to world
ble gaps in the
inating position in the world's capital relations. This change, lamenta
.
in itself, is bound to bring a corresponding change in many trade recovery
In looking to basic conditions that affect the future of
currents that follow capital movements. The
of the trade
n business, therefore, we are confronted with two
change has thrown upon us a responsibility that we cannot America
On the one hand, we find an abundance of evievade whether we wish to or not. Moreover, this change sets of facts.
ns dence that very substantial improvement over the worst pemust powerfully react upon our domestic business conditio
on has taken place at home. In addition
and upon our important economic policies. Wherever we riod of the depressi
debusi- to this we find to a somewhat less degree, but still to a
turn in our examination of the elements that make for
encouragement, a readjustty in our own domestic affairs, gree that offers much basis for
ness stability or instabili
and financial conditions in many other.
whether it be that of the capital supply, the gold or currency ment in commercial
find a condition of affairs
levels, or the future of trade countries. On the other hand, we
questions, the future of price
obEuropean countries that presents definite
restrictions at home or in other countries, we find new eco- In certain
of world trade. In
to consider the bearing of stacles to anything like the full recovery
nomic conditions that compel us
to be
view of these two sets of conditions, what may be said
movements abroad.
from the point of the outlook for American business?
In fine, whether we view the question
men
I believe that there are open to American business
view of the increase of foreign influence upon our own afof improvement
e upon foreign af- two courses. By relying upon indications
fairs, or the growth of our own influenc
have had, by developing confidence and
fairs, we are confronted with the fact that in the future we such as we already
certain additional
than ever before faith in the future and by bringing about
must consult world-wide activities far more
somewhat difficult possible character).
(of a
In our history. Let us look for a moment, therefore, at the readjustments
help of
I believe that we may, within ourselves, and by the
situation abroad.
to us in any circumstances, admust come
We have had the greatest war in all history. Great and what foreign trade
development in this country and attain a
terrible as have been the effects of some of our previous vance business
ty.
wars, in the loss of productive workers, in the destruction of moderate prosperi
If, however, we content ourselves with a modest recovery
capital and in the diminution of the buying power of the
take a position which will constitute a signal reworld, they are dwarfed into comparative unimportance by we shall
treat from the spirit of enterprise that has animated this
the effects of the Great War of 1914-18.
a hundred years; and that has made of
Four years have passed since the armistice, and yet we country throughout
to
n of affairs America a great progressive nation. We Americans, up
still find in a widely extended area a conditio
satisfied with mediocre
have never been
that might suggest to a stranger that the war had only just the last few months,
to take great risks; and, if
come to an end. Many millions of people living in the terri- results. We have been willing
have been detery powerful States are reduced to a pitifully necessary, to suffer great losses; but we
tory of formerl
s of millions mined to enter upon great undertakings and to hope for
low state of economic well-being, and hundred
s.
have had their buying power drastically reduced. The loss great accomplishment
The second course which I believe to be open to American
of these markets has directly or indirectly impeded the reto something approaching the old opporcovery of many of the nations that in the past have pur- business is a return
the old rate of progress and a real prosperity. Never
tunities,
chased American products.
a time in the history of America when
If the recovery of world trade depended only upon the re- before has there been
a predominant position in world finance,
such
pairing of physical losses due to the war, we might properly she occupied
The never before has there been a time when other countries so
expect a much more rapid recovery in the near future.
. The urgently needed our products.
fact is, however, that we face an entirely new problem
But in order to grasp the opportunities before us the rest
of so-called treaties of
war has been followed by a series
- of the world must be started upon a normal course. If we
interfer
peace, the carrying out of which involves greater
in the Americans are to take advantage of our new position in
ence with economic currents than any previous act
world affairs and if we are to have conditions in which we
history of industry.
position,
than three years since can make the mose of our new international capital
Notwithstanding the lapse of more
play our part in the readjustment of
appreciating it is essential that we
the signing of these treaties, we are only just
been erected world conditions.
the full significance of the barriers that have
I believe that the outlook for American business, therefore,
of the world's currents of trade.
against the normal trend
men are
light new evidences depends largely upon whether American business
Every passing month, however, brings to
a relatively smaller role
political going to be contented in playing
of the obstructing character of the economic and
c
treaties of peace. than before the war, to restrict their international economi
changes left by the war and dictated by the
restricted market modest
place relations and to accept within a
It is true that a considerable readjustment has taken
since the close profits, or whether they are going to broaden their views to
In some of the belligerent nations of Europe
countries and in the new vision that is demanded by present problems and
of the war as well as in neutral European
of
business decline in opportunities, and to assume their part in the great work
other parts of the world since the drastic
rehabilitation has taken place readjustment that is yet to be done.
the beginning of 1920. Much
Problems of the Hour
By
FRANK
A. MtJNsEy, Owner, New York "Herald" and New York "Sun."
's telegram
Mr. President and Gentlemen: Mr. Lonsdale
ion expressed the belief
inviting me to speak at this Convent
helpful to
that I might say something to you that would be
discussion of the busibanking and helpful to business. My
the New
ness and industrial outlook for 1922, published in
York "Herald" on the first day of the year, seems to have
been largely responsible for the impression.
That forecast was substantially optimistic. This is as far
as it went. The basic conditions on which sound prosperity
rests were not yet right, but they were improving. We had
150
BANKERS' CONVENTION.
put 20 months of retrenchment between us and
the wild orgy
You may very well fancy that it is not altogether clear
to
of inflation and speculation of 1919. My
purpose was to me why the rebound from depressi
ng conditions of eight
show that we were making progress toward better
times, and months ago should have come on so fast. No, it isn't
altothat what we needed was confidence. People never
get very gether clear to me. I question if the underlying conditio
ns
far, never accomplish very much, while enshroud
ed in gloom. are right to sustain the premature boom
of recent months.
Confidence is necessary to progress, but confidence
governed It may very well be, however, that I am wrong. To be right
by facts and sound reasoning is the only confiden
ce worth all the while is to be a drone or to own the world.
while.
But the discussion of finance and economics and immediWe are a mercurial people. We are either up in the
clouds ate business is not my purpose to-day. You are all steeped in
or down in the depths. When business is good, industri
es are finance, in economics, in the science of banking, and what
humming, securities booming, there is no limit to
our op- you don't know about these will be told to you
by other
timism. We are temperamentally incapable of seeing
that speakers.
the period of high pressure activities cannot go on
forever.
The labor problem is one of our most pressing problem
s
And so, too, we are temperamentally incapable of
seeing any just now. The country hasn't enough labor
to arry on its
light and hope ahead when we are plunged from the
bright work, hasn't enough skilled mechanics, especially in the
heights of booming prosperity into the valley of gloom.
This building trades, to carry on its work.
does not apply to all Americans. It does not apply
to farWith wages advancing, lower living costs are not possible.
seeing, sound-reasoning men, but it is true of the
American In the steel mills and in the textile centres wages have
had
people in the large bulk.
a sensational advance, and this advance was compulsory
One of the soundest pieces of work ever done in this
coun- because of the shortage of labor.
try, one of the most necessary pieces of work ever
done in
In both fields of activity it was a question of bidding high
this country, was done by the banks in 1920, in calling
a halt for labor or shutting down the plants. Labor, like commodi
to speculation and reckless expansion.
ties, is subject to the law of supply and demand. The wage
It called for fine courage to jam on the brakes as
you gen- of labor will never come down until the supply exceeds the
tlemen jammed them on at that time. We were running
wild demand.
with wide open throttle; we were running straight
for a
The law passed by Congress soon after the war restricting
smash that would have paralyzed the nation and
stunned immigration is wholly responsible for the present labor
the world, when, under the able leadership of
Mr. W. P. G. shortage. If this law had never gone on the statute books,
Harding, Governor of our Reserve Bank System, you
warned If our portals had remained as free to immigration since the
the country that it must immediately begin slowing
down, war as they were before the war and as they have been
and you applied the remedy that meant slowing
down.
throughout our history, our inflated wage scale would have
There was no other way to save the situation. There
was been well liquidated before now.
no other force, not even the Government itself,
that could
That wages would not deflate when there was a shortage
have saved the situation. Industries cannot run
without of labor should have been clear to the Washington statesmoney fuel, business cannot function without money
fuel, men. It should have been clear to them because of the fact
speculation falls flat without money fuel; and since
the that America does not produe its own labor, and never has
banks held the money of the country they alone were
in a produced its own labor since the formation of the Governposition to initiate and carry through retrenchment.
ment. England, France, Germany, Italy and all the counIn my January 1 discussion of conditions this year,
as in tries of the Old World produce their own labor. They
do
my January 1 discussion of conditions last year,
I painted no not depend upon foreign labor to do their
work. Our only
alluring picture of business. I saw no boom in the
offing, domestic labor, outside of the rural sections, is colored,
and
and did not wish to see one,for conditions were
not yet right. In the North that is wholly negligible. There isn't enough
of
What I wished to see, and regret that we have not
seen, It to make a dent in the situation.
is a gradual but thorough liquidation in our producti
on costs
We produce no labor in America for the reason that there
and in distribution costs, a general liquidation in house
rents is no sympathy between the American public school and the
and other living expenses. With this liquidation we
should pick and the ax. Put a boy through an American public
have a sound foundation on which to build business
and to school, whether he be the son of an immigrant laborer or
the
look with justifiable confidence for a good run of prosperit
y. son of an old line American, the result is the same. He will
But instead of lower production costs, we have gone to
have nothing to do with labor.
higher production costs; instead of liquidation in the wage
And what is true of the American boy is true of the Ameriscale, we have inflated the wage scale; instead of lower can
girl, in respect to service. This spirit is fine, admirhousing costs, we are compelled to maintain, if not to in- able.
It is the spirit that has made America what she is—
crease the present housing cost.
the richest and strongest nation in the world. But it leaves
In this situation are the underlying conditions right for a us without
labor of our own and almost wholly dependent on
run of sound business prosperity, and have they been such foreign labor
to do the plain, simple work that only human
as to justify the bull market for the last six months? Isn't hands can do.
the business revival largely in response to the cry of empty
We must mave a sub-stratum of plain labor. Modern life
shelves? If so, will the activity last?
and modern civilization cannot exist without it. We must
And how about foreign trade? With our high cost of pro- have mechanics, carpente
rs, plumbers, plasterers, bricklayduction, there is and can be no such thing as foreign trade ers and painters to build
housing quarters for our people.
for America, except in raw materials, in foodstuffs, and in Modern civilization cannot
exist without this skilled labor,
certain specialties. Production costs that make competition and the present shortage of it is so
great that mechanics here
with other countries impossible annihilate our export trade; in New York have been demandi
ng and getting bonuses beand without foreign trade what is the answer?
yond the union scale that have run their wages up to as
In spite of all this; in spite of the fa& that general condi- much as $15 a day.
tions have not been right; in spite of the serious conditions
In Chicago prices have gone still higher—as high as $25 a
abroad; in spite of the long drawn out coal strike; in spite of day for plasterers, according to a Chicago
dispatch published
the disastrous railroad strike, security prices have gone in one of the morning papers in New York a few
days ago.
steadily up, until now they stand at figures warranted only Can you fancy anything more impossible than this?
Can
on sound economic conditions.
you fancy what it means in house rents, what it means in the
But have we sound economic conditions, considering our cost of the shoes we wear, the clothes we wear, the
food we
relations with Europe in her financial and economic distress, eat? For all branches of labor have a direct bearing,
the
and consdering, in the large view, our own unrest and our one on the other, in respect of wages.
unsolved and unsettled problems? And is business generally
In this situation it is perfectly clear that the country
coming back in dependable volume, or is the revived activity should demand, and that you should demand, an
immediate
merely spotty?
change in our immigration laws—a change that will let into
NATIONAL BANK DIVISION.
this country the willing workers of the Old World who are
begging at our doors for admittance. In the matter of immigration what we need, and what common intelligence dictates we should have, is not restrictive laws but a selective
system.
Any Zliange in the immigration law that would let into this
country more plain labor and more skilled mechanics will be
fought to the limit by organized labor. Whether our present
restrictive law was passed at the behest of organized labor I
do not know; but I do know that the law is exactly what organized labor has been contending for, and what organized
labor will contend for with all its force.
Our Political Machinery.
goods, handicapped as they are by the accumulated prejudices of time.
What we want and should have is service, and we should
see to it that we have the machinery that can give us the service. In our political conventions it has been the custom of
both parties to dwell at length on their historic achievements. This does not mean a thing to me. What a party
can do, is doing, means everything to me.
The salvation of our present situation would be a liberal
conservative party, numerically strong enough to hold the
balance of power against the radical forces.
There is no more conservative section of the country than
the South. The conservative people of the South naturally
beyong with, and should line up with, the conservative people
of the North. With new political parties this would be perfectly simple, while it is not possible with the old parties as
A country the size of America, a democracy, must have
party government. There is no other way to manage it. No
big concern can exist without organization, and the biggest
business concern of the world to-day is the American Government.
A democracy is a mutual concern managed by the citizens
of the country. With a population of a hundred and ten millions, obviously the only way the individual citizen can make
himself felt in the management of of his business—and his
Government is his business—is through a political party.
We are not lacking in party organization. Indeed, the
Democratic and Republican parties are so strongly organized,
have become so thoroughly intrenched in the field of politics,
that it is a question if they have not become our masters,
not our servants.
In the early days of the Republic they represented distinct
and positive ideas. But with these great fundamental ideas
converted into history there are no longer any big outstanding issues between them that have any place in our politics.
There are, to be sure, many small points on which the Republican and Democratic parties differ to-day. It is their
business to differ, to create differences, to work up issues,
without which they'would cease to exist as political parties.
It is the business of each party to oppose and to fight the
acts and proposals of the other party. here is very little
team work between the two parties in Congress and in our
State Legislatures given to constructive measures—very little team work given to the economies of government, given
unselfishly to the interests of the Government and to the
interests of the people.
The truth is that neither party has a sufficient margin of
safety to justify it in taking chances on such co-operation;
that neither party has sufficient margin of safety to justify
it in forgetting for a minute the vote back home.
While this political jockeying has been going on since the
great old issues disappeared, a new issue has developed that
now divides all America into two political camps,as yet without political names. They are the radical camp and the conservative camp, and within each camp there is a wide range
separate entities in the field.
To make it plainer: If, for example,the Democratic party
should come out as the radical party, retaining the old Democratic name,can you fancy that men who had been voting the
Democratic ticket all their lives, however conservative their
sentiments, would switch over in large numbers to the Re.
publican party?
And considered from the other side, can you fancy that
men who have been voting the Republican ticket all their
lives, however radical their sentiments, would switch over
In large numbers to the Democratic party?
This is the crux of the whole matter, for the important
tl.ing in this situation is for our voters to enroll with the
party tnat stands for the thing they stand for in their own
hearts. And this is not possible with the Republican party
and the Democratic party in the field. With these two old
parties out of the way, the new political alignment of the
pew le would obviously be in perfect accord with their sentiments
But there is one way that these two old parties could be of
the greatest service to the country. This is through consolidation. Still the name—the Democratic-Republican
party, or whatever it might be—would give no indication of
its policies. Nevertheless, this combination of forces would
constitute a mighty wall of strength reared against the fast
rising tide of radicalism.
f can see nothing so important to this nation as would be
the welding together in a great solid unit of all our citizens
who think alike as concerns constitutional government, who
think alike as concerns property rights, who think alike as
concerns the institutions of our Government under which we
have grown into a great, powerful and happy people.
Reconsecrated to liberal conservatism—liberal conservatism in fact—our politics would be in much better shape than
they are to-day, in much better shape than they have been
since finishing the work for which the two old parties were
of thought and feeling.
Some day, and not a very distant,day at that, these two
groups will evolve into organized political parties with names
that signify what they stand for.
The names of the Republican and Democratic parties have
no significance that fits the present day. Each means substantially the same thing—means a stand for popular government. Since, however, we are not by way of changing our
form of government, these party names mean nothing.
It is not in me to put aside things that are old simply because they are old. No more is it in me to continue the use
of things that are old simply because they are old. I have no
such maudlin sentiment.
If an old machine can give as good an account of itself as
a new machine it is the part of economy, the part of common
ecosense, to continue using it. If it cannot do this it is an
poltical
nomic crime to continue using it. This is as true of
vast steel
machinery as it is of any tangible machinery in our
great undertakings.
plants or other
And so, if the two old parties can continue to do our work
as well as strictly new parties could do it, I should certainly
favor keeping them in the harness. It would be the easy
way. But, personally, I do not believe they can deliver the
151
originally formed.
With radicalism the issue, with a radical party on the one
hand and a liberal conservative party on the other, there
would no longer be occasion in Congress and our State Legislatures for jockeying for issues.
I have said that the very great issues which separated the
Democratic and Republican parties have passed into history.
Let us go back and check up the facts. The original issue
between the Democratic party and the old Whig party, the
predecessor of the present Republican party, in the early
days of the Republic, was the tariff.
Almost at the outset of the Republic friction began to develop between the North and the South over this question.
The South, with its abundant crops of cotton, corn and tobacco, and with no manufacturing, stood out for free trade.
It could live and prosper on the products of its soil. It had
no infant industries to protect, and, as the South reasoned,
why should it be taxed through the mechanism of a tariff to
protect the infant industries of the North?
The North, on the other hand, without the sunshine and
the fertile soil of the South. could not live on the products of
its own hard, rocky acres. With the North it was a question
of industrial development or no development at all. Its
small factories could not compete with the established fac-
152
BANKERS' CONVENTION.
tories of England without a tariff that would level up
the
America is in a transition stage to-day. The whole world
costs of production abroad with the costs of production
at is in a transition stage to-day. America has cut loose from
home.
the conservatism of our fathers and penetrated deep into
And so the issue was clearly and sharply drawn
between the wilderness of radicalism. This is true in our politics, in
the two sections, with their wholly different interests.
As our statesmanship, in our social life, in our business life, in
time went on, the feeling over this issue became so
tense that our pont of view in all things.
John C. Calhoun and Robert Hayne, Senators from
South
The change from a century ago has been insidious, revoCarolina, came out vigorously for the separation of the
South lutionary. The amassing of great fortunes, general prosfrom the Union.
perity, organized labor, the spirit of unrest, the spirit of
This action created a storm that shook the young Republic
Bolshevism, the love of play, the demand for short working
to its very depths. A long and bitter fight followed,
but hours, the general dislike for work—all these are represented
under the leadership of Daniel Webster, Senator from Masin the new idea, in the spirit of the times.
sachusetts, the battle was won for the maintenance of the
We must give earnest consideration to this change and
Union. The tariff sore, however, remained unhealed.
square ourselves to our responsibilities. Good government
And the contention of Hayne and Calhoun that the States
Is back of good banking, back of good business. There can
had a right to secede from the Union still gripped the
people be no safe banking without good government. There can be
of the South, and had some following in the North.
The no safe business prosperity without good government, and
Democratic party was the instrument of the Southern idea;
it is our duty—your duty, gentlemen—to see to it that we
the old Whig party, the predecessor of the present Republican
have the right machinery to insure good government.
party, was the instrument of the Northern idea.
America is the best living country in the world to-day.
Later came the slavery question, which stirred the South with
its incomparable natural resources and incomparable
to the point of putting the Hayne-Calhoun contention to
opportunities for human advancement. America is worth
the test.
That question, the right of secession, was saving. If it is saved, it will
be saved by you and by men like
settled by the Civil War—that question and the slavery you;
if it is lost to the world as the foremost example of dequestion.
mocrarcy, it will be lost by you and by men like you.
With these two issues passed on to history only free trade,
Nothing succeeds without ownership interest in the manthe original issue, survived the war as the big dividing issue agement.
This is as true of Governments as of business; as
between the two parties. And now that question has been true
of your Government as of your banks. If you want a
settled, in point of fact, through the South itself becoming good
government you must pay the price that insures a good
one of the greatest industrial camps in the Union—an indus- government
.
trial camp destined to become bigger than the North, vastly
The price of good government in a republic means a deep
bigger, for the reason that it has the raw materials at its personal
interest in your Government, the same serious indoor, has lower living costs and is nearer to the centres of terest you
have in your business. The price of good governconsumption.
ment in a republic means work, means watchfulness, means
In this situation the tariff has no place in our politics. It giving the
best there is in you to your Government.
is wholly a business question, and should be so treated.
The living of a life is a serious business. The life that
Standing out, however, as the original issue between the two absorbs from
the world, gets everything it can out of the
parties, it is still the fighting ground between them and to world, and
gives back nothing to the world is not worth
the shame of the American people, who permit these two old while, it is
a flat waste of human force.
parties to keep this great economic question under the sordid
A man may serve his Government in many ways. Public
heel of politics.
service does not consist solely in holding public office. The
For a considerable time after the Civil War one other of organization back
of public office is in the public service
the pre-war issues between the two parties continued as a quite the same as
the Congressman or the Governor or the
stalking horse. That was State rights. Considered literally, President, for it
is the organization that puts him in office.
and in its original meaning, it was a dead issue; but it grad- Service in the organization is
fundamental and imperative
ually came to mean the relative balancing of the powers of in the lfe of a democracy.
the States with the national Government.
The postion you hold in your respective communities
That issue no longer functions, for in the eight years of means more than being a good banker,
means more than
the recent Democratic Administration the national Govern- earning dividends for your stockholders.
It means citizenment took on greater powers in relation to the States than it ship responsibility, means citizenship service to your
respechad ever done in all our history.
tive communities .means citizenship service to your country.
COMMITTEE
OFFICERS' REPORTS-NATIONAL BANK DIVISION
Remarks of the President of the National Bank
Division, John G. Lonsdale.
In calling to order this annual session of the Division, it is my pleasure
to state that the year 1922 shows national banks continuing onward in
their healthful development. On June 30 of this year the
combined
resources of national banks amounted to over $20,700,000,0
00, 500 million
above the statement of May this year.
Every energy of this Division should be directed in the future
as in the
past to the fostering of constant and constructive expansion
by every
fair and helpful means. Ours should be an eternal vigilance, not
only for
equal banking opportunity for our own class of institution,
but for the
advancement of banking in this nation in every safe fashion.
The banker has an increasingly responsible position to hold.
Things
have changed in a decade. The pro-war banker, turned Rip Van
Winkle
would come back to-day an obsolete character in many ways,
a stranger
to the multitude of new practices and terms that have originated with
and
since the war.
To-day we have cast aside the accumulated mysticisms of the
past, and
the public knows and appreciates the banking profession,
not as dealers
in negative replies, purveyors of bad news, but as one of the most
interested
and constructive forces in every community. Bankers, essaying
no longer
habitual timidity, are assuming their rightful positions in civic and
national
affairs for which their experience so well qualifies them.
Has the banker or his business suffered from this popularizing
process?
Decidedly not. His prestige is at par. his worth a growing
asset to his
community, and his business has grown apace with this better under
standing.
Sound banking has been the guiding beacon of the past year's progress
out of the wilderness and up the favorable side of business. With the
passing of a period of extreme credit contraction, there are succeeding
problems requiring caution and the sanest thought. Banking expansion
is in prospect. How rapidly this is undertaken to avoid a period of secondary inflation will be due to the real safety measures that only the individual
banker can effectively apply.
In the vital work of readjustment, the Federal Reserve System has
supplied the needed unity to our independent banking system. Through
its functioning, the banking power of the country has been doubled and
In thus exercising the full force of our financial strength in behalf of the
nation it has proved a real business savior. It has placed the soundness of
our currency beyond question, and given stability and certainty to the
conduct of business.
Because it serves for the benefit of all, the support of the Federal Reserve
should be unanimous, its membership including every bank and trust
company eligible under the law.
This supervision is of the highest order and the rightful type of Federal
interest in business. But increasing governmental competition with
legitimate enterprises is not only basically wrong, but unfair and retarding
to the exercise of private business ingenuity, in which our commercial
greatness has its origin.
Paternalism Is stifling to native ability. There is no longer justification
for the nurturing of Washington agencies which came into being as war
NATIONAL BANK DIVISION.
153
Bank
to maintain and operate branches within
emergencies. Business at this particular time needs every form of en- the Act as to permit national banks which the head offices of such national
corporate limits of the cities in
couragement, and competition, sustained or subsidized by the already banks are located, to be confined, however, to States in which State chartered
institutions are authorized to have branches."
too burdensome public tax, is doubly retarding.
Governmental interest could be indicated by a systematic study of needs,
This quest for banking equality is no plea for special privileges or any
obsolete laws to the new standards of the day, and enabling
adjusting of
new rights to the exclusion of others. To disapprove of the equalization
American industry through vast, uniform production to successfully
of what already exists would be to depreciate justice. If the practice itself
compete in the market places of the world.
be bad,then it is universally unsound, but that conception of its worthiness
More and more we are coming to realize that there can be no full measure
is not within the provision of the Division's official expression. That it
of prosperity in this country with Europe out of step, with every great be fully
considered by the Association as a practice affecting all banking
Continental nation—excepting possibly one—spending from two to three
is all that this Division can in justice demand.
times as much as their total annual revenue,and with suffering and economic
Attention to legislation naturally takes an important part in the year's
chaos general.
work, as banks of this Division derive their power from, and are regulated
It is natural that we should view the international situation with concern;
by the Federal Government. To this end, the Federal Legislative Combecause the establishment of order and resumption of trade on the Conmittee, with the assistance of the general counsel of the Association, has
tinent must precede the peak of our own affluent times.
been extremely busy. In this respect, the Division has not only been
However provindal we might have been before the late conflict, the wider
committee, but also a
vision gained in that experience, the very necessity of our participation fortunate in having a capable chairman of this
has taught the inter-dependency of nations. Conceding the claims of those gentleman whose home is at legislative headquarters—Washington. His
who hold that this hemisphere or this continent is economically self suffi- alertness in laying before the proper Congressional committeesfacts pertinent
cient, it is also true that trade relations for over a century have been based to banking legislation and also in keeping members advised through headon an interchange with Europe and to rearrange this would disrupt industry quarters of the status of these measures has been of greatest value.
for a decade or more. When we realize that a foreign market virtually
Charter Bill.
influences, if not actually fixes the price of two big staple crops—wheat
Considerable anxiety reigned in national bank circles because there was
and cotton—our trade dependency is apparent.
no legal provision for the extension of a national bank charter beyond the
We are entering a great mercantile era that has no counterpart since the second twenty years, and no less than twenty-four charters were on the
first Phoenicians ventured forth to expend their home land through mari- eve of such an expiration. The bill authorizing 99
-year franchises, while
time commerce. In this commercial contest of nations, the United States having the endorsement of the Association, was so distinctly a Division
has almost every natural advantage to trade supremacy, including the matter that the latter, through its officers, its committees and its indidiplomatic position of being the creditor nation.
vidual members, acquainted Congress with the justice of the measure,
Increased production here, as well as in Europe, is the only road to im- resulting in its adoption.
provement,• course impossible with a decadent Europe. War debts and
Many associational influences co-operated in having placed in the
reparation settlements, domestic production, the substance of all things Revenue Bill a provision permitting banks to deduct from their income
hoped for, are but phases of a universal cycle of trade. None is possible tax the sums paid in State, county and municipal taxes. Our Division
without a growing resumption of commercial intercourse, and yet all are watched this through the Senate and in conference and was a vital factor
deferred, retarded because of the stalemate in European affairs.
through being continually on the job concerning this measure.
Isolation as a patriotic fetish has its commendable aspects, but from an
Stats Taxation.
economic standpoint, aside from all politics of the situation, it is impossible.
A special Association Committee was appointed to consider the proThese United States cannot fully function, or reap the ultimate rich reward
posal of Congress to amend Section 5219 of the National Bank Act, but
of restoration, in the role of an onlooker.
Every attempt at adjustment so far has met with minor success; the because of its extreme importance to this Division, the Committee on State
increasing turmoil abroad: the undertainty that holds the entire world in Taxation of National Banks, and, in fact, our entire organistion, has been
suspense augments instead of subsiding. Statesmen plan,diplomats party. very active on this question. There have been various amendments before
luminaries discuss and counsellors investigate to little avail, while the Congress proposing to the give the State power to measure the rate of taxation assessed upon shares of stock in national banks by something other
conflagration of discord grows apace.
Governmental circumvention of the past seems checkmated. Why not than the rates assessed on.other monied capital in the hands of individual
give that ever-resourceful, never-found-wanting element of hard-headed citizens, as the law now requires.
One bill introduced in the ITouse, and urged for passage by a number of
business statesmanship an inning? Over here when we go broke, the first
formality, at least, is a creditors' meeting. That's a common-sense proced- State tax commissioners,would permit States to tax either the incomes or the
ure now. Every factor concerned: financial, commerce, shipping—is shares in national banks at a rate no greater than imposed upon the State
essentially a business one. Bring into play the ingenuity of business minds banks and trust ompanies, and also to permit a State to tax additionally
on this situation, for, once gathered around the conference table, they could the income from the shares. This was actively opposed by the American
Bankers Association Special Committee,but was finally passed by the House
be expected to make progress where little heretofore has been made.
We are told that the President of this nation has recently indicated that after a number of changes had been made in it. These changes and the
the time is approaching when America could more fully participate in the progress of the bill will be more fully covered by other reports. However,
resuscitation of Europe. Isn't now the propitious time for this, the great the bill, after leaving the House, was sent to the Senate and is there being
American Bankers Association, to not only serve the best interests of this handled by a sub-committee that has also under consideration the Kellog
country, but of the world, in extending its good offices to the Government Bill, which seeks to place all banks, National and State, in one class and
An bringing about in conference an interchange of information and data assess them, without regard to the rates imposed upon other moneyed
on the principal subject of betterment—"International Credit Financ- capital. The inequalities of this measure in its form at the time of writing
ing." America. her broad freedom from malice generally recognized as of this report are immediately apparent to all bankers and inasmuch as the
the only nation with moral persuasion necessary to effect such an under- proposed bill contains retroactive clauses which would legalise the taxes
standing. The mere congregating of world financial minds would give assessed, levied or collected since Jan. 1 1917, the legislation Le receiving
careful attention both in this Division and by the Special Committee of
direction and stability to the present uncertain situation.
Remember,"No man who puts his hand to the plow and looketh back the American Bankers Association.
is fit for the Kingdom of God."
Extension of Loan Powers.
There has been agitation in some quarters for the liberalisation of the
National Bank Act, giving greater latitude for loans upon real estate. This
question was referred by the Administrative Committee of the Association
The National Bank Division of the American Bankers Association is to this Division. After going very carefully into the situation and ascertaining by letter the viewpoint of Division members, your executive comfinishing an eventful year in its history—a period of considerable legislation, mostly beneficial, as has been a great deal of the last twelve months' mittee went on record as opposed to such a change in the loan system of
progress. Especially gratifying has been the attempt to both enact and National banks. Only one-eighth of the replies received favored such a
change.
interpret legislation in fairness to national banks.
The increased use of the Washington office both by the Division and by
This Division of approximately 7,000 members has always deemed it
foresight of those
an honorable policy to be solidly for every banking development of a the Association at large has continued, verifying the
who originally conceived this plan. With all Government agencies that
wholesome nature, whether or not it especially pertained to national banks.
have to do either directly or indirectly with bank management, through
In this respect, it is noteworthy that the broad spirit of Americanism—
them. While
that enlightened principle of our reedom that all men are born free and this office the Division is kept constantly in contact with
Department,Compequal—has throughout the history of this Division dominated any lesser the principal relationships have been with the Treasury
troller of the Currency and the Federal Reserve Board, there is being
or personal motives.
co-operation
Originating in this Division at the Los Angeles convention, as a move developed, especially in the matter of foreign trade, a close
Defor banking equality, the subject of what constitutes proper banking with the Department of Commerce and similar connections with the
partment of the Interior, which are expected to be of growing importance
facilities has assumed its true significance before the Association at large.
National banks, seeking the impartial application of banking oppor- to banker members in the period of greater development ahead.
tunities, and by reason of the prevalence of certain practices by other
Washington Office Popular.
classes of banks, officially adopted as the position of the Division in this
American bankers have come to realize that there is firmly established in
important matter the following resolution:
Washington a general service office through which members can have
"Whereas, The banking business of this country, in order to take care representation in the transaction of whatever business requires their attenof the ever-increasing demands of commerce and to encourage thrift tion at the National capitol.
amongst all classes, has resulted in the establishment of branches by the
Generally summarized, the headquarters work resolves itself into the
State chartered institutions in many sections of the country; and,
"Whereas, National banks are not permitted to establish or originate following classifications:
acquire banks with branches already established and,
branches, but may
First. Attention given to legislation, that members may know what is
by conversion, operate them as branches; and,
being done in Congress—and this includes ascertaining the viewpoint of
"Whereas. In the advantage the State banks have in the matter of governing committees and individual members on all pertinent legislation,
business through the establishment of branches and
development of their
by the facilities offered by membership in the Federal Reserve System, and transmitting it to the proper Federal committees.
Second.Embraces the task of representing the members before the various
there is grave danger that the national banking system will be disrupted
and
or superseded by the State chartered institutions; National
Bank Division executive departments in matters of special business pertaining to their
"Whereas, It is the opinion of the members of the
the national banking system banks.
of the American Banker; Association that its existence and that it is the
Third. Includes the gathering and dispatching of a great deal of informahas for more than fifty years fully justified bank Act from time to time
Congress to so amend the national
tion to secretaries of sundry State associations for distribution to their
duty of
business and to
as will enable national banks to meet the needs ofinstitutions;nnd reason- members.
wereaslaetheepinienethememeieinnl Bank
competition oftle State chartered
et t
Fourth. The maintenance of activities intended to assist member banks
is
Division that branch banking as practiced in certain foreign countries it in the development of the several departments of their business.
United States, but
not for the best interests of all the people of the banks to manage and
Trust and Savings.
would be entirely practicable and safe for national
This latter activity in one that is growing apace and will in the future permaintain branches within a reasonable radius from the head office; therefore, be it
mit of specialized development due to the increasing number of National
"Resolved, That the National Bank Division of the American Bankers'
both trust and savings deAssociation requests the Congress of the United Slates to so amend the National banks including in their services to the public
Report of President of the National Bank Division.
a47g
154
BANKERS' CONVENTION.
partmenta. This feature of the work will be covered
more in detail by
the Committee on Trust Departments in National
Banks and the Committee on Savings Departments in National banks.
There are now 1.595 national banks with trust departments
and approximately 4.500 national banks with savings departments, with
total savings
deposits well over the three billion mark. The
widespread success of these
new functions, which were added to render complete
service to the community in common with other institutions is causing the
number to grow with
rapidity. In consequence, the specialized information
pertaining to this
department of the work, along with helpful suggestions,
is gradually drawing closer together in their working relations the
national banks having
these departments in common.
The Committee on Relations of National Banks with
the Federal Reserve System, Committee on State Legislation and
Committee on Membership will report in the course of our proceedings and it
is only my purpose
to acknowledge here not only the constant and efficient
service of the chairmen of these various committees, but to extend
my appreciation to the
members of all these committees who accepted this work
in their line of
duty and discharged it with great benefit to the
Association and to the
Division.
The membership of the Division stands at 6,990,
which, in the face of
recently increased dues, is a splendid record. There
should be no let up
In the effort to bring into the fold of this Association
every eligible national
bank in existence.
As president, it has been my privilege to serve with the
worthy gentlemen
composing the Adminstrative Committee of the
Association and I have
tried in every manner both to reprt amt the composite
viewpoint of our
Division as well as to counsel for the benefit of the
profession of banking as
a whole.
Bankers Take Part.
The members of the Administrative Committee
last December attended
an important session at Washington, which, in many
ways, has an epochal
significance in that the banker, realizing his duty
to the country, went
down to Washington, sans requests and personal
interests, and offered his
whole-hearted co-operation to the Government
heads in bringing about an
adjustment of the business and economic difficulties
besetting the country.
The improvement and stability that has followed
cannot be whooly accredited to such a conference, and yet there is every
reason to believe that the
confidence inspired and the co-operation engendered
at that session were
an example to the entire country and had a far-reaching
effect.
This example of public participation in the
events pertaining to city,
State and national development is one that should
be encouraged and augmented until the banker rightfully assumes the leadership
and influence in
public affairs to which his knowledge and experience
qualify him.
The Exectutive Committee which decides on the
interim policies of your
Division held a June meeting at White Suplhur
Springs, Va. The capability and earnestness with which they
discharged their duties both at this
meeting and during the year forms the bulwark
around which the year's
accomplishments have been builded.
The Division has as a Deputy Manager in
charge of the Washington
office a secretary whose ambitions and energies
fit peculiarly into the expanding requirements of the work. The splendid
manner in which he has co-operated with the executive heads in increasing the
service of the headquarters
is fully appreciated, and last, but not least in
my thoughts, is a final word
of thanks to the members of this Division for the
honor they have conferred
upon me in electing me president, for I feel that the
experiences and contact with the capable minds composing this
group have been among the
most enjoyable and profitable periods of my life.
Conclusion.
National banks form the nucleus of that wonderfully
effective machinery, the Federal Reserve System. The nations's scheme
of financing and
banking takes into consideration and is dependent in many
quasi-governmental functions upon the thoughtful and healtful development
of the national bank. As a unit of our financial system, its worth
and necessity
are testified to by the continued growth and the expansion
of national
bank facilities to include ail accepted and legitimate forms of banking.
This Division Is proud.almost zealously so,of that development and upon
the individaul interest of the members,combined with a fair, but far-sighted
aggressiveness on the part of the divisional administrative heads, depends
the continuance of this expansion and the future success of national banks—
institutions worthy by service and by experience to parallel the best pro
grass of these grand old United States.
JOHN G. LONSDALE. President.
Report of the Executive Committee of the National
Bank Section.
Your Executive Committee has met tnree times since the last Annual
Convention, though much of its business nas been conducted by correspondence.
The meeting held in Washington Dec. 12 1921 was called to consider several matters of moment to national banks.
It is apparent to every one that there is alarming and growing disparity
between the capital and resources of national banks and the capital and
resources of State banks. This is occasioned largely by the broader powers
granted to banks organized under the laws of some of the States. It this
condition should continue for a few years, it would undoubtedly endanger
our unified banking system under Federal supervision. Out of more than
Twenty-two thousand State banksin the United States, most ofthem eligible
to membership in the Federal Reserve System, only sixteen hundred have
so far joined, though there are more than eight thousand national banks,
all of which are of course members of the Federal Reserve System.
The disadvantage under which national banks labor in some States makes
it imperative that Congress and the Administration be informed
of the tendency toward the relinquishment of rational charters and urged to stay
withdrawals from the national system, thus resulting in the weakening
of
the Federal Reserve System. As an example, in the City of Los Angeles,
out of a total of over 500 million deposits, the deposits of national banks in
that city have been reduced to only 165 million. There are 185 banks and
branches. Of these only three are national banks, and 182 are represented
by State institutions. These conditions pervail to some extent in other
localities in the United States.
It was rot thought that national banks would seek any special privileges.
and they do not, but it is gratifying to know that some of the Government
officials, legislative and administrative, recognize that a financial structure
under Federal control is essential to stability and sound finance. Twentytwo States in the Union now have a system of branch banks, and we have
heard of no sound reason why national banks should not be accorded the
same privilege, at least in these twenty-two States.
At another meeting of your Committee, held at White Sulphur Springs
in May 1922, the work bY the Division during the early part of the year vtas
approved and a plan adopted far the latter half. One of the most important
subjects was that of the extension of national bank charters. The Committee gave its strong endorsement to the efforts made by the Division to
secure the enactment of a law which would grant charters to national banks
for unlimited periods of time, and much time and effort was spent in this
direction. The final result was that Congress passed a law granting
national bank charters for a period of 99 years from July 1 1922. While
this was not what your Committee desired. or what the national banks really
had a right to expect, It serves almost every desired end, and your Committee feels that it is a mark of real progress.
At this meeting the provision in the revenue law exempting certain building and loan wsoc'ations from income taxes was attacked as an unwarranted discrim*nation against banking institutions, ard some corrective
legislation was urged upon those in position to grant relief, though to this
time there has been nothing done in this direction.
Your Committee, basing its opinion upon expressions received from national bankers in all sections of the country.* stated its opposition to the
several proposals made to Congress for a so-called liberalization of the laws
governing real estate loans by national banks. Your committee is of the
opinion that the existing laws are sufficiently broad and that no effort should
be made to have them adjusted.
"Your Committee has from time to time noted what it considers a very wise
attitude of the Comptroller toward national bank agenices. In some
quarters there existed for a considerable time the opinion that a proper
construction of the National Bank Act authorizes the maintenance of more
than one office of a national bank in the city in which it is chartered to
operate. The present Comptroller is one of those who entertained that belief. and, after a careful review of the rulings and the reasons therefor, and
an exhaustive search of the statutes and the court decisions, he announced
his conviction of the correctness of that p ,gttIon. Acting upon this view,
and with his approval, a number of national banks have established additional banking offices in their efforts to meet the competition of State banks
with branches. A distinction is drawn between a branch bank and an additional office or agency,and only the latter are contemplated by the Comptroller's position. There aro a number of measures before Congress on this
subleet. The Courts have also been appealed to to prevent national banks
from establishing agencies.
The several bills before Congress to amend the National Bank Act in
its grant of authority to the States to tax the shares ofstock in national banks
have been given constant and diligent attention by the National Bank Division. This subject is still a live one before Congress and is receiving attention all over the country. However, because of the widespread interest
in this matter, not only to national banks but to others, a special committee
of the American Bankers Association has been zonstituted to consider the
various measures on this subject before Congress. A study of the history
of the taxation of bank shares leads us to the conclusion that, except for the
existence of Section 5219 ofthe Revised Statutes, which covers this question.
the taxation of bank shares would have been even more burdensome than
the rates assessed in violation of this statute in a number of States.
Your Committee has not hesitated in their individual capacities to join
other interests in urging upon Congress the danger of constantly creating
commissions and bureaus which are forever and eternally meddling with the
intimate private affairs of the people. We consider this one of the most
alarming tendencies of the times and the rights and privileges of the people
were never so interfered with and private initiative was never at a lower ebb
than it is at present. Of the multitudes of commissions and bureaus it is
doubtful if there are but few of any real service to the public. All of them
are expensive and the people would be far better off If Congress should begin
a campaign of simple rather than complex government. One of the curses
of this age is too much government.
The members of the Executive Committee have followed the work of the
Division closely during the past year. and many of them have often visited
the Washington office and have kept informed of the Division's activities,
but a large portion of the work has been most efficiently handled by the
Deputy Manager and his very competent assistants.
Respectfully submitted.
(Signed] T. R. PRESTON. Chairman.
Resolutions on Branch Banking, &c.
Mr. J. W. Barton (Minneapolis): As Chairman of the Resolutions Committee I beg to leave to submit the following resolutions:
Resolution No. 1—America Should Join Europe to Restore Normal
International Relations.
"Whereas, The liquidation of International War obligations and the
restoration of the economic order of the world depend upon profitable production, and
"Whereas, The production of new wealth, the only permanent basis of
recuperation, is dependent upon the uninterrupted flow of products and
material everywhere, be it
"Resolved. That efforts to restore normal international world relationships having thus far failed to achieve tangible results, the urgency of the situation demands the same deliberations of business statesmanship, and that
with governmental sanction the leading business brains of America should
be joined with those of Europe in a conference out of which would surely
come at least the basis for a better understanding of the problems involved
and for anearly and practical solution of these problems.
Resolution No. 2.—High Quality Paper Urged As a Protection Against
Counterfeit Money.
"Whereas, Recent reports show unusual activity in the making and circulating of counterfeit paper money, therefore be it
"Resolved, That this Convention requests the Secretary of the Treasury
to resume the same high quality of materials and of mechanical production
of paper money that obtained prior to the war, in order to provide the
largest possible protectlion against counterfeiting. Be it further
"Resolved. That a copy of this resolution be sent to the Secretary of the
Treasury, the Chairman of the Appropriations Committee of the United
States Senate, and the Chairman of the Appropriations Committee of the
House of Representatives.
Resolution No. 3.—Against Preference For Savings Deposits.
"Whereas. The is history of the National Banks of the country is one of
continuous service to their respective communities, which service has ex•
panded as additional needs have arisen, and
NATIONAL BANK DIVISION.
155
invade that
to be resolution that we have, and make no effort and no attempt to
"Whereas, The savings departments of National Banks have come
banking by reason of the added banking time-honored question?
Important features of national
I shall therefore vote against the amendment.
facilities offered the public, and
Bank
President-Elect Newcomer: Is there any further discussion?
"Whereas, Experience shows that the provisions of the National
Section
Mr. Latta: If I am correct, there was a resolution passed by this
Law are not only right in theory but in practice as regards the investment
permitting
at Los Angeles which put us on record at that time in favor of
and
of national bank funds
States as
nationals banks to have branches in their own cities, in such
"Whereas, It is unwise to set aside any particular part of a bank's assets
permitted branches for State banks. Am I correct?
in order to prefer one class of depositors over another, therefore be it
-Elect Newcomer: Yes sir.
President
changes
"Rest?bed, That it is neither necessary nor prudent to make any
body?
Mr. Latta: Why not let that stand if that is the feeling Of this
In a provision that has proven eminently satisfactory.
that the
And in view of the fact that it is the feeling of the body, I move
matter as it now stands be laid on the table.
Resolution No. 4.—National Banks Should Not Be Discriminated Against
-Elect Newcomer: What is your pleasure, gentlemen?
President
In Taxation.
The motion was seconded, that the matter be laid on the table.
that to subI under"Whereas, The history of tax legislation has demonstrated
President-Elect Newcomer: The motion to lay on the table,
of
motion is to lay
ject the taxing of the shares of National Banks to the changing moods
stand, is to apply only to Mr. Maddox's qmendment; the
State Legislatures tends towards the creation of a special group Mr. Maddox's amendment on the table.
the several
amendor class which may be unfairly burdened by taxation.
Mr. Latta: I meant the whole question, because Mr. Maddox's
"Whereas, The force and justice of the provisions of Section 5219 of the ment in fact, while it was not so presented, is really a substitute for this,sir.
be it
addition to it.
Revised Statute is fully recognized, therefore
President-Elect Newcomer: It was not a substitute; it is an
a matter of
"Resolved, That this Division reiterates its endorsement of the spirit
I think the Chair will have to rule that it shall be treated as
the
of said Section. commends the work of the special taxation committee of
must come on the question of amendment.
end that the separate action. The first vote
on the table:
Association, and pledges its continuous co-operation to the
Of course, you can make your motion to lay the whole thing
protection afforded by this Section shall not be withdrawn or lessened.
I will agree to that.
. A resolution with reference to branch banking was then read . . .
. .
Mr. Latta: That is what I intended.
resolu(which was voted down).
-Elect Newcomer: That refers only to that particular
President
tion, of course.
Resolution No. 5.—Thanks To Speakers.
brought in
as
It is moved and seconded, gentlemen, that the resolution
with Mr.
"Whereas, This Division is under deep obligations to the speakers and by the Committee, on the question of branch banks, together
, for the masterly way Maddox's amendment, be laid on the table.
all others who have participated in our proceedings
that a motion
in which they have discussed present day conditions and needs, therefore
One of the members called for a point of order and stated
be it
to lay on the table was not debatable.
thanks,
to offer to withdraw my
"Resolved, That we as a Division extend to them our heartiest
Mr. Maddox: Mr. President, I was just going
the motion:
and acknowledge the deep obligations under which they have placed us, amendment, with the consent of the gentleman who made
to
of the benefits to be derived from the adoption of and if the gentleman who made the motion will permit, I will be glad
and the consciousness
vote upon the
withdraw my amendment in order that the Section may
the precepts they have so ably and clearly set forth.
resolution as brought in by the Resolutions Committee.
Mr. President.
Resolution No. 6.—Appreciation of Welcome To City.
Mr. Latta: I will be very glad to withdraw the motion,
of Mr.
people of
-Elect Newcomer: Then it stands that the seconder
President
"Whereas, The welcome we have received at the hands of the
there is some
Maddox's motion consents to its being withdrawn. Unless
this great city has been so cordial and sincere, and
further voting.
desire objection, the Chair will rule it withdrawn without
re-read here?
"Whereas, the preamble of the official welcome expressing the
Mr. Jeffries (Missouri): Might we not have the resolution
theremore.
that 'this is your city as much as ours' has been abundantly fulfilled,
I think it is all right, but I would just like to hear it once
fore be it
Mr. Barton re-read the resolution on branch banks.
York
to take any
"Resolved, That the National Bank Division extend to the New
President-Elect Newcomer: Are you ready, gentlemen,
that
bankers gracious appreciation of their fine hospitality and assure them
by the Committee?
wonderful city has been re- action on the resolution as read
the admiration and regard for their, and our,
The question was called for.
newed and cemented for all time to come."
understand it, to
President-Elect Newcomer: There is no motion, as I
JOHN W. BARTON, Chairman,
lay that on the table; or has that been withdrawn?
this: That we
ALEXANDER DUNBAR.
Mr. Latta: The think I had in mind, Mr. Chairman, was
this resolution as it is
JOHN POOLE.
went on record in Los Angeles. Now, if we pass
if this resolution
offered, as I understand it, we practically reverse ourselves
means anything in particular. Am I correct?
RESOLUTION ON BRANCH BANKING TABLED.
this. There
President-Elect Newcomer: I am not prepared to answer
Mr. Maddox (Georgia). May I ask the Chairman of the Resolutions
to listen to
so many things coming in here, I have not been able
Committee to read once again the resolution containing the reference made have been
the discussion very clearly.
to the branch bank matter?
that way?
Mr. Latta: Mr. Maddox, wouldn't you understand it
Mr. Barton re-read resolution covering branch banks.
somewhat that
Mr. Maddox (Georgia): Yes sir. I believe it would have
President-elect Newcomer: Is there any discussion, gentlemen?
know really what the resolution would really mean.
Mr. Maddox (Georgia): I wonder what that resolution means when it effect. I don't
we strike out that
Mr. Trimble (Missouri): Mr. President, I move that
says that they confirmed, not asked for, any privilege for the national banks
part of the resolution referring to branch banking.
having branches. I would like to have it read just as the resolution was
entire resolution subPresident-Elect Newcomer: That is, strike out the
read, but I would just offer for the consideration of the national bankers
(I am sorry there are not more of them)for discussion, briefly, whether mitted by the Committee.
here
The motion was seconded.
or not it would be wise to add this to that resolution:
and seconded that this
President-Elect Newcomer: It has been moved
"And whereas, Since the last Annual Convention of the National Bank
referring to branch banking, be
continuation resolution submitted by the Committee, "aye"; contrary-minded "no".
Section of the American Bankers Association, there has been a
All in favor say
of the establishment of branches by banks operating under State charters stricken from the report.
The motion is carried.
in many parts of the United States, and
s report covering the
A motion is now in order to adopt the Committee'
"Whereas,These branches of State banks are in active competition with
on branch banking.
other resolutions with the exception of the one
many banks operating under Federal charters, therefore be it
seconded, that the ComIt was voted, upon motion regularly made and
the one
"Resolved, That in justice to the national banks and for the protection
the other resolutions, with the exception of
and preservation of their business, in cities where State banks are operating mittee's report covering
branch banking, be adopted.
branches, national banks should be allowed to open additional offices, pro- on
vided such additional offices are not established outside of the limits of the
rs for
cities in which the banks are located."
Report of Nominating Committee—Office
President-elect Newcomer: You offer that as an addition to the resoluNew Year.
tion?
Mr. Maddox (Georgia): I move that that be added to the resolution
the Nominating ComPresident Lonsdale: I am told the Chairman of
Just read.
mittee is ready to report.
Gentlemen: Your
The motion was seconded.
Mr. Yetter (Davenport, Iowa): Mr. Chairman and
President-elect Newcomer: It is moved and seconded that this resolution, Nominating Committee,after due deliberation. beg to submit the following:
resolution in the Comas read by Mr. Maddox, be added to the particular
FOR PRESIDENT
mittee's report relating to branch banking.
Mr. Jeffries (Missouri): Mr. President, I have no objection whatever to
of Baltimore
Waldo Newcomer.President ofthe National Exchange Bank
frightfully
the resolution as read and presented by the Committee, but I am
the province of the resoafraid the amendment that was suggested invades
FOR VICE-PRESIDENT
lution that was adopted by the Convention this morning. We are all mindChattanooga.
Thomas R. Preston, President Hamilton National Bank.
ful of the inroads that are being made on the question of branch banks.
asked whether Tenn.
President-elect Newcomer: Mr. Jeffries, the question was
you are a delegate here,sir?
OF THE EXECUTIVE COMMITTEE (Made Up
of FOR MEMBERS
RepreMr. Jeffries (Missouri): I am a delegate from the National City Bank
of Twelve Members, each Federal Reserve Group Being
St. Louis, and an officer of that bank.
sented by One Member).
about the amendment,
I don't know that there is anything so serious
Pass
Federal Reserve District No. 3. to fill a vacancy this year, E. P.
we adopted
except let us not break down the morale of the resolution which
more, President North American National Bank, Philadelphia, Pa.
this morning.
Federal Reserve District No. 4, A. F. Mitchell. First Vice-President
of the counMy idea is that this Association,in keeping with the traditions
in some parts Northern National Bank, Toledo, Ohio.
try, in the face of the fact that branch banks are established
Federal Reserve District No.6, E. C. Melvin, President Selma National
time-honored
of the country, has put itself on record as being in favor of the
that the Bank, Selma, Ala.
First
calling the people's attention to the fact
tradition of the nation,
Federal Reserve District No. 10, Charles W. Carey. President
branch banks.
Association stands with the people as opposed to
Committee simply ratifies and National Bank, Wichita, Kan.
during
Now, the resolution as presented by the
Federal Reserve District No. 7 (to fill a vacancy which occurred
this morning, in that it
First National Bank.
confirms the position taken by the Convention
made upon the year). John F. Hagey, Vice-President of the
attention to the inroads that are being
keeps in mind and calls
an Association, rep- Chicago.
the business by the States, and is it not better for us, as
All the above were elected and installed.
to stand firmly on the
resenting the banking interests of the United States,
STATE BANK DIVISION
AMERICAN BANKERS' ASSOCIATION
Sixth Annual Meeting, Held at New York City,
October 2, 1922.
INDEX TO STATE BANK PROCEEDINGS
Financing Agriculture, Eugene Meyer, Jr
Practical Problems of State Banking, Marshall
Cousins_
Report of Federal Legislative Committee
Opinion on Branch Banking Eliminated From
Report
Report of State Legislative Committee
Report of Farm Finance Committee_
_
Page 156
161
163
163
163
164
Report of Public Service Committee_
Report of Committee on Exchange_ _
Report of Membership Committee__ _
Report of Committee on Resolutions
Declaration Against Branch Banking
Report of Nominating Committee _
_ Page 164,
169
166167
167
16T
Financing Agriculture
By EUGENE MEYER, JR., Managing Director, War
Finance Corporation.
The acute phases of the agricultural crisis of 1920-21 are
now happily passed. The aftermath, in the form of
a burden
of debt on the farmers and stockmen, still remains;
and
some thousands of banking institutions in the country
districts are still in an over-extended condition. But probably
at no time in our history has there been so rapid and extensive an improvement in our economic condition as during
the past 18 months.
•
The present is an opportune moment to study our recent
experience—to analyze the facts and the forces involved.
Now is the time to determine the features which may properly be classified as unique and therefore unikely to recur,
and those which may be attributed to definite changes in our
economic position, internally as well as internationally.
With exact knowledge of the facts and with a thorough understanding of the complex forces that have been of chief
influence in the recent crisis, we may hope to arrive at sound
conclusions as to what modifications are necessary to adapt
our banking methods and machinery to the needs of agricultural finance.
It is =necessary, before this audience, to emphasize the
importance of agriculture as our basic national activity, fundamental to all commercial, industrial and financial operations. It has been demonstrated, amply though painfully,
during the past two years that in America the stability of
commerce and industry is inextricably interwoven with a
prosperots agriculture.
.
Need for More Gradual Marketing.
In the interesting emergency work of the War Finance
Corporation we have had an unusual opportunity to observe
the many difficulties and problems that developed in the
various sections of the country, and, through intimate contact with them, to glean something of useful application in
the future. The crisis served to emphasize one outstanding
fact—the need for the more gradual marketing of agricultural products, with longer term financing to correspond
with this slower process. Unquestionably, it would have
been advantageous, even under pre-war conditions, to market
our products more gradually. Under present conditions, it
is more than a matter of advantage—it is an absolute necessity. If we are to preserve our agriculture, if we are to foster and develop it to meet the needs of an ever-increasing
population, we must face this problem squarely.
A generation ago wheat was threshed throughout the winter, and in the natural course of events came on the market
gradually. But power machinery on the farm, motor transportation, and good roads have greatly reduced the time involved in the physical operations of threshing and hauling
to market. This development, coupled with the prevailin
g
system of short term financing, has resulted in hurrying
the
crop to market within a few weeks after the harvest
But
the mere fact that it is physically possible is no
reason why
the crop should be forced out of the producers'
hands more
quickly than the market can absorb it. This is only
one of
many factors which make it necessary to cOnsider
what
changes and adjustments should be made in our
financial
structure to insure the marketing of the crop in accordan
ce
with the cossuming demand.
Fundamental Change in Export Markets.
The collapse in agriculture and in the banking situation
in the agricultural districts was characterized by an attempt
to collect loans on farm commodities in too short a period.
It was marked also by a fundamental change in the attitude
and practice of the foreign buyer, brought about by the economic situation in Europe. This is strikingly illustrated by
the figures for the movement of export cotton. Before the
war it was the custom of the European cotton merchant to
purchase, during or shortly after the harvest, his requirements for the year; and approximately 80% of our annual
cotton exports went forward in the six months from September to February. But changed economic condition
s, and
especially the violent fluctuations "in international
exchanges, made it impossible for him to contract ahead
for
large supplies and he was compelled to buy on a
hand-tomouth basis, laying in sufficient stocks only to meet
current
needs. As a consequence, since the war only about 50%
of
our cotton exports have been going forward in these same
months. In other words, from 1,500,000 to 2,000,000 bales,
which ordinarily would have been exported during the period from September to February, had to be carried oyer into
the second six months' period.
Failure to understand this radical change in conditions
and to provide means for storing and financing the cotton in
this country had a disastrous effect. Neither the American
producers nor the country banks were prepared to assume
the extra burden. Indeed, there was no adequate machinery
for meeting such a contingency. As a result, a disorderly collapse occurred in the cotton market and several thousand
banks in the cotton growing sections became dangerously involved. Their correspondent banks in the larger centres
STATE BANK DIVISION.
were likewise embarrassed through inability to collect loans.
And, in a more or less similar way,from various interrelated
causes, the markets for wheat and hogs and cattle and sheep
became demoralized, With identical effect on the banking
institutions and producers of the West.
Forced liquidation and hasty selling impaired the farmer's
buying power; and this, in turn, brought about a reduced
demand for the products of industry. The adversely interacting forces of weakening finances and weakening markets
resulted in general demoralization. The stock raiser with a
short-time loan was unable to obtain the renewal he needed
In order to bring his animals to maturity; so he had to sell
young stock and breeding animals. The cotton grower, with
a slow market taking his cotton gradually, was confronted
with the necessity of meeting immediately after the picking
season the bills incurred for the whole year's producing operation. The corn belt farmer, with a bumper crop, could not
get credit for the purchase of feeder stock to which he could
feed his corn. Deposits were drawn down, reserves were
depleted, loans could not be collected, and the stability of
our entire banking structure was more seriously threatened
than many are willing to admit, now that the danger is
157
in the Middle West to from 45 to 50 cents; wool that sold on
the Western ranges at 17 cents is now worth around 35 to 40
cent; while hogs, sheep and cattle are not only worth considerably more in the markets, but are in greater demand
for breeding and fattening purposes.
Psychological Aspects of War Finance Work.
The task of the War Finance Corporation during the emergency involved a great deal more than the mere lending of
money. Important as were the loans of the Corporation.
the psychological apects of the work were of even greater
consequence. Over-expansion, inevitably and always, is
characterized by over-confidence, while depressions are
characterized by a general and undiscriminating lack of confidence, intensified at times by periods of acute panic.
Neither business nor agriculture can be stabilized without,
at the same time, stabilizing these psychological factors.
If we review the public expressions, during the winter of
1919-20, of men in high positions in Government or banking
circles, we find an extraordinary absence of adequate notes
of warning. In fact, we May observe, in a general way, that
business leaders commonly lack courage in times of optimistic over-expansion to sound the note of caution that is needed.
passed.
If they do so, they apply so many reservations that the efThe War Finance Corporation.
fectiveness of the warning is largely nullified. When everyhangs high, no man likes to be
This was the situation that confronted the War Finance one is optimistic and the goose
fears that he may be accused of havCorporation when it began to function under the Agricultural a prophet of evil. He
very trouble which he predicts. But during
Credits Act of Aug. 24 1921. That Act authorized the Cor- ing caused the
a note of caution and warning,
poration to make loans for agricultural purposes to banking periods of over-confidence,
and to co-operative marketing as- uttered at the proper time, is the most useful contribution
and financial institutions
economic leadership.
sociations for periods of not to exceed one year, with power that can be made by sound
In times of depression we more frequently find that men
renewals for additional periods not
to grant extensions or
. But here,
exceeding two years. It filled a gap in our banking machin- are willing to express themselves optimistically
facility that was adapted to too, there is hesitation about making predictions regarding
ery and provided a rediscount
the future. The average business man or banker generally
the peculiar needs of agriculture during the emergency.
in its application and it was nec- does not like, in public statements, to anticipate the facts
The Act was nation-wide
essary for the Corporation to set up what amounted to an too far. He hesitates to jeopardize his established reputation
auxiliary banking system throughout the country. Leading by publicly expressing definite opinions concerning coming
bankers and business men in the various agricultural and events. He will not be praised if he is right, and he may be
live stock districts wore called upon to serve on committees, placed in a more or less ridiculous light if he is wrong.
In general, pessimism follows and does not precede untowithout compensation, to aid the Corporation in making its
funds quickly available. By the latter part of October the ward events. Pessimism is rampant after a disaster; optimmachinery for administering the measure was in good work- ism precedes it. But to lsten to the pessimists, one would
ing order, and from then on the Corporation approved loans think that the prophet of evil was anticipating events inIn steadily increasing volume. During the period from No- stead of merely recording them by his emotional reactions.
vember 1921 to January 1922 they reached an average of If one could plot the curves of optimism and pessimism as
exactly as one can plot the curves of prices and the volume
more than $2,000,000 a day.
Up to Sept. 15 1922, the Corporation had authorized nearly of production and consumption, one would find that they
7,000 loans, aggregating $183,000,000, to approximately 4,400 follow considerably behind the material conditions. Only
banking institutions in the agricultural sections of the coun- the few anticipate events; the many stop, look and listen
try; 750 loans, totaling $72,000,000, to live stock loan com- after the event is passed.
panies; and advances aggregating $175,000,000 to co-operaPessimism Overcome.
tive marketing associations. Altogether, the loans authorA disturbed state of mind produced by financial pre.armre ;
ized for agricultural and live stock purposes, including exa combination of hopelessness and resentment over inability
ports of agricultural products. totaled $470,000,000.
at prevailing prices;
These loans strengthened the banking situation in the to pay debts from the proceeds of sales
and an apand relieved the necessity for forced liqui- a sense of injustice; disappointment in the past
country districts
hopeless outlook for the future were the salient
dation. They put the banks in position not only to carry parently
Corporation
their farmer customers for a longer period, but also to make psychological facts in the situation when the
new loans, and were a vital factor in bringing about a began to function under the powers granted by the Congress.
marked improvement in the whole economic situation. Better The problem was twofold. It was necessary to furnish finanprices for farm products, renewed activity in the farming cial assistance quickly to large numbers of farmers and
districts, and revival of business generally were within a stockmen, but it was even more vital to replace despair with
few months reflected in the way in which repayments began renewed hope and to change the inaction of a discouraged
people into the energy of restored confidence.
to flow into the Corporation.
Considering the vast sums that are required annually to
Although the blighting effects of the agricultural depresstill in evidence, the change that has taken place finance our agricultural and live stock industries, the loans
sion are
within the past year is little short of remarkable. The farmer of the War Finance Corporation may seem relatively smalL
spots In the situaand stockman are not completely out of the woods, but their But the money was directed to the weak
is so vital to
position has been immensely strengthened. The harvest tion and helped to restore that element which
favorable, and, although there were declines re- all kinds of business—confidence. Even before the funds
prospect is
made available, a psychological recently in the prices of some commodities, most staple farm of the Corporation were
considerably higher than they were in the sum- action took place and confidence began to return. The Chairproducts are
man of one of the 33 agencies of the Corporation, for exammer and fall of last year. Cotton that sold at the farm for
now worth approximately 20 cents; corn ple, reported that he had been able to stop the sacrifice of
around 8 cents is
points breeding herds and young cattle on the mere prospect of rehas advanced from about 20 cents at country elevator
158
BANKERS' CONVENTION.
lief, before a dollar of the Corporation's funds reached his
State.
The loans of the Corporation not only helped directly the
borrowing institutions and their farmer customers; they had
a much more far-reaching effect upon the banks to which
the Corporation made no loans at all. In places where some
banks were weak and some were strong, it was found that
the inability of the weak banks to serve their communities
was matched by an unwillingness on the part of the strong
banks to function in a normally confident and courageous
way. Nor is this to be wondered at. Knowing well the overextended condition of their neighbor banks, the stronger institutions felt compelled to consider the necessity of remaining strong. The longer term rediscounts offered.by the War
Finance Corporation to the over-extended banks, and the
restoration of market values following relief from forced
liquidation, encouraged that more normal operation of the
stronger banks and that more liberal use of their resources
which was warranted by the removal of the danger spots.
War Finance Corporation Necessarily Temporary.
The War Finance Corporation is essentially a temporary
agency designed, to meet an emergency. Its highly centralized form of organization, with concentrated power and resources, was admirably suited to the grave crisis that confronted the country. In my opinion, however, it is entirely
unsuited to the permanent banking structure of the nation.
In determining what can be done by legislation to change
or to improve and develop the machinery of banking to meet
the needs of agriculture, we are bound to be influenced by
the limitations of business administration. If the War Finance Corporation has succeeded in its efforts, it is because
it has been able to enlist locally the services of some of the
best bankers in the various States, working devotedly in the
public interest without compensation and in a way that can
only be expected temporarily and for the purpose of meeting an emergency. We know that, under normal conditions,
it is not always possible to command the same talent and the
same application, or to employ the same methods, in Government work as in private business. Under the circumstances,
if we can find a solution for the permanent financing of agriculture through business channels, relying upon the Government only to authorize the proper machinery and to provide the necessary supervision and regulation, it will undoubtedly prove to be the better and more practical way.
Agricultural Financing Measures Pending in Congress.
Many measures dealing with agricultural and live stock
financing are now pending in Congress. One bill, introduced
by the Chairman of the House Committee on Banking and
Currency, is based largely upon the experience of the War
Finance Corporation. It provides, among other things, that
agricultural paper having a maturity of not to exceed nine
months and secured by non-perishable agricultural products,
properly warehoused, shall be eligible for rediscount in the
Federal Reserve System when issued as part of a program of
orderly marketing. It gives the same privilege to ninemonths paper secured by live stock in process of fattening
for market. It declares that paper of co-operative marketing associations, evidencing advances for agricultural purposes, is entitled to all the rediscount privileges of agricultural paper. The purpose of these provisions is to make more
available to agriculture the great rediscount resources of
the Federal Reserve System, in so far as this may be done
safely and soundly.
Liquidity of Loans Depends Upon Security Back of Them.
We all recognize the desirability of maintaining the liquidity of the assets of the Federal Reserve System. The
view seems to prevail in some quarters, however, that paper,
In order to be liquid, must have a maturity of GO or 90 days.
That view was largely imported from Europe, and particularly from those portions of Europe which are primarily industrial and commercial rather than agricultural. The fact
that the Federal Reserve Act permits the rediscounting of
agricultural paper with a maturity of six months, is only a
partial recognition of the need for a differentiation between
the time limits for agricultural and for commercial paper.
A sharp distinction should be drawn between short-time
bank paper and the question of the liquidity of the security
that underlies bank paper, long or.short. For instance, the
six and nine months' loans on wheat and cotton, made by the
War Finance Corporation to co-operative marketing organizations, are as liquid, from the point of view of the security.
as 90-day paper representing advances to merchants and
manufacturers. Long-time paper may be more liquid as to
security than short-time paper. It may not be as well
adapted as an investment for all of a bank's funds, representing deposits payable on demand; but the experience of the
War Finance Corporation has demonstrated that, when adequite financing for the time needed is provided, staple agricultural commodities are liquidated in an orderly way and,
in fact, the liquid quality of the security is enhanced by a
more gradual marketing process.
During the past year it was clearly shown that commercial
paper depends for its liquidity on the orderly buying of the
manufactured goods, and that this orderly buying, in turn,
depends largely upon a purchasing power based upon the
orderly marketing of our basic agricultural products. Indeed, if our late experience established any definite differentiation between the liquidity of commercial paper and of
paper based upon staple, non-perishable agricultural commodities, properly warehoused, it established the fact that •
the latter is decidedly more liquid under adverse conditions
than the former. At no time were such commodities so entirely unmarketable as were certain lines of manufactured
products upon which the so-called liquid commercial paper
was based.
Eligible and Non-Eligible Paper.
While it is important to safeguard the Federal Reserve
System by proper restrictions regarding eligibe paper, it is
equally important to safeguard the business of the country
by avoiding discrimination against paper which may properly be considered as eligible. The System gave us banking
elasticity in a way that was long necessary, but it also created a difference between different kinds of good paper. Before the System was established paper was judged on its
merits. It was good or bad according to the worth of the
maker and the security back of it. There was no distinction
between different kinds of good paper, provided the banker
or the investor was willing to lend for the length of time it
was issued. But now good paper is classified either as good
rediscountable paper or good paper that is not rediscountable; and bankers are considering their loans, even where
they have no intention of using them for rediscount purposes,
with regard to the requirements of eligibility.
We are too apt to think of the Federal Reserve System
only as adding a new facility and additional resources to our
banking structure. But we must not overlook the fact that,
while the System has greatly enhanced the desirability of
eligible paper, it has correspondingly decreased the desirability of non-eligible paper, even though that paper may be
satisfactory in every respect from the standpoint of security.
Live Stock Financing.
While modification of our banking conceptions and practices is essential to the more orderly marketing of our agricultural products, the live stock situation presents rather
special problems. The live stock industry has never been
properly financed. It involves a turn-over of two to three
or three and a half years, and there is no "home" to-day for
live stock paper of that duration. It is not suitable for banks
of deposit, nor is it eligible for rediscount in the Federal
Reserve System.
The outside capital invested in the live stock industry has
come largely from a restricted number of bankers who have
had personal contact with it. So far, the industry has not
been able to make a successful appeal on a broad scale to
bankers outside of the live stock territory who are out of
contact with the business, like those in New York, Boston
and Philadelphia—great banking centres that stand ready
STATE BANK DIVISION.
159
to furnish capital at reasonable rates on good security. No small, stockmen have been compelled to pay high rates of
matter what form of organization for live stock financing interest on ranch mortgages, and even then it has been difmay be •developed, it is essential that the industry recon- ficult for them to get money. This was especially true a
for capistruct its methods so as to provide that assurance of safety year and a half or two years ago, when competition
which will induce the bankers of the financial centres of the tal forced up the price of financial accommodation so that
country to make loans on live stock as readily as they do n even the best borrowers had to pay high rates on liquid securities. The market for land mortgages was at a great disad'dther commodities.
of the American National Live Stock vantage, and this situation was undoubtedly responsible for
At the recent meeting
Association in Denver, I pointed out some needed reforms in some of the congestion in the banks of the live stock territhe industry. I urged the Association to study the best prac- tory, because they became loaded down with land loans. In
tices that have been developed in the various States for the many cases they did not intend to make land loans; they
protection of titles to live stock under mortg..ge; to canvass merely financed the current operations of the stockmen, but
the best methods that have been devised for the protection of as these operations did not return the money loaned and frebrands and for safeguarding live stock from being stolen or quently involved heavy losses, they took mortgages on the
shipped out of the State; and to organize and license a corps land as security.
The Federal land banks have increased the scale of their
of experienced and competent inspectors so that if a banker
making a live stock loan is not entirely satisfied with the operations during the past year. They are now making loans
representatiops of the borrower, he may be able to obtain a at the rate of approximately $18,000,000 a month, as against
certificate of inspection made under the authority of the As- about $12,000,000 last fall. But in certain States, like Wysociation. These matters are of vital importance if the in- oming, Montana, Colorado, New Mexico and Texas, the need
dustry wishes to enlist the capital of the great money centres. for mortgage money has not been adequately met by the
Farm Loan System because of the limitation which prevents
Loans Through, New Live Stock Loan Companies.
the land banks from lending more than $10,000 to any one
When the War Finance Corporation came into the critical borrower. That amount would not be very helpful to the
situation last fall, it sought agencies through which it could Western grain farmer who cultivates an extensive acreage,
place its funds safely without too much delay and too many nor to the stockman whose ranch, to be an economical propractical difficulties. The banks, generally speaking. had ducing unit, must be conducted on a fairly large scale.
Recently a number of additional joint stock land banks,
all the live stock paper they were able to carry. The large
live stock loan companies not only were fully supplied with which are authorized to lend from $37,500 to $50,000 on one
paper but were having a struggle to take care of it. In fact, holding of land, have been formed in the Western States,
both the old loan companies and the banks were in urgent and they are meeting a very definite and pressing need.
need of relief.
Furthermore, with the general improvement in the financial
When I was in the West in September a year ago, it be- situation, private investors and great lending institutions,
came clear that new loan companies with fresh capital were which were attracted away from farm mortgage loans by
necessary. Beginning with Salt Lake City, Cheyenne and the inducement of higher rates for commercial paper and
Denver, and following later on with Fort Worth, Albu- short-time securities, are rapidly coming back into the marquerque and other Western live stock centres—from Mon- ket for such loans. In many districts a larger supply of
tana and Oregon to New Mexico and Texas—we were able money on land at reasonable rates will be very helpful to the
to get the local bankers and business men to organize new banks, and through the banks to the farmers, because it will
loan companies, each with substantial capital, through result in the transfer of unliquid, so-called frozen, loans out
which the Corporation could make live stock loans promptly of the banks, where they do not belong, into the hands of
and on a large scale. Our loans on live stock total about long-term investors, where they do belong, and will thus
$88,000,000, including approximately $16,000,000 to banks make it easier for the banks to finance the current agriculand about $72.000,000 to loan companies. The greater part • tural needs of the farmers.
of the $72,000,000 was placed through the new companies.
Co-operative Marketing Assooiations.
When the need for new loan companies was apparent, the
One of the most significant developments in the marketproblem was where to get the necessary capital. The banks
ing of agricultural products in recent years is the growth of
In some States subscribed very liberally. In fact, the capital
the co-operative movement. Through further development
of some of the companies came almost entirely from banks.
improvement
are not suitable, in un- along this line we may expect to see a definite
While loans of the longer duration
in our whole system of distributing farm commodities.
limited amounts, for banks whose deposits are payable upon
Generally speaking, the American producer has been
demand, nevertheless, many banks are closely affiliated in
to sell his crop hurriedly and at the time of maximum
their current business with the people interested in the grow- forced
supply. Within three or four months almost the entire proing end of the industry. From the fact that when called
passed out of his hands, though twelve months
upon they helped to organize the new companies, it has been duction has
to the National are required for its consumption. The farmer's credit mabrought home to us that an amendment
November. The merchant, who has proBanking Act might not be out of order, an amendment by tures in October or
to subscribe vided him with supplies and equipment on credit, finds his
which the national banks would be permitted
during the same period, and presses the
to the capital of live stock loan companies, such companies own bills maturing
supervision. This would farmer for payment. There is a call for cash all down the
to be subject to Federal banking
bank in the city, from the counnot be an entirely new idea, because a somewhat similar line, from the correspondent
in the Edge law, which was passed try bank and from the merchant. As soon, therefore, as the
amendment was contained
it is rushed to market.
in December 1919, when the maintenance of our export trade crop is harvested,
But the co-operative marketing associations are gradually
thing from a financial point
seemed to be the most important
overcoming this situation. In the hands of the individual
of view.
loan companies, organized and farmer, his products have often been little more than an offI believe that live stock
set against debts contracts in order to carry on his producowned locally, are the best agencies through which live stock
will, in my opinion, prove to be ing operations. In the hands of the co-operative association,
loans can be placed. They
they can be assembled in quantity, graded and warehoused,
more helpful than loan companies operating over unduly
should be able to attract capital pledged as collateral for loans and marketed in an orderly
extended areas, and they
reason- way. The farmer is thus relieved of the necessity of selling
from the more distant points on a sound basis and at
during the annual "low" of the market, and distribution is
able rates.
adjusted to consuming demand.
Land Credits.
Cotton Situation Reached Through Co-operatives.
There has never been a satisfactory market for mortgages
the midst of the worst depression that the cotton indushow well
In
on land that is devoted to stock raising, no matter
in many years. It was through the co-operasuited for the purpose. Although the valuations per acre are try has suffered
160
RANKERS' CONVENTION.
tive marketing associations that the War Finance
Corporation developed plans for extending assistance to
the industry
on a comprehensive scale. In the summer of 1921,
when cotton was quoted at around 8 cents a pound at country
points
and when business throughout the cotton belt was in
a demoralized condition, the Corporation made its first
large
loan to an association in Mississippi on 100,000 bales
of cotton. The cotton was classified by the Association
according
,to grade and staple and placed in bonded warehouses
under
inspection. The loan enabled the association not
only to
make advances to its members for their urgent
financial
needs, but also to market the crop through a greater
portion
of the consuming year instead of forcing it on a
demoralized
market.
Within a week or ten days, other loans were authori
zed
on a similar basis to cotton co-operatives in Oklaho
ma on
200,000 bales and in Texas on 300,000 bales. There
immediately followed a radical change in the cotton situatio
n. Confidence was restored, other avenues of credit were opened
up,
buyers began to resume purchases on a liberal scale,
and
more normal conditions, both with regard to prices
and volume of business, ensued. The change was promptly
reflected
in improved general business throughout the South.
for systems of credit unions similar to those that
exist in
Europe, but the large co-operative marketing associat
ions, as
we know them, have grown up naturally in respons
e to our
own peculiar needs and economic conditions.
Keynote of Policy for Agricultural Financing.
Agricultural financing must be based, first of all, upon
the
fundamental facts of American agriculture and, second,
upon
the existing economic and financial structure
of the country. Not to meet the first requirement is to force
agriculture
into the impossible position of endeavoring to make
production and distribution conform to banking practice
s. Not to
meet the second is to weaken rather than strengt
hen the
financial machinery of the nation.
The keynote of our national policy should be
the development of the usefulness of the Federal Reserve
,System to the
maximum. New machinery should be held to
the minimum.
The Federal Reserve System is, and should
remain, the
great banking rediscount organization of this
country. Nothing should be done to impair its strength;
evelything should
be done to extend its usefulness in proper way.
It would be
uneconomical and unsound—it would be the height
of folly—
to set up other agencies for doing the things the
System can
and should do. Not only that, but agriculture is entitled
Co-operative Movement Spreading.
to
the best banking rediscount facility, and It should
not be
The success of these cotton co-operatives has
encouraged satisfied with a second-class facility,
such as is contemplated
the spread of the movement; and many new associat
ions by some of the measures pending in Congres
s, when the adhave been organized for the handling of cotton,
wheat, to- justment of the eligibility rules of the
Federal Reserve Sysbacco, rice and other staple products.
tem to the business involved in the orderly marketi
ng of
The War Finance Corporation has already authori
zed agricultural products would give it a
first-class facility.
loans totaling more than $110,000,000 to co-operative
marPaper based upon the security of non-perishable commod
keting associations to assist in financing the orderly
market- ities should be made eligible for redisco
unt for the length of
ing of the 1922 crops. It is expected that only a portion
of time necessary to market a season's
product before the next
this amount will be actually advanced and that the banks
harvest. It is idle to designate as speculation the
carrying
in the interested districts will do the major part of the
fi- of agricultural commodities by farmers
or farmers' organinancing for the associations. That is what happened
last zations for orderly marketing,
or to say that by forcing the
year. While the Corporation agreed to lend approximately
products out of the hands of the producers specula
tion will
$64,000,000 to co-operative marketing associationc in
all be avoided. Somebody
must carry crops between seasons.
parts of the country, on such products as cotton, wheat,
rice, We eat bread the year
around, but wheat is planted, cultipeanuts and tobacco, only slightly more than $18,000,000 was
vated and harvested within a few months.
And so it is with
actually used. It is gratifying to note that this year the
other farm commodities. When an agricult
ural product has
large Eastern financial centres are showing a decided interbeen produced, either the consumer must
buy it and carry it
est in the financing of such associations, and considerable
until it is actually needed, or the dealer
who supplies the
amounts will be made available from these centres in addiconsumer must do so, or the jobber must
stand between the
tion to the advances provided by the local banks.
producer and the manufacturer who ultimate
ly takes it for
Management a Vital Factor.
distribution to the consumer, or, going back still
farther, the
Co-operative marketing associations have a definite place producer himself must find ways
and means of carrying his
in our economic structure. If they are soundly organized and product and marketing it gradually.
competently managed, they are bound to be helpful not only
Those who object to adjusting the eligibility
rules of the
to the agricultural interests themselves but to the business Federal Reserve System to the time required
for the orderly
of the country at large. Management is as vital a factor in marketing of agricultural products seem to
fear that the
the success of co-operative enterprises as of any other busi- soundness of the System will be jeopardized.
But the Sysness organization. Without good management they cannot tem suffers from friends as well as from foes—those
who deestablish and maintain that degree of confidence in the fend its every act and policy and who stand for the
immutasoundness of their operaticns which is absolutely essential. bilitay of Its present law and regulations may be
as harmful
I am glad to say that the relations of the War Finance Cor- as those who are extreme in their denunciation. of
the part
poration with the associations to which it has made loans played by it in the collapse of commodity markets
and prices.
have been satisfactory. They have met the requirements The true friends of the Federal Reserve System
are those
and regulations of the Corporation in a whole-hearted way who are willing to see its machinery adjusted
along sound
and have conducted their operations in a thoroughly busi- lines to meet changed conditions, both in this
country and
ness-like manner in almost every case. They have not only abroad.
made considerable progress in bringing about more uniform
Difficulties Involved in Dual System of Banking.
grading and classification, furnishing a better basis for
Our national policy should not only look toward the furcredit and insuring the more efficient handling of the prodther development of the Federal Reserve System; it should
uct, but they have erected machinery which will greatly farecognize also the fundamental importance of welding into
cilitate the gradual, orderly distribution of the products of
a closer and more harmonious unit the different elements
their members.
that make up our banking structure. The recent crisis
Many plans have been proposed in this country for financbrought to light many difficulties in connection with our
ing the farmer. Most of them have involved the theory of
dual system of banking.
co-operation, but many have had little in common with the
The United States is a union of sovereign States and from
selling co-operatives as they have developed in America. the beginni
ng each State has had its own banking machinery.
They have been based rather on the principles of the Euro- In the early
stages of our national life, central banks were
pean co-operative credit societies, or upon some other type of chartered
by the Federal Government on two occasions. But
co-operative agency that has not been tried out here. There each bank
went out of existence at the expiration of its charmay be a place in the older and more densely settled com- ter for politica reasons or on account
l
of the opposition of
munities, under State authorization and State superviion, the State banks.
On Feb. 25 1863 the National Banking Act
STATE BANK DIVISION.
161
testing against the action of the Corporation, although apparently he was entirely willing that the banks under his
jurisdiction should come to the Federal Government for
financial aid.
Competition Between State and National Banking Systems.
The State banking laws frequently permit practices which
national banks cannot legally engage in. This is creating
competition between the two systems which cannot be regarded as wholesome and may lead to the gradual weakening of both. The question of branch banking is one that is
causing considerable discussion at the present time. Some of
the States permit branch banking on an unlimited scale. As
a result, agitation is now going on for an amendment to the
National Banking Act to put national banks on a par with
State banks in this respect. Branch banking may be good
or it may be bad. It may be good if carried on in a limited
way; and bad if permitted on an extensive scale. But
whether it is good or whether it is bad, branch banking
should be considered on its merits and should not be the
product of competition in the endeavor to expand either the
State or the national banking organizations. The competition that exists at the present time between State and national banks cannot fail to remind one of the competition
that prevailed a generation ago among the various States
seeking to become domiciles for corporations—a competition
that was based upon the laxity of the laws governing incorporation. Nothing could be more disastrous than competition between the State and national banking groups based
cent difficulties.
in laxity.
Many causes are assigned for the failure of such a large upon competition
Banking supervision naturally varies, in form and degree,
State banks to enter the Federal
proportion of the eligible
in the different States. While in some it is quite unexcepReserve System. I will not undertaken to enumerate these
that it is on a low
as familiar with them as I am. Though tionable, in others experience has shown
causes here. You are
because level of efficiency. And there is one important class of
many State banks have remained out of the System
is not subject to any banking suthey object to its supervisory powers, yet they do not hesitate financing institution that
funds fur- pervision whatever, either State or nirtional. I refer to live
to advocate a rediscount system operating with
cases have made
nished, directly or indirectly, by the Federal Government, stock loan companies, which in numerous
will nec- advances ranging from ten to twenty times their capital.
ignoring completely the fact that any such system
not be permitted to conessarily carry with it the banking supervision of the Fed- This situation is one that should
tinue. No reason is apparent why such financial institutions
eral Government.
imFurthermore, we all know that State banks and State should not be subjected to supervision similar to that
banking officials are frequently jealous of their autonomy posed upon State and national banks.
We are at a parting of the ways, and now is the time for
and authority. Let me cite one case in point: Two State
we are going. We
banks in the West made application to the War Finance Cor- us to determine the direction in which
These banks found themselves in must decide whether we shall continue the more or less happoration for an advance.
banking machinery, or whether
a difficult situation and were in urgent need of funds to tide hazard development of our
n decided to ask the Comptroller our action shall proceed along lines based upon a comprethem over. The Corporatio
the country, bringing our entire
of the Currency to make an examination of the banks. The hensive view of the needs of
I may add, specifically author- banking structure and resources into a more harmonious
law under which we operate,
n. The subject is one that demands
izes such examinations, provided the consent of the banks and unified organizatio
within a short time we received the earnest and thoughtful consideration of the members of
concerned is obtained. But
the American Bankers Association.
a letter from the Banking Commissioner of the State pro-
became law, and on Oct. 1 of the same year 66 national banks
had been organized. Two years later the number had increased to 1,566, and the National banking system has concontinued to expand until to-day we have 8,154 national
banks. The number of State banking institutions also has
continued to increase and now there are approximately 22,600, of which 21,000 are functioning solely under the jurisdiction of the various States.
-Member Banks Seek Assistance in Times of Stress.
N6
With the establishment of the Federal Reserve System in
1914, the national banks became members of the System.
Notwithstanding- the fact, however, that more than 11,000
State institutions are now eligible for membership, only
about 1,600 have joined. And yet in times of stress the nonmember banks are in greatest need of access to a central
reservoir of credit. This is conclusively proved by the experience of the War Finance Corporation during the past year.
Approximately 85% of the banks to which the Corporation
has made loans are State institutions and only about 15% are
national banks. In terms of dollars, the loans of the Corporation to State banks constitute 80% of the whole. And
these figures do not take into account the large advances
made to live stock loan companies which are organized under
State laws. The fact that two-thirds of all the banks in the
country, representing 30% of our total banking resources,
have no direct relation to the Federal Reserve System is undoubtedly responsible, in part at least, for some of our re-
Practical Problems of State Banking
By MARSHALL COUSINS, Commissioner of Banking of the State of Wisconsin.
Since the assignment of this subject to me by your worthy
President, I have made an effort to find banking problems
which were confined exclusively to the institutions operating
under State charters and State supervision. My efforts have
been without avail. There appear to be no particular problems confronting the State banking institutions which do not
also affect those chartered by the Federal Government.
Banks operating under national charters, State charters,
or as private institutions, all occupy the same position in
their relations to the public. In this day all banks are expected to receive the deposits of the public and to furnish
accommodations to the public in the way of loans. There are
the bank of the present
many other types of service which
whole our banking instituday is expected to render. As a
worthy of the confidence
tions, both State and national, are
acceptably the service for
of the people and are rendering
which they were organized.
The last compilation of statistics of the banking resources
of this great nation was compiled from the figures shown by
the call of March 10 1922 by the Hon. R. N. Sims, Secretary
of the National Association of Supervisors of State Banks,
and I might say incidentally, Vice-President of the Hibernia
Bank & Trust Co. of New Orleans, of which institution the
President of this Division is also President.
This compilation showed 30,499 banks reporting to the
Comptroller of the Currency and the State Banking Departments.
Eight thousand nine hundred and seventeen of the banks
so reporting were national banks, and 22,802 were banks
chartered by the various States, or private institutions under supervision of the State Banking Departments.
The total deposits carried by the State banking institutions
were $23,510,877,185 07, and by the national banks, $15,390,438,000.
162
BANKERS' CONVENTION.
The total resources of the State banking institutions exYou gentlemen here assembled are practical bankers and
ceeded the total resources of the national banks by $8,958,- have before you thVse matters
for consideration at all times.
151,357 84.
I do not propose to take your time to discuss the many and
Mr. Sims's compilation shows total resources of all banks varied problems of our banks
in detail.
on March 10 to have been $48,658,955,357 84.
I feel that it will not be improper to say a little something
It must be remembered that in these figures there is not before this Division as to the usefulness
and the value of
included several billion dollars of resources of savings and our State banking institutions
:
loan associations, banking institutions of special character,
Many of our citizens whose lives have been spent in the
and in the returns for some of the States, trust company cities do not realize the services
rendered to the commercial
banks are not included.
interests of the country by the so-called "country
We all realize that the rural communities are first and banks."
directly served by the small State bank in their localities.
Many of our metropolitan newspapers praptically ignore the
Thousands of the smaller towns have no national banks and country bank. To their minds
there is but one system and
are served entirely by the State banking institutions.
that the National System.
Problems confronting these small institutions are also the
The figures which I gave you a few moments ago should
problems of the banks in larger towns and cities, as through demonstrate the value, the
usefulness, the services and the
our system the banks in the larger cities and the commercial necessity for these country
bank.
centres assist the rural banks in carrying their burdens and
The world is still passing through the turmoil and the conmust naturally be as much interested in the solution of the fusion occasioned by the efforts
of a certain ambitious man
problems confronting these small banks as is the small insti- of Europe to become the world
master. Upon this country,
tution itself.
totally unprepared, was thrown a task of gigantic magnitude.
The rural bank located, possibly, at the crossroads, where It became necessary for the financial
institutions of the nathe only other business may be the general store, possibly a tion to finance innumerable enterprises
called into being by
creamery, often a garage, which in former days was a black- the war.
smith shop, and one or two residences, is called upon to carry
Through the banks the Government placed billions of dolburdens of the people of its locality far beyond its own abil- lars of bonds. The burdens of war could not have been
carity. These institutions turn to the larger town of the county, ried had it not been for the close co-operation of
the banking
and from the bank in that town receive assistance through institutions. The country banks did their full share
in assistthe placing of bills payable or by rediscounts. Later the ing to finance the Government through the sale
of bonds
bank in the large town of the county finds the requirements and carrying local burdens.
made by the smaller banks are beyond its powers to meet,
The State banking institutions are not of necessity conand it becomes necessary for these banks to go to its corre- fined to the rural districts. We find in our great cities instispondent in the city for assistance, and through this process tutions chartered by the State carrying heavier deposits
and
eventually the great banks in the commercial centres, and doing a greater volume of business than
many of the nathe Federal Reserve banks, have taken up their share of the tional banks.
burdens. Consequently, the problems of the small State
I recognize the value of our national banks, but I am a
banks have become the problems of the larger banks, both thorough believer In our
dual banking system. Through the
State and Federal. The officers and directors of these banks wise legislation of the majority
of the States the difference
become as much interested in finding a proper solution as the between the State banks
and the national banks as to reguofficers and directors of the small bank first affected.
lations and supervision has become but nominal. It is as
One of the great problems confronting the banks annually essential for banks under
national charters as it is for those
is that of financing the agricultural operations during the under State charters
to conduct their affairs upon the lines
growing season and the marketing of the crops. Without laid down by the laws
under which they operate, and the
co-operation all along the line this would be exceedingly dif- rules of conservative banking
methods. "Rigid observance
ficult of accomplishment.
of all statutory provisions" should be the motto of the banks
This is not a new problem confronting banks, it has been everywhere, and, I believe, in
the vast majority of institua problem from the time of General Alexander Hamilton, tions it is the motto. It is only
through the rigid observance
and the bank planned and organized by him had as one of its of laws, lawful department regulations,
and due respect for
objects the handling of this problem.
conservative banking methods that banks can maintain the
It is to the country bank that those devoting their atten- confidence of the people of their immediate community
upon
tion to agricultural pursuits first turn. The neighborhood whom they must depend for their success. Public
confidence
bank must furnish the funds needed during the growing sea- is the greatest asset a bank can have. It does
not appear
son and must finance the moving of the crops. It would in- upon the face of the published statement, but without
it a
deed be a problem for these small and most necessary insti- bank cannot hope to retain its business and must eventually
tutions could they not depend upon the larger banking insti- close its doors.
tutions in the commercial centres for assistance.
There is a place in our commercial life for national banks
Another problem confronting all banks alike, but possibly and a place for State banks. Both systems are of value
to
the smaller banks to a greater extent than the larger, and in the nation, and each has its special sphere of usefulness.
The
many localities a condition which has not arisen before for existence of two systems is a safeguard and a check
upon the
many years, is the liquidation of so-called frozen loans. .This Congress and the State legislative bodies, and the public
is
Is not a problem of the State banks alone. It is a problem accordingly protected and benefited. Should it come to
pass
receiving the thought and attention of all banks alike. While the Congress endeavors to inflict unjust legislation upon
the
in many instances considerable time will be required, by co- national banks they can surrender their national charters
operation of banks and the application of the rule of common and organize under the law of the State in which they are
sense, the problem can be successfully solved.
located. Should the Legislature of any State inflict unjust
I was particularly impressed by the concrete and concise legislation upon the banks operating under the laws of that
advice given by Dr. Benjamin M. Anderson in an address be- State, the banks can surrender the State charter and take
fore a bankers' association in the West several months ago. out a national charter.
Referring to the problems left by the war conditions, the
And now a word as to the Federal Reserve System: A
Doctor advocated the following rules:
great many eligible State banks have not taken membership
1. Liberal lending to protect the solvent business man, and to give him In the System. One reason for this perhaps is that the banks
time to turn around.
2. Pressure, however, upon debtors who were using credit as a means of In the commercial centres in many parts of the country do
staving off losses.
not encourage their smaller correspondent banks to take such
8. More definitely and more vigorously, a refusal to extend credits to really membership
, as they prefer to furnish them with the accominsolvent businesses; BUT
modations which they could obtain, if members, from the
4. The necessity of continuing the regular loaning operations of banks
to
enable current production and marketing to go on.
Federal Reserve Bank.
STATE BANK DIVISION.
I question the wisdom of this method, and I believe it is
more desirable that the eligible banks, who find it necessary
during certain seasons of the year to obtain help from other
banks through borrowing of money, should take membership
in the System that they may transact their business direct
..with the Federal Reserve Bank of their district.
The larger the membership of State banks in the Federal
Reserve System, the greater will be the influence of these
banks in determining legislation affecting the system.
The Federal Reserve System was not organized for the
especial benefit of the national banks. Its purpose was to
serve the country, and the State banks should feel that the
system is for them as well as for the institutions chartered
by the Federal Government.
From practical experience in both State and national
banks, I can see but little difference between them. There
163
should be no difference. The same rigid supervision of the
supervising authority and the same conservative policy of the
management should apply to both classes of banks. They
are all organized for the same purpose and should render
the public the same service. There should be no friction between the banks of the two systems. It is for their own good
and for the public good that there should be co-operation.
I believe we will more closely approach the ideal situation
when for the welfare of nation-wide credit and trade
and of national solvency the two banking systems, the State
and the Federal, each supreme and useful in its own functions, can be made as one in matters of mobilization of reserve, currency supply and efficient supervision.
The Congress and the Legislatures of the respective Commonwealths should be urged to place upon the statute books
laws which will bring this about.
COMMITTEE AND OFFICERS' REPORTS-STATE BANK DIVISION
Report of Federal Legislative Committee.
Mr. Guy E. Bowerman: The Federal Legislative Committee of the
State Bank Division has kept in close touch with the work of the same
actively
committee of the Association, but has not found it necessary to
engage in legislative matters as there has been no conflict of interest,
l
and, in consequence, no occasion to take advantage of the constitutiona
right of independent action in legislation affecting the State Bank Division.
ourselves of the constitutional
While we should not hesitate to avail
privilege should necessity require, the committee feels that its activities
should be
should be more defensive than offensive, and that our position
new.
that of combating unwise or harmful legislation rather than to initiate
a legislative way, to the best
• In the absence of anything inimical, in
Interests of the State Bank Division during the past year, we find ourselves
have
generally in sympathy with the program of the Association and
supported it accordingly.
in January, to which were
The committee held a meeting at Chicago
of
invited several bankers who are especially interested in the welare
agriculture and any proposed legislation for its benefit. While no definite
satisaction on the part of the committee was requested, a mutually
factory understanding was reached.
I approach, with some hesitation, the question of branch banking,
although it was discussed at the Chicago meeting, where there was an
absence of complete harmony of thought, but, after all, no such divergence
of opinion as to prevent an amicable agreement.
None of the committee present have been in the past, are at this time,
or expect to be in the future, advocates of branch banking as an integral
part of our great financial system. At the same time we all acknowledge,
I think, that we are confronted by a fact and not a theory. We recognize that branch banking has arrived. We recognize that ten or twelve
States either allow or authorize State-chartered institutions to engage
in branch banking, and, such being the case, we believe there should be
no discrimination against national banks in those States. The spirit
of justice and right, the spirit of fair play, and the American spirit of
equal opportunity make no other attitude tenable.
But this committee, and this Division, stand unanimously for the
protection and wellbeing of that great body of American citizens designated as the "Small Town Banker," who must abandon his chosen profession and seek other means of livelihood if branch banking is not in
some way limited.
The question now is not, "Shall we have branch banking?" but rather,
"What shall we do with branch banking?" It isn't "going to arrive".
It's here, and those who do not look this fact squarely in the face are,
I think, standing in their own light.
'rhere will be no attempt, in this report, to discuss the merits or demerits of this mooted questions. The American Bankers Association
is on record as being opposed to branch banking. This Division has
taken a very positive stand against it, and yet the practice grows rapidly
and is gaining ground almost daily. It has ceased to be a matter of
ethics, resolutions or recommendations and has resolved itself into a
matter of Federal and State legislation—State legislation, in fact, almost
exclusively, and this rests largely with the bankers in their respective
States.
If you do not want branch banking in your State, since you are alive
to the probabilities of the situation, you should use your best efforts to
prevent the enactment of legislation which makes it possible. If the
present laws are unsatisfactory, endeavor to correct them by elimination
or amendment.
Both this Association and this Division are bound by resolution in
general convention and will, I am positive, use all honorable means to
protect the interests of the unit banker who constitutes such a majority
of its membership, but, as I see it, the future expansion of branch banking
or its regulation and control rests with the bankers themselves in their
respective States.
Personally, I have two well-established convictions, the first of which
is that it is supremely selfish and unworthy of us and just bordering on
cowardice to deny national banks the privilege which their competitors.
the State banks, enjoy; second, that just ordinary business prudence and
foresight as well as our own protection in the future prompt us to direct
our effort toward circumscribing branch banking to cities of one hundred
thousand population or more and limit them to this field.
Again, I feel sure that the city banker, in his espousal of branch banking,
does not seek to monopolize the banking business of the country, but is
actuated by the sincere desire to more effectually serve his community,
and if we will aid, or at least not oppose, this worthy ambition, I have
sufficient confidence in the fair-mindedness of this class of bankers to
and leave undisturbed
believe that they will revect our wishes in return
the field now occupied by the smaller banks.
OPINION REGARDING BRANCJFI BANKING ELIMINATED.
Mr. Scudder (Passaic, N. J.): I move, Mr. Chairman, that we sti ike out
all that part of this report which refers to the personal opinion of Chairman
Bowerman.
While the Chairman of the Federal Legislative Committee states that
branch banking has arrived, he does so only as to the twelve States which
have adopted branch banking. Branch banking may have arrived in the
twelve States he refers to, and his recommendation is excellent which says
"that if the present laws are unsatisfactory, you should endeavor to correct
them by elimination or amendment."
That is fine. I echo that sentiment: but tie winds up his report by practically recommending that we adopt in principle the branch banking for all
the States to the extent of cities having one hundred thousand population
or more.
This be frankly admits is a personal proposition, a personal suggestion on
his part, and has nothing to do, it seems to me, with the thought which
comes before us as a convention for adoption. I trust I will have a second
to my motion that all of that portion of bis report which begins,"Personally,
I have two well established convictions"—you will find it at the end of the
report on this sheet, going over onto the next column.
President Hecht: Gentlemen, may I be permitted to interrupt Mr. Scudder for just a moment? I would like to make this suggestion, that there
will be plenty of additional discussion of the branch banking problem betore this meeting adjourns. My suggestion is—of course it is up to you to
decide what you want to do—to let all of the reports be read and filed, not
approved, and that leaves open all these matters for future discussion.
lam afraid that unless we do that, our whole program will be out of joint.
I want to assure Mr. Scudder that there is no desire to cut short the discussion on that subject, because I know from the program that is before us
that you will bear a good deal more about it in the course of the afternoon.
If that is satisfactory to you. Mr. Scudder, I would offer that.
Mr. Scudder: Mr. Chairman, I would be very glad to adopt that suggestion, were it possible for me to be all the time at this meeting; but I am here
away from my duties and I really ought to be in the bank right now. My
Cashier is away and I am very busy, and particularly interested in this part
of the convention's exercises, and it seems to me that it is hardly fair to
postpone this, because I can't be here later, and I don't see why we shouldn't
take up a simple proposition of that kind that is so plain to us as an organman's
ization representing State barks, because It is as plain as the nose on a
personal
face that the report is a report of the Committee until it gets to the
equation.
while Mr. Bow.
President Hecht: It is only fair to say, Mr. Scudder, that
report is signed
erman unfortunately used the personal pronoun, that that
not trying to cut short the
by all of the members of the Committee. I am
the purpose of exdiscussion on branch banking. I only appeal to you, for
one time, instead of
pediting our program, to let that subject come up all at
having partial discussions at different parts of the meeting.
's motion, if
I am, however, ready to entertain a second to Mr. Scudder
there is one.
because we do
Mr. Rathje (Chicago): This is the time to consider that,
Many of us have
not want that part to go into the report if we can help it.
the present moment,
come away from busy banks, where we ougtt to be at
This convento protect our interests. We are all here for that purpose.
question has attracted great attention because it is the most momentous
tion of the day and we must protect ourselves hi every step we take.
seconding Mr. ScudTherefore, Mr. Chairman, I take the privilege of
der's motion.
The question was called for.
the last
President Ilecht: You have heard Mr. Scudder's metier, that
Committee be
two paragraphs of the report of the Federal Legislative
Is that
stricken out and that the report be then received and approved.
your motion?
Mr. Scudder: Be received and filed.
"aye"; opl'resident Hecht: All those in favor of the motion please say
posed "no."
The motion was carried.
Report of State Legislative Committee.
the State
Mr. D.M. Armstrong: The Committee on State Legislation of
Legislation of
Bank Division has co-operated with the Committee on State
recommended by
the Association in promotion of the enactment of bills
regular sessions
the Association. Only nine State legislatures have held
has been
during the year, and in some of them no banking legislation
General
passed. In South Carolina the Bank Slander Bill, drafted by our
phraseology from the
Counsel, was passed, but in somewhat different
that "any person who shall falsely and
recommended .draft. It provides
164
BANKERS' CONVENTION.
willfully and with intent to injure, circulate any report, or make any
false
statement as to the assets or liabilities of any bank in South Carolina, or
to its solvency or ability to meet its obligations, or as to its soundness; or
who shall make any other false statement, calculated to affect the credit
or standing of said bank, or to cast suspicion upon its solvency, soundness
or ability to meet its deposits or other obligations in due course, shall be
deemed guilty of a misdemeanor," and provides a fine of not less than 8100
nor more than MO or imprisonment not more than one year, or both,
in the discretion of the court.
In Virginia a law has been passed prohibiting the organization of a bank
by stock promoters.
In Mississippi a law was passed providing for the exemption of all taxation
of income on deposit in bank, both upon time and savings.
Our Committee pledges its continued co-operation with the Committee
on State Legislation of the American Bankers Association for the campaign
of 1923, during which year forty-one State legislatures will hold regular
sessions, and especially in the promotion of an amendment of the Negotiable
Instruments Act that will protect banks which certify checks which have
been altered before certification.
Report of Farm Finance Committee.
President Hecht: The next report is the report of the Farm Finance Committee. I am very sorry to have to tell you that Mr. J. D. Phillips, the
Chairman of that Committee, who has done very hard and intelligent work
during the entire year, has recently been stricken with a rather serious illness and is still confined to his home and was unable to come. In his
absence we have asked Mr. Gordon of Missouri to read his report.
Mr.'Gordon: Accompanying the report of Mr. Phillips is a letter to Mr.
Allen, our Deputy Manager, of rather a personal nature, in which he states
that he violated the instructions of his doctors and son in order to compile
this report. The last paragraph, I think, will be well to read to this
meeting. He sends his kind personal regards and best wishes for the
success of the whole convention and with special interest in the State Bank
Division.
Report of Public Service Committee,
Mr. H. A McCauley: The words "Public Service" were adopted at th.
Los Angeles Convention as a name for the committee theretofore known
as the Public Relations Committee in order that there might be no confusion
with the work of the Public Relations Commission of the Amer:can Bankers' Association. The work previously undertaken by the Public Relations
Committee of the State Bank Division was then, and for that reason,assumed by the Public Service Committee, for the activities of which this report
is meant to account.
During the year previous to this administration your committee had
undertaken to have prepared and published full data of State banks, which
should be given, if possible, equal publicity with that of national banks.
The work accomplished toward that end has been followed up this year,
and, while the publicity is not yet as far reaching as we hope to make it,
no doubt State banks have been benefited, and the work will be carried on.
Your Committee at its first meeting this year decided to prepare and
submit to the membership of the Division a list of questions intended to
to bring out an expression as to what was of greatest moment to State
banks, what most desirable and expedient to take up that would be of
benefit to the greatest number, and whatthe committee might undertake in
any way that would be of service to our members. The response, while
not as general as we wished, brought forth many ideas and expressions from
a large number not heretofore heard from but whose importance to our
Division is such that we desire to acknowledge our appreciation of the
interest manifested.
One meeting of our Committee was held Dec. 15 1921,in Chicago, where
a majority wore present together with President Hecht and Chairman
John D. Phillips of the Farm Finance Committee of this Division. At
that meeting, following suggestions from President Hecht, it was decided
to eliminate from our work anything of a general character which might
and should properly be undertaken by the Public Reattions Commission
of the American Bankers Association. It was brought out at this meeting
that the Public Relations Commission was performing air work of a character to benefit the Association as a whole and that due care should be
taken that no work be duplicated for the benefit of any group at added
expense to the whole Administrative Committee. For this reason no
further expense was incurred, but our Secretary has accomplished through
his office a great deal of the work outlined by your committee, and President Hecht has given his time and splendid ability to set forth work that
the State Bank Division might properly undertake.
One subject which has been under discussion by your Committee and
which has been clearly explained by President Hecht in a recent very able
address is that of Co-operative Marketing. This question is of extreme
Importance and most timely because of the strong co-operation existing
in almost every faction of Capital and Labor, and because of the general
prostration that exists with farmers marketing most essential commodities
such as wheat, cotton and other staple necessities, such as live stock.
dairy and poultry products. The co-operative movement cannot gain
great momentum without the support of country bankers, and it would
appear to be the special function of this Committee and this Division to
put forth a united effort to accomplish its complete organization and effective working order, thus benefiting those most who can benefit us.
In concluding this report we emphasize that PUBLICITY is a function
of the Public Service Committee. Mouth-to-mouth and hand-to-hand
publicity of the TRUTH about the banking business and every kindred
line of business which handles capital, which is properly apportioned
and
exploited for the benefit of the greatest number, is the antidote for
the
agitator and the Bolshevist. The demagogue and cheap politician who
rides into public office all too often upon a platform or program
villiof
fication of those who are entrustedovith the wealth and credit of community
centres, should have the light of "Pitiless Publicity" focused upon them.
Our country is infested with these parasites and imposters, and the powers
of this Association should be used to combat this worst of evils.
Not enough of our mmbership are active and outspoken; ant it is our
desire to cultivate mutual acquaintance, extablish and perpetuate a better
relationship, and draw from our rank and file everywhere ideas and information that will make this Division most useful to its membership and to the
American Bankers Association as a whole.
REPORT.
"Your special Committee on Farm Finance, appointed a year ago, after
the convention at Los Angeles, California, would beg leave to submit the
following report.
"Your Committee met in Chicago in November, 1921, and discussed quite
thoroughly the financial situation of the American farmer. The Committee
took the privilege of appointing a sub-committee to do the active preliminary
work, on account of the great expense and time it would take for the whole
committee to meet. Mr. George Woodruff of Joliet, Mr. B. A. Molenpaugh of Milwaukee and your Chairman were appointed as the sub-committee. We held many meetings in Chicago and had before us some of the
very best men in this part of the country, if we may judge from experience
and ability along their particular line of business.
"After due consideration this sub-committee concluded that the ideal
banking system for long-time credits to the farmer, or in ocher words, investment credits, would be the development of the Federal Land Bank System in such a way that all banks might become members of it, very much in
the same way that banks are now members of the Federal Reserve System,
and that the banks might make loans and function in exactly the same way
that the Farm Loan Associations now do,thereby building up in this country
two wonderful banking systems—the Federal Reserve System, which in our
judgment is the greatest piece of financial legislation ever enacted in any
country in the world, whereby the commercial needs of the farmer as well
as all others might be cared for, and the Federal Farm Land Banks System,
through which the long-time loan, or investment credits, might be placed.
"Your Committee made a trip to Washington, D. C., and after some investigation discovered, or rather was convinced of what we had been told
about, that the political selfishness of certain organizations, whose existence
was maintained for political purposes, made it impossible for us to get
through a law of the above described nature, so the next thing to do was to
get the same results, if possible, in a different way.
"Your Committee therefore recommends that a sufficient number of
Joint Stock Land Banks be established and the Federal Farm Loan System
be so developed as to take care of the long time or investment credits of the
American farmer. The War Finance Corporation has filled a very great
need during the depression which we have been and are still passing through, Report of Committee on Exchange, by Chas. deB.
Claiborne, Chairman Whitney Central Trust
and should be highly commended for the service it has rendered and Its
operation continued until such a time as amendments can be made to the
& Savings Bank, New Orleans.
Federal Reserve Banking Law. enabling Federal Reserve banks to rediscount certain kinds of agricultural and cattle paper for at least nine months.
President Hecht: The next report is one of considerable importance and
I say nine months because the leading minds in the banking business seem will be presented by a gentleman who has given a great deal of his time and
to have agreed on nine months, but in the judgment of your Chairman, the thought to a problem in which a very large percentage of our membership
time should be twelve months. Only 18% of tbe business done by the Fed- has been interested for many years; the report of the Committee on Exeral Reserve banks of the country is of an agricultural nature, and the paper change by Mr. Claiborne.
carrying the twelve months' mautrity would be of such a small percentage
Mr. Chas. de13. Claiborne: Mr. Chairman, Ladies and Gentlemen: It
of the 18% that it would be infinitesimal in the enormous amount of busi- is not my purpose to abuse your good nature by taking all of your valuable
ness transacted by the said Federal Reserve banks. There is a certain time in a long discussion on the technical or academic side of exchange on
amount of business that both farmers and stock men transact that demands checks. Your Committee feels that we have discussed this matter
at
a credit of twelve months, and I am a firm believer that all business in a several meetings before this one, that you should therefore be now prepared
community should be handled by the local banks and they in turn should be to act, but we likewise feel that we should advise you as to the status
of
in a position to rediscount all legitimate paper of this character at the Fed- the litigation. A suit was filed in Atlanta, in 1920. That suit
finally
eral Reserve Bank.
went to the Supreme Court of the United States. That Court said:
"There has been much agitation and many bills before Congress, the pur"The United States did not intend by that Statute (Federal Reserve
pose of which was to establish in this country a third banking institution, Act)to sanction this sort of warfare upon legitimate creations of the States."
known as an Intermediary Credit System, Your Chairman has been from
That decision was the culmination of an action of which we complained
the start and now is positively and absolutely opposed to anything of this and of which we complained the Federal Reserve banks and Board at
kind, although the War Finance Corporation has acted in this capacity and Washington were to blame. The offenses that we complained of existed
has rendered a very greatly needed service to the country; but in my humble in a number of districts. In the case of California, the Court said:
opinion, with the Federal Reserve Act amended along the lines as above sug"The testimony here impels me to the conclusion that the Federal
gested, and the development of Joint Stock Land Banks and the Federal Reserve Bank has gone to the length of endeavoring to coerce the Brookings
Land Banks, there will never be a need of such an institution. However, Bank to accede to its demand that the latter bank agree to remit at par.
Your Chairman recommends that a law be enacted permitting the establish- Its purpose is obvious, &c."
ment of private corporations under the supervision and direction of the FedThe Court came to that conclusion and cited the two letters which
eral Government, for the purpose of taking care of the intermediary credit you will find on the reverse of the pamphlet which you have on your chair.
It said: "If we continue to accept exchange we are of course extracting
should there ever be a need of such a thing in this country.
"Your Committee has been in close touch and co-operation with Mr.J. R. the sting from our direct collections."
You gentlemen know well enough what that means. The contention
Howard, President of the American Farm Bureau Federation, and his adof your committee had been for years that the purpose of the Federal
visers during.the last year.
Reserve banks and Boards at Washington in attempting to collect coecks
"Respectfully submitted,
over the counter was not merely for the purpose of collecting the checks
J. D. PHILLIPS. Chairman.
but was absolutely for the purpose of intimidating, annoying and forcing
W. C. GORDON.
M. H. MALOTT,
that bank to remit at par, and up to the time that this letter was found.
GRANT McPHERRIN,
O. A, HOLDERNESS."
we did not have the positive evidence, but I believe that you gentlemen
STATE BANK DIVISION.
165
should be convinced of the charges that we made when we offer this letter number of years had agents. In the very suit that I cited to you the Federal Reserve Bank of San Francisco paid $4,000 to collect 16100,000 worth
in evidence and it is confirmed by the judgment of a Federal Court.
That same Court went on to say: "Shortly after all the banks in the of checks, which the bank was willing to do for $100; in other words, they
country have had time to consider becoming par voluntarily, it will be expended $3,900 over the legitimate cost to collect those checks. They
necessary to use more forcible methods with the few banks that refuse to collected them. I don't call that remitting at par. The percentage included in the 93% means just that kind, that the Federal Reserve Bank,
pay their checks at par."
In other words, our contention had been that it was the purpose of those through the American Express and through paid agents, have been able to
by collect on 93% of the banks.
banks to force non-member State banks to par. That letter is signed
Mr. Lowe: Here is exactly the point that I am trying to get clear in my
the manager of the Portland Branch of the San Francisco Bank.
One of the letters which appeared in the Atlanta suit, which showed you mind. What I would like to know is how many of the State institutions are
the petty and the small way that these gentlemen attempted to force that remitting at par without adopting the methods that you have just cited
scheme of par collection over, is best evidenced by this letter which was Is there any data that is available that will give us ti at answer?
President Hecht: I don't believe that such data is available anywhere,
signed by the Deputy Governor of the Atlanta Bank. It is as follows:
(This is addressed to a small country bank as an inducement.) "It occurs because in a great many cases items on State banks are undoubtedly colto us that in the event they do not agree to remit at par you would be lected through national banks who are members of the system; in other
interested in handling for us at par their items. This would probably give words, there may be in one city two State banks and one national bank.
You control of the clearings on your city as well as the benefit of the informa- Those two State banks would probably be on the par list because the one
tion that may be derived through the handling of checks upon a competitive national bank would be able to clear the items. So I don't believe that any
one will be able to give you a specific answer ta that question.
bank."
Mr. Claiborne: There is one agency that would be able to furnish the
Now, here is a Government bank that suggests and is guilty of this type
of banking. I leave it to you gentlemen if this Association can long stand information, that is the Federal Reserve Board, but that information would
be absolutely useless to'this convention from the fact that I tell you it is
these kinds of methods without taking some action.
You will find besides the Atlanta case and the San Francisco case, the beyond denial; the Federal Reserve Board themselves can't deny it, nor any
argued and submitted since the Federal Reserve Bank; that if you have to-day a number of State banks, it
Kentucky case. That case has been
month of January. but the judge has not as yet given us a decision. The is because they have been forced to that position. In other words, admitNorth Carolina case is now before the Supreme Court, but in the four ting the fact that you did have 93% that they were remitting through the
districts we still have an injunction against the Federal Reserve Bank mails,it wouldn't mean anything to this convention, because if you ask those
gentlemen (and we have asked them over their own signature), who are
against collection of checks at par on non-member banks.
Your Committee is asking for certain legislation, not because we are SO% ofthat 93%,they will tell you that they are doing so because they have
uneasy as to the outcome of the courts, but we feel that if we could get the to. Therefare, what good would the evidence be if we had it?
Mr. Lowe: If I may just ask one more question—Is there not and has
legislation to harmonize this entire situation, it would be a big assistance
there not been an attempt on the part of the Federal Reserve to ask for
to the Federal Reserve System.
Your Committee suggests an amendment to what is known as the Mc- co-operation in the collection of items by the State banks with the further
Fadden Bill. The McFadden Bill is simply a bill which allows the banks understanding that a certain amount of collection shall be done for them
to continue the collection of checks, but instead of the clause which exists through the Federal Reserve System free of cost? Is there not now somein Section 13 which says that no charge shall be made against the Federal thing of that nature? And if there is, what I would like to know is how
Reserve, we have suggested an amendment which is as follows: "Subject many of the banks have gone into that sort of an agreement with the
to conditions of the Federal Reserve Board, any Federal Reserve Bank Federal Reserve System?
President Hecht: I don't believe that statistics are available here because
may collect any check or draft by sending It to the bank on which it is
drawn and may charge to the bank from which such check was received, they are Federal Reserve statistics.
Mr. Lowe: Why doesn't that have a vital importance on the subject
exchange or remittance charge incurred in the collection ofsuch checks."
such
matter that we are asked to consider?
The balance of the amendment is the same as the Act.
President Hecht: I, of course, believe that that Committee has given
We feel that with that it will be optional for every bank, member bank
or non-member bank, to charge as it sees fit.
about as much data as it would be practical to present to this convention.
We do not believe that any other solution of this problem can be arrived but I think Mr. Claiborne has made it perfectly clear that the question of
at, at the moment. We have had discussions with the boards, we have what the State bank members really want to do will be better expressed
appeared before Congress. Your Committee has had dozens of meetings. by a vote that we will take at this meeting than it will be by the percentages
I have studied this thing in and out for two years and I honestly believe that which you have been told about for the reason that one of them will be a
this is the only happy solution of this entire matter.
voluntary expression of their views and the other may or may not be. I am
Your Committee therefore makes the following report: "Your Cammittee not taking sides in that question at all, but I think that really the question
suggests that the State Bank Section, in convention assembled, approve and can be voted upon here without waiting for such information as you are
enders..? the McFadden Bill as amended by said Committee of the said Bank now asking for, and which is simply not available.
Section.
Mr. Lowe: I don't want to be misunderstood, Mr. President. I am not
"It further recommends that at a general session of the A. B. A. this same attempting to debate this question. I merely asked for the information.
bill be approved, which has been approved by the State Bank Section; I happen to corhe from a section of the country where it has been the
that a committee be continued to further study and develop a collection practice and is the practice to remit at par.
plan in accordance with said McFadden Bill, and that the necessary funds
Mr. McKane (Little Rock): I just want to speak a word against the
be provided therefor."
ado'ption of Mr. Claiborne's report. I think the adoption of this report
I thank you.
means a step backwards. I come from a State, the State of Arkansas.
President Hecht: You have heard the report of the Committee on Ex- that has about five hundred fifty banks and prior to the Federal Reserve
change. What is your pleasure?
System's operation every one of those banks with very few exceptions
Mr. Sprecner (Wisconsin): I don't think anything else needs to be said in charged exchange. To-day we have practically no opposition to par
behalf of this discussion,inasmuch as it is very common with all of the mem- clearance.
bers here. I therefore move that the report of the Committee be adopted,
Mr. Hecht's bank in New Orleans could not collect a check in Arkansas
and also that the State Bank Section approve of the McFadden Bill as at less hardly than twenty-five cents a hundred exchange. If you give our
amended.
country bankers the opportunity to-day to charge again, they will be
Mr. Healy (Chicago): Will the gentleman enlighten the convention, perfectly willing to make that charge again. However, they are perfectly
McFadden Bill provides other than what he has men- satisfied under the present operation. There is no discontent on their
briefly, as to what the
part and I believe that in States like ours where that practice was prevalent
tioned?
Mr. Claiborne: It simply provides, as the Act provides to-day, that Fed- as it was if it was worked out satisfactorily to these people would be a fair
eral Reserve Banks may accept from member banks all checks, whether on example of what it is worth to the entire country at large.
For that reason for us to make this optional now,to raise a question with
member banks or banks that have the facilities through the collection.
The only difference in this bill is that instead of there being a prohibition every bank as to whether they charge or do not charge, is simply a step
against the Federal Reserve Bank making a charge. as exists to-day, this backwards in a financial machine that is working to the best interest of
will allow any bank that remits to a Federal Reserve Bank to make the all the people at this time.
For that reason I would hate to see this report adopted.
charge, out that charge is to be saddled back on to the depositing bank.
That is the orly change in the Act. In other words, the Act will remain as
Mr. John E. Wagner (Missouri): I think that is one of the best reports
it is, except the words"But no charge shall be made to the Federal Reserve." that I have ever heard. I am very anxious to see that report ad ted.
The actions of the Federal Reserve banks in every State in this Union in
Mr. Healy: It contains no reference to any other subject?
regard to collections have been the actions of coercion and oppression.
Mr. Claiborne: No other subject at all.
Mr. Chas. F. Lowe (Vermont): I want to know what the practice is. They sent an agent with threats on his lips, to our little State banks in
I wonder if the Secretary of this Section has ary data that he can give us— Western Kansas, that they would protest the checks of our bank if we
the information as to the proportion of banks that remit at par and the pro- didn't remit to them at par. Those little banks were making about $600
a year out of collections, out of exchange charges. The bank that made
portion of banks in the United States that do not.
President Hecht: I should imagine that the Chairman of this Committee that threat was making 179% a year out of the pockets of the bankers of
can probably answer that better than the Secretary, if you will permit. the country. I am perfectly willing that the bankers of Arkansas shall
clear every item on earth at par, if they want to. But I also ask the
Mr. Claiborne to answer.
Mr. Claiborne: The question must not be misunderstood as to how many privilege that the bankers of Kansas or Missouri or any other State be
hanks are remitting at par, and where it is possible for the Federal Reserve permitted to make a reasonable charge for collections if they care so to do.
Mr. Chairman, the only thing I don't like about that report is that
Bank to collect. The figures whicn are published continually, wni7h are
misleading, are that 93% of the bangs of the United States are remitting at it recommends something that had McFadden's name on it and McFadden
the Federal Reserve banks is in favor of branch banks. But I sincerely hope that this report will be
par. That is not a fact. While it is possible for
to collect on 93% of the banks, the facts are that those banks are remitting unanimously adopted.
President Hecht: If the Chair may be permitted to inject a word into this
because all of the national banks, which include about 8,500 banks,are compelled by law. The question as sent out by this Association, the A. B. A., discussion, I would like to say that the Chairman of your Committee on
the system were opposed to par Exchange and the Chairman of this meeting have often differed very much
showed that 80% of the national banks in
collection. They were remitting because it was the law and they were on this same question. a believe, however, the course which that Committee now recommends is one of conservativeness because I believe the
forced to so remit.
The State banks that are now remitting with very few exceptions are re- Federal Reserve Board in Washington itself—and I was going to refer to
coerced into remitting at par. that in a few moments in my own report—is of the opinion that there are
mitting because they have been forced and
That statement is justified by the fact that not only the question as sent out some things about this collection question that had better come by evolution
by the A. B. A. showed those figures as 80%. but a question sent out two than by revolution. So that I do not believe the report of this Committee
years ago by the National Standard State Bankers Protective Association on Exchange as now presented is in any sense radical, nor do I believe that
it will meet with a great deal of opposition in Washington when they finally
showed that 83% of the banks of the U. S. were opposed to par collection.
nol,
Mr. Lowe: It is uot exactly in the manner that I would like to have it. sit around the table, as I am sure they will as soon as the vacancies
Then am I to understand that 93% of the State banks at this time do remit existing on the Board have been filled.
the house, gentlemen, to approve the report
There is a motion,before
for collections at par?
Mr. Claiborne: It is possible to collect on tnat percentage of State banks, the Committee on Exchange; the motion has been seconded. Is there
but they are collected in various ways. The Federal Reserve Bank for a any further discussion?
166
BANKERS' CONVENTION.
Mr. Lowe: I come from a section of the United States—and a little State dating character,
i. e., provided they are drawn in the early part of the
—where this same charging of collection on items was the only discordant planting season
and are to be paid out of the proceeds of the crop when
question before the State Association—the Vermont State Bankers Associa- harvested.
tion. It was confined to a very small section, and we had some time
Effect On Federal Reserve Membership.
getting the banks there to agree to collect their items at par—and they have
done it. All through our section, items are being collected at par. It
It is very likely that there would be a considerable increase in the memfacilitates banking. If the majority of the bankers of this United States bership of the Federal Reserve System if
such a change were made. It
are now remitting at par and are perfectly well pleased and satisfied with
might particularly prove to be an inducement for the smaller banks to
that method, I think it would be a serious mistake to change it.
join if the law permitting banks of less than $25,000 capital to become
Mr. Sprecher: The reason I made this motion is due to the principle that eligible, should become effective.
At present, less than 1,600 out of the
is involved in this discussion. We to-day are opposed to labor unions for
11,000 State banks, which have been eligible all along, have actually joined
this reason: They come out and say "You can't work unless you belong the system: and under the new
law there wont(' be 4,203 more banks added
to the union." That principle is wrong. It is un-American. And the
to the list of State banks which could and might become members if the
reason I make this motion is that we members shall have the right to charge facilities offered proved sufficiently
attractive to them.
if we wish to. If we don't want to, why then we do not need to, but
Report of the War Finance Corporation indicate that during the short
that principle prevails in everything that you and I do in the United States period in which it has
functioned 4,220 banks availed themselves of its
and it should prevail in this.
rediscount facilities.
We, in our small State banks at Wisconsin before this exchange matter
Nearly all the institutions so accommodated were State banks—not memcame up, made very little. In other words, we made a reasonable charge bers of the Federal Reserve
System—and many of them too small to qualify
for exchange. To-day we are making more out of the exchange charge for such membership under
the old law.
than we did then.
This is eloquent argument in favor of some adjustment of the rules of
So I have no axe to grind but my idea in making this motion was merely eligibility of agricultural paper,
.
and, no doubt, that can be sone without
because I am opposed to the principle that the Federal Reserve Board is seriously affecting the liquidity
or jeopardizing the soundness of the system.
trying to stuff down our necks.
On the other hand, when it comes to the financing of live stock we are
President Hecht: The question has been called for. All those in favor of confronted with an entirely different
problem because in that case a turnadopting the report as submitted by Mr. Claiborne as Chairman of the over of from two to three years
is required. Paper running for such a period
Committee, please say "aye". Opposed? The "ayes" have it. The cannot, of course, be handled by the Federal
Reserve System, and it is to
report is adopted.
be hoped that private initiative will supply some other kind of machinery
for that purpose.
Report of Membership Committee, George E. Allen,
Chairman.
Circumstances over which I had no control prevented my attendance at
the Convention in Los Angeles last year. and this is, therefore, the first opportunity I have had to thank you, gentlemen, for the high honor you conferred upon me in electing me to the Presidency of this Division at a time
when I was many thousands of miles away.
The State Bank Division now has a voting membership of approximately
12,000 banks, most of which are located in the smaller communities.
Following the sound policies adopted by our predecessors, we devoted a
large part of our time and effort to a study of these problems which are of
paramount interest to the banks outside of the larger cities.
The field of our activities has none the less been varied, for the problems
of the banker, both in city and hamlet, have indeed been many.
In order to cover each subject as thoroughly as possible, special committees were appointed and their reports ,which have just been submitted
In detail, will have convinced you of the efficient manner in which these committees discharged their duties.
It seems hardly necessary, therefore, to burden you with too many details
in this introductory address, which will be confined to a brief review of the
Section's activities. The report would perhaps be still briefer if it were not
for the fact that there developed at times some decided differences of opinion, which led different members of our committees and out membership at
large to opposite conclusions, but which at no time disturbed the harmony
and co-operation of your officers or your committees.
All of you will have a free opportunity to express your views from the
floor in the course of the afternoon's session, but as this privilege will in the
nature of things be denied to your Chairman, you will no doubt permit him
to outline some of the principles which in his opinion should govern our
course of action.
Agricultural Credits.
The farmers, like most other producers, have gone through a most difficult period of readjustment, and it cannot be denied that the lack of proper
credit facilities made their problem all the more serious during the past two
or three years. The Federal Land Banks. the rapidly increasing number of
Joint Stock Land Banks and the War Finance Corporation have all helped
to give the farmer relief wherever possible, and each one of these agencies
has fulfilled its function in a most satisfactory manner.
Nevertheless, there remains a very strong sentiment throughout the country that something is still lacking in our credit system to take care of the
so-called "intermediary" credit which the nature of the farmers' business
seems to require. It is argued, and properly so, that the "turnover" of
farm products takes somewhat longer than the turnover in manufacturing
or commercial enterprises, and that special machinery should therefore be
provided to take care of the farmers' needs.
While freely recognizing the importance and necessity of giving careful
attention to these needs, we frankly believe that it is just as dangerous for
the farmer to make It too easy for him to borrow money as it is to deny him
adequate credit facilities for the production and orderly marketing of his
crops. Already we have numerous proposalsfrom perfectly well-intentioned
friends of the farmer,calling for further legislation and for new Governmental
agencies to alleviate the sufferings of our agricultural sections. Your Chairman does not believe that any of the bills heretofore proposed will prove a
sound and permanent solution of the agricultural credit problem.
No praise could be too great for the wonderful work accomplished by the
War Finance Corporation under the courageous and far-sighted leadership
of its managing director, Eugene Meyer Jr., during the past year or more.
But credit conditions have changed completely during the past year and it
is high time that the Government got out of the banking and every other
business and thus live up to the slogan used so frequently during the last
campaign, I. e., "more business in Government and less Government in
business."
The economic disturbances resulting from the abnormal conditions of the
past few years are rapidly being adjusted and the great improvement in the
country's financial condition will automatically solve most of the farmers'
problems.
' Let us be very slow, therefore, in giving the official endorsement of our
Association to any of the bills now pending in Congress, for surely there is
no legislative panacea for all of the farmers' ills, any more than we can hope
to cure the economic disruptions in other lines by the mere passage of more
laws.
The one way in which we can perhaps give some relief through existing
agencies would be to make the regulations of the Federal Reserve Banks
slightly more elastic than they are at present. We appreciate the necessity
for keeping the assets of the Federal Reserve Bank as liquid as possible,
but we do not believe that any serious harm could result if such banks were
permitted to carry a reasonable amount of agricultural paper, running for
a period of nine months, provided such obligations are of a truly self-tiqui-
Co-pperative Marketing.
The question of co-operative marketing is beginning to attract a good
deal attention among farmers, business men and bankers. This new
economic development impresses us as being thoroughly sound in principle,
but its ultimate success vb ill depend entirely on the business ability which
those who are charged with its administration may display. The greatest
danger is that on the advice of honest but mistaken leaders, these marketing associations may develop into holding corporations, which may try
to override the law of supply and demand, and attempt to get an artificially high price for their product by withholding It from the market
when It is really wanted, or by unduly limiting production or other ironclad rules.
So long as they live up to the true object of their organization, which
Is to market their products gradually as the demand for them will absorb
them, nothing but good can come from their operation. But it behooves
us as bankers to take an interest in this new economic movement, because
its success will mean a great deal to the farming and business interests of
the nation. Indeed, if completely successful, it would result in a more
even distribution of business activity, more stapio prices, less speculation
and less violent fluctuation of bank deposits. I can think of no worthier
movement to attract the interest of the bankers.
Public Service Committee.
One of the activities undertaken by the State Bank Division a year ago,
was the preparation of newspaper advertisements suitable for country
banks and the work was delegated to the Public Service Committee of the
Division. A detailed questionnaire was sent to State banks regarding
their present facilities and future needs. Accompanying such questionnaire
were several specimen advertisements, and the responses indicated that
some system of advertising was desired by country bankers. Subsequent
to the action of the State Bank Division at Los Angeles, the Public Relations Commission of the American Bankers Association prepared specimen
advertisements designed for use by all classes of banking institutions. The
Executive Committee of the State Bank Division, after consultation with
the Public Relations Commission, decided that any duplication of effort
should be avoided, and, therefore, voted to combine its work with the work
of the Public Relations Commission with the understanding that any plan
of advertising p:ovidcd shouid give duo consideration to country banks.
The Federal and State Legislative Committees.
The Federal and State Legislative Committees of our Division have kept
in close touch with the activities of the same Committees of the Assoziation
and it is a pleasure to be able to report that we have been in full accord
with the work of those larger committees and have had no occasion to avail
ourselves of our constitutional right to take independent action in any
legislative matters affecting our division.
The Work of the Committee On Public Education.
Realizing how great, in the solution of all our problems, is the need of
education in fundamental principles. I wish to urge intelligent understanding of, and constructive co-operation in the splendid and vital plan worked
out by Mr. J. H. Puelicher, one of the organizers and first President of the
State Bank Section. This plan is being carried out under the Committee
on Public Education, of which he is Chairman, and is one of the most
Important pieces of creative work in which the Association ever engaged.
Because of like service rendered during many years in numerous capacities
for the Association, we,of the State Bank Section, who feel greatly indebted
to Mr. Puelicher, desire this year that there shall be conferred upon him
the highest honor which this Association can give.
Branch Banking.
At the Convention in Los Angeles last year our Division went on record
as being opposed to branch banking in any form. In the meantime this
problem has assumed nation-wide interest due to the recent efforts to expand
the branch banking system on a rather large scale in some of the Middie
Western States.
It goes without saying that none of us want to see our independent
banking system put in any jeopardy, but, with the exception of one or
two States, there probably is no real justification as yet for the fear of some
of our banks that their autonomy and independence are in any danger and
that we are threatened with any sort of monopolistic control.
We should not permit the issue to become unduly confused, for there is
all the difference in the world between the unrestricted expansion of branch
banks on the English and Canadian principle and the permission to operate
several offices within the same municipality in which the principal office
Is located. The one really does not carry with it the danger of too much
concentration of power in the hands of the few. The other is usually merely
a convenience to the public—the bringing of the bank to the people. After
STATE BANK DIVISION.
.
all is said and done, the real place to make a fight against the extension of
the branch banking system is at the State conventions and the sessions of
State legislatures because our action here can at best have only a sentimental, general effect on the several States. There is, however, one aspect
of the case in which all of us have a very direct interest, and that is that we
should insist that the Federal Government absolutely prohibit national
banks from invading the territory of State banks with "additional offices"
or branches in States where the State law denies the same privilege to
State banks. We believe that it would be quiet unfair to permit banks
chartered under the Federal law to compete with State chartered institutions
on such unequal terms and the members of our Division should protest most
emphatically against any interpretation of the law which would snake
possible such competition in the States where our own members are denied
the same privilege.
On the other hand we see no occasion for any undue heat and bitterness
in the discussion of this subject nor is there any good reason why this
question should be permitted to split the American Bankers Association
into two hostile camps. It would appear that the proper course to pursue
is to reiterate in no uncertain language that our Division is opposed to any
development of the branch banking system on the English or Canadian
principle, especially as in passing such a resolution we will but confirm the
action taken by the Kansas City convention of the American Bankers
Association in 1916, and we believe moreover that the vast majority of
the membership of all the sections of the Association in attendance at this
convention will favor the passing of such a resolution.
Relations With National Banks.
Notwithstanding the fact that national banks have in recent years been
given most of the privileges heretofore enjoyed by State banks, such as
conducting trust and savings departments, the State chartered institutions
have shown a steady increase in numbers and resources.
There have been a good many conversions from national into State
banks. In New Orleans only one bank remains doing business under
national charter, in Cleveland only three and in most other large cities
State chartered institutions now hold the overwhelming banking power in
their respective communities.
But notwithstanding the fact that the lines of demarkation between the
two classes of banks are becoming more and more obliterated since the
establishment of the Federal Reserve System, the same reasons which
make it highly desirable for the country to have a fairly evenly matched
Democratic and Republican party also make it advantageous to have two
classes of institutions—one under Federal and the other under State jurisdiction. Nor is there any reason why the friendliest relations should not
always exist between the two classes of banks and the two divisions of this
great Association which respectively represent the State chartered and
national institutions.
Co-operation With National Association of State Bank Supervisors.
We have maintained the same cordial relations as heretofore with the
National Association of State Bank Supervisors and have co-operated
with them in the compilation of statistics of all State chartered banks.
You are probably familiar by this time with the figures as published recently
by R. N. Sims, Secretary of that Association, but it may be worth while
to give you the following totals: there are 22,302 State banks, trust companies and savings banks with total deposits of $23,510,000,000 00, as
compared with 8,197 national banks with total deposits of $15,390,000,000 00.
The National Association of State Bank Supervisors extended your
Chairman the courtesy of inviting him to deliver an address at their convention recently held at Detroit, and as you already know, we are to have
the privilege of hearing from one of the leading members of that Association
this afternoon.
Our Division is also supporting the efforts of the Supervisors Association
and of the Investment Bankers Association to secure proper national
legislation to prohibit the sale of fraudulent or worthless securities without
crippling corporations engaged in legitimate business.
167
Report of Committee on Resolutions.
President Hecht: Mr. McCain is ready to report for the Committee on
Resolutions.
RESOLUTIONS OF APPRECIATION ANDSYMPATHY AND
DECLARATIONS AGAINST BRANCH BANKING.
Mr. C. S. McCain: "Be it resolved that the members of the State Bank
Division of the American Bankers Association extend to the banks and
bankers of the State of New York, their assurances of genuine appreciation
and gratitude for the unexampled hospitality and entertainment extended
to them and their families during this convention.
"Be it resolved that the sympathy of the officers and members of the
State Bank Division of the American Bankers Association be extended to
Mr. John D. Phillips, Chairman of our Executive Committee, in his recent
illness, and that, furthermore, this resolution convey to him an expression
of our appreciation far the careful and intelligent work done for the Division
as Chairman of this Committee on Farm Finance, and best wishes for his
speedy recovery and return to active business.
"Be it resolved that the State Bank Division of the American Bankers
Association views with alarm the establishment of branch banking in the
United States and the attempt to permit and legalize branch banking; that
we hereby express our disapproval of and opposition to branch banking in
any form in our nation.
"Resolved, That we regard branch banking or the establishment of
additional offices by banks, as detrimental to the best interests of the
people of the United States. Branch banking is contrary to public policy,
and violates the basic principles of our Government, as it concentrates the
credits of the nation and the power of money in the hands of a few.
"Be it resolved, That the appreciation of the State Bank Division of
the American Bankers Association be extended to R. S. Hecht, who has
so ably served the Division as its President, and by his uniform fairness
and courtesy, his soundness of judgment and untiring efforts, have influenced tee sentiment in the nation for better and sounder banking coordinated the activities of the membership of the Division to the extent
where their influence is felt as a powerful factor in the financial affairs of
the country. He has given a full and fair hearing, and an opportunity
for expression of views to all members on all questions presented.
"Be it further Resolved. That the thanks of the Division be extended
to its able Deputy Manager. George E. Allen, whose beneficent influence
has been constantly felt in the successful activities of the Division, and
that we wish for him continued health, happiness and prosperity."
C. S. McCAIN, V.-Pres. Bankers Trust Co.,
Little Rock, Ark., Chairman.
ROY 0. WEST. Director Bank of Dwight, Dwight, Ill.
F. T.IIODGDON,Cashier Farmers & Merchants Bank,
Hannibal. Mo.
GRANT McPIIERRIN, Pres. Central State Bank.
Des Moines, Iowa. '
M. B. WELLS, V.-Pres. Home Savings Bank,
Milwaukee, Wis.
Mr. C. S. McCain: I offer these resolutions for adoption.
The motion was carried.
Report of the Nominating Committee, by E. C. McDougal of Buffalo.
Complaint of Failure To Attend Meetings.
Mr. McDougal: Mr. Chairman, before offering the report, the Committee has asked me to express to this meeting the thought that nominees
who accept office, when elected, should do so with the understanding that
they are to attend meetings. The organization had cases where men have
taken office and they never attended one Committee meeting hardly or
not more than one. That is not quite right. Whether it would be proper
in notifying these men officially of their election for the Secretary to say
to them that it was rather understood that if they skipped a couple of meetings or did not attend that their resignations ought to be offered, is not for
our Committee to say. We will have to leave that to the Executive CamPar Clearance Problem.,
mittee, but it was thought timely to emphasize that one point, that no man
As you are aware, the personnel of our Division's Committee on Exchange should accept office, either as a stated official or as a member of the Execuis almost identical with that of the Committee of Five of the American tive Committee unless be was willing to attend the meetings and come to
Bankers Association appointed to consider the same subject. The report the convention.
The report, Mr. Chairman, is as follows:
of Mr. Claiborne, who is Chairman of both committees, will be laid before
For President, H. A. McCauley, President of the Sapulpa State Bank,
you during this convention's meeting.
It appears at this time as though this long drawn out controversy can Sapulpa, Oklahoma.
For Vice-President, J. D. Phillips, President of the Green Valley Bank,
probably be settled on some basis fair to all concerned just as soon as the
two vacancies now existing on the Federal Reserve Board have been filled. Green Valley, Illinois.
For Chairman of the Executive Committee, W. C. Gordon, President of
We believe that the officials in Washington have come to realize that it
will be far better for the Federal Reserve system and for the banking the Farmers' Savings Bank, Marshall, Missouri.
To fill the vacancy for a term of one year caused by the elevation of Mr.
fraternity at largo if certain features of this problem be made voluntary
instead of compulsory and that the economic good which it is designed to Phillips to the Vice-Presidency, Guy E. Bowerman of St. Anthony,Idaho.
For member of the Executive Committee for three-year term to fill the
accomplish can better be brought about by evolution than by revolution.
Certain it is that a working agreement of this sort will go much further vacancies by those that expire, N. S. Calhoun, President of the Maysville
than acrimonous debate, Bank, Maysville, Kentucky; W.P Shorer, President of the Midland Bank,
toward a permanent solution of this problem
Cleveland, Ohio.
legal controversies, and even legislative enactments in some of the States.
SAVINGS BANK DIVISION
AMERICAN BANKERS' ASSOCIATION
Twenty-first Annual Meeting, Held in New York City, October 2, 3 and 4, 1922.
INDEX TO SAVINGS BANK PROCEEDINGS
Thrift and Thriftlessness, Dr. Nicholas Murray Butler
Service to Our Depositors, George E. Brock
Industrial Savings Banking, Jarvis Hicks
Savings Bank Advertising, Victor A. Lersner
School Savings Banks, Alvin P. Howard
Ideals, Philip J. Lawler
Why Banks Install School Savings Systems, C.
Laycock
Boy and Girl Bankers, Edward A. Richards
Educational Values, Prof. Clifford Brewster Upton
Page 168
170
170
172
173
174
W.
175
176
177
Annual Address of President Raymond R. Frazier
Remarks of T. B. McAdams
Report of Committee on Federal Legislation
Report of Committee on State Legislation
Report of Committee on Savings
Report of Committee on Facilities and Service
Report of Committee on Mortgage Loans
Report of Committee on Liquid Investments
Report of Committee on Resolutions
Report of Committee on Nominations
Page 179
179
180
180
161
181
181
182
183
183
Thrift and Thriftlessness
By Dr. NICHOLAS MURRAY BUTLER, President, Columbia Uni versity.
It is a great privilege and pleasure for me as a New Yorker
to share in the welcome which has been offered not only by
the bankers of this community but by its citizenship and by
its press, to this very representative company of visitors
from all over the United States.
You in particular are, by reason of your relation to the
business of banking, by reason of your character and skill,
directly the trustees for the savings of tens of millions of
Americans, and it goes without saying that because of that
fact you carry a very heavy load of obligation and responsibility in this country.
When your President and Secretary did me the honor to
ask me to speak here for a little time this afternoon—and I
am going to give you a practical example of thrift—an examination of our program indicated that it might be worth
while, and perhaps apposite, to say something about the
larger aspects of thrift and thriftlessness and their significance in the life of the American people just now.
So far as thrift and thriftlessness is concerned, we need go
no further than the pages of Charles Dickens for the classic
example. In his novel, "David Copperfield," he created the
wholly inimitable character of Mr. Wilkins Micawber, and
the story of Mr. Wilkins Micawber is the story, more eloquent than any that I could tell, of the difference between
thrift and thriftlessness and what happens when one is substituted for the other.
You remember that Micawber in offering counsel to the
young Copperfield said with that grandiloquence that was
characteristic of him: "Annual income, 20 pounds; annual
expenditure, 19.06; result, happiness. Annual income, 20
pounds; annual expenditure, 20.06; result, misery. The
blossom is blighted, the leaf is faded and the God of day sets
upon the horrid and dismal scene and you are floored forever, as I am."
It would not be easy to improve upon Mr. Micawber's picture of what happens when thriftlessness is substituted for
thrift. In preparing myself to speak to you this afternoon, I
had occasion to look into some of the recent statistics of our
nation, and I confess to have been very much surprised to
find how thrifty are our people in the way of money, when
contrasted with their thriftlessness in so many other ways,
ar.d what I wish particularly to point out is the necessity at
your hands and with your co-operation of carrying the
lesson of thrift in respect to matters of money, out into the
larger area of thrift in respect to matters of idea, of institutions, of the Instruments of civilization.
It astounded me to discover that there are forty million
holders of life insurance policies in the United States. I
knew the number was very large, but I was not prepared,
perhaps you were not, for so huge a figure as forty million.
Now, after making all allowance for those who carry more
than one policy, it is perfectly evident that an astonishing
proportion of our adult population is sufficiently thrifty to
take that much thought for the future. We are paying in
this country three billion dollars a year in premiums for insurance of one kind and another, and more than half of that
is paid in premiums for policies of life insura..Ace.
That would indicate that substantially our whole adult
population had been gathered into the net of thrift, had been
led to take thought of to-morrow, of the needs of a dependent
family, for the education of children, for the day of illness
and possible dependence, and for the thousand and one happenings of an unfortunate kind that may come to us in this
life.
But that is not all. Our own Secretary says, producing
the very latest statistics on the subject, that one-half of all
the deposits in the banks and trust companies in the United
States are savings deposits, and that their amount is over
sixteen and one-half billion, distributed among twenty-six
million accounts. Why, these figures are perfectly appalling. They are inconceivable a generation ago or two generations ago. Of course, probably then is almost complete
duplication between the twenty-six million and more who
have savings accounts, and the forty millions who have life
insurance policies, but it only indicates that the habit of
thrift has gained a very strong hold on our American population.
On the other hand, do you realize how careless we are of
many human values, particularly how shockingly careless
we are of human life? In San Franc:sco the other day I
listened at the meeting of the American Bar Association to
the reading of the report of the Committee on the Enforcement of the Law, and they stated in that report that there
were some nine thousand illegal killings a year in the United
SAVINGS BANK DIVISION.
169
States, murders—three, four and five times as many in pro- trusted it to men of capacity and character to care for and
portion to the population as is the case, for instance, in Can- invest.
Why, we have at this moment a public ownership f the
ada, separated from us only by an imaginary line.
Do you realize that in the United States three is one death railways of a truly American kind that is unprecedented In
from accident every six minutes night and day? The popu- the history of the world in respect to any great enterprise or
lation of a city of considerable size somewhere between sev- any great public utility.
Millions and millions of Americans own the railways with
enty-five and e:ghty thousand wiped out in the United States
every year by accident! Very many of which accidents are their savings, here a little and there a little. When those
preventable by the same kind of forethought and the same who have not thought attempt to array class against class.
kind of foresight that has led to this stupendous development we find they have completely overlooked one of the ruling
elements in this problem.
of life insurance and of savings banks accounts.
One other point, Mr. President. I have long felt and have
Life insurance is growing eight times as fast Ls the population. Can that be said of any of the applications of thrift often said that thrift offered the one certain solution of our
fundamental industrial problem.
In the other fields to which I refer?
I mean this. Before what is called the industrial revoluThen, Mr. Chairman, we are singularly wasteful of human
values of every sort. We take pains to gather together wher- tion took place, that is, before the development of steam and
ever we can the results of past experience of human en- electricity and the growth of the factory.system and the condeavor, of human experiment, of human undertaking. We centration in great cities of large numbers of wage workers
collect great museums; we build huge libraries and we bring —all that is only 125 years old or less—before that took place
In to them great aggregations of learning which tell us the the relation of the workman to his job was one that was so
story of human experiment, human success and human fail- personal and so direct that he was able to take an interest in
ure, human attempt to solve these problems by which our It and to regard it as his. He could have joy in the job as a
finished product of his hands, whether he made it at home,
age, our generation, is confronted.
How much use do we make of them? You and I are con- whether he made it at the guild centre, or whether he made
stantly solicited to try all over again social, economic and it in a little group.
Then came the great factory system, the division of labor,
political experiments that have been discredited for from
five hundred to two thousand years. That, Mr. Chairman, the separation of functions as in the printing of cottons, or
the making of shoes, and the workman found hinself brought
is not thrift; that is thriftlessness.
When we are told that after all that has happened in the simply to the constant repetition, many hundreds and thoudevelopment of free institutions, in the building of civil sands of times, of one mechanical and uninteresting act. He
liberty and its protections, in the institution of private prop- naturally began to think much more about getting free from
erty, in the judicial protection under our Constitution of that than about completing it. He naturally looked upon
public law and private rights, when after all that we are that as an alien undertaking to which he had no personal retold that this means nothing, that we must begin again, that lation; he couldn't point to a finished pair of shoes or a finwe must put the majority in the place from which our fathers ished bolt of cotton and say: "I did this." He could only
dispossessed the tyrant, that we must shackle ourselves so look upon a thousand boxes as they went out from the facthat liberty shall not be permitted to exert itself to develop tory and say: "I put on the heels," or "I put on the red part
capacity and to gain property; when we are told that we of the pattern."
The consequence is that as the man became alienated from
must throw down and attack the courts and the judicial protection of public law and private rights, then, Mr. Chairman, interest in his job, he became alienated from everybody reI say that you might just as well pour your millions and lated to what is at the bottom a co-operative undertaking. If
we are going to lessen the sharp incidents of the industrial
hundreds of millions of savings in the sea.
What use, what possible use, will it be for us to pile up life problem and its danger, we have got to get back to the wage
insurance, to pile up savings banks deposits, and to go the worker his joy in his job, to make him proud, happy and satway of Russia? What possible use, what protection can be isfied when it is well done, because he has done it. And we
had from thrift in one narrow and restricted field, however have got to substitute for the rather crude and mechanical
important, if we have no care for those great achievements notion of employer and employed, or the still cruder and more
which represent the thrift of those who went before us?
mechanical notion of Capital spelled with a large C, and
If there had not been men rich in ideas, strong in charac- Labor, spelled with a large L; we have got to get back the
ter, fearless in courage, intrepid in zeal, it would not have notion of industry as a co-operative enterprise between hubeen possible for you to maintain the institutions which you man beings—men and women with blood, with hearts, with
conduct or for these tens of millions of Americans to lean souls, with ambitions, with needs, not mere parts of a maupon them as sources of strength and dependence in respect chine, but co-operating together in the production of that
which is the end of an industry.
of material things.
We must regard industry as a co-operative undertaking
It is a profound truth and no rhetorical figure that unless
we are sparing and thrifty in respect of intellectual and so- between those who work with their heads, those who work
cial and political values, we shall have no opportunity in the with their hands and those who work with their savings, and
long run to use the results of our thrift in the field of mate- the sooner we can by thrift make the man who works with his
rial things.
hands also a man who works with his savings, the sooner we
We need a great stirring of the spirit on the part of the will get back to joy in the job.
men of affairs of the United States. There is no sadder
There should be no more inviting and no more useful place
sight than to see antagonism growing in a democratic so- for the man who works with his hands to put the results of
ciety, taking on the form of class consciousness and class his thrift than the enterprise in which he is a co-operating
hatred, antagonism growing between those who have a little agent. That is beginning. It is beginning in some large corporations. It ought to•spread, and I hope it will spread, to
more and those who have a little less.
Only a few weeks ago, when some of our industrial dis- many smaller ones of a different type, but believe, me, gentleputes were at their height, I listened on the Pacific Coast to men, until thrift is made the bridge to enable what is now laan impassioned attack upon the millionaires who own the bor to become capital, to destroy the essential difference berailways. That set me to thinking, and I wondered who they tween the two, and to destroy the joy in the job—because the
were, and then I realized that instead of the millionaires wage worker feels that it is his, he has some control over it,
owning the railways, the ownership of the railroads as repre- some part in it, and can identify himself in relationship to it
sented by their bonded indebtedness and far the larger por- —until we do that, we shall be guilty of thriftlessness in me
of the largest and most far-reaching undertakings of mc.. .rn
tion of their stock issues is in the hands of the holders
these life insurance policies, the depositors in the banks and society.
You cannot, you dare not, permit present conditima. in
trust companies, these millions of Americans who by their
thrift have saved of their material wealth and have en- England, in France, in Italy and in the United States inu
170
BANKERS* CONVENTION.
nitely to continue. It would be sheer stupidity for us to do
Now, gentlemen, that is the message which I have had it in
so. to say nothing of the thriftlessness, the waste, the extrav- my heart to speak before this great body of men of affairs
agance on a huge scale that that would exhibit. It is neces- this afternoon. I have wanted, if I could, to lead you to
sary, and you sitting here in this room to-day are in positions think of the larger implications of your own busIness, of the
of strategic importance to guide and influence public opinion enormous social and political industrial importance of the
in these respects. It is necessary to get that conception of principles that underlie the institutions in whose prosperous
thrift and thriftlessness which does not confine it to mone- conduct you are engaged, and now as a result of my thrift,
tary savings or to insurance, but which will use those as I have in my possession something which very few New
models or types for its application to the large field of ideas, Yorkers ever have—I have forty-five minutes of spare time
of political institutions, of social and of industrial endeavor. which I present to this audience with my compliments.
Service to Our Depositors
By GEORGE E. Bancx, President, Home Savings Bank of Boston and President, National Association of Mutual Savings
Banks.
The greatest and best service we can render to our depositors is to so conduct our business that they may be assured of
a sound bank in which to deposit their money; this is our
primary duty. This doctrine is old, it has been handed down
to us by our forefathers; but it will also always be new, becanes it is fundamental to all good banking.
There has been a great awakening in these days of keen
competition and savings bank men are asking themselves on
every hand,"What more can we do for our depositors?"
The answer to this question has so often been attempted
that it is nigh impossible to give anything new,but a few observations may be worth while,even though they are a repetition.
The amount of service which a bank renders to its depositors is largely in the hands of the executive officers. If the
executive officer is a grouch his bank will remain in the old
rut and be submerged by the present day competition. If he
be timid, he will content himself with following the lines of
least resistance. If he be self-sufficient it will be hard for
him to believe there is anything new under the sun worth
while, but if he be energetic, forceful, with a broad horizon,
he will lead his trustees in new paths and reach out to give a
greater number of people the benefits which his institution
can confer upon them. I will mention a few of the things
which may well engage his attention.
It is very apparent to many of us in the State from which
I come that the time has arrived for savings banks to change
their methods in respect to the payment of interest. However much we believe in the old method of paying interest
once in six months, thereby causing people who draw between
interest payment periods to suffer loss, nevertheless, a new
public sentiment is rising which will ultimately compel us to
change our methods. Either we must resort to the payment
of interest quarterly, or follow some such plan as has been
recently inaugurated by one of the large mutual savings
banks in New York City, namely "The Calendar Monthly
Plan." I believe we are going to be compelled to make some
change, and it behooves us to consider the situation and adopt
some plan which will give enlarged service to our depostiors.
There is much, also, which we can do in the line of personal service to the people in our communities, such as
budget work, school savings work; work in the industries,
In clubs, stores and associations of all kinds, bringing before
the people in small groups the benefits accruing to them from
vacation clubs, Christmas clubs, budget making, and a regular savings plan. Savings banks will do well to consider seriously the advisability of creating a new department, call it
what you may, the Home Service Department, the Personal
Service Department, or any other name, but be sure that the
head of such a department is charged with the duty of projecting the hank into the community. In a community where
the banks are too,small to bear the expense which this would
involve, two or more banks might join in the undertaking,
sharing the expense.
The foregoing suggestions consist of endeavors to make
new friends. After they become our customers the paramount duty of the officials of the bank is to see that proper
service is rendered; prompt, courteous and efficient. In order to accomplish this result, it is necessary to gather together from time to time the employees and have them become familiar with the aims and aspirations of the management of the bank, and to teach them, so far as possible, the
methods by which these aims can be accomplished. There is
nothing more important than this, because the large majority
of the people whom we serve need assistance, and it is necessary to have an intelligent, sympathetic and agreeable company of clerks who are proud of the institution for which
they work, and look upon the service that they render as a
personal service to the customer at the counter.
The further away we can get from the machine methods of
handling people, the more cordial will our relations be, and
the more effective will our work be among our depositors.
There is a great work for us to do; we have but scratched
the surface as yet, and if we will but take ourselves to the
hill tops, where our horizon will be enlarged, we will find
abundant opportunities for the exercising of the best judgment and wisdom of which we are possessed.
Industrial Savings Banking
By JARVIS HICKS, Secretary and Treasurer, Long Island Savings Bank, Long Island City, N. Y.
It is with a very great deal of pleasure and delight that I Island City Savings Bank some 40 years ago. I assure you
am invited to say just a word on a very favorite subject of I did not receive the deposit.
• Before entering upon my subject matter—industrial thrift
mine. It has been my privilege for the past 10 years possibly
to go in and about this State discussing the question of in- and savings banking—it might be well for you to have a preliminary remark as to how this thing first started out. Some
dustrial thrift.
Industrial thrift, as I take it, is one of the new things that one was good enough to accuse me of being the first bank soIs being foisted on savings banks to-day. The school sav- licitor in the State of New York, which took place some 35
ings bank idea is not a young one. We have all listened with years or so ago.
Over in Long Mand—you will pardon me, please, if I refer
much pleasure and delight to Mr. Howard, but it gives me
very great pleasure also to say that the first school savings to the Long Island City Savings Bank, or myself too often; I
bank deposit that was taken from any scholar in any school assure you it is only to connect an idea and a bank together,
In the United States of America was deposited in the Long and it is with no intention whatever of announcing conspicu-.
SAV I
•
S BANK DIVISION.
171
ously our bank, to say nothing of the speaker. We have tees of the Watertown Savings Bank." Keep the bank and
probably 200 to 250 very live industries in our city in which the board of trustees before you and much of the hard work
there are employed possibly fifty to sixty thousand persons. will be made very much easier by the fact that most of the
About six or seven years ago, when it was my privilege to industrial heads, I have found, are trustees of savings banks,
go out of the commercial banking (where I had the very since only the very best men in any community can serve.
Your representative should be a member of the Chamber
great privilege or honor to serve for 25 years with the great
Exchange Bank of this city) and came over into the of Commerce or Board of Trade so that his acquaintanceCorn
ship may be extended to its fullest degree.
savings bank world, bank solicitation was something new.
Just a word about the man or woman who represents you.
It occurred to me through the approving power of our
board of trustees that it might be well to exert some of this In the first place, he or she must be possessed of salesmansame energy along the lines of savings bank solicitation, ship. But even technical knowledge and salesmanship in
themselves are insufficient. He must have a soul. His pay
which up to that time was absolutely unheard of.
Industrial thrift, or industrial savings banking, as my cannot be based on dollars alone, but must be, in part at least.
topic is so described, means simply this: In order to get it measured by the satisfaction that the work in which he is
before you definitely, I have five questions which have been engaged has a higher and more glorious purpose, in that it is
given to me, not once, but a dozen times, probably a hundred raising the standard of mankind.
I have found in my many, many talks to these industrial
times, as I have gone through, in and about the State, and I
thought it would be well, so as to make what few words I employees that one of the strongest and best influences for
had to say, concise and somewhat to the point, as your Chair- good is to be sympathetic. Your representative must be kind
man has said, I will endeavor to ask these questions as they to them. He should inform himself as to their home life.
find out what some of their adversities are, and talk along
have been asked me, and then answer them briefly.
I would like to say in passing just what a few of those these lines with them. The right kind of a man can help
• them wonderfully, and gain their confidence. Get them to
particular results have been, as they relate to our bank.
About seven years ago we had an institution of approxi- ask questions, show a kindred spirit, enter into their lives as
mately seven millions of dollars. We worked along casually far as it is humanly possible, and by all means, show them
In the factories, and up to and within the time of.the armis- that thrift and regular saving is the biggest regulatory power
tice, we were working along in a very quiet way. We had a in the world. Tell them what a savings bank is, and all
very peculiar situation to overcome. Our trustees were giv- about it, and how it fits into the lives of working men better
ing a great deal of careful thought to what might happen than any other financial institution in the world, etc., etc.
I have had at least 25 bank officials from all parts of the
after the close of the war, or such time as its activities or
hostilit:es would cease. Our little bank was busy going country call on me during the past year, and they have all
along in its own quiet way, but during the past six years, asked quite a number of questions, among which is, "How
through industrial effort, the most promising feature to the or what system do you use for its operation?"
We have used the Deduction Plan. By that I mean, where
advancement of our bank's business was 10,000 vacant lots.
We had to do something. We felt as soon as the war ended, the employer deducts from the weekly wages. This is unand with these. thousands of new depositors whom we had doubtedly the best method. But we do not confine ourselves
received owing to the fact that the people had been earning to any specific plan. What we want is to start these people
great.sums of money—large wages—we thought it would be saving, and if our plan doesn't suit, we are quick to accept
well for us to strengthen ourselves so that when this chaotic theirs, to the end that our ultimate idea be carried out.
Another very reasonable question is: "How does it fit into
time did cease and we started to readjust ourselves, the most
natural thing that we could expect would be withdrawals, the life and activities of a savings bank?"
.
Up to within the past few years it was considered most unbecause of the fact that we were located in an industrial city
and not with a dense population through which and by which dignified for a bank, and especially a savings bank, to enter
into any form of account solicitation, and it is my humble
we could get new business.
It gives me very great pleasure, however, to say that dur- judgment that, unless we savings bank men become more
ing those six years we increased the resources of that insti- alive to the situation, much of the business that rightfully
tution from seven million to twenty-five million, in the face belongs to us, will be found in the resources of other financial institutions, where nothing is being left undone to proof all these withdrawals and adverse circumstances.
Just as I was coming out to-day my secretary handed me a cure this business, and where the law of the land does not
slip of paper on which it said, "The good work is going on give the same degree of protection to these funds, as it does
just the same. If you want to speak of this, here it is: For when they are where they belong, on deposit in the several
the last three months the net deposits in our little institution savings banks throughout our State and nation.
Another question very properly asked: "What are the
have increased $730,000." Whether or not we are alive, I will
possibilities of industrial savings?" To my mind, that can
leave that with you.
Industrial thrift. What is it? How do you set the thing only be answered in part, by analyzing the uses to which sava-going so that it functions? How does it work? How does ings bank funds are generally put.
Let us consider for a moment some of the more important
It fit in to the lives-and activities of a savings bank? What
are its possibilities? In answer to the first question, What objects. If we men were to enter into an intense campaign of
is industrial thrift? It is simply carrying the gospel of sal- industrial savings banking, from which channel, yet unvation through thrift into these industries and factories touched, millions—yes, billions—of dollars are bound to
where we have fifty or sixty thousand people employed in- flow.
I think we all agree that the greatest cause for much of the
stead of having them come to you and possibly not at all.
The next question is; How do you set the thing going? underlying unrest—Bolshevistic ideas, and its like—is due to
This is very dry. In the first place, it will be necessary to Jack of education, or a better understanding among the peohave the name of every industry in your city or locality. I ples of the world.
Will the savings banks grasp this opportunity?
would suggest a card system; on each card I would put the
I am hushed to low voice when I think of this great city of
name of the industry and its address, the telephone number
and the name of its officers, if possible. The most important New York, with 1,000,000 children attending its public
man or woman of all with whom you will come in contact schools, at a cost of nearly one hundred million dollars a
finally is the plant superintendent. If he or she has an in- year, and for the year 1923, a building fund of about ninety
dividual telephone in the plant, get it. After your first in- millions more-190 millions to be spent in one year for edutroduction you will find most of your work will be with him cation. Think of what this all means for a single city.
What institution or institutions on earth has contributed
or her. After that you will want a goodly number of calling
or business cards. Don't make the serious mistake of putting so largely to the development of the public schools, the greatthe name of the representative Of your bank foremost on est single enterprise on earth? There is but one answer: the
this card. Rather put it in this way: "The Board of Trus- savings banks as bond owners. Pardon my eagerness to
BANKERS' CONVENTION.
172
mention that our city schools are presided over by a trustee
of the Long Island City Savings Bank—Mr. George J. Ryan.
My mind still travels along the line of industrial savings
possibilities.
We have touched briefly the educational value of industrial savings banking, and the tremendous constant need of
funds to carry on such an enterprise which industrial thrift
can supply.
May I ask who owns the major portion of the bonds that
created the greatest water supply system in the world? The
savings banks. Push industrial thrift, procure additional
funds, extend this system, make it possible for other cities to
get the same degree of service.
Where does the greatest bulk of the money come from that
builds our great State and interstate highways? Road bonds
held by savings banks.
As you good people from all over the country travel in and
about our great city, think with me for one moment of the
great parks, a breathing space in the open for about six million people. Tunnels under our rivers, connecting cities, the
result of the greatest efforts of the human mind expressed
In these great developments, all built with money procured
through the sale of bonds. Who owns these bonds? The
savings banks.
Industrial thrift and savings banking can supply an unlimited source of funds to extend these developments. If we
savings bank men will put our shoulder to the wheel.
Who has given New.York City the finest fire equipment
in the world? The savings banks, in a large measure, who
own the bonds issued for that purpose. Here again industrial
savings banking can help extend ever greater fire protection.
Industrial savings banking has another great opportunity.
If the cost of living is to be reduced, it will come only in the
same proportion as the people will save. Let's help them
through industrial thrift.
Over in Long Island City we have many definite cases of
rent reduction where we have been carrying on a very extensive housing campaign. Rents have been reduced materially.
This can be traced right back to our industrial efforts, from
which source we received the money which enabled us to
carry out our plans.
Listen. It is the earnest belief of the board of trustees of
our bank that we have assisted to a higher citizenship over
20,000 persons in the past six or seven years, since that number of people have opened accounts in our bank, which is
largely attributed to our industrial thrift and banking campaign. The work seems to show from every angle.
It is our further contention that the man or woman who
becomes the proud possessor of a United States Government
bond or the pass book of any savings bank, or deed to property in this great country of ours, has made the greatest
stride in the elevation of his patriotism.
I have called your attention to a few of the possibilities
which may be approached through industrial thrift through
the medium of a savings bank, such as educational advantages, religious advancement, highways, water supply, sewers
and disposal plants, tunnels, parks, fire protection, reducing
cost of living, reducing rents, higher citizenship, more intense
patriotism.
In passing, think what the savings banks have done in one
single item of 925 millions of dollars in railroad bonds, to
extend transportation facilities, and its contribution toward
the industrial development of our nation as a whole. There
is no end to industrial savings possibilities.
But leave to the last the greatest of all these. The religion
of the world is inspired with natural growth. Not only is it
the cornerstone and the underlying strength of our institutions, but that medium of power by whin we shall all be
measured, as to what use we have made of time and opportunity. It has to do with the highest and noblest quality in
man's possession.
Up to this time, all to which I have referred, has been
accomplished through the voluntary act of a depositing
public.
What may we expect from a body of men, as are here assembled,set to work intensively, either going or causing some
one to go, into every industry of our country, backed by thousands of the very best men in our land—I refer to the boards
of trustees of the several savings banks.
Gentlemen, in my humble judgment, no living man has the
power of mind to estimate, even in part, what industrial
thrift and savings banking possibilities are. Let us wax
strong, and go forth, and take our rightful position in the
world of things. Industrial thrift means opportunity. Industrial thrift means work, my fellow bankers. Are you
ready to accept your share? I believe you are.
Savings Bank Advertising
By Vicros A. LERSNEB, Comptroller, Williamsburg Savings Bank, Brooklyn, N. Y.
To ask me to discuss "Bank Advertising" is to take advantage of my deep interest in the subject and, at the same time,
expose my limitation of knowledge thereof.
When we think of the term "advertising" we at once find
our thoughts running towards publications, and particularly
newspapers. While such methods are of unquestionable
value in their own way, they are, and can be, only a part of
the whole, if we will interpret advertising in its broad meaning and full application to our bank's advantage. To do this
we must consider advertising in its dictionary sense, which
defines it as "making known by public notice—to commend
to the public."
To offer a viewpoint of the substance of advertising .is to
describe it as something that purposes to create an impression on those to whom it is directed, and the degree to which
it accomplishes this basic idea determines its elemental
merit. But the principle has only been partially established
unless the impression is capable of effecting action and it is
through the combination of the elements, Impression and
Action, that the intent of advertising becomes a reality.
When this action is obtained it is imperative to both retain
and extend it by seeing that the advertised article is exactly
what was offered, and the item in our case being "Service,"
we must provide the personal equation that answers to its
dispensing.
I feel that any and all printed and display efforts and effects will only be a fractional accomplishment of advertising
purposes unless generally supplemented by human quantities, who, by their conduct of our banking machinery will be
actual advertising mortals, and it can only be through a combination of the animate and inanimate lements that we can
sensibly expect to obtain an effective advertising compound.
The field of printed advertising is limitless, as all bank
men know, but my personal estimate of the relative merits
of the most common forms in this division is something after
the following order: Pamphlets and their many varieties,
bill boards, newspapers, calendars, blotters and magazines;
the order of selection being based on the most advantageous
means of putting a message before the public. While I give
full recognition to the publicity man and copy writer, their
calling, after all, while a dignified profession, is not a science—a statement readily proved by submitting the same
matter to a number of these accomplished persons with their
unvarying exception to such details as are expressed in their
d'alect of "lay-out, white space, number of words, position,
type face, illustration, margins, borders, etc., etc." But any
one seeking to secure the most serviceable advertising cannot ignore any of these recognized items of design, and it is
only by their competent employment that we distinguish the
effective from the primitive, and the professional from the
novice.
I cannot resist giving my estimate of the most proficient
kind of bank advertisers by declaring in favor of men trained
in bank work who supplement this experience with diligent
SAVINGS BANK DIVISION.
173
I plead to being a radical on the broad subject of advertisadvertising study. Concededly, this combination of ideals is
in
readily secured, but is well worth striving for. However ing, but feel that few, if any of us, have begun to invest
not
he cannot the infinite opportimities that merely need our intelligent
adaptable a general advertising expert may be,
the public
interpret the meaning of a bank's needs, nor grasp the true cultivation to make them mutually profitable to
and our institutions.
psychology of the public to a degree equal to the aforesaid
Some one has recently published the result of a study as
sort of bank trained man. He is the one blest with the
means of putting the message over, which concededly is the to the consensus of relative advertising value of the general
and human elements, which shows about a 50-50% decision.
sine qua non of the entire question.
Denying the printed for the personal element, I submit the This verdict may run true to actual conditions and would
primary thought that the most consummate order of printed seem to prove how slight has been our attention to the permethods can only be conserved to the extent to which our sonal portion of our ambition to develop our banks. It seems
.
banks are becomingly conducted by all those who come into to be a human characteristic to conclude that we must seek
Immediate contact with the public, for we cannot expect to external ways for the realization of our wants, rather than
escape the influences and results of being judged and meas- believe they are internal problems—analyzing our own immediate conditions seems less attractive than accepting some
ured by our deeds, rather than by our words.
our common plan of operation which stands prepared plan that is promised to fit every situation. EnvyOne factor in
out as a conspicuous example of my contention is, the New ing the greenness of our neighbor's grass leads to spending
Account Teller, because of his being at the junction point of dollars for new seed rather than dimes for more sprinkling.
How many of us have ever compared the number of hours
the depositor's initial touch with the bank, and here we venthat eoncerns itself with first we extend to interesting salesmen offering wares of unknown
ture all of that valuable asset
Impressions. Too many of us know, the extent of our inter- usefulness and that which we expend in trying to discover
nal weakness in this respect, but various considerations de- the golden nuggets and uncut diamonds among our employter us from effective curative methods. The prime cause ees. Could we not with great profit measure the comparaseems to me to be the too prevalent consideration of senior- tive investment value of money now spent for general adverity with a corresponding neglect for merit, and the force of tising material and what some part of that sum would re
this faulty practice only comes to us when changed condi- turn to us if devoted to increased salaries and sustained by a
tions and new influences cause us to seriously seek advertis- free spirit of encouragement and cordial suggestion to the
ing, whether it be as a means of counteracting adverse and members of our working force.
In building an ideal bank I would construct it of human incontending forces or to something that is responsive
to a change in bank management or administrative tegers who would so glory in their bank and work that they
would be active agencies for developing their institution durdirection.
Bringing the subject back to the definition as meaning "to ing time that would not only include every minute in the
commend to the public," it would seem that savings banks bank, but many hours outside the banking room. Give me a
have both a right and a duty to favor advertising if they are force of bank rooters who had substantial reason for reto fulfill their true mission as protagonists of thrift. Any specting as distinguished from roasting their superiors, and
agency that has real advertising value should be made a I would be content with this if were only allowed one of
part of savings bank development. Not the least of recent two quantities.
Not to be false in my logic or reasoning I repeat my alleextensions in this respect is the work being done by the
Department, under such titles as "Home Service," giance to advertising in its freest interpretation, but sumWomen's
"Home Economics," "Personal Service Departments." This marize my meaning in stating it should be a proper admixnew function has provided the facility for giving a real hu- ture of judicious outside ingredients and one that consisted
man character to our banks, a something that has been re- of a human portion which so respected their work by reason
gretably absent in our affairs, and many of us see a great of sympathy and example of those in official position that
usefulness in these departments, in that they furnish the they would at all times be nimble salesmen of their bank
necessary answer to so many of our previous unsatisfied ' through courtesy and capability and thus not leave the marketing of inherent virtues to outsiders.
needs.
School Savings Banks
By ALVIN P. HOWARD, Vice-President, Hibernia Bank & Trust Co„ New Orleans.
Lord's prayer, the Creed and catechism in Sunday School,
and table manners, decorum, punctuality and industry in
their homes. Quite obviously, these children have the ability to learn things that they do not thoroughly understand,
If at all, and with the teaching of each of these series of
things is associated the immediate surroundings of the school
room, the Sunday School and the home, through the medium
of the teacher, the Sunday School teacher and the parent.
That seems to be how to teach children. Whether it is right
or wrong, it seems to be the universal system in this country.
Call it a parrot-like method, if you will, but the results speak
for themselves by the presence of those here in this room, because'each of Us has learned in exactly the same way. Now,
then, where do you want to teach thrift to children? The
Sunday School is excluded, the home perhaps, but the school
room by all means, because that is the place where outside
influence, improvidence and indulgence have no place. They
are there to be taught according to school room standards.
Suppose we agree that they should be taught thrift in the
schools.
termine the fundamentals.
What are the fundamental principles involved in the
The first fundamental principle to establish is to teach.
learn the alpha- phrase "School Room Standards"? Obsmation shows that
We are dealing with school children who can
learn in the school room, and not in the halls,
bet, multiplication table and how to write, in school, the school children
The history of school savings in the United States during
the past five years has been fully reviewed and the statistical
information obtainable is on file in printed form with the
Secretary of the Savings Bank Division. A casual glance at
these figures will convince anyone that school savings is no
longer an experiment. As a matter of fact, it is hoped that
all of the experiments have been tried, because the classification of the various systems in use shows an alarming number of different plans and a varied amount of success. We
have a large country, with many different laws, customs and
peoples, so it is to be expected that this variation should occur, because of a lack of cohesion and co-operative guidance.
New England has tried one system without result, has abandoned it in favor of another plan, which has already been
tried hi the South or West and found lacking; the same system elsewhere is an apparent success, while others do not
produce results. In 'a brief way, an examination of the history of school Savings shows conclusively that the main trouble is a lack of comprehensive and continental study to de-
174
BANKERS' CONVENTION.
stairways or play yards, and I suppose that is a part of the
general subject of "association," asexpounded by Sir Francis
Galton, the eminent Professor of the University of London,
now deceased.
I have watched school children in the school room, and
there is no doubt that their whole expressioh is different
from that exhibited when they are idly passing through the
corridors or playing in the yard. Not all of them are attentive faces, and some are. quite bored, but most of them are
compelled to absorb by the very nature of their surroundings
and the habit of associating the school room with a place
where they learn. At least, you stand a better chance of
teaching anything in the school room than you do in any
other part of the building. It is humdrum, dull and uninteresting, but the force of routine and habit are ultimately predominant.
So we learn by routine, and the natural conclusion is that
thrift must be made a part of the routine curriculum in order to be understood, digested and taken away for permanent
use. I do not think that this is theory, and I am certain that
it is the case with my own children, and doubtless with
many, many others. You can easily recall when school children did not know the words and music of or national anthem, nor were they taught respect to the flag. Times have
changed since, and, I dare say, school children have learned
this much to better advantage than. we ever did, simply because they have been taught these things in school
under the routine guidance of the teacher, even though.
with the doubtful assistance of a tuneless piano. Do
we agree again that thrift can be taught in exactly the
same way?
The school board objects, the teacher refuses, and some
very good men say that school children are being taught so
many other things that they do not learn the three R's. There
may be a law making the teaching of thrift compulsory, but
the objections are there just the same. At this point we must
decide who is right, and I ask you as fair-minded persons,
without any selfish motive to serve, whether or not the peo-
ple of our country should be governed in their educational
policies by what the school teacher will do, or by what we
ourselves think is best? If we subscribe to the first proposition, it is inevitable that the school teacher will teach the
three R's and nothIng more; but who owns these children,
the school teacher or the people of our country? And if we
own the children and pay taxes for their education, who has
the right to decide what they shall do? Ladies and gentlemen, all of you know that the banks are not engaged in this
work for selfish profit. You cannot find many bankers who
will truthfully admit that they have made money out of having the teacher teach thrift. If we hope to ultimately make
a profit from this class of business, I belleve we are entitled
to it, because the many benefits of national thrift cannot be
dealt with so lightly as to place a paltry profit gained ahead
of our children to come, when considered as grown up men
and women who have learned to save.
I refer you for specific details on this subject to the printed
report before you, giving the judgment of the Savings Committee on this subject. The committee has worked faithfully
for one year as a body, and with equal faith as individuals
prior to that time. They, in turn, have no selfish purposes
to serve, but are anxious to see that proper guidance be
given, in order that we may have a thrifty younger generation and at the same time place the banks in a position where
the economic value of school savings will earn a profit and
become a thing of permanence. We must not delay any
longer, and we cannot afford to play with the matter. It is
either a question that needs concerted action along fundamental lines, or else we owe it to the children to abandon the
project in full.
I do not claim that bankers are altruistic in this plan, but
I do say that they are Americans, with American children.
living in America, and that we must conform to the ideals
and principles for which we stand, or else confess our failure. Let this be a brief word to you, but call yourself as
judge for what you want. If you agree with us, be determined to see it through.
Ideals
By PHILIP J. LAWLER, Bank of Italy.
It is said that the first savings enterprise, amongst English-speaking people, was started by a Miss Wakefield in
England about 1795, for the express purpose of encouraging
frugality amongst children. The success of her effort eventually stimulated a desire to inaugurate a similar plan for
men and women. This was the real beginning of the modern
savings bank.
In initiating this movement amongst boys and girls, Miss
Wakefield demonstrated that she was not only a philanthropist, but an economist and a patriot. Her work was
philanthropic, because in teaching children to save, she
showed them, in a practical way, how to avert the evils that
frequently lead the unfortunate to the poorhouse or to a
reformatory.
This woman must have been an economist, too, for in
dealing with children only, she grasped a fundamental economic principle, in. an evident full realization that the "cradle" and the "school' are the logical places to begin great
reforms, the places where the real preparation for the future
should commence, in order to create a better appreciation of
life itself, as well as to awaken a deeper interest in the home
and in the nation.
Miss Wakefield's service to patriotism was not less important than her other contributions to mankind, for who will
deny the tremendous value to the nation of men and women
who have learned to co-ordinate their expenses to their income by periodically saving something to meet emergencies.
In the perspective of the history of savings banks, Miss
Wakefield's endeavors in behalf of children should stand out
in clear outline as a majestic peak of achievement among the
mountain chains of great events.
The humanitarian efforts of a woman in behalf of little
children, that brought into existence the savings bank, should
have had a substantial acknowledgment on the part of bankers during the past century, that might well have taken the
form of provisions for encouraging the habit of savings
amongst school children. Except, however, in a comparatively few instances, the child has been overlooked in the
average banker's program of activities, that are frequently
so broad in their scope.
Eleven years ago the Bank of Italy established a school
savings department. The representatives of this department
now visit 450 California schools every week, to cover which,
eight men travel over 2,000 miles. There are 35,000'depositors in our school savings department, who have standing to
their credit over one million dollars.
In maintaining this department, we contend that we are
ass!sting banks in every State in the Union, for if we teach
children to save in California, and these children take up
their residence in other parts of the United States, as they do
frequently, our best information leads us to believe that they
invariably continue to save in their new homes.
What we have accomplished in our school savings department on the extreme western border of America should be a
reminder to those who do not see the potential value of a
penny or a nickel, that these small coins, like the children
who posssess them, have boundless posssibilities with proper
environments. They may well be compared to a certain little
creek I once heard described, the "Baby" river that vvabbles
through the woods of Minnesota.
I cannot help but liken this river to the penny saved by a
child, that does not know whither it is going.- The river just
SAVINGS BANK DIVISION.
keeps on, never giving up or quitting until it reaches the
place where gravity says "Little Misssissippi, do you want to
grow? Then you will have to go south." The little Mississippi starts south, while the folks look on and say, "Why,
Mississippi, you are foolish, you hain't got water enough to
get out of the county." That is a fact, but he is not trying to
get out of the county, he is only trying to go south, even as
the child tries to save. The Mississippi has not uch water,
he does not wait for a relative to die and bequeath him
some water. He has water enough to start south and he does
that, even as the child who may not have enough money to
buy anything, yet has enough to save.
The Mississippi goes a foot south, then another foot. He
goes a mile south and picks up a little stream, then he has
more water. Day by day he picks up streamlets, brooklets
and rivulets, even as the child through his maturing years
should keep accumulating pennies, nickels and dimes, with
the aid of his banker. Finally, the Mississippi reaches the
Gulf of Mexico, even as the child who has been taught thrift
reaches his goal by having saved enough to provide for a
175
higher education, or to buy a home or to start in
business.
If every school, with the assistance of a banker, incorporated in its course of study, a practical plan of saving with
regularity, the "Commencement Day" of the future would
take on a new significance, because the recipients of school
honors would have acquired, through the school savings system, at least a spirit of self-control that would make its advantages manifest in countless ways in after life.
Once upon a time there was an old Admiral who had been
retired by his country after many years of faithful service.
He was loath to discontinue serving his beloved native land,
so he always carried about a pocketful of acorns which he
planted in soil that would insurOfertility. Moon being asked
why he did this, he said, "To help provide oak for my country's ships." If you gentlemen, delegates to this Convention
of the American Bankers Association, will, like the dear old
Admiral, help to implant in the plastic minds of children
thrift "seeds" and savings habits, it will react to our country's welfare by developing "Ideal" citizens.
Why Banks Install School Savings Systems
By C. W. LAYCOCK, Vice-President, Miners Bank, Wilkes-Barre, Pa.
The evolution of banks and banking methods has been
progressive. Instead of the traditional banker, who, we have
been told, was tall, cool, calculating, aloof, who would permit
the deposit of money in his concern, and make loans if the
security offered were unquestionable, and the borrower
would tell what he wanted to use it for, we have, to-day, the
modern banker who is genial, is interested in your affairs
and rejoices when you prosper, sympathizes and counsels
with you when you have hard problems to solve, is thoroughly human and "goes out after business." He believes
that every person owes some service to the community in
which he lives and that it is possible for his institution to do
something that his directors and stockholders cannot individually do.
It is not a great many years since bankers began to realize
that, in the aggregate, large sums of money, that should be
available for use in business, did not find lodgment in banks
at all, but were being carried about in the pockets of the people, kept in secret places in the homes, or, what is worse,
were being spent unwisely. It was then, by various methods,
they endeavored to bring this money out of pockets and
stockings and have it banked, thus adding to the working
capital for business. Plans to induce and encourage saving
and depositing in banks by wage earners were adopted and
worked with good success. Thrift campaigns were inaugurated, literature was sent out and many devices were used
to arouse and stimulate a purpose and determination to save.
But please note that most of these efforts were expended upon
those who had, to a large degree, formed their habits of life.
Now we have entered another phase of development—
thrift by educating the children and young people. It is said
that one of the most important lessons needed by the American youth to-day is that of thrift. As I understand it, thrift
does not mean saving alone, but, as the late Colonel Roosevelt said, "it is common sense applied to spending."
I believe there are two kinds of thrifty people. First—
those who are so by heredity. In money matters and things
material they are naturally careful and prudent. The natural bent of this class varies in degree, in some this trait is
so pronounced that they are penurious and mean, while in
others the inclination manifests itself in a manner altogether
satisfactory and agreeable.
The second class are those in whom this faculty or tendency is far less pronounced and may lie dormant unless
proper stimulus is
stimulated and awakened. But when the
them they may become quite as
given and facilities afforded
successful as the other class.
himWhen the president of a thrift corporation introduced
by
self and presented a certified copy of a resolution adopted
the Board of Education of our city to the effect that permission had been granted to his company to install its system of
school savings in the public schools, and offered us the opportunity of becoming a factor in the operation of the plan,
there soon developed in our minds three outstanding reasons
why we would accept the proposition.
First. We then recognized, but not as fully as we now do.
the wisdom of the school directors in making lessons in thrift
and the fundamentals of banking a part of the curriculum of
the *schools, and we deemed it our duty to co-operate with
them along that line of educational endeavor. This decision
on the part of the school directors was entirely of their own
volition, we had nothing to do with it, and I seriously question whether any bank can be justified in exploiting the public schools merely for the sake of getting deposits. Any savings system in the schools, in order to succeed, must have
the hearty and enthusiastic co-operation of the teachers, and
if there be the impression that it is a bank scheme to make
money and the teachers are asked to do the extra work for
that purpose the plan is doomed.
I do not want to be understood as advocating the system
of any particular concern, but the plan offered us made its
appeal because it closely approximated regular banking. It
uses pass books rather than slot machines and stamps, and
makes it possible for pupils to deposit as little as one cent.
Their transactions are visualized and associated with regular banking. The benefits of an account in bank are made
real when they find it desirable or necessary to come to the
bank to draw money out.
If I had the knowledge, and ability to do so, it would be
interesting to discuss the psychology of school savings systems that are operated by proper methods, but as I lack
these qualifications, I shall pass that by with quotations
from two authors, one a nerve and brain specialist and the
other a psychologist.
I shall not try to harmonize any contradiction there may
appear to be in them, but use them as suggestive of the principle underlying the school, savings idea.
The M. D. says: "We can make our own brains, so far as
special mental functions and aptitudes are concerned, if only
we have wills strong enough to take the trouble."
Teach the child self-restraint, and you are directly developing his will power. Soon he will learn the next step in will
development, and win Carlyle's great equipment for life, the
ability to take trouble.
The Psychologist: "We are incapable of exercising the
will unless the imagination has first furnished it with a goal.
We cannot simply will, we must will something, and that
Roniething exists in our own mind as an idea."
176
BANKERS' CONVENTION.
Application: Give the boys and girls right ideas to influence their wills before their brain matter is "set." as the
potter says, by the lapse of years.
The second reason that influenced us to assume the expense and labor connected with the installation and operation of the system was the added opportunity it would afford the bank to be of service to our community, the benefits
of which would be not only for the present, but for the years
to come.
A tiorifty peasantry more than once has been an important factor in the financial salvation of France. The Irishman with two goats is much less likely to become a Communist or Socialist than the fellow with one or none.
Third. Ten or fifteen years hence these young people will
be the men and women in business and society, and the theory is, that, having formed the habit of thrift, and having acquired a fair understanding of banking methods as well as
the value and convenience of an account in bank, they will
as business men, salaried people and housewives become increasingly valuable bank customers, and while all of the
banks in the community will share in the result, it is natural
to expect that the institution in which they had their first
account will be preferred, but even if the latter should not
be realized, the officers and directors of that bank will at
least have the consciousness of a worthy motive transformed
into good works.
Boy and Girl Bankers
By EDWARD A. RICHARDS, of East New York Savings Bank, Brooklyn, N. Y.
It is not difficult to get absolute agreement among savings
bankers as to the purpose of their organization. All agree
that their primary object is to encourage thrift and foresight
among men and women of moderate income by providing a
safe place of deposit and a reasonable interest on small sums
of money saved from time to time. No one familiar with mutual savings banks of the United States will deny that a hundred years' experience has demonstrated beyond question
that they are well adapted to accomplish the purpose of their
organization. Certainly savings bankers have reason to be
proud of their record and their success.
If there is any difference of opinion among savings bankers
--and I think there is—it is not as to purpose, but as to
methods.
He who calls himself a conservative and claims to follow
the traditions of the system, will argue that savings banks
are unselfish, semi-philanthropic institutions organized and
operated solely for the benefit and adavntage of those of the
public who care to become depositors; that savings banks
are not in business for profit or personal advantage, and that
all the savings banker should do is to open his doors ready to
receive deposits'and let those come who will. He feels that
those who do not come harm themselves and not the bank.
If they do not see the wisdom and advantage of bringing
their money to a mutual savings bank, that is their misfortune and not the bank's fault. He feels that it is no part of
the duty of the bank or its trustees or officers to try to induce people to come in nor to spend the depositors' money to
teach others the advantages of foresight and thrift.
He who is pleased to call himself progressive and claims
that he is trying to keep up to date, admits that we have just
the kind and quality of an institution of which the other
speaks, but argues that there are hundreds of thousands of
people who don't know anything about our institutions. He
contends that the policy of the conservative, especially when
exaggerated as it is by some, tends to make their banks little
more than cold storage warehouses for dormant accounts.
He admits that it is true that the habit of thrift and saving
is valuable, if not absolutely requisite, to future happiness,
but points out that no one is teaching the people to save while
hundreds are showing them how to spend. Both agree that
there is no doubt but that the whole community would be better if people generally spent wisely and saved consistently,
and that that which is good for the country at large is good
for every individual who lives therein.
And so the progressive savings banker urges that we advertise our wares, which are the distinct advantages that we
have to offer; that we try to teach the public the value of
personal preparedness—the need of looking out for the future; that we go out and get depositors rather than wait until they come in; that we go to those that ought to save and
show them how and why they should do so.
Thoughtful men and women know that it is wise and expedient for the young and vigorous to look ahead in the days
of their youth to the declining years of inability and old age;
that the prudent man and woman while in health and vigor
prepares for the future by laying aside the surplus earnings
of the present—and not only that, but sees to it that there are
surplus earnings, either by increasing income or decreasing
wants and desires. The wise ones spend less than they earn
and save the rest.
Thrift and thriftlessness are both habits. A habit—good
or bad—once formed is hard to break. "As the twig is bent.
the tree is inclined."
_
Paraphrasing the Psalms, we might say: "Remember to
save in the days of thy youth that the evil days come not
when thou shalt say: 'I wish that I had what I spent foolishly.'"
With the progressive savings bankers who agree with
these propositions, there is no need of argument in favor of
school savings banks. The school bank simply gets the child
when it is young, helps to form the saving habit, teaches that
there are banking institutions where their money can be kept
at interest until such time as it is needed.
The mutual savings bankers need have no hesitancy in trying to sell his bank to the child and to the parent through
the school, because his bank is the bank of the people, a thoroughly unselfish institution. We are seeking nothing more
or less than to build up our bank in the community, that it
might thereby render better and greater service to that community.
The New York State law expressly provides for the establishment of school savings banks, and gives to the mutual
savings bank preference in the matter of deposit. Why more
savings bankers have not seen the advantages thus offered, I
do not understand. This wonderful opportunity to render
fine service at exactly the right time and the right place and
at the same time to build up the bank of the community, has
for the most part gone begging at the bargain counter. And
yet, school savings banks are no new idea and no experiment.
They have been successfully operated in many foreign countries, where the need of thrift is and has been much greater
than here. Out of their great need they have devised this
method of teaching thrift. I am glad, however, to note that
in the last year many savings bankers who heretofore hesitated, have seen the light and are co-operating in the establishment of these banks.
Just see what may be done in the City of New York, and I
assume that similar opportunities are to be had or can be
arranged for in other towns and cities. The Board of Education invites us to come right into the public schools and open
miniature banks; permits us to tell the children all about the
value of thrift and saving and of the savings bank
system,
and helps us to establish contact, not only with the children,
but with their parents. The aluthorities are perfectly willing
to help us distribute leaflets and pamphlets, telling about
thrift, saving and savings banks, and to let the children take
these home to their parents. I wonder if any know of any
better, more effective and less expensive method of advertising?
If ours were money making institutions organized for private profit. with stockholders looking for their share; if the
SAVINGS BANK DIVISION.
size of the salaries of some of our officers were dependent
upon the progress and earnings of our institution, I feel certain that every savings banker in town would be out to establish all the school savings banks he could. When a savings banker establishes his connection with the public school,
he is simply doing what he asks prospective depositors to
edo—look ahead to the future. School banks of and in themselves do not pay a present-day profit, but the future value
of such institutions to the bank and to the community is beyond measure.
Take, for instance, what the East New York Savings has
been able to accomplish in a year and a half through a school
savings department with a competent man at its head. In
that time we have opened 22 school banks out of a possible
25. In these schools there are 40,000 children, of whom over
26,000 are depositors in the school bank. When a child accumulates $5 in a school account, the amount is transferred to
our bank and an individual account opened in the name of
the child, and as each $5 is saved in the school bank it is
transferred to the individual account in our bank. In these
18 months we have opened over 6,000 accounts with these
children, and the average deposit in these accounts is already over $30. I have no idea how this record compares
with what others have done, but I am very sure that it fully
justifies our efforts and our expense.
The children are a direct point of contact between the
bank and the parents. The parents are interested and believe what the children are taught in public school. The
opening of an account by the child suggests to the parents
that they should open an account, and where the child's account is, the parents take theirs. Our records indicate that
this has happened in many cases.
It is in the home where there are children that there is
most need for economy, saving and foresight. It is there
that thrift literature should be sent. For 10 cents a year we
send 10 eight-page folders to the child and its parents, one a
month, except during vacation. We call our medium the
"School Savings Bank Monitor." It is a miniature newspa-
rn
per or magazine, with articles for the child and parent; pictures, cartoons, reports of contest, honor roll and the like,
all of intense interest to both the pupil and the parent. We
know that the children look forward eagerly for each issue.
We know that our papers are carried home. Those who
know the cost of printing, addressisng, closing and mailing.
and the uncertainty of delivery of advertising matter, will
admit that a cent a copy a month delivered IS a rather reasonable price. We would not be able to mail two copies a
year for what it costs us to deliver ten through the school
children.
The children learn to regard our bank as their bank—the
bank that is taking care of their money, and they get the
spirit of the thing to such an extent that.in many cases they
insist upon the parents opening an account in "their
bank"
If we were commercial stock banks, we could be justly criticized for seeking our own selfish ends through the schools.
but as mutual savings banks organized for service rather
than profit, we go without question to render service to the
children.
In a large measure we give credit to. our school savings
work for the increase in our deposits. Since we have had a
school savings department our depositors have increased in
number from 18,349 to 30,766 and our deposits have increased
34%, in the face of an average increase among all the savings banks in our borough of 8%.
We are enthusiastic about the possibilities of school savings banks energetically conducted with the co-operation of
the savings banks, and we want to enthuse other savings
bankers. There is not time now to tell you just what we
have done or how to do it, but we are more than glad to pass
on the information upon request. When the savings banks
are fully awake to their opportunities, I feel certain that
commercial banks will be willing to leave to them entireir
the work for which they are so well adapted, well knowing
that after the small savings of the people are gathered, that
It is put by the savings banks into the channels of commerce.
Educational Values
By Prof. CLIFFORD BREwsnat UrToN, Provost of Teachers' C ()liege. Columbia University.
Mr. Chairman, Members of the Savings Bank Division: I
am not a banker and therefore cannot speak to you from the
practical experience of the savings bank. My interest is in
the schools of the country, and I want, therefore, to speak of
this savings movement from the standpoint of the schools. I
want to give you a little idea of why it is worth while for the
schools, because some of you may have felt if you have tried
this, that it has not been worth while because it did not yield,
possibly, gain commensurate with the time and money you
have put into it.
I want to say that no matter how much money you have
put into it, no matter how much trouble you have been put
to to install savings systems in the schools, and no matter
what losses you have met, the thing has been worth while,
after all.
From the standpoint of the school, the installation of savings banks means thrift, and likewise from the standpoint
of the school, thrift is a very large term. Thrift in all of its
aspects touches life in every form, and in fact, thrift in its
widest sense touches the life throughout the whole term of life.
It is this large interest in thrift that the school has and
the school has every device for cultivating and giving this
large and wide notion of thrift. In the arithmetic class, for
example, we can teach those phases of thrift that have to do
with money, the saving of money. In the geography class,
we can teach those phases of thrift that have to do with the
resources of this country, and in the domestic science classes
we can teach those that have to do with food, the conservation of food, and in the other classes, we can teach all those
that come in through the modern times.
All these phases of thrift must be taught and everything
you are doing in the school savings bank to teach one phase
of the subject is helping to teach these other phases, likewise
important. What we are doing in general in the whole thrift
movement helps you and what you are doing helps us very
materially.
I want to make clear that this subject of thrift is so broad
that it is particularly the job of the school. I don't want
you men to think by that that I am for a moment suggesting
that you should get out of this job. I want you to stay in it,
but I mean it is particularly the job of the school, and for
several reasons; and if you know why it is the job of the
school, it will help somewhat to know what your relation to
this school job can be.
In the first place, it is the job of the school because the
subject of thrift in all of its aspects is a very complex idea.
It is a very complex habit to get in the minds of children. It
is not a simple thing like telling children to clean their teeth.
That is a simple habit, easily acquired, but this big idea of
thrift and saving, thrift in not only your personal affairs,
but in your country's affairs, is a very difficult idea to get
over. Any difficult idea has to be put over in favorable circumstances, and under a favorable condition of time. The
school demands of the child a certain number of hours a day;
likewise, the school commands the child while he is young,
and that is the very great thing in your favor, because all
new ideas can best be taught to the young.
You know, in your offices you dont' want old men. You
want young men. The old have their habits formed and you
don't get very far with them. So the school is particularly
the place to teach thrift because it can hold the child when
it is young.
There is another reason why it is particularly the job of
the school, because the school has primarily the job of form-
178
.
BANKERS' CONVENTION.
ing habits. Everything we do in school is forming of habits.
Your reading, arithmetic and writing are complex habits
that the school by repetition had to form. Habits are the
most important thing we have in this world to make life
easy. They are those things you do easily and automatically.
Your life would be very difficult if you did not possess these
habits. Those things you do automatically give you time to
think. Your eating, walking, speaking—all those things are
habits. Your thoughts regarding the city, State, Federal
Government—all those matters are habits and it takes a
long while to acquire a habit.
The school, then, is particularly the place where we have
the time to acquire this additional habit called thrift..
Now, since the school seems to be the appropriate place,
we want to raise a few questions about the co-operation between the school and the bank. We need the bank very
much. We can't get along without the co-operation of the
bank. We can't get,along easily without it. We need the
bank for certain reasons, and I am going to enumerate one or
two of them.
In the first place, any habit that is taught'to any one,
whatever that habit may be, is not successfully taught if it is
just a matter of talking about it. All habits to be effective
In life, must be reduced to action. You can talk about handwriting, and crossing of the t and dotting of the i, until you
are blue in the face, but that doesn't Mean that the child will
necessarily cross the t and dot the i. You can talk about
the cleaning of the teeth, but that doesn't translate that into
action, and the daily cleaning of the teeth necessarily. You
have to establish that habit itself.
We talk about thrift in the schools, and always have talked
about it. We are talking about it more to-day than we ever
did before, but through the school savings bank we have the
daily opportunity to practice thrift, to see the thing before
us as a daily example just as we see our fellows cleaning
their teeth every day or taking exercise, doing what the
other fellow does, and doing it and having the opportunity is
one-of the greatest factors in establishing a habit.
Therefore, your co-operation in that respect is very important. Let me say here that any banker interested in this
big movement, interested in the education of your own boys
and girls, your own sons and daughters, can af4ord to go to
the greatest expense and trouble, even financial loss, to put
the savings system into the school because of the educational
value it will have. You are not doing this for the extra deposits you bring to your bank. You are doing this for the
sake of the boys and girls whom you want to bring up for the
next generation to be the right kind of boys and girls.
So I particularly plead that you do all possible to co-operate with the school, no matter how much trouble you have
to go to, to make this movement of the most educational
value that is possible.
Now, since we are all in certain efforts to inculcate this
thrift movement, both the bank and the school, I am going
to take a moment to repeat just certain fundamental laws of
learning that the psychologist has taught us. Any learning
that people do, after all, proceeds according to certain fundamental laws, though sometimes we never stop to think about
them. Therefore, all your efforts at promoting thrift and
all of your preaching and advertising and stimulating should
have in mind these fundamental laws because it will help
you and it will help the school.
I have no doubt that much of the thrift effort which has
been undertaken by banks has had a certain amount of lost
motion in it simply because it hasn't realized what are the
correct methods or principles of correct teaching. In the
first place, if you want to inculcate any habit, you want to
create on the part of the child or the person who is to acquire
the habit, the desire to possess it. That is extremely important. Let them see the advantages of the school savings
bank. Let them see the advantages of laying-up some money
for a rainy day. Don't go at this blindly. There are real
advantages in so doing.
In the second place, if you want to inculcate a habit, you
wsint to give a certain amount of knowledge of the funds-
mentals. You don't want the child to do this blindly. in an
imitative way.
What is some of the fundamental knowledge in relation to
thrift? In the first place, they ought to know something
about the safety of the place in which the money goes, that
it is far more desirable that the money go into the savings
bank than get-rich-quick schemes. The schools have to teach
that in all their work, and in all your efforts you should help
the schools to teach it.
In the second place, we want to get rid of the idea that
saving is throwing money into a hole and never getting any use from it. Some people feel, "If I had that, I
could do this, that and the other." Yes, you could. Help to
give this fundamental fact which you know better than I.
that saving is investing, and that the money put into the
savings bank is merely put into a place where it can
get to work and do something to help the industry of the
world.
Further, let us make it clear, as the Government is now
doing, that not only is your money invested and working,
but you are getting paid for it. The interest that the bank
pays you, compound interest, and so on, that accrues from
leaving your money long enough in the bank is all to your
credit.
Psychologically, I think the present device of the Government in pointing out that if you buy certain Government certificates you earn so much for a certain length of time, is
far better than those devices where you don't point out the
earning power of the money.
I am quite sure during the war we would have sold more
Liberty bonds if we had pointed out that the 4% Liberty
bond was going to yield the buyer not a hundred but two
hundred dollars, that a hundred-dollar bond would bring
back the buyer two hundred dollars if he would only put the
coupons into the savings bank and let it compound for 17
years. Every time we sold a Liberty bond we should have
said, "Loan the Government $100 and after 17 years you will
get back $200."
Those fundamental facts, I think, are of interest and very,
very important. I have said in the first place, one of the
fundamental laws is the desire to gain the habit. Another
fundamental is to support them with some fundamental
knowledge.
The third law is in getting a new idea there must be repetition, and that is where the school can come in. That is
where the banks come in. Don't think you can go at this six
months and then let up. You have to go at it eternally, if you
want to fix the habit. So the idea of repetition, taking the
thing over and over and over, just as in advertising, is the
thing that counts.
Then, another thing is the practice of that idea. If you
want the idea to work through, you have to give people the
opportunity to practice it, and there is where the school savings bank comes in, to make a fundamental law effective.
giving the opportunity to practice it.
And fifth (this must be so conducted that you get the fifth
law of learning) there must be a resulting satisfaction. If
you have worked all your life to save money and put your
boy or girl through college, you want some satisfaction, and
your satisfaction is sufficient that the boy or girl is successful in college. And there, with every other habit that we put
through, must be a resulting satisfaction; in some instances.
merely the saving of money to go to college, to buy a house.
but the point is that there is a resulting satisfaction, and
seeing there is one, rather than annoyance, is extremely important.
Let. me sum up by saying that the school savings bank from
the school standpoint is distinctly worth while. If in any
instances it has not been worth while to you in a business
way, let me assure you that in educational ways it has been
more than worth while, and I therefore appeal for your constant and continuous and hearty co-operation with the
schools, no matter how much trouble it may put you to, in
order to give the boys and girls of this country that priceless
gift, the habit of thrift.
SAVINGS BANK DIVISION.
COMMITTEE
179'
OFFICERS'REPORTS-SAVINGS BANK DIVISION
Annual Address of Raymond R. Frazier, President
Savings Bank Division, President Washington
Mutual Savings Bank, Seattle, Wash.
the country the benefit of thoes studies. It is hoped that school savings
banking may soon become universal in the United States.
(2) Savings Bank Laws.—Does any student of the subject doubt that
the best way, after all, to really promote systematic, continuous thrift
among the masses is by the enactment of scientific savings bank laws?
If so, study the history of savings deposits in the various States: Consider New York, for example. This State has builded its savings bank
legislative structure so wisely and well that Alvan Markle, who addressed
the American Bankers Association in Los Angeles last year in support
of Postal Savings Banking, declared that "the savings banks of New York
are practically as solvent as the Government itself."
So high a tribute might well be paid Massachusetts and other New
England and Eastern States.
In New York we find as the result of one hundred years of scientific
savings bank legislation, one-third, and in Massachusetts two-thirds, of
the entire population, men, women, and children included, have savings
accounts in savings banks.
In California on the Pacific Coast 500 out of every 1,000 of the inhabitants have savings accounts in the State savings banks. Why?
Because, in California they have adapted the New York and New England
mutual savings bank policy to a system of capitalizaed savings banking.
In California the law requires absolute segregation of savings from demand
deposits, and the restricted investment of savings funds in high-grade
securities. It is a fact that in those States which have the soundest
banking laws are found the greatest percentage of savings depositors to
population. Thus it has been clearly demonstrated in the East and
in the West:
First, that it is within the power of the State more than any other known
force to encourage universal thrift by enacting good laws to govern savings
banking,
Secondly, that it is within the power of bankers themselves to encourage
and direct such legislation.
As to the segregation of savings deposits, the Division is on record in a
resolution unanimously adopted at the Washington, D. C., convention of
the American Bankers Association in 1920, which declares:
"That the Division will improve every opportunity for calling the attention of
the public, as well as of bankers, to the peculiar nature of savings deposits and
the necessity of preventing any situation to arise under State or national law
whereby the savings depositor will become, in effect, a deferred creditor of the
bank."
No way has yet been discovered to vouchsafe to savings depositors the
protection to which they are entitled, except by laws requiring the absolute
segregation of savings from demand deposits, and the investment of such
deposits in a restricted class of high-grade securities, to be held solely for the
benefit and protection of such savings depositors.
Thirdly, another way to stimulate thrift is by encouraging the acquisition of homes.
After the Armistice a bill was introduced in Congress to provide a revolving fund of fifty million dollars to be loaned through Federal Reserve banks
for home building. Fortunately, the bill did not pass. It served, however,
to arouse interest among savings bankers. What is fifty million dollars to
the savings banks of the country? It is only a fraction of one per cent of
the resources of the mutual savings banks alone. It is considerably less
than one-half of one per cent of the total savings deposits in the banks of
the country. Savings banks could, without the slightest embarrassment,
establish within ten years a revolving fund of fifty times fifty million dollars to be employed in the encouragement of home building. Can you conceive of any greater insurance to the stability and safety of the nation, or
a more effective means of promoting the happiness and contentment of our
people, than would thin; be accomplished?
Savings bankers have it directly within their power to make this a nation of home owners, and thus to insure us for all time against the destructive fires of discontent and radicalism. And from a purely selfish standpoint, that of building up your own business, it is impossible to conceive
of a sounder method than to lend money to people with which to buy and
build homes, providing always you extend the privilege of repayment in
convenient installments and at low rates of interest on unpaid balances.
When you lend money for home building and extend the partial payment
privilege to borrowers, you establish a system of enforced thrift, and you
develop men and women who will uphold law and order under all circumstances.
In America we are accused of "Dollar Worship," and a stigma attaches to
our method of teaching the young the meaning of success in life. We Americans get the impression very early that the poor boy who becomes rich is
the one to be emulated. And that the measure of a man's success is determined by the value of the property he has collected together under restricted ownership.
As the greatest menace to any country is the concentration of wealth into
a few hands, so the greatest boon to any nation is the existence of powerful
forces, such as our savings institutions, operating to accomplish a more equal
distribution of the wealth of the nati3n.
If, therefore, you ever become discouraged in your work, just call to mind
• that last year banking institutions paid more than four hundred and fifty
million dollars interest to savings depositors, an amount sufficient to build
ninety thousand homes worth five thousand dollars each, or one hundred
forty thousand homes worth three thousand apiece!
Derive lasting satisfaction from the knowledge that you savings bankers
are engaged in a business that stands for the increased happiness and contentment of the masses, that stands for a more equal distribution of wealth.
a business that encourages the average man to accumulate a competence
as an insurance policy against want in the days of declining earning capacity.
President Frazier: Ladies and Gentlemen: At the risk even of dividing
your attention at the very beginning, I am going to inflict upon you a few
figures, and in so doing, I believe that we will add to our knowledge, and
therefore possibly to our power because you know the old saying is that
"Knowledge is Power."
With that brief apology, I will say that the Constitution and By-Laws
of the American Bankers Association provide for four general Divisions,
including "a Savings Bank Division whose scope shall embrace all matters
relating to institutions receiving savings deposits." A majority of the
thirty-six theusand banks in the United States actually receive "savings
deposits." hence the Savings Bank'Division sustains a peculiarly intimate
relationship with all classes of banking institutions. The strictly savings
banks no longer have a monopoly on savings bank activities. Publicists
and statisticians, however, have clung tenaciously to the idea that no
banldng institution which transacts a commercial banking business may be
properly classified as a savings bank. Practically all authorities every
where, when dealing with savings bank statistics in the United States, include only those statistics which pertain to (1) Mutual Savings Banks, and
(2) Capitalized Savings Banks which do not accept checking accounts.
A few years ago, while President, William Howard Taft told the Governors of our forty-eight States that of the entire "savings deposits" in this
country, mutual savings banks held approxiniately 80%. In giving out
these figures, Mr. Taft had reference only to s ric ly savings banks, ignoring
"savings deposits" in the savings departments of National and State
banks and trust companies, because no official statistics were available
covering the latter class of institution.
As late as August 1922 no less keen an observer than out distinguished
banker-economist, Mr. John H. Puelicher, First Vice-President of the
American Bankers Association, declared that whereas in some countries
one-half of the entire population have savings accounts—in the Uni:ed
Stales we have but nin:ey-nine savings depositors out of every thousand inhabi,
ants."
Now, Mr. Puelicher's figures, like those of Mr. Taft, had reference to
the business of s ric ly savings banks. Mr. Puelicher obtained his figures,
as no doubt did Mr. Taft,from the official reports of the Comptroller of the
Currency. The report of the Comptroller for 1921 shows that the mutual
and stock savings banks of the country had on their books about ten
million, eight hundred forty thousand savings accounts. If that figure
represented the total savings accounts in the United States, Mr. Puelicher's
statement that in this country "we have but ninety-nine savings depositors
out of every thousand inhabitants" would be correct. The fact is, however.
that when we consider the combined savings business of commercial banks
and strictly savings banks, the number of savings depositors is found to be
over twenty-six million instead of less than eleven million; thus, there are
about two hundred fifty savings depositors instead of only ninety-nine out
of every thousand of our inhabitants.
Also, the aggregate of savings deposits in the United States, instead of
being less than seven billions, is actually over fourteen billion dollars.
These new figures, which have been very carefully compiled by the
Savings Bank Division in co-operation with the Comptroller of the Currency and State officials throughout the country, have a double value.
First, they are inspirational; secondly, they emphasize the fact that in
many sections of our great country, commercial banking institutions are
called upon to assume the functions and responsibilities of savings banks.
Incidentally, it is proper to state that in so far as these commercial banks
are governed in their savings bank activities by lofty ideals of safety and
service to depositors, they are a blessing to their respective communities.
In view of the by-law above quoted that "The scope of the Savings Bank
Division shall embrace all matters relating to institutions receiving savings
deposits," it is the duty of our Division to render every possible service to
all classes of banking institutions which lawfully solicit savings accounts.
The Savings Bank Division continues to work diligently to facilitate
an increase in the number of savings depositors and the aggregate of savings
deposits. During the past year generous contributions have been made
by the Division to the literature of savings banking—including a paper by
our Secretary, Mr. Leo Day Woodworth, on "Twenty-five Plans for
Increasing Savings"; also papers on "Insured Savings Accounts," "Christmas and Thrift Clubs,""Industrial Savings,""Home Economics,""Household and Personal Budgets," "School Savings Banking," &c., all of which
have been published in the "Journal."
In this address I shall refer briefly to three methods of encouraging thrift:
(1) School Savings Banking.—This is easily one of the most important
activities in which savings bankers may engage. We find in some cities
practically the entire enrollment of public school children have savings
accounts, while in other places the work is entirely neglected.
If those responsible for the education of the children of America, namely,
school boards and teachers, could themselves be educated to a realization
of the tremendous advantage to the nation of directing the minds of the
young along the lines of property ownership, no excuse based on crowded
curricula would ever be advanced against school savings banking. "Train
up a child in the way he should go,and when he is old he will not departfrom
it." School authorities would better eliminate one or several standard
subjects from the school curriculum than to ignore the opportunity offered
in scholl savings banking to encourage children in the acquisition of funds
with which to meet the necessities imposed by our civilization. Knowledge
is a good thing, but knowledge without thrift is worse than ignorance.
The spendthrift is a menace to society. Anarchism breeds readily among
spendthrifts. Patriotism waxes strong among savers. Universal thrift
• will bring happiness and contentment to all our people and establish a
Remarks of T. B. McAdams, President A. B. A.
nation that can never be destroyed. The sure way to create a nation of
savers is to teach school children how to save by providing within the
investment of small sums.
President Frazier: We have with us another distinguished gentleman
schools practical facilities for the
During the past three years the Savings Bank Division has been es- who comes from a very busy time of numerous meetings to spend a few
pecially aggressive in promoting school savings banking and is pleased minutes with us, and I want him to greet you before you go. Before I call
participating during upon him, I wish to say that it is a happy and hopeful sign in modern eduto record that the total number of pupils reported as
666,000 last year cation that we can select men t3 head our great educational institutions who
the last school year was 1,305,000, as compared with
before. A special committee of the Division has measure up as statesmen and practical economists in the manner in which
and 463,b00 the year
of our distinguished speaker who has addressed us this afternoon surely does.
made a nation-wide study of the best plans, and will give the bankers
180
BANKERS' CONVENTION.
Before we get into our business meeting, which will come soon, I want
you to listen for a few minutes, because it is the first and only opportunity
we will have, to bear our very able and very lovable President of the American Bankers Association, Mr. Thomas B. McAdams of Richmond, Virginia.
Mr. McAdams: Mr. President, ladies and gentlemen: It is a privilege,
but quite a surprise. It seems that the policy inaugurated this year of
eliminating our former custom of conducting a three-ring circus, insofar as
the Sections of the various Divisions are concerned, has been a success,
and I congratulate the Savings Division upon having this wonderful meeting
this afternoon.
For the purpose of considering that fundamental problem of the future
success of this nation, the success of our convention in New York is not so
much in the registration of almost ten thousand five hundred bankers and
their wives—well over twice the size of any previous convention in the history of our Association—but rather in the wonderful interest that the men
and women are taking in such messages as have just been presented to you
by Dr. Butler.
I am sure that we will go away from New York—I am impressed wita the
hospitality of the people here who have poured out their very spirit in making U3feel at home, but also that we will be able to carry back to our homes
a feeling of stability,of confidence in our nation, and above all, the need for
a firmer grasp upon ourselves, that we may more fully measure up to our
responsibilities of citizenship.
America is looking to-day to this convention: it is looking to the expressions which will go forth from this meeting of bankers, and it seems to me
if we carry nothing else back, we can go home to encourage people, first,
to go to work and to work hard, and then to save systematically a part of
what they produce, for from the combination of those two will come prosperity for America, and increasingly will come our ability to assist in working out world problems which were so forcibly presented to us to-day by
Mr.Lamont.
Report of Committee on Federal Legislation.
Your Committee on Federal Legislation submits the following report
and will only refer to the more important items that affect the Division
that have come up during the current year.
The Committee appreciates the digest as issued from time to time by
the General Counsel,Judge Paton of Federal legislation passed and pending
of interest to bankers.
We are pleased to report that the subject of tax exempt securities has
crystallized in a proposed amendment to the Constitution, which,if adopted,
will permit the Government to tax the income of all securities hereafter
issued and in turn permit the States to tax the incomes of Government securities hereafter issued. The putting into effect of such a constitutional
amendment will mark the close of diligent efforts put forth by the Savings
Division and the Association, in conjunction with other groups, for the
removal of the most pronounced evils that have troubled Government and
business operations.
While this constitutional amendment has received the favorable consideration of the Administration, yet, in direct conflict with the spirit of such
an amendment,the last revenue Act of 1921 contained a provision ofexempting for a period of five years, beginning Jan. 1 1922,so much of the amount
received by an individual as dividends or interest from domestic buildings
and loan associations, operated exclusively for the purpose of making loans
to members, as does not exceed $300. This exemption was opposed by the
Association and there is now pending a bill to repeal this provision. This
exemption subsidizes a class of Institutions operating under the general
designation of domestic building and loan associations, without, however,
Inquiring into the plan of operation or the character of service rendered,
and is class legislation in direct discrimination against banks and other
financial institutions.
The provision is probably of greater value as an argument for publicity
and advertising than it will be in actual savings from taxes to depositors.
Many of the associations have already used this enactment as a basis for
appealing for savings deposits by reason of this special recognition on the
part of the Government. It will not promote additional thrift, but may
have a tendency to transfer savings deposits from banking institutions to
those associations.
The revenue Bill, in fixing the making of loans to members as the gauge
of mutuality overlooks the important fact that mutuality is really to be
determined from where the profits of operations go, rather than to whom
the money is loaned that is received on deposit. Mutual savings banks and
mutual insurance companies are types of mutuality which loan money to
other than their members, but the profits of operation go exclusively to the
depositors or policy holders, in the respective cases. The decision of Judge
Peck, in the District Court of the United States, Southern District of Ohio,
Eastern Division, recently rendered in the case of the Lilley Building and
Loan Company, Columbus, Ohio, is most illuminating on this subject of
exemptions.
The bankers have no quarrel with the building and loan associations as
such, but contend that the principle of equality in taxation is proper, for it
is beyond the province of a government to select one class for exemption
and deny it to others, and still be a government for all the people.
The Savings Division has also opposed an amendment to the Postal
Savings Bill, seeking to enlarge and extend the operations of the department, which would put that part of the Government service in direct competition with the savings business of the banks throughout the country.
Much has been expected from the adoption of a so-called budget system
for Federal appropriations. Every means for emphasizing the apparent
need for a decrease in the cost of government should be taken by creating
public sentiment aganist unnnecessary appropriations. Previous report
from this Committee have indicated the evils of a Federal aid system of
appropriations.
The importance of bankers generally being in close touch with proposed and pending legislation is emphasized to a greater degree to-day than
ever before. The time has passed when bankers or any orther class of
business men are to be accused of sinister motives when opposing or advocating the enactment of legislation affecting their interests. Watchful
waiting will not suffice in the future, but active participation in presenting
to the various Congressional committees the views of bankers on bills affecting their business has become one of the essentials inproperly serving the
public. This presentation of views must be timely and comprehensive, and
Congressional committees and Administration leaders should welcome the
active participation of our members in these matters, to the end that a
proper and thorough understanding may be had of all questions that are
presented as subjects of legislation; otherwise, safe and sane laws cannot
be enacted that will be of benefit both to the Government as a whole and its
constituents in their individual endeavors.
In brief, your Committee recommends co-operation in all matters of
legislation and it seems needless to restate the well-known position of
bankers generally, that special privileges are not desired, but sound and
sane legislation is sought that will promote and not restrict the general
activities of the Government business and the business of public and private
corporations and individuals.
Your Committee has been impressed with the difficulties that are apparent in looking after legislation directly affecting the Savings Division. It
has been suggested that its work should be more closely co-ordinated with
the Federal Legislative Committee of the Association and a means looking
toward such co-ordination might be found in having the chairmen of the
Federal Legislative Committees of the four Divisions as members, or
members in an advisory capacity, of the Federal Legislative Committee of
the Association. In this way the General Association Committee would be
kept in close touch with the work of the different divisions and the different
divisions would have direct contact with the main Committee.
In conclusion, our thanks are extended to the various officers and divisions of the Association and members for their co-operation in matters
affecting the work of this Committee.
Respectively submitted,
CHAS. H. DEPPE, Chairman:
JOSEPH H. SOLIDAY,
W. A. SADD,
B. F. SAUL,
Wm. E. KNOX,
JOSEPH R. NOEL.
Report of Committee on State Legislation.
During 1922 regular legislative sessions were held in eleven States, viz.:
New Jersey,
Georgia,
Maryland,
South Carolina,
Kentucky,
Massachusetts.
New York,
Virginia.
Louisiana,
Mississippi,
Rhode Island,
Your Committee would call attention to a mischievous tendency evidenced in the Legislatures of several States, notably Massachusetts, to regulate the internal government of savings banks and to dictate the proportion
-urities by legislative
of their assets which shall be invested in certain see
enactment. Such legislation as would force savings banks to pay interest
monthly or provide for the election of trustees by depositors or compel the
investment of ft certain portion of their deposits in first mortgages on real
estate illustrates the viciousness of such legislation.
Fortunately no such legislation was actually placed on the statute books
and the efforts of Mr. Swig of Massachusetts to secure sufficient names to a
petition asking for a referendum vote of several of these measures was
also unsuccessful, which is encouraging as indicating a sanity on the part
of a majority of our legislators and electorate that is gratifying, but the
recurring number of such bills introduced in the various State Legislatures.
and even in Congress, should be sufficient warning to us that we should not
cease to be on our guard and should combat such efforts with a vigorous
counter propaganda.
Investments of savings bank funds should be properly restricted by law
so as to protect the interest of the depositor, but when the line is crossed
by barring some investments and compelling others, the proper limits of
legislation have been overstepped.
There are many desirable social objects which merit our support as
individuals. but the duty of savings banks is primarily to keep funds safely
and wisely invested and not to promote this or that scheme of social welfare,
no matter how estimable such may be.
FUTILITY OF GUARANTY FUND LEGISLATION.
Lastly, your Committee wishes to place itself on record as unalterably
opposed to legislation looking to the guaranty of bank deposits. That the
sentiment favorable to the guaranty of deposits is not dead is seen by the
fact that a bill has been presented in Congress providing for the creation
of a national deposits guaranty fund in each Federal district, providing the
national banks in such districts vote favorably for such a fund.
Eight States now have guaranty bank deposit laws upon their statute
books. The motives which prompted the laws in such cases were economic
rather than political and we usually find the bank deposits guaranty idea
flourishing during a financial panic or as a result of such.
The principal arguments advanced in favor of the guaranty of deposits are:
First. That it would prevent panics.
Second. That it would bring from hiding places hoarded capital.
Third. That it would afford complete security to depositors.
The Texas bank deposit law became effective in 1910 and during the
twelve years of its existence it has probably worked as effectively as any
deposit guaranty Act could. Depositors in failed banks have been paid in
full within ninety days and it is claimed that the Act has given to the people
of that State, in a time of great uncertainty, confidence, whereby they allowed their money to remain in the banks to a much greater degree than they
would if such a law had not been in force.
In Oklahoma the guaranty law has had a stormy career. Depositors in
failed banks have not been paid in full and the guaranty fund is reported
to be in arrearages in an amount of over $1,000,000.
In North Dakota and Washington the guaranty deposit Act has been a
complete failure so far as prompt payment to depositors or inspiring confidence in banks in the State in times of panic are concerned. Over sixty
banks were closed in North Dakota and nothing has so far been paid the
depositors in any of the closed banks as yet. In Washington, where the
system is optional, it has failed to accomplish any of the purposes claimed by
its advocates, but as in that State the banks have the option of going into
the guaranty system or remaining out, that State is not a fair test. The
guaranty deposit system is also voluntary in Kansas.
In Nebraska and South Dakota guaranty deposits Acts have worked
with reasonable satisfaction, but so far in neither of these States has there
been a thorough test of the value of the system under stress.
In conclusion, we maintain that a guaranty of deposits violates the
sound economic principle that the competent and good should not be taxed
to pay for the bad or inefficient, that honesty should not be taxed to pay
for dishonesty or experience and ability for the errors of lack of training
or knowledge required to foot the bill for the mistakes of Ignorance.
STATE SAVINGS FUND LEGISLATION.
Of the States holding legislative sessions, legislative action of interest
savings banks was taken by only two—New York and Massachusetts.
to
New York.
The following bills of interest to savings banks were passed by the New
York Legislature of 1922 and have been signed by the Governor and are
now law:
First. A law permitting ten days of grace at quarterly as well as at
semi-annual dividend periods and permitting payment of dividends on
accounts closed between dividend periods.
SAVINGS BANK DIVISION.
Second. A bill permitting savings banks to make loans of not exceeding
100% instead of 90%, as at present. of the balance due holders of pass
books pledged as security for promissory notes.
Third. A bill permitting a trustee to deposit money in any savings bank
of which he is a trustee and receive dividends or interest on such deposits
the same as any other depositor.
Fourth. A bill extending .the field of savings bank investment so as to
include "Farm loan bonds issued by the Federal Land Bank of the First
Land Bank District as created pursuant to the Federal Farm Loan Act."
'Fifth. A bill requiring banks, savings banks and trust companies to give
information on request to local authorities charged with the administration
of poor laws as to whether an applicant for relief or husband or wife has
funds on deposit with the bank.
Two bills snot cad the support of the Savings Bank Association of the
State of New York failed of passage. One would peemit any savings bank
In any city to open one branch, provided the Superintendent of Banks first
gives his approval. The second would have permitted savings banks to
conduct a limited safe deposit business, and this met with such str3ng
opposition from the Safe Deposit Association that it never got out of committee. There seems to be no reason why savings banks should be debarred
from rendering such service when commercial banks are permitted to d3 so,
and much of the opposition to such a bill might be removed if it was restricted to bonds, mortgages, stocks, securities and valuable papers of any kind.
Massachusetts.
The special commission on revision of banking laws appointed in Massaf
chusetts owed its appointment probably to the failure in 1920 and 1921 o
five trust companies in Boston. Hence it is natural that toe commission
devoted much of its attention to the savings departments of trust companies. The conclusions of this commission sustain the position that the
combination under one management of a savings department designed primarily and principally for the encouragement of small savings and having
the matter of the security of deposits as its bas:c principle, with commercial
institutions whose object is and always must be to make a profit, is unwise.
Bills which became laws were:
First. A bill providing for the election of savings bank trustees in three
groups with terms of one, two and three years, respectively.
Second. A bill requiring bonding of officers and employees of savings
banks.
Third. A bill permitting loans to depositors secured by pass books to
an amount not exceeding 90% of their deposit and for a period not longer
than the interest dividend date.
Maine.
In Maine a special recess committee of the Legislature is Investigating
the general subject-matter of the revision of the banking laws of that State
and this committee is paying special attention to toe laws pertaining to
investments by savings banks. The banking department of that State bas
propounded an interesting question to such commission, as follows:"In view
of the difficulty in keeping step with changing conditions with the process
of constant amending of the savings bank law, is it feasible to have a
commission appointed under legislative authority and empowered ta act by
prescribing from time to time rules and regulations under which securities
can be legalized?"
CONCLUSION.
In conclusion we would again call to your attention that, in spite of
every effort to render banking institutions as safe as possible, losses wilt
occur So .ong as the human equation exists and the security a depositors
In the final analysis will, in the future as in the past, rest primarily upon
the character, ability and sound judgment of those who manage our savings
institutions. On th3 other hand, while no amount of statutory regulation
or supervision can entirely overcome or supersede this human element,
nevertheless every endeavor looking toward helpfui regulation and supervision should receive the hearty encouragement and active support of this
Association, and especially of the Savings Bank Division.
Respectfully submitted,
THOMAS F. WALLACE, Chairman, ELIAS A. SMITH,
GEORGE E. BROOK,
J. F. SARTORI,
ERNEST K. SATTERLEE.
N. B. COFFMAN.
Report of Committee on Savings.
181
in liberal quantity, into the practical operation of member banks engaged
in school savings work. The official A. B. A. system must teach and
must be inexpensive and economically sound to survive, as the profit is
small, if it exists at all. The Committee has found many cases in which
volume of deposits has been obtained by various expensive methods, but
that these systems do not survive the test of ago.
It should be mentioned that of the four remaining members of the
Executive Committee, one is opposed to the recommendations above,
two did not reply in writing and one approves in principle, but states
that a similar plan failed in this particular community.
Indus rial Savings.
Five of the six members of the Savings Committee and a majority of
the Executive Committee have approved the following recommendations:
1. That the pay-roll system be used.
2. That an authorization from the employee must be signed, instructing
the cashier or paymaster of the corporation to deduct so much per week
from his pay envelope, placing therein a card, or other slip, showing the
amount deducted.
3. That employees be reqyired to sign a regular bank signature card,
which will be retained by the bank.
4. That no new account will be accepted for less than 25 cents per
week.
5. That it be understood the authorization of the employee to the
cashier is voluntary and can be canceled at any time.
6. That pas-books will be kept at the bank, subject to inspection by
,
the employee, or at the option of the employee they may be kept by the
cashier, where they can be withdrawn at any time accompanied by a
receipt signed by the employee and given to the cashier.
7. That the hearty co-operation of the corporation officials must be
secured, and yet paternalism, or any attempt to examine pass-books
and pry into the affairs of the employee be avoided.
8. That the forms and stationery to carry out such a plan shall be
approved by the Executive Committee of the Savings Bank Division.
General.
There are two ways of carrying out the recommendations above on
School and Industrial Savings:
1. For the Secretary of the Division to sell the forms and stationery
required to member banks at cost.
2. To furnish member banks with accurate samples of forms and stationery to b3 used,allowing member banks to have them printed at their
Own expense.
In either case the question of copyright must be settled. Your Chairman feels that No. 1 above should be adopted, but as these are matters
that belong under the jurisdiction of the Executive Committee and the
Legal Department, no recommendation is made.
The Committee has not been hampered by lack of attention on the
part of committee members. Full co-operation has been received from
officers of the Division.
Respectfully submitted,
ALVIN P. HOWARD, Chairman. E. V. HAYS,
W. S. WEBB,
MRS. ALLAN P. STEVENS.
PHILIP J. LAWLER.
MYRON F. CONVERSE,
Report of Committee on Facilities and Service
The subjects within the province of your Committee on Bank Facilities
and Service are numerous, but are handled ordinarily as matters of office
routine. We will make the following brief mention of a few:
First, we have considered the advisability of submitting an outline for
the establishment and operation of home service departments in savings
banks. We concluded that such an effort is premature in view of our
limited experience.
Second, more effective use of pay-roll checks in place of cash is advanced
as a means for promoting thrift by introducing employees to the banks as
well as a measure of safety. The manufacturers of a check-writer have
collected data from several banks which tends to show that the cost of
handling is reduced and that there is not the amount of inconvenience in
paying the checks which was anticipated. The Studebaker Corporation of
South Bend, Indiana, is one of the companies which now has operated the
pay-roll check system for a long enough period to demonstrate its efficiency.
and our office was recently advised by their auditor that a return to the
cash system would not be considered.
Third, we request your approval and hearty co-operation in the movement to legalize and promote the establishment of branches by institutions
for savings within the locality where its principal office is located.
The proposition rests on the broad ground that nothing can do more to
encourage the practice of thrift in personal finance than making savings
bank facilities more convenient to the great bulk of our population. This
idea is at the base of all industrial savings systems, and is involved in the
school savings banking work.
We believe that an impartial examination of the subject will disarm any
opposition from commercial bankers in States which are served by mutual
banks and in other States we suggest that the question be handled in a
broad-minded way in order that a real public need may be served and that
the savings banks may competently perform the functions for which they
were created.
Respectfully submitted,
SAMUEL M.HAWLEY,Chairman, VICTOR A. LERSNER,
W. E. MOREHOUSE,
JOHN H. DEXTER.
The work of the committee for the year has been concentrated upon
recommendations for official A. B. A. School and Industrial Saving
Plans. It has not been possible to hold meetings of the Committee,
but twelve separate exchanges of inter-committee letters have produced
the same, or better, result, and while there has been no verbal discussion,
the evidence has been submitted in writing and the various ideas set
forth in black and white. These ideas were fully discussed with the
Executive Committee at the White Sulphur Springs meeting, after which
your Chairman interchanged letters with the members of the Executive
Committee for tle purpose of reaching more definite conclusions. The
work was reviewed from every angle and from all parts of the country,
In order to get a broad view of the problems involved and to study the
various systems in use.
School Savings.
Five of the six members of the Savings Committee and five of the nine
members of the Executive Committee have approved in writing the following recommendations:
-book system which will be operated by actual collections of
1. A pass
money in the schools on certain days of the week, the amounts to be
entered in a school folder, or school pass-book.
Report of Committee on Mortgage Loans.
2. The transfer of these school funds to be made to individual accounts
Events of the past year have served to confirm the general opinion of
opened at the bank, after $1 has been accumulated on the school folder.
3. The active co-operation of teachers, with an optional feature whereby bankers that real estate values of the war and readjustment periods would
high stand pupils may act as tellers and cashiers within the respective be deflated regardless of propaganda to the contrary.
We will here record our final verdict that the cost of money to borrowers
grades,in order to relieve the teacher of the detail duties required.
-book system, who could offer actual security was never materially inflated and the cost
4. No recommendation is made for any particular pass
but if the Secretary of the Savings Bank Division is requested to furnish of money at no time was an important item in balancing of profit and loss
a complete system with forms prepared, he can recommend any plal or in fixing rents. The restraint exercised by bankers who did have cash
that complies with the above requirements and that meets with the approval available for real estate mortgage investment only serves to prove the
high degree of public spirit with which the savings banks meet their reof the Executive Committee of the Savings Bank Division.
5. It is recognized that any complete and detail system with all official sponsibilities.
The extent of the building activity of the last year exceeds all records,
would be impractical at this time, and that it is better
forms prepared
to reach an agreement on the general principles of school savings as viewed both as to capital invested and projects undertaken. The distribution of
from information and statistics already collected, leaving some room for that activity seem its be quite regardless of any tax exemption or other
subsidy which was made available in a few instances. We anticipate that
improvement.
The Committee feels that it is fundamental to teach thrift and economy the movement will continue until the cheaper class of accommodations are
in the school as a lesson and at the same time to throw these two qualities, provided in as ample quantity as soon will be the higher priced.
•
182
.BANKERS' CONVENTION.
Mortgage Loan Business of the Banks.
of mortgage loan demand which is taken care of through banks. Inquiry
One hangover from the period of extreme scarcity of housing and of of rurai banks will, I am sure, develop information along this line which
inactivity in the building trades has been an agitation for new credit facilities will be instructive."
which belittles the amounts and underestimates the capacity of the banks
A State bank in Wisconsin with capital and surplus of $60,000 and loans
in the field of mortgage finance.
and discounts of $459,000 reports real estate mortgages of $332,000, but
Thus a speaker before the national Convention of Realtors asserted remits that new loans have ceased with it and other country banks due to
that perhaps a majority of "the commercial banks and the savings banks advice of the State Bank Commissioner, and that a great deal of the small
and trust companies" are not interested in mortgage loans because "it will activity by the Federal Farm Loan institutions has been because of loans
take all the resources of all those institutions to finance the short-time being turned over to them by the banks in the case of farmers who were
commercial paper which is so much more profitable than frozen credits of very slow pay or were running behind and not meeting their obligations.
the mortgage loans, and the banks are not investing in mortgage loans to the
State Bank Commissioner Medill of Delaware says that his experience
extent that they formerly did." He further asserted "the banking interests indicates an annual turnover amounting to 5% of total mortgages in
of America will not Invest in mortgages in the future as they have in the the State.
past" because of the Federal Reserve System and its possible further
A national bank in New Hampshire reports no mortgage loans by the
extension.
bank but advises that such loans in its community are made through
But, turning to the annual report of the Comptroller of the Currency mutual savings banks at 5% and that the accommodation is granted
for 1921, page 168, we find that 30,812 reporting banks in the United States whenever the amount requested is reasonable.
hold a total of $4,753,000,000 of loans on real estate security, of which
A national bank in Baltimore which reports $30,000 mortgages owned
$610.000,000 was secured by farm land. At page 144 of the same report but no turnover says that "this institution, as well as other banks, lends
the loans on real estate by mutual savings banks are shown to amount to quite a sum of money to building associations on their notes endorsed by
$2,460,000,000 ($20,000,000 on farm lands), or about one-half of the the directors. These funds are used in building operations, and it would
national aggregate.
seem that this fact should be noted in determining whether or not banks
Neither new nor renewed loans are reported to the Federal or State are a material factor in real estate mortgage markets."
A State bank in Oregon with capital and surplus of $2,000,000 reported
officers, and no estimate of this annual turnover seems to exist. The
Division has therefore sent a questionnaire to a limited but well distributed $661,000 mortgage loans. Several of its officers are on boards of charitable
list of banks and trust companies, being those which are represented on the institutions whose endowment funds are in first mortgage loans for investlist of officers of the American Bankers Association and its four divisions. ment and income that "ran into considerable amounts and are usually
The replies are illuminating because of the general interest shown by these directed from the officer's desk that may be handling the particular enbankers in the mortgage market,and an intention to take not less, but more, dowment."
A State bank in Washington says that the banks in Yakima Valley are
interest in it as land values stabilize. Our inquiry did not include personal
loans for real estate improvement, but we noted that localities which had a doing a short-time loan business, generally leaving the farm mortgage
relatively low percentage of such bank loans and mortgage securities were business to the loan companies and Federal Farm Loan System and the
usually found to be drawing upon bank funds for the operations of finance residential loans to savings and loan associations.
A national bank in Tennessee writes: "I am of the opinion that all banks
corporations and co-operative credit associations.
Our inquiry indicates that during the fiscal year.ending June 30 1922, in Chattanooga have outstanding now, directly and indirectly, real estate
the banks of the country loaned not less than $2,000,000,000 on mortgage loans that they have negotiated and that they have on hand to the amount
security, although it was notoriously a year of "frozen credits" and reduced of twenty to twenty-five million dollars, which is almost equal to 80% of
the total loans of this community for commercial and other purposes."
financial activity. This estimate is based upon the following table:
A State bank in Missouri estimates that the average country bank
Proportkm of Mortgage Loans During Year ending June 30 1922 to Holdings carries real estate loans to about the amount of total capital and surplus.
on That Date.
Practically all farm loans are placed by bankers, percentage in Federal
North Atlantic
231West South Central
35 Land Bank being small.
Middle Atlantic
26
A State bank in Indiana says: "Our farmers have never suffered from
48J Pacific
South Atlantic
451Mountain
50 a lack of credit to meet legitimate demands or needs."
East North Central_
461
A State bank in Michigan reports capital and surplus of $350,000 and
• West North Central
421 Total all States
45 mortgage loans of $386,000. The State law requ'res 50% of savings
It is as difficult to compare the extent and scope of banker activity in deposits in mortgage loans, but this bank meets both farm and State
different States or even in adjoining communities as it has been difficult requirements where safety is assured regardless of statutory minimum.
to make a so-called national housing problem out of conditions in a few
Amortization.
localities. Types of financial institutions will vary according to local
The application of the principle of amortization of mortgage loans
customs and needs. This variation'is only one of the many examples of
has been stimulated to an unusual degree during the period of changing and
tne limited field for nationalizing all business activity. For illustration,
more or less unstable values in the real estate market. It is unnecessary
we cite the following replies:
here to review the arguments as both the banks and the permanent investors
From a national bank in North Dakota: "The only responsible, forces
now understand the merits of the plan for all concerned.
in the State in the farm mortgage game are the banks and trust companies.
No feature of our work for the wider application of the principle of
and they do, without any question, even for the Federal Farrn*Loan Bank.
thrift is more important than to teach that mere ability to get into debt
95% of all of the farm loan business." Although this bank at time of
does not prove that indebtedness is a desirable condition. Amortization of
writing held but one or two small loans, it had on its books $385.000 of farm
a mortgage loan places very little additional obligation upon the borrower's
loans which had been negotiated by its President as an officer ofthe bank.
income. It results in better security for carrying charges along with less
Another national bank in North Dakota, reporting capital, surplus and
ability to venture into uncertain investments, and the liquidation of each
profits of $600,000 and mortgage loans of $388.000. or about 10% of total loan provides new
means for meeting subsequent needs of other borrowers.
loans, writes that "this bank is advancing funds for real estate loans in
Larger Use of Savings Deposits for Mortgage Loans.
about the proportion it should, and I think that you will find the majority
of Western banks are doing likewise."
Your Committee heartily endorses the effort by President Frazier to
He further advises that "practically all of the farm mortgages negotiated stimulate a larger investment of savings deposits in housing loans whatever
in North Dakota are moved througn the banks of the State, the bank or an may be the nature of the bank which holds these deposits.
officer acting as agent for outside investment, arranging for the funds,
We approve the principle that savings depositors as a clam.; have a right
collecting principal and interest, and looking after loans. All banks carry to look to their savings institutions for a class of loans which are essential
more or less of farm mortage loans."
both for their advantage and for the public welfare.
A State bank in Minnesota with capital and surplus of $400,000 had city
As indicated above, no general percentage of loans held for investment
mortgages of $549.000 and farm mortgages of $1,247,000. It sells no or even of annual turnover can be determined, but we urge every bank
mortgages, but holds mortgage loans for 45% of As time deposits. City which receives savings funds to make a survey of its community to ascertain
mortgages are made direct for not over 50% of the value without com- whether its savings depositors are properly provided witn mortgage loans
mission, on 6 months' amortization period and to savings depositors only. on a conservative and therefore low rate basis. If not, we believe that it
"This plan of loaning has woven very popular, and the loans are rapidly is incumbent upon such savings banks to meet the situation both by investpaid off. This accounts for the small total amount of these loans on hand. ments of their own funds and by exerting both institutional and personal
All farm mortgage loans are purchased from trust companies and mortgage influence upon the investment of endowment or other trust funds, the
concerns, which make them direct, or perhaps from country banks.
encouragement of co-operative societies and even direct distribution to
"State banks in this section generally make farm and city real estate private investors.
loans. To get the information that you are seeking. I think tnat it would
In connection with this last remark we urge a strict maintenance of
be necessary for you to write to every State bank. That there is propa- bank standards in the determination of credit and the value of security, and
claiming that banks are not a material factor in the real estate therefore caution against any tendency to overloan on the theory that
ganda on,
mortgage market,sounds extremely ridiculous to me, at least as far as State amortization payments will soon eliminate the excess. •
banks are concerned. It is true that the national banks are restricted in the
Respectfully submitted.
making of these loans. As national banks now generally maintain savings JOHN J. PULLEYN, Chairman,
P. J. SLACH,
national banking law should be so amended II. T. BLACKBURN,
departments, I think that the
J. M. WILLCOX,
that national banks be permitted to invest at least 50% of their savings W. B. BLACKWELL.
E. A. BROWN,
or time deposits in real estate loans. To do this would materially help S. FRED STRONG.
the situation."
A State bank in Milwaukee holds $73,000 in mortgages representing
settlements of other debts only, but sold through bond department over
Report of Committee on Liquid Investments.
$500,000 of real estate mortgage bonds other than bonds of Federal Land
During the past year, while general business has been resting on its
Banks and Joint Stock Land Banks.
A national bank in Georgia owns no real estate mortgages and handies oars and has only in the past few months shown indications of return to
none, but Indirectly has a turnover of $100,000 in mortgage loans and con- normal conditions, there has been no active demand for legislation looking
siders it a safe estimate that each bank in Georgia handles indirectly in towards an increased field for short-term investments by savings banks.
This cnange if attitude is caused largely by the huge issue of Governrenewals and new loans a turnover through the efforts and influence of
ment obligations, whim were literally purchased by nearly every savings
their officers of at least $50,000.
institution in the nation. The very fact of this large holding of the most
A national bank in Kansas with capital and surplus of $2,000,000 reported $136,000 in mortgage loans but says:."Up to this time we have not widely and readily marketable security in the world relieves for the present
bought or sold any real estate loans, but we are now opening a department the condition whica calmed into being this Committee on Liquid Securities
for making real estate loans and expect to do a considerable business in In 1917.
At that time conditions were such that savings banks had but small
this line."
could legally invest
A State bank in Ohio owns $42.000 in mortgage loans and during the range of choice among the securities in which they
such being the recogpreceding year sold $39,000 of:cans made in the usual course of business. when they wanted to purchase early maturities: and,
It writes: "I am sure that it is the practice of most banks located in rural nized facts, E. W. Kemmerer, Professor of Economics and Finance at
communities to take mortgages and dispose of them to their own custome..s Princeton University, was asked to address the Savings Bank Division on
or others, and because of tnis practice the amount of mortgage loans at this subject at the annual A. B. A. convention in Chicago in October, 1918.
The address he there 'delivered so clearly showed the need for shortany time reported by banks does not in any true sense indicate the amount
•
SAVINGS BANK DIVISION.
urged a vigorous
term investments that the Committee on Liquid Securities
legal for savings
campaign during the ensuing year looking toward making
resulted in acceptances
banks the purchase of bankers' acceptances, which
being made legal in nearly every State in the Union.
study of railroad
The next year the Committee made an exhaustive
notes issued by
equipment notes and definitely recommended the equipment
made legal and endeavored
the National Railway Service Corporation be
to.that effect; but, owing to the lack of understanding
to have laws enacted
the Committee was
by•the general public of just what these notes were,
successful in having them made legal for savings banks only in the States of
Wisconsin, Minnesota and WashingMaine, New Hampshire, Connecticut,
ton. The notes proved to be an especially advantageous purchase for savings banks located in the States where they were made legal and the only
reason why the matter has not been vigorously pushed this year is because
the volume of the notes in the market at the present time is not sufficiently
large to induce the passing of general legislation along this line.
The equipment notes are not only exceptionally secured, but yield an
attractive return, and it is to be hoped that the railroad situation will be so
adjusted that the National Service Corporation will soon again actively
function, with probably added powers granted by Congressional Act.
In which event our Division will be warranted in urging legislation
during the coming winter when the legislatures of nearly all tin States
will be in sessian to greatly widen the territory in which these highly
attractive notes will be legal for savings banks to purchase and hold.
In view of the facts set forth in the early paragraphs of this report, it
seems unnecessary to maintain two committees covering the investment
field. The Committee on Investments should, of course, be continued, but
In our best judgment the Committee on Liquid Securities should cease to
funztion with the close of the current fiscal year.
Respectfully submitted,
SAMUEL H. BEACH, Chairman.
LOUIS BETZ,
J. HOWARD 130GARDUS.
Report of the Committee on Resolutions, by Alvin P.
Howard.
1. "Resolved. That the Savings Bank Division of the American Bankers
Association tenders to the United States Government its full co-operation
in the redemption and refunding operations incident to the War Savings
certificates maturing Jan. 1 1923. Also, be it
2. "Resolved, That a policy of giving priority to investment of savings
deposits in real estate mortgage loans for homes, preferably on an amortisation plan, be recommended.
3. "Resolved, That the promotion and extension of school and industrial
savings by banks be endorsed and in the operation of such plans the principles recommended by the Executive Committee of this Division for
official A. B. A. school and industrial savings systems be approved.
183
4. "Resolved, That the public should be warned for investment purposes
against any class of contract involving the principles of lottery and in
particular against that form of real estate mortgage contract issued by what
are popularly known in many States as 'three and four per cent contract
loan companies.'
5. "Resolved, That we disapprove of any legislation looking to actual or
pretended guaranty of bank deposits because it violates the sound and
economic principle that the competent and good shall not be taxed to pay
for the inefficient and bad. Finally, be it
6. "Resolved, That we express our appreciation of the ability and earnestness displayed by President Raymond R. Frazier of Seattle and his associates in the retiring administration, and all who contributed in any way
to the pleasure and profit of those attending this our twenty-first annual
meeting."
Chairman Knox (Mr. Frazier had turned over the Chair to Mr. Knox):
You have heard the report of the Committee on Resolutions, what is your
pleasure?
Upon motion duly made and seconded, it was voted to adopt the resoutions as read.
Report of the Committee on Nominations, by Mr. Sadd.
Your Committee on Nominations bee to report the following list of
officers for the year 1922-1923:
PRESIDENT.
Samuel H. Beach, Presicknt Rome Savings Bank. Rome, N. Y.
VICE-PRESIDENT.
Chas. H. Donee. Vice-Pres. Union Savings Bank & 'Cruet Co.. Cincinnati. Ohio.
MEMBERS OF EXECUTIVE COMMITTEE FOR TERM EXPIRING
1925.
Thomas F. Wallace, Treasurer Mechanics & Farmers Savings Bank
Minneapolis, Minn.
John S. Broeksmit, T vasurer Harris Trust & Savings Bank,Chicago, Id.
W. R. Morehouse. Vice-President Security T:ust & Savings Bank,
Los Angeles, Calif.
MEMBER OF EXECUTIVE COMMITTEE FOR TERM EXPIRING
1923 TO FILL VACANCY.
John It. Dexter, President Society for Savings, Cleveland. Ohio.
Respectfully Submitted,
W. A. SADD, Chairman. JOS. R. NOEL.
S. FRED STRONG.
GEO. E. BROOK.
Chairman Knox: Tbe Secratary has cast one ballot and I have the
pleasure of announcing that these gentlemen are unanimously elected
officers for the Division for the coming year and for the various terms
in the case of the members of the Executive.
TRUST COMPANY DIVISION
AMERICAN BANKERS' ASSOCIATION
Twenty-seventh Annual Meeting, Held in New York City, October 2, 3 and 5, 1922.
INDEX TO TRUST COMPANY PROCEEDINGS
Keeping Fqith with Europe, Alvin W. Krech
Page 184
Turkey and the Near East, Henry Morgenthau
186
The Growing Hazards and Liabilities of Conducting a Safe
Deposit Business, Waldron H.Rand, Jr
187
Telling the Story of the Trust Companies to the Nations,
Francis H. Sisson
189
Annual Address of President J. Arthur House
191
Report of Vice-President Theodore G. Smith
192
Resolution Against Removal of Association's HeadquartersPage 192
Report of Committee on Co-operation with Bar
192
Report of Committee on Protective Laws
192
Report of Committee on Community Trusts
193
Report of Committee on Staff Relations
193
Report of Committee on Legislation
193
Election and Installation of Officers
193
Suggestion for a Committee to Provide Scale of Prices...
194
Keeping Faith with Europe
By ALvIN W. KRECH, President, The Equitable Trust Company of New lurk.
A great many people think that the European situation
does not touch us. Certainly business by and large is good—
better perhaps than at any time since the armistice. The
proof of the pudding is in the eating. Present conditions
speak louder than words. Our exports, though showing
diminution, are still substantial. There is a plethora of gold
and a plethora of agricultural products, and while wages are
high compared with international standards, there is also a
corresponding increase in our consuming power. Why should
we worry? This seems to be the viewpoint of the average
superficial observer as he points to the empty kerosene cans
bearing the American trade-mark strewn over the landscape
of Central Thibet, or shows how Paris and Calcutta alike
have a preference for the Los Angeles film, and boasts that
the sun never sets upon the motor cars turned out in Detroit,
not to speak of our surplus cotton and copper and food supplies which Europe cqntinues to take with avidity. I am
aware that some of us have publicly expressed the view that
our export factor plays so small a part in the nation's business as a whole that even a violent disruption of our export
business would not affect the nation's prosperity. A very
sweeping and assertive statement, which everything in our
national economy disproves.
In the year 1913 the world was at peace, and international
trade was conducted under normal and peaceful conditions.
During that year the value of our exports footed up approximately 21 billions of dollars, of which two-thirds was taken
h
by Europe. These exports included 66% of our cotton crop,
10% of our wheat and 8% of our meat products. Such was
our trade with a solvent Europe—with a prosperous, thrifty
and industrious Europe. The Europe of to-day is pathetically poor! I need not paint the picture. Potatoes and turnips took the place of American grain in practically the
whole of Central Europe during the war, and, alas! it is to
be feared that in certain countries potatoes and turnips may
again become the fare of the masses.
Mr. Cravath, one of our intelligent international observers, recently wrote as follows:
It will readily be seen what a serious displacement of agricultural effort
Even though in the end the world would again be prosperous, the loss to the
United States would have been irreparable because other nations would have
found means of getting on without, or themselves producing many of the commodities they have been in the habit of buying from the United States.
The question uppermost in my mind is, how long is impoverished Europe going to continue to take our goods, keeping
in mind besides that our impoverished foreign customers will
practically be forbidden the approach of the American market by the erection of our tariff wall.
For the first seven months of this year, preceding the erection of our latest tariff wall, our excess export balance had
already shrunk from 1,361 millions of the previous year, to
455 millions, or approximately 35%, the high of our excess
exports balance being 2,671 millions in the year 1919.
There is nothing more fatal for any country than to have
on its hands an unexportable surplus—whether that surplus
consists of commodities or credits, some of our friends to the
contrary notwithstanding.
Surely, on purely practical and selfish grounds, we are vitally interested in the restoration of European solvency, and
in the maintenance of her capacity to take from our abundance. It is our plain duty to accelerate the process of her
rehabilitation.
The two great rocks which bar the road—reparations and
inter-Allied debts—have been made the 'Lain theme of this
Convention.
Respecting reparations, Mr. McKenna in his very able and
scholarly analysis yesterday, made two practical suggestions:
1st: That the immediate reparations demand be limited
to what Germany's present foreign investments and balances
may produce.
2nd: That she be given a breathing space for a few years,
and thereafter pay whatever her exportable balance may
produce.
But this whole question of reparations touches us but remotely, and only to the extent th.it it is the fundamental element in the stabilization of the European Continent.
The United States asked for no reparation and has gotten
what she asked for. We have declined official representation
would follow any permanent, radical reduction in our exports of agricultural upon the Commission. Signor Nitti has called the whole
products. The shock from this displacement would not be confined to the
portion of our population engaged in agriculture. The diminution of the buy- story of reparations "un enorme equivoco"—an enormous
ing power of the agricultural population would automatically reduce pro- comedy of errors.
duction in many other departments of industry. The agricultural popuBut the denouement seems to be in sight, since M. Poincare
lation, rendered idle by the reduction in production ir. the agricultural field,
would seek employment in other activities, causing unemployment and reduc- has for the moment abandoned his bellicose attitude and has
tion in wages. A readjustment would doubtless be accomplished after a suffi- accepted the latest srecommendation of the Reparations Comcient number of years. but no one can measure the loss, distress, suffering and
the lowering in the standards of living that would result in the meantime. mission.
TRUST ,.303,1PANY DIVISION.
185
years have elapsed the question of the cancellation should
be taken up again. I believe that these ten years of an absolute suspension of the effects of the debt would create an
atmosphere of judicious aloofness. We should then be in a
much better position and also in a much better mood to approach so vast a proposition.
"After all, it will be granted that in 1931 things may look
quite different from what they are now. Our debtors are
hardy people, who have weathered more than one storm, and
ten years should witness great changes for the better in their
affairs. But the point is not so much to wait ten years in
the hope that our Allies may be in a position to pay easily
their debt; my proposition is not a veiled moratorium. I
conceived it in the hope that, ten years hence, conditions
both in this country and abroad will have prepared a better
terrain for the discussion of the problem."
The terrain for the discussion of the problem was at the
time so little propitious, indeed, that, instead of the beau
geste advocated by Professor Seligman and so many of our
best minds both in academic and financial ditties, the Bill
amortization.
Series"B" bonds with a like rate of interest and for the refunding of the Allied War Debts was signed by
38 billions
President Harding on Feb.9 1922.
amortization.
Quite naturally, the people and the press in Europe were
82 billions Series "C" bonds.
What bearing has the proposed cancellation of inter-Allied far from pleased at the action taken by the United States
Congress. Eight months have passed since the signing of the
indebtedness upon the reparations question?
The funding negotiations with Great Britain will take, bill, and it will be admitted now that the bill is anything
place, probably, in November. However willing or able but a summons to pay. The bill merely creates a World War
Great Britain may be to meet her obligation, we may well Foreign Debt Commission, which is authorized to refund the
find it inexpedient to accept her payment in strict accord- debts of the former Allied and Associated Governments. But.
ance with the terms of the funding bill. Experinece has as has been pointed out in our discussion, the Commission's
demonstrated that the actual liquidation of so huge an in- power is very strictly limited by the proviso that the time of
ternational debt is far removed from an unmixed blessing maturity of these debts cannot be extended beyond June 15
to the creditor nation. But as to her ability to pay there is 1947, at an annual interest rate of not less than 4%%. Fino doubt. Breat Britain can pay, and, what is better, wants nally, the Commission's authoritcy to refund the debt is to
to pay. "The British Empire," the "Morning Post" wrote cease at the end of three years from the date of the passage
lately, "is built upon pride. Take away the Britishers' pride of the bill. In other words, the bill means that a commission of five should start negotiations with our debtors, but
and they are nothing."
Speaking of the British indebtedness to the United States, its power to refund the Allied war debts is made dependent
Mr. McKenna tells us that Great Britain is prepared to honor upon ,the proviso of a 25 years' maturity. Because of the
very strictness of this limitation the commission is pracher bond in full.
Gentlemen, British pride and British honor have always tically precluded from refunding the war debts, and all it
seems to be able to do is to discuss with the .representatives
been the finest collateral in the world.
of the foreign treasuries the possibilities of eventual payAs to France and Italy, does anyone really believe that our ments. The Commission is told to try to refund the war
forgiving of their debts would in any way help the Allies to debts, but only on condition that the maturity be not excollect from Germany? Since France and Italy are perfectly tended beyond the 25 years. If the Commission is unable to
safe in leaving out of their calculations, for the moment at obtain from the debtor acceptance of the maturity stipulaleast, the amounts they owe to America, what immediate tion, all it can do is to report its failure. The bill, and this
good could a cancellation of the debt bring about? In my is the parting shot, graciously grants three years to the Comopinion cancellation of the debts would not in the least af- mission to try and do its best.
The bill, I repeat it, is not,a categorical summons to pay;
fect the present aspect of the reparations problem. "Oh,
yes!" I hear you say, "cancellation, or, at least, a part can- It is an invitation to talk matters over. It undoubtedly serves
cellation of the debts, would probably be immediately an- notice to the Allied world that our people are not in favor
swered by a cancellation of a corresponding amount of 'C' of a cancellation. It does not at all warrant the criticism
bonds." Very good! But the "C" bonds are but a mirage on that America is an implacable, merciless creditor. The soluthe distant horizon, and when all has been said and done the tion I suggested in Pittsburgh would have this advantage
reparations payments in the latest form are not even suffi- over the Funding bill in that it takes the question out of the
cient to touch the fringes of,the "B" bonds. Nevertheless, I realm of politics for a definite period.
In the meantime, the important thing for us is to know
do not want you to take this as an argument against cancellation; I merely want to point out that the Reparations Com- how to shape our own financial and economic policies with
mission, whose duty it is to collect from Germany, would not an eye upon the European situation. We have not ratified
find its difficult task lightened by even so drastic a measure the Versailles Treaty, we are not in the League, we are not
on the Reparations Commission, but our abstention from the
as the cancellation of the inter-Allied debts.
About a year ago I had the honor of discussing this subject councils of the world does not preclude us from living in the
before the American Economic Society, and I have since midst of a world of which, whether we like it or not, we are
seen no reason to change my views. I said then: "the mo- a very powerful, but still a dependent, part. Our failure to
ment is ill-chosen to bring the question of the cancellation occupy a seat at the conference table in Genoa has certainly
of the debt in so uncompromising a manner before our peo- not lowered an asbestos curtain, financially or economically
ple. Economically speaking, we are at present a very much speaking, between Europe and us. Our State Department
harassed people. The burden of the taxes, the difficulties turns out polite notes declining invitations to attend interand hardships brought upon us by deflation, make it very national gatherings,. but in the meantime our people subhard for the people at large to examine so important a ques- scribe to foreign loans, buy foreign exchange, or sell locotion in the right spirit. Therefore, I propose that we should motives to countries whose credit rating is not even always
take a leaf out of Secretary Hughes's book and declare a very reassuring.
On the other hand, you will have noticed, for instance, that
holiday of ten years for our Continental allies, during which.
as non-existent. After ten our people have become less enthusiastic in taking up foreign
the debt would be considered
No one can find fault with Mr. MeKenna's clear and logical conclusions—truth—facts—expediency—all these point
the way.
But the inevitable denouement falls with a heavy hand
upon France. France has spent up to now 90 billions of
francs on the rehabilitation of her devastated regions, and
the deficit of her general budget amounts to upwards of four
billion francs. The French people have an admirable way
of answering the call of their Minister of Finance, and the
new loan which is shortly to be issued will find the same response as its predecessors. But even French thrift has its
limitations, and besides, the floating of loans does not go
without its economic and financial dangers.
Leaving aside what Germany has already paid in kind and
in cash, the reparation obligation has taken the following
form:
Total—one hundred and thirty-two billion gold marks, divided as follows:
12 billions Series "A" bonds with 5% interest and 1%
186
BANKERS' CONVENTION.
loans which certainly goes to prove that we are following as
closely as possible affairs in Europe, and that our financial
seismographs record even the slightest tranatlantic tremors.
Much gratuitous advice has been given to poor Europe.
Europe is told to balance her budgets, to reinstate the gold
standard, or failing this, to stabilize her currencies; to levy
higher taxes—in a word, to behave according to the rigid
precepts of a conservative political economy. Good, sound.
old-fashioned economics, but they are the preaching of categorical imperatives about as impossible to comply with as the
friendly advice to a man falling off the Woolworth Building, to whom one would say, "Go slow, my friend; better
take your descent in easy stages; or, better still, go back to
your starting place and don't fall."
History, after all, like the experience of the individual, is
the very best teacher.
After our Civil War the recovery of the Southern States,
with their currency wiped out, their obligations repudiated,
would have been delayed for generations had they not been
a part of the greatest interstate free trade area in the world.
Free interchange of goods, commodities and service unhampered by artificial barriers was immediately resumed.
I believe-and hope that Europe will sooner or later profit
by this experience in our history. It is high time, now that
self-determination has been at least measureably accomplished—though not in all cases with full justice—that the
snarling and bickernigs and quarrels of Europe should cease
and be replaced by sound principles, mutual understanding
and mutual co-operation. It is high time that Europe should
cease her criticism of the aloofness of the United States, and
that the various nations get together for their mutual interests.
The British review, "The Round Table," observes that
many Americans had felt acutely that the United States
should take a hand in the work of reconstruction, but that
these Americans had also felt that the greatest necessity of
all was that the nations of Europe should begin to show
some kind. of European community. This is well said.
America is very little inclined to play a part in the European
concert, and when she receives the flattering invitation of
assuming leadership she must refuse to accept the baton of a
guest conductor. But America will not withhold her co-operation from a Europe which shows some sense of European
community.
England, a creditor nation for more than a century, maintained her financial supremacy, not by collecting and spending, but by collecting and re-investing what she collected.
The statistics of the growth of her foreign investments show
that her foreign holdings have been steadily built up by the
accumulation of interest.
America, a young creditor nation, with enormous sums of
money flowing back to her in the form of interest and sinking
fund payments, will necessarily be on the lookoutfor safe and
profitable re-investment opportunity. The problem of finding
markets for her exportable surplus of goods will be paralleled
by a not less vital one, the finding of employment for her exportable surplus of credit. Not in the form of gigantic international loans—I must confess that my imagination stalls when
they are under discussion—but the future holds for the
American investor countless attractive opportunities which.
as time goes on, he cannot afford to neglect, if once Europe
gets together on safe, sane and practical lines. That such a
movement is going on on the Continent is without question.
There are innumerable instances where these silent forces—
constructive, friendly, co-operative—are actively at work.
A loan to Austria guaranteed by her former enemies; German Treasury notes assumed by British and Dutch banks;
a French group and a German group coming together in an
effort to effectuate on a practical basis the reparations in
kind; the Soviet Government recognizing the vested rights
of a British corporation; Austrian banks re-establishing
their branches in the succession States; are facts which show
that Europe is fast coming back to her senses. These are
not quixotic or fantastic suggestions. Europe is putting
herself in line with them.
Keep faith with Europe? Surely there is no other way out
either for Europe or ourselves. From the ethical point of
view, our duty to stand by Europe attains the heights of a
moral law. which we cannot possibly escape. I think that it
was Plato who said that the man who could live alone was
either a god or a beast, and this is as true of nations as it is
of men. From the cultural point of view, America'refuses
to turn her back on the nations which have shared with her
their art and their learning. America's soul, so full still of
the poetry, the songs, the legends of the old countries, can
never give up her yearning for the European shores. America
must keep, will keep faith with Europe. but Europe must do
her part and keep faith with herself.
Turkey and the Near East
Hy HENRY MORGENTHAU, Former U. S. Ambassador to Turk ey.
Mr. Chairman, Ladies and Gentlemen: When I was asked
:this morning to come here and say a few words, I could not
refuse because once upon a time I also was president of a
trust company, so I had a very companionable feeling.
I had a few minutes with Mr. House (the President of the
'Trust Company Division) and he thought yoti would be very
much interested in knowing something about the Near East.
I listened with as much, and 'perhaps even more, interest
than some of you—to the very splendid address of Mr. Krech,
and I agree with Practically all he said, but he left a lot of
things unsaid. He did not take into consideration sufficiently the political and the human aspects that these foreign countries are confronted with, and I am going to confine my remarks to one of the most serious things, and that
is this festering boil in the Balkans, Turkey, which does not
seem to be curable, which will some day have to be destroyed
before you can have complete peace in the Balkans.
Turkey, under the rule of Abdul Hamid, was for 30 years
.continually exploiting all her people. They were living—the
Turks—as parasites on the other peoples that lived in their
country. When this Young Turk Party was organized, after
they came into power, they discovered in a very short time
-that these centuries of misrule of the Turks had so completely exhausted the Turkish people, had deprived them of
all sense of freedom or desire for self-government, even, that
they made up their minds that the only way in which they
could continue their power was to be Abdul Hamids themselves, so that instead of one there were certainly 30 or 35,
because there was an Executive Committee of the Union
and Progress Party, which really was then, and is now, the
invisible government of Turkey. This committee can be best
compared to the leaders of an organization like Tammany
Hall.
These men were determined, at all hazards, to retain power
as long as possible, and when this war broke out, the Great
War, they were the ones that determined to throw their lot
with the Germans, and they were the ones who ordered the
massacres of the Armenians and started this pillaging which
has been going on ever since.
Now, when peace was made—I don't propose to spend much
time on what took place during the war—the conference in
Paris determined to cut up Austria—and they did.
They cut it up so completely that they took off both her
arms, both her legs and as much of the trunk as they could
without reaching the heart. They left something that could
not function or operate, and we see what has been the result.
Austria had to submit because they were right in the centre
of Europe and the people around them were ready to organize these countries and take advantage of it.
Germany, as you all know, was so charged with an amount
of reparation, that to-day she is like a crushed gladiator on
whose head the victor is sitting and is telling him, "Get up
TRUST COMPANY DIVISION.
and earn something to pay me for the damage you did to me
before I put you on the ground." I have no sympathy, as
such, with the Germans as a nation, but I believe that it is an
utter impossibility for them to rise and live as long as the
Army of Occupation is there and this reparation hangs over
them. I do not think that a mere suspension of ten years'
time will help the situation. We men as trust company men
know that if we hove a bad debtor and we are strong enough
and can be honest to our stockholders and to our depositors
and to ourselves, and we feel we collect any of it, or only a
small portion of it, we won't carry it as an asset on our books
—we will cancel it or reduce it.
Now, my friends, I have been in Germany; I had the extreme pleasure or privilege of visiting Krupp's factory. I
saw those people at work and I talked with the managers,
and I received a thorough explanation of how they converted their factory, this great big factory, the biggest group
I had ever seen, where they used to make armor plates, how
they converted that in four months into a locomotive factory
and were turning out one locomotive a day. I visited the
other place, where they made the turrets for the submarines,
and I saw them making these great big pipes for th^ nitrate
plants of Germany.
I asked them how long it would take to reconvert Krupp's
establishment for war purposes. They told me not quite as
long as it took them to construct it or change it for civil purposes.
But I found that Germany was in that position that it is
utterly impossible for them, with their marks depreciated as
they are, to continue to do business much longer. I am afraid
I am wandering away from what I originally wanted to
say.
What I want to tell you is this: The third country, Bulgaria, was cut off from the Mediterranean, her ports were
taken away, and Bulgaria is to-day just watching and waiting for an opportunity to get back her chance to have a seaport
Then, when it came to Turkey, what did they do? These
people divided Turkey among themselves: Great Britain,
France, Italy and Greece. They did not know the psychology of the Turks and did not know how the Turk was living
and on how little he could live and in what a desperate economic state he was. All these other peoples had commerce
and industry to protect and preserve. The Turk had nothing
of the kind.
The Turk, when he found out that these other countries
were following up what had been going on for 10 years, or
more, and how he had lost Govinia and Bosnia and Bulgaria
and Greece and Rumania, and that now he was to lose a number of other territories and sections of land, he simply (this
committee of thirty-odd) retired to home in Constantinople
and considered what to do. The world didn't consider that
it was of much importance, but these men concluded that although the British and French had the Sultan in Constanti-
187
nople, that he was ready to approve of the treaty, that they
would start a revolution and rebel, they would not assent
to this treaty, they would resort again to what they had done
repeatedly—a system of anarchy, and set up their own Government in Angora—which they did.
As you probably know, the Turk defeated the attempts of
France to secure a firm hold in Turkey. France made the
Treaty of Angora and agreed in that treaty that she would
not fight the Turk. Italy also made a treaty in which she
agreed to turn over her munitions which she had in Turkey,
and not to fight against the Turks. Greece, that was making
this great fight, encouraged by the other Powers at the beginning, had to fight on and was defeated, not because the
Greek army was weak, but because King Constantine took
control of the Government and replaced a very able General
by one whom I am reliably informed, though I have not the
absolute evidence, was an inmate of a lunatic asylum for two
and a half years. This man immediately removed all the
good Generals and officers that Venizelos had put there and
furthermore told them that within a month they would be
back in Athens with their wives and sweethearts. They returned to Athens, but not in the way the General thought '
they would.
Now. the Turks pursued these men. There is no question
that the Greeks in their retreat did some damage to the
Turkish villages and did murder some Turks, but nothing
that occurred could justify the cold-blooded murder and destruction that took place at Smyrna.
Now, my friends, gory with blood, full of loot, this Turk
reached 15 miles away from the Dardanelles, the neutral
zone. Nothing was there to stop him from running amuck.
following the Greeks right into Europe, right through Thrace,
and then, except the British navy and the British General,
Harington, and none of us know except those who were behind the scenes, what a grand piece of work Great Britain
did again. Great Britain saved the civilization of the world
within the last two weeks.
I just want to conclude as rapidly as possible. If the Turks
had been permitted to enter Thrace at that time, and not
peacefully, as they may be permitted in a few weeks, but as a
war-like nation and with the determination to crush the
Greeks, the Bulgarians would have risen, they would have
had a revolution, and it seems to me that the Germans would
have taken courage and would have said,"If Kemal with his
few untutored soldiers can make a stand against the united
Allies, why can't we do it?"
Now, my friends, I would close with this remark: Great
Britain to-day is standing a tremendous strain to protect the
preservation of present-day things, which we call civilization.
She is under a terrific strain, and you men who are moneyed
men and represent money, let us forget that for a moment,
let us realize that you are the guardians of civilization, as
well as Great Britain, and that we have to stand back of it
and do our share.
The Growing Hazards and Liabilities of Conducting a Safe
Deposit Business
By WArAntoisr H. RAND, Jr.. Vice-President, Commonwealth T rust Company of Boston.
I have been asked to talk for 20 minutes on the "Growing
Hazards and Liabilities of Conducting a Safe Deposit Business."
To one who like myself has lived for the past 20 years almost continuously in the midst of these hazards and liabilities, and who has seen these same hazards and liabilities
broaden here and diminish there as the business of safe deposit grew and expanded from its original modest beginnings, 20 minutes seem indeed a short time in which to deal
with such a subject.
There has been a steady increase in the hazards and liaof this has been
bilities of the safe deposit business. Much
The safe deposit business is one of about 50
unavoidable.
expanded tremendously.
years growth,and in that time it has
Back in the old days, the first thought was to use every precaution to make the vault strong and secure against forcible
entrance, and the vaults that were then built were built regardless of expense. They stand, some of them at the present time, a monument to the integrity and courage of their
builders and also a standard of vault construction that it
would have been wise if the present day had more religiously
followed.
As the public gained confidence in the safe deposit companies and began to realize the increased safety to their possessions, their valuables, their securities, in depositing same
In a properly built, organized and maintained safe deposit
vault, as the business grew, there came forward, as there
comes forward in all business, the competitive feature. I
188
BANKERS' CONVENTION.
think it is to this spirit of competition—which induced many not, it is perfectly obvious that there is existing in those lobanks to open safe deposit departments without sufficient calities where such standards are not being maintained a
investigation as to the cost of construction and the overhead constant condition of risk and hazard—not only to the bank
expenses of maintenance—that we owe much of our present that is failing in this duty to its customers, but to all bankday trouble and worry. This factor, and also the great in- ing interests of the locality.
crease in the number of persons owning securities of a nature
First, as to the standard of safe and vault construction.
negotiable by delivery, such as Liberty bonds, has brought can we state what this standard is in general terms? I
the question more and more acutely to the front.
hardly think so. It would be easy enough to state what conSteadily, as the safe deposit business has grown, the vaults stitutes proper vault construction in any specified case, but
have become more and more subject to attack, both during the problems of vault construction vary so greatly with the
closed hours and during the open or business hours. This locality in which the bank is engaged in business that no
has made it particularly necessary at the present time for all one general rule can be followed. A bank, for example, lobankers who have to do with the safe deposit business to stop cated in the midst of the big city has far different problems
and to take stock of the equipment they are doing the busi- of construction from a bank located in a small suburban town
ness with and the grade of service and protection they are or country village. Yet it must be constantly borne in mind
offering their customers.
that each one of these problems is definite and ascertainable.
It is the most important matter for present discussion. I and each problem is of prime importance not alone to the
do not believe that the majority of the bankers of this coun- suburban or city bank involved, but in fact to the entire
try begin to realize the hazards, the risks and responsibili- banking community. If a bank from motives of false econties entailed in the conduct of a safe deposit vault. Perhaps omy, through a desire to save a few dollars, constructs a safe
the best way will be to spend the time allotted us in first con- deposit vault for customers that is not of sufficient strength
sidering roughly what the hazards and liabilities are—what and this fact becomes known to the public through some loss.
the risks and responsibilities—and then in discussing briefly the effect is similar to the throwing of a stone in the middle
the methods of reducing or minimizing these.
of a calm pool of water. The ripples of distrust spread
All these risks and responsibilities base in ,the duty of safe steadily and in ever increasing circles from the point of disdeposit vaults to their box holders to furnish the highest turbance until the whole banking pool suffers somewhat from
grade of protection. If we consider briefly what this duty the commotion thus aroused. It is of mutual interest to all
is we will gain a practical viewpoint from which to define bankers that a correct standard of construction prevail in
these responsibilities. The hazard is always grounded in a the safe deposit business.
claim of loss by a customer. These claims fall under three
Turning to the second division of the safe deposit busiheadings—the claim arising in an actual loss, the claim aris- ness, namely maintenance (the duty of maintaining a proper
ing in an honestly believed loss but where in fact there is no standard of service) we find that here also there is far too
loss attributable to the safe depost company, and the claim apt to be a failure to maintain such standard. Correct idenarising in a plain frame-up, a blackmail attempt to bluff a tification of customers—the constant watching of customers
bank into some settlement to avoid the threatened publicity. while in the vault and on the premises—proper restrictions
The defense against each class of claim is the same. It is, in as to the place of examining contents of safe deposit boxes—
brief, an anticipatory defense, that is, a defense centred in the leaving of keys by the customers in the lock—the proper
the maintenance of the highest standard of vault construc- care and custody of the keys of unoccupied boxes and the
tion and of service—Construction and Maintenance the cause proper method of delivery of same to new customers when
of practically all the risks and hazards of the safe deposit the safe Is rented—the keeping of proper written records of
business and at the same time where properly standardized, ownership and access—the installation and niaintenance of
the main line of defense against any claim of loss by a cus- suitable burglar alarm systems—above all, the choice and
tomer. Just what is this required grade or standard of con- training of an efficient personnel of vault attendants—all
struction and maintenance?
these are details of management that will certainly be exEveryone, I assume, understands that a bank is not an in- haustively inquired into in the event of a claim of loss by a
surer or guarantor of the safety of the contents of its safe customer.
deposit vault. The safe deposit law of the diffe-ent States
To sum up, proper Construction and Maintenance are both
as to the duty of safe deposit vaults to their customers is not vitally necessary in the conduct of a safe deposit business.
the same by any means; but it may fairly be said that the As yet they have not been standardized as they should be.
prevailing law of the United States as to the legal duty of a The cause in many cases is ignorance. Where this ignorance
bank engaged in the business of renting safe deposit boxes is is of the proper type of construction and of maintenance it is
that such bank is required to use that degree of care in the Inexcusable, for in recent years the growth of the safe desafe keeping of the property deposited therein which is de- posit associations through our States has been such that no
manded from a bailee for hire in the keeping of valuable banker need, nor will, be excused from having a knowledge
property. The highest standard of care is required of such of how a vault should be constructed and how it should be
bailee. In a certain Federal case dealing with this subject run. The ignorance lies to a degree in the blind disregard of
the court said: "Persons . . . depositing valuable arti- the liabilities—of the risks—which a bank runs in conductcles with them (safe deposit vaults) expect that such meas- ing a safe deposit department merely as a convenience for
ures will be taken as will . . . secure the property from depositors, furnished, without prior investigation as to costs
burglars outside and from thieves within . . . and also of construction and maintenance and along lines of false
that they will employ fit men, both in ability and integrity, economy. Yet this cause of ignorance ought not at the presfor the discharge of their duties. . . . An omission of ent time to exist, either. We have had instances within resuch measures would in most cases be deemed culpable negli- cent years of the fatal blow that a legal attack upon a safe
gence so gross as to amount to a breach of good faith, and deposit vault carries against both vault and parent bank.
Such an attack is in all such cases sure to be a deadly one
constitute a fraud upon the depositor."
So you see that a bank conducting a safe deposit depart- and fatal to the continued existence of the bank itself unless
ment is legally liable for loss sustained by a customer aris- the evidence discloses a proper vault construction and a
proper system of management by a force of properly paid
ing out of any failure on the part of the bank
1. To use the highest standard of safe and vault construc- and properly trained officers and employees.
You. cannot avoid such a threat by incorporating your
tion. This, of course, includes the type of keys, locks, burglar
vault as an independent corporation. This step has, to be
alarms, and the like.
2. To maintain the highest standard of service and of pro- sure, certain advantages; (for example, In liquidation and
tective efficiency in the conduct of the business both during where stockholders are assessable under State or Federal
law) but the force of the blow is against the public credit,
closed hours and open hours.
Is this standard of safe and vault construction and of the reputation, and the standing, of the bank more even than
maintenance being maintained throughout the country? If against the dollars and cents of its assets.
TRUST COMPANY DIVISION.
189
adequate receipts by
at the porting; that is, the failure to provide
Nor can a banker, as some are attempting to do
their boxes. There
bank charging customers a sufficient rental for
present time, protect himself, his stockholders and his
this question, to charge off the expenses
is written is a tendency to beg
by insurance. In the first place, no insurance that
unnecessary.
of the vaults to advertising. This is not only
most probable sources of liability, and in the seccovers the
in its effect on the morale and the
be paid until but it is very serious
ond place, insurance will in all probability not
ents. Moreover,
be standard of maintenance in such departm
y is established, and legal liability can only
legal liabilit
that it is unnecessary. No one is goble accom- the sad fact about it is
established by court proceedings, with the inevita
rental when
of ing to look for a cheap bargain in safe deposit
ure of the type of construction, the grade
panying disclos
safe custody of his or her entire
of the the matter involved is the
service—in fact, all the important items and details
deposit box
worldly wealth and savings. The hiring of a safe
and equipment.
vault management
the economic law of barter and
situ- is a striking exception to
No, the only way of minimizing this risk is to face the
g but
trade. No one of average intelligence wants anythin
to have your safe deposit vault of proper
ation squarely,
price—within reasonable limits—besafe- the very best, and the
construction and surrounded by all approved modern
time
practically immaterial. This has been illustrated
the business of safe deposit with an comes
guards, and to conduct
last two or three years where
ed by and time again within the
efficieat and trained personnel in a manner approv
safe
have deliberately raised the price of their
associations. Too many banks have banks
present-day safe deposit
the loss of customers bedeposit boxes. In each case
grown into the custom of conducting a safe deposit departof such advance in price has turned out to be practo their business, installed for its cause
ment merely as an adjunct
ly, as tically nil.
supposed advertising value, and upon which, natural
ions.
The safe deposit business has grown to large proport
as possible. This has been the
little money is to be spent
as so many other dein The only way is to standardize it just
history in several cases of recent legal proceedings, and
banking are now standardized. The proper
exceedingly humiliating and costly partments of
each case it has been an
tion should be
ostly committee of the American Bankers Associa
history as retailed to the public by way of the press—c
gate and report facts necessary for a
g instructed to investi
not only to the bank involved, but also to the entire bankin
maintenance.
standardization of construction, equipment and
community. And repeating myself, I wish again to emphaa committee would furnish the banking
mely The report of such
size the fact that this latter phase is a very real one—na
departments
pres- world with a standard to which all safe deposit
the loss to the general banking in credit, standing and
were done, failure on the part of a
remiss could be held. If this
tige, when any one bank is publicly exposed as being
exceptional
bank to observe such standard would soon be so
In its duty to its customers.
non-existent. The public would be
to become practically
One great error in the establishment and maintenance of as
the better probetter served, the banks and trust companies
safe deposit departments, and one which has been the cause
branch of banking business guided
tected and an important
of unsatisfactory conditions of maintenance and equipment.
safe and prospering channels.
Is the failure to make the safe deposit department self-sup- into
Telling the Story of the Trust Companies to the Nations
By FRANCIS H. SissoN, Vice-President. Guaranty Trust Com patty of New York.
You will see on the boards at my left the real exhibit and
the real report which this committee has to present, and so
far as the phrasing of English permits, the bulletins upon
all
those boards and the advertisements which you have
their
seen, tell the story of the trust companies and spread
message of service to the best advantage that this commit
to detee you have asked to send this message has been able
of the
vise, and so I have in mind to give you simply some
which have attended this campaign and to outline some
facts
nt that is
suggestions for its continuance, if in your judgme
desirable.
campaign,
During the year 1921, in which we started the
ies contributed $67,430 to its maintenance,
the trust compan
to 1922, and in
and of that amount $188 was carried over
of $47,000 has been contributed by the
the year 1922 the sum
remains unexcompanies to the campaign, of which $11,000
I have here compiled from the letters which we have received, scores and scores of favorable comments upon the
ies
work of the campaign and the results which the compan
it, and it is not my desire,
feel that they have secured from
nor have we time, with the decorators and the Ball Committee hard upon our trail, to go into any detail of what these
unaniresponses have been, other than to say they have been
ative.
mously favorable and very appreci
recAnd so your committee comes to you with this brief
continued; that it be conommendation: that this work be
an
tinued for several reasons. In the first place, that as
of corporate service in
agency for spreading understanding
the trust field, of corporate executorships and trusteeships.
and so on, that we serve a splendid purpose by spreading
rthis campaign of education in breaking down misunde
on unstanding and opposition, in making selfish ppositi
profitable and unresultful, and better than that, of spreading the knowledge of corporate service to the point where we
underconstantly increase the business resulting from that
standing.
We believe that we are serving a worthy end in advising
the American people of the service we have to render, and
we welcome participants in that field of service enthusiastically. We feel disposed to compliment greatly, and with all
the appreciation we can voice, the advertising that has been
done by many of our great companies, particularly in our
larger cities, in the spreading of this sort of service, and in
the education of the public concerning the goods we have to
pended.
been
The results we have secured from this campaign have
President in his report to you, but
summarized briefly by the
.
perhaps a little elaboration might also be of interest
in inquiries at our central office,
We received altogether
were made of
something like 10,000 letters. Many inquiries
which we have no record. We
individual trust companies, of
of the trust
used national periodicals in tell:ng the story
about five million, which as
companies, with circulation of
about twenty millions
periodical publishers compute, means
message.
of people were reached with our
s to those who
The first year we distributed 98,000 booklet
leaflets and pam- offer.
subscribed to the campaign, and 63,000
I think that there is nothing that I need to add in detail.
the current year,
phlets of various sorts. This last year, for
fact that in many States
booklets and about 47,000 but just to call your attention to the
we have distributed about 52,000
in the Union we face conflicts with the bar, in many States
leaflets..
we feel
has been in the Union we face competition with those whom
But this work in that particular field, of course,
not so well qualified to serve in these capacities as are
the amount of are
limited by the number of subscribers and by
here we face
of the gen- the organized trust companies; and that everyw
their demand being somewhat lessened because
itloora nee of the quality of service which well organized
n
eral economic conditions, we believe.
190
BANKERS' CONVENTION.
trust companies can render along all the lines of fiduciary
service, which we can constantly attack, and in the dissemination of knowledge concerning these services secure a constantly increasing volume of business.
The field is so vast, the opportunity is so great, that every
dollar we can spend intelligently in that field must be returned many fold to those who are prepared to render the
service vvhith we advertise.
We will be delighted to have suggestions from those who
subscribe to our campaign at any time we have been feeling
our way in the course of its development, but we believe
that
we have struck a note of service which is sound and profitable and which may well be continued.
The dignity of trust service bears advertising and salesmanship and the old banking ideal that it was undignifi
ed to
advertise any form. of service of this character has
been so
long lost sight of that I need hardly make an appeal
to that
point, but I am - willing to state my own deep convictio
n,
which, I am sure, is shared by many here and perhaps
all,
that any service that is helpful to human beings, that
any
service that is honest, that any service that helps ameliorau
the conditions of life or simplify the conditions under which
we must live, is salable and advertisable with complete dignity and self-respect. And the trust companies have entered
that field of selling their services, individually and
collectively, with what 1 believe is dignity of approach and quality of service, which commands the utmost
respect.
If by any chance we ever depart from those high standards and those proper ideals, we would be glad to be criticised and I present them to you only as the standards by
which we are guided and in some measure the promise of theresults which we hope to attain.
And so, Mr. President, with this brief conclusion, I ask
for the support of the Trust Company Division in our further campaign which we hope to wage more intensively next
year, and if we could by any chance secure that far-off idea/
of 100% co-operation, I am sure it would be with lasting results to the great service which we all hope to render and
profit to those who render it.
TRUST COMPANY DIVISION.
191
COMMITTEE OFFICERS'REPORTS-TRUST COMPANY DIVISION
Annual Address of President J. Arthur House, President Guardian Savings & Trust Co., Cleveland.
Since the meeting of our Division at Los Angeles in October of last year,
many important things have taken place in the world at large and in our
own country, all having a bearing upon the finanial situation, both nationally and internationally.
In the international field might be mentioned the Limitation of Armaments Conference held in Washington last winter, called by President Harding, so ably carried to a successful conclusion through the efforts of the
President and Secretary of State Hughes. It is almost impossible at this
time to estimate the effort of this important step in bringing together the
five principal nations of the world to stop the enormous expenditures of
money in the ever-increasing demands for better and larger navies. This
conference might well be taken as a pattern for future conferences to consider many of the perplexing problems unsolved which are troubling this
whole world of ours.
The failure of the Genoa and Cannes conferehces to accomplish the purposes for which they were called was most disappointing to those of us who
had hoped that out of those gatherings might come a solution of some of the
grave problems with which Europe is confronted.
The almost total collapse of the European exchanges, the unsettled German reparations situation, the failure of the European nations to balance
their budgets, the enormous issuance of paper money by those nations,
the jealousies and lack of harmony among the European countries—all
create a most difficult situation and one which will require the utmost patience, diplomacy and highest type of statesmanship to deal with.
We can no longer say to ourselves that we are not interested in the proper
and just solution of the European situation. We are. For whether we
will or no, our future prosperity is dependent upon a reconstructed and
normal Europe, and not only Europe, but a normal condition in every country in the world with which we are doing business, and in which we can find
markets for our surplus of manufactures, of food and of agricultural products. Our farmer is interested in the price at which wheat sells in London,
l'aris and Berlin, for the price established there fixes the price at home.
Likewise, we are interested in knowing what they have to dispose of.
The question of the settlement of the debts of European nations to us has
a very important bearing upon many of the questions referred to, and it is
hoped that the Commission appointed by President Harding to study this
Important problem will make a recommendation which will settle and solve
the question.
So much for the international phase of the situation.
In our own country we have experienced a gradual return to normal
business, interrupted unfortunately by industrial disputes and strikes of
more or less magnitude, notably the coal and railroad strikes, both of which
have tied up many industries, causing factories to close, throwing men out
of employment and causing suffering and loss difficult to estimate. The
hard and soft coal strikes, fortunately, have been settled, and the railroad
disputes bid soon to be a thing of the past. Whether we agree with
the manner in which they are settled or not, the fact that they are settled
tends to help the business situation of the country.
The tariff and immigration questions might well be given consideration
but those are questions the Economic Policy Commission of the American
Bankers Association has under consideration and upon which they have
given expression of their views at length for the benefit of members of
the Association, and are only mentioned in passing as some of the problems
with which we are confronted in our march back to normal business
The importance of our business is emphasized by the provisions of the
Federal Reserve Act permitting national banks to establish trust departments and transact business under certain conditions. National banks,
in ever-increasing numbers, are taking on trust powers as authorized
by the Act. We welcome them into the field—the surface has hardly
been scratched and there is business enough for all.
Trust business, however, cannot be carried on as a side line and our
concern is that it be conducted in the future, as in the past, on the same
high plane of service by highly trained experts. And yet, in this tretrust
mendous increase in the number of banks qualifying to perform
lous
functions lies a grave danger that inexperienced trust men, over-zea
principles of trust company
for business, may innocently transcend the
service, the canons of ethics, and tne ideals for which this association
offending
has stood. Every such instance reflects not alone upon the
problem at
company but upon all trust companies. And so we have a
eductaion—and I earnestly
home, among our own profession—a problem of
every trust
bespeak your consideration of a program which will bring to
those ideals
official a comprehensive knowledge of those principles and
the heart and
which a quarter century of experience has breathed into
life of this association.
matters effectThe Division has been active and elert with respect to all
every phase
ing trust company interests. Through our various committees
has careof our work is cared for. Our Federal Legislative Committee
for the protection of the
fully watched and taken appropriate measures
concerred. There
interests of our business as far as national legislation is
to the
is now most urgent need for an amendment to our laws in respect
between
final determination of the value of estates and a closer co-operation
oecuring greater service
Government officials and corporate fiduciaries in
of our meto the public in the administration of estates. I would urge all
bars to watch legislation effecting trust companies in their own State*
meet. In
during the coming year when so many State legislatures will
has been
some States legislation very adverse to trust company interests
enacted or proposed and it will be well for our membership to cultivate
the acquaintance and friendship of State legislators so that they may
n
frankly discuss with them any measure which may arise for consideratio
effecting trust company or banking interests in their respective
States.
Most excellent results have come from the work and activities of the
Committee on Publicity in the forwarding of the National Publicity Campaign and the sale of the trust company idea to millions of people throughout the country during the past two years. This pioneer work, undertaken and accomplished on a broader scale than ever before, merits the
support of every member of the Trust Company Division. During 1921
and 1922 about $110,000 has been secured for this work,and from the most
careful and conservative estimates which I make personally I am of the
belief that business already secured and written will bring to the trust
companies of the United States earnings representing large dividends on
conditions.
States.
The last year has given us much to be thankful for in the United
the country
One year ago unemployment was very general throughout
and now practically none exists.
of President
The adoption of the National Budget through the efforts
Harding, ably assisted and administered by one of our own Trust Company
officials, General Charles G. Dawes, President of The Central Trust Co.
l
of Chicago, marks an epoch of far-reaching importance in our governmenta
affairs.
The insistence of Congress at this time in passing a Soldiers' Bonus bill
a time
calling for an ultimate expenditure of over $4,000,000,000, at
when the country is confronted with the task of meeting within the next
billions of dollars of maturing obligayear the problem of refunding many
again
tions, decreasing revenues and a deficit in the year's operations,
makers to the business
draws attention to the utter disregard of our law
treatment of our
side of our Government. We stand for the most liberal
their Government
soldiers and sailors, who,in the discharge of their duty to
become disabled or incapacitated,
and their country in the Great War, have
men is wrong in principle and
but the payment of a bonus to able-bodied
The action of President
cannot be defended in a country such as ours.
by Congress is to be most highly comHarding in vetoing the bill passed
as its President a statesman
mended and the country is fortunate in having
and, seeing his plain duty, does
who has the courage of his convictions,
him in the discharge of that
not allow political expediency to influence
duty.
Division of The American
Twenty-six years ago, when the Trust Company
were in the United States about
Bankers Association was organized, there
resources of about $643.713,741. To-day
251 trust companies, having total
companies with resources in excess
there are approximately 2.500 trust
their statements published on June 30
of $12,000,000,000. as shown by
companies of the United States
1921. Just how much property the trust
impossible to state, as publication of
hold in their trust departments is
States, but, undoubtedly, it is far
those figures is not required in most
and it is unquestionably a true statein excess of the banking resources,
the United States hold in their banking
ment that the trust companies of
property than any other group of banks in
and trust departments more
country.
our
the amount expended.
Our various other standing committees have been active, such as the
Forms
Committee on Community Trusts, Committee on Standardization of
and Charges, Committee on Staff Relations, &c.
to the responsiI want to call the attention of the State Vice-Presidents
bilities of their office and to suggest that they keep in close touch with all
matters relating to trust company affairs, and to bring to the attention
of the officers or members of the Committee any subjects or situations
that may arise during the year in their respective States affecting trust
company business.
This year, from the standpoint of trust companies, has been most satisthe
factory. Reports coming in from our members from all sections of
country indicate that business is reviving and that our members are sharing in its revival.
public
Trust company services are coming to be better understood by the
estates.
generally through personal contact and skillful handling of trust
made in my own city by our trust
Judging from the great strides being
in the past.
companies,the next ten years promises still greater success than
In February of this year was held our usual Mid-Winter Conference and
attended in the
Eleventh Annual Banquet, which was probably the largest
sughistory of the Division. Out of the discussions came many valuable
was in
gestions for increasing trust company business, and the banquet
every way a success.
In conclusion, permit me thank you for the honor you conferred upon
me in electing me President of the great Trust Company Division of the
have
American Bankers Association and for the many courtesies which
been shown me during my administration of this office. My appreciation
of the
is especially due to the officers of the Division and to the members
the
Committees who have performed the real tasks and who have made
work of the year so successful and so pleasant.
Since I have read my report, some figures have been handed to me with
respect to the total resources of the trust companies of the United States,
as compiled by the United States Mortgage at Trust Company, for the
year ending June 30 1922. These figures are from 2,372 trust companies.
practically the same number that reported in 1921, and the total resources
year
of those trust companies are $12,739,000,000, an increase during the
increases
of $416,000.000 in resources—about 3 3-10%. The greatest
the
were in the State of New York, $227,700,000; Illinois, $109,800,000; in
Maryland.
State of California, $77.200,000: in New Jersey, $53,300,000;
Pennsylvania showed a de$34.100.000; Massachusetts, $33,200,000.
by
crease of $72,000,000. and Texas of $40,000,000. The net increases
the
territory are approximately as follows: In the New England territory
: Southern
resources increased $53,000,000; North Atlantic, $250,200,000
territory. $26.300,000; Pacific Coast, $63,100,000; North Central, $104.000,000, and the Plains, $8,600,000.
I thought those figures might be of interest in view of the statements in
the report.
192
BANKERS' CONVENTION.
Report of Vice-President Theodore G. Smith, VicePresident Central Union Trust Co., New York.
New York. Oct. 5 1922.
To the Members of the Trust Company Division:
The office of Vice-President is less active than that of your President
or Chairman of the Executive Committee and will, therefore, require
only a Ma report.
Custom has decreed that your Vice-President shall preside at the midwinter conference, and it was with some misgivings that we undertook to
introduce for discussion at the last mid-winter conference, a variety of
"problems" encountered by trust company officials throughout the country
in the conduct of their daily work. This experiment p:oved to be a pronounced success and many expressions of commendation and testimony
of helpfulness were received from those in attendance. A few of the
extracts conta ned in letters received read as follcws:
"Just a line to tell you what a splendid meeting I thought the one on
Feb. 16 was. I feel that this institution picked up quite a let of good
material for consideration."
"We have an educational course for the employees of this company.
The answers to the first four or five questions that were asked at the morning
session of the recent trust companies' conference could very well be worked
into an address that would be very helpful to our force."
"I have been intending to write you a letter and lift my hat in congratulation upon that recent meeting in the Waldorf. That was, undoubtedly,
the most profitable meeting of the trust companies at which I have ever
been present. and I have already begun to look forward to the meeting a
year hence where it is my intention to bring along several gentlemen from
our trust department. When you send out your questionnaires next year
I hope to send in a question or two that I trust will be of interest to hear
discussed."
"One of our vice-presidents told me something about these inquiries.
stating that they proved most successful, and that a very interesting
program was arranged in this manner."
"This conference was the first one I have attended. and I want to express
my enjoyment in being there and of the many good suggestions I heard
from the several speakers. It certainly does one good to rub
shoulders
with a fellow worker who has the same problems to face that we meet
in
our own office, and in exchanging views learn of many good points to be
used advantageously."
Following the conference several members inquired regarding the preparation and conduct of such a meeting, as they desired to teed similar meetings
in their own States or cities. It is hoped that this plan
will be further
developed at future meetings.
At the meeting of your Executive Committee held in New York
on
Feb. 17, your Vice-President was authorized and requested to appoint
a
committee of five, with himself at; chairman, for the purpose of'
securing
a new form of entertainment at the twelfth annual banquet
to be held in
New York en Feb. 15 1923. The following gentlemen were invited
and
accepted the invitation to serve upon this committee:
Uzal H. McCarter, President Fidelity-Union Trust Co., Newark,
N. J.:
John W. Platten, President U. S. Mortgage & Trust
Co., New York City;
Francis H. Sisson, Vial-President Guaranty Trust Co., New
York City:
Edwin P. Maynard, President Brooklyn Trust Co., Brooklyn,
N. Y.
Frequent conferences have been held throughout the year with
the
Secretary and members of the Executive Committee, and
considerable
correspondence has been conducted, upon various phases of the
work
carried on by the different Officers and committees.
Respectfully submitted,
'riiE0DORE C.. sM IT H. Vice-President.
Resolution Against Removal of Association's
Headquarters.
Mr. Fransis H. Sisson: Mr. President. I want to make a motion and read
to you a resolution which was passed at the meeting of the Executive Committee held Monday and to which X would, in harmony with the feeling of
my associates on the Executive Committee,, wish to draw your most carefui
attention. The resolution reads ail follows:
"Whereas. The President of the Division has reitortedto this Comniirree
that the question of the removal of the offices of the American Bankers
Association to Washington, D.C., has been again referred to a committee,
of which he is a member, and
—
"Whereas, Heretofore the Triest Company Division, through its Executive Committee and by action of its convention, has expressed definite disapproval ofsuch removal, therefore be it
P "Resolved, That this Committee reaffirms at this time its disapproval iM
recommends to the members of the Division that at the convention to be
held Oct. 5 1922 similar action be taken."
Mr. President, I move you the approval of this resoultion, presented to
us by the Executive Committee, and its adoption by the convention here
assembled.
The motion was unanimously adopted.
Report of Committee on Co-Operation with Bar.
President House: One of the most important committees of )ur Association and which has had a great deal to do with controversies all over
the country in connection with our business has been that of the Committee on Co-operation with the Bar. We would like to have a brief
report from that Committee at this time. Mr. Stone will present the
repo-t in the absence of Me. Miller.
Mr. Stone (Detroit): I should say for Mr. Miller, perhaps, teat he
was here earlier in the week to attend the meeting of our Committee, but
he was called come unexpectedly and he left with me the duty of making
this brief report.
As a matter of fact there is very little other than the routine work of
the Committee to report A number of cases have come to the attention
of the Committee during the year, through attorneys, trust companies
and by direct observation of Mr. Mershon and members of one Committee,
in which trust companies and banks with trust departments have advertised to draw wills free of charge, to furnish free legal service and to do
some other things which are peculiarly within the province of the lawyer.
These cases have been handled by Mr. Mershon along lines fixed by the
Commit.ee in a manner entirely satisfactory to lawyers and the trust
companies and banks concerned. They arose unwittingly and without
intention on the part of tne trust companies and banks and it is fair to
say that they are rapidly becoming fewer In number.
The Committee has acted in an advisory capacity, in a few situations
where a lack of understanding as to the real ;unctions of a trust company
and Ithe manner of its operation existed, and where legislation embarrassing
to them seemed likely. These cases have mostly been adjudicated or
are in process of adjustment t the satisfaction of all parties.
A law was enacted in California during the year, covering the unlawful
practice of law by corporations, which the trust companies and banks
and other corporations of that State regarded as sufficiently embarrassing
to the operation of their business to require a refeeindum and a campaign
Is now being conducted there with a vote thereon next month. In the
State of Wasnington, where there had been in force a drastic law affecting
trust companies and banks with trust representatives, the cultivation
of a better understanding with lawyers has resulted in very considerable
and satisfactory modifications of the law. Upon the part of the lawyers
there has bean no concerted action during the year, other than the adoption
of a resolution by the Conference of Bar Association Delegates, held
during the American Bar Association Convention in San Francisco last
August, affirming a resolution adopted at its Roston meeting, which
welcomed the effort on the part of trust companies to co-operate with the
legal profession and which recommended to State and local bar aasoclatIons that they bring cases to the attention of the trust company
division.
Tne Committee realizes that it cannot, in the nature of things, have
a very intimate knowledge of the preelse situation in the various States
and lccalities throughout the country. But so far as information and
observation go, it is clear that there is a growing appreciation on the part
of lawyers as to the manner in which trust companies serve them and
their clients, and this has contributed to a substantial increase during the
year in the spirit of ce-operation, and the establishment of mutually
helpful relations between the legal profession and trust companies. Aside
from any selfish advantage to either trust companies or lawyers, it is
right that they should work together. because in so doing, both of them
can best serve the public, and that is of vastly greater moment.
Report of Committee on Protective Laws, By Nathan D.
Prince, Vice-President of the Hartford-Connecticut
Trust Company of Hartford, Conn., Chairman.
Inasmuch as the printed program states that the report will be printed
in the proceedings of this convention, I ought not to take the time now to
read my report. I might say, however, in passing that the duties of the
Committee in the past year have been less arduous than in the preceding
year, due to the fact that 45 State legislatures were in session last year.
whereas, in the present year only nine legislatures were in session. To
those who are familiar with legislative work (as I am sure you all are),
you must realize that any Committee on Protective Laws is engaged
more or less on the defensive rather than on the offensive. Bills are introduced which in their effect will be hostile to trust companies in their operation. Therefore, a great deal of real confidential craft work has to be
done on the defensive to try and kill those bills in the Committee, before
they are allowed to come before the various legislatures.
With this claim, I will pass in our report:
COMMITTEE ON PROTECTIVE LAWS.
Hew York City, October 5 1922.
To the President and Members of the Trust Company Division of the American
Bankers Association:
Eleven State legislatures convened during the present year in the following
States: Kentucky, Maryland, Massachusetts, Mississippi, New Jersey,
New York, Rhode Island, South Carolina, Virginia, Georgia, Louisiana.
Ken'ucky.—At the session of the Kentucky Legislature in February a
number of bills hostile to barks and trust companies were introduced.
They were, however, all killed in committee with the exception of one
which was afterwards vetoed by the Governor.
Maryland.—A bill was passed and vetoed, which imposed certain restrictions upon the establishment of branch banks and trust companies. Thin
bill also gave the Bank Commissioner power to grant to any bank applying
therefor, the right to exercise the same powers ana privileges as those
conferred by law on trust companies.
Massachuset's.—Bills were passed during the session of the Massachusetts
Legislature relative to proceedings against trust companies in case of insufficient reserves; time in which a trust company shall organize and
commence business; charters of consolidated trust companies; prohibition of
a trust company from making loans on shares of its capital stock; bonding
of officers and employees of trust companies; granting of certificates permitting trust companies to commence business; subjecting interdepartmental transfers of assets by trust companies to the supervision of the
Commissioner of Banks; real estate held for banking purposes by trust
companies; requiring of a weekly statement of the daily reserve of trust
companies.
A bill dealing with the establishment of brarch offices of trust companies and another regarding attorneys representing trust companies to file
fee with Bank Commissioner, were held over to the next annual session of
the Massachusetts Senate in 1923.
New York.—More than two hundred bills directly or indirectly affecting
trust companies were introduced in the New York Legisksture. The report
furnished to us does not state in most cases whether or not these bills have
been enacted into law, but this can, of course, be easily ascertained. A few
of the more important bills are outlired below.
Inserting new article in the tax law placing a flat tax on unincorporated
businesses. This is to meet the objection raised that there are large sums
of money in competition with the banks and trust companies paying no
tax for doing business.
Authorizing trust companies and savings banks to invest in Federal
Farm Loans.
Then there are the bills from the special committee appointed to investigate the New York corporation laws. All of these bills are very important
pieces of legislation and must have consideration by trust companies
because they have to do with the clientele in one form or another.
Conunent is also made on the following b'lls:
Amending the Decedent Estate Law, extending to individual fiduciaries
the same privileges now held by trust companies in relation to trust funds.
Killed.
TRUST COMPANY DIVISION.
Amending the Decedent Estate Law, providing for recording of certified
copy of any resolution and declaration of trust adopted by directors of a
trust company or financial institution.
Providing that the Stock Corporation Law relative to issuance of preferred and common stock shall not apply to domestic corporations oeganized
under banking law. Passed.
Providing that no trust company or banking institution except savings
banks shall receive money for deposit in accounts on which interest is
calculated. Killed.
Rhode Island.—Our State Vice-President for Rhode Island reports that
there were very few bills presented this year; none affecting trust companies, either favorably or unfavorably. Practically all of the session was
spent in a beautiful squabble over a judgeship bill.
Virginia.—There were no bills introduced in the State Legislature that
would affect the trust companies adversely.
As no word has been received in response to an inquiry from our State
Vice-Presidents for Louisiana, Georgia, South Carolina, Mississippi and
New Jersey, it is assumed that no bills of vital interest to trust companies
were introduced in these States.
Respectfully submitted,
COMMITTEE ON PROTECTIVE LAWS.
JOHN STITES,
NATHAN D. PRINCE, Chairman,
F. G. BOYCE, JR.
THOS. C. HENNINGS,
J. H. COVERLY.
J. W. CHALFANT,
New York City. October 5 1922.
Report of Committee on Community Trusts, By Frank
J. Parsons, Vice-President United States
Mortgage & Trust Co., New York.
193
The Staff Relations Committee held a meeting on July 13 at Cranford,
N. J., at which time the whole situation was gone over very carefully, further developments of the work discussed and plans evolved for the future.
Respectfully submitted.
P. E. HATHAWAY.
Report of Committee on Legislation, By Henry M.
Campbell.
To the President and Members of the Trust Company Division A. 13. A.:
At the spring meeting of the Division at White Sulphur Springs. I called
attention to two bills which were then pending in Congress. imposing taxes
upon gifts. These bills were in the hands of the Ways and Means Committee. Nothing further was done with them, and the subject may be considered as dropped for the present.
During the session of Congress which has just closed, several other propositions, mostly relating to taxation, were introduced, such as the La
Follette-Frear Bill, which sought to impose a tax of 50% of the net estate
in excess of $30.000.000 and the proposal of Senator Ladd to impose a
bonus to be paid to the soldiers by taxing banks, banking interests, trust
companies and partnerships to the extent of 60% of their profits. All of
these propositions failed to materialize, and generally speaking, the attitude of the Committee has been one of watchful waiting.
The bills which have recently been introduced in Congress relative to the
maintaining of branches by National banks, and which will probably be
fully considered by the National Bank Division at this meeting, might
affect trust companies organized under State laws, who are members of the
Federal Reserve System. If all members of the Federal Reserve System
should be prohibited from maintaining branches, many of the trust companies would be faced with the alternative of either surrendering their
membership in the Federal Reserve or giving up their branches—a most
unfortunate and unnecessary situation. When the bills are up for consideration at the next session, the Legislative Committee will do what it can to
defeat such unreasonable legislation, and I hope that the members of the
Trust Company Division will bring such influence to bear upon their Senators and Representatives as will prevent the imposition of restraint upon
trust companies, the only effect of which would be to hamper and embarrass
them in the transaction of their legitimate business, as well as to cause
the public great and unnecessary inconvience.
The formation of a Committee on Community Trusts has been amply
justified during the year that has passed. Your Chairman has received
and answered a large number of letters from trust company and banking
interests contemplating the formation of Community Trusts, as well as
from existing Trusts or Foundations, and in this manner the Committee
has been able to be of considerable assistance in carrying on the movement
as a whole and in wisely directing its activities. Among the larger cities
contemplating the formation of a Trust at the present time is Kansas
City, and it is interesting to note in this connection that they plan to
utilize the multiple trustee idea.
Respectivefully submitted.
At the request of the Chicago Community Trust, your Chairman, in
HENRY M. CAMPBELL. Chairman.
January, attended a meeting of representative bankers in that city, with
a view to assisting in broadening out the plan and purposes of the Chicago
Community Trust.
Election and Installation of Officers.
Through the courtesy of Dr. John H. Finley of the Editorial Staff of the
New York "Times," favorable publicity and editorial comment on the
President House: Theodore Smith of the Central Union Trust Co. of
situation as a whole, was secured in the issue of July 4.
New York has been nominated for the office of President of this Division.
The Committee, by means of a questionnaire, has secured definite
Upon motion duly made and seconded it was voted that the nominations
information concerning the existing Trusts throughout the country, which be closed and that the Secretary be instructed to cast one ballot for the
Is available upon request. The work of collecting information respecting election of Mr. Theodore Smith.
cases of obsolescence in charitable gifts, is progressing slowly, and it is
President-elect Smith was escorted to the platform.
hoped that during the coming year more progress may be made.
President-elect Smith: This seems to have been done with a great
In general it may be said that the Community Trust movement is on deal of expedition.
a. sound basis, with slow but substantial progress being made in all of
Members of the Division, I very sincerely appreciate the honor that
the cities where it is being seriously developed. The fact that the adoption has been conferred upon me, and assure you that I shall most heartily
of the plan carries with it certain responsibilities and obligations, as well as endeavor to merit the confidence that you have placed in me.
opportunities for profit, is now thoroughly understood. The more active
The duty of President naturally carries with it grave responsibilities.
Trusts have demonstrated that the unfavorable developments feared by I know they are
increasing each and every year, and yet we have a happy
of the opponents of the plan, have not materialized, and gifts and situation in our
some
Trust Division in that we can always get and do receive
bequests are being secured in direct relation to the knowledge, enthu- the most excellent
service and help from each and every member of the
siasm and energy of the various Trustees.
Committees, State Vice-Presidents and those to whom duties are assigned.
Last-minute advices from the Fletcher Savings & Trust Co.,one of the
So I might continue to speak of our Division, for I love it, as you all do.
Trustees of the Indianapolis Foundation, to the effect that three cash There are a few things, perhaps, we must carry away. I mean such as
gifts aggregating over $2,000,000 wlil shortly be available for the work the growth of the Trust Company work in the United States, as recorded
of the Indianapolis Foundation, is very gratifying.
this afternoon.
FRANK .1. PARSONS. Chairman.
The total resources are now over twelve billions of dollars. I think
sometimes we forget that that represents 25% of the banking strength
of the United States, and as a Division of the American Bankers AssoReport of the Committee on Staff Relations, By P. E. ciation we can feel very proud of the strength and also of her oftentimes
humble position.
Hathaway.
1 have been impressed the last few days with the thought of the speakers
by you in May of last that have handled these larger problems, and it seems to me that we must
The Committee on Staff Relations, appointed
issuance, through Mr. Mershon's office, all of us carry away very much material for very sincere thought and
year, commenced its work by the
of a questionnaire which related very closely to matters affecting the per- education because without reciting the different aspects of the foreign
sonnel of all trust companies in general. The response has been very grati- situation and those domestic ones that appear large, the principal thing.
fying, 750 answers have been received and many letters accompanied the I feel, is that something must be done, some big plan must be formed.
answers, expressing an interest in this subject, and asking for specific in- and it is not in the far and distant future, but it must be done soon, and
formation on certain points and assistance in solving personnel problems. such plan and execution of the plan will in a large Measure be in the hands
In a number of answers the opinion was frankly expressed that, while the of men like you.
We will now proceed to the election of a Vice-President. Nominations
banker felt the need of better training and closer supervision of employees,
he was in doubt as to the best methods to pursue to attain this end.
are in order.
A summary of the replies to the questionnaire, which was published in the
Mr. Dinkins (Louisiana): Vor Vice-President of the Trust Company
"Journal," showed the fellowing points of most outstanding interest:
Division I desire to place in nomination Evans Woollen, comparatively
trained in the se- a new member of the Executive Committee, but who served it very
78% had no personnel department or any one specially
lection of new employees.
efficiently last year. Mr. Woollen, President of the Fletcher Savings
77% had given no thought to the employment of young men with college & Trust Co. of Indianapolis. Ind.
It was voted, on motion duly seconded, that the nominations be closed
education.
59% had no methods of studying their staff by which an employee might for Vice-President and that the Secretary be instructed to cast one ballot
fitted.
be used in a position for which he was best
for Evans Woollen.
President-elect Smith: We will now listen to the Report of the Nominat47% had used no special care in selecting men of the highest adaptability
ing Committee:
for meeting customers at the counters and tellers' windows.
the questionnaire felt
Mr. U. H. McCarter: The Nominating Committee appointed by the
The fact that 82% of the Trust Officers answering
that customers generally were expecting much more in the way of service President of the Trust Company Division, American Bankers Association,
than in the previous years would seem to show from a reading of the figures presents the names of the following candidates for membership on the
the
above that the Trust Officers to a great extent are now preparing and train- Executive Committee of the Trust Company Division to serve during
three-year term ending in 1925:
ing their employees to fill the increasing demands of their clients.
encouraged over both the quality and
Trust Co., Detroit, Mich.
Frank W. Blair, President Union
Your Committee feels very much
it has
Edward J. Fox, President Easton Trust Co., Easton, Pa.
number of the replies received, as they betoken interest in the work
Wm. S. Miller, Vice-President The Northern Trust Co., Chicago.
undertaken beyond its expectations.
its
Gilbert T. Stephenson, Vice-President Wachovia Bank & Trust Co..
Your Committee would recommend that it be allowed to increase
sub-committees, which would Raleigh, N. C.
number by the establishment of sectional
disT. H. West Jr., President Rhode Island Hospital Trust Co., Providence.
commence their work by the distribution among those banks in their
ticts which had answered the original questionnaire of another series of R. I.
done
U. H. McCARTER, Chairman. T. H. FRIES.
questions going further into the subjects. It is felt that if this is
LUCIUS TETO It.
systematically and fully that a booklet containing the questions, answers
THOS. C. HENNINGS,
Committee on each point brought up would
and recommendations of your
F. H. SISSON,
undoubtedly be of great value to the trust companies of the country.
194
BANKERS' CONVENTION.
It may say, Mr. President, that in endeavoring
to arrive at proper
nominees for this Committee, due attention has been
given both to the
service of the members of the Association in the
past as well as to geographical location.
I move the adoption of the report.
The motion, after having been duly seconded,
carried.
Suggestion for a Committee to Provide Scale of
Prices.
Pre-sident-Elect Smith: Is there any new business?
Mr. Witt: (Kentucky): Mr. Chairman, perhaps what
I have to say
might better have been said a few moments ago under
another heading,
but the developments of the trust company business
have been marvelous
in the last few years in this country. A few years
ago nobody thought of
a trust company except in connection with a few large
banks in some of
the larger cities. The fact is, many of the smaller
banks with a capital
of $25,000. under a ruling of the Comptroller of the
Currency,are establishing trust departments.
This Division had a committee some years ago (I bon't
know whether it
is one of the standing committees or not) that
suggested a scale of prices,
and the method of obtaining business connected with
that scale of prices.
which applied absolutely to the larger trust companies
in the country.
There are thousands of young trust companies, small
ones, through the
country now, that don't know just what they ought to
charge, and I would
suggest that a committee be appointed to furnish a suggestion
of a scale
of prices for the government of the trust companies in
the United States,
as it especially applies to the smaller companies in the
smaller places.
r
I move that a committee be appointed for that purpose, to suggest this
scale of prices and to prevent, in some measure, the competition in the
reduction of the cost of administration arising out of a competition with
those who are unintelligent and without a knowledge of the value of the
services rendered by the trust company.
President-Elezt Smith: The chair would be willing to entertain any
motion of that kind that comesfrom the floor. However,I think the proper
procedure would be that your suggestion (undoubtedly a good one) or the
motion,should be more in the farm that it be referred to the Standing Committee on Standardization of Charges, having due regard and respect for
the smaller companies. That would cover it in a better way, rather than
to have two committees functioning in the same way.
Mr. Witt (Kentucky): I didn't mean to create any new committee, if
thee was one qualified to handle that subject. I think under present
conditions it is one of the most important matters that this Association
should consider at this time. There are thousands of trust companies,
especially among the smaller national banks, that are assuming trust company features undo the rulings of the Department, and they ought to know
something about what their charges ought to be and have something that
would limit or prohibit, if possible, the competition among the smaller .
companies in the smaller places.
I would like to have the matter referred to that Committee, if there is a
proper Committee.
Secretary Me-shon: Mr. President, as Secretary' a the Committee on
Standardization of Charges, I can assure the gentleman that his suggestion
is already being considered by that Committee and during the next year a
new eeport will undoubtedly include the feature which you desire.
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Full details of these and other facilities are given in the new edition of
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ASSOCIATED BANKERS CORPORATION
Supplementing, not competing with, local bank service
A national institution of associated banks organized
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DIRECTORS
GEORGE B. CALDWELL, Chairman of the Board
Former'y Vice-President
Continental and Commercial Trust and Savings Bank
Chicago
CHARLES E. HOYT
CLARENCE M. SHERWOOD, President
Treasurer, South Norwalk Trust Co.,
Formerly with Chemical National Bank,
South Norwalk, Conn.
National City Bank, New York, and
Director, Bridgeport Trust Co., Bridgeport, Conn.
President of Foreign Trade Banking Corporation
JOHN JACOB ARNOLD, 1st Vice-Pros.
FREDERICK J. LISMAN
Formerly Vice-President, First National Bank, Chicago
F. J. Lisman & Co.
CHARLES C. BARLOW, Vice-Pres. & Treas.
Former Vice-President, Yale National Bank,
JOHN C. MOTTER
New Haven, Conn.
President, Mechanics Trust Co., Harrisburg,
ARTHUR C. QUAINTON, Secretary
FRANKLIN D. ROOSEVELT
Formerly Commercial Manager & Director,
Vice-President Fidelity cfc Deposit Co. of Maryland
Quead, Ltd., London
Manager, Glanvill, Enthoven & Co., Lloyds, London
ROBERT W.'WOOLLEY
EARL HARDING
Former Director of the Mint and
Formerly Chairman of Board
Interstate Commerce Commissioner
Colombian Commercial Corporation
AUTHORIZED CAPITAL, $5,000,000
NEW YORK
35 WALL STREET
Descriptive booklet on request
MAITLAND, COPPELL & CO.
62 WILLIAM STREET, NEW YORK
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ON
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Banco Nacional de Mexico
AND ITS BRANCHES
Agents for the Bank of Australasia, etc.
TRAVELERS' LETTERS OF CREDIT
AVAILABLE THROUGHOUT THE UNITED STATES
1 05
Underwood
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lifts the
"Shadow or the Pen"
Drawn from photograph taken in
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Actual photograph of the
Guaranty Trust Co. Bookkeeping Department at
present, showing installation of 23 Underwood
Bookkeeping Machines.
"We feel that the machines are
a demonstrated success, resulting in economy for the company,
better working conditions for
our employees and better service to our customers."
Vice-President
(;uaranty Trust Co. of N.
U NDERWOOD ACCOUNTING supplants the
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Address
196
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SANDERSON & PORTER
Corporate Organization
Management
Industrial and Commercial
Investigations Reports Valuations
Technical Advisors Engineers Constructors
NEW YORK
52 WILLIAM STREET
CHICAGO
SAN FRANCISCO
W. S. BARSTOW & COMPANY
INCORPORATED
50 PINE STREET
NEW YORK CITY
ESTABLISHED 1906
Engineers and Managers of
Public Utility Properties
Special Services Rendered Bankers and Investors in
Financial Reorganizations, Investigations and Reports
198
A
STONE & WEBSTER
Incorporated
DESIGN steam power stations, hydro-electric developments, transmission lines, city and interurban
railways, gas and chemical plants, industrial
plants, warehouses and buildings.
CONSTRUCT either from their own designs or from
designs of other engineers or architects.
MANAGE public utility and industrial companies.
REPORT on going concerns, proposed extensions and
new projects.
FINANCE industrial and public utility properties and
conduct an investment banking business.
NEW YORK
BOSTON
199
CHICAGO
The Importers & Traders National Bank
of NEW YORK
Capital
$1,500,000
Surplus
7,000,000
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Undivided Profits
1,500,000
EDWARD TOWNSEND, Chairman
H. H. PO WELL, President
J. A. MITCHELL, Assistant Cashier
E. P. TOWNSEND, Vice-President
J. W. DOWNING, Assistant Cashier
C. F. REGAN, Cashier
C. F. PUCKHAFER, Assistant Cashier
G. H. MASH, Assistant Cashier
W. V. SILLECK. Assistant Cashier
Directors
JAWS A. GOLDSMITH
President, Hess, Goldsmith & Co., Inc., Silks
JAMES %V. LANE
Of J. H.Lane & Co.. Cotton Commission Merchants
ADOLPH LEWISOHN
Capitalist
JOHN %V. PLATTEN
President. United States Mortgage & Trust Co.
H. H. POWELL
E. P. TOWNSEND
Vice-President
President
EDWARD VAN VOLKENBURGH
HENRY SPADONE
Prest., Gutta Pecha & Rubber Mfg .Co. Formerly of P. Van Volkenburgh & Co.,Dry Goods
J. WALTER SPALDING
JOHN J. WALTON
Chairman, A. G. Spalding & Bros.
of Hunter, Walton & Co., Produce
EDWARD TOWNSEND
CHARLES A. WIMPFH'IMER
Chairman
President, A. Wimpfheimer & Bro., Inc.. Velvets
247 Broadway
Opposite City Hall
WINSLOW, LANIER & CO.
59 Cedar Street, New York
BANKERS
Deposits Received Subject to Draft
Interest Allowed on Deposits
Securities Bought and Sold on Commission
Act as Fiscal and Transfer Agents
Also as Agents for Corporations for the
payment of interest and dividends
FOREIGN EXCHANGE, LETTERS OF CREDIT
200
@FedFRASER