Full text of Commercial and Financial Chronicle : September 18, 1915 : Bankers' Convention Section, Vol. 101, No. 2621

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BANKERS' CONVENTION
SECTION
OF THE

CdMIVIERCIAL &

FLIANCIAC

HRONICLE.

Copyrighted in the year 1915 by William B. Dana Company, in the office of the
Librarian of Congress, Washington, D, C.

Vol. 101.

NEW YORK, SEPTEMBER 18, 1915

THE CHRONICLE.
THE COBIMERCIAI, AND FINANCIAL CIIRONICLE is a weekly
newspaper of 06 to 112 pages, published in time for the earliest
mails every Saturday morning, with the latest news by telegraph and cable from its own correspondents relating to
the
various matters within its scope
THE CHRONICLE comprises a number of added Sections
or
Supplements, issued periodically, and which form exceedingl
y
valuable adjuncts of the weekly issues.
Thu RAILWAY AND INDUSTRIAL SECTION, Issued three
times a
year, is furnished without extra charge to every
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month
with the Inter-State Commerce Commission, is also furnished
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WILLIAM B. DANA COMPANY, Publishers
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INDEX TO ADVERTISEMENTS

A complete index to the advertisements appearing in the present issue of the Bankers' Convention Section will be found on pages 86 and 87.

No. 2621

Tentative opinion, encountered in everyday conversation, ranges all the way from predictions of
desperately hard times immediately after the war,
with us involved in them, to a movement of immense
prosperity in the United States when called on to
repair the waste and ruin of the old world.
President William A. Law of the First National
Bank of Philadelphia, in his presidential address to
the National Convention, grappled courageously
with this problem. He, too, was cautious about
specific prediction; but his diagnosis of the situation
which actually exists, and his suggestions regarding
the longer results, provide interesting basis for reflection. Mr. Law points out, as any one who discusses the situation must do, the extent to which
previous predictions have already been upset:
"Several of our strongest assumptions have
proven erroneous. Our stock of gold was not
exhausted by foreign shipments; in fact, international exchanges gradually turned in our favor.
Our cotton exports were not cut in five as predicted, but exceeded 92 per cent, of the previous
year's volume. Our copper industry was not ruined,
but has been stimulated. Our stock exchanges have
not been overwhelmed by a flood of distressed
American securities sold at sacrifice prices by
European holders, but we have readily absorbed all
offerings."

These unexpected results naturally tend to make
experienced men more careful in committing themTHE LONGER FINANCIAL OUTLOOK OF selves to judgmen
t on what is to happen next. Mr.
THIS COUNTRY
Law Suggests the complications—economy so se•
For obvious reasons, nothing could be more diffi- verely practiced as to injure the country'
s retail
cult than to elicit, from bankers at such a gathering trade; manufacturers handicapped by
the war
as the National Convention, clear, positive and fluctuations in price of raw material and
of finished
unanimous views of the financial future. The hesi- products; dearth of labor in many quarters
through
tation of experienced men in making such predic- cessation of immigration, and difficulti
es of the
tions has had another illustration in the report lately railways through their low freight rates and
high
compiled from the views of 6300 business corre- cost of labor and money. Yet against this
is placed
spondents by the Continental & Commercial Bank of the extraordinary position of the United
States in
Chicago of which the summary issued by that relation to the markets of the outside world;
our
institution declares a noticeable feature of the re- record-breaking wheat crop • at an hour
• when
plies to be "the absence of anything that can be Europe's harvest'had run short and when
some of
interpreted as prediction of what is to come, should the world's largest producers were blockaded;
the
the war be prolonged, or of what is to follow the astonishing balance of outward trade
created by
restoration of peace." This attitude characterizes this and other causes, and the conseque
nt unpreall exchange of views in competent business circles. cedented fall in exchange and flow of
gold from




84

BANKERS' CONVENTION.

However severe the immediate industrial setback,
Europe to our markets. The presidential speech
recognized that much of this export excess must be the world's industrial and financial progress will
ascribed to reduction of import of raw material, continue, and it would seem that the United States
which itself was due to retarded industrial activity must on return of peace assume the leadership in
in this country. But the situation on international the forward movement. England after Waterloo,
exchange remains, and is of a character which, at though she herself had been bearing a heavy, finanordinary times, would be assumed unhesitatingly as cial burden, resumed very promptly her career of
the sure forerunner of prolonged industrial and industrial and financial extension. Her international prestige and her financial power were cerfinancial prosperity.
Mr. tainly far greater a decade after the Napoleonic
What then is the prediction for the future?
wars than a decade before them. But any such reLaw has this to say:
sult, in the case of a European nation, must at least
"A few words about the near future. We have be shared on this occasion with the United States,
reasons to believe that our financial position will and therein lies the question of largest economic instrengthen steadily as the European war progresses; terest for our own future.
that our devoted President will be successful in preserving neutrality. When war ends, what will it
mean to us as a nation? We shall be rich enough and
THE RAILROADS AND THE PEOPLE.
generous enough to contribute liberally toward the
Very appropriately one of the topics which was
help of the needy; to assist in the reconstruction of
of the ruined nations; to give employment to made the subject of a symposium at the meeting of
some
the mass of emigrants who will probably rush to our the bankers—in the Savings Bank Section—was
shores; to compete vigorously with the stronger na- that which forms the caption of this article. Two
tions in seeking foreign trade."
interesting and instructive addresses were delivered
one by William Sproule, president
Perhaps this is as specific as any such prediction on the subject,
the Southern Pacific Company, and the other by
can safely be made to-day. Undoubtedly, the really of
Hill, President of the International
baffling problem of our own financial future lies in Dr. John Wesley
Peace Forum. Both speakers dealt extensively in
the question whether we can escape the influence of
figures to indicate the closeness of the
the period of reaction and poverty which in Europe the use of
relations existing between the railroads and the peomust inevitably follow this devastating war. The
shall not quote any of those statistics
forecast even of Europe's own conditions is difficult ple, but we
since the addresses are printed in full on subsequent
enough. There is no precedent for the enormous
of the figures have been often in print,
structure of emergency credit expedients which was pages. Some
ought to be quite familiar. Yet they are
built up on the outbreak of the war, which has been and hence
and the need of appreciation and jusperpetuated and enlarged during the conflict, yet not familiar,
railroads must be reiterated somewhat
which must be dismantled when peace returns. tice for the
the people until they really feel it.
Many, perhaps all, of the great belligerent states further upon
To present the railroad as standing in the dock,
will then be paying in interest on their public debt
for justice, is a personification rhetorically
as much as their entire public revenue in the year pleading
though not much helpful to the case. The
before the war. What will be the effect of this the attractive
has no natural body to be wounded, and
inevitable burden of taxation? If all Europe is to railroad
to be hurt. If assailed or merely negbe poor, how will that affect its imports from us. no feelings
and overworked, its revenge is the same as
and its competition with our producers through its lected
the horse's under like treatment; its ability of servexport trade?
, and it can be reduced even to two
These are questions which cannot be answered ice dwindles
of rust and a right of way, a state correconfidently. It is not unreasonable to say that the streaks
to that of the horse which has gone to the
failure in the fulfillment of so many dismal predic- sponding
the rendering plant. The railroad is not
tions of a year ago, regarding the immediate finan- crows or
mendicant. It "asks" nothing. It repays malcial effect of war, gives at least some encourage- a
t by inefficiency. If the public, as a workment to the idea that similarly gloomy predictions treatmen
too far this most comprehensive of
of to-day, for the period after war, may not be real- man abuses
workman can fall back upon the tools he
ized in full. Back of all other considerations, more- tools, the
this one; here is the alternative, exover, staid certain notable and evident facts regard- had before
in the simplest terms.
ing our own situation. The United States has be- pres'sed
Very few pause to even know what this wondescome the central market of the world, with the priviwrought. The railroads of this country
leges as well as the burdens of that office. The capi- ful tool has
the world, we might say) substa,ntially betal of outside communities is more and more gravi- (and of
the middle of the last century. Some of
tating to our markets. Our own energies have prob- gan about
geographies of that day (possibly not the
ably been stimulated by war, without having been the school
down to date) had maps with names
expanded to an unhealthy basis, with the possible most brought
upon what is now the Middle West.
exception of production of war material. Our of Indian tribes
American Desert of our schooldays has
wealth is increasing rapidly, and our prodrictive The Great
red, partly because men know more about
facilities have not been impaired through participa- disappea
n, but largely because travellers' tales and
irrigatio
tion of our own in the ruinous conflict.




BANKERS' CONVENTION.

85

legends had been accepted without knowledge. Hill, merely following along the line of direction of
When the first transcontinental railroad was opened his thought. "New" sections so desire railroad
ceremonially, a few years after the Civil War (its that almost anything is promised if capital will only
construction having been accelerated and empha- come forward and build; when the sections are
sized by that war, just as the Isthmian Canal was by built up, the obligation and service are forgotten
the war with Spain) a train on each road came to and the road is denounced as a devourer. As the
the mid-point and halted for the ceremony. Bret "Chronicle" has suggested, if it were only feasible
Harte's verses for the occasion began:
to suspend all rail operation for a few days, there
would be a most wholesome lesson taught, for hu"What was it the engines said,
man nature never appreciates advantages until it
Pilots touching, head to head"
has lost them. More and more servide, for less and
less pay, is the demand; it ought to be enough that
The engine from the States began with a proud
this is unjust and unreasonable, but it is also imand half-patronizing discourse of how it was bringpossible.
ing the East into communication with the lonely and
The delusion, never expressed in words so that it
inaccessible Coast, and the machine which stood
can be looked at, that a railroad is a sort of huge
headed eastward could not stand this:
Afrite of service which can run independently of
rest and food, still persists; it is a third entity,
'
"Said the Western engine, Whew!
neither the government nor the people; it is
Why / bring the East to you!'"
"owned" somewhere. Suppose it were owned by
And did it not, figuratively speaking? Has not Germany, or by England, or by Wall Street, or by
the opening of the country which is now the great the most misrepresented and denounced family in
States of the trans-Rockies and the Pacific Coast the country? In no case could there be an evasion
really brought the Occident into touch with the cen- of the law of self-interest that would cause the richter and with the Atlantic slope, notwithstanding a est man on earth to abandon an unprofitable proptemporary interruption by the Furuseth-La Follette erty concerning which he could see no hope; if he
folly which nominally takes effect soon but must could neither use nor sell it, he would abandon it
be as speedily and fully undone as possible? The to the public and the weeds. In fact, as Dr. Hill
lines from coast to coast are several now, and the points out for the thousandth time, railroad ownermost unique road on the globe joins Florida to Key ship is widely scattered and continues to scatter,
West, permitting us to indulge the pleasant conjec- notwithstanding the outlook; taking together the
ture whether it will ever push on to Havana and direct and the indirect ownerships, it is strictly true
whether the little gap at the extreme northwest will that there is no property so truly belonging to the
ever be so treated as to allow an all-rail route from common people.
Boston to Pekin and Paris.
The error of the regulative Commission has been
Speaking to bankers assembled on Puget Sound in its misconception of its own function; this has
and the majority of them coming from Slates which been repeatedly pointed out, yet it continues unmitiin the political and industrial sense have been made gated. The members of that body are not intenby the railroad, Dr. Hill appropriately dwelt upon tionally or consciously unfair; they take the attithat as a world-builder; it found the national wealth tude of defending shippers, without any apparent
estimated at less than three thousand millions and idea that to defend investors also comes within their
it is now fifty times that. If anybody protests that purview. They take the negative position at once;
the rail is receiving credit for too large a share, let they are critics who have eyes for faults alone.
him try to imagine what the country would now be
Saying this is mere repetition, certainly, but these
had it been restricted to the highway even in the gentlemen take the attitude which they suppose the
best form, for without the rail we should not have people want; they attempt to do what even experts
had the automobile. Perhaps some of the men who could not do, because they suppose this is what they
listened to Dr. Hill may have recalled that it is are set up to do and what the people want of them.
scarcely forty-eight years since "Seward's Folly,"
Their attitude will change and correct itself when
the purchase of Alaska for a little less than seven that of the people does so. That will come about
and one-quarter millions in gold. The folly then when the people realize the real nature of the case:
lay in the ignorance, which was generally shared ; the indispensableness of the service, the impossiRussia realized as little what she was selling as Mr. bility of joining starvation with efficiency; the pubSeward realized what he was buying, and in his lic ownership of the means of transportation. Some
mind the transaction was not much more than a set- progress is making toward this, and Dr. Hill's adtlement of some differences by a stroke of diplo- dress and also the addresses of Mr. Sproule and Mr.
macy.
Taft are one more bit of push towards this slow
We are not attempting any paraphrase of Dr
awakening.




INDEX TO ADVERTISEMENTS
PAGE.

Atlanta, Ga.
ATLANTA NATIONAL BANK
FOURTH NATIONAL BANK

55
55

Atlantic City, N. J.
ATLANTIC SAFE DEPOSIT & TRUST
COMPANY .
52
Baltimore, Md.
CONTINENTAL TRUST CO
FIDELITY TRUST CO
LEACH (A. B.) & Co
MARYLAND TRUST CO
NATIONAL UNION BANK OF MD...
SAFE DEPOSIT & TRUST CO

28
50
13
51
3
51

Bayonne, N. J.
MECHANICS' TRUST CO

76

Berlin,•Germany.
BANCO ALEMAN TRANSATLA NTICO . 71
DEUTSCHE BANK.
71
FARMERS' LOAN & TRUST CO
82
HALLGARTEN & CO
196

PAGE.
79
CURTIS & SANGER
CuTTER (M. H.) & Co.
33
HATHAWAY, SMITH, FOLDS & CO 17
HALSEY (N. W.) & Co
11
HANCHETT BOND CO.
33
HARRIS (SANFORD F.) & Co.
33
I MBRIE (WM. MORRIS) & CO.
6
LEACH (A. B.) & Co.
13
LYBRAND, Ross BROS. & MONTGOMERY
47
MERRILL, COX & CO.
32
NOYES & JACKSON
30
PONVELL, GARARD & CO.
31
READ (WM. A.) & Co.
1
RICKARDS (W. T.) Co.
12
RUSSELL, BREWSTER & CO.
32
SLAUGHTER (A. 0.) & Co
31
STAATS (WM. R.) Co.
26
STATE BANK OF CHICAGO
30
STONE & WEBSTER.
194
WARE & LELAND
30
WHITE (THE J. G.) COMPANIES .195
Cincinnati, Ohio.

Birmingham, Ala.
BIRMINGHAM TRUST & SAVINGS CO. 52
Boston, Mass.
BAYNE, HINE & CO
79
BLAKE BROS. & CO
12
BOND & GOODNVIN
16
BOSTON SAFE DEPOSIT & TRUST CO 56
CURTIS & SANGER
79
FEDERAL TRUST CO
58
HALSEY (N. W.) & Co
11
HATHAWAY, SMITH, FOLDS & CO. 17
INTERNATIONAL TRUST CO
57
LEACH (A. B.) & Co
13
MERRILL, OLDHAM & CO
57
MURRAY, MATHER & CO
66
NATIONAL UNION BANK
58
NEW ENGLAND TRUST CO
81
PLACE (WALTER S.)
58
READ (WM. A.) & Co
1
SOLLERS, PHILLIPS & CO., INC
57
194
STONE & WEBSTER
Brooklyn, N. Y.
,BROOKLYN TRUST CO
FRANKLIN TRUST CO
KINGS COUNTY TRUST CO
NASSAU NATIONAL BANK
Buffalo, N. Y.
LEACH (A. B.) & Co
TAYLOR (H. P.) & Co
THIRD NATIONAL BANK.

78
20
78
78
13
48
61

Camden, N. J.
CAMDEN SAFE DEPOSIT & TRUST.. 77
Chattanooga, Tenn.
HAMILTON NATIONAL BANK

53

Chicago, Ill
BABCOCK, RUSHTON & CO.
31
BANK OF MONTREAL
62
BAYNE, HINE & CO.
79
BECKER (A. G.) & Co.
32
BOXD & GOODNVIN
16
BURNHAM (JOHN) & CO
32
ComPTON (WM. R.) Co.
39
CORKILL & Co.
31
CORN EXCHANGE NATIONAL BANK
Inside Back Cover




FIFTH-THIRD NATIONAL BANK.. . 49
.
Cleveland, Ohio.
FIRST NATIONAL BAN K
FIRST TRUST & SAVINGS CO
aris & Co.

80
SO
52

Colorado Springs, Colo.
OTIS & CO.

52

Columbia, S. C.
PALMETTO NATIONAL BANK

53

Columbus, Ohio.
OTIS & CO.

52
Denver, Col.

BOETTCHER, PORTER & CO
INTERNATIONAL TRUST CO.
OTIS & Co.

29
29
52

Detroit, Mich.
DIME SAVINGS BANK
PEOPLES STATE BANK
UNION TRUST CO.

41
41
28

76

Fort Worth, Texas.
FORT WORTH NATIONAL BANK.... 55
Grand Rapids, Mich.
HOWE, SNOW, CORRIGAN & BEETLES
KELSEY, BREWER & CO
MICHIGAN TRUST CO
OLD NATIONAL BANK

40
40
40
40

Hartford, Conn.
HARTFORD-AETNA NATIONAL BANK 60
Havana, Cuba.
ROYAL BANK OF CANADA

65

Hong Kong, China.
HONG KONG & SHANGHAI BANKING CORPORATION.
70
Houston, Texas.
FIRST NATIONAL BANK
Jacksonville, Fla.
HEARD NATIONAL BANK

COMMERCIAL TRUST CO. OF N. J
FIRST NATIONAL BANK
Kansas City, Mo.
COMMERCE TRUST CO
NEW ENGLAND NATIONAL BANK.
PRESCOTT & SNIDER
SOUTH WEST NATIONAL BANK OF
COMMERCE

33
15
39
38
38

38

London, England.
ANGLO-SOUTH AMERICAN BANK.. 73
.
BANCO ALEMA N TRANSATLANTICO 71
BANK OF BRITISH NORTH AMERICA 64
BANK OF MONTREAL
62
BANK OF NEW SOUTH WALES.. 75
.
CANADIAN BANK OF COMMERCE.. 63
CAPITAL & COUNTIES BANK, LTD. 75
CHARTERED BANK OF INDIA, AUSTRALIA & CHINA
73
DEUTSCHE BANK
71
DOMINION SECURITIES CORPS
69
FARMERS' LOAN & TRUST CO
82
HALLGARTEN & CO
196
HALSEY (N. W.) & Co.
11
LEACH (A. B.) & Co
13
LONDON CITY & MIDLAND BANK,
LIMITED
72
LYBRAND, Ross BROS. & MONTGOMERY
47
MORGAN, GRENFELL & CO.
Outside Back Cover.
READ (Wm. A.) & Co
1
ROYAL BANK OF CANADA
65
SPEYER BROTHERS
4
STANDARD BANK OF,S. AFRICA, LTD..72
UNION OF LONDON & SMITHS
BANK, LTD
74
UNION BANK OF CANADA
67
WHITE (THE J. G.) COMPANIES. 195
WOOD, GUNDY & Co
67
YOKOHAMA SPECIE BANK, LTD.....70
Los Angeles, Cal.
CITIZENS' NATIONAL BANK
FIRST NATIONAL BANK
STAATS (WM. R.) Co.

25
24
26

Louisville, Ky.
FIDELITY & COLUMBIA TRUST CO.. 52

Elizabeth, N. J.
UNION COUNTY TRUST CO.

PAGE.
Jersey City, N. J.

55

Lynn, Mass.
SECURITY TRUST COMPANY

60

Mexico City, Mexico.
CANADIAN BANK OF COMMERCE... 63
Minneapolis, Minn.
16
BOND & GOODWIN
.
EASTMAN (WILLIAM W.) CO... 35
NORTHWESTERN NATIONAL BANK 35
Montreal, Canada.
BANK OF BRITISH NORTH AMERICA
BANK OF MONTREAL
BROWNE (W. GRAHAM) & Co
DOMINION SECURITIES CORP
MERCHANTS' BANK OF CANADA. .
.
MOLSONS BANK (THE)
NESBITT, THOMPSON & CO
ROYAL BANK OF CANADA
STARK (N. B.) & Co.

64
62
68
69
68
68
67
65
66

Nashville, Tenn.
53

FOURTH & FIRST NATIONAL BANK 53

INDEX TO ADVERTISEMENTS—Continued
PAGE.

Newark, N. J.
BYRNE & MCDONNELL
FIDELITY TRUST CO
UNION NATIONAL BANK

28
190
77

New Orleans, La.
WHITNEY-CENTRAL NAT. BANK
54
WHITNEY-CENTRAL TRUST &
SAVINGS BANK
54

PAGE.
READ (WM. A.) & Co
1
ROYAL BANK OF CANADA
65
RUSSELL, BREWSTER & CO
32
SEABOARD NATIONAL BANK
14
SMITH (EDWARD B.). & Co
46
SPEYER & CO
4
STANDARD BANK S. AFRICA, LTD 72
STONE & WEBSTER
194
TAYLOR (H. P.) & Co
48
TRANSATLANTIC TRUST CO
18
UNION EXCHANGE NATIONAL BANK 23
UNION TRUST CO
5
UNITED STATES MTGE. & TRUST CO 18
UNITED STATES TRUST CO
16
WHITE (THE J. G.) COMPANIES. 195
WILLIAMS, DUNBAR & COLEMAN. 193
YOKOHAMA SPECIE BANK, LTD
70

87
PAGE.

Plainfield, N. J.
PLAINFIELD TRUST CO.

77

Portland, Ore.
CANADIAN BANK OF COMMERCE....63
LUMBERMENS NATL. BANK
27
NORTHWESTERN NATL. BANK
27
Providence, R. I.
INDUSTRIAL TRUST CO
KENMORE (BRANDELL) & CO
MERCHANTS' NATIONAL BANK
MILLER (ALBERT P., JR.)
RHODE ISLAND HOSPITAL TR. CO

59
61
New York City.
59
ANGLO-SOUTH AMERICAN BANK
73
59
BABCOCK, RUSHTON & CO.
31
59
BANK OF BRITISH NORTH AMERICA 64
BANK OF MANHATTAN CO.
19
Richmond, Va.
BANK OF MONTREAL
62
AMERICAN NATIONAL BANK
49
BARNEY (CHAS. D.) & Co.
20
St. Louis, MO.
BAYNE, HINE & CO.
79
BAYNE, HINE & CO.
79
BERTRON, GRISCOM & CO.
13
BOATMEN'S BANK
Norfolk, Va.
39
BICKMORE (A. H.) & Co
23
NATIONAL BANK OF COMMERCE
49 COMPTON (WILLIAM It.) CO
39
BLAKE BROS. & CO.
12
NORFOLK NATIONAL BANK
49 HATHAWAY, SMITH, FOLDS & CO 17
BOND & GOODWIN
16
McCEuNEY & Co
12
Oakland, Cal.
BROOKLYN TRUST CO
78
25 MECHANICS-AMERICAN NAT. BANK 37
CENTRAL NATIONAL BANK
BURNHAM (JOHN) & CO
32
25 NATIONAL BANK OF COMMERCE
CENTRAL SAVINGS BANK
36
BYRNE & MCDONNELL
28
St. Paul, Minn..
CANADIAN BANK OF COMMERCE
Omaha, Neb.
63
OMAHA NATIONAL BANK
41 FIRST NATIONAL BANK
CHARTERED BANK OF INDIA,
34
MAGRAW (F. E.)
AUSTRALIA & CHINA
35
73
Ottawa, Ont.
CHASE NATIONAL BANK
1
BANK OF OTTAWA
San Diego, Cal.
66
CHATHAM-PHENIX NATL. BANK
19
BANK OF COMMERCE & TRUST CO. 25
Paris, France.
CHELSEA EXCHANGE BANK
78
San Francisco, Cal.
FARMERS' LOAN & TRUST CO
82
CHEMICAL NATIONAL BANK
ANGLO & LONDON PARIS NATL
MORGAN, HARJES & CO
CITIZENS CENTRAL NATL. BANK
14
BANK
26
Outside Back Cover.
CLARK, DODGE & CO.
10
BANK OF BRITISH NORTH AMERICA 64
COAL & IRON NATIONAL BANK
22
Pasadena, Cal.
BOND & GOODWIN
16
COLUMBIA TRUST CO
15
STAATS, (WM. R.) Co
26 BYRNE &
MCDONNELL
28
ComrroN (Wm. R.) Co.
39
CANADIAN BANK OF COMMERCE., 63
Paterson, N. J.
CONVERSE (A. D.) & Co..
22
FIRST NATIONAL BANK
76 FIRST NATIONAL BANK
26
CORN EXCHANGE BANK
191
PATERSON NATIONAL BANK
76 HALSEY (N W.) & Co.
11
CURTIS & SANGER
79
LYBRAND, ROSS BROS. & MONTPhiladelphia, Pa.
DOHERTY (HENRY L.) & Co.
80
GOMERY
47
79
EQUITABLE TRUST CO
193 BAYNE, HINE & CO
26
BIOREN & CO
20 STAATS (WM. R.) Co.
FARLEE (J. S.) & Co
79
46 WHITE (THE J. G.) COMPANIES..195
FARMERS' LOAN & TRUST CO... 82 BODINE, SONS & CO
22
FIDELITY TRUST Co.
21 CONVERSE (A. D.) & Co
Seattle, Wash.
FRANKLIN TRUST CO
20 CORN EXCHANGE NATIONAL BANK 47 CANADIAN BANK OF COMMERCE 63
HALLGARTEN & CO.
196 DREXEL & CO... Outside Back Cover. LYBRAND, ROSS BROS. & MONTERVIN & CO
46
GOMERY
HALSEY (N. W.) & Co.
47
11
FIRST NATIONAL BANK
44
HATHAWAY, SMITH, FOLDS & CO 17
Spokane, Wash.
HODENPYL, HARDY & CO.
17 FOURTH STREET NATIONAL BANK 43 BANK OF MONTREAL
62
FRANKLIN NATIONAL BANK
191 WHITEHOUSE (IRVING) & CO
HONG KONG & SHANGIIAI BANK28
191
ING CORPORATION
70 GIRARD NATIONAL BANK
Springfield, Mass.
HUDSON TRUST CO.
21 GIRARD TRUST CO. Inside Front Cover. SPRINGFIELD NATIONAL BANK
60
11
IMBRIE (WM. MORRIS) & CO..... 6 HALSEY (N. W.) & Co
Sydney, N. S. W.
KIDDER (A. M.) & Co.
79 HATHAWAY, SMITH, FOLDS & CO 17 BANK OF NEW SOUTH WALES
75
13
LEACH (A. B.) & Co.
13 LEACH (A. B.) & Co
Tacoma, Wash.
LYBRAND, ROSS BROS. & MONTLINCOLN NATIONAL BANK
21
NATIONAL BANK OF TACOMA
27
GOMERY .
47
LYBRAND, ROSS BROS. & MONTToronto, Canada.
GOMERY
47 MARKET STREET NATIONAL BANK 44 CANADIAN BANK OF COMMERCE
63
MAITLAND, COPPELL & CO.
74 PENNSYLVANIA CO, FOR INSURDOMINION SECURITIES CO
69
ANCES ON LIVES
IMPERIAL BANK OF CANADA
69
MARKET & FULTON NAT. BANK
22
66
Inside Front Cover. MARTENS (A. H.) & Co.
MARTENS (A. H.) & Co
66
MURRAY, MATHER & CO.
66
MCMILLIN (EMERSON) & CO.
71 PHILADELPHIA NATIONAL BANK. 45 WOOD, GUNDY & CO.
67
1
MEGARGEL & CO.
23 READ (WM. A.) & Co
Trenton, N. J.
42
MERCHANTS' BANK OF CANADA.. 68 REAL ESTATE TRUST CO
TRENTON BANKING CO.
77
46
MOORE, LEONARD & LYNCH
48 SMITH (EDWARD B.) & Co
THIRD NATIONAL BANK
Utica, N. Y.
44
MORGAN (J. P.) & Co.
61
UNION NATIONAL BANK
47 CITIZENS TRUST COMPANY
Outside Back Cover
MULLER, SCHALL & CO
Washington, D. C.
71
Pittsburgh, Pa.
MURRAY, MATHER & CO
66 HATHAWAY, SMITH, FOLDS & CO 17 COMMERCIAL NATIONAL BANK
51
MUTUAL BANK •
21 LYBRAND, ROSS BROS. & MONTWinnipeg, Canada.
NEW NETHERLAND BANK
16
GOMERY .
47 UNION BANK OF CANADA
67
NEW YORK COUNTY NAT. BANK
19 MOORE, LEONARD & LYNCH
48
Worcester, Mass.
NEW YORK LIFE INS. & TRUST CO 2 PEOPLE'S NATIONAL BANK
48 MERCHANTS' NATIONAL BANK.... 60
NEW YORK TRUST CO
9 TAYLOR (H. P.) & Co.
48
Yokohama, Japan.
RANDOLPH (EDMUND & CHARLES) 193 UNION TRUST CO.
8 YOKOHAMA SPECIE BANK, LTD
70




BANKING SECTION
AMERICAN BANKERS' ASSOCIATION
41st Annual Convention, Held at Seattle, Wash., Sept. 8 and 9, 1915
INDEX TO CONVENTION PROCEEDINGS
Economic and Political Summary, Wm. H. Taft
Self Defense, Henry D. Estabrook .
Diehl
The Church and Rural Life Conditions, W. W.
Effect of Good Home on Community, M. F. Rausch
The Federal Reserve Act, F. A. Delano
Boys and Girls, T. J. Newhill
Annual Report of Secretary
Currency Commission Report of General Counsel
Report of Protective Committee
Report of Treasurer

Page 88
Page 94
Page 99
Page 101
Page 106
Page 108
Page 110
Page 114
Page 114
Page 115
Page 116

Report of Library and Reference Department
Report of Law Committee
Report of American Institute of Banking
Report of Department of Public Relations
Report of Committee on Federal Legislation
Report of Insurance Committee
Detailed Report of Proceedings
President Law's Address
Memorial to George H. Russell
Agricultural Symposium
Organization of National Bank Section .

Page 116
Page 117
Page 118
Page 119
Page 119
Page 121
Page 122
Page 124
Page 126
Page 131
Page 136

"Economic and Political Summary of the Generation
Just Closing.
f

By HON. WILLIAM H. TAFT, Ex-President of the United States; Kent Professor of Law, Yale University,
New Haven, Conn.
It has seemed to me appropriate this morning to
invite your attention to the consideration of some of the
Important political and social currents since the Civil.
War. That struggle was the climax of a controversy
that rent the country over the moral issue of slavery,
and we did not really recover from its effect for more
than a decade after peace was declared. The pseudoprosperity that the currency inflation gave us, and the
panic and depression of 1873, were sequels of the war
and were part of its cost. When specie payments were
resumed in 1878 the country was restored to a normal
condition, and from that day the subsequent business
growth on a sound basis of our country began. From
that time, for more than a quarter of a century, our
material expansion has exceeded anything in history.
The settlement of the unoccupied lands of the West, the
spread of agriculture, the construction of railroads, the
growth of industries and the development of all our
national resources have doubled and redoubled our
wealth until its statistical description is monotonous.
One of the important elements in this progress has been
that of combination and organization. The field of invention in the industrial arts has been a great one, and
the combination of mechanical elements into complicated
devices has often added a hundred-fold or more to the
power of production of a single laborer. In no field has
the ingenuity of the American shown its exceptional
character so much as in this of invention and discovery.
In the use of capital, too, the possibility of saving
by enlargement and organization of equipment and plant
has been demonstrated. The little rills and streams of
the savings of the wage earners and those of moderate
means have been directed into reservoirs of immense
capital funds, which under the management of men of
executive genius have metamorphosed our manufacturing industries and our transportation systems, and have
' reduced in a way we hardly realize the cost of produc-




tion. By this principle of combination our citizens have
been given a larger power per capita of producing wealth
than ever before in the history of the world.
USE AND ABUSE OF CAPITAL
III the progress that civilization makes, however, new
evils appear as concomitants of our advance, and new
problems are presented and new remedies are made
a necessity. The tremendous power which the combination of capital gives to the comparatively few persons
who must control its use, if that use is to be effective,
tempts them to an abuse of the power. The rapid growth
of wealth between 1880 and 1900 absorbed the attention
of all our people. Material development became the cry,
and the settlement and expansion of the country became
the one great popular ideal. It was growth and size that
we were aiming at. It was the invitation of capital to
investment that seemed the highest good. We were all
absorbed in the chase for the dollar. Professions became
commercialized and the success of a man was measured
more by his ability or luck in amassing money than by
his character or public usefulness. It was an age of the
formation of great corporations, and then of the combination of'those great corporations again into trusts.
In the newer country, to induce rapid development, legislatures and municipal bodies parted with special privileges and did not guard their use or their retention with
any care as to the future public weal.
This principle of combination was found quite as
applicable to politics and party government as to machinery and capital. By the use of patronage and the
use of money bosses established their power and created
machines that worked with the same force and accuracy
and smoothness as a Corliss engine or a Standard 011
Trust.
The great corporations found it useful first to restrain
hostile legislation and then to secure affirmative legis-

,4r

BANKING SECTION.
lation giving them undue advantage in the conduct of
their business. The time came when it was • possible
In some great corporations for the officers and directors
to issue, with the same nonchalance and certainty of
their being complied with, orders for steel rails or industrial equipment .on the one hand, or for the delivery of
delegates to a state, county or national political convention on the other.
•
In the early years of this century the people became
fully aroused to the fact that they were almost in the
grasp of a plutocracy. Warnings had come to them in
the decade before, and effort had been made by legislation of a tentative character to meet the anticipated
danger, but it was not until the decade between 1900 and
1910 that the full force of the threatened control over
our government and our policies and our business became
clear to them. The agitation grew to be nation-wide, the
indignation of the people became acute, the demand for
appropriate legislative and executive action became
imperative, and the effect upon our politics and our
business was made manifest.
THE INTERSTATE COMMERCE LAW
The interstate commerce law passed in 1887 was the
first legislation in any history in which Congress had
exercised in any full measure the control that the Constitution gave it over our interstate railroad system. It
was seen that the arterial circulation of our interstate
transportation was tainted with unjust discrimination
in favor of the largest shippers, who were able to use
this unlawful preference to suppress their less powerful
competitors and to enrich their coffers with unlawful
gains. The law did not, however, intrust sufficiently
broad and direct powers to the Interstate Commerce
Commission which it created, and the railroads, blown
with pride, treated the commission with derision and
flaunted their defiance of its orders in the face of the
people. Amendment after amendment followed, and for
more than two decades the controversy went on 'between
the railroads and the executive, legislative and judicial
branches of the government until the weakling board
of 1887 grew into the powerful tribunal of 1910, and the
railroads found themselves brought under complete governmental control.
This history of the interstate commerce law and its
enforcement contains one of the most useful lessons
to those who would defy the people in the pride of
intrenched power. It may take years, but "all the people
cannot be fooled all the time." I listened to a most
Interesting speech by the worthy president of a railroad
that has been brought to grief through the headstrong
defiance of popular will by his predecessor, in which he
set forth in plaintive but forcible language the present
subjection of the railroads to official regulation. I could
not but contrast his manner and -matter with what his
predecessor would have presented to such an audience
ten years ago.
THE ANTI-TRUST LAW
A similar change can 'be traced in the effect and
enforcement of the anti-trust law, though this has been
brought about in the course of judicial interpretation
and decision rather than by amendment. In 1890 Congress passed the Sherman Act to forbid restraints of
Interstate trade in the forms of trusts and monopolies,
leaving to the courts to enforce the law and interpret the
general terms. The first decision was, unfortunately,
narrow, and the great industrial and railroad combinations repeated the error which had been made in respect
to the interstate commerce law and flouted the new
measure. It took twenty years of executive prosecution
and judicial construction to show the power that was in
the law, and to-day no investment is made, no combination is carried through without the utmost anxiety and
care on the part of those who are promoting it to avoid
violation of the terms of that comprehensive statute.




89

In politics the name of the machine has become
anathema. The cry that a candidate is supported by the
bosses has been in the last decade often sufficient to carry
the popular vote against him. There has been a tremendous rousing of the public opinion and popular political action. Corporations have been driven out of politics,
and while, of course, corruption is not ever absent, the
danger of plutocracy has disappeared and the purification of politics has constituted a real reform for which
all good citizens must be grateful. .
Popular indignation cannot be really roused or the
leviathan of the people be stirred to action such as they
have just taken and stop short at the line of wise moderation. Part of the cost of the original disease is in the
incidental damage from the inevitable excess of remedy.
The hostility of legislatures and of Congress, consciously
or unconsciously, has come to be directed against all
successful investment of capital without discrimination.
The inquisitorial and nagging character of the powers
of commissions created for the close supervision of corporate activities have so frightened capital as to shrink
Investments and stop normal expansion in the business
of the country. Nothing is so timid as capital, and
nothing is so easily able to take care of what it has. A
hostile spirit manifested in legislation buttons up the
pockets of those who control wealth that would otherwise be invested.
EFFECT ON WAGE EARNERS
The sad feature of such excess of remedy, however
well intended, is that the persons who suffer most are
those who are least able to bear suffering, the wage
earners whose comfort and living are dependent upon
regular employment. In time of great prosperity, when
wages are good and employment constant, everybody is
comfortable and snug with a consciousness of power,
there is a full opportunity for the play of the forces of
class jealousy and discontent with inequality, and the
popular delusion spreads that legislation can do anything.
Schemes for forcing, not equality of opportunity, but
equality of conditions, are proposed. Measures are
adopted to strike at the successful without distinction as
to whether their success is dependent upon legitimate
methods or otherwise.
The close and absolute supervision over the management of railroads and the restriction upon the rates
that are charged by them in interstate commerce and in
commerce within states, together with the increase, or
the maintenance, of wages through the power of the
trades unions, have ground the railroads between the
upper and nether millstones and prevented a fair return
upon their capital. The solvency of some is threatened,
and all this to the detriment of the business of the country, and especially to the comfort and happiness of wage
earners dependent on normal business and a normal
demand for labor.
We are all in the same boat. The prosperity of each
class is largely dependent on the prosperity of all.
The bad conditions of one class reacts upon that of all
the others. This is no reason why we should not repress
injustice and take away its opportunity and punish
abuse of power. But it is a reason why we should not
Indulge in excess and injure all classes by injustice
to one.
But the people of the United States are intelligent.
When they suffer in the discipline of adversity brought
on by their own mistakes they are quick to see them and
to remedy them, and such excesses as I have described
are only the natural outcome of the just indignation that
was excited by capitalistic abuse of power, and we must
look now to a retracing of our steps to the line of
moderation and justice.
We must grant increased rates to the railroads when
the conditions require it, and grant them quickly. Their
prosperity is important to the prosperity of the country.

BANKERS' CONVENTION.

90

Their needs constitute a substantial per cent. of the
demand for our manufactured goods. Millions own their
stock. They employ millions of men.
THE CASE OF THE RAILROADS.
We must not allow the outrageous injustice to continue by which we inaugurate the real reform of parcels
post, and do it at the cost of the railroads by compelling
them to carry the enormous increase of traffic for
nothing.
We should repeal the full crew bills that impose
upon the railroad companies the burden of employing
unnecessary labor.
In retracing our steps to cure these excesses there
is no reason why we should not maintain the real.progress which we have made in disenthroning plutocrats
and in making those who choose to exercise public
franchises serve the public for not more than a reasonable profit..
Another most successful instance of the application
in
of the principle of combination has been seen . the
development of trades unions. Wage earners, especially
those engaged in skilled manual labor, have united in a
common cause, have organized, have appointed leaders
to represent them in the inevitable friction of interests
between labor and employers as to the terms and conditions of employment. No change in our social condition, it seems to me, has been more beneficial on the
whole to the workingmen than has this resort to the
power of combination among them. There is no doubt
that at common law the rules governing the relation of
the employe and the employer were framed in the interest of the employer. The single employe was at great
disadvantage in seeking favorable terms of employment
or in maintaining them. By union, however, the wage
earners have been able to place themselves upon an
equality of dealing with their employers. By joint contributions they create funds which maintain them pending disputes over terms. Their quitting employment in
a body has proven a real inconvenience and a real interference with the employer's prosperity, which makes it
a powerful leverage in maintaining their reasonable
demands. On a rising market the combination of
laborers can compel their employers to give a just share
of the increased profit of their joint product in the form
of advanced wages, and on a falling market they can
restrain the employer from undue haste in making a
cut. Of course, wages are determined in a free market
by the law of supply and demand and no combination
can ultimately avoid an adjustment in accord with that
economic law. But in the meantime trades unions can
protect the workman against the undue haste and greed

worked out, they will inure to the benefit not only of
the employe but the employer and the community.
These are the advantages of trades unions. We
should know that they have come to stay and to remain
powerful factors in the progress of the community. But
evil tendencies have appeared in such combinations, just
as in combinations of capital. 'rendes unionism has
tended to create a dead level of industry and skill among
wage earners. By securing the same pay for the good
worker and the poor one it takes away the motive in
the individual workingman for greater industry and
higher skill. These tendencies, we may hope, trades
unions themselves will seek to mitigate and neutralize
for their own good.
But the chief ground for criticising the recent policy
of trades unions is the fact that the power they have
legitimately acquired by combination and have properly
used for the betterment of their conditions, they are now
attempting to abuse by seeking to place organized labor
in a privileged class. Congress and legislatures have
not deemed it necessary to take the same pains to
impose detailed restrictions upon the possible abuse of
the power of trades unions as in the case of railroad
companies and trusts. To those who are injured by the
abuse of their power by trades unions ordinary principles of law offer remedies which are probably sufficient.
But the unions are not content with this freedom from
special legislative restriction. They are demanding from
legislatures and from Congress that common law and
equitable remedies be suspended against their methods
of industrial warfare, which have been declared to be
illegal by the courts. They have succeeded in some of
the states, as they have succeeded in England. They
have partially succeeded in Congress, but not as fully as
their leaders represent, in the passage of what is called
the Clayton Act.
COUMPOUND AND OTHER BOYCOTTS.

• The Anthracite Coal Commission appointed by President Roosevelt, which settled the anthracite coal strike,
and which contained a representative of organized labor
upon it, made a report that the compound boycott was
one of the most cruel and illegal instruments that could
be evoked in a labor dispute, and they strongly condemned it. There are three kinds of boycott—the primary boycott, the secondary boycott and the compound
boycott, so called. When a body of workmen withdraw from employment and notify their employer that
unless he complies with their demand they will not work
for him, nor will they patronize him in any way—that
.
is what is called a primary boycott. It is legal and
always has been. They may use the normal inconveniences that such withdrawal from employment and withof employers.
holding of custom enable them to inflict on the employer
to induce him to a compliance with their terms. When
POLITICAL PONVER OF TRADES UNIONS.
they enlarge the field of inconvenience to him by trying
The trades unions have secured great benefit to their
to persuade others to sympathize with them in withthe political power they have
members because of
holding custom or valuable association of any sort from
exercised. This they have been able to wield, not
engaged in a secondary boycott.
a majority of the community, the employer, they are
because they constitute
The Clayton bill in my judgment makes legal a
for the members of trades unions and organized labor
secondary boycott of this description, and it thus authorare very much in the Minority even among wage earners;
izes the use of an instrument in industrial warfare that
but they are a forceful, well-directed, 'compact body,
may work unjust hardship.
in every local community as well
active and influential
The compound boycott, however, is much more danas in the nation at large, and are supposed to hold a
gerous to the community, and it would be a serious
power in many legislative and ,congressional
balance of
public injury to make it legal. It seeks to draw into the
districts. They have been able to moderate the severity
controversy by compulsion members of the community
common law against their class, to impose upon
of the
who have no normal relation to the issue between the
employers obligations in respect to the safety and health
contestants in the labor dispute.
place of labor and the use of safety appliances
of the
A is an employer and B is the .body of employes in
in dangerous employment, to abolish the inequitable
a trade union and C is a customer of A. If the B trade
servant rule and to obtain workmen's compensafellow
union has a dispute with A, and B notifies C that he
tion acts insuring the workmen against disabling
must withhold his custom from A or B will boycott him
accident. Some of these workmen's compensation acts
been accepted, also, this is a compound boycott, both against A and C.
are in operation, but the principle has
It was illegal at common law and gave an action for
and I doubt not in the course of time, when properly




BANKING SECTION.
damages to both C and A, and was a criminal conspiracy
punishable as a misdemeanor. Its evil is in the opportunity by moral duress it gives the striking and boycotting workmen to involve the whole community in the
fight and array them against A.
The Supreme Court of the Unite States has held that
such a compound boycott used to destroy the interstate
trade of a hat manufacturer in Danbury, Conn., was a
violation of the Anti-Trust Act and has sustained a
judgment for $225,000 against members of the trade
'union which carried on the boycott. In my judgment
there is nothing in the Clayton Act passed last year
which would prevent a similar judgment for similar acts
in the future.
UNDUE RESTRAINT OF CORPORATIONS.
We in the past found corporations exercising undue
privileges to the disadvantage of the people which the
people in the enthusiasm of material expansion had
unwisely granted,them, and now in the reaction we find
that the movement toward the curtailment of their
powers has gone beyond the median line, has resulted in
injustice to them and injury to the community. On the
other hand, we found that the wage-earner class was
suffering from a fundamental and unjust disadvantage
in dealing individually with capital. In order to put
them on an equality with their employers, so that they
might secure a proper share of the joint product of labor
and capital, it was necessary to recognize the legality of
combination among them. In the encouragement which
they have been given and the power that they have been
exercising they now seek to obtain privileges through
their political influence.
We are now halting in business and progress and are
learning the unwise steps we have taken that need
retracing. We need not go back to the conditions that
led to the great reform, and we shall not do so. But
we should go back to the line of justice and equity.
ATTACKS ON REPRESENTATIVE GOVERNMENT.
Another most important development in this country
has been an attack upon our representative system of
government as a cause of the corporate and corrupt
control of politics. It was said that the system involved
the selection of agents by the people to act for them in
executive and legislative work who too often proved
faithless, and that the only method of carrying on the
government safely was to dispense with legislative
agents and let the people legislate directly. A most
formidable wave of public opinion in favor of such
a
change has swept the country and has found expression
in the initiative and the referendum. After a study of
the working of these innovations, I do not hesitate to
say that it proves the unwisdom of such changes. If
it be true that a people have not information and intelligence to select from their own number competent and
honest agents to do their work, they certainly have not
the capacity to perform the much more difficult task
of passing useful judgment on statutes, frequently difficult to construe or understand. Again, the duty
imposed upon the people in legislating by initiative and
referendum is so much more burdensome than that
imposed by tile representative system in selecting agents
to do this work that the majority of the voters too
frequently refuse to perform their electoral duties, and
thus leave to a minority of tile electorate the decision
of important questions submitted by referendum. The
majority of the electorate thus show that they do
not
approve the reference to them of such difficult questions.
The statistics show that at the same election at which
officers are to be elected, and measures referred are to
be voted upon, the proportion of those who vote upon
the measures is rarely more than 60 per cent. of those
who vote for candidates. and not infrequently is as low
as 25 or 30 per cent. thereof. In the election of 1912
in Oregon the electors were called upon to vote upon




91

the question of adopting thirty-one complicated statutes.
In order to explain the issues thus presented the state
published 'a volume containing 250 closely printed pages
and circulated it among the voters. I ask this intelligent audience to look into their hearts and answer me
truly, and say how many of them in preparation for
such an election would read diligently through that
volume of 250 printed pages. It would be on subjects
with many of which they were not familiar. Much or
all of it would be the dryest kind of reading. Then I
ask those who think they would read such publication
how. many of them after reading it would think their
judgment upon the statutes worth anything.
The initiative gives the power to anyone who can
induce five per cent of the electorate to sign his petition
to frame a legislative bill and compel its submission to
the electorate, and this without amendment or discussion
as to form. It is a great burden upon the electors
and
eliminates all possibility of that wsie adaptation to
the
real public needs that illuminating discussion
and
refraining so often give to laws when they are
passed
by Congress or a state legislature.
THE BUSINESS OF LEGISLATION.
The business of legislation is an expert matter.
It
is something that requires a knowledge of the
meaning
of legal terms. It often requires the taking of
evidence
in order to determine what the real evil is to be remedied
and how such a remedy can be formulated. Legislators.
even if they are not trained lawyers, acquire excellent
judgment as to the merits of bills by reason of their
experience and the full opportunity and time they have
to study the bills, and from the calm and informing discussion of their details. This is impossible with the
general public. It is just as absurd to propose to build a
bridge without engineers, to build a house without an
architect or a competent contractor as to propose
detailed legislation by votes at a popular election. This
is not to impeach the intelligence of the electorate, it is
only to recognize the limitations upon men, however, in
doing something under the conditions no intelligence
will enable them to do.
The pure democracy attempted in Athens proved to be
a failure, and government in those days was so
much
simpler than in our cities and states that even a
temporary success in such a community would not justify
a
resort to the same method now. The town meeting
in
our New England states was a form of direct government adopted when the necessities of village and town
government were few and when almost anybody could
discharge the duties of any office. Yet those Puritan
ancestors of ours, the moment their villages became three
or four in number, turned to the representative system.
The general courts of Massachusetts and of Connectic
ut
and of Rhode Island and of all the other New England
states evidence the conviction that the town meeting
system is inapplicable to a community of any considerable size, especially to a community in which the
people
live in different settlements remote to the
seat of
government.
The institution of recall deals with the executive
and
judicial branches of the government. With
both its
operation is injurious to the public service,
though in
the case of judges it is much more dangerous.
If an executive officer is dishonest lie can in
effect
be recalled by impeachment or by criminal trial
and
convicition, and sentenced to the penitentiary.
Under
the new system of recall an honest official, before
he
has had time to work out and vindicate his policies,
may
be ousted by an ambitious rival through misrepres
entation in the press and the hasty judgment of the
minority
of the electorate who go to the polls. The
necessary
tendency of such a system is to prevent his
adopting
ally affirmative policy at all, to discharge his duties
in a
colorless way, to restrain all energy and enterpris
e, and

BANKERS' CONVENTION.

92

to keep him with his ear to the ground to enable him
to avoid the doing of anything that shall arouse discussion. It adds greatly to the tyranny of a reckless and
unscrupulous press. It necessarily discourages enterPrise and originality and real effort for reform because
no reform was ever initiated that did not stimulate
misrepresentation to obstruct its successful inauguration. Under such a system Lincoln would have been
recalled.
THE RECALL OF JUDGES.
The evil of the recall of judges and judicial decisions
is, however, much greater. The tenure of a judge or
the right of the individual litigants is to depend on the
chance and uncertainty of one popular election. In the
nature of the case, the people cannot be advised of the
legal arguments pro and con even if they could understand them. Again the power of a reckless press would
be enhanced and justice and equity would play little
part in the result.
The evil tendency of such so-called reform is in the
destruction of the sanctity of our constitution. Under
the initiative and referendum, no greater consideration
by the people is required in the passage of a constitutional amendment than in that of any temporary and
unimportant measure. A bill of rights and an appropriations bill in such a procedure rest upon the same
sanction. The success of our popular government, in
promoting the happiness of all the people, depends upon
the justice and equity with which it reconciles the rights
and power of the whole people with the rights of
minority and of individuals. Such justice and equity
has been obtained by the adoption of a written constitution and the interpretation and enforcement of it by an
Independent judiciary whom the people took pains to
surround with every protection against popular passion
or congressional or executive restraint. The system of
representative government is an institution hammered
out in the struggle for liberty by our Anglo-Saxon
ancestors for eight hundred years. The system of
written constitutions and an independent judiciary has
vindicated itself in the strenuous life of the Republic
for 125 years and there is nothing in the actual results
of the initiative, referendum and recall that commends
them as a substitute.
PARTIES ARE NECESSARY.
What is true with respect to the state is true with
respect to the party. Parties are essential to popular
government. In no other way practically can the will
of all the electorate be interpreted and embodied in
affirmative action, legislative and executive. The selection of candidates by a party is a matter in which the
community may properly take an interest and with
respect to which the legislature may properly pass laws
-to prevent abuses which have arisen in party government. But the question which I moot is whether the
selection of candidates at a general primary has tended
to the elimination of corruption or political machine
rule and the selection of better representatives of a
party. I say without hesitation that it has not. Certainly it has not with respect to the many offices to
which it applies, when the persons to be selected are
not persons of whose qualification the public can, in the
nature of things, have any intimate knowledge. The
standard of judges in those states where the candidates
are selected by a general primary has notably and perceptibly become inferior to those who were selected
under the old convention system.
The convention system gave rise to abuses. Bosses
and machines were able to control the convention, but
even under the worst boss and the worst machine the
convention was a body with a sense of some responsibility growing out of its •desire to nominate a ticket
which would win in the election; and therefore while it
may have nominated many machine candidates whose




selection did not make for the public interest, it frequently nominated men of strength and popularity and
high character in order that the ticket might be a votegetting one. Under the system of the general primary
there is no such responsibility. Especially is this true
In the selection of the subordinate officers. Circumstances of no real or proper significance in the selection
of qualified candidates affect the choice in such cases.
If the initial letter of the candidate's name comes early
in the alphabet, and he is first in the list of candidates,
he may receive thousands of votes more than the man
whose name begins with W. Anything that gives a
man notoriety or conspicuousness in the community,
however unimportant in showing his qualifications,
attracts votes to him because the voters have no other
means of identifying or discriminating between the many
candidates. The man who advertises_ himself most in
the newspapers has a great advantage. The general
primary in the opportunity which it offers to the use
of money in organizing a campaign, expended, not corruptly but merely in giving publicity to the candidate,
greatly increases the power of money. I have known
man after man, worthy of party preference, who has
declined to enter a primary contest because of the
financial burden that a successful issue imposed.
MACHINE CONTROL OF PRIMARIES.
• Nor is it true that the general primary is any less
subject to the control of a machine and the boss and a
political organization than a convention. Primaries are
usually attended by a minority of the party. In other
words, the result is much affected by the number who
can be aroused to come out to vote, and that depends
upon organization. This places .in the hands of the
politicians who have an organization the means to'
control.
In America we have been greatly influenced by the
success that our people have shown in the invention
of machines to reduce the amount of labor needed and
the cost of production, and we cannot get over the idea
that political evils can be remedied by a change in
political machinery. I don't mean to say that one form
of machinery in politics is not better than another, but
I do mean to say that everyone will fail, or will suffer
in its operation if the electorate do not perform their
electoral duties. The representative system in legislatures and in conventions will work well if the people who ought to vote will turn out, and it will work
for the reasons I have stated a great deal better than
the initiative and referendum and the general primary.
But we should realize under any system the politicians
will control, if the people fail in their electoral duties.
These so-called reforms fmd their popularity are a sincere expression of the desire of the people to make
short cuts and to avoid the evils of a failure of the
people to do their duties. It is a futile policy, as
experience is showing. We find the so-called bosses still
controlling under the general primary, and we find the
reformers as bitter against the result of the general
primaries when they are defeated as they were against
the convention. We may, therefore, expect a wise reaction from this attempted infusion of "more democracy
to cure the evils of present democracy."
Another marked tendency" of this generation is the
growth of the spirit of universal brotherhood. It has
shown itself in the sense of responsibility that rich men
who have accumulated great fortunes have manifested in
enormous donations to every variety of philanthropic
activity. They have shown this not only by the size
of these contributions but by the foresight and labor
with which they have formulated the provisions and
created the instrumentalities for their useful application. But not among the rich alone has this feeling
spread. The organization of all sorts of charitable
societies and the unselfish activities and devotion of

BANKING SECTION.
people of moderate or very limited means
to help their
stumbling brethren and sisters is apparent on
every
hand. The awakened interest on the part
of the many
in public matters, the organization
of thousands of
women's clubs for the discussion of subjects of
public
Interest, and for the promoting of plans for municip
al
and other kinds of community improvement are manifest to every observer. The churches, too, have minimized doctrinal differences and have united
and stand
shoulder to shoulder in a common effort to
make the
spirit of religion the handmaiden of the moral
uplift
and of the spread of the fraternal spirit. The
people
have halted in their mad rush for dollars and
have
become ashamed of their previous absorption in material
matters and are now seeking,to show to the unfortunate
who have not shared in the general prosperity
their
interest in them and their desire to help them on.
PATERNAL LEGISLATION.
The same spirit shows itself in the trend of legislation which has assumed a much more paternal characte
r
than that of a quarter of a century ago, when the
doctrines of the laissez faire school of government
seemed
to be controlling. It is quite possible that in
this
enthusiasm many foolish things have been done. A movement of this kind cannot be carried on without developing an hysteria that promotes silly projects, but
these
are the mere excrescences and excesses in a
movement
of real progress in humanity that every
lover of his
kind must welcome. The suggestion that
by legislation
we can all lift ourselves by the boot
straps, can abolish
poverty, can distribute fortunes and produce
a universal level of happiness is the dream of
the socialist.
Many schemes of uplift, whose authors deny
that they
are socialists, are equally unsound. They
are, however, an evidence of this spread of the fraterna
l feeling,
although they promise no practical good and may
involve
obstruction to real progress in the waste
of public
activities, in the squandering of public funds
and in a
useless increase in the burden of taxation.
This new fraternal feeling is not limited
by national
boundaries. The people of the world are closer
to each




93

other. They are taking more interest in each other's
welfare. Those of us that dreamed of universal peace
have had a dreadful shock in this awful cataclysm that
has come to Europe; but even that has developed the
world-wide interest in the welfare of peoples and has
shown by the general sympathy with the suffering of
all the belligerents how much more united the peoples
of the world are than they ever were before. The vast
sums that are being contributed, the many activities that
are being carried on among our people to relieve
the
wounded and starving of all the nations through
the
Red Cross and other agencies far exceed anything
that
history has shown in the past, and are as much greater
in their extent as this war is greater than any previous
war in the history of the world.
THE DESTRUCTION OF CAPITAL.
The war, the end of which no man can now see,
staggers the imagination in the loss of life and in the
destruction of hard-earned capital that its probable long
continuance must involve. When it came it was such
a shock and such a disappointment that those who hoped
for human progress lost their faith. But, as it grows
to be an older story and we bring our philosophy to
bear on the facts, we find occasion for hope in the very
suffering which when the war is over will prompt the
adoption of some peaceable means of settling international disputes to prevent a recurrence of such an awful,
catastrophe.
I am an optimist. The difference between a crank
and an optimist, it seems to me, is not in their ideals,
for an optimist may have as high ideals as a crank, but
a crank is a man who believes that his ideals can be
realized to-morrow by legislation, and has no interest
except in their instant accomplishment. lie is not willing to await the slow growth in the character of the
individual which must be the foundation of all human
progress. The optimist believes. his ideals are only
attainable by indomitable struggle and never ending
patience; but that so much are they to be desired that
every effort toward them is life giving, and every real
advance, however gradual, is worth while.

BANKERS' CONVENTION.

94

"Self Defense.
•

rs at Law, New York.
BY HENRY D. ESTABROOK of Noble, Estabrook & McHarg, Councello

No stranger can say "hail and farewell" to Seattle
without recalling the words of the Master: "If ye have
faith as a grain of mustard-seed and shall say unto this
mountain, Be thou removed, and be thou cast into the
sea; it shall be done." But, says St. James, faith without works is dead, so that by works a man is justified,
and not by faith only.
It is worth any man's journey from the uttermost
parts of the earth just to visit this wonderful city and
see confirmed this scriptural challenge to credulity—a
.
miracle to be sure, but a miracle brought to pass by
Seattle's faith justified by Seattle's work. For she has
said to her encompassing mountains, Be ye removed
and be ye cast into the sea, and lo! nothing doubting,
the deed was done! Her mountains, useless and inaccessible, have been brought low—dissolved—held in solution—liquefied and flowed over valleys and housetops
to push back the shoreline of Old Ocean himself, so
that today any real-estate broker in Seattle will reluctantly sell you, at 'steen dollars a square foot, what
was formerly a mountain back somewhere in the interior, but now transformed, translocated, transfixed into
a level waterfront, the very choicest warehouse property in the city.
And the instrumentality through which this work
of faith was accomplished only adds to the miracle;
for it was not gunpowder or dynamite, but water—just
plain, every-day water, seemingly the weakest, wettest,
softest, least puissant of all agencies. Of course, your
engineer will say that it was a mere problem in
hydraulics; that given a certain head, and a certain
volume, and a squirt-gun big enough, water in motion
will lift a mountain out of its socket and batter it into
batter, and that that is all the miracle there is to it.
But your engineer thus admits that it was not simply
.water, but water in motion that did the trick. Isn't
motion, next to life itself, the greatest of all miracles?
Tie a pendant knitting-needle to a stick and revolve it
fast enough and you have not a line of steel but a steel
disk. Give water a head of 500 feet and you have not
water but an arm of adamant. Motion! Is there such
a thing as motion absolute, or is motion only relative?
Can force act at a distance or only on substances in
contact? Is all force and all substance resolvable finally
Into the forth-putting of some universal Mind? You
see it is ony a step from physics into metaphysics. If
Atlas supported the earth on his shoulders, is the boy
who stands on his head with his heels in the air another
Atlas? Emerson declares that the soul of God is poured
into the world through the thoughts of men. "The
world," he says, "stands upon ideas, not upon iron or
cotton; and the iron of iron, the fire of fire, the ether
and sources of all elements is moral force. As cloud on
cloud, as snow on snow, as the bird rests on the air and
the planet rests on space in its flight, so do nations of
men and their institutions rest on Thought."
GOVERNMENT RESTS ON THOUGHT..
NOW, just as America was a new continent which the
Almighty had kept'fallow and perdu for the working out
of some great design, so the American governnient was
founded on brand new ideas; it and its Institutions rest
on Thought. First was, the idea that all then are
created equal. England read this .declaration of our
fathers and wai amused at the erratic notion. "Governments derive their ,just Powers. from the colisent of
the governed." Here Was another of those new ideas.




England heard of it and became furious. Hence the
Revolution in which these ideas were vindicated.. All
the world heard of the event. European labor shifted
the burden from its shoulders for a moment and strained
its weary eyes across the waters. It beheld the white
hand of Freedom beckoning from the West. It was
asked to come and it came. From all quarters of the
globe—from Europe, Asia and Africa—people of every
nation, character and tongue flocked to render aid in
the upbuilding of so ambitious a structure. Foreign
powers laughed at the motley spectacle..'What inglorious
failure awaited an undertaking born of the imagination
and reared by ignorance! What riot and anarchy must
ensue from such a diversity of habit, thought and language! Was America to be the new Tower of Babel?
Yes—yes, with these differences: Instead of a few
square feet on the plains of Shinar for a basis, the new
Babel comprehended a continent; instead of the impious purpose of subverting the will of God, God Himself was to be the architect; instead of the dispersion
of one nation and the confusion of tongues, the new
Babel was to amalgamate all nations and unify all languages!
Our Civil War was but a corollary of the Revolution, for by this war the Declaration of Independence
Itself was vindicated. It became something more than
nt
a rhapsody of words, something more than a magnifice
paradox; three million people were made citizens instead
of slaves.
Fellow citliens, our American Republic, the hope
and •beacon of the world, is still in process of erection.
It was our fathers' task and only lately our brothers'
task, to die for it; be ours the harder task to live for
it. We shall •not survive to see it finished; God forbid
rethat we should survive to see it perish. We are
of our own generation and for the
sponsibile for the acts
education of the next. Shall our institutions endure?—
and for how long?
"How long, good angel, oh, how long?
Sing me from Heaven a man's own song!
Long as thy art shall love true love,
Long as thy science truth shall know;
Long as thy eagle harms no dove,
Long as thy law by law shall grow;
Long as thy God is God above,
Thy brother every man below;
So long, dear land of all my love,
Thy name shall shine, thy fame shall glow."

Please observe that these poets haxe a way of making truth so obvious as to forestall argument. Note
perthe conditions laid down by Sidney Lanier for our
Art in all its aspirations and accomplishpetuity: Our
ments shall love true love, that gracious principle or
habit that looks for good rather than evil in the world.
Our science shall know truth—not the learned ignorance
and jargon of the schools, not the conceits of egotism,
but God's . truth• that makes free and endureth to • all
generations. Our noble Eagle Shall harm' no dove—
only let the vulture and the cormorant beware! Our
law by law shall grow, "slow ripening down from precedent to precedent," under a Constitution that presents
no barrier to•the ultimate. will of the people, but wisely
•princompels them to think twice before relinquishing a
Our f God
ciple of action once thought to be the 'best.
shall be GOd above—not any 'god'under us, but the one
God over us=a hovering ideal of spiritual' good--•-abeVe
—always above—towards which We struggle by the very
necessity of our spiritual being: Finally, our 'brother

BANKING SECTION.

95

shall be every man below. Lowell, another poet, had
already called America "half-brother to the world."
And Shakespeare, the poet of poets, says:

monium by the people themselves as a punishment for
their own wickedness and folly—an idol of Heathendom
made manifest in the flesh.

"Strange is it that our bloods
Of color, weight and heat, poured all together,
Would quite confound distinction, yet stand off
In differences so mighty."

Tom PAINE'S PHILOSOPHY.
Tom Paine has proved all this in his "Common
Sense- and proved it from the Bible! Let me read to you
a few extracts from his "Common Sense," the pamphle
t
that more than any other single influence led to our
Declaration of Independence:
"The cause of America is, in a great measure,
the
cause of all mankind."
"The laying a country desolate with fire
and sword,
declaring war against the natural rights of
all mankind,
and extirpating the defenders thereof from
the face of
the earth, is the concern of every man to whom
nature
hath given the power of feeling."

That statement is as true today as when Shakespeare made it, save only in our own big, tolerant,
humane and hospitable country, where the bloods of all
nationalities are poured together without distinction to
the making of that ultimate being, greater, freer, nobler
than any King on earth—an American, upon whose
shoulder a Sovereign People hath laid the accolade of
Man.
IS THE REPUBLIC WORTH FIGHTING Fon?
Was America as erected by such men as Washington and Hamilton worth fighting for? Our forefathers
thought so—even to the death. Was the berpetuity of
our Union worth fighting for? Our fathers and brothers
thought so—even to the death. .Is America just as she
is, under the tutelage of those to whom ,Washington has
become a steel engraving and Hamilton anathema, worth
fighting for? She is if an American is to continue lord
of himself and not the vassal of a lord. She is if liberty
means self-government. Groping, vacillating, jealous,
discontented, costly and chaotic .even as popular government, from its very nature, is doomed to be, we
Americans would not exchange the adumbrations,
the auroras,
the mists that spiritualize the hopes of democra
cy for all
the hard, cold certainties of even contented
slavery.
Our states no longer have to defend themselv
es
against each other, for they have a common interest ill
every inch of territory under a •Constitution that guarantees the equal rights of every citizen of every state
in every other State. Otherwise, suppose that New
York as a separate sovereign, and looking only to her
separate interests, should deem herself over-populated
and so fall to hankering for the everglades of Florida
and a place in that tropic sunshine; would not
some
of her statesmen find an excuse for annexing
Florida?
Rather! And who would hinder her? And why
shouldn't she? Isn't necessity, next to self-defense,
the
first law of nature? And does not luxury become
necessity, particularly the luxury of sovereigns? Except
for
our Union, therefore, we ourselves would today
be living in perpetual warfare, and every one of our several
States would be a dainty morsel tempting the appetite
of every King in Europe.
REIGN OF EQUAL LAWS.
Now, what does all this prove? For the first time
In history America has proven that the peoples
of the
world, left to their own devices, and regardless of nationality, language, creed or need, under the reign of
equal laws, with no other sovereignty than their expressed will, owing allegiance only to humanity and
themselves, may and will live in peace and a growing
consciousness of the fatherhood of God and the brotherhood of men. Such a world-democracy as ours is the
only hope of universtil peace. Idealists dream of world
peace through treaties of disarmament, negotiations of
diplomacy, and the adjudications of international courts.
Tennyson looks forward to the Parliament of Men and
the Federation of the World, admitting it to, be far-off
a
divine event. There is poet enough in everyone of us
to.share Tennyson's dream and long for its materialization, but the oldei• I grow the more I realize that it is
a dream within a dream unless and until every king
and kinglet, prince and princelet, together, with all their
preposterous claims of divine rights—together with all
the pomps and frauds and shams of royalty—have been
banished from the earth. So far from being the Vicar
,of God, a King is a monstrosity conjured out of
Pande-




"The design and end .of government are freedom
and
security."
"How came the king by a power which the
.
people
are afraid to trust, and always obliged to check?"
"The fate of Charles the .First hath only made
kings
more subtle—pot more just." •
"Male and female are the distinctions of nature,
good and bad,. the distinctions of heaven; but how
a
race of men, came into the world so exalted above the
rest, ahd distinguished like some new species, is worth
inquiring into, and whether they are the means of happiness or of misery to mankind."
"In the early ages of the world, according to the
scripture chronology, there were no kings; the consequence of which was there were no wars; it is the pride
of kings which throws mankind into confusion."
"Government by kings was first introduced into the
world by Heathens, from whom the children of Israel
copied the custom. It was the most prosperous invention that was ever set on foot for the promotion of
Idolatry. The heathen paid divine honors to their deceased kings, and the Christian world bath improved on
the plan by doing the same to their living ones. • How
impious is the title of sacred majesty applied to a worm.
who in the midst of his splendor is crumbling into dust!"
"As the exalting one man so 'greatly above the
rest cannot be justified on the equal rights of nature,
so neither can It be defended on the authority of Scripture; for the will of the Almighty, as declared by Gideon
and the prophet Samuel, expressly disapproves of government by kings. All anti-monarchical parts of Scripture
have been very smoothly glossed over in the monarchical
governments, .but they undoubtedly merit the attention
of countries which have their governments yet to form."
"Nearly three thousand years passed away, from
the . Mosaic account of the creation, until the Jews,
under the national delusion, requested a king. Till then
their form of government. (except in extraordinary cases
where the Almighty interposed) was a kind of republic,
administered by a judge and the elders of the tribes.
Kings they had none, and it was held sinful to acknowledge any being under that title but the Lord of Hosts.
And when a man seriously reflects on the idolatrous
homage which is paid to the persons of kings he need
not wonder that the Almighty, ever jealous of His honor,
should disapprove a form of government which So impiously.invades the prerogative of heaven."
"Monarchy is ranked in Scripture as one of the sins
of the Jews, for which a curse in reserve is denounced
against them. The history of that transaction is worth
attending to."
"The children of Israel being oppressed by the
Midianites, Gideon marched against them with a small
army, and victory,- through the divine interposition, decided hi his favor. The Jews elated with success, and
attributing it ,to the generalship of Gideon,. proposed
making him a king, saying, 'Rule thou over us, thou

BANKERS' CONVENTION.

96

and thy son, and thy son's son.' Here was temptation
in its fullest extent; not a kingdom only, but an hereditary one; but Gideon in the piety of his soul replied,
'I will not rule over you, neither shall my son rule over
you. THE LORD SHALL RULE OVER YOU.' Words
need not be more explicit; Gideon doth not decline the
honor, but denieth their right to give it; neither doth he
compliment them with invented declarations of his
thanks, but in the positive style of a prophet charges
them with disaffection to their proper Sovereign, the

THE WAR A FAMILY FEUD.
Fellow citizens, the bloody, beastly war raging in
Europe—the outcome of a family fued among royal kinsmen—is of no immediate concern to this country except
as some of the belligerents have trampled our rights as
neutrals. As for these aggressions, we have entered our
protest and recorded our resentment. It is hardly probable that the situation at the worst will involve us in
armed conflict, though it may lead to reprisals and demands for reparation.. Both reprisals and reparation
we could forgo, at whatever cost of prestige and
national honor, rather than challenge •combat with
otii• superiors in strength. But what stuns and almost
stupifies us is the sudden discovery to ourselves of how
far we have separated ourselves from kings and all they
of
stand for and from all those who share the sordidness
their ambitions. Neither the Atlantic nor Pacific measures the distance of that separation. It is interstellar—
as wide as the reaches of thought itself. The investment
Tom
that suddenly fell from the Veiled Prophet in
more
Moore's Lalla Rookh did not more suddenly nor
s of
completely reveal the hideous and frightful uglines
rade
the face it hid than did this war reveal the masque
usof kings. Faith, honor, truth, justice, mercy, righteo
heart
ness—all the tremendous words which the human
itself
throughout the centuries has been gathering to
to spiritualize and soften it are to kings but empty
sounds dead as a cracked cymbal. Is there any magic
in the name America to lull the lust and greed of
Kings? or to save us from their ravishment? And yet
America is the best hope of humanity. Here, if anywhere,
Is the Ark of the Covenant. If we fail to safeguard it
to
we are traitors to our fathers who fought for it, and
Himself who died for it. Every dollar in our
Christ
blood stand
treasury and every red corpuscle in our
an oath before
pledged to its defense. We have sworn
rankle the
men and angels that no kingly foot shall ever
we propose to
clean earth of our Western World. Do

King of Heaven.
"About one hundred years after this they fell again
into the same error. Laying hold of the misconduct of
Samuel's two sous, who were intrusted with some secular concerns, they came in an abrupt and clamorous
manner to Samuel, saying, 'Behold,thou art old and thy
sons walk not in thy ways; now make us a king to
judge us like all the other nations.' And here we cannot but observe that their motives were bad, viz., that
they 4 might be like unto other nations, 1. e., the heathen;
whereas• their true glory lay in being as much 'unlike'
them as possible. 'But the thing displeased Samuel
when they said, Give us a king to judge us; and Samuel
,
prayed unto the Lord, and the Lord said unto Samuel
of the people in all that they say
Hearken unto the voice
unto thee, for they have not rejected thee, but they have
rejected Me, THAT I SHOULD NOT REIGN OVER
THEM. Now therefore hearken unto their voice, howbeit, protest solemnly unto them and show them the
manner of the king that shall reign over them. And
Samuel told all the words of the Lord unto the people
that asked of him a king. And he said, This shall be
the manner of the king that shall reign over you: he
will take your sons and appoint them for himself, for his
run
chariots, and to be his horsemen, and some shall
capbefore his chariots, and he will appoint them
tains over thousands, and captains over fifties, and
,
will set them to ear his ground and to reap his harvest
instruments of war, and instruments of
and to make
be conhis chariots; and he will take your daughters to
and to be cooks and to be bakers, and he
fectionaries,
will take your fields and your olive yards, even the best
take
of them, and give them to his servants.; and he will
give
the tenth of your seed and of your vineyards, and
to his officers and to his servants' (by which we
them
see that bribery, corruption and favoritism are the standof your
ing vices of kings), 'and he will take the tenth
men servants, and your maid, servants, and your goodhis
liest young men, and your asses, and put them to
work; and he will take the tenth of your sheep, and ye
shall be his servants, and ye shall cry out in that day
because of your king which ye shall have chosen. AND
THE LORD WILL NOT HEAR YOU IN THAT
DAY.' Nevertheless the people refused to obey the voice
of Samuel, and they said, 'Nay, but we will have a king
that
over us, that we may be like all the nations, and
our king may judge us, and go out before us and fight
our battles,' Samuel continued to reason with them, but
their
to no purpose; he set before them their ingratitude,
'I will call unto the Lord and He
folly, he cried out,
shall send thunder and rain' (which was then a punishment, being in the time of wheat harvest), 'that ye may
perceive and see that your wickedness is great which ye
G
have done in the sight of the Lord, IN ASKIN YOU
A KING. So Samuel called unto the Lord, and the
Lord sent thunder and rain that day, and all the people
greatly feared the Lord and Samuel. And all the people
the Lord
said unto Samuel, 'Pray for thy servants unto
thy God that we die not, for WE HAVE ADDED
UNTO OUR SINS THIS EyiL, TO ASK A KING.'
posiThese portions of the Scriptures are direct and
That
tive. They admit of no equivocal construction.
the Almighty hath here entered his protest against
is
monarchical government is true, or the Scripture
false."

'




keep that oath?
WEAKER THAN DISHWATER.
who
No nation threatens us in so many words; but
and intimations that speak louder
is oblivious to hints
repel attack
than words? We boast our strength to
are weaker ,than dishwater. While
when we know we
for aggression we
every other nation has been preparing
ready even for defense. Is this state of
have not made
embecility• to endure? Shall we continue to listen to a
wandering Voice as imbecile as our condition? When
s of
this Voice was recently removed from the counsel
we thought, good easy souls, we had
our government
Isaiah,
gotten rid of it, and were ready to cry out with
been with child; we have been in pain; we
"We have
Bryan
have, as it were, brought forth wind." Has Mr.
we
himself so good a prophet in the past that
proven
future? You recall what
can afford to trust him for the
according to Mr.
direful things were sure to happen,
to repudiafe a moiety of its
Bryan, if this country failed
of silver the
honest debts by giving to fifty cents' ,worth
Personally, I have never believed
magic name of dollar.
him sincerity only
in Mr. Bryan's wisdom, and I grant
worth arguing.
because the point is not
Mn.

BRYAN'S POLICY.

And yet I would heartily advocate Mr. pryan's
of
policy of non-resistance rather than any policy
and
half-preparedness. I had rather scrap every gun
For if
warship we own if we are not to add to them.
could
we were without strength to. oppose invasion we
privilege of the weak and surrender
at least claim the
to the pity
without loss of life, with a moral claim even
whereas to fight inadequately armed and
of the invader;
of
with a certainty of losing would be nothing short
which you and I and every taxpayer in the
murder, for
United States would be rdeasurably responsible.

BANKING SECTION.
To say that we are too big or too proud to fight in
.self-defense is, with all respect to the estimable but mistaken gentleman who said it, absurd and puerile. To
say that a mob of a million or so of untrained citizenry
would leap to arms• and put to flight the bullet-tested
soldiery of Asia •or of Europe is -worse than puerile—it
is murderous stupidity. The machinations against this
government at the moment are more subterranean than
submarine. • Our duty is to defend against both. We
are permitted no alternative. We must forthwith spend
money for defense, and lots of it. We must know that
we are safe even from the temptation of attack. Our
peace and future happiness depend upon this assurance.
Haldane, you know, answered the appeal of Lord Roberts
for better military equipment with a beautiful phrase,
worthy our own President, or a Spencerian copybook:
"We should prepare for the reasonably probable," said
Haldane, "but not for the logically possible." There
spoke the lawyer but not the statesman. Haldane discredited himself, but, worst of all, he discredited his
country. The words of our own Washington are the
words of a statesman, a soldier and a patriot, and they
cannot be repeated too often or become too familiar:
"To prepare for war," said he, "is one of the most effective ways of preserving peace. A free people should
not only be armed but disciplined. To that end a uniform
and well-adjusted plan is requisite."
WASHINGTON'S ADVICE.
Has Washington ever been discredited? If so, when
or where, or by whom? Has not time vindicated his
right to warn Americans? To instruct them in their
duty? To safeguard, even from the grave, the priceless
heritage which he and his compatriots bequeathed to
them? A free people, says Washington, should be armed
and disciplined according to some well-adjusted plan.
Whose plan? I should say that the recommendations in
the first instance should come from our military experts,
and that in so far as their recommendations were unanimous they should be adopted without much debate and
regardless of cost; with the understanding, however,
that the sole purpose to be subserved is not conquest but
self-defense. This simplifies and limits the problem as
well as the expense. It means, obviously, a big navy—as
big as any navy in the world—with every flying, diving
amphibious auxiliary that can add to its effectiveness,
and with all the munitions and means to boot—munitions for a year's campaign at least always in cold
storage. It means as many naval officers and men as
may be necessary easily to operate the machinery furnished by the government. And inasmuch as most of
the machinery will be complicated and scientific, it means
officers and men of brains and technical training. But
this sort of men can at all times find lucrative employment in private life, which means that the government
must outbid the market for their services. Insurance
will cost money, but it is worth the price.
Washington's "well-adjusted plan" must likewise include a skeleton army capable of taking on flesh at a
moment's notice—a standing army, say, of a hundred
and fifty thousand, a decimal of a reserve army subject
to call.
MENACE OF THE STANDING ARMY.
I admit that a large standing army is a perpetual
menace to the very government that created it. History
shows that armies have mutinied and overthrown the
governments they were expected to protect. Armies
have been at once the incubators and tools of kings. So
not the least debt of gratitude which America owes to
Providence is her immunity from this danger.
There is no instance on record where a navy, however big, has turned against the government that fostered it; and in the very nature of things a navy lacks
the opportunities as well as the incentive to foment




97

rebellion. Wherefore, a large navy and a small standing
army must be our program. But, says Washington,. a
free people should be disciplined; and I think he meant
the whole people. It has been suggested that the state
militia should be brought under Federal domination.
This ought to be done, of course. The first duty of an
American volunteer should be to his country, not simply
to a locality. It may cost the militia of our several
States the companionship of those who join their ranks
for a Summer outing rather than for business, but those
who do join will be soldiers neither of tin nor of tinsel,
but of a different metal and a better mettle. The
concerns of any particular State are inconsequential compared with the concerns of the nation. Our necessities
and our laws have outgrown state boundaries, and, if you
will pardon me for speaking out of my partisanship, it
is
my solemn conviction that the country has outgrown
the
competency of any political party to administer whose
horizon is bounded by a locality. Any party which by
training and tradition, by precept and example, has been
nurtured in the idea that a state is bigger or more important than the nation, has a whole lot to learn and to
unlearn before it knows enough to govern the United
States of America.
A CASE IN POINT.
But, personally, I should advocate a discipline that
went beyond a volunteer militia, and this for several
reasons that grow out of my own observation. The only
political office I ever held in my life was that of a regent
of the Nebraska University, where there was no salary
attached nor the ghost of a chance to steal. Part of
our revenues came through the Monell Act, under which,
also, the government furnished us a West Point graduate
to instruct our boys in the duties of a soldier. In my
time this young officer happened to be Lieutenant
Pershing, now General Pershing, who rendered such
brilliant service in the Philippines. Pershing was called
a martinet, but the boys all loved him and tried to please
him. Indeed they spent so much time shining their
shoes, brushing their clothes, polishing their accouterment and learning the manual of arms, that the faculty
complained to the board of regents that the boys were
neglecting their studies, and asked that the military drill
be abolished or greatly curtailed. I listened to the arguments of the learned faculty but cast my vote against
them. For I had seen scores of these lads who had come
from farms and villages to work their way to an education by doing chores, however menial—great, splendid,
slipshod, country bumpkins, with more legs than a centipede and more arms than Briareus—as awkward and
clumsy as Newfoundland puppies; and in a year's time I
had found myself envying their elegance of carriage,
their poise and pose, their self-possession—why, they had
even learned how to stand still and to do it gracefully! I
told the faculty that there was not a study in their
curriculum that in my opinion meant half so much to
these young fellows in after life as their military training under Pershing. Think of the habits that grew out
of such discipline! Obedience, promptness, a sense of
duty, temperance, cleanliness, deportment—everything
that goes to make a useful and self-reliant citizen! In
any walk of life these habits would be as valuable to
them as all their knowledge, and in the event of war they
would not like Col. Bryan have to be taught their "hay.
foot" from their "straw-foot." A million or so of such
citizens would rival the armies of Germany and Japan.
It seems to me that it would be well for him and for our
country if every boy could have that discipline, and
Washington, I think, was of the same opinion.
MERCHANT MARINE A NAVAL AUXILIARY.

Permit me further to suggest that there is no better
auxiliary to a navy than a merchant marine, nor is there
any instrumentality that contributes more to the glory
and riches of a country. I need not elaborate this fact,

I

98

BANKERS' CONVENTION.

for it seems to be conceded, except by the infatuated.
Time was when the American flag covered the seven
seas; and the ocean highways, which are always paved
and cost nothing for repairs, were as much ours as England's. Now the ship that flies our flag is a lonesome
as
spectacle—a subject of derision—and such few ships
Act will soon put out of comwe have the La Follette
mission.
Liberty! Liberty! what tyrannies are committed In
is
thy name! Will we never learn that class legislation
defeats itself or injures the
always tyranny, and either
many to benefit the few? Was not this truth illustrated
recently in New York, where the work on the subway
was held up until the legislature in a frenzy of haste
could repeal a law forbidding the employment of aliens
on public works? Freedom and, honesty are nature's
scheme for equal justice, and no "reformer," for all his
good intentions, has ever been able to improve upon it.
The fundamental error of most social economists, so it
seems to me, is their separation of labor and capital into
immutable categories, as if once a laborer always a
laborer, once a capitalist always a capitalist. Whereas
in a.free government honestly administered these relative positions are as shifting as the sands, due to the
difference in personal qualities and the time and chance
that happeneth to us all. In our country there must be
no classes and not categories, and woe betide the man
who first creates them!
THE LA FOLLETTE ACT.
Do not grow confused in your distinctions. For a
state to grant pensions to its widows, its aged, its disabled, is not "class" legislation, but a gift outright, made
Some
by the state for the supposed good of the state.
expenditures I heartily indorse,
of these paternalistic
way
and do not begrudge my contribution to them in the
of the police power is a theme in
of taxes. The exercise
itself. But when the government tells me that I must
run my business at a loss for the benefit of a favored
to,"
class I have the right to tell the government to "go
shop. If the government permits me to
and shut up
uncompete with my rivals in business only on terms so
to spell .bankruptcy and ruin, I will tell the
equal as
my
government to please excuse me, and sell out to
The La Follette Act is the stupidest piece of
rivals.
legislation in the history of the country, and all who are
In any way responsible for it share in the culpability of
enits author. It should not be spoken of as an Act to
our merchant marine, but to abolish it and turn
courage
our shipping over to Japan, for that will be the
sum total of its accomplishment. The La Follette Act
was perhaps expected to force employment of only American sailors, at better wages and easier work, amid more
luxurious surroundings than any other sailors in the
world. The fact that to do this involved abrogating
treaties with nearly every country, as well as regulating
the usages and commerce of those countries; the fact
that no American shipowner could live up to the requirements of the Act and pay the cost of operation
mattered. not at all to these Utopians. But the purpose




of the Act defeats itself. No American sailor will be
employed 'because there will be no American ship to
employ him. To repeal the Act will therefore injure no
one, not even the American sailor.
A MERCHANT MARINE.
Do we • wish the United States to have a merchant
marine? Very well, then. How hard do we wish it?
The government cannot compel Americans to build ships
—isn't that so? ' It can only coax and tempt and encourage them to build ships—isn't that so? The cheapest encouragement it can offer is to permit our shipowners to compete on even terms with the shipowners
of the. world—isn't that so? If that involves subsidies
or their equivalent, then our government must equalize
conditions or go without its ships—isn't that so? For
our government itself to go into the business— well, that
has been suggested and even urged by those who ought
to know better, but the mocking laugh with which the
country greeted the suggestion shows that the people
still have some appreciation of the functions and limitations of government.
en
Suppose that we had legislators and statesm
to save
patriotic enough, wise enough and brave enough
some of our agitators from the consequences of their
own folly; suppose our government should offer inducements sufficiently alluring to tempt Americans to build
their own ships; what do you suppose would happen?
Leaving out of consideration the value of a merchant
marine as an auxiliary to our navy; leaving out of
consideration the inestimable aid -to our commerce and
international exchange which these ships would give to
us, let the workingmen of our country try to realize what
various occupation it would furnish them—in mines,
open
forests, factories, forges, shipyards—why, it would
would mean the employment
new fields of endeavor—it
The
of thousands of workers not otherwise employed.
opposite of all this. It
La Follette Act means the very
n
means no American ships and no benefit to the America
a dog in the manger?
sailor. Is the American sailor
If he cannot benefit himself, will he prevent others from
benefiting? Is he less than a patriot? I do not believe
it, for at the core of him he is every inch a Man, with the
privilege and duty to deserve the title, for it is America's
only title of nobility. To acclaim a man a Man with
a capital "M" for emphasis, and the word lengthened by the emphasis, is to honor him in the highest—
eulogy can go no further. It is a challenge to the sex in
us. It is to masculinity what a bugle blast is to music.
We are conscious of an exaltation rising in the heart, of
an heroic icon efformed and fashioned in the mind. That
exaltation is the voice of God—that icon, a vision of the
ideal, moulded of the God-essence, out of which all men
God:
are moulded. For man, in his manhood, stands for
dignity
for strength, courage, candor, selfhood, and the
The
of selfhood that is neither dependent nor aloof.
integrity of our institutions
hopes of our republic, the
friends, they are
are based on manhood, and 0, my
long as that voice cries in the
sound and safe—safe so
the soul.
heart of us—so long as that vision haunts

BANKING SECTION.

99

Some Things the Church Can Do to Improve Rural
Life Conditions.
BY REV. W. W. DIEHL, Pastor First Methodist Episcopal
Church, Hinckley, Illinois.
One of America's greatest present day needs is a new
already too high, to make the contemplated change will
and progressive type of rural life. We need on every
make the tax burden still heavier." Believing
the
'farm, men who understand and practice the principles
change contemplated to be for the community good,
we
of scientific agriculture. The depletion of soil fertilities
began an active campaign, building • new communit
y
in large areas of our agricultural sections, the relatively
sentiments respecting the value of higher educational
small acreage still open for settlement; and our rapidly
advantages for our children while they were still
at
Increasing population, make rural life development a
home with their parents.
grave economic question of nation-wide import.
Every legitimate means looking toward the achieveOne-half of our population lives under rural condiment of our task was used. In the course of two years
tions; one-third upon the farm. On this part of our
a school board was elected, all of whom favored an
population, we depend for food and clothing, the basic
accredited high school. The change was made and
now
necessities of life. Without the farmer and what he
we have in our village one of the finest and most
produces, the whole fabric of our civilization would
efficient high schools to be found in any rural section of
collapse. Viewed from this angle, it becomes clear that the state. The people
are all pleased and have a comhe who in any way contributes to the uplift of rural
mendible pride in our school.
life, performs one of the finest services within the reach
When the survey was made we found social life for
of man. Many agencies are now at work on the splendid
the young people meager and very unsatisfactory. A task of creating this new type of rural civilization. Our
biographical study club was organized. Boys and girls
agricultural colleges, the federal department of agricul- from
thirteen to twenty years of age were gathered
ture, agricultural extension agencies, experimental staInto this club. Meetings were held in the church once
tions, editors of farm journals, the rural press,
every two weeks. The program consisted of devotional
merchants, manufacturers and bankers are all rendering
exercises, followed by literary and musical productions.
efficient service in this most vital enterprise.
At every meeting two short biographical sketches of
What can the church do to aid in furthering this noble distinguished
characters were given. Each member was
work? First of all, the church must supply a new type supposed
to give at each meeting an item of current
of rural minister. Religiously, country people are not events
worthy of note. After the literary program was
having a fair chance. As a general rule, clergymen
finished, the young people spent an hour or two in social
avoid as far as possible work in rural sections. They
enjoyment. The work done by the accredited high school
regard the country parish as undesirable, offering
and the Biographical Study Club has been highly
limited opportunity for men of culture, capacity and
inspirational. We now have twelve young people from
worthy ambition. Laymen both in the city and the
our church, graduates of the high school who are taking
country alike, share in holding this false and most perwork in some higher institution of learning or preparnicious opinion. Only rarely do we find ministers of ing to do so. As
far as the young people are concerned,
wide culture, superior intellectuality and large capacity
the social and intellectual barrenness of rural life has
for leadership spending their time in a rural parish. been corrected.
The order that now obtains must be changed. We must
The survey revealed opportunity for new developments
man our rural churches with ministers of large vision,
among the farmers themselves. To secure this new
who can see clearly and are gripped firmly by the
development, we organized a Rural Life Progress Club.
splendid opportunities for service presented by the counThe members of this club live in the country from two
try church. In the second place, the church must get a
to six miles from town. As a group the members of
new and an enlarged conception of her mission. Here- this
club are intelligent, thrifty and progressive. Accordtofore, the,church aimed to get the Christian life into
ing to the terms of Membership, each farmer was to do
the individual and then sought to get the individual
one or all of five things each year:
Into the church. This program is well and good but
First, something to improve the soil fertility .on his
it is not large enough. The Church must do more. She farm; second,
something to improve the buildings on
must seek to get the life and spirit of Christ into all
his farm; third, something to improve the quality of livephases of community life. She must make bad com- stock kept
on his farm; fourth, something to raise the
munity conditions good and good community conditions standard of
life in the home; fifth, something to improve
better. To this end, a careful community survey must communit
y conditions. From the very start, the club
be made.
has been a success. Meetings were to be held once a
Every community has its own peculiarities and
month during winter only. The people are so pleased
presents its own peculiar problems. A careful
and
that they continue to hold meetings once every month
Intelligent survey will indicate clearly the task
that during the entire year. After operating for the brief
should be clone and the assets at hand with which
to
period of two years, splendid results looking toward
work them out. Because this program has been followed
community betterment already appear. One of the
in a practical way in the church I now serve, I am
officers elected was the co-operative agent. When we
asked to state what we have done, and whether the
used the term "Co-operative Agent" someone said
results obtained justify the methods employed.
"What will you do with him?" I answered, "Harness
The survey revealed good school advantages for our
him, hitch him up and put him to work; if he balks
children, but offered at the same time room for improveand refuses to pull, we will unhitch him and turn him
ment. We set out at once to establish in our community
out to grass; if he works well, the advantage of having
a high school doing the quality and quantity of work
such an agent will appear."
required to place the school on the accredited list Of
Farmers as a class are "riotously individualistic."
high schools. Opposition was at once encountered. The
They boast of their independence and exercise it with
cry was raised in many quarters "Our school tax is
great freedom. Pronounced individuality is a most




100

BANKERS' CONVENTION.

economics, while issues of national import - furnish
to
excellent characteristic, but when pushed so far as
topics for conversation among the men. Cafeteria
a
destroy the spirit of needed co-operation, it becomes
all have what they
ideal economic lunches are served by the women and
hindrance rather than a help in building
"delightful time." What I am saying is, this
call a
social and community relationships. Farmers more than
club has solved for this community the problem of rural
any other class of people need the benefits that may
social barrenness and helped to make country life what it
accrue through the practical exercise of the sane coto be found anywhere.
work, has wisely should be, the most desirable life
operative spirit This agent, by his
perplexing problems confronting
One of the most
led the people in co-operative measures and caused them
belt-is the problem of land tenancy.
to see the advantage of practical cOmMunity'co-opera- • farmers in the corn
At the present time from thirty to forty per cent. of the
He purchased alfalfa and ground raw limestone
tion.
belt are farmed by tenants. Under
in carload lots and furnished the farmers with these farms in the corn
our present system of farm leasing, the tenant in order
greatly to their advantage. He also purchased
articles
his rent is compelled to rob the
a concrete mixer to be used in building concrete founda- to make good and pay
This in the long run is
sidewarks, feeding floors and such other things soil of its stored fertility.
tions,
farm improvements. disastrous to the land-owner himself and to the farm,
as make for permanent and useful
ultimately it reacts unfavorably on the whole comUnder his direction, several more co-operative measures
munity life. Tenant farmers, now members of this
other, the purchase of an
are contemplated. Among
club, are pleased with the neighborhood in which they
alfalfa cultivator, which purchase, when made, will
live and prefer to remain in the community because
and real profit to all the menibers
result in economy
living conditions are so satisfactory. In this fashion
holding s,hares in the cultivator. Mr. Eckhardt, our
permanent tenancy is greatly encouraged. The land"As far as we now know on the
county advisor, says,
makes good terms for
majority of soils in our section of Illinois, three things lord, feeling he has a good tenant,
; the
to maintain soil fertility unim- the tenant when drawing up the lease contract
are necessary in order
citizen and a better farmer
paired and at the same time pursue agricultural methods tenant makes a better
conditions. He treats the
with profit. Limestone to sweeten the soil and make because he lives under better
his contract enables him and
possible the growing of legumes the growing of legumes farm more fairly because
encourages him to do so. This club in a measure has
to furnish humus and combined nitrogen available for
perplexing probplant food, and phosphorus. This last element can best helped to solve for this community the
by applying raw ground rock phosphate to the lem of land tenancy.
be supplied
All these improved conditions work together toward
soil. When these three things are wisely used in
the production of better rural conditions. The young
practice, we may say farmers can indefinitely
agricultural
people while taking part in the literary exercises of the
furnish feed and foodstuffs for the people and maintain
ties; their amed the crop-producing power of the soils. Our club come to realize their latent possibili
unimpair
acquire a liberal education is inspired; a
possible the
bition to.
Co-operative Agent has helped to make
life is created; the possiuse of these articles. As a consequence the best methods genuine satisfaction with farm
by several
of living a large, active,, efficient and wholesome
bilities
of agricultural practice are being followed
life on the farm are made evident. And so it has come
members of this club. Those who really understand
have been members of
the import of this statement will pronounce this achieve- to pass that young people who
the Biographical Study Club, of the Rural Life Progress
ment as something greatly worth while.
have graduated from the Accredited High
One great cause for dissatisfaction with farm life Club and
the four years' course
the farmer's wife is com- School are now in college, taking
grows out of the fact that
in agriculture with the expectation of returning to the
pelled to do so much laborious work. As a rule, she perthere practicing both the art and the science
forms her tasks with inefficient equipment. Consequently, farm and
of modern agriculture. They expect to spend their lives
she becomes discouraged and dissatisfied, she longs to
not in the city but on the farm. In the days to come
leave the farm and go to the city, where she may have
they will be the leaders who will demonstrate to the
modern conveniences and release from the excessive
world that the farm is not only the best place to be born
burdens imposed upon her. The club meetings are held
all
. When one and bred, and to acquire that most important of
at the homes of the various members
success, the power of initiative, but that
s to
farmer installs some improvement in his house, all the essential
also the best place for men of ambition, capacity
women of the neighborhood sooner or later come to see it is
culture to invest their life. Given such men upon
this improvement. As a result, the improvement made and
the farm, and we have at least in its beginning that
In this
in one home is duplicated in other homes.
life so essential to the economic, social, intellectual
fashion many burdens incident to life on the farm are rural
such
and religious welfare of the whole nation. But
can do her work
so removed that the farmer's wife
return to the farm after graduating from
men will not
easily and have some time for leisure, culture and recreaand
college unless opportunity for increased culture
tion. The organization of this club has done much to
noble leadership are offered. These opporscope for
bring about this desirable result. There are homes in
the rural church has not furnished in the past.
this community now equipped with hot and cold water, tunities
must furnish them in the future.
She
gasoline engines for pumping water, running the washInstead of several small struggling churches working
ing machine and performing such other burdens as will
in the same community, we must have strong commandlighten housework on the farm.
, building rather than destroying, the spirit
Social barrenness of rural life is also a source of ing churches
having for their directing
young people and women on of co-operation; churches
discontent both among the
serve, not to be served"; churches that
motto "To
the farm. Under the auspices of this club social gatherappreciate ministerial ability and willingly pay for it;
ings are held once a mouth throughout the year in such
in charge of ministers of noble native power.
fashion as to furnish sane, wholesome and satisfying churches
reinforced by the best training offered by our .most
are these social gatherings
social conditions. So popular
liberally endowed colleges and divinity schools; prophets
that almost all the young people, children, women and
and attractive the character
ged, are invariably present at of God who can make real
men, old and middle-a
and power of the unsurpassed and unsurpassable
these gatherings. The Hayseed Glee Club furnishes
ages, in short, a builder of the
music; the young men engage in athletic sports; the Teacher of all the
Kingdom.
women discuss items dealing with questions of home




BANKING SECTION.

101

What a Good Home Means to the Community.
BY MARY F. RAuscx, Assistant Professor of Home Economics Extension Division,
University of Washington, Seattle.

I take it for granted that my audience this morning this is not correct for there are many poor housekeepers.
is composed of men and women who take an interest It is true that there are many born housekeepers, but
In the home. The very word has magic in it. I like it is far easier to do work well if one knows how.
the old song, "Be It Ever so Humble, There is no Place
A wave of reform and improvement seems to be
Like Home." Perhaps some of you can remember the
sweeping all over the educational world, and this is
place where you were born and can recall the old house
especially true of home economics, and it is a step in
the right direction. The art of home-making means
with the green blinds, the narrow path that led to the
happy homes, and is it not a happy home life that makes
barn, and the old apple and maple trees, and the lilac
bushes, the dark cellar and the trunk in the attic when life worth living?
My friends, do you not know that hundreds of young
you played there on a rainy day. Every stick and stone
girls grow up with a very poor knowledge of what it
of the old home is dear to you. I like this definition of
means to be a modern housekeeper? They do not know
the word home "Home is the place where it is nobody's
how to have or to keep a strong body. They do not
business." We come home where we are free and can
know how to furnish a house comfortably and artistictalk about our troubles and joys.
ally, or to buy wisely in food and clothing. How to
Home making is the general occupation of many of
have good sanitation and ventilation or how to select
our women. It is the oldest of our professions, yet few
women seem to think it necessary to make special
and prepare proper food for little children. The cellar
preparation for their work. In the early days when the
is a very important patt of the house, and yet many
home was in a.tent, or in a cave in a rock, the field of
young housekeepers pay little attention to the cellar.
housekeeping was a narrow one, but even then the The baby always creeps on the floor. It gets sick. A
women who cooked the meat of a wild animal better
little white hearse drives up to the door and a mother's
than her sister was admired by the men and envied by
heart is broken and a household is saddened. Why?
the women. We have better buildings and a greater
Because the mother did not know.
variety of food for the family to-day, but women have
A few years ago I made some inquiries among a great
not kept pace with the progress and are content to do
many middle-aged women and was astonished to find
how many had lost their first baby. Three or four years
their work in the old way, although newer and better
things are being added daily to people's lives. Modern
ago I was holding a housekeepers' short course. I
noticed a very attractive young woman who attended
utensils and inventions should lighten the labor of
every session. She told me that she was a university
women and broaden their fields for happiness, such as
was never dreamed of two generations ago.
graduate and had two degrees. She said, "My husSchools are crowded with girls studying music and
band has tuberculosis and my two children are delicate.
fine arts, but real housekeeping is taught in but few of
I am living on a ranch two thousand miles away from
them. Home should provide food and shelter, peace and
home and friends and I have absolutely no idea of the
happiness. Housewifery is the chief vocation of woman- care of my family. I think it is perfectly wicked for a
hood, and there is no nobler calling.
girl to go through a university without being taught
something of housekeeping duties."
It is strange that so many of our women are giving
up their homes to live in a flat, or in a boarding house.
Woman is the center of the home. It takes a woman
This looks like a confession that women have not been
to make a home. Single people can live comfortably in
.able to manage their own home successfully, and so they
rooms but it takes a home to bring up children. Many
a woman is bound by the four walls of her home and
go to an apartment, which often times is managed by
her view of life must be narrow and cramped. Homea man, and where the cooking and cleaning is often done
making is the only occupation that people undertake
by men. Women are very careless about details, but
without previous training. Our girls are thrust into a
It is the details that count. If a man builds a factory
home and they have no idea of the value of money, and
he puts in the latest improvements, knowing that he will
are helpless when little children come. Ninety per
get much better work from his men and more profit for
cent. of the women in the United States do their own
himself, but this is not true of the home, and strangely
housework. Hundreds of girls leave school at the age of
enough, it has not kept up with other agencies. Half
of our housekeepers to-day accept homes that are badly fourteen. I think that every school in the United States
planned with regard to light, heat and ventilation. The should teach this work in a practical way so that when
slinks, stoves and tables are much too low for the aver- a girl leaves school she can cook a simple meal, set the
age woman, and how seldom do we find a window in a
table nicely, dress neatly, and keep things orderly.
clothes closet. Clothes need airing just as much as the
Housekeeping is a business or a profession like any
rooms do. Why have women been content to live on
other business. More people engage in it than in any
like this? The average woman does not take a broad
other occupation. It must be run on businesslike prinview of things, and is often opposed to innovation. They
ciples. Every good business man has learned how to syssay, "Well, my mother got along without science, and
tematize and to take the short cut He uses modern
what was good enough for my mother is good enough
equipment. Ninety per cent, of all that people earn is
for me."
spent for clothing, food and shelter.
Many housekeepers think that housekeeping Is
Bitter experience often teaches one how to be a good
drudgery, but that is because they do not know how to
housekeeper. A woman has the care and nursing of the
do it in the easiest way so as to make it a real pleasure. body at the critical moment of childhood and sickness.
We do not train our candidates for matrimony, but we She has the training of the mind in the most impressiondo train for every other profession. If a man wishes able years of childhood. And she has much of the govto be a lawyer or doctor, he must have training in these ernment and economics of the family home. The duties
lines, but a girl is thrust into her home and expected
of women are as sacred and important as any ordained
to be a good housekeeper. Some people think that for man, and yet it is only within the last few years that
because she is a woman all these things come to her, but any training or preparation has been accorded her. You




102

BANKERS' CONVENTION.

be given responsibility. .In a home where there are comcan recall the day when every woman knew how to knit
forts and conveniences, books and music, there is a chance
and make soap and carpets. They also had to carry in
for real happiness. Often you hcar a man say I had
water and scrub the kitchen floor. You can also recall
to move to town on account of my wife and daughter.
when a college training was only given to the
the time
Perhaps in that home there were no'modern utensils, no
boys who expected to become ministers. Girls did not go
washing machine and nothing to lighten the work. Also
to college, and as for placing home economics as a reguno hours for recreation and social life. Men seem to
lar study in a university the very idea would have been
have more opportunities to meet other men. You will
laughed at. Now it is in nearly every good school in the
notice at a farmers' institute that there are many men,
country.
but often the wife is at home doing the work. When I get
At another short course I noticed a little girl of about
the men together I have to tell them of the wonderful
fourteen dressed in deep mourning. She came every
morning at eight and stayed until six. On Friday after-. ways of making the housekeeping easier. One farmer
noon a big rancher waited at the door to speak to me. told me that my lecture of a previous date cost him $150
because he put water in the house, linoleum on the kitchHe said: "I waited to thank you for what this week
en floor, bought a new stove, washing machine and other
has meant to my little daughter. Her mother died three
things, and that it was worth it as his wife was younger
months ago. I am very badly off—my ranch is not it sucand happier than she had- been in fifteen years. Another
cess and this little girl will have to keep house for me
and five little brothers and sisters. The baby is two. time I said that the meen had everything in the barn
My daughter has been at school from the time she was that was new and labor saving and I knew some women
had to use an old tomato can for a dipper. After the
five years old, but she has never had a lesson in housewash the dishes, lecture a big shy-looking farmer came up and said:"My!
keeping. Now she must cook the food,
you ain't afraid to say things and you made me feel small
do the sewing, manage the housework and do the washas a petanut. My wife has that tomato 'can for a dipper,
help."
ing because I cannot afford any
Many children have to leave school at an early age. but how did you know it? But I am going to the store
to buy a new
In New York it was found that out of 1420 children un- now to buy her a good dipper and I'm going
stove too." No girl should be married until she has a
twelve years of age, 758 did the family marketing and
der
talk about the future finances with her husband to be.
in 307 cases the mother was out at work all day.
You are well dressed, well to do men and women. Rewoman up to the time she marries
The average young
member that there are thousands of young housekeepers
and has a home of her own is apt to take housekeeping
who are living on a very small income. Encourage
as a matter of course, as she does her clothes. After
she has a home the scales fall from her eyes. These them to have a modern home with gas or electric range,
bathroom and so forth, but teach them how to make the
things should be taught in preparation for life; for no
best of what they have. They must get three meals a
matter if a father says that his daughter will never need
day, wash the dishes, dress the children, wash, iron,
to work, no one knows what the future may bring, and
the woman who is to be happy and useful must know the scrub, clean and bake. Why not show them the easy
way—how to have nice meals, an attractive table and a
art of home ruling or she will never have a successful
pretty home and teach them to have a pride in it. Teach
home. It is impossible to have good servants unless you
know how to have things done properly and be able to the mothers not to let the girls go to high school with
tell the why and wherefor of it yourself. The wife of such fancy clothes. I should like to see every girl in.
college, wearing a simple, pretty white dress at graduaone of our multi-millionaires and best known men, and
tion. It is poor taste for young girls to wear elaborate
who has perhaps twenty servants in her home, goes to
clothes, and it makes many a heartache, and parents canthe kitchen every morning and looks after things and
not afford the cost.
with her own hands makes some dainty and nourishing
The mother who helps her little ones, steers them
food which her husband likes. You may be sure that her
care and thoughtfulness have helped to assure their fu- through the rough places of childhood, keeps her little
home together, who teaches her children politeness and
ture.
obedience, who teaches hospitality, who takes an interest
People say that our great grandmothers did nearly all
their own work, made the clothing, visited the sick, in humanity, surely such a woman, whether she has servants or is doing her work in a log cabin, is doing her
took care of the garden and had their church duties as
well as the care and bringing up of a large family. So share in woman's noblest calling.
When you teach people to think that it i necessary for
they did, but think of the quiet, regular life they lived
as compared to present-day life. Times are different a girl to be taught housekeeping it will rise in dignity,
and everyone will think that it is the finest and the
now and what satisfied them will not satisfy us. In New
greatest and the best of all vocations, as it has always
England in those days there were usually only two or
been. Years ago housekeeping was nearly all that was
three rooms and a loft reached by a ladder where the
children slept. The kitchen was used for all general pur- demanded of a woman. Now she has to be a good
poses as a dining-room, study, parlor and sewing-room, mother, society woman, club, church woman and citizen.
The modern housekeeper has many problems. Years
also a wash-room. Every member of the family came
in there to perform their toilet in the morning. The ago the study of food had not been. thought of. To-day
a woman knows that if her children are to grow up well
meals were very simple, often a dish of cornmeal mush
or baked beans and bread and butter. If a family owned and strong, and with a brain, and to be an efficient citia dozen silver teaspoons they were looked up to by the zen, that she must study the kind and preparation and
combination of food. Many a man and woman of midwhole community and their treasures were carefully
wrapped in red flannel and only used on state occasions, dle life is suffering now for want of right kind of food
like Christmas or a wedding. This was a simple life. and sleeping with open windows when a child. Growing
Then more people came into the neighborhood and they childreen need plenty of good, wholesome food. They
began to want things a little better, and it is said that should never touch tea or coffee or pickles. If you take
care of a child's stomach for the first seven years of life
the first family who decided to have the wash bowl in
the bedroom instead of in the kitchen was severely criti- the future will take care of itself. But many a kind
and good mother starts her children on a poor diet
cized for putting on airs amid wanting to be better than
their neighbors. So you see it is hard to introduce a through ignorance.
change. Was it not Lord Bagot who said, "There is no
There are many people who are rich and have others
path like the path of a new idea."
do their work for them, ,but the majority of us have to
work with our hands and the day has come when the
In the country there is a wonderful opportunity to buy
man or woman who works with his brains alone is conup a real home. There is a chance for the children to




BANKING SECTION.

103

sidered only half educated. There are many rich peowork quickly. You men come home and find a tired wife.
ple who work harder than poor ones. Life is like one
So you go off to visit a neighbor or you sit down and read
great carpet and some of Us have to weave the dark body
the paper for hours. That reminds me of a story I heard
threads and others put in the gay ones. We could not yesterday. "Come on, Jamie, lets play house," suggested
have our carpet without the body threads just as we four-year-olld Alice to her twin brother. "All right,"
could not have the world as it is to-day without the work
, Ile agreed,." you get the broom and be the mother and
ers. They are the back-bone of our nation. It does not I'll get the newspaper and be the father."
matter what kind of work we have to do as long as we
A little cabin of one or two rooms out on the prairie
do it well. You can make your work dignified, no mat- Is often so cozy and homelike, that people love to stay
ter what the work is. If-you are ashamed of your work, there for a few days and it may be the home from which
the work will never be done right, and you can never be some great man comes. How much useless money is
a happy person. We must do our work well, and we can spent on cheap furniture, ugly rugs, plush curtains, and
make our work and our life what we will. There is no sofa pillows. Thousands of dollars are wasted every
more glorious work for women than that of housekeepyear in buying very ugly and cheap vases and bric-aing, and the woman who makes a home, prepares the
brac. Think of the care bestowed upon them. A man
meals, washes the dishes three times a day and makes
will spend one hundred dollars for an article which will
the clothing for the little children is the woman who is
be seen in his living room by every caller, but he will
entitled to all honor and glory. The woman who is her
begrudge five for something which makes the kitchen
own housekeeper and mistress can so dignify labor that
more comfortable for his wife.
housekeeping will be considered the finest kind of a proGrowth does- not depend upon food alone, but on the
fession. Half the battle in any fight is to love the work
right kind and the proper preparation. Many children
we have to do and to have enthusiasm for it. Do what starve in the midst of plenty, because it is not the right
you have to do to-day and do it well. Do not envy other kind of food. If suitable food is given early in life, it
People but be satisfied with what you have.
. will make fine, strong, healthy men and women who are
Every mother and father should see to it that their capable of doing good mental and physical work. Many
daughter is inspired with the art of good housekeeping of our criminals come from the tenement districts and
and feels that when necessity arises she can do her own
the slums where the food is very badly cooked.
work without feeling that she is doing anything that
What can the woman do for the home and the nation?
lowers her dignity. Those who live well are those who
By being a perfect home-maker, she not only makes a
by faith daily perform the miracle of making some
happy, perfect home, but her influence is what makes
coarse things fine; it is the common things of life that the nation great. If the woman in the home brings
her
are the grand things.
sons up in a happy home life, and a moral one, when they
No woman should become a slave to her home. She
help with the affairs of the nation it will be the same.
must learn to let things go, and not to be ashamed of
Right living is equally important to men and women.
a little clean dust on the tables or on her piano, no mat- There is one obligation on all persons, rich or poor. We
ter how busy, and take time to rest five minutes several • are required to do our utmost to use wisely the gift
times a' day. There are the women who are too clean
which God has granted us; we are expected to live for
about housekeeping and who want to polish every nail in
others rather than for ourselves. There is an old prothe attic flocr so as to show that they are good houseverb, "Take care of the pennies and the dollars will take
keepers and have everything bright and shiny.
care of themselves," and so if we know how to take care
Every woman, rich or poor, should be acquainted with
of the home and make it the foundation of all that is
the art of housekeeping, and her greatest pleasure should
good and to make strong men and women, there will be
be in making her home an example which the children
no fear for the future of this grand nation of ours. It
will never forget. The future lives of her children dewould be impossible for us to say how a well-regulated
pend in a great measure upon the mother's wise counsel
household has the power of doing good. A well-ventilated
and good advice, and one good mother is better than
room and a dainty table means so much at breakfast.
twenty teachers.
which is really the most important meal of the day, alRealizing that the truest and fullest life is to be in the though it should be a simple one. A good breakfast prehome as housekeeper and home maker the twentieth cenpares one for the day's work and a good dinner prepares
tury woman prepares herself for her life work, just as one for the evening's enjoyment.
an engineer, or a physician, prepares himself. She studies
Domestic work is a condition and necessity of home
under those who have made thorough and scientific re- life. It is true that if domestic work disappears, the
search into every phase and department of the home. home is impossible. If there is a home there must be
She learns how to plan her own house, that it shall be
housekeeping; if there are children, they must be cared
simple, convenient and comfortable, full of light and sun- for; if there be invalids, they must be looked after; if
shine and sanitary in every way; how to furnish and
there is food, it must be prepared; and all these things
equip it in good taste, and with reasonable expenditure involve work as a simple, practical necessity. These
of money; how to keep the house sweet and clean, and
are woman's duties. She must first be capable of bding
wholesome without sacrifice of too great time and effort; a business • woman. She must have enough business
how to leave out the drudgery, substituting for it whole- ability to manage the home properly. By being a busisome, happy labor; how to plan and prepare her meals
ness woman I do not mean that she should be able to
that well-balanced, well-served, satisfying meals shall be go out and take care of some business, but to be economithe rule of the home. She learns the wise and economical cal, practical and capable of planning the 'business afexpenditure of money; how to cut, fit, sew; how to care fairs of the home.
for the babies; how to nurse the sick; how to make
Girls and boys should be taught good manners. Robert
strong, healthy animals of her children—the relation of Louis Stevenson told us that the Americans had the
best
good food, proper exercise, fresh air, and sunshine to
hearts and the worst manners in the world. We should
good health. She learns the laws relating to the develop- be the politest of people. Do not have company manment and growth of the mind and soul.
ners. Keep your manners polished as you keep your face
Women have hated housekeeping because they have clean—first, because self-respect demands it, and second,
not had the proper tools and the right spirit. Everyone
because respect for your neighbors demands it.
bought a sewing machine when they were invented, and
Men and women should always work together. It
It must not be long before every woman has a good stove
takes two to make a home, the man to build the house
and a good dish washer. I believe that every woman
and the woman to make the home; women only can
should have proper utensils so as to get through her
create the homelike atmosphere. But the father should




104

BANKERS' CONVENTION.

Let us lift our hats to the little woman in the communhelp more than he does in the bringing up of his boys.
ity who is striving to make the,home a better place to
it is pretty often that I hear
I meet many women, and
live in. Stephen Girard said that the recipe for happia woman say, "What shall I do with my boys? I have
ness was to keep busy. Any woman who puts her mind to
my husband says he is too busy
no control over them and
the task of housekeeping and backs it up with hard work
to help me in training them."
will be a fine housekeeper. I believe that every man who
is generous and gives a good deal
The American man
A
owns his own home is a better man, a better citizen.
but he does not always give his time to his family.
There is nothing like having a few hundred dollars in
the world and his opinion is respected by
man is out in
the bank to give one a stiff backbone and a feeling of
the boys.
self-respect. Taere is never joy in idleness.
I hear people say, "How changed women
Sometimes
They want
Miss Kelly, of .Louisiana, told us last year of a little,
are." Women are just the same as ever.
neglected, underfed, typical farm lad. He wore a coat that
praise and love whether they are married one
affection,
had been handed down from an elder brother two deyear or twenty-five years. It is a Pity to hear people
grees removed, and an old hat dragged down over his
women have changed. The woman of to-day
say that
ears. He was competing for a prize at the Pig Club. His
is a product of our times. Because a woman has to alter
pig was so large that they had to 'drive it into the pen
of living; because the manufacturing plants
her manner
of her
cornerwise. During the day men came and talked to
have taken knitting, weaving and baking out
him, and asked him how he fed his pig to get it to look
simply means that she must alter her way of livhands
for her
like that. At noon he began to stand a little more erect.
ing. But every successful business woman longs
When she passed at night he was a different lad. His
home, because it is a place where she can make comown
her, and be prohead was up, his shouldeis held back and the coat acfort and happiness for those who love
tually fitted him. He was swelled with pride because
tected from the stress of daily life.
he had done more than any other boy or man in the
I could tell you of hundreds of women who are earncommunity and he had the look that came from success.
their living and putting some brother or sister
ing
So it is with the girl in the home. She can feel that she
through the university or helping some aged father and
is a great help in the family life' if she knows how to'
has no time to be proving that she is a
mother. She
control materials, to spend wisely. .She gains in selfwomanly woman. She has to work for herself and others
respect and in dignity. She will also feel that she has an
make her less womanly. She loves the
and it does not
sew or
economic worth in the community. But she must have
quiet hour at home when she can sit down and
money with which to buy things that makes life worth
supper. She has to meet new conditions, but
cook the
home. living. Hundreds of girls leave the farm home because
at heart she is loving, unselfish and devoted to her
they will not live a life such as their mother has led.
Mr. Mortimer Schiff emphasized the fact that the lack
They see the mother getting old.and tired and longing
the young man
of thoroughness is the greatest fault in
money. And the girl says, "I will
business. Still another fault IS untidiness in dress, for a little spending
In
never marry a farmer for I will never have any money
true of women. Every
manner and work. This is equally
chicken and egg money belongs to
woman should dress neatly and be thorough in her work. ; of my own. The
mother, but she is entitled to more, and sometimes we
stress should be laid first
I believe in the schools that
and egg money was a great favor
on health, then neatness of dress and personal appear- feel as if the chicken
and she uses it for the bread and butter." It is humiliats of attitude and willingance, self-confidence, cheerfulnes
ing for any woman to have to beg a dollar for a new
ness to take responsibility.
kettle or a new hat. The home must mean more than
you forgotLet the children take responsibility. Have
four walls. The visiting housekeeper will do wonders in
ten the day when you first went to the store? Do you
helping the mother and telling her how to manage her
remember receiving a little purse and a slip of paper with
work and in making her life easier.
instructions to the grocer, and do you remember how
We must have good homes or our neighbors won't have
of peaches and a
proud you were to bring back a quart
good homes. Many a woman sacrifices her health bepackage of soda crackers and a few other things? And
has to work all day. The curfew
did your mother give you a penny to buy some molasses cause she thinks she
should ring for women who are in the kitchen after two
taffy, a licorice stick or some other wonderful cOncoction
o'clock. All work in the home must be directed toward
and did it hurt you a bit?
making the home a better place to live in with regard
The market basket represents personal selection, and
to happiness and service. No matter how good a housethe woman who wants to save the pennies must select
who interferes with comher own groceries and meat and must pay cash for them. keeper she may be, the woman
fort of the family and the development of the home is a
and delivery system is to
I am sure that the telephone
poor mother. Every woman should learn to be thrifty;
blame for part of the high cost of living, but when a
to my mind that does not mean at all to be stingy.
duties and a large family and somewoman has many
Thrift is the guarding of one's possessions in such a
times a large pocketbook we would not change if we
way that they are constantly increasing. Thrift is spend•
could.
Someone has said that to 'be thrifty
Then the goods delivered in packages. Buy a glass jar ing money wisely.
means to be careful of health, time, talent and money.
of bacon and weigh the contents and you will find you
certainly gives one a sense of self-confiare paying about 50 cents per pound against 30 or 35 To be thrifty
Happiness consists of earnis dence and peace of mind.
for sliced bacon bought at the butcher's. True, it
little and spending a little les.s It makes a strong
sliced thinly, it is good quality, and it is convenient and ing a
handy to have on an emergency shelf. But I am speak- character.
Bankers and housekeepers should work together. We
ing of the woman with a moderate pocketbook who must
of rice—one pound is 10 cents, home economics teachers are your best friends, because
buy wisely. A package
but only 6 cents if you buy it in bulk; mixed pickles, we are trying to teach thrift and economy. Our hope
Is i nthe young women, for they will be the ones to
cereals, biscuits are all the same: One of the grocers in
bear and bring up the futtire men and women. Our
central New York, in a town of 4,500, said that in ninegirls should be taught the vallue of money. They must
teen articles, buying a pound of each in a package and
be paid for the work they do on the farm. Girls and
the same in bulk, there was a saving of $2.66. That is
boys want money. I think every gill of twelve should•
a positive economy. That was for one trip. Every househave her own allowance and I want you fathers to help
keeper should know something of the buying of supplies
me. Every woman should have a savings account. I
and that will help to deal better with the high cost of
hope educational work will become more useful and
living, or the cost of high living or the cost of careless
make every boy and girl think for themselves and not
living.




BANKING SECTION.
copy everybody else. I believe that women should
be encouraged to take a course in home making in
its broader sense. I hope to live to see the day when
every woman who is going to be married will have to
pass an examination in housekeeping before she gets
her license.
In the annual report of the Commission on Education
for 1908 it as stated that only one out of every 500 young
people ever entered an agricultural college. Out of every
100 rural and urban children, only five ever reached high
school. We must encourage the children to go on. Here
are some figures from the United States Bureau of Educational exhibits at the Panama-Pacific Exposition:
Uneducated laborers earn about $500 a year for forty
years, or $20,000. High School graduates earn on an
average $1,000 a year for forty years, or $40,000. In the
wages of two groups of Brooklyn citizens those who
left school at fourteen began with $200 a year and were
earning $688 a year at twenty-five years of age. Those
who left school at eighteen began with $500 a year and
were earning $1,550 at the age of twenty-five. The
United States Department of Agriculture is doing wonderful work in helping the homes.
The reaching of the country women and the importance of the rural school is the topic to-day wherever
a large body of educational public spirited men meet.
In the town, simple social pleasures seem to grow up
quickly because people live near each other and can be
reached quickly. That is one of the greatest needs in
small communities, and the school-room and church
should be a meeting place for many social activities.
Washington is the first State which has perfected the
rural school and given to the rural teacher the teachers'
cottage. I think too that the country church can do a
great deal to help the community. There must be a
social side. The men and women must have more recreation. No life is well lived unless it has its play
time. There must be recreation in the country home.
Home-making means more than housekeeping. It means
that everyone must get together and bring joy and gladneSes and a big deep friendliness into the life of the country people. Great things are being done for the country
community; fine roads being built, rural delivery, better




105

schools, stronger churches, but the home has not kept
up with the procession.
If the farmer is doing better things on the farm, of
what use is it, if it is not used in part to give better
things in the home? He is happiest, be he king or peasant, who finds peace in his home.
When the housekeeper does not know how or why
she thinks it is drudgery, it is just the point of view.
Work becomes a joy and a pleasure when we have a special education for it. The geologist breaks rock all the
day and is happy. The laborer breaks rock and is unhappy. The geologist has a wide vision; the laborer a
narrow one. Behind every great movement there has
been some finer sentiment to inspire men. Difficulties
and discouragement have been the key to success. The
prosperity of the American people depends on the homes
in the small community. If the parents do not know how
to keep their boys and girls well and happy, they will
never keep them on the farm. Do not say, Back to the
farm—say Stay on the farm.
It is a wonderful thing and marks the cornerstone of
a new development when the American Bankers' Association takes up the work of public welfare and it
seems to me a happy omen for the future when they
have thought fit to place the woman's side on their program. Preach the gospel of serenity and contentment.
Cultivate the habit of hospitality in keeping with your
means. Don't apologize for simple meals. Try to have
your meals so pleasant that a guest will feel welcome to
come at any time. It is a good thing for us all to have
our circle enlarged by the presence of a friend. But
live without display and practice simplicity. The dream
of restlessness is with the American people. Let us all
try to take life quietly and simply so that we may enjoy
health and happiness. The world is full of bustle and
hurry. But in the home there is time for the pressure
of a loving hand, a smile.. In the home we can meet sorrow and gaiety. Love makes the roof and walls into a
home; without its magic touch it is only a house.
Do not grasp at the stars.
But do life's work, plain common work—
As it comes, certain that daily duties and daily bread
Are the sweetest things in life.

106

BANKERS' CONVENTION.

The Federal Reserve Act and the Banking System It
Has Created.
BY F. A. DELANO, Vice-Governor of the Federal Reserve Board.
Much has already been said, and well said, about the
Federal Reserve Act, and it is doubtful if I can add
anything new. I wish, however, to call attention to
some important features which have been accepted as
mere commonplaces, but which are really deserving of
more notice than they have received.
First, it should be borne in mind that it was necessary to frame the new law so as to provide for a complete change in our note issuing and credit basis, yet,
at the same time, so accomplish this as to cause no disturbance in business by the upsetting of our existing
banking system. It was like the problem of reconstructing. a great office building, changing an antiquated
construction and substituting therefor steel and marble,
yet accomplishing it all without serious inconvenience
to the tenants.
The task was necessarily a difficult one and the law
provided three years for its accomplishment.
Under the old law, banks were all independent of each
other, reporting direct to the Comptroller of the Currency at Washington, but each bank for itself. The
ownership of branches was forbidden, and thus it was
that when. the law went into effect there were seventysix hundred separate and distinct National banks varying in capital from twenty-five thousand to twenty-five
million, and in addition, approximately eighteen thousand
state banks, trust companies and savings bahks. These
banks were not organized or grouped in any way except
that those in three large cities (New York, Chicago and
St. Louis) were classed as Central Reserve Banks and
were allowed to hold a large share of the reserve deposits
of National banks in other cities, while another group
was formed of banks in some fifty cities known as
Reserve Cities, which were allowed to hold a considerable
share of country bank deposits and in turn deposit onehalf their reserves in Central Reserve banks. A third
group represented all the banks in other and smaller
cities, towns and villages, which were classed as nonreserve city or country banks. These were allowed to
hold a minimum of reserves (15 per cent:) and deposit
three-fifths of it in Reserve and Central Reserve Cities.
This loosely formed grouping of the banks did not
bring about any real unity of action or an effective
organization, and, even though some co-ordination of
effort was accomplished by Bankers Associations, Clearing House Associations and similar voluntary organizations of banks and bankers, the fundamental idea underlying the American Banking System was "Everyone for
himself and the devil take the hindmost." The framers
of the new law were face to face with the problem of
devising a way to retain the advantages of competition
between banks yet so to group and assemble the banks
as to make it possible to use reserve resources jointly
and effectively for the benefit of all and for the protection of the public. This was accomplished by creating
twelve different central joint stock banks, each of them
the dominating or central bank of a large area. These
banks as established represent 385 to 982 member banks
with a nominal capital ranging from $4,808,000 to $21,624,000—only one-half of which has been paid in. These
central banks were not created to transact business with
the public, but primarily, as their name implies, for the
purpose of holding the reserve deposits of their owning
banks. Among the important services which they may
render to their member banks the most important is




the right to rediscount their paper and issue bank notes
against it. Manifestly then the first great result of
creating twelve banks has been to bind together all the
National banks of the country into twelve strong regiments thereby creating an effective solidarity. Who
can doubt the immense gain in doing that, even if nothing•else had been accomplished by the act? It is as if
a man were asked to organize an effective police force
in your splendid city, and found 7,600 policemen all
reporting to one chief. The first thing he would do
would be to divide the force into divisions with suitable
headquarters and a competent officer in charge of each.
Indeed without developing the simile further it should
be.apparent without elaborate argument that the creation
of twelve central reserve banks was, from the standpoint of efficiency of operation alone, the greatest step
in advance which has been made in the banking history
of this country.
Reference has been made to the fact that, under the
old system in effect for fifty years, there had been
developed a system of depositing reserves of smaller
banks with other and larger banks. This had led not
only to serious duplication of reserves which rapidly
evaporated in times of stress, but in addition to this,
the results of active competition for deposits led to
many vicious practices, stich as paying high rates of
Interest or granting special facilities or favors. Banks
kept reciprocal balances with each other and by a system
which might be likened to the time-honored plan of
"you tickle me, I tickle you," they got ahead, at least
on paper. However, these methods were not conducive
either to safe banking or to low and stable interest
rates for the public. Hence it was that one of the
objects of this new law was to make banking less
hazardous, make profits gurer, but to accomplish it in
such a way that the investor, the manufacturer, the
merchant, each and all, could count on banking facilities
in good times and bad and also a fair stability of interest rates. Banking which has to recoup big losses with
big gains may be expected in a new and raw community,
but should not exist in a well-established, orderly community such as ours. I am not a banker by training,
but I believe that the principles which apply to banking
are similar to those which apply to business generally
and require that losses must be compensated by gains.
It has been repeatedly pointed out that the only way a
merchant or manufacturer can permanently reduce his
premium payments is by reducing actual losses. So it
is that the Federal Reserve Banks can only be an
effective instrument for improving the condition of the
district of its domicile by protecting its member banks
against loss, by relieving necessity and by intelligently
foreseeing and forecasting events.
Of course during the first three years when reserve
deposits are being gradually shifted from the reserve
and central reserve city banks, we shall hear grumbling,
but the far-seeing banker already appreciates that the
Immense advantages of the new system will more than
compensate him for the loss of reserve deposits. But
I may assume that there are some skeptics in this
audience, some gentlemen from Missouri who want to
be shown. To them I must say first, you must admit
that the old scheme of reserves was, to say the least,
very faulty. When you needed it most you did not have
it, and, in fact, as it was counted mostly twice, there

BANKING SECTION.

107

really wasn't enough to go around when, as in the fall
some neglected features of strength ui the new banking
of 1907, everyone called for it at once.
law. To me they are important. Experience
has taught
The new plan seeks to put the reserves where you can
me that the greatest necessity in modern industria
l life
count on them. In a bank of which you and the other
is intelligent organization. Without
it we cannot secure
contributing banks of the district are the sole stockco-operation or efficiency. It was a misnomer to call
holders, your stock is assured a 6 per cent, return, and
the old banking system a system. If
it was a system, it
all earnings above that go to the government, after the
was so against the spirit of the law
which created it,
bank's own reserves have been strengthened. The reand came about by purely adventiti
ous methods. Now,
serves in the (Central) Reserve Bank of the district are
we have what can really be called
a system-7,600 or
used expansively as the basis of note issue, so that
more banks grouped into twelve districts,
each district
instead of these reserves being unavailable in time of
headed by a central bank, which, being
the mutual,
need they are at once available to the fullest extent. jointly owned
bank of all the member banks of the
The operation, simple enough to most of you, consists
district, should serve the necessary purpose
of creating
in allowing member banks to bring around your com- an organization
in a hitherto unorganized aggregation of
mercial paper, and provided it complies with the not
units.
onerous provisions of the law and rules of the Federal
These Reserve Banks belong to the banks
so largely
Reserve Board, you are given a credit on the books of
represented here. They are created and
managed by
the bank or, at your option, Federal Reserve notes for
your directors. The Federal Reserve
Board, a quasithe full amount. When issuing notes to you the Federal
gorvernmental body, has no desire to interfere
with
Reserve bank deposits against such note issue, and as
their management. It is obviously our aim to
have the
additional security above the commercial paper bearing
spirit of the law complied with, and our duty
to have
your endorsement, 40 per cent. in gold. In other words, the letter of the law
obeyed, but we have no thought that
the Reserve deposits which your bank and others have
It will ever be necessary to adopt harsh or
arbitrary
contributed become potentially capable of sustaining a
methods to accomplish that purpose. We are
glad to
paper circulation two and one-half times its face value—
exchange views with you, glad of your suggestio
ns and
or stated in another way, if allowance is made for 35 per
criticisms. While only two of our number - are bankers
cent. reserve against all deposits and 40 per cent. of experienc
e and training, all are equally desirous of
reserve against note issue each one hundred dollars of
making the system a success, and we know full
well
reserve money is capable of expansion, when you bring in
that success cannot be had unless the member banks
as
your commercial paper, to $162.50. Here, then, is a servwell as the business men of the country fare well
under
ice which no Central Reserve or Reserve City Bank in the
Its operation. We hear much of the danger of competipast was ever able to perform. Here is a real insurance
tion of the Federal Reserve Banks with member banks.
and something which fully compensates you for loss of
It isn't strange perhaps that in a time when business
interest on your reserve deposits.
is poor and a plethora of money exists that there
should
Under the old system every National bank was required
be those who resent the fact that Reserve Banks
are
to hold United States Government bonds and these in
permitted to enter the open market—but those who
turn were the basis for bank note circulation. The
really study the question, will soon realize that
these
fundamental idea underlying that system was to make
open market operations at most are negligible when coma market for United States bonds. The law served its
pared to the aggregate of such operations by state and
purpose admirably and the banks who were among the
national banks. The rediscounting of commercial paper
first to enter the system made great profits from
of member banks by the Reserve Bank is the chief
the
appreciation of value of their bonds and made money
function of these banks, and while it creates some comwith their bank note circulation as well, but it has long
petition in dull times with large banks who have herebeen recognized as a very rigid, inelastic system which
tofore rendered this service for their correspondents, it,
led to a shortage of note circulation in busy times and
too, is negligible in volume and in busy times would be
a super-abundance or redundance in dull times.
welcomed. The fact that the new law lowered reserve
The new law lets the National bank note currency
requirements, of course released reserve money which
pretty much alone, provides for the gradual retirement
competed with previously existing funds and tended to
lower interest rates, but that will soon adjust itself
of United States bonds through a period of twenty
years and supplements it with an elastic currency known
when business improves.
as Federal Reserve notes based, not on United States
Per contra and over against all the arguments which
bonds, but on short-time commercial paper, as hereto- the skeptic and the grumbler may assert, I ask
you to
fore described. This feature of the law is something that
consider the benefits of organization and co-ordination
American banks of this generation have had no experiof effort, resulting from the grouping of banks into disence with and it is perhaps not easy for them to adjust
tricts, each under a strong mutually owned bank.
themselves to it. Many of them have been taught to
If you gentlemen who are complaining of the ruinous
believe that loans should be made preferably against
effect of competition brought about by the Reserve
securities as collateral, such for example, as well known
System, will apply yourselves loyally to the task you
stocks and bonds. To them the new plan seems revocan make this Federal Reserve System, chartered as it
lutionary, or at least difficult to comprehend. In point
is under Federal law, the bulwark against the fiercest
of fact it is the basis upon which banks of issue in our
kind of competition, unfair competition, competition
own country, before the Civil War, and practically all
which makes for payment of high rates of interest for
European countries have operated. The theory upon
bank or individual deposits, or else retains or encourages
which the issue of notes on short-time paper is justified
other equally absurd practices.
and preferred to the idea of issuing notes against good
You know these things better than I, and I believe
bonds is that if bank note currency is to be really flex'.
you can find a way to abolish many of these absurd
blt, it must expand or contract in volume exactly as schemes, and by means
of your Reserve Bank, create
the business of the country expands and contracts. • a real system—a
system in fact as well as in name—
Furthermore, it must be based on articles of daily use
which wil make for better banking, safer banking, more
and necessity, articles which -like food and clothing are stable profits for
the owners and more uniform interest
being consumed and therefore bought and paid for
rates and certain accommodation for the merchant, manevery day. This, experience here and abroad has taught, ufacturer or producer
who are your clients.
is a better basis for currency than Government bonds
I am willing to give up some valuable years in my life
or any other slow or long-time investment security.
to bring this about and I hope I may appeal to the
In what I have said, I have tried to explain briefly
enlightened self-interest of this association to co-operate.




-108

BANKERS' CONVENTION.

"Boys and Girls."
, Wash.
BY PROF. T. J. NEWBILL, University of Washington, Seattle
enough in their search for culture. A great many
Mr. Chairman, Members of the Association, Ladies and long
can be
nity to present to others have more recently found out that culture
Gentlemen: I am glad of this opportu
digging agricultural roots. There is as much
you in the short time allotted to me one of the great had from
in agriculture as in a study of any of the ultraforward movements in education which concerns itSelf culture
l subjects if we only dig it out. Nearly all of
primarily with the making of better men and better cultura
for the home, the word agriculture is culture.
women. It is directed toward the home,
backno
What is club work? It is a definite farm-garden,
and performed at the home. All school study and
ns itself
yard, or home interest enterprise, and concer
doing things in
practice is not a good thing. Hence, it is
e
with at least-a season's care and management.
the organization of boys and girls who keep an accurat
are
Let us dignify labor by teaching them that they
required, where inaccount of time, money, and labor
to get an education to get out of work,
not going to school
dustry and thirft are 'cardinal virtues.
to work intelbut that all education ought to help them
Industry and thrift should be the watchwords for our
of the people in our land at the present
y. ligently. Think
century. A thriftless people are a national liabilit
the
soil time who are counting time from the Atlantic to
Think, forty per cent. of all the products of the
an erroneous idea, who are now huntused
Pacific, with such
in these United States last year were wasted, not
looking for
jobs—no, not jobs, for most of them are
for human betterment In any form, and yet last night ing
accent on the sit every time.
with the
fifty per cent. of the people who trod this globe went to sit-uations,
s habit;
a
One of our great National needs is the saving
bed hungry. It is no wonder that we are known as
earning habit first. Little use is
but we must have an
nation of spenders and a nation of wasters. The opporto teach boys and girls to save who have never
tunity of every city lies in the country. The conserva- it to try
to
our
been taught to earn a dollar. It is a waste of time
tion of the national forests, the conservation of
the
enormous by- try to teach a tadpole to jump. No one knows
water power, even the conservation of our
I
convalue of a dollar until he hits first earned a dollar.
products, do not compare in importance with the
y who are
peoples. We find fathers and mothers all over the countr
servation to every city of its rural life and
cash
g and saving and laying up inheritances in
cannot raise any community faster than we build individ • farmin
to know how to
for their children, and expect them
community. A
ual ideal in the separate homes of that
farm
or save it wisely. And, after the worn-out
contented, productive rural life is a continuous asset. spend it
ienced boy to take
farm move- has ceased to pay, expect the inexper
We hear a great deal about the "back to the
it a go. Dissatisfaction results, and he is
ment"; there is no such thing. That is a municipal the- it and make
an opporstay on the away to town also. Better had he been left
ory. The most important movement is the
living, not from the inheritance left him
earn a
farm or stay at home movement, which is ours by the tunity to
it go any
or the worn-out soil, for father could not make
Improvement of home life and living conditions.
still productive, built-up, fertile farm,
is longer, but from a
The attitude of the younger or growing generation
ance in
really a fertile opportunity. The greatest inherit
Infinitely of greater importance to the agricultural world
opportunity without a guardian.
fixed or
this world is an
than any attempt to reform or transform the
on that a
ics
Agricultural education is the only educati
older generation. Agriculture and home econom
from home that will fit him to live
Conboy can get away
should be the first interests to a rural community.
at- at home. Too many of our boys and girls are being eduservation to rural life of the best youths through the
a- cated away from the farm and away from the home.
tention of the club members is the highest conserv
There
reach the
Agriculture ought to be taught more generally.
tion, as two-thirds of our boys and girls never
boys and girls destined for country
attainments. Why? There is al- are as many city
eighth grade in their
life as there are country boys destined for city life; and
ways a reason. Most of them are not getting the kind
life then if we are to prepare them for the lives which they
of an education that is fitting them to live the
live in the are to live our duties are apparent.
they or their folks are living now or may
aEvery country boy and girl needs and wants inform
future. Nearly the same number and nearly the same
is usually
l expression
tion, inspiration, and encouragement, which
pupils are longing for some sort of physica
clubs
lacking. By organizing our boys and our girls into
of themselves; not the oral, grammatical requirements
such as the
the world for some of these worthy home enterprises,
of the school-room, but the examination that
nt Corn Clubs, Pig Clubs, Poultry Clubs, Garden and Canfor success demands; success so often is entirely differe
ning Clubs, the Mother-Daughter and Father-Son Club,
from the examination of the school-room.
lives
Milk Testing, Stock Judging, etc., we are thus stimulatWe can do very little with the older folks, whose
will be significant.
ces, to help ing a lasting interest in the home that
are bundles of habits and bundles of prejudi
ation available anywhere is sent to them
best inform
in this great movement, but our hope is in our receptive The
the from the agricultural colleges and the U. S. D. A., and
boys and girls, whose pores are open, looking for
thus they grow up with better farm practices and better
best wherever they can find it. Start them right, catch
ive years satisfied because they make money at home rather than
them young, and with twice as many product
our to grow up with the idea that in order to make money
ahead our work is more worth while. Attention to
you must leave home.
the grease where
boys and girls, then, is really putting
While yet in their youth they are taught that great
economically.
the squeak is,
out every- civic lesson of co-operation, and that under the motto
Too many of the older farmers have sold
ly
of the Four Square Club Education, viz.; education of
thing and moved into town in search of a place general
s of our the head, the heart, the hand, and the health. The averwhere they can die cheap. Let's make partner
Is an individualist. The only time he will
boys and girls in the home-making and farming business, age farmer
co-operate is when he can't make it go alone. Then he
ng. Let's teach
and watch the great difference resulti
as is willing to co-operate if you will let him be the co-part
.them to be producers, earners, owners, and savers,
dignify home pur- of the co-operation.
well as how to spend wisely. Let's
In our agricultural activities let us be conscious of our
suits. They have been digging Latin and Greek roots



BANKING SECTION.
natural adjustment. Every child passes through the
same periods in his development that the race has passed
through. Some of the earlier stages in the development
of the race were the hunting and the fishing stage, then
the pastoral stage, where they drove their flocks from
place to place and cared for animals. Later came the
great agricultural age, when they planted the seeds and
had to wait around these favored spots for their harvest.
This was the beginning of the greatest institution that
is known in this world, the beginning of home life.. We
are now in what we might term the great commercial
or financial age. Every child has a period in his development that he wishes to care for animals; he likewise
has that response to his own nature when he wishes to
care for plants; and these instincts, like the instinct to
music when it arises, if it is not cultivated or exercised,
perishes. Hence, the place of this agricultural encouragement in the lives of more of our boys and girls at an
earlier period. In many of the elders it becomes a sustenance propositibn rather than a natural evolution. Lend
all your concouragement to the susceptible boys and girls,
and the line of efficiency will certainly rise on your
horizon.
It is the same in the West with us as it is with you
in the East. Everything we have but fish, and our hope
of the future, comes out of the soil. We have a half
million boys and girls at the present time in the different
States in the Union who receive instruction and encouragement regularly in their home interest enterprises
from their State Colleges and the U. S. D. A., and are
demonstrating to the whole world better methods of
farming and larger net profits from the farm enterprises.
In these Western States the Pig Clubs are attracting
much attention. We have in operation a co-operative
plan, fostered by the State College, Department of Education, Bankers and Stock Yards organization, whereby
any worthy boy or girl may be supplied with an opportunity of making some money at home in the form of
a pure bred sow, bred to a pure bred sire, and immunized
against hog cholera before she is sent out. The members
give their notes, at six per cent., to pay for the sow
when the little pigs have grown up to big hogs in the
fall. I think this a wonderful plan and a wonderful
opportunity, and it makes me wish that I again might
be a farm boy with such an opportunity. As a result,
community types of breeds have resulted. Community
marketing and community co-operation in the purchase
of a sire for the whole community. Ethel May Harney,
the little girl who purchased her sow, kept her records,
did her own work, produced pork at a cost of three and
one-half cents per pound, when it was costing many of
the elders six to seven cents per pound, made between
$78 and $79 from her pure bred sow, and won the Shetland pony which she rides two and a half miles to school




• 1:,1

109

and back every day, because she was the best pig raiser
in the State. This is real achievement, and "achievement is the only patent of nobility in modern times,"
says the President. The Canning Clubs are teaching the
use of the by-products of the field, garden, and orchard,
as well as the importance of the neglected balanced ration for the -human animal. Thousands of such achievements might be enumerated.
How long will it take you to diversify the interests in
your community if every boy and girl has a pig, some
chickens, and a calf?
Why not standardize your community? We hear of a
standard school, a standard church, a standard hotel,
and a standard bank. What constitutes a standard community? One in which you would like to raise your own
fainily for the maximum of contentment and efficiency.
Let us have a Banker for every club boy in the
United States, and ten club boys at least for every
Banker in the United States, with at least ten girls for
every Banker's wife to know and encourage. What will
this do for the boys and girls, and what will this do for
the Bankers? When you meet a boy in his own garden
plot or in his own barnyard you are a different Banker
to the whole family thereafter; and they are different
people to the Banker. You are all friends. Let's remember that the country produces great minds, but does not
develop great minds. We need to suburbanize the rural
minds and develop mind by contact with mind.
How the banker may help. This movement, first, for
the home, requires leadership in every county in every
State in the Union. Second, you can promote it fastest
by your insistence on a county agriculturist or farm
adviser for every county in the United States, especially
yours. Third, you can encourage by offering prizes of
opportunities, not large, to stimulate and maintain interest. Fourth, you can extend credit to worthy boys
and girls for pure seeds and pure bred live-stock. Fifth,
by being a leader yourself, getting acquainted with the
future business men of your community.
Home life is worthy of all the attention we can give
it in the rural community. Home interests, home activities should be measured in our attentions. Every boy
and girl in the State of Washington next year in all vocational subjects is to be permitted to receive school
credits for related supervised vocational activities done
at home. This is another move to dignify labor both at
school and at home.
Let every Banker in this great organization in this
Banker-Farmer movement leap at the opportunity of
assisting in making better men and women out of our
boys and girls by encouragement, support, and contact,
and enlist actively in this great forward movement,
of
teaching the great lessons of industry and thrift.
1916 is the Thrift year.
What are you going to do about it?

Committee and Officers' Reports Banking Section.
Annual Report of the General Secretary.
NEW YORK CITY, August 16, 1915.
To the American Bankers' Association:
GENTLEMEN: I respectfully submit my report as General Secretary of the American Bankers' Association for the period
from September 1, 1914, to August 14, 1915. The fiscal year
of the Association ends on August 31, but the early date of
the Convention made it necessary to balance the books and prep
pare the usual reports at an earlier date than is customary,
For details of Association activities during the past year I
desire to call your attention to the information contained in the
various reports submitted by the officers of the Association, the
Sections, Commissions, Committees and Departments which are
made during the sessions of the Convention. It is my purpose
to give an outline of this work in the briefest manner and to
deal more fully with matters pertaining directly to my administration of the general business of the Association and its
finances, as I am called upon to do so.
EXECUTIVE COUNCIL.
Each year brings a large increase in the membership of the
Association. Every annual Convention shows an increased attendance. Each year it becomes more apparent, therefore, that
the business of the Association must be transacted by the Executive Council and to that body must fall the duty of deliberating upon and discussing the various matters affecting the operation, progress and welfare of the Association.
The constitutional provision which confines the membership
of all standing committees to members of the Council has been
justified in practice. As it is now organized, the Executive
Council has a greater efficiency and a better understanding of
the work of the Association than was possible under the old
constitution.
The Spring Meeting of the Executive Council was held at the
Hotel Chamberlin, Old Point Comfort, Va., May 3, 4 and 5,
1915. The absentees were few and their absence was unavoidable. The business of the Association received the most careful consideration of those present and the action of the Council
was harmonious in every respect.
The new Council which will be organized at the close of this
Convention will comprise twenty-five members in the one-year
class, thirty in the two-year class, and twenty-five in the threeyear class.
Occasionally expression is given to the opinion that the Executive Council is too large and too unwieldy for the most efficient transaction of the busiriess of the Association. This expression can come only from those who are not familiar with
the methods of the Council and the manner in which it goes
about its work.
I doubt if the present form of representation on the Council
can be improved. It is equitable, and it is so divided geographically that every State has representation based on the number
of its members in the Association; thus each State contributes
an influence on the work of the Association and develops an interest in it that could probably not be so well secured in any
other way.
SECTIONS OF TIIE ASSOCIATION,
The Sections of the Association during the past year have,
as usual, been most active in promoting the particular interests
of the banks directly interested in the work they are doing;
I can point with satisfaction to the fact that there has never
been a year, during the period in which I have served the Association, where there has been such hearty co-operation between
the Sections and the various officers of the Association.
The Trust Company Section has had problems of serious import to consider and has been most active in the promotion of
discussion of these problems, particularly in their relation to
trust company affairs as affected by the Federal Reserve Act.
The Annual Dinner of the Trust Company Section was held at
the Waldorf-Astoria in New York on Friday evening, May 7,
1915, and, like the dinners that preceded it, was largely attended and most successful.
On February 1, the Savings Bank Section lost its efficient
secretary, E. G. McWilliam, who was called to fill an important
position in Los Angeles, Cal. In May, M. W. Harrison was
chosen as his successor. Mr. Harrison has taken bold of the
work with much vigor and has shown such initiative and resourcefulness as to insure continued progress. Not only are the
general interests of the members of the Section being carefully
studied; but the thrift movement, which has been a feature of
the work in the past, is now being developed along new lines
which promise even greater success.




ry of
In November, 1916, will come the hundredth anniversa
in the United States.
the establishment of banks for savings
n of this event are
Plans, and preparations for the celebratio
n it is
already under way, and by way of general celebratio
which all banks may
planned to make 1916 a year of thrift in
to encourage savings
join and special efforts will be made
that the production of
through educational work to the end
capital may be increased.
lost the services of its
The Clearing House Section has also
successor will be chosen
secretary, 0. 'Toward Wolfe, and his
returned to the bank
during the Seattle Convention. Mr. Wolfe
connected. His
in Philadelphia with which he was formerly
the past year,
excellent work and that of the Section during
been in revoluwhen clearing house practices and methods have
no comment at
tion as the result of the new bank law, needs
time.
this
Institute
The thirteenth annual convention of the American
August 18-20.
of Banking Section was held in San Francisco
the progress
Each succeeding convention of the Institute marks
has shown an
is made. During the past year the Institute
that
manifested even a
increase in membership and there has been
members to
stronger desire on the part of its officers and
excellence.
its work and bring it to the highest point of
broaden
of Institute
Bankers' Health Commission, which grew out
The
it is confidently
needs, has been making decided progress, and
that its development will show the wisdom of those
predicted
who organized it.
with
The State Secretaries Section has been in co-operation
general
the Association at all times and in all phases of the
parwork. The assistance of the State Secretaries has been
where
ticularly valuable in committee work and in that field
Associajoint action of committees of the American Bankers'
to the greatest
tion and the State associations was necessary
efficiency.
m, M. W. HarTo Secretaries P. S. Babcock, E. G. McWillia
, and George
rison, 0. Howard Wolfe, W. W. Bowman, Pkesident
s Section, I wish
II. Richards, Secretary of the State Secretarie
on during the past
to extend my thanks for their co-operati
the success of their
year and I wish to congratulate them on
work.
on
Secretaries McWilliam and Wolfe served the Associati
refaithfully and successfully for three years; and it is with
on.
gret that their connection was severed with the Associati
on that their
It is, however, with a feeling of much satisfacti
n of
promotion to new fields of labor was a distinct recognitio
their ability.
al Director
Great credit is due to George E. Allen, Education
zeal,
of the American Institute of Banking. His alertness,
the progenergy and resourcefulness have had much to do with
Instiress of the Institute. The support of the officers of the
especially
tute has been most valuable, but this Association is
indebted to Mr. Allen for the time and attention he gave to
the
the editing and publishing of the Journal-Bulletin during
illness of W. W. Waine, the associate editor. For some months
Mr. Allen carried this work along in addition to discharging
his duties to the Institute.
NATIONAL BANK SECTION,
preAt the Convention in Detroit in 1912 a petition was
National
sented by a number of National Banks asking that a
that time
Bank Section of the Association 'be organized. At
proposition. In
the Council did not look with favor on the
a Section,
for such
the new constitution provision was made
easily organized.
and if the Council consents it can now be
such a Section will
I understand that a proposal to organize
the Seattle Convenbe submitted to the Executive Council at
tion . There are apparently reasons why the proposal should
are members
be favorably received. All the National Banks
of the Federal Reserve system. Experience has already shown
that changes in the Federal Reserve Act are desirable and, in
respect of some provisions, are necessary. Moreover, the interpretation of the Federal Reserve Act through the rules and
regulations promulgated by the Federal Reserve Board, is a
be
matter of great importance to National Banks. It would
all
within the province of a National Bank Section to consider
of this
matters pertaining to the amendment and interpretation
a Section.
law, and there would seem to be much work for such
JOURNAL-BULLETIN.
At the Convention held in Richmond last year there was discussion in the Council meeting as to the scope of the JournalBulletin. The tendency had been to keep the Association's publication within narrow lines. However, there was a growing

BANKING SECTION.
demand on the part of the members for a widening of its field
and the consequent increase in its usefulness. As a result of
the discussion at Richmond and by authorization of the Administrative Committee, the Journal-Bulletin has been greatly improved, in my opinion, within the year. This result has been
achieved and the development of the publication is largely due
to the acquisition of A. D. Welton, now editor, and George
Lewis, now associate editor. At the Richmond meeting a special committee was appointed and charged with the duty of
reporting on the advisability of separating the Journal from
the Bulletin and of publishing the reports and matters of some
of the departments in the form of supplements. This committee reported at the Spring Meeting, there being a majority and
minority report. These reports were referred to the Administrative Committee, which was given the power to decide. An
important suggestion of the special committee was that the
report of the Protective Department be printed separately.
This suggestion was given effect July 1. I believe it is a most
desirable change. It will benefit the Proteetive Department,
because the supplements can be placed in the hands of those
directly interested in the reports without taking from others
the copy of the Journal-Bulletin.
The circulation of the Journal-Bulletin is now approximately
31,000 copies a month. It is being freely quoted by financial
journals and the press of the country, and its articles are
widely discussed. Letters of commendation from members have
been received from all parts of the country, and it is the hope
of the editors and the publisher that it will grow in efficiency
as time passes.
LEGAL

DEPARTMENT.

No division of the Association's activities has developed more
in importance than the Legal Department under the able conduct of General Counsel .Thomas B. Paton. The department
had outgrown its offices, and a new suite was fitted up for Mr.
Paton, more commodious and better adapted to the accommodation of his staff of assistants and his ever-increasing law
library. Mr. Paton's report will cover very fully the work of
his office and the many important matters on which he has
acted during the year. The giving of legal opinions to the
members of the Association and the increased demands upon
Mr. Paton, of necessity require patient study, deliberate thought
and absolute correctness. No opinion goes from Mr. Paton's
Office until it has had his most careful consideration ; it is my
belief that his opinions are so carefully thought out that the
risk of error or wrong construction of the law is reduced to a
minimum.
STATE ASSOCIATIONS.

There are now. forty-eight State Bankers' Associations and
forty-nine including the District of Columbia. For several
years I have made special efforts to bring about the organization in every State of an association of bankers, and it is more
than gratifying that I can now report this as an accomplished
fact. The last State to organize was Rhode Island, which
formed an association early in April of this year.
The State Bankers' Associations are not such in name only.
There is not an ineffective organization in the list. Their activity and progressiveness depends, of course, to a large extent
on the size of the State and the number of banks which contribute to the support of the organization. In a large number
of instances, however, the work that is being done by these
State Associations is not excelled by that of any organization
of any kind or class in the country. With this aggregation of
State Associations and the American Bankers' Association there
is a combination which is unrivaled in its powers and potentialities.
As in the past, the General Secretary has endeavored, so far
as time has permitted, to visit State Associations, members of
the American Bankers' Association in the various States and
kindred organizations. Where it has been impossible to visit
the Conventions the General Secretary has attended State Association banquets, the banquets of Group Organizations, and
dinners and other functions of the American Institute of Banking. He attended the conference held under the auspices of
the Agricultural Commission in Chicago in July, the joint convention of the six New England States at New London, Conn.,
the meeting of the Maine National Bankers' Association, and
the State Conventions of Florida, Maine, New York, and Michigan. In this manner contact is obtained with some thousands
of bankers, as the conventions had uniformly a large attendance. The Association has also been competently represented
at many State Conventions by President William A. Law, VicePresident James K. Lynch, General Counsel Thomas B. Paton,
Assistant Secretary William G. Fitzwilson, B. F. Harris, Chairman Agricultural Commission; George E. Allen, 0. Howard
Wolfe, B. A. Ruffn, Secretary of the Insurance Committee; L. W.
Gammon, M. W. Harrison and A. D. Welton, of the Department
of Public Relations. W. J. Burns has also attended many conventions.
DEPARTMENT OF PUBLIC RELATIONS.

Acting on the authority given it by the Executive Council,
the Administrative Committee organized the Department
of




111

Public Relations in the Fall of 1914 and appointed A. D. Welton as manager. The enlargement and development of the
Journal-Bulletin has given added emphasis to the importance
of the creation of this department. The publicity work
done
for the Association has reacted to the general advantage
of
banks and bankers. Success has been achieved in placing
before
business men and the public generally information as to
the
function of banks, of the position banks hold in the economic
scheme, the workings of the Federal Reserve Act, and,
when
necessary, efforts have been made to correct false impression
s
in regard to banking and to place the banking
interests of the
country in the proper light when they have been
subjected to
unfair criticism and undeserved attack. Mr.
Welton's long
experience, his ability as a writer and his
versatility have
made him a most valuable addition to the
official force of the
Association.
COMMITTEES.
The Committees of the Association are the
bulwark of its
strength. Dependence upon them has increased
as the membership of the Association has grown up to its present
magnitude of 15,000.
The Administrative Committee has held twelve meetings
since the adjournment of the Richmond Convention. It has
been in close touch with all the important business of the Association and its members have full knowledge of the Association's activity. One of its members lives in New York
and the other two are within easy distance of the general
offices; hence it has been possible for this committee to give
unusually close attention to the affairs of the Association.
Among the important matters on which the committee has
acted was giving authority to the General Secretary to secure
more space adjoining the present offices; the selection of Old
Point Comfort as the place of the Spring Meeting; fixing the
dates of the Seattle Convention and numerous details in connection therewith; authorizing the Insurance Committee to arrange with burglary insurance companies to furnish certain information regarding attacks on banks, with the understanding
that much benefit would accrue to the members of the Association therefrom; it was understood that the proposal be later
submitted to the Protective Committee for its consideration.
The Administrative Committee also authorized the discontinuance of the money order. The American Surety Company,
which issued these orders, had declined to continue their issuance because of insufficient support to make the business profitable.
The Insurance Committee, which has its own office in Richmond and a secretary who devotes much time to the work of
the committee, has had an active year. Its work is now intertwined with the Legal Department, Membership Committee,
Protective Committee and the Library. Particularly effective
have been its efforts in reducing the cost of burglary insurance. In co-operation with several of the State Bankers' Associations, it is expected that premiums on such insurance will
be reduced twenty per cent. This would mean a saving of
$140,000 a year to the members of the Association. In several
States this reduction in cost is already in effect.
The new fidelity bond is coming into general use. This bond
gives a protection to members of a kind that has never before
been had. Many of the State Associations are now appointing
insurance committees with which the Insurance Committee of
-the American Bankers' Association has co-operative relations.
The Secretary of the Insurance Committee, Mr. Ruffin, has visited several of the Conventions of State Associations, before
which he has made effective addresses. This work is bound
to
result in benefits to the Association in increased membership
as well as in influence.
The Committees on Law and on Federal Legislation are both
well organized. The Committee on Law has been particularl
y
active during the past year in the Association's proposed
legislation in the States of the Union; the Legislatures of many
States having been in session. The Federal Legislative Committee, while not so active, has. been interested in the many
phases of Federal legislation. Reports of the work of these
Committees will be given in full by the General Counsel, who
is the legal adviser of these Committees.
The Finance Committee and its sub-committees have given
adequate consideration to the various financial reports and
statements which are submitted to them at the time of the
annual Convention and the Spring Meeting. The financial
affairs of the Association have received the consideration to
which they are entitled at all times.
The Committee of Twelve, representing the Trust Companies,
Savings Banks, National Banks and Commercial State Banks,
was appointed at the last Convention and directed to confer
with the Federal Reserve Board in regard to amendments to
the Reserve Act whereby it would become more desirable for
State Institutions to join the Federal reserve system. After
considering the question the committee deemed it wise to withhold action until the reserve system had been further developed. At the Spring Meeting of the Council this committee
asked that the work assigned to it be placed in the hands of
the Federal Legislative Committee.
At the Spring Meeting the Executive Council appointed a

BANKERS' CONVENTION.

112

special Committee to consider and report on the advisability
of the publication by the Association of the legal opinions rendered by General Counsel Paton during the past seven years.
CURRENCY COMMISSION.
At the Richmond Convention it was decided to continue the
personnel of the Currency Commission. There has been no
occasion for activity during the year. As the Federal Reserve
Act passes beyond the experimental stage and the necessity for
its amendment is demonstrated, there will be work for the Currency Commission to do and it should be continued in order
that the Association may be ready for action when the time
arrives. The members of the Commission are students of banking and finance and they have had a large experience in the
matter of currency problems and reform.
AGRICULTURAL COMMISSION.
The Agricultural Commission has expanded its labors during
the year. Its members are bankers who are enthusiastic in the
work of agricultural development, and they have worked hand
in hand with the various State Bankers' Associations and their
Agricultural Committees. The Banker-Farmer has been well
received, and answers excellently the purpose for which it is
published. The Agricultural Conference held in Chicago the
week of July 5 was, to my mind, one of the most important and
successful meetings ever held under the auspices of the banking
fraternity. There were present representatives from most of
the States of the Union and the attendance was by no means
confined to bankers and agricultural committees of banking
associations. There were many farmers present, and the agricultural colleges and agricultural journals all sent representatives. The Banker-Farmer movement seems to be one which
requires diplomatic handling, but the possibilities which it unfolds for effective work more than justify the efforts and expenditure. If it is developed along the lines of improvement
for farming communities—which includes better roads, schools,
community settlements, etc.—it will be successful, but the
farmer will resent interference with his business of farming or
an attempt to instruct him in the conduct of the business
which he thinks he understands, and probably does.
PROTECTIVE COMMITTEE.
Under the provisions of the new constitution the Protective
Committee is composed of three members of the Executive
Council. For obvious reasons these names are not made public. They cannot, therefore, receive as individuals the commendation to which they are entitled for their supervision of
the Protective Department and the time and attention they
give to this important work of the Association. The report of
the Protective Committee, made to the Executive Council, and
the report of Manager Gammon, of the Protective Department,
give in detail what has been accomplished during the past year.
In connection with the full report of the William J. Burns
International Detective Agency, Inc., which is available to
members of the Association, these reports give all necessary
information and should be read carefully by members.
Some time before the Spring Meeting of the Executive Council a studied effort was made by the detective agency formerly
employed to create dissension and discord among members of
the Association and of the Executive Council. Members of the
Association were solicited and requested to write to the members of the Council in their respective States complaining of
the work of the Protective Department. Recourse was had to
misrepresentation. The result was that the questions involved
came up at the Spring Meeting of the Council and were freely
and fully discuosed. Former presidents of the Association and
others familiar with the incidents and causes that led to a
change in detective services made full statements to the Council, and the exact facts, which brought about the severance of
relations with the detective agency formerly employeci, were
brought out and made a matter of record. After the discussion the resolutions which follow were adopted without a dissenting vote, and the General Secretary was directed to read
these resolutions at the next Convention of the Association:
"Whereas, The Protective Committee has made a detailed report establishing to the satisfaction of the Executive Council the efficiency of the present
Protective System, and
"Whereas, It is desirable that the membership shall be advised of this satisfactory condition of the Association's protective feature; therefore be it
"Resolved, That the Executive Council hereby expresses its entire confidence
in the Protective Committee and the William J. Burns International Detective
Agency, Inc., and be it further
"Resolved, That the Executive Council hereby recommends the continuance
of the contract with the Burns Agency, and be it further
. .
"Resolved. That the General Secretary is hereby directed to read to the
Convention in meeting assembled in Seattle, this resolution for their information."

The Executive Council instructed the General Secretary to
send a copy of these resolutions to every member of the Association and to invite the mempers to correspond freely with
the general offices and to make such suggestions as they might
deem advisable for the improvement of the service. Members
were also invited to make whatever criticisms seem to them
necessary.




The letters received have, almost without exception, been
commendatory and the expressions of satisfaction with the
service have been general. The action of the Executive Council in authorizing a renewal of the detective contract with the
Burns Agency has been generally commended.
That there may be no misunderstanding whatever as to the
nature of the service tendered by • the Protective Department;
and to the end that every member may have exact information,
it seems desirable to state that all cases which come within
the rules of the Protective Department, are handled without
cost to the member concerned; the Association will prosecute
the amateur as well as the professional criminal, and cases reported to the nearest office of the Burns Agency will be taken'
up without delay. The allegation that before a case will be
taken up communication with New York must be had and that
a large amount of red tape stands in the way of immediate action, is false.
L. W. Gammon, the manager of the Protective Department,
Is untiring in his attention to the details of the work in which
he is engaged. He has proved his value by years of efficient
work luid his competent handling of the thousands of cases
which come to him in the course of a year. The work of the
Department, under his management, becomes yearly more valuable, and he constantly develops out of his experience new
qualities which contribute to make the protective work increasingly successful.
In accordance with the action of the Executive Council, operating through the Protective Committee, a new contract has
been entered into with the William J. Burns International Detective Agency, Inc.
The following resolution was also unanimously adopted by
the Executive Council:
"Inasmuch as the personnel of the Council is constantly changing,testimony

in regard to the facts of this matter shall be taken, to be at all times available
for the further use of the Executive Council of the American Bankers Association, and that a Committee of three be appointed to secure testimony from
those conversant with the facts, the same to be filed with the General Secretary, to be available at all times to members of the Association but not to go
into the Proceedings."

LIBRARY.
The report of the Library and Reference Department is made
by Miss Marian R. Glenn, Librarian. The Library has made
progress in the past year. The advantages it offers have come
to be more widely understood and appreciated. However, there
is still a considerable part of the membership of the Association which is either not acquainted with or has made no use
of the vast store of useful information which the Library contains, nor is there general understanding of the availability of
this matter for those who wish to make use of it. The Association is indebted to many organizations, libraries, bankers
and individuals for contributions of books, pamphlets, magazines and newspapers whereby it has become possible largely
to increase the efficiency of the reference service. The success
of the Library is due to the zeal and enthusiasm of the Librarian, and the success will increase as the Library grows.
FINANCES.
The report of the Treasurer shows a cash balance on hand
of $36,097.75, as against a balance in 1914 of $20,152.70 and
a balance in 1913 of $5,479.29. This year's balance is the largest that has been shown in some time. It must not be understood that expenditures have not been freely made in every
direction where the interests of the Association required and
where the work of the Association could be made more effective
thereby. It is recommended that the Finance Committee set
aside for investment a portion of this balance. The early date
of the Convention made it necessary that special effort be made
to secure all outstanding bills of the Association. All bills
have been paid to the end of the fiscal year.
OFFICE IMPROVEMENTS.
Under authority of the Administrative Committee additional
space was added to the general offices of the Association. General Connsel Paton now has more commodious and satisfactory
rooms, and the library has been enlarged so that it occupies
twice the former space. There was also a rearrangement of
the corridors and the reception hall and an adjustment of the
smaller office rooms. This work was done at the expense of the
Hanover Bank Building Corporation. The changes necessitated
some refurnishing, and new equipment of a substantial kind
was purchased. The offices are now completely equipped and
have an appearance that reflects credit on the Association,
while the rearrangement is calculated to expedite business.
ROUTINE WORK.
During the fiscal year just ended, we sent out from the General Offices more than 551,000 letters, circular letters, Proceedings, Journal-Bulletins, etc. The following statement showo
the volume of mail and express matter in detail:
FIRST-CLASS MAIL MATTER.
10,279
Letters
87,383
Circular Letters.
-ass mail other than letters,such as typewritten lists,etc.
First
3,025

,
100,687

BANKING SECTION.
SECOND, THIRD AND FOURTH-CLASS

MAIL

MATTER.

Journal-Bulletins, including those
of A. I. B
Codes
Signs
Lists of Members
Packages
Postal Cards
Pamphlets

MEMBERSHIP BY YEARS.

363,857
900
922
16,333
1,595
843
230

Year.

384,68
Total A. B. A. Mall Matter

485,367

SECTIONS AND DEPARTMENTS.
Total First-Class Mall Matter
Total Second-Class Mall Matter

31,299
19,870
51,169

Total Mail Matter
Express Packages

536,538
14,476

Grand Total

551,012

At the close of the fiscal year, August 31, 1914, the membership of the Association had reached 14,720. When the books
were closed on August 14, 1915, the membership was 15,010,
a net increase of 290. The addition to the membership was not
so great as in former years, but it is hardly to be expected that
the rate of increase can be obtained now that the 15,000 mark
has been reached. In the membership there is now included all
of the banks of the principal cities of the country and the
larger portion of the banks in the smaller cities. Those that
remain without the fold are probably the small country banks
that do not realize the benefits that membership confers. I am
glad to state that we have the twelve Reserve banks
in the
Association and that they pay their dues the same as
the rest
of the members. New York State with 993 holds the banner
for membership; Pennsylvania is second with 937 and Illinois
Is third with 920. The largest increase for the fiscal
year is
In Kansas, which has a net gain of 42. Iowa is next
with a
net gain of 31.
August 31, 1914
*Erased from the rolls through failure, liquidation, consolidation and
withdrawal, December 1, 1914
Membership
August 14, 1915, new Members Joined during the year
*Regained members (secured from the above)

14,720
924
13,796

724
490
1,214

August 14, 1915, Membership

15,010

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

290
218
216
434

Making the actual gain in new members

724

It will be observed that the list of delinquents is exceedingly
small, considering our large membership.
The delinquents for the year were 216 out of a membership
(at the beginning) of 14,720-less than the year before, when
with a membership of 14,100 the delinquents numbered 220.
The aggregate capital, surplus and deposits of our membership amounts in round numbers to about $16,000,000,000.
The membership and resources of the Association have increased as follows:
Paid Membership.
September 1, 1875
1,600
September 1, 1885
1,395
September 1, 1895
1,570
August 31, 1905
7,677
August 31, 1906
8,383
August 31, 1907
9,251
August 31, 1908
9,803
August 31, 1909
10,682
August 31, 1910
11,405
August 31, 1911
12,072
August 31, 1912
13,323
August 31, 1913
14.100
August 31, 1914
14,720
August 14, 1915
15,010 (estimated)

Annual Dues.
$11,608.00
10,940.00
12,975.00
127,750.00
137,600.00
150,795.00
162,507.00
175,352.00
188,934.00
198,530.00
213,752.50
229,324.48
233,915.00
238,508.90

INCOME,
Interest on Bonds and Corporate Stock
Interest on Bank Balances (estimated)
Estimated Annual Dues for Fiscal Year Ending August 31, 1916




1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915

Gross Loss by Net Loss by
Failures, MerFailures,
ger, Delin- Merger, Deliaquents, etc.
quents,etc.
371
•
248
211
234
200
186
313
500
1,038
337
434
691
...
760
374
781
298
1,304
405
790
330
744
359
894
384
924
434

Membership.
2,813
3,424
3,915
4,500
5,504
6,354
7,065
7,563
7,677
8,383
9,251
9,803
10,682
11,405
12,072
13,323
14,100
14,720
15,010

Gross
Gain

Net
Gain

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

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

MEMBERSHIP OF STATES AND TERRITORIES HAVING
LESS THAN

MumuEusiiir.

Making Total Income, year ending' August 31, 1916

113

$4,730.00
2,800.00
238,508.90
$246,038.90

100 MEMBERS.

(As of August 14, 1915.)
Alaska.
Arizona'
Delaware
Nevada
New Hampshire
New Mexico
Rhode Island
Utah
Vermont
Wyoming

14
70
40
27
69
69
47
80
77
86

Canada
Cuba
Hawaii
Isle of Pines.
Republic of Panama.
Porto Rico
Philippine Islands
Mexico
Total

44
24
16
2
2
4
3
16
690

MEMBERSHIP.
DIVISION

OF BA N Ks

State or Territory.
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
..
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma.
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Canada
Cuba
Hawaii
Isle of Pines
Republic of Panama
Porto Rico
Philippine Islands...
Mexico

IN ASSOCIATION, AUGUST 14, 1915.
State. Private. Trust Co.'s. Sav.Bks. Total.
85
2
23
9
178
10
1
o
o
14
37
0
20
1
70
154
2
27
2
228
290
6
36
82
617
85
8
17
8
226
11
8
39
47
174
1
1
15
2
40
3
4
3
15
38
122
5
12
4
192
277
8
18
12
401
79
1
9
1
136
279
218
70
35
920
149
40
50
3
390
145
52
18
200
608
440
2
5
4
630
79
1
24
4
182
124
1
22
5
185
o
o
35
20
112
35
24
19
27
185
2
28
58
106
348
153
45
8
162
452
265
9
4
6
459
122
0
14
2
168
352
22
41
30
538
133
19
12
1
217
230
4
7
2
392
16
o
1
o
27
1
o
7
14
69
24
3
96
17
320
23
1
9
1
69
262
146
92
91
993
95
1
31
7
195
208
0
3
3
323
129
63
53
113
593
202
0
9
1
412
84
10
11
7
188
92
51
187
35
937
1
2
19
7
47
119
1
10
18
176
208
3
s
7
308
111
1
49
9
240
148
27
54
1
520
42
4
4
8
80
o
0
22
13
77
112
13
14
10
246
201
17
23
9
320
91
2
19
4
195
231
2
10
19
378
48
1
5
0
86
42
2
o
0
44
19
3
1
o
24
6
2
4
o
16
1
0
0
o
o
0
1
o
2
3
1
0
o
4
3
o
0
o
3
15
1
0
o
16

Nat'l.
59
3
12
43
203
108
69
21
13
49
86
46
318
148
193
179
74
33
57

so
154
84
175
30
93
52
149
10
47
180
35
402
81
109
235
200
76
572
18
28
82
70
290
22
42
97
70
79
116
32

o
1
4
1
1
0
0
0
5,411

6,199

868

1,348

1,184

15,010

•

BANKERS' CONVENTION.

114
IN MEMORIAM.

George H. Russel, of Detroit, Mich., president of the Peoples
State Bank of that city, and president of the American Bankers' Association in 1897, died at his home May 17, 1915. For
many. years Mr. Russel was a conspicuous figure at the Conventions of the Association. He was a man of great ability, uniform in his courtesy and a sincere friend and companion. He
was admired and beloved by all who knew him. It is proper
that the Association in Convention assembled should take appropriate action on his death.
W. W. Waine, for eight years a faithful employee of the Association and with many friends among the members, • died
April 17, 1915. The Executive Council gave fitting recognition
to his services by continuing him on the payroll during his illness of six months and by the further payment to his widow
of a portion of his salary for several months following his
death.
APPRECIATION.
It is once more the pleasure of the General Secretary to express his appreciation for the assistance and the courtesy extended to him by the Executive Council, the Departments, Sections, Committees and Officers of the Association, Vice-Presidents of States and State Secretaries. He is grateful to the
general membership of the Association for loyal support, friendly and encouraging letters and the warm welcome he has received when brought into personal contact with bankers
throughout the country.
In the activities of the Association during the past year the
connection with President Law and the members of the Administrative Committee has been always agreeable and helpful.
President Law has been a frequent visitor at the General
Offices and has taken a keen interest in all affairs of the Association. No one could be associated with him without being
impressed with his earnestness and sincerity of purpose. To
Treasurer Hoopes, to Assistant Secretary William G. Fitzwilson
and to the employees of the Association in the General Offices
are given assurances of appreciation. Their hearty co-operation
has made the work of the General Secretary more effective as
well as more agreeable.
SEATTLE.
The Convention of the Association in Seattle is the forty-first
in the history of the organization. Four conventions have been
held on the Pacific Coast—San Francisco 1892 and 1903, and
Los Angeles in 1910.
Those who have never visited the great Northwest, the Empire City on the Northwest border of our great country, will
look with amazement on the achievements of a city that is yet
young in Years. Banker guests of Seattle will find unbounded
hospitality, energy, pluck and perseverance—the characteristics
which have made Seattle great.
The bankers of Seattle have been enthusiastic in carrying
out the plans for this Convention. There has been hearty cooperation on the part of the entire business community of this
section.
To the Clearing house Association of Seattle and the associated banks of the city the General Secretary wishes, for himself and with the full knowledge that he expresses the views
of the members of the American Bankers' Association, to say
that the Convention will be long and gratefully remembered.
Respectfully submitted,
FREDERICK E. FARNSWORTII,
General Secretary.
No Report

of Currency Commission.

The Currency Commission has been quiescent during the
year, and the following letter from the Chairman of the Commission, A. Barton Hepburn, indicates the reason why:
THE CHASE NATIONAL BANK,
NEW YORK, N. Y., August 10, 1915.
FRED. E. FARNSWORTH, ESQ., GEN. SECY., AMERICAN BANKERS'
ASSOCIATION, NEW YORK CITY.
MY DEAR Mn. SECRETARY: I am in receipt of your valued
favor of August 8, asking whether it is desired to have a meeting called of the Currency Commission of the American Bankers' Association coincident with the meeting of that Association
at Seattle, September 6.
By informal discussion and correspondence with different
members of the Currency Commission it was deemed unwise to
have a formal meeting of the Commission or to take part in any
formal action at the present time, for the reason that the Federal Reserve Bank Law, recently enacted, has only been in
practical operation since the middle of November, 1914. Sufficient time has not elapsed to demonstrate the practical working
of the present law and expose any defect which it may possess.
The fact that there has been a money plethora ever since the
bank commenced operations has rdinimized its functions and
the volume of its business; the law has not been subjected to
any strain or test such as would naturally follow a strong and
insistent demand upon its resources. It seems to us, therefore,
that the attitude of the American Bankers' Association, or at
least its Currency Commission, should be a quiescent one, study-




ing the general situation, with special reference to the good
qualities and possible defects of the Federal Reserve Law.
Later, it seems to us, working in conjunction with the Federal
Reserve Board, we may be able to bring to the attention of
Congress needed amendments, or additional provisions desired
for the better working of the law, in a way to command their
consideration and favorable action.
It is not our purpose to have a formal meeting of the Commission at present; I hope very much, however, that any members of the Commission who may be present at Seattle will hold
an informal meeting, exchange views and indulge in a general
discussion, that we may be better prepared for action at such
subsequent time as the full Committee may be convened.
Very truly yours,
A. BARTON IIEPBURN,
(Signed)
Chairman.

Annual Report of General Counsel, Thomas B. Paton.
In rendering an account of the functions and activities of
the General Counsel in the Association affairs during the past
year, it is assumed that the General Convention will prefer a
broad outline of the general features of the work rather than
be burdened with too much specific detail. The matters contained in this report will all be comprehended under the three
main divisions of (1) Federal Legislation, (2) State Legislation,
and (3) General Advisory Work.
FEDERAL LEGISLATION.
The Constitution of the Association places in the exclusive
charge of the Committee on Federal Legislation for necessary
by
action all subjects of Federal legislation favored or opposed
the Association, and the General Counsel has acted as the adviser and active attorney of the committee, subject to its direction, in favoring or opposing specific measures before congressional committees and interviewing members of. Congress, in
circularizing the membership and enlisting their support and
co-operation and that of other persons, organizations and bodies
for or against certain measures, in exercising control in the
matter of publicity or non-publicity with reference to Federal
legislation and in keeping track of all bills introduced in Congress in any way affecting banking interests, noting their progress and constantly advising with the committee in respect to
all such bills.
During the Sixty-third Congress over 500 bills, original and
amendatory, introduced in Senate and house, have been examined; also reports of special committees and commissions of
Congress; and correspondence and interviews at Washington
and elsewhere had with respect to many of such matters. The
range of activity has included the urging of bills of lading
legislation, which passed the Senate but failed in the House;
opposition to the interlocking directorate legislation, which,
after being modified in the House, was eliminated from the
Clayton bill by the Senate, but put back with further modifications by the conferees and became law; the procuring of modifications during the pendency of the Income Tax and the War
connection with a number of other
Revenue Acts, and active .
bills and amendments. General Counsel has in charge, in behalf
of the Committee on Federal Legislation, certain matters of
amendment of the Federal Reserve Act to be urged in the Sixtyfourth Congress; also of the Income Tax Act, among others,
the elimination or modification of the collection at source provisions, as to which much preliminary work has already been
done; the promotion of bills of lading legislation, and other
subjects of legislation which will not be specified in detail.
The report of the Committee on Federal Legislation covers
much of this more fully, and further specification in this report
is unnecessary. In connection with the Income Tax Act, General Counsel has been successful in some instances in procuring
a reversal of rulings by the Internal Revenue Commissioner
in the interest of members of the Association, and some of the
objectionable interpretations are among tile subjects as to
which amendment of the Act will be sought.
STATE LEGISLATION.
In view of the conflicting and inadequate condition of the
law in many States covering many subjects of banking business,
it has been the province and privilege of the General Counsel
during the past six years to draft in behalf of the Association
and urge, under the auspices of the Law Committee, forms of
bills or statutes designed to make the law of the different
States uniform and adequate upon the subjects covered. The
uniform statutes on negotiable instruments, warehouse receipts,
bills of lading and stock transfers drafted by the Commissioners on Uniform State Laws have also been recommended by the
Association and urged in the different States. This work has
been prosecuted through the active agency of the State Bankers'
Associations, whose legislative committees and secretaries have
met with considerable success in past years in securing the passage of the different uniform laws and special measures recommended by this Association. This year has been no exception,
for a large number of measures recommended by this Association have been passed by the different State Legislatures. The
report of the Committee on Law, will contain full and detailed
information on this subject, but a brief summary indicating the

BANKING SECTION.
subject of the measure, the number of States in which passed
this year, in previous years, and the total enactments, will not
be inappropriate here:
Enactments
Total
Previous
This
Enact
Title.
Years.
Year.
meats.
Negotiable Instruments Act
47
47
Warehouse Receipts Act
3
30
33
Bills of Lading Act
16
3
13
Stock Transfer Act
5
5
False Statements Act
20
27
7
Derogatory Statements Act
20
15
5
Checks without funds
25
6
31
Burglary with explosives
20
20
Forged or raised checks
22
22
Payment of deposits in two names.
26
3
29
Payment of deposits in trust
21
2
23
Competency of bank notaries
2
9
11
Deposits of minors.
5
••
Refusal of check through error
4
..
..
In the promotion of the above legislation General Counsel
has conducted an extensive correspondence with proponents and
other interested persons in the different States, supplied drafts
of proposed acts and printed explanatory literature, answered
objections in certain cases raised by legislators and prepared
special written arguments upon particular points where necegsary.
GENERAL ADVISORY WORK.

Report of the Protective Committee.
NEW YORK, N. Y., August 28, 1915.
!The past year has been a very active one for the Protective
Department, owing to the unsettled conditions prevailing
throughout the country, which always have a tendency to increase all classes of crime, especially the beginner; but there
has been no marked increase in the operations of the professional operator.
ARRESTS.

For the period from September 1, 1914, to July 31, 1915, I
beg to report as to the operations against members, as follows:

Convicted
Released, escaped. insane or died




This will make 42 more arrests for the above period than for
a like period of the preceding fiscal year.
BURGLARIES, HOLD-UPS AND SNEAK THEFTS.
From September 1, 1914, to July 31, 1915, there have been
13 burglaries and 16 attempted burglaries, with a loss of
$11,995.84; 27 hold-ups with a loss of $59,520.72, and 6 sneak
thefts with a loss of $19,540.00. A number of these cases have
been that of strictly amateur operators, where they entered the
bank but did not get Into the safe or vault.
COMPARATIVE BURGLARY TABLE.
Since the inauguration of the protective feature the following figures are given for your information as to 'Attacks
on
members and pon-members:
Non-Members
Members

1,496
425

Difference

Loss.
Loss.

1,071

$2,130,196.42
259,047.17
61,871,149.25

FORGERS AND BOGUS CHECK OPERATORS.
During the past fiscal year there has been no marked increase in the number of forgers and bogus check operators
so
far as the professional operator is concerned; but there has
been a considerable increase in the operations of the amateur
operator.
PHOTOGRAPHS.

Under this classification a variety of detailed work may be
briefly referred to. The Federal Reserve Act has called forth
many questions of interpretation of particular provisions and
has caused certain changes in forms of commercial paper and
in methods of business. In connection with these problems,
General Counsel has been consulted from time to time by officials Of some of the Federal reserve bans as well as by members generally, and has participated in the framing of documentary forms and discussed and rendered opinions upon questions of interpretation of the law and upon the validity and
negotiability of particular instruments used in banking under
the Federal reserve system.
The Income Tax Law and the War Revenue Act have presented constant problems of interpretation, many of the rulings
of the Internal Revenue Office thereunder being deemed unjust
by the banks affected. In some instances, rulings under the
Income Tax Law have the sanction of court decisions, and a
change can only be made through amendment of the Act; in
other instances the official interpretation is of doubtful legal
validity. A considerable argumentative correspondence has been
entailed.
General Counsel is constantly consulted in behalf of the protective Committee on questions of criminal law, has given advice to the Insurance Committee on matters pertaining to its
work, and has been called into consultation from time to time
in the affairs of other committees and sections of the Association.
More than one thousand letters have been received during
the Association year just ended from members in every State
asking for opinions or advice as to the law and statutes of a
particular State governing questions of right or liability arising
out of some transaction in which the member bank is involved.
The handling of this extensive correspondence in a manner satisfactory to the member interested, and the finding of necessary
time for study and research upon numerous questions without
Infringing upon the time required for important constructive
and legislative work, has been one of the most serious problems
the General Counsel has had to face. But with the training of
able assistants, the gradual accumulation of a technical Law
Library and the systematic classification of more than three
thousand legal opinions, published and unpublished, which have
been rendered in the past six years, the office of the General
Counsel is better equipped than ever before to cope with the
cetestions that are constantly submitted.

Cases not disposed of September 1, 1914
Arrests since September 1, 1914

115

94
328
420
232
79 311
109

The Department now has 4,322 photographs of criminals,
comprising "yegg" burglars, hold-up men, sneak thieves, forgers, worthless and bogus check operators, with a complete record of each:
CORRESPONDENCE.
During the period referred to above the Department has received 29,639 reports and other communications from our Detective Agents—The Wm. J. Burns International Detective
Agency, Inc., also received 1,172 letters and telegrams—and
has written 2,569 letters and telegrams. These figures do not
inelude circular letters and similar communications.
OFFICES OF OUR DETECTIVE AGENTS.
The Wm. J. Burns International Detective Agency, Inc., now
have twenty-three offices of their own in this country, four foreign offices, and one correspondent at Des Moines, Iowa, also one
special representative at Jacksonville, Fla. They have also assigned a special representative to the State of Oklahoma, who is
trained for the work of hold-up men, as Oklahoma has had the
greatest number of hold-ups in the past fiscal year. This representative is looking into these cases in that section, and his efforts have resulted in a number of arrests being made. In addition to his work as an investigator he is also assisting in preparing these cases for trial, and has them in very good shape.
This Association also has a special representative at Atlanta,
Ga., Mr. George H. l3rodnax, who is looking after the interests
of their members in that city.
CONTRACT FOR DETECTIVE SERVICE.
The Protective Committee have advised me that by virtue of
authority vested in said Committee by the constitution of the
Association, and in addition to the resolution unanimously
passed at the Spring Meeting of the Executive Council at Old
Point Comfort in May last, in which they recommended that
the Protective Committee renew the contract with The Wm. J.
Burns International Detective Agency, Inc., that they have
renewed the contract with said Agency for three years, with
the privilege of renewal on the part of the Association on the
same terms as their present contract.
INSPECTION TOUR.
During the fiscal year I have made a personal inspection of
the Burns Offices at Chicago, Buffalo, Kansas City, St. Louis.
Houston, New Orleans, Birmingham, Denver, San Francisco,
Portland and Seattle, and found conditions as to indexing and
filing in connection with our work very satisfactory. Up to
date • I have visited all offices of the Burns Agency in this
country except Spokane, which I will inspect on my return
East from the Convention. I have personally met all the managers and most of the men who are handling the work of this
Department.
I also attended the Annual Conference of the Secretaries of
the Central States Association at Chicago, Ill., as well as the
Colorado Bankers' Association at Greeley.
DETAILED REPORT.
For more detailed information relative to individual cases
and the work accomplished, I respectfully refer you to the
monthly Journal-Bulletin, which gives a detailed account of
what is being performed each month in connection with the
work of the Protective Department.
Since the June issue of the Journal-Bulletin the Protective
Department has been published as a separate supplement, which
appears to have met with favor on the part of many of our

BANKERS' CONVENTION.

116

members. At the end of June each year we will publish an
index relative to each party mentioned each month. This index
can be bound with the supplement each year.
In conclusion I might state that the records of this Department are in excellent shape, and the work of the Burns Agency
under my supervision has continued to improve since they have
had our contract, and at the present time the work is bandied
In a very f-atisfactory manner.
I wish at this time to thank the Federal, State, County and
local authorities throughout the United States and Canada,
who have aided this Department very materially during the
year in their investigations.
L. W. GAMMON,
Manager.

Report of the Treasurer.
DALLAS, Tax., Sept. 2, 1915.
To the Members of the Executive Council and the American
Bankers' Association.
Ma. PRESIDENT: The cash balance in the bands of your
Treasurer on August 14, 1915, was $36,097.75. The cash on
hand September 1, 1914, was $20,152.70. During the year the
receipts have been $252,232.15 and the disbursements $236,287.10. The large cash balance is no indication of curtailment
of the activities of the American Bankers' Association during
the year, but it is gratifying to report that, after paying all
the bills incurred in the course of a year of enlarged activity,
the cash balance on hand is so large. In 1912 the cash balance
was $3,992.88, in 1913 it was $5,479.29, and in 1914, $20,152.70.
The drafts for membership dues, 14,696, which were sent out
the first of September, called for payments of $235,805.00, an
Increase of nearly $5,000 over the previous year. With the
prospect of increasing the investments of the American Bankers' Association from the surplus of this year, the prediction is
justified that the income of the Association during the year
which has just begun will be the largest in its history. This
will make it possible to extend the services of the Association,
as it is necessary and desirable, and it gives assurance that the
American Bankers' Association will continue to be the efficient
organization that it has been for forty years.
In making my last report as Treasurer of the Association, I
desire to express my thanks for the honor which has been conferred upon me and to assure the members of my appreciation.
It has been agreeable work and has been made more so by the
courteous co-operation of the officers of the Association, the
General Secretary and the staff in the general offices in New
York. It has been more than a pleasure to be associated with
those active in the work of the Association.
In accordance with custom, the surplus funds of the Association have been invested in high-grade securities. The Beeneties„ under the control of the Executive Council, are held in
the Bankers Trust Company, New York. The list follows:
Par Value.
Chicago, Burlington and
Quincy, Ill., Division. 4'a
$50,000.00
due 1949
Chicago, Burlington and
Quincy, Joint 4's due
12,000.00
1921
Atchison, Topeka and Santa Fe, General Mortgage
30,000.00
4's due 1995.
New York City Corporation, Registered 334's
30,000.00
due 1940

Carried On
Books At • Market Value

Cost

$47,400.00

846,500.00

$50,843.75

11,600.00
.

11,580.00

11,559.09

28,500.00

28,600.00

30,825.0()

26,500.00

25,680.00

25,506.67

$122,000.00 $114,000.00 $112,360.00 $118,734.51

In closing I wish again to thank the Association for the
honor I have had.
Respectfully submitted,
J. W. HOOPES,
Treasurer.

• Report of the Library and Reference Department.
MARIAN R. GLENN, Librarian.
It would be interesting to know how much it costs bankers in
time and money, every year, to do work they could have the
Association Library do for them. When a banker spends his
own time, or that of his employees, in hunting for information
that has nrobably already been looked up and recorded at the
Association Library, he is wasting effort that could be more
productively employed.
If twenty bankers want the same information, it may not
cost each one of them much to have a clerk find it, but the
total cost of having tw.enty people look up the same thing
twenty times is worth saving if the purpose could be as well
served by having one central source—the Association Library
—supply it to as many members as may want it. When this
process is duplicated in hundreds of banks and multiplied by
the number of questions asked daily, the annual cost of such
waste effort, even in small banks, must be a larger item of ex-




pense than necessary, now that the Association has a Library
to serve as a clearing house for financial information wanted
by members.
The Library keeps a record of banking events, of Federal
Reserve system development, currency discussion, convention
addresses, and financial articles. Its business is to collect
everything that can be found in print on banking practice, to
loan it to officers and employees of member banks, and to answer inquiries that do not come within the province of the Sections or any other department.
The Library grew out of the suggestion of General Secretary
Farnsworth, who found that the banking business was without
a central source of that information for which bankers were
writing to headquarters, and with which it was necessary the
Association should provide its members, since no library then
in existence specialized in banking practice.
That was nearly four years ago. Now two rooms are required to shelve the books, to file the traveling loan collection
of thousands of clippings and pamphlets, and to provide space
for systematically carrying on the card indexing and reference
work; 7,500 records have been added to the card catalog during the past year, and 11,000 additions made to the traveling
loan collection. Special efforts have also been made to complete the collection on credit practice, the Federal Reserve system, and agricultural credit.
Of the 2,700 volumes now in the Library, only about 500
have been purchased, most of the books having been secured as
gifts, by exchange or as permanent loans. As material from
the traveling loan collection has been in more active demand,
very little has been spent on books since the Library, was
started, and the reference collection has been kept down to as
small a working basis as possible.
General collections on money and banking are to be found
In the Library of Congress, the John Crerar Library in Chicago,
the New York Public bibrary, the private Library of Professor
E. R. A. Seligman, and in several university libraries. But it
remains for the American Bankers' Association to give the
country a really representative American banking and currency
library, and the time has come-to adopt a definite policy for
doing so.
It would take years to build it up, but a good foundation
has been laid, and an American Banking Library would embody
the patriotism of American bankers in a most practical and
enduring form, and would become as famous as the Foxwell
economic collection which English bankers purchased in order
to keep it in England when it was found that an American
library was about to secure it.
Such a library should be developed systematically by dividing the country into sections, and making a thorough annual
canvass of some one section; by advertising for material, writing to bankers, legislators and private collectors; and by traveling when necessary, to secure from the storage stacks of
libraries, the basements of public buildings, and from out-ofthe-way places the material which it is often impossible to
purchase in book stores. A beginning should be made, during
the coming year, with the New England States, since it is there
that much valuable early pamphlet literature exists, if it can
be found.
It would not be necessary to make large annual appropriations for the purpose, as many of the reports and pamphlets
which the Library needs can be secured without cost if Association members will co-operate by making the Library a depository for everything they can find in their own banks and
communities in the form of currency pamphlets, local histories,
State reports, bank bulletins, etc. During the past year the
Librarian secured some valuable material by making a trip to
the private library of the late Senator Aldrich and to a Boston
library which had discarded some books and pamphlets that
could not have been found in the market, had it been desirable
to purchase them.
For the present, however, the historical aspect of the Library
should be kept secondary to its possibilities for immediate
practical services to Association members. It must be a laborsaving business adjunct first. As American banking develops
under the Federal Reserve system, and the stimulus of international business opportunity, the range of bankers' interests
is increasing. In addition to the usual requests, they are beginning to ask for material on general public questions, on industrial conditions, business organizations, and the trend of
economic thoughtt in relation to banking.
There is a growing literature on such subjbcts, and the rising
generation of bank officers and employees who are graduates
of the American Institute of Banking, expect the Library to
supply that to which they would otherwise not have access,
either through lack of local library facilities, or unwillingnesa
on the part of their banks to purchase books for their use.
Only those books will be added to the Association Library,
however, which seem to have value as a stimulus to present
business or as a permanent contribution to American banking
thought.
From now on, Association members will want more information on foreign banking and business. The new publicity department will require, research work of a more analytical nature than has been expected of the Library thus far, and, while

13A1sIK1NG SECTION.
it is not possible in a short report to describe in detail all the
demands now being made upon it, or to forecast future ones,
it is evident that the Library is outgrowing the narrow field
of its original functions.
During the past year 10,800. books and reference articles
have been loaned to Association members, in addition to the
queries answered by mail and at headquarters. This is an increase over the total loans of both the preceding years.
The Library is indebted to the. State Association Secretaries
for much information and publicity. With their help the
Library recently compiled a list of bankers who are authorities
on subjects upon which it is difficult to secure printed information, and plans are now being made to secure more material
from original sources during the coming year.

Report of Committee on Law.
Forty-one State legislatures have held regular sessions during the present year and a large number of bills favored and
recommended by our Association have been passed. An unusual amount of other legislation affecting banks has also been
passed during the year.
First as to the legislation advocated by this Association:
'

ASSOCIATION MEASURES.

BILLS or LADING: The Uniform Bills of Lading Act has been
passed this year in Idaho, Washington and Vermont. A strong
effort was made in Missouri to pass this law, but it was defeated in the Senate. The Pomerene bill, which is substantially the Uniform Act adapted for Federal enactment, passed
the Senate of the 63d Congress but failed in the House. With
the three States added this year, the Uniform Bills of Lading
Act has .now been enacted in fifteen States and one Territory,
as follows:
Maryland.
Massachusetts.
Connecticut.
Illinois.
Iowa.
Michigan.
New York.
Ohio.

Pennsylvania.
Louisiana.
New Jersey.
Alaska.
Rhode Island.
Idaho.
Washington.
Vermont.

•
UNIFORM WAREHOUSE RECEIPTS ACT.—This Act has been
legislatures of Idaho, Arkansas and Oklahoma
passed by the
during the present year. It is now the law in thirty-three
States. It was introduced in Arizona, but failed to pass.
UNIFORM STOCK TRANSFER ACT.—This Act was passed by the
legislature of Idaho but was vetoed by the Governor. In Minnesota the Bar Association also caused the Act to be introduced
but did not succeed in having it passed. It has heretofore been
passed in ten States.
FALSE STATEMENTS FOR CREDIT.—NeW Hampshire, Nsw Mexico, West Virginia, Wisconsin, Oklahoma, Florida and Wyoming passed our Association measure on this subject during
this year. In Illinois the Legislature passed the measure
closely following the text of our bill, but it was vetoed by the
Governor. In a number of other States the measure was introduced but failed to pass. This Act has now been passed either
in the form recommended or by other form of enactment of the
same purport, in twenty-seven States. The Act as passed in
Wisconsin differs from the Uniform Act in one material point.
It provides that the statement must have been relied upon in
granting the credit and actual financial loss thereby sustained,
while the Uniform Act requires merely that the false statement should have been issued with intent that it be relied upon,
and there is no necessity thereunder of proving actual financial
loss in order to obtain a conviction. The Act as passed in
Florida also adds the feature that credit, money or goods must
have been obtained, in order to convict.
DEROGATORY STATEMENTS AFFECTING BANKS—Our measure
on this subject has been passed in five additional States, Delaware, Florida, Kansas, New Mexico an North Carolina. It
was introduced in Minnesota but rejected by the committee to
which it was referred. This Act is now a law in twenty States.
CHECK WITHOUT FUNDS.—Our Association measure on this
subject has been passed this year by the legislatures of Nebraska, North Dakota, Ohio, Kansas, Vermont and Delaware.
In Vermont the penalty provision has been changed so as to
make the offender liable in a civil action to the person injured,
in which, for want of property, his body can be attached. In
Delaware and Nebraska the phraseology of the law has been
considerably changed. In Kansas the law as enacted also differs
from our bill. In the States of Colorado, Florida, Idaho, Indiana and Washington the legislatures have made new enactments on the subject this year which take the place of the former laws.
In all, thirty-one States have special measures on this subject, being either the measure recommended by our Association
or other form of statute with like object in view.
BURGLARY WITH ERFLOSIYES.—No additional States have
enacted this measure during the present year. It has been




117

enacted down to date, either in the form recommended or a
law of substantially the same purport, in twenty-two States.
FORGED OR RAISED CHECKS.—Our Association bill 011 this subject has not been enacted this year in any State. Twenty-two
States have heretofore passed the measure.
DEPOSITS IN Two NAmEs.—Delaware, Idaho and Missouri
have passed our bill on this subject during the present year.
In Maine the law, which was previously enacted, has been
changed so as to include loan and building associations and also
to authorize payment to the legal representative of the survivor.
In Washington in a new act passed this year authorizing the
incorporation of mutual savings banks, there is a section covering joint deposits. This is in addition to the existing statute
on the subject, which relates to deposits in two names in banks
or trust companies. Twenty-nine States now have our Association measure on this subject, either in the exact form proposed or substantially similar form of enactment.
• DEPOSITS IN TRUST.—The States of Idaho and Delaware have
passed this year our bill covering payment of deposits in trust.
Laws authorizing payment of deposits in trust have now been
enacted in twenty-three States.
COMPETENCY OF BANK NOTARIES.—The State of Kansas has
passed our bill relative to competency of bank notaries. Minnesota has also passed a law under which notaries who are officers, directors or stockholders of corporations are authorized to
take acknowledgments of instruments wherein the corporation
is interested, to administer oaths to officers of the corporation
and protest paper owned or held for collection by the corporation. This is virtually of the same purport as our bill but in
different phraseology.
Our Association measure is now in force in eleven States.
REFUSAL or CHECK THROUGH ERROR.—The bill newly drafted
last year by our General Counsel to protect a bank from excessive
damages where it refuses payment of a check through error, has
been passed this year in Idaho, Montana, Oregon and New
Jersey. It also passed the Senate In South Carolina and in
Utah, but failed in the House. In Minnesota the bill was rejected by the committee to which it was referred. The bill was
also introduced in the Ohio Legislature but failed to pass.
DEPOSITS or MINORS.—The legislature of New Mexico has
newly enacted a provision (Section 48 of the new Banking
Law) that "banks may receive deposits directly from minors
and pay the same to their order." In Idaho, Maine, Missouri
and Montana the legislatures have also amended their laws
relative to payment of deposits to minors.
GENERAL BANKING LEGISLATION.—A large amount of legislation has been passed in many of the States during 1915 relating to the organization, powers and operation of banks and
other financial institutions. It will be impracticable to attempt
to present in this report a reference to all the legislation which
has been passed this year relating to or affecting the banking
business. There is on file in the office of the General Counsel,
or in process of accumulation, all the State legislation, original
and amendatory, relating to banks. Reference only to a few
general features will be here made.
New and improved general banking acts have been passed
this year in the States of Missouri, Montana and New Mexico.
In Alabama, California, Florida, Idaho and South Dakota the
banking laws have been amended in a number of particulars.
Bills for the guarantee of bank deposits were introduced this
year in a number of States. In Arizona, Iowa and North Dakota bills of this character failed to pass, but in South Dakota
the legislature has' enacted a revision of the banking law
and added provisions for the guarantee of bank deposits. The
new law provides for a Depositors' Guarantee Fund Commission,
and for the maintenance of a guarantee fund by assessment
upon the banks of one-quarter of one per cent. on the average
daily deposits. It will become a law upon approval by the people after submission to vote at the next general election to be
held in 1915.
The following States have passed laws during the present
year empowering State institutions to become stockholders in
the Federal Reserve Banks: California, Delaware, Idaho, Iowa,
Kansas, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota and
Washington.
Last year such laws were passed in Kentucky, Louisiana,
Massachusetts, New Jersey, New York (contained in new revision of the banking law), Ohio (Special Session), Virginia,
South Carolina and Texas. In Mississippi also the new banking law of 1914 provides that "No r art of the stock of any
bank, except regional reserve banks, doing business in this
State, shall be owned by any bank under the provisions of this
Act." The exception doubtless constitutes an implied authorization to own Federal Reserve Bank stock.
During 1915 a number of State legislatures have passed
specific legislation making it lawful for National Banks, when
authorized under the laws of the United States, to exercise
trust powers within the State. These are Colorado, Indiana,
Iowa, South Dakota, Vermont, Virginia and Washington. In
Colorado, Indiana, South Dakota and Washington State banks
are also given trust powers. Similar legislation as to National
and State banks was passed in Ohio in 1914. On the other

118

BANKERS' CONVENTION.

band, New York in 1914, in the new banking law, expressly restricted trust powers to trust companies organized under the
laws of the State, with certain exceptions; while in 1915 North
Carolina has enacted legislation of like prohibitory purport;
in New Hampshire a law has been passed depriving all banks,
including National Banks under the Federal Reserve System,
from transacting any probate business, and the n'ew banking
law of Missouri contains a provision prohibiting other corporations from encroaching upon the powers of trust companies.
New Jersey, Missouri and Connecticut have passed laws
this year authorizing acceptances by banks and trust companies
of drafts drawn by their customers payable at a future date,
and New Jersey and Missouri add an authorization to issue
letters of credit authorizing holders to draw such draft. The
time limit of such draft is fixed by New Jersey and Missouri
at one year, and by Connecticut at six months. The aggregate
of all acceptances is limited by Missouri to the unimpaired
capital and surplus, with a discretion in the Bank Commissioner
to increase the limit, and by Connecticut to 50 per cent. of the
capital and unimpaired surplus. The total amount which can
be accepted for any one customer is fixed by New Jersey and
Connecticut at 10 per cent. of the capital and surplus.
Connecticut has also passed a law authorizing savings banks
to invest not exceeding three per cent, of their deposits and
surplus in acceptances of National Banks or other members of
the Federal Reserve bank located in Connecticut or in the cities
of Boston, Providence, New York or Philadelphia, or of State
banks or trust companies in Connecticut authorized to issue acceptances; limiting the amount invested in acceptances of any
one bank to thirty per cent. of capital, surplus and profits of
such bank, and, where a savings bank has a deposit with the
accepting bank, the total of deposits and acceptances cannot
exceed such thirty per cent.
Last year New York incorporated in its new banking law
provisions authorizing banks and trust companies to accept for
payment at a future date drafts drawn by customers and to
issue letters of credit authorizing the holders thereof to draw
drafts at sight or on time not exceeding one year; and Massachusetts authorized trust companies to accept drafts "growing
otit of transactions involving the importation or exportation of
goods having not more than six months to run," with prescribed
limits as to amount in each State.
This report will not be further lengthened by reference to
specific subjects of legislation.
The following preamble and resolution has been presented to
the Law Committee by the Savings Bank Section with request
that it be considered and that the Law Committee draft and
recommend a statute in amendment of the Federal Reserve Act
to carry out the purpose thereof:
Resolution from the Savings Bank Section to the General Convention through the Law Committee of the American Bankers' Association, to be presented at its annual meeting, Seattle, Wash., September
7th, 1915:
Whereas, The •Savings Banks of the United States, in a large degree, maintain the equilibrium of public confidence; and,
Whereas, This public confidence is largely determined by the knowledge on the part of the people that they can at all times secure their
funds from the Savings Banks; and,
Whereas, The Savings Banks have required from their depositors
in time of necessity a notice of withdrawal of funds varying from
thirty to ninety days on account of the non-availability of currency;
and,
Whereas, During the,times when the said notice of withdrawal has
been enforced the Savings Banks have had to sell some of their securities at a great sacrifice; and,
Whereas, The said notice of withdrawal should only be enforced
under the same extreme conditions as the Federal Reserve Law provides for the suspension of reserve requirements of the members of
the Federal reserve banks—that is, only in times of great national
peril; and,
Whereas, It is the function of a Savings Bank to supply capital
rather than credit; and,
Whereas, It is not general that the Savings Banks are permitted by
the State laws to use their funds for the purpose of advancing credit;
and,
Whereas, The Federal Reserve Law does not permit securities other
than commercial paper to be used for the purpose of obtaining currency from the Federal Reserve Banks;
Therefore Be It Resolved: That the Savings Banks Section recommends that the Law Committee of the Association prepare for the
dual approval of the Executive Council and General Convention, in
accordance with Article V, Section 16A of the Constitution, a draft of
statute in amendment of the Federal Reserve Act to the following
report:
First—Permitting the Savings Banks to. secure currency through the
intermediation of any bank, member of the Federal Reserve System.
Second,
--That such currency may be obtained upon the security of
certain government and municipal bonds and short-term obligations
of the kind and character described in the Aldrich-Vreeland Act.
Third—That such right should be given to the Savings Banks only
in the event of necessity, and under the authority of the Federal Reserve Board.
And that, upon such dual approval, the enactment of such amendment be asked of Congress through the Committee on Federal Legis-




lation, as provided in the constitution, and, if possible, the endorsement by the Federal Reserve Board of such proposed amendment be
secured.
After due consideration, the Law Comtnietee feels that the
proposition is so far-reaching in its effect and so contrary to
the provisions now on the statute book, that it would not be
wise to recommend the proposed amendment without further
consideration.

Report of the American Institute of Banking Section,
Robert H. Bean, President.
Gentlemen: I have the honor of bringing to you the annual
report of the American Institute of Banking Section.
The report herewith submitted brings to a close a very successful year and in the matter of educational'development one
of the most important.
It is perhaps not necessary to state to this body the fundamental purposes of the Institute nor to record the fact whica
we believe is known to many of you, that this year has witnessed greater progress in the standardizing and perfecting of
the study courses than during any previous year since the organization of the Section.
In such a work as is undertaken by the Institute, there must
of necessity be a long period during which the ideas and suggestions of experienced educators are tested and the best thought
crystallized into the form that shall be accepted for general
use as the educational program.
From year to year there has been eliminated from our courses
all that has been found to be impracticable or unsuited for the
needs of the student member.
Greater emphasis has been laid in recent years upon the history of banking economics and a study of current problems of
financing, especially the Federal Reserve System and the development of foreign trade. These subjects have been treated
liberally and in their broadest sense and are brought together
now in volumes, which will soon be ready for use in classes in
City Chapters and for Members of the Correspondence Chapter
who are somewhat removed from the large centers. The change
from pamphlet form to the handy bound volume has been a
welcome one and will add materially to the number of students
in the Institute.
Such a text book as has been prepared will be generally used
during the next and succeeding years, thus making more systematic and uniform the study work than has been possible
heretofore.
To fully justify its existence and perform its best service, the
Section must through Its administrative officers keep in intimate
touch with the individual Chapters to the end that they may
be assisted and advised, if necessary, and in return receive from
them the experience of successful educational undertakings in
the particular section of the country in which they operate.
This is made possible by the plan of study courses now being
presented to the local Chapters and which offers promise of
much success.
Believing that such an important undertaking as the revision of the Institute Text Book should feel the experienced
hand of the expert, the Executive Council authorized and designated a Board of Regents composed of two bankers and two
educators. This Board has performed invaluable service during
the past year and to them is due, in a large measure, the
credit for the development recorded herein. As the standard is
raised in the Institute, we note a corresponding tendency in
all Chapters to emphasize the one purpose which should be
paramount, the training of bank men in principles of banking
and such elements of law as pertain to their business.
Funds contributed by member banks to local Chapters are, to
a greater degree than ever before, being used for educational
purposes and may I venture to suggest that no contribution
should be made without the express stipulation that it is to be
applied to the needs of the Chapter in carrying on its educational
work.
The incorporation of the Correspondence Chapter, bringing as
it has into one group, the country Banker-Member, has worked
out most advantageously and while the number has not increased to a marked degree there is promise of substantial gain
within a few months.
Finding the duties in the office of the Educational Director
becoming increasingly burdensome, the Council at its meeting
in Dallas, one year ago, appointed an Assistant to the Educational Director.
We were extremely fortunate in securing the services of Mr.
0. Howard Wolfe, who had been a willing and valuable servant
in the Institute for many years and during the larger part of
this year he was of great assistance to the Educational Director.
It was hoped that he would be able to serve for some time to
come, but as it is impossible to hide genius for any considerable
length of time his ability was soon recognized beyond the
bounds of Institute activity.
In June of this year, he was •called to an executive position
in the Philadelphia National Bank. His resignation has been
accepted by the Council, accompanied by expressions both of
congratulations and regret.
.

BANKING SECTION.
Before passing from this monetary reference to the executive
offices of the Institute, the Section wishes to record its voice
of commendation for the work done by the Educational Director.
Realizing the impossible task of meeting the desires of many
minds among the members, we have witnessed a constant and
unflinching effort to maintain the high standard of Institute
ideals, and a purpose of bringing about at all times the greatest
good for the greatest number.
During the past year the Institute has experienced a marked
growth in members. While the number of Chapters remains at
60, the combined membership is now 15,606, which includes
1,339 Correspondence Chapter students. This is a gain for
the year of 1,543, of which gain 407 was in the Correspondence
Chapter. The number of Institute graduates has increased 373,
and now stands as 1,510. There has been a steady increase
in membership in the larger and more successful Chapters. This
has been a natural and sure result of a persistent effort to
maintain the standard set by previous administrations in the
matter of systematic educational work for ambitious bank men.
For the smaller cities where the number of men employed in
banks does not warrant the belief that a Chapter would be
successful, we have strongly urged the formation of study
classes which would be enrolled in the Correspondence Chapter
and whose educational work would be supervised by the Educational Director.
Following is a statement of Institute receipts and expenditures covering the fiscal year from September 1st, 1914, to
August 14th, 1915, inclusive, classified in accordance with the
directions of the Institute Executive Council:
SUMMARY.

Total Receipts
Total Expenditures

$33,474.90
28,158.57

Balance, August 14th, 1915

$5,310.33

Department of Public Relations.
Since it was formally organized last fall the Department of
Public Relations has been chiefly concerned in remaking the
JOURNAL-BULLETIN as the matter of first importance in a work
which takes account of the attitude of the public toward banking. As the medium of the expression of correct views on
banking and allied economic topics, it seemed important tbat
the publication of the Association be brought to the form from
which it may develop into a journal of commanding and authoritative position in its field.
Some progress has been made, and it is hoped to continue the
progress so that the JOURNAL-BULLETIN will become monthly
more valuable to its readers and more indispensable. In tills
work tile co-operation of the Administrative Committee is highly
essential and has been of decided value. Tile publication of
the Monthly report of the protective work as a separate section
of the JOURNAL was authorized by the Administrative Committee
and seems to have met general approval. The separation has
permitted certain changes in the report of MS work and has
made it more convenient for handling and for reference. It has
taken out of the JOURNAL a report which had no place in a
publication of the kind demanded by the members.
Other changes that have been made in the arrangement of the
JOURNAL-BULLETIN are technical and designed rather to show
in the result than in the method. A constant effort is being
made to secure articles of high class, and it is the hope to
have contributions directly from bankers as well as from financial writers.
As an aid to general publicity and education on banking subjects the JOURNAL-BULLETIN is becoming of continuously greater
assistance to the Department. It permits the ready dissemination of some kinds of information, and the newspapers have
shown willingness to use in various forms the articles printed.
The Department has prepared a great many articles which
were widely printed in the financial journals and, in some
instances, were the subject of other articles and of editorial
comment. It is unfortunately impossible to measure with any
degree of exactness the use to which publicity material is put.
One distributed, it reappears in unexpected places, in unexpected form and at unexpected times. Many newspapers have
been supplied with inforamtion as well as with special articles,
and many look to this Department for assistance when occasion
demands.
It is impossible to reduce to figures the extent of the use of an
article. In one instance an effort to count results showed
publication in twelvd newspapers whose combined circulation
was nearly three million; that is to say, the one article, approximately a column in length, had nearly three million circulation.
It is, at least, of equal interest and importance that there is
constant contact with a large number of correspondents, reporters and writers, and that the relations so established make
possible a service which is of benefit to the American Bankers'
Association and the newspapers as well. This field of operation
is being constantly enlarged and will be made more comprehensive as time permits.
The Department has been in constant consultation with the




119

Sections and departments of the Association, and its facilities
and services have been freely extended in co-operation with the
work being done by the Sections and departments.
A. D. WELTON,
Manager.

Report of Committee on Federal Legislation.
The following report omitting certain paragraphs was made
at the Spring Meeting of the Executive Council, and is now
presented to the Association as it covers the activities of the
Committee during the greater part of the Association year and
until after the close of the 63rd Congress:
The Committee on Federal Legislation have kept in close
touch with all matters of legislation affecting tile interests of
members of the Association which were introduced in the last
Congress. The 63rd Congress was memorable in respect to
continuity, having been in continuous session during practically
the entire two years of its existence, beginning with an extra
session immediately after the inauguration of President Wilson
which merged into the first regular session in December, 1913;
the long session continuing up to October 24, 1914. The short
session began in December, 1914, and, by operation of law,
closed on March 4, 1915.
During the sessions of the 63rd Congress, four principal
measures became law in which the Association was especially
interested:
The Income Tax Act, approved October 3, 1913.
The Federal Reserve Act, approved December 23, 1913.
The Clayton (Interlocking Directorate) Act, approved October
15, 1914.
The Emergency Revenue Act, approved October 23, 1914.
During the progress of the Income Tax bill through Congress, our Committee acting through its individual members and
General Counsel of the Association, secured its modifications by
the exemption of mutual savings banks and also an amendment
to make it clear that no deduction at source would be required in respect of interest of bank deposits, but did not succeed in the larger effort to eliminate entirely the provision as
to the withholding at source nor to restrict such provisions
to the mere giving of information at source. Shortly after the
passage of the Income Tax Act, the policy was determined upon
of urging its amendment so as to do away with the collection
at source feature entirely or, if that could not be attained,
then to seek its amendment by providing for information at
source, eliminating deduction and collection, and also simplifying the provisions of the law. A number of bills were introduced in the 63rd Congress along these lines, but the Committee on Ways and Means to which these bills were referred,
announced that they would not take action on any bills of this
character during that Congress. Our Committee propose to
conduct an active campaign to procure amendment of the Act
by the 64th Congress, and part of its activity will be devoted
to the accumulation of detailed evidence, which will show the
great expense to which banks are put in carrying out the collection at source, provisions of the law, and that such provisions are not necessary so far as the Government is concerned.
Since the passage of the Federal Reserve Act on December
23, 1913, three amendments have been adopted:
The act of August 4, 1914, which amended Section 27
to
make more generally available the temporary provisions
of the
Federal Reserve Act, relating to national bank circulation.
• The Act of August 15, 1914, amending Section 19,
subsections b and c of the Federal Reserve Act, relating
to reserves.
The Act of March 3, 1915, amending the Federal
Reserve
Act, relative to acceptances by authorizing the Federal
Reserve
Board in its discretion to increase the amount of acceptances,
based on the importation and exportation of goods
which a
member bank may discount and a Federal Reserve Bank
rediscount.
The Clayton Anti-Trust bill, so far as it related to
Interlocking Directorates of Banks was opposed by our Committee
and
General Counsel acting in our behalf. A number of modifications
were secured in the House while in the Senate still great
success was attained, for the Interlocking Directorate provisions
were entirely eliminated. They were restored to the bill, however by the conferees of the two Houses and thus finally became
law. The various steps taken during the progress of this measure have been detailed in previous reports and need not be
repeated. The Interlocking Directorate provisions do not take
effect until two years from the passage of the Act, and it is
the
intention of our Committee to urge the amendment of the Act
by the Sixty-fourth Congress by the elimination of these
unjust
provisions.
The Emergency Revenue Act is, of course, but a temporary
affair, for it provides that no taxes shall be levied thereunder
after December 31, 1915. As originally introduced it provided
a special tax upon banks of $2 for each $1,000 of capital.
Our
Committee filed a protest with the Committee on Ways
and
Means against the injustice of this provision for the
reason
that such tax, by singling out one class of corporations
instead of spreading the burden over all corporations alike,
was
discriminatory and unfair. We urged a readjustment of the

120

BANKERS' CONyENTION.

bill in this particular and a personal argument was made by our
General Counsel to Mr. Underwood, in which he urged that banks
were now heavily overtaxed in different ways and that it was
unjust to single out one class of corporations alone instead of
An
distributing the tax burden over all corporations alike
active campaign was conducted through circulars to all the
Clearing Houses and State Bankers' Associations in the United
States, to whom it was suggested that they make immediate
independent protest and that their members present arguments
to individual Senators and Congressmen. As a result of this
agitation the proposed tax on bank capital was reduced from $2
to $1 for each $1,000.
In addition to the four measures above set out, our Committee has kept track of a number of subjects of legislation affecting the banking interests upon which bills were introduced
In House and Senate during the 63rd Congress, none of which
finally passed that body. These included the bills relating to
Rural Credits, Postal Savings Legislation, to authorize cumulative voting for bank directors, the guarantee of bank deposits
and a number of other subjects.
In the matter of Rural Credits space will not be taken in
this report to detail all the various bills introduced and the
specific character of legislation therein proposed. But during
the last week of Congress when the subject of Rural Credits
was understood to be postponed until the next Congress, awaiting further investigation, the Senate in passing the Agricultural
Appropriation bill added a rider (being the McCumber bill, S.
6,602), providing for Government loans to farmers on bond and
mortgage at five per cent. through the agency of national and
2
1
/ per cent. ten or
state banks, the Government to issue 4
twenty-year debenture bonds and sell them to investors. The
House thereupon passed the Agricultural Appropriation bill,
but substituted for the McCumber rider the provisions of the
Hollis bill (S. 5,542), which as modified followed the general
lines of the Federal Reserve Act, providing a Federal Farm
Loan Board, Federal Land banks in Federal Reserve districts
and local loan associations with minimum capitalization of $10,000 to loan on farm mortgage security and sell the mortgages to
the land bank of the district, the latter to issue investment
bonds based upon the mortgage security. The House, however,
added a provision calling for the purchase by the Government
from the Federal Land banks of not exceeding $50,000,000
yearly of farm loan bonds, the Government to provide means
therefor by the issue of Panama Canal bonds bearing inter2
1
/
est at 3 per cent. The Senate and House conferees, however,
eliminated the Rural Credits feature, being unable to agree, the
chief point of difference being the inclusion or exclusion of
the Government aid feature. No Rural Credits legislation was
therefore enacted by the 63rd Congress except that the following
provision, inserted by the conferees in the Agricultural Appropriation bill, became a law:
"There is hereby constituted a joint committee of.the Senate
and House of Representatives to consist of the chairman of the
Senate Committee on Agriculture and Forestry, the chairman of
the House Committee on Agriculture and the chairman of the
committees on banking and currency of the two houses and the
two other members of each of said committees to be designated
by the chairman of the respective committees, and it shall be
the duty of said joint committee to prepare, after such investigations as may be deemed necessary, and report to the Congress
on or before January 1, 1916, a bill or bills providing for
the establishment of a system of rural credits adapted to
American needs and conditions. The sum of $10,000 is hereby
appropriated, the same to be immediately available out of any
funds in the Treasury not otherwise appropriated, to defray all
necessary expenses of said joint committee, payment of said
expenses to be made upon vouchers approved by the chairman of
said joint committee, who shall be selected by the committee."
Bills were introduced in the 63rd Congress to amend the
Postal Savings law, which limits deposits of any one person to
not more than $100 per month with total deposit limited to $500
exclusive of accumulated interest. These sought to remove the
monthly restriction and enlarge the aggregate and also to amend
the Federal Reserve Act by allowing postal savings funds to be
deposited in other than member banks. Without detailing the
history of this legislation, a bill (IL R. 7,967), finally reached
the President which removed the $100 a month limit, and enlarged the existing $500 interest bearing limit by a proviso that
the board of trustees might in its discretion accept additional
deposits not to exceed an aggregate of $500 for each depositor
upon which no interest should be paid. This bill, however, was
vetoed by President Wilson on September 11, because it contained a provision allowing postal savings funds to be deposited in other than member banks. Following this veto, bills
were introduced in House and Senate along the same lines,
with the exception of the feature disapproved by the President
and later a rider was attached to the Post Office Appropriation
bill, wherein the postal savings depositor was allowed to have
an interest-bearing deposit of $1,000 and an additional $1,000
without interest in the discretion of the board of trustees.
This rider after passing the House was struck out by the
Senate and the entire Post Office Appropriation bill failed to
pass before close of the session. As a consequence, the Postal
Savings law, with reference to deposits in the Postal Savings




law, with reference to deposits in the Postal Savings banks,
remains unchanged by any legislation in the 63rd Congress.
S
* o far this report has dealt with subjects of legislation,
both enacted and not enacted, as to which the bankers have
either been opposed or at all events not tile active proponents.
Concerning legislation which the Association has affirmatively
favored in the 63rd Congress, our Committee has been active
in urging the passage of S. 387, the Pomerene bill, relating to
Bills of Lading. This bill passed the Senate unanimously on
June 9, 1914, but failed in the House. We had the same success in the Senate of the 62nd Congress, with like result in
the Howie. Our Committee are preparing an active campaign
for the promotion of this measure in the 64th Congress and
we trust to have better success. Conditions of legislation in
the 63rd Congress which it was impossible to overcome, crowded
out all opportunity for consideration of this measure in the
House.
Our Committee also intends to urge for Federal Enactment
legislation, designed to punish the making of false statements
to Federal Reserve and member banks. In connection with the
policy of the Federal Reserve Board to require rediscounting
banks to give full and complete information as to the financial
responsibility of the borrower, it would seem important that
Congress should supplement this by legislation punishing borrowers who make false statements to any Federal Reserve or mem•
ber bank.
Supplementing the above report, the following matters are
presented:
At the Richmond Convention the Association authorized the
appointment by the President of a Committee of twelve, representative of the four classes of banks, "to confer with the
authorities at Washington in order ot secure the adoption of
such amendments to the Federal Reserve Act, as should make it
more desirable for state banking institutions to join the
Federal Reserve System." The Committee of twelve made a
report at the Spring Meeting of the Executive Council, in which
they concluded:
"The Committee has given careful consideration to the
subject before it. The Federal Reserve System having been
in force so short a time it is impossible for your Committee
at this time to offer any constructive suggestions as to amendments to the Federal Reserve Law. We recommend that the
matter be referred to the Federal Legislative Committee."
The report was adopted by the Executive Council. Pursuant
to such reference the Committee on Federal Legislation has
given consideration to the subject, but is not yet prepared to
make suggestion of amendments. In the meantime, the Federal
Reserve Board on June 7 issued a circular stating it to be the
aim of the act to embrace in the system all types of banking
institutions, state banks, trust companies and national banks,
and announcing it would use its broad discretionary power to
accomplish this object and this was accompanied by a set of
regulations governing admission, conduct and withdrawal of
said institutions. The Board stated that "the problem presented is to find a basis upon which these different types of
banking institutions may thus be associated, which will be fair
to each and will not require greater uniformity of operation
than may be necessary to the attainment of the purposes of the
Federal Reserve Act." The full text of the circular and regulations was published in the Journal of the Association for July,
1915. It is too early to determine what effect this action
of the Board will have upon a situation not adequately covered
in the act itself. The subject will be dealt with in a future
report.
In connection with the movement in charge of our Committee
to procure amendment of the Income Tax Law by the elimination or modification of the deduction at source feature, permitting banks to deduct taxes paid on shares and other amendments of the Act, we are pleased to report that a committee
of the National Tax Association are also working on this subject and at the recent convention of that Association in San
Francisco, a report of the Committee on Taxation was adopted
• recommending generally a complete restatement and clarification of the law and making seventeen specific recommendations
of amendments, among them, for modification of the collection
at source feature and introduction of a system of information
at source; calling for returns by partnerships the same as by
corporations; allowing individuals to deduct losses where gains
would be taxed; permitting corporations to deduct amounts received as dividends.
Our Committee are prepared to conduct an active campaign
during the sessions of the 64th Congress, in behalf of the
measures placed in its charge wbich are advocated by this
Association, as well as in opposition to such proposed National
legislation as may be derogatory to sound banking and to the
interests of the members of this Association.
On behalf of the Committee, I desire to offer the following
resolution—which was approved by the Administrative Committee—and is now recommended for adoption by the convention:
Reaolved, That an attempt be made to procure an amendment of
Section 19A of the Federal Reserve Act so as to give member banks
not in the Federal Reserve or central reserve cities, the option of
keeping 4 per cent, with any national bank in any reserve or cen-

BANKING SECTION.
tral reserve city in the United States, or within a radius of 300 miles
of the member bank, or within the Federal Reserve District, in addition to the option the member bank now has of keeping such 4 per
cent, in its own vaults, or in the Federal Reserve bank.
Our Committee also suggests the urging of a proposed amendment to Section 5,219, of the United States Revised Statutes,
so that the same shall read as follows:
'Nothing herein shall prevent all the shares in any association from
being included in the valuation of the personal property of the owner
or holder of such shares in assessing taxes imposed by authority of
the State within which the Association is located, or where such taxes
are imposed upon the income of personal property instead of upon
personal Property, nothing herein shall prevent the income derived from
said shares from being included in the income of the owner or holder
thereof in assessing such taxes; but the Legislature of each State may
determine and direct the manner and place of taxing all the shares
of national, banking associations located within the State or the income therefrom, subject only to the two restrictions that the taxation shall not be under more burdensome conditions, or at a greater
rate than is assessed upon other moneyed capital or 'income in the
hands of individual citizens of Bitch State, whether or not such capital or income comes into competition with that of national banking
associations, and that the shares of any national banking association
owned by non-residents of any State or income derived therefrom
shall be taxes in the city or town where the bank is located and
not elsewhere. Nothing herein shall be construed to exempt the
real property of associations from either State, county, or municipal
taxes to the same extent according to its value as other real property
is taxed."
We recommend that the above be approved by the convention.
Report

of Insurance Committee.

Mr. Chairman, Ladies and Gentlemen: Your Committee on Fidelity
Bonds and Burglary Insurance has previously reported to you the compilation of improved fidelity bond and burglary policy forms, which
forms have been copyrighted by the American Bankers' Association,
and a majority of all of the principal insurance companies of
this
country have been licensed to execute them. These copyright
forms
have from time to time been examined by many authorities,
including
insurance experts, insurance commissioners, attorneys for banks,
etc.,
and your Committee has, without exception, been able to show
in
every instance their superiority over any other forms heretofore offered
the banks by the American insurance companies. Many thousand
copies of your Committee's reports have been distributed among member banks; wide correspondence has been inaugurated with as many
banks as could be reached with funds within the disposal of your
Committee; articles have been published in the JOURNAL-BULLETIN
of the American Bankers' Association regarding the advantages of
using these copyright forms, and addresses have been delivered from
time to time by members of this Committee before State Bankers'
Associations, all looking toward an introduction of these copyright
forms, together with the other insurance service of your Committee,
to the member banks, and yet there are many banks not using
these
forms. The insurance companies avoid selling the banks our more liberal forms wherever possible, substituting more restricted' forms of
their own, and using our forms only to meet competition, or upon the
Insistence of the applying bank.
Your Committee cannot too highly emphasize the importance of an
adequate protection to the bank in the form of bonds or policies purchased. The Supreme Court of the United States in a recent decision,
Justice Holmes writing the decision, used the following language:
"What the insured cannot do is to take a policy without reading
it,
and then when he comes to sue at law upon the instrument, ask to
have it enforced otherwise than according to its terms." Your Committee through the co-operation of the Protective Department receives
a prompt report upon every burglary or robbery committed against
a member bank and reported to that Department. Your Committee
upon receipt of each such report immediately tenders its services to
the member bank in the matter of adjusting its claim against the
insurance company. Through this plan your Committee has investigated many claims of the member banks against the insurance companies, assisting oftentimes to the material advantage of the bank,
but we have found so many cases of inadequate coverage because of
the use of antiquated and restricted insurance forms, that we deem
It Important to emphasize this part of our report. For instance, we
were recently requested by a Pennsylvania bank to pass upon its form
of bond, and found that one of the largest and most representative
Insurance companies of the country was continuing to sell the bank
an old bond form originally executed in 1902. The insurance companies themselves in the last few years have provided much improved
policy and bond forms, but none of them as yet are as broad in
their
coverage as the copyright forms of the American Bankers'
Associa%ion, and your Committee earnestly recommends that these forms
be
continually kept before the member banks, and that all
banks be
Invited to call upon this Committee for a report upon their present
policy forms wherever the copyright forms are not being used.
Your Committee further desires to submit to the member banks the
need of caution in accepting endorsements or riders attached by the
insurance companies to their bonds or policies and tending to change
the conditions thereof. We desire particularly to point out the danger of making statements or applications by the bank when applying




121

for the policy or bond. For instance, it has been the custom of some
of the insurance companies to require the bank upon the renewal
of
its fidelity bonds to give what is known as a "cut off" agreement
under which the bank warrants at the time of the renewal of its
bond that all of its accounts have been audited up to that date,
and
found correct, and the insurance company upon delivery
of the renewal will have no liability under the previous bond. It is manifestly impossible for any bank to warrant all of its accounts,
including inactives and savings accounts, to _be. correct upon
a given
date in each year, and yet under the "cut off" agreement
the protection of the bank depends upon its ability to warrant
the correctness of all accounts on given dates. It is necessary
to attach endorsements to the burglary insurance policies from time
to time in order
to meet the varied requirements of different banks,
and your Committee has accordingly drawn the license authorizing
the insurance
companies to execute the copyright burglary policy,
so that endorsements are required to be submitted by the insurance
companies to
your Committee for its approval. We respectfully urge
that the member banks obtain a report from this Committee upon
any endorsements or riders or other agreements not provided for
in the face of
their policy or bond.
In the settlement of claims, your Committee has
found the insurance companies usually ready and willing to settle within the
limits
of the policy or bond contract. We have advanced the theory,
however,,that a reputable insurance company catering to the business
of
the member banks should deliver at least the best forms of
insurance
and bond contracts offered by themselves to other banks of
the same
class, and, failing to do so, should settle claims upon a more
liberal
basis than the restrictive provisions of old contract forms.
We endorse
very heartily this disposition shown by a leading insurance
company
in a recent burglary settlement with a member bank
in which the
insurance company used the following language: "In view
of the fact,
however, that the safe was burglary proof, and we would
have granted
limited coverage outside of the chest had it been requested,
we decided to assume a full pro rata share of both the money and
damage
loss." Settlements of this sort will tend most to insure a mutual
confidence between the banks and the insurance companies.
Your Committee in its report to you of October 12, 1914, outlined
the small amount of losses on burglary insurance of member banks
as compared with the premiums paid by the banks. Our figures were
compiled after the most painstaking and lengthy work, and we believe
them to be accurate. There are various reasons for the small amount
of burglary and hold-up losses in member banks, among them being
principally the efficient work of the Protective Department of the
Association. At least one representative American insurance company, the Casualty Company of America, having its home office in
New York, has recognized .this condition, and has submitted a proposal
looking toward a reduction of 20 per cent, in the cost of this form
of insurance to the member banks. Inasmuch as the member banks
pay, approximately, $700,000 per annum for their burglary insurance,
a 20 per cent. saving means $140,000 per annum. The matter was
made the'subject of a special report by this Committee to the Executive Council May 3, 1915, and was referred by the Council to the
Administrative Committee with power to act. With the approval of
the Administrative Committe, and further with the approval of the
Protective Committee, it has been made possible to offer the member
banks a reduction in the cost of their burglary insurance aggregating
more than $10,000 per month.
Obviously, the insurance companies do not take kindly to this reduction in their wide margin of profits heretofore enjoyed on bank
burglary insurance.
The insurance companies have formed an
Association for the maintenance of rates among other things. This
Association includes most of the burglary insurance companies of the
country. The resulting concerted action of the insurance companies
makes it very difficult for your Committee to maintain the reforms
that have already been accomplished, and to enforce additional reforms
that are needed. More than one bank has suggested to your Committee the possible violation of laws involved in the so-called insurance combine. The courts have held, however, that insurance is not
commerce, and a recent decision of the Supreme Court of the District
of Columbia reaffirming a ruling of the United States Supreme Court
holds that the provisions of the Sherman Anti-Trust Law do not
cover insurance policy transactions, as a policy is not an instrument
of commerce. These facts are presented for your information, and
not as an indication of the temper of your Committee. On the contrary, it has been the policy of your Committee in the two years of
its existence to co-operate with the insurance interests fully so far
as possible, and to obtain the use of better policy and bond forms,
the more satisfactory settlement of bank claims, and a modification
of insurance rates wherever the conditions might warrant, by a fair
and logical presentation of the facts to the insurance companies.
Much opposition is, of course, shown by the insurance companies to
the wide use of our copyright forms; occasionally some insurance company objects to the discussion by your Committee of the settlement
of claims; concerted opposition may be expected to the reduction in
the cost of burglary insurance above outlined. Your Committee, however, insists that it Is possible to continue this work with friendly and
co-operative relations with the insurance companies.
Your Committee feels justified in expressing its satisfaction at the
results of its work to date, and respectfully expresses the hope that it
will meet with your approval.
OLIVER J. SANDS,
Chairman.

Detailed Report of Proceedings.
FORTY-FIRST ANNUAL CONVENTION, HELD AT SEATTLE, SEPT. 6, TO SEPT. 9, 1915
FIRST DAY'S PROCEEDINGS.
MORNING SESSION,
Wednesday, September 8, 1915.
The Business Sessions of the Forty-first Annual Convention
was called to order by the President of the Association, William
A. Law, President of the First National Bank of Philadelphia,
Pa., at 10 o'clock on Wednesday morning, September 8, 1915.
PRESIDENT LAW: The convention will come to order. In accordance with our custom the exercises will be opened with
prayer by the Rt. Rev. F. W. Keator, Bishop of the Diocese of
Olympia.
INVOCATION.
By

THE RT. REV. F. W. KEATOR, BISHOP OF THE DIOCESE OF
OLYMPIA.

Almighty Everloving God who (loth from Thy throne behold all the
dwellers upon earth. It is meek and right that in all our undertakings we should seek Thy presence and favor. With Thee is all power
and might. Without Thee nothing is strong, nothing is holy. Therefore, 0 our God we would acknowledge our entire dependence upon
Thee and yield to Thee high praise and grateful thanks for all Thy
goodness toward us in the past days as we seek Thy presence and
guidance in the days to come.
Let Thy blessing continue to rest upon this land of our homes and
our labors. Bless those set in authority over us, and especially the
President of the United States and the Governor of this State, that
in all things they may seek Thy honor and glory. And do Thou so
direct and rule us that we would do justly, love mercy, and walk
humbly before Thee all our days. Whatever dangers may threaten
do Thou protect and defend us, and out of all the unrest of our
social, commercial and political life do Thou bring peace and happiness.
Now 0 God we ask Thy blessing upon this assembly of men called
to a great work, and charged with a great responsibility. Help them
to be worthy of every confidence reposed in them. Help them to discharge faithfully every trust committed to them. Direct them this
day and throughout this convention with Thy favor, and further them
with Thy continued help, that in all things that they may do Thy
will and set forward Thy kingdom of righteousness and peace.
We ask it through Him who hath taught us to pray. Our Father
who art in heaven, hallowed be Thy name, Thy kingdom come, Thy
will be done on earth as it is in heaven. Give us this day our daily
bread and forgive us our trespasses as we forgive those who trespass
against us, and lead us not into temptation, but deliver us from evil;
for Thine is the kingdom, the power and the glory, forever and ever,
Amen.

PRESIDENT LAW: We are greatly honored in having with us
to-day the Governor of the Commonwealth of Washington, who
has consented to speak a few words of greeting.

Address of Welcome by Hon. Ernest Lister, Governor of
Washington.

condition of mind which will induce many of you to look westward
when that period comes that you are looking about for a place to
spend your vacation, rather than that your eyes should in the future
be turned across the Atlantic to European shores for your holiday.
We are great believers in the motto of Seeing America First, and
in seeing America first in order to have well seen it we believe that
you will have to come to the great Northwest. I thank you.

PRESIDENT LAW: Mayor Gill, of the city of Seattle, comes at
this point on the program to extend an additional word of welcome to us.

Address of Welcome by Hon. Hiram C. Gill, Mayor of the
• City of Seattle.
Mr. President and Gentlemen: I suppose I have the greatest privilege
that ever fell to the lot of the ordinary man that has to do business
with bankers. I can look into the faces of a large number of socalled malefactors of great wealth and talk unlimitedly, and they
can't say a word back. (Laughter.)
Gentlemen, I have no time to dwell on what we have in this city.
I am glad so many of you are here from the East, so that you can
learn what this city really is. We welcome you, and we don't care
whether you spend a nickel or not, or whether you sleep on a haystack, you are welcome just the same. We are seeking to enlighten
the people of the United States about this great Coast, and about this
part of it in particular. I welcome you to a city from which even
you may learn much, for I know that many of you have labored under
the impression that the great Northwest was a country of freaks and
legislative fads. Well, it has been so a great deal in the past; but
it isn't so any more. This is a city from which youof the East will
learn that democracy is going to rule you, and it is a good thing for
you bankers to learn that while you have time to learn it. May be
some of you at one time in your lives had to work for a living; I
did, but some of
don't know, I never saw very many bankers that
you probably did. (Laughter.) I am saying this as a means of impressing upon you how cordially I welcome you. I offer you on behalf
of this city a welcome just as cordial as you or I might have years
ago dreamed a bank president would have extended to any of us.

PRESIDENT LAW: Gentlemen, there seems to be a remarkable
unwillingness on the part of the Governor and also on the
Mayor's part to go into details as to the city of Seattle and the
State of Washington. I had expected that they would give
us valuable information as to the resources and characteristics
of this city and State and load us up with interesting facts,
because personally I believe that they are here.
Now we are going to hear from a banker, and I throw out
this suggestion before introducing him. We really want Mr.
Backus to tell us something about this great city.—
M. F. &tutus: (President Seattle Clearing House Association, interposing) Mr. President, I think Mayor Gill will give
us a little more extended talk, and I cheerfully yield part of
my time to him.

PRESIDENT LAW: We Will gladly hear further from the Mayor.
Mr. President, Members of the American Bankers' Association,
MAYOR GILL: I always try to make an address of welcome brief.
Ladles and Gentlemen: It is, indeed, a pleasure to me to be able
As a general rule, I don't believe in dishing up a lot of statistics,
to be with you this morning, and add a few words to the welcome
but what your President has said impressed me. Usually Governor
that will be given you by the Mayor of Seattle and by the representaLister goes into these matters. The last time we met he didn't leave
tive of the Bankers of the State.
me anything to talk about except the dog pound and the rat laboraWe regret that we are not furnishing you that weather which we
tory. (Laughter.)
usually have in the State of Washington. The particular reason,
Now, speaking about this city. To-day by our last Government estihowever, is that those in charge of the weather here had the feelmate Seattle contained 337,000 people. It has 250 miles of asphalt
ing that if we were to furnish the usual weather all of the delegates
paved streets. It has a $0,000,000 park and boulevard system, which
from the other States would be so impressed with tile beauty of our • has been paid for. It has a lighting plant—and those of you who
country that there would be none of the membership present at your
are interested in the great financial circles of the country may have
business sessions. Therefore, you are having the kind of weather that
read some unfair criticisms about it, but it gives this city the lowest
you experienced yesterday, and also this morning, so that there may
lighting rate of any city in the United States, running from five and
be a large attendance at the meeting in order that the work that you
a half kilowatts to seven-eighths of a cent to the consumer; and,
came here to do may be well done. It has been arranged, I undernotwithstanding all criticisms, it is an absolutely safe profit-paying
stand, that the sun will shine to-morrow, so that you may have an
investment to this city. Seattle has a water plant owned by the
opportunity to see the beauties of the Northwest.
municipality, which furnishes water to any eight-room house in the
We, of course, in Washington, are proud of our State. We speak
city for fifty cents a month. This water is brought to the city from
of its wonderful and rapid growth. We boast occasionally of its
the mountains a distance of thirty-eight miles. Seattle ranks nineresources. We also recognize tile fact that it is one part of the great
teenth as having the lowest tax of any city in the country. It has
combination of States, and that the success of all of the States is
manufactures comparable to those of any city of its size in the counthat which brings success to us. The reason for this gathering totry. It is the leading salmon packing center of the world. It handles
day is so that the minds of the different portions of the United States
practically all of the commercial business of Alaska to-day. The
may exchange ideas, and from such exchange that there may come
County of King, in which you sit to-day, is one of the richest counforth information that will bring abotlt better and still better conties in the State. It cost $200 an acre to clear this land, and now
ditions to all.
it is one of the greatest dairy counties in the United States. 'We have
We are delighted to have the bankers of the United States meet
a condensed milk plant, which is now beginning to furnish condensed
here in this great Northwest. We hope that we may have an oppormilk to you people in the East, and the cans are made within eighteen
tunity in the days that are to come to show you more of it, and we
miles of this city. Those are our resources. Sometimes we talk
feel that as a State we will be benefited,, commercially and indusabout our lumber, but if I begin to talk about lumber I'll get in
trially, by your presence.
bad with the Democratic Administration, and I don't want to talk
I am delighted to add a word of welcome this morning, and I cerpolitics, which is the one thing we are suffering from out here.
tainly hope that each and all of you may enjoy every moment that
(Laughter.) We will be glad to show you everything that we have.
you spend with us. We trust that your visit will bring about that
We admit that we have made some municipal ownership mistakes.




BANKING SECTION.
That is, some people did—none of us who are in the chair these days.
Not speaking egotistically at all, I assure you that we have the cleanest municipal administration and the best legislation of any city in
the United States, and you men of finance can investigate and ascertain those facts for yourselves. You can learn a great deal from
this city and profit by our mistakes, because so sure as the sun rises
you will shortly meet in other States and cities with woman suffrage,
with the initiative, with the referendum and the recall. We've got
them all. (Laughter.) But the people are learning, and the banker
must begin to learn that his day of legislation is passed and gone,
and that he must meet and legislate with the people. If you don't,
gentlemen, your deliberations in the future will not amount to much.
If you do, you will control the situation, because in the last analysis
the people are wise and they are just.
Now, gentlemen, anything we can do for you we will be only too
glad to attempt. (Applause.)

PRESIDENT LAW: Thank you very much, Mr. Mayor. What
I said was not at all in any spirit of criticism; it was simply
a suggestion, and I am very glad that Mayor Gill accepted it,
because I am very sure we have enjoyed his remarks about this
city's statistical position.
We are now going to hear from Mr. M. F. Backus, President
of the Seattle Clearing House.

Address of Welcome by M. F. Backus, President Seattle
Clearing House Association.
Mr. President, Members of the American Bankers Association, Ladles
and Gentlemen:
Governor Lister has extended to you a hearty welcome to the Evergreen State, Mayor Gill has bidden you welcome to our Queen City
of Puget Sound, and I now extend greetings from time Associated Banks
of this city, and on their behalf take pleasure in bidding you welcome to everything else in sight. And is there not good reason for
our extending this united welcome? The Scriptures tell us that
Abraham entertained angels unawares. We have the advantage over
Abraham in knowing the character of our guests, who, while they
have not yet all fully qualified as angels, we have no doubt will do
so later on.
It is, fortunate, indeed, that this Convention is held in Seattle
ery
this year, because next year the State is to be dry, and, notwithstanding that we produce a fine quality of grape juice, some of you
might experience a certain feeling of disappointment.
Time Seattle Clearing House Association appreciates the honor conferred upon it by your acceptance of its invitation to hold your fortyfirst annual Convention here "in the geographical center of the
Union," and welcomes you, one and all, from whatever State you
hail, all the way from Coney Island, from Key West, or San Diego
to Mount Rainier. A great many people do not realize the fact that
the geographical center of the United States, including Alaska and
the Aleutian Islands, lies a little northwest of this city, and that Seattle if) therefore located just where the West begins.
"Out where the hand clasp's a little stronger,
Out where the smile dwells a little longer—
Out where the West begins.
"Where there's more of singing and less of sighing,
Where there's more of giving and less of buying,
And a man makes friends without half trying,
Out where the West begins."
We welcome you to our great forests and our mighty rivers. We
welcome you to our snow-capped mountains and our fruitful valleys,
to our azure lakes and our beautiful inland sea studded with a thousand
•
"Sea-girt isles,
That like to rich and various gems inlay
The unadorned bosom of the deep."
We welcome you to the broad field of priceless opportunity foretold
by Mr. Seward nearly sixty years ago, when he said: "The Pacific
Ocean will become the chief theatre of events in the world's great hereafter." We welcome you to the port on the Pacific Ocean lying
nearest to Japan, to China, and to Asiatic Russia. Here you may
take ship, and sail by the shortest possible route from the United
States "Westward and further west until West is East," visit Yokohama, Vladivostock, Shanghai, Hong Kong, and Singapore, and then
return by this same shortest route and receive our cordial welcome
once more.
We welcome you to the entrepot for the great future commerce of
Alaska, the only part of this country left for the pioneer and the
seeker after adventure, a land of untold latent wealth, its
waters
teeming with the choicest food fish, its hills filled with coal, copper,
and gold—a land so vast in extent that if every human being
on the
face of the earth, every man, woman, and child who breathes
the air,
were set down within its boundaries, there would be less
than five
persons to the acre. Nowhere else in the world to-day are
there such
opportunities, such natural resources, awaiting the hand
and intelligence of man for their development. And I can further promise
that
if any of you will visit that great unexplored Empire to the
North
you will receive a hearty welcome there also.
Three events of highest importance to future business, especially
on
this Coast, have occurred since the last meeting of our Association
at
Richmond on the James, each of which, in turn, has received a
sincere
welcome. These are—the operation of the Federal Reserve
Act; the
opening of the Panama Canal, and the passage of the act authorizing
the construction of railways in Alaska. While in the welcoming
line
I will say that we all welcome the marked change in public
sentiment which promises to end what has been aptly termed the
"reign
of terror" under which business has struggled for the
past eight
years. We welcome the passing of the"muckraker." We welcome
the




123

recent decision of the Federal Court in the case of the United States
Steel Corporation, and the more recent order of the Interstate Commerce Commission on the appeal of the express companies for permission to charge living rates. We .welcome our billion-dollar international trade balance, and likewise our ten-billion-dollar harvest of
farm products just now being garnered. We welcome the fact that
we are changing from a debtor to a creditor'nation. We welcome the
"noble army" of American tourists who are just now learning to
"See America First."
Among the things which we hope to welcome in the near future may
be mentioned—an end of the terrible European war; a restoration of
decent conditions in Mexico; a reform in our shipping laws, which
will make it possible to re-establish an American Merchant Marine
and enable us to operate ships from the Pacific Coast under the American flag; and as more directly concerning the banking fraternity some
plan which will attract the State banks and trust companies into our
Federal Reserve System, for only thus will the new system ever become fully successful.
Seattle boasts much of her excellent terminal facilities, and I must
not impair her reputation in this regard, but just let me add that
one distinguished party who is said to be on his way to whom we
will all join in extending the heartiest of welcomes .when he arrives,
whose acquaintance we shall be delighted to renew once more, is old
"General Prosperity." God speed him!
The bankers of Seattle most cordially welcome this meeting of the
American Bankers' Association, and earnestly hope that its deliberations
may result in working out much that shall prove good, not alone for
the Associated Banks, but for all the people of this broad land, from
Canada to Mexico, from the Pacific to the Atlantic—the land
which
we all so highly honor and hold so dear.
Our hands, our hearts, our homes are all open to you, and
to all of
them we bid you welcome.

PRESIDENT LAW: On behalf of the Association I thank
the
Governor, the Mayor and the President of the Clearing
House
Association for their words of welcome. I would repeat
what
Mr. Knox, the President of the Savings Bank Section, said so
aptly yesterday: We have seen all around us the work of your
hands in Seattle, but the hospitality that you are showing us is
the work of your hearts. Mr. Backus has succeeded in smashing forever the tradition that a banker is never an orator.
This Association is often seriously advised to select a permanent meeting place and cease its journeyings from North to
South and from ocean to ocean: However, we have always decided that it was advantageous to hold our annual gatherings
in widely separated sections of the country in order to bring
about by travel and intercourse that closer understanding which
is essential to intelligent banking co-operation.
We have recently met with the Puritans and Pilgrims in Boston; with the Cavaliers and Huguenots in Richmond, and
now
we stand in the presence and breathe the influence of those
who made your traditions and fixed your standards, creating
the ideals which for generations will shape your lives and
those
of your children—the Pioneers.
While your State was a part of Oregon Territory, these hardy
Americans, actuated sometimes by a desire for wealth,
sometimes by love of adventure, and oftentimes by the American
instinct that seeks to conquer difficult situations, followed
the
trail across the waste and fought a tireless war, not only
against hostile man but against the contending forces of nature.
As has been well said of the "Forty-niners," "The cowards
never started and the weaklings died on the way." The
Pioneers gave an inspiration to their brethren in the East by
undertaking great tasks and completing them at all hazards.
In the pursuit of fur-bearing animals, in the development of
fisheries, in the lumber camps, in the mining camps, in the
accomplishment of engineering feats, in the construction of harbor improvements, in the development of hydro-electr
ic power,
In the construction of lines of transportation, they
and their
sons had the faith that enables men to remove mountains
and
cast them into the depths of the sea. As Rudyard
Kipling's
"Sons of Martha"
:
"They say to the mountains, be ye removed, they
say to the lesser
floods, run dry;
Under their rods are the rocks reproved, they are not
afraid of that
which is high;
Then do the hilltops shake to the summit, then is the
bed of the
deep laid bare;
That the Sons of Mary may overcome it, pleasantly sleeping
and unaware."
In the East we are apt to dwell upon the historic
events of
the past: Here you are thinking more of your vigorous
present
and brilliant future, but the Seattle and the Washington
of today could never have existed but for the sacrifices
and toil of
those brave men who set up their rude huts at Astoria
and at
your own Alki Point, and it is well to recall their
deeds on
this occasion.
The vices of the Pioneers were generally manly, frank
and
aboveboard, their virtues were simple and basic.
They taught
universal respect for women, the defiance of ill fortune,
fortitude in the face of disaster and courage till death.
At some future time as our labor requirements become
fully
supplied, when your population has increased in
density, you
will be in a position to utilize your own raw
material, and .
much more that you will import. With your wealth
of coal and
hydro-electric power, Seattle will become a much
more impor-

124

BANKERS' CONVENTION.

tant manufacturing city, drawing its raw material from lands
beyond the seas as well as from your own cbasts, and you will
ship your manufactured product as you are now shipping raw
material, to Alaska, to the Orient and to your nearby agricultural territory, thus retaining the labor cost upon what you
fabricate and perfect, as well as the commercial profits earned
here in this unexcelled port, blessed with climate, nearby fuel
and forests beyond 'comparison.
Your need is what all sections of this country feel, namely,
more men with willing hearts and trained hands who love to
work, and also love to play in order that they may more successfully work and perform their different tasks.
But the Seattle of to-day, equipped with exceptional railroad
and water transportation facilities, with a back country of untold natural wealth, with strong basic industries, with civic
and educational advantages, with a courageously aggressive people, is steadfastly doing its share of the world's work.
Therefore, we esteem it a priceless privilege to be here wi,th
you, to see what you are doing, and to enjoy your bountiful and
charming hospitality.

Annual Address of the President, William A. Law.
These annual gatherings are milestones which mark our banking
progress.
Since our Richmond Convention last October many events of vital
Importance have been crowded together, often too swiftly for realization and analysis, so seriously have they affected our lives and fortunes.
A farther perspective will result in clearer vision.
We are meeting in the midst of strange and stirring days, saturated
with the romance of world changes. History is being made on every
continent and new maps are being drawn with a pen remorselessly
dipped in the blood of strong men and of innocent women and children.
In Europe war has continued its progress with increasing military
ferocity, economic devastation and loss of human life. In America the
situation has served to reveal the marvelous material resources of the
United States. After recovering from the first paralyzing shock, our
leaders began energetically and resourcefully the task of repairing
shattered confidence and effecting the resumption of normal commercial
activities and industrial operations. Transportation interruptions by
sea and land were overcome. Emergency measures previously provided
gradually enabled banking transactions to proceed along the usual
lines; the stock exchanges were opened on December 12 under certain
restrictions after having remained closed about four and a half
months, and international and domestic traffic have since been conducted under abnormal influences and extraordinary difficulties.
During the year you have seen sterling exchange rise to its maximum
price of two generations, and sink to its minimum. You have seen interest rates uncomfortably high and again discouragingly low; you
have seen wide fluctuations in the values of our staple products; you
have seen economy practiced till, as a consequence, retail trade suffered severely.
Manufacturers In many branches have not been able simultaneously
to meet the combined effects of tariff changes, the unusual shifting of
prices of both raw material and products under war conditions, and
recently the demoralizing competition for skilled labor by the contractors for war supplies. As soon as business Is resumed on a large
scale we are going to face most unusual labor conditions. Practically
no immigrants are coming in at the present time; our normal movement averages about 100,000 per month.
Those industries concerned in the production and distribution of food
stuffs have been least injured. Leather has been strong and active;
the automobile industry has been surprisingly stimulated, due in great
measure to the war. On the other hand, textiles have been irregular
and difficult. Construction and all products purchasable by the railroads have been slow and dull. Our coal tonnage exceeds the combined tonnage of the products of agriculture, forests, manufactures
and animals. The success of many of our railroads, therefore, depends
from
upon manufacturing activity. The railroads have been suffering
rates and
a fourfold burden of decreased tonnage, decreased freight
overthe increased costs of labor and money, but they are pluckily
coming their difficulties.
is
As a whole, production is irresistibly increasing; unemployment
slowly and steadily decreasing; distribution is quietly broadening.
The unprecedented prices for some of our agricultural and industrial
products have revitalized stagnant labor generally, besides strengthenng. The United
ing the position of our most important interest—farmi
factor in
States has grasped its unique opportunity to become a larger
international finance and commerce. Every business man's life has
their opbeen affected more or less by these events. Some have used
portunities to advantage, while many others have sustained severe
they could not adjust themlosses because they were so situated that
changed conditions. New political
selves profitably to the suddenly
for immediate solution.
problems have been thrust upon our officials
of our two most bountiLast Fall, when Europe needed the surplus
for the first time, by a rare
ful crops, wheat and cotton, we harvested
wheat and gathered over
coincidence, over 930,000,000 bushels of
amazing international credit trade
17,000,000 bales of cotton; hence our
amounting to $1,094,000,balance for the year ending June 30, 1915,
serious exchange problems for
000. This immense balance has created
Let us not forget, however,
European merchants and governments.
export excess as compared with the
• that over $220,000,000 of this
in imports of raw material in
previous year was caused by the decrease
by idleConnection with our retarded industrial activity accompanied




ness and suffering on the part of wage-earners in many of our manufacturing centers.
Several of our strongest assumptions have proven erroneous. Our
stock of gold was not exhausted by foreign, shipments; in fact, international exchanges gradually turned in our favor. Our cotton exports
were not cut in five as predicted, but exceeded 92 per cent, of the
previous year's volume. Our copper industry was not ruined but has
been stimulated. Our stock exchanges have not been overwhelmed by
a flood of distressed American securities sold at sacrifice prices by
European holders, but we have readily absorbed all offerings. Our
issues of emergency currency amounting to $384,000,000, and of Clearing House Loan Certificates amounting to $212,000,000, nearly $600,000,000 in all, did not long remain outstanding, but reduction and
redemption took place promptly and they were practically all retired by
the middle of January, 1915. The timely visit of Sir George Paish, the
special representative of the British Treasury, paved the way for a
perfect understanding as to the soundest and simplest methods of resuming international trade with and payment to Great Britain, who is
our largest customer, buying annually from us, if we include Canada,
over $1,000,000,000 worth of merchandise or about three times as much
as our next best customer, Germany. Our fundamentals were never
more sound than now. At the present time the iron market, the
barometer of our national trade, is strong and active. We are witnessing activities in metals, both as to production and fabrication, beyond
precedent, and the producers of steel, copper, zinc and other metals
have seen soaring prices as well as new records in volume. As always
we have sold most of our products in the form of raw material, other
nations deriving the profit from manufacture. The New York Stock
Exchange is vigorously celebrating its new lease upon life with a
speculative orgy in some issues which is causing thoughtful men no
little concern. This is caused mainly by the unprecedented plethora of
funds congested in New York City, where funds were loaned as low as
1 per cent. on call.
On November 16, 1914, the Federal Reserve Banks were opened,
starting too late to afford relief during the financial stringency, as the
retirement of emergency currency was by that time in full swing. Unfortunately, this contraction was not sufficient to meet the reduced
requirements of commercial depression combined with speculative inactivity, and for the past six months at least we have been suffering
acutely from redundant currency, a condition in many respects more
dangerous than a stringency. We have not as yet an elastic currency.
Contraction ceased when emergency issues were retired, and substantial
amounts of Federal Reserve notes are *being steadily put out, adding
to the unhealthy plethora. We have witnessed rates so low that neither
banks, customers nor investors are benefitted. Cheap money induces
speculation and unsafe credit expansion. The recent activities on stock
exchange would have occurred in some'other class of securities even if
the war stocks had not taken the center of the stage. Excessive speculation, as always in the past, will follow the presence of redundant
money until the proper deviges for contraction are perfected and
operated.
The Federal Reserve Act provides a comprehensive plan for American
banking co-operation. The responsibility for working out important
details rests upon the Federal Reserve Board. They are doing this admirably and conscientiously, and have exhibited willingness to make
changes where trial has shown that they are mistaken, which is a
most hopeful sign. The principal features of the system will remain a
part of our permanent banking fabric, but in all probability there will
be various amendments to the act as their necessity becomes apparent.
National banks located in the larger cities should be authorized to
operate branches. Our principal cities are growing rapidly in area as
well as population, and oftentimes banking facilities are required In
remote sections where sufficient business does not efist at the moment
to cover the overhead cost of first-class management for an independent
institution. For the sake of economy and convenience it should be
Possible for a national bank to have a reasonable number of branches
in any part of the city in which it is located, if the population exceeds
200,000. The utility of such a plan has been proven by the experience
of State-chartered institutions in several of our cities—notably in Detroit, New York and New Orleans.
The strength of the Federal Reserve Board in shaping the conduct of
the twelve banks has given us in many respects practically a central
bank, but without its economy and simplicity. The advocates of a
central bank have noted with approval arrangements made for contriburegulation to the central gold fund in Washington and the numerous
Banks laboriously
tions for the conduct of the twelve Federal Reserve
perfected and promulgated by the Federal Reserve Board just as the
the same function.
head office of a central bank would have performed
As yet nine of the twelve banks have had no general opportunity to
demonstrate either their usefulness or their earning capacity. They are
all well managed by the practical and experienced men selected as
directors by their owners, the national banks of the country. It is certain that they will earn more than their dividends under normal business conditions because they are operating under a distinct advantage
over other banks of similar size, in that they do not pay either interest
on balances or circulating notes, taxes or exchange charges, and have
eliminated the more expensive and risky processes of modern banking.
The national banks have deposited a portion of their reserves as required by law; the collection system has been put into effect to a
moderate extent and a reserve of about 250 millions in gold assembled.
As indirect benefits the system teaches the superior value of liquid
in due
assets in the form of short-time commercial paper, and will
and
course of time effect general co-operation in mobilizing reserves
stabilizing interest rates. The system has designated official leadership
in national finance, and later on will probably create a real international discount market, assisting the establishment of our trade with
the other nations.

BANKING SECTION.'

125

In the meantime, the discrimination against bonds by
the Federal
At Richmond there was appointed a Special Committee
of Twelve
Reserve Act, coincident with the other difficulties of the railroads,
has
to confer with the Federal Reserve Board and consider
possible amendserved to aggravate the economic changes which have caused enormous
ments to the Reserve Act which would make membershi
p in the new
shrinkage in the values of securities held by national banks.
system more advantageous, or less disadvantageous
to the State banks.
The Federal reserve system has not yet been fully tested. The counCircumstances have made it impracticable for this Committee
to accomtry still awaits the action of two most important factors in its operaplish the objects for which it was appointed.
After a careful consideration, namely, the entry of the State banks as members and the removal
tion of the matter at the May meeting
of the Executive Council it
of Government deposits from the independent treasury. It cannot be
seemed best to recommend the discharge
of the Committee from further
questioned that all commercial banks, no miitter where their charters
labors.
are derived, together with the Secretary of the Treasury, should finally
The premier banking event of the year
is, of course, the opening of
co-operate with the system if we are to co-ordinate all elements in our
the Federal .Reserve Banks. Your
Association has, for many years,
sphere of commercial finance.
repeatedly urged upon Congress the
necessity for banking and currency
In completing the Panama Canal, and opening it to the ships of the
reform. Finally, in 1906, you
appointed a Currency Commission, of
world, we have shown what American brains, resources and courage can
which the Hon. A. Barton Hepburn
was elected chairman, and he still
do in winning where other nations have failed. To-day the people of
holds that position. This Commissio
n is composed of active and expe.the Atlantic seaboard are sharing with you the effects of this big underrienced bankers representative of all
parts of the country, and was
taking upon exports and imports. In the construction of the watercharged with the duty of assisting
legislators in framing a suitable
way there is glory enough for all, and with the story of the Panama
banking law. • Without going into details
as to the various operations
Canal will be linked forever the names of Roosevelt, Stevens, Wallace,
.
of the Commission, it is sufficient to
say that during the whole time
Shouts, .Goethals, Gaillard and Gorges. The digging of this fifty-mile
the Federal Reserve Act was in the making
the Currency Commission
ditch completed a plan that had been in the minds of men for over four
of the American Bankers' Association
was. In close touch with the
hundred years. It cuts in half the ocean distance between Seattle and
situation and frequently, by friendly criticism
and counsel, directed the
New York, and in its creation of new values compares with the other
legislation along wise lines. The Commission
is still in existence and
two great trades made on behalf of this country—the one by Jefferson
while it is quiescent, it awaits only the demand
of necessity for further
when in 1803 he made the Louisiana purchase from France for
participation in creative labors.
$15,500,000, and the other by Seward when in 1867, during the PresiThe important educational work of the Associatio
n, which is condency of Andrew Johnson, he bought Alaska from Russia for $7,200,ducted through the offices and efforts of the
American Institute of
000. The complete canal will probably cost $325,000,000, and aside
Banking, continues to be quietly and efficiently
performed. With an infrom its commercial value and strategic importance in time of war will
creased and increasing number of students
and with the improved
rank with the noted engineering achievements of the century.
methods which result from long experience
, this phase of your work
A few words about the near future. We have reasons to believe that
yields to none in importance and in
the value of results achieved. It
our financial position will strengthen steadily as the European War
is a work not only of to-day, but
of the future. Thousands of the
progresses; that our devoted President will be successful in preserving
junior officers of banks are entering upon
their duties more thoroughly
neutrality. When war ends what will it mean to us as a nation? We
equipped than their predecessors and the
banking profession as a whole
shall be rich enough and generous enough to contribute liberally toward
Is bound to derive great benefit from
the Institute's work. In perthe help of the needy; to assist in the reconstruction of some of the
fecting the complete course of instruction
the Institute has had the
ruined nations; to give employment to the mass if immigrants who will
invaluable co-operation of the Board of
Regents, of which Professor 0.
probably rush to our shores; to compete vigorously with the stronger
M. NV. Sprague of Harvard University is the
chairman, and the other
nations in seeking foreign trade.
members are: Prof. E. W. Kemmerer, of
Princeton University; Harold
Shall we have made heavy sacrifices and assumed serious risks for
J. Dreher, of Milwaukee ;' C. W. Allendoerf
er, of Kansas City, and
the sake of humanity, or shall we have ceased advocating the cause of
George E. Allen, of New York.
the oppressed of other countries? Shall we find that on account of the
Under the auspices of your Agricultural Commissio
n a notable conenormous profits exacted from the dire necessities of the belligerent
ference was held in Chicago July 7 to 9, 1915.
s
The chairman of the
we have devoted our attention more to material gain than to the moral
Commission, B. F. Harris, has brought this work
to a high degree of
and spiritual influences which should accompany our traditions regardsuccess. He has succeeded in interesting not only
the bankers but the
ing human liberty? We are on the eve of world-wide changes in every
farmers and the farm journals, which are
co-operating earnestly and
department of life. The responsibility rests upon each of you who are
giving important and highly valued publicity. The
work of the Agrithe leaders in thousands of communities to use your influence with
cultural Commission is highly important. It
affects our greatest inwisdom and conservatism in shaping sentiment and the conduct of
terest—farming—and is rapidly bringing about
a closer understanding
affairs.
between the bankers and that large body of
their customers who diThe new Constitution of the Association has now been tested for two
rectly or indirectly derive their living from the
cultivation of the soil.
full years; practical use has demonstrated the wisdom of its framers.
The Insurance Committee is getting excellent
results from its efforts
The Constitution imposes large responsibilities upon the Administra
to improve the form and reduce the cost of fidelity
tive
bonds, and burglary
Committee, which meets at frequent intervals, and in the
interim beinsurance.
tween meetings exercises the powers of the Executive Council.
The Finance Committee, which was. constitute
The
d to supervise the
members of this important committee become thoroughly conversant
finances of the Association, is performing its work
adequately and with
with the varied activities of the Association and advise promptly and
results which show in the splendid condition of
the Association. The
frequently with the General Secretary and various departmental
heads
Committees on Law, Federal Legislation and
Membership have also
regarding all matters of moment.
given strict attention to their duties along their
respective lines.
A wise provision of the Constitution requires that members of the
The work of the Sections of the Association has
been performed to
Council shall be classified as to their terms of service and so arranges
the signal satisfaction of members. Three of the
sections have had
the personnel of all committees that at no time is one of them comspecial matters to enlist their attention, and the
State Secretaries
posed of new and inexperienced members.
Section has always been in co-operation with the
Association. The
Your aggressive and industrious General Secretary again announces
Trust Company Section has been studying particularly
the provisions
an increase in the total membership of the Association, which for the
of the Federal Reserve Act which relate to the
admission of State
first time exceeds 1,500. The Association has grown steadily in membanks. The Savings Bank Section is preparing for
the hundredth anbership and has been for many years a center for the crystallization of
niversary of the establishment of savings banking,
and the Secretary
ideas and action on all manner of banking subjects. It is now in touch
of the Clearing House Section had an active
participation in devising
with the great majority of the bankers of the country and we expect to
the new plan for check collections under
the Reserve Act. The vasee it grow in influence as well as in numbers as time goes on.
cancy caused by the resignation of E. G.
McWilliam as Secretary of
To the officers who are in touch with the various affairs of the Assothe Savings Bank Section, has been filled
by the election of M. W.
ciation it is evident that many members are not sufficiently familiar
Harrison who has taken up the work with
intelligence and vigor. The
with its machinery and its various activities and do not utilize to the
Position of 0. Howard Wolfe, who resigned
as Secretary of the Clearfull advantage the facilities which the Association affords. Comparaing House Section to accept a banking position,
has not yet been filled.
tively few of our members realize the diversity of the Association's inThe Legal Department of the Association, guided
by the master hand
terests, its numerous functions and the wide range of its possibilities
of General Counsel Paton, has developed a field
of service generally
for usefulness.
used by the members and highly appreciated.
This organization, originally formed by the voluntary action of.a few
The Protective Department, whose conduct requires
close attention to
bankers, has specialized its work and organized one department and one
an infinity of detail, has been conducted along
the lines of practical
Section after another until now its operations cover every field of bankusefulness and has had the commendation of the membershi
p.
ing co-operation possible for such a body. Many who have its interests
During the year the Department of Public Relations,
which was
sincerely at heart feel that the creation of additional Sections is unestablished by vote of the Executive Council on October
15, 1914, has
wise. The General Offices are thoroughly organized and, under the
been organized under the management of A. D. Welton,
whose training
exceptional executive supervision of your General Secretary, transact
a
In journalistic and civic work equips him exceptionally
for this responsivast amount of conscientious, well-finished work. But the organizati
on
bility. This Department is intended to disseminat
e through the
is capable of still greater efficiency, which may be brought about by
JOURNAL-BULLETIN and through other channels such informatio
n as will
centralizing and combining the operations of the several Sections in
the
keep the public in touch with the activities of the Associatio
n and will
hands of one Assistant Secretary.
also keep the members of the Association advised in
regard thereto.
In the matter of finances you will note the increased income which
It has developed rapidly into an exceedingly useful
is
part of the Assoreflected in the cash balance on hand at the end of the fiscal year
ciation's machinery and yet we feel that at present it is
of
only in its
$36,097.75 as compared with $20,152.70 for 1914. Upon the same
Infancy. You have doubtless noted the marked improveme
basis
nt in the
the income for this year amounts to $238,508.90 as compared
form and character of the JOURNAL-BuLLETIrt and the
with
quality and
$233,915 for the year 1914.
arrangement of its editorial matter. It is the purpose
of the Council
The affairs of the American Bankers Association have been conducted
that these Improvements shall continue until the JonaNAL-B
umacerzx
wins recognition as an authoritative financial force.
upon the theory that, as the dues are comparatively small, it is
better
The Library and Reference Department is discharging its duties
not to decrease them but rather to expend wisely and judiciously
and
and
awaits your requirements before more books of reference
for the benefit of all our members any increased income.
value are
added. The collection is being constantly increased at the
During the year the twelve Federal Reserve Banks have responded
discretion of
to
the capable and industrious librarian.
our invitation and, with the consent of the Federal Reserve Board,
WILLIAM A. LAW,
have become members of our Association.
President.




••

BANKERS' CONVENTION.

126

THE PRESIDENT: Unfortunately, Sir Richard McBride, Premier of British Columbia, and who was to have added greetings from the Northwest, is unable to be with us to-day. So
we will omit that part of our program.
The next item in the order of business is the Memorial to the
late George H. Russel, who was the President of this Association at one time. I believe Mr. Swinney has some resolutions
to offer.

Memorial to George Howard Russel.
The death of our ex-President, George Howard Russel, occurred at his home on Monday, May 17, 1915. Mr. Russel was
sixty-seven years of age, born in Detroit November 29, 1847.
"He did not fail
Like drooping flowers that no man noticeth,
But like a great branch of some stately tree,
Rent in a tempest and flung down to death."
He was not born to a life of ease. At the early age of sixteen he was placed upon the threshold of the future to hew his
own way. No college door swung ajar that he might be educated,
and it may be said that his first schooling was a battle with the
world in a struggle for a living. He was an apt pupil; he
learned the fundamentals of correct living—probity, honesty
and industry—and squared his life to no other standards. The
story of his life is an open book; every page one of inspiration.
His fellowmen know him as he was—a great-hearted, noble
man. Children loved him because he loved them. His friends
admired him because "His life was gentle, and the elements
so mixed in him that nature might stand up and say to all the
world, 'This was a man.'"
Years added experience to his knowledge without abating his
mental vigor. In his business life he softened the sometimes
necessary asperity of his action by the kindness of his manner,
and often gained by persuasion what would have been lost by
persistence.
While charged with the executive management of a large
bank, and with varied business interests, he was never too busy
to give a word of counsel and advice. Thoroughly democratic
• in his manners, he was at all times approachable, and always
ready to lend a sympathetic ear to the troubles of others.
"His worth is warrant for our grief."
Generous beyond his means, helping others help themselves,
always hopeful, busy, just, cheerful; a model citizen; always
thinking of the public good, feeling that what he had he held in
trust; loving nature, familiar with the poetic side of things;
touched to enthusiasm by the beautiful thought, the brave word
and the generous deed; full of magnetism, friendly in manner,
candid and kind in speech; modest, but persistent; loving and
gentle in his family; physically fearless; intellectually honest;
thoroughly informed; hospitable, unselfish, sincere and loyal—
he was, indeed, a splendid replica of the noblest work of God.
"The record of a generous life,
Runs like a fragrant vine around his memory."
He became President of the People's State Bank in 1889 and
served continuously in that office until his death—a period of
over twenty-five years. In 1891 the bankers of Michigan
showed the high esteem in which they held him by electing him
President of the Michigan Bankers' Association. In 1898 he
was elected President of the Bankers' Club of Detroit, and was
Chairman of the Detroit Clearing House Association at the time
of his death.
He had a very wide circle of friends among the banking fraternity of the United States.. He was a very loyal supporter
and took deep interest in all branches of this Association. His
commanding presence and great magnetism in attracting friends
made his face very familiar at Council meetings and conventions of our Association, at which he was always present if it
were within the possibilities.
His city and State suffer great loss by his death. In the
business world where he has for years been so prominent, his
imprints are many. It may be well said of him that "The
wheels of industry sing his praises, the white wings of commerce salute him."
He left a record behind him of which any man might well
feel proud, and his name is a household word among the bankers of the United States.
His untimely death robs the American Bankers' Association
of one of its strongest and most loyal members. Multiplied
-pect and affection he
words will not enrich the universal re,
commanded in life; formal phrases of condolence cannot assuage the sorrow that is so deeply felt by his family and
friends. And to his bereaved family we extend our most heartfelt sympathy.
"Heaven calls us different 'ways."
"So we wither, one by one, and drop into the sear and yellow
leaf, and relentless fate blows us into the dark valley of the
Shadow of Death.. Out of the sight of the memory of the living
and the useful, but with faith ever green in our hearts, we
shall live and bud again in a spring beyond the skies."




"Then let us stretch our hands in darkness,
And call our loved ones o'er and o'er;
Sometimes their arms shall close about us,
And the old Voices speak once more."
COMMITTEE:
• (Signed)

WILLIAM LIVINGSTONE,
Chairman.

THE PRESIDENT: I understand Mr. Swinney moved the adoption of those resolutions.
(Motion seconded and unanimously carried.)
THE PRESIDENT: Personally, I wish to say that I enjoyed
the pleasure Of Mr. Russel's acquaintance from the time he was
first• elected President of this Association; and through many
years of delightful fellowship and of business correspondence.
He was not only a sane banker and a patriotic citizen, but we
can truly say of him that he was a Christian gentleman.
We will now have the annual report ,of the General Secretary.

Annual Report of the General Secretary.
Mr. President and Members of the Association: For some
three or four years, it has been customary for the various reports of the officers of the Association to be printed and distributed to those who attend the Convention. With the increased activities of the Association, the reports of the officers
and the report of .the General Secretary are increasing in
length.
Now, it is my intention this morning only to read two or
three paragraphs, and particularly some instructions received
from the Executive Council to report to this body action taken
by the Executive Council. And I shall allude in just a few
words to some of the activities of the Association while these
reports are distributed.
The guests in attendance seem to find very little time to
read printed matter.
First, I want to pay my respects to the forty-nine State Secretaries who co-operate with the American Bankers Association
in every way in their power to make this work a success. This
part of the report, you will see by the reading, was referred to
the Convention.
[Mr. Farnsworth's report in full as Secretary will be found
on pages 110 to 114 of this issue.]

Report of Treasurer.
THE PRESIDENT: You all have in hand the printed report of
the Treasurer of the Association, Mr. J. W. Hoopes, of Dallas,
Texas. Mr. Hoopes is absent, and therefore as his report is in
print, we will not read it.
[For the report of the Treasurer see page 11(1 of this issue.]

Report of General Counsel.
The annual report of the General Counsel, Mr. Thomas B.
Paton, New York City, is the next number on our program.
[We give the full text of Mr. Paton's report on pages 114 to
115.]
Ma. GOEBEL, Kansas City, Missouri: Mr. Chairman, in order
to save time, I move that the reports of the various officers
which are printed in this pamphlet, this yellow covered Pamphlet, be received and filed, without reading.
(Motion seconded.)
THE PRESIDENT: Are there any remarks? The motion is
made and duly seconded that the reading of the reports be dispensed with in order to save time. All in favor say aye; opposed, no. It is carried.

Amendments to the Constitution.
We will now come to "Amendments to the Constitution."'
Gentlemen, the General Secretary reminds me that no action
was taken upon the resolution embodied in his report, which he
read to you, in pursuance with the instructions of the Executive Council.
GOVERNOR BAILEY: I move you, sir, that the report of the.
General Secretary be accepted, and the instructions which havecome to us from the Executive Council be endorsed by the general meeting.
I do this, Mr. President, on the theory that I have heard
some talk of dissatisfaction in one way or another. I haveserved on the Executive Council of the American Bankers' Association; I am not now a member of that Council; so I feel I
have a right to speak in this way.
They are the administrative force of this body. They are the
selected members and delegates chosen from each State. I
feel the American Bankers' Association can well trust the
affairs of the Association in the hands of this Council for the
reason that the recent action taken by the common council is
reported by the General Secretary, to be endorsed by the Convention.
(Motion seconded.)
Mn. HENRY R. WILLIAMS, Utica, New York: I think a large
part of this body would be pleased to know, Mr. President, in
brief, some of the principal reasons for changing from the

BANKING SECTION.

127

Pinkerton agency to the Burns agency. Not in full, but briefly.
MR. FREDERICK W. HYDE: I
move the adoption of the amendIf the Secretary could give us that information I know
it
ment as read.
would be favorably received by a number of those present.
(Motion seconded.)
GOVERNOT BAILEY: I do not think this is the opportun
e time
Ties PRESIDENT: You have all heard the motion,
which has
to handle such a subject, nor is this the place. The Executive
been duly seconded. All in favor say aye;
and opposed, no. It
Council is the. administrative force of the American Bankers'
is carried.
Association, to take up these matters of this kind. It is not
GENERAL SECRETARY FARNSWORTH:
Now, you will find pages
a proper place to take it up, on the floor of the Convention, as
23, 24, 25 and 26; we will consider.
it is a subject which can be taken care of much better and
On page 23 there is a suggested amendme
nt in relation to
given proper consideration by this body which has the time
"membership dues."
to do it.
MR. WILLIAM G. EDENS,
Chicago, Ill.: I move the adoption
Without any effort to shut off discussion, I move the preof tile amendment.
vious question in order to get it to a vote.
(Motion seconded.)
THE PRESIDENT: Gentlemen, you have heard the moving
of
THE PRESIDENT: Are there
any remarks? (No response.)
the previous question. It calls for an immediate vote. All in
All in favor say aye ; opposed, no.
Motion is carried.
favor say aye; opposed, no. The ayes have it: It is carried.
GENERAL SECRETARY FARNSWORTH:
Pages 24, 25 and 26 and
That brings up Governor Bailey's original motion, approving
a portion of page 27. Those four pages
relate to the election
the action of the Council. That motion was duly, seconded.
of officers where the State Convention
follows the General ConAll in favor say aye; opposed, no. It is carried.
vention.
Now, in the matter of "Amendments to the Constitution,"
For years certain States of the United
States, and this
you will find on pages 22, 23, 24, 25 and 26 of the official proparticularly true with reference to the States
of Indiana, Illigram sundry suggested amendments. All of these come to
nois and Nebraska, hold their conventions
after the Convenyou with the endorsement of the Executive Council, and with
tion of the American' Bankers' Association,
with the result
a recommendation that they be adopted.
that four or five members of those States on
the Executive
GENERAL SECRETARY FARNSWORTH: I would like to say to the
Council, whose terms expire, would have already
expired, and
gentlemen here, and to others, in regard to this resolution just
those States would be without representation on
the Council
passed, that in a recent number of the JOURNAL-BULLETIN
on Thursday night when the new Council is organized
. These
there was published a full report prepared by an ex-President
States and others suggested that the Constitution be so
amended
of the Association, which explains why the change was made
that the members of the Council for these States who
do not
from the Pinkerton agency to the Burns agency. It was writelect before the Convention, that the members of the
Council
ten by an ex-President, who took part in the controversy.
from those States be allowed to have representation, and
that
. We will now take up these proposed amendments to the Conthe members of the Council and the members of the Nominati
ng
stitution and By-Laws.
Committee hold over until these States meet. This has
been
In pursuance of Article 11, Section 1, of the Constitution, I
prepared so there can be no perpetuation of officers.
They
would say that these amendments, which are lengthy, have been
must meet after our Convention and elect officers.
The State
printed in the JOURNAL thirty days in advance, and they are
of Illinois has over nine hundred members in
the American
printed in this program, and the President says they have been
Bankers' Association, and it should have a full
representation
considered by the Council.
at the Convention.
I will explain them. First, we will go to page 22 'of the
MR. W. H. BeliKS, Wellington, Kan.:
I move we adopt the
printed program. You will find "Federal Reserve Banks as
amendment.
Special Members."
(Motion seconded.)
The twelve Federal Reserve Banks joined the American
Tun PRESIDENT: All in favor of the adoption of
the amendBankers' Association. The Federal Reserve Board expressed
ment say aye; opposed, no. It seems to be carried;
it is carthe opinion that it was their desire and wish that the Federal
ried and the amendment is adopted.
Reserve Banks should not take active part in the political side
GENERAL SECRETARY FARNSWORTH: The
next subject r lates
of the activities of this Association, and were not to hold
to "National and State Legislation." It is proposed
by the
office. So, to cover that, the Administrative Committee proGeneral Secretary and the General Counsel.
posed the follo*fng change in the Constitution. That gives
This is the proposed amendment which was approved
by the
them practically an Honorary Membership, special members
Executive Council with some dissenting votes. In other
words,
shall not be bound by resolutions or declarations of policy by
this amendment was approved by the Law Committee and
the
the Association, its Executive Council, or any of its committees.
Federal Legislative Committee of .
the Association. The amendTHE PRESIDENT: Gentlemen, are there any remarks on the
ment is to amend By-Law sixth by adding at the end thereof:
adoption of this amendment to the Constitution? (No
response.) The Chair will entertain a motion that this amend"Subjects of National and State legislation originating in
any Section shall not be urged independently, but presented through the
ment be adopted.
Law
Committee for dual approval of the Executive Council and
MR. FREDERICK W. HYDE, Jamestown;, New York: I move
General
you
Convention, and action, if approved, in accordance with
that the amendinent just read by the Secretary be adopted.
Article V,
Section 10 (a), of the Constitution."
(Motion seconded.)
THE PRESIDENT: Was there any dissent on the part of the
The object of this proposed amendment is to clarify
what is
already the law of the Constitution, but which
Council to this recommendation, Mr. Secretary?
is sometimes
misunderstood. The Constitution provides the method
GENERAL SECRETARY FARNSWORTH: All of the amendments
and machinery by which the Association urges proposed
which are proposed here, with one exception, were passed
legislation
affecting members, namely, (a) considera
by the Council unanimously, and are recommended to this
tion and presentation
through Law Committee, (b) dual approval
Convention. There was one which was not by unanimous vote,
by Executive Council and Convention, (c) presentation to Congress
and I will call attention to that when we reach it.
by Committee
on Federal Legislation and presentation to
PRESIDENT: This amendment we are now voting
THE
State legislatures
on was
by State Associations. There is an exception
unanimously recommended by the Council.
in the case of
emergency Congressional legislation, which is
All in favor say aye; opposed, no. It is carried.
handled directly
by the Committee on Federal Legislation on resolutio
GENERAL SECRETARY FARNSWORTH: The next is in
n of the
relation
Executive Council or Administrative Committee without
to the membership of Administrative Committees.
going
before the General Convention. It has happened
Amend Article V, Section 15 (d), of the Constitution by inin the past
that bills have been urged by a Section before legislatu
serting after the words "President of the Association" the
res independently, without receiving the approval as provided
words "and the last living ex-President," so that section 15
by the
Constitution; and it may happen in the future that
(d) as amended will read as follows:
a Section,
acting as an independent organization, may independe
ntly urge
"(d). The Executive Council at its first meeting as aforesaid shall
before a State or National Legislature measures affecting
their
elect from its membership one person from the one-year class,
particular interests, which may be contrary to the interests
one
of
person from the two-year class, who, with the President of the Assotile entire membership. Or, it is conceivable that two
Sections
ciation, and the last living ex-President, shall constitute the Adminmight independently urge legislation on the same subject
of
istrative Committee, and whose membership shall expire with their
contradictory purport. To make it clear that all
subjects of
membership in the Council, and annually thereafter shall elect
one
legislation originating in a Section must first come
up for apperson from the two-year class, to fill the vacancy occasioned by the
proval as provided in the Constitution and if approved
expiration of term. Any vacancy occurring by death, resignatio
be hann, or
dled by the proper committee or agency therein defined
other cause, shall be filled by election from the same class for
the
the
adoption of the amendment above proposed may be wise.
unexpired term."
Ma. C. A. HiNscir, Cincinnati, Ohio: I move that
the amendTile object of tile proposed amendment is to give to the Assoment be adopted.
ciation the benefit for another year of the experience acquired
(Motion seconded.)
by the retiring President as a member of tile Administr
ative
THE PRESIDENT: Mr. Hinsch moves the
adoption of this
Committee. The Administrative Committee is a committe
e
amendment, and the motion is duly seconded. Are
there any
which meets frequently during the year in consultation with
remarks? (No response.) All in favor say aye;
opposed, no.
the officers in New York City, and which is tile committee which
It is carried.
has the power and the authority to act for the Executive CounGeneral Counsel Paton has a matter which he wishes to
cil.
bring
to Your attention at this time.




128

BANKERS' CON:VENTION.

MR. THOMAS B. PATON, New York City: Mr. President, these
out of
amendments just prepared and printed have all arisen .
new conditions, and were prepared before the Meeting of the
Convention. It ha A developed at the Convention that the members of the Nominating Committee, with the alternates from
twci or three States, are not present, and I have been requested
by the representatives of the States of Iowa, Kansas and Louisiana to see what could be done, as it seems unite important or
desirable that those States be represented on the Nominating
Committee, which holds its session immediately after the first
session of the General Convention.
I was asked whether a member of the Nominating Commit.
tee could appoint a proxy. I said I thought it would be extremely doubtful; that the exercise of a vete on the Nominating
Committee involved judgment and discretion. I was informed
that in one or two States the member of the Nominating
Committee had been given, power to appoint a substitute.
I advised him that that was also extremely doubtful, as the
Constitution provides the sole method of electing a delegate
and electing an alternate. I said I would endeavor. to prepare an amendment to these By-Laws, which would cover the
situation, and permit substitute representatives from States
where the representative and the alternate are both absent,
to act at this meeting. I have done so, and I thought some
member from some State would bring it up; but it has not been
done and I will read what I have prepared as an amendment;
Amend the By-laws by adding after the second sentence of Bylaw Fifth, as amended:

take a majority of the members from any State to transact business. That is absolutely fair, and if a man has the courage to
come across the continent to represent Ms State, and to pay his
own expenses, he should be permitted to represent his State.
Mn, EDWIN T. COMAN, Spokane, Wash.: What provision is
there in this resolution for giving this notice; and bow are the
members to be sure that there will not be three or four different members who would call meetings?
Mn. BURKS: That is easy. No snap judgment will be going
on as there will be some fellow smart enough to get the roster
from the headquarters.
Ma. DINKINS: I move that the whole matter be referred to
the Executive Council.
GOVERNOR BAILEY: That would disfranchise some of the
States whica should be represented here. It is purely a matter
of fairness and is not vital; and it is simply saying that the
State should not be disfranchised because some man who is
appointed does not come.
Tun PRESIDENT: Has Mr. Dinkins' motion a second? (No
response.) If it has not a second, I will proceed to put the
motion that this be referred to a special committee. You have
heard the motion, that this whole matter be referred to a special committee to report back this afternoon. All in favor say
aye; all opposed, no. The motion is lost.
We will now come back to Governor Bailey's amendment,
which was not accepted by Mr. Hinsch.
GOVERNOR BAILEY: In the event that a member of the Nominating Committee or the Vice-President is not attending the
convention, that any authorized delegation from that State
shall have a right to call a meeting of the delegates of that
State, but a majority of the delegates attending this Convention
shall constitute a quorum for transacting business for that

"In the event of the absence from the General Convention of both
the member of the Nominating Committee and the alternate from any
State, the members present from such State shall meet during the
first session of the General Convention, upon call of the State ViceState.
President, and elect a substitute who shall serve as member from such
(1iotion seconded.)
State at the forthcoming meeting of the Nominating Committee. A
Mn. BacxwiTu: If any member may call a meeting, there
Secretary shall be elected at such meeting who shall immediately
might be four or five members whc; might call four or five
certify to the General Secretary the substitute member of the Nomseparate meetings,
inating Committee elected from such State."
GOVERNOR BAILEY: But you could not have four or five maNow, if the members from any State desire it passed it can be
jorities of the same delegation.
and adopted by two-thirds vote of the Convention as an
moved
Mn. BECKWITII: This is not a matter of sentiment and it is
amendment of the By-laws.
not a matter of disfranchisement, and we should not make this
MR. EDENS: I move the adoption of the proposed amendment.
appeal because there is only one member. That member, accord(Motion seconded.)
ing to the action contemplated, that man might be the presiMR. EDENS: If we had to offer it under that By-law, our
dent of the meeting, the secretary of ,the meeting, of the Nomient is not here. What would we do then?
Vice-Presid
nating Committee, and he might nominate himself, and he might
PATON : Why not have it that the members can call
MR.
do that because the gentleman referred to is supposed to have
and select a presiding officer in the absence of the
a meeting
"the courage to cross the continent." Any State which has
Vice-President. In the original draft I had a provision
State
not sufficient interests to send more than one delegate is not
against that contingency and it has been omitted in the copy.
entitled to a vote here.
that in the absence of the first Vice-President, any
It said
Mn. EDENS: Take the State of Arizona. Mr. John J. Swinthree members may call a meeting and elect a represntative.
ney is the delegation; he is the Vice-President, member of the
MR. Enass : I offer that as an amendment.
Nominating Committee and the rest. He !has been in Arizona
Mn. GEORGE E. WEBB, San Angelo, Texas: I second that
thirty-four years and is considered as probably the most reamendment. Our Vice-President, as well as the member of the
sponsible banker in the State. In this case we should recognize
Nominating Committee, and the alternate, are all absent; and
quality, and we should not disfranchise anyone. All the •states
some relief.
we want
have practically complied with the fundamental provisions of
MR. PATON : As amended, this reads:
the Constitution, and their Vice-Presidents authorized to call
"In the event of the absence from the General Convention of both
a meeting, but in cases like Arizona, Illinois or Texas this bythe member of the Nominating Committee and the alternate from any
law provides that the delegates of that State can call a meetState, the members present from such State shall meet during the first
ing on proper notice. I cannot understand why you are so dissession of the General Convention, upon call of the State Vice-Presitrustful of bankers in another State. You must be familiar
dent, and elect a substitute who shall serve as member from such
with the political methods of a party operating in the section
the Nominating Committee. In
State at the forthcoming meeting of
you come from. I support the amendment as offered by GovVice-President, any three members may call
the absence of the State
ernor Bailey.
certain meetings. A Secretary shall be elected at such meeting who
(Calls for the "Question.")
shall immediately certify to the General Secretary the substitute memTHE PRESIDENT: All in favor of the amendment as suggested
ber of the Nominating Committee elected from such State."
by Governor Bailey will say aye; opposed, no. It is carried.
GOVERNOR BAILEY: I suggest that three members be authorNow Mr. Hinsch's motion comes up. All in favor of Mr.
meeting, but it might be a majority only that has
ized to call a
Hinsch's motion will say aye; and opposed, no. It is carried.
State, to elect.
power from any
The Amendment to By-Law Fifth as finally adopted is as
I suggest that it be that any three members may sign a call,
follows:
transact business for the State shall be a mabut a quorum to
jority of the delegates attending the Convention from that
"In the event of the absence from the General Convention of both
State.
the member of the Nominating Committee and alternate from any
(Motion seconded.)
State, the members present from such State shall meet during the
first session of the General Convention, upon call of the State ViceTHE PRESIDENT: Do you accept that amendment, Mr. Hinsch?
President, and elect a substitute who shall serve as member from such
MR. RINSCH: I do.
State at the forthcoming meeting of the Nominating Committee.
MR. BURKS: The amendment says that the call shall be made
"In the absence of the State Vice-President, or the member of the
when signed by three delegates. I would suggest that that be
Nominating Committee, ox if alternate is not attending the Convenlegal when signed by one. There might not be three delegates
tion, any authorized delegate from that State shall have the right to
from a State. There might be only one.
call a meeting of the delegates of that State, but a majority of the
Mr. Hinsch, do you accept that amendment?
THE PRESIDENT:
delegates attending the Convention shall constitute a quorum for
I believe a State which is not able
Me. HiNscx : I do not.
transacting business for that State.
to send more than one representative is not entitled to a vote.
"A Secretary shall be elected at such meeting who shall immedia State which has a man who has courMn. BURKS: I think
ately certify to the General Secretary the substitute member of the
across the country and pay his own exage enough to come
Nominating Committee elected from such State."
penses is entitled to a vote.
THE PRESIDENT: The time has now arrived for us to have
any one member may call the delegates
I would suggest that
the address of Mr. Delano, who is a member of the Federal
of the delegates from that State
together, and that a majority
Reserve Board.
shall constitute a quorum to transact the business in question.
We esteem it a great privilege to have this great opportunity
(Motion seconded.)
of hearing him, as he is a man who knows men; he knows bankMn. RINSCH: I am willing to accept that if the representaing, and he has had a personal acquaintance with big business,
tion is three or more from any State.
and at my urgent invitation he has come clear across the conMR. BURKS: That any member can call a meeting, but it will




BANKING SECTION.
tinent to address you on the subject of Federal Reserve Acts.
I am sure we will all derive interest and profit from what he
has to say on this subject most interesting to-day to all of our
members. Mr. Delano, gentlemen. (Applause.)
HONORABLE FREDERIC A. DELANO: When I accepted the seductive invitation of your President, I did so under the misapprehension that I could speak informally to you as man to
man; but as the time approached I began to receive demands
for manuscript, and my long experience as a railroad man convinced me more and more of the advantage of terminal facilities. (Laughter.)

The Federal Reserve Act and the Banking System It Has
Created.
[Mr. Delano's address can be found on pages 106 to 107 of
this publication.]
PRESIDENT LAW: I am sure we have all greatly enjoyed this
able address, and I desire to say to Mr. Delano that the bankers
of this country are as much interested as he is in making the
Federal Reserve System a great success; and I assure him that
he may rely upon the help that is to be given to him by the
great body of the bankers.
Ma. H. I. STUART, President Union National Bank, Pasadena,
Cal.: Mr. President, would it be in order to move a reconsideration of one of these amendments? I would like to do so
if it would be proper at this time.
PRESIDENT LAW: What does the 'gentleman from California
refer to?
Mn. STUART: It is in regard to National and State legislation. It is with great reluctance that I bring the matter up,
but it strikes me that in this day of rapid-fire legislation that
we in California—or the people in any other Stat, for that
matter—should not be called upon to consult the Executive
Council, or any other body, if in their opinion they deem it
necessary to take steps to combat some injurious legislation
that is proposed in their State. Now I do not think any such
amendment as that ought to be countenanced.
PRESIDENT LAW: The amendment to which the gentleman
from California refers specifically exempts from its operation
any emergency situation that might arise.
GENERAL SECRETARY FARNSWORTH : With the permission of
the Convention, I would inquire if the gentleman understands
the amendment to which he refers to be applicable to any matter of State legislation?
MR. STUART: That was my understanding. Yes, sir.
GENERAL SECRETARY FARNSWORTH : I Would state to the gentleman from California that the amendment to whicn be refers
does not affect the action of any State Association, but that it
was framed and introduced simply for the purpose of co-operation, cohesion, and in order to restrict legislative activities on
the part of Sections or departments or committees of the Association acting independently; and for the purpose of providing
that before any initiative was taken on legislative matters the
same should be submitted to the proper committee or committees
of the American Bankers' Association. That is all. The amendment has nothing whatever to do with State legislation or with
the action of a State Association, or with the action of any
individual banker or with any body of bankers in any State.
It refers to our organization, and not to State organizations
or individuals. Am I not right about that, Mr. Paton?
GENERAL COUNSEL PATON : Yes, entirely SO.
PRESIDENT LAW : Mr. Stuart, are you satisfied with the explanation of Mr. Farnsworth?
MR. STUART: Yes, sfr.
PRESIDENT LAW: Members of the Convention, we come now
to the matter of announcements. I understand that Mr. Farnsworth has several announcements that ought to be made at this
time.
ANNOUNCEMENTS.
GENERAL SECRETARY FARNSWORTH: I am

requested to anthat the Los Angeles Clearing House Association has
established headquarters in the Alexandria Hotel, in that city,
for the benefit of bankers visiting Los Angeles following this
Convention; and all bankers, and the ladies accompanying them,
are accordingly invited to visit the headquarters on Saturday,
September 18, and days following. All who desire to have hotel
accommodations reserved for them in Los Angeles are requested
to communicate with Mr. E. G. McWilliams, at the Hotel Calhoun in Seattle, who represents the Los Angeles Clearing House
Association for that purpose.
I desire to read to the Convention a telegram just received
from the President of the Missouri Bankers' Association:
nounce

"FRED E. FARNSwOETII, Secretary American Bankers' Association,
Seattle, Wash.:
"I desire to extend greetings and most cordial good wishes to the
members of the American Bankers' Association assembled in Convention
at Seattle.
"I regret exceedingly that unavoidable circumstances prevent my
attendance. May your meetings be the most pleasant and profitable in
years. We confidently expect the next Convention to meet in Kansas
City." (Applause.)




129

This telegram is signed by W. C. Gordon, the President of thi
Missouri Bankers' Association.
I am requested to announce that all persons holding railroad
certificates should present them at the registration headquarters
and have their attendance and presence in Seattle certified
promptly.
I desire to call the attention of the Convention to the program for this afternoon, at 2 o'clock. There will be submitted
reports of the Sections; a report of the Currency.Commission;
a report of the Committee on Law, and a report of the Committee on Federal Legislation.
At 3 o'clock there will be an address by Henry D. Estabrook,
a member of the New York bar, on "Self Defense." I will say
in regard to Mr. Estabrook, as some of the gentlemen present
may not know him, that he is a Nebraskan product, who went
to Chicago and practiced law for a while, and then removed to
New York City, where he is regarded as one of the ablest
orators of the metropolis, and I know that you will enjoy hearing him.
It was the intention of the officers of the Association to Lave
the hours at which the Convention meets strictly observed. We
were late in meeting this morning, and it is requested that all
delegates be in their seats promptly at 2 o'clock.
PRESIDENT LAW: Gentlemen, I will be here promptly at 2
o'clock, and if there is a quorum present we will start the afternoon session at that time.
Gentlemen, the motion to take a recess until 2 o'clock is now
in order.
Mn. FRED W. HYDE, of Jamestown, N. Y.: Mr. President, I
move that the Convention do now take a recess until 2 o'clock.
(The motion was seconded.)
PRESIDENT LAW: It has been moved and seconded that the
Convention take a recess until 2 o'clock. All in favor of that
motion will signify by saying aye; those opposed, no.
The motion is carried and the Convention stands adjourned
until 2 o'clock.
Adjourned until 2 p.m.
AFTERNOON SESSION.
WEDNESDAY, SEPTEMBER 8, 2 O'CLOCK.
The Convention will please come to order.
Gentlemen, the first item on the program for this afternoon
is the report of the Trust Company Section, and we will receive this report from President Mason of the Trust Company
Section.
PRESIDENT LAW:

Barony
Mn. JOHN H. MASON

Or TRUST COMPANY SECTION.
(Vice-President Commercial Trust Company, of

Philadelphia, Pa.).
Mr. President and Members of the American Bankers' Association:
On behalf of the Trust Company Section I beg to report that the past
year has shown a most satisfactory growth, and the membership in
the Section is now 1,363, which is the largest since its organization.
Probably the most important question that has confronted the members has been the advisability of entering the F. R. S.
The general opinion seems to be that for the present at least the
policy of watchful waiting should be pursued until ample time has
elapsed to ascertain the benefits of the act as it pertains to the
National Banks.
However, it is my opinion that the question of joining the F. R. S.
must of necessity. be left to each individual member of the Section.
It is not my intention to go into details and thereby take up the
valuable time of this meeting, and I will beg leave to file the report of
the Section with the General Secretary.
It may not be out of place for me to take this occasion to say that
in so far as any desire on the part of the Trust Company Section to
wilthdraw from the American Bankers' Association as reported in one
of the morning papers, there is not a particle of foundation for such
a statement.
We may have our • differences of opinion, in fact we should have
them, but the present is the time for the bankers throughout this
country to stand togethei and work in unison, no matter whether they
be chartered by the Federal Government or the commonwealths of the
different States.
I thank you. (Applause.)
PRESIDENT LAW: Next in order is the report of •the Savings
Bank Section, which will be presented by Mr. Hawley.
MR. N. F. HAWLEY, Treasurer Farmers & Mechanics Savings
Bank, Minneapolis: Gentlemen, the report of our Section is on
file and I beg leave to be excused from reading it, as it will
appear in the printed Proceedings of the Convention.
PRESIDENT LAW: Unless there is objection, 'the report need
not be read. Next is the report of the Clearing House Section.
That will be passed at present, as the President Of that Section
appears to be absent.
I will next call for the report of the State Secretaries Section,
Mn. W. W. Bovaterr, Secretary of the Kansas Bankers' Association, Topeka, Kan.: Mr. President and Members of the
American Bankers' Association, I take pleasure in presenting
the following report:

REPORT OF THE STATE SECRETARIES SECTION.
M. BOWMAN This Section, the smallest perhaps in the A. B. A.
family, is the largest in point of self-esteem. It is composed of fortynine secretaries of as many State Bankers' Associations, each one of

BANKERS' CONVENTION.

130

whom represents the greatest association in the United States. Collectively, they count themselves the whole thing. There is nothing
beyond their jurisdiction. They are in touch with all the State legisislatiye bodies .in the country, and periodically break into Congress
sad Federal administrative bureaus. They represent nearly 25,000
banks; and co-operate with all the State bank departments, or, rather,
vice Terse, the various State departments co-operate with the secretaries. Each secretary is a veritable Lord Selkirk. He issues
ultimatums to his Executive Council, and daily directs his presi:
dent when add where and what to sign. He dictates resolutions,
Yokes vigorous protests, reaffirms allegiance to himself and alter.
nately "views with great alarm" or "points with pride," and upon
due pro:vocation proceeds gently to inform all recalcitrant nonconformists where they may go. • All association committeemen, moreover, have
long since learned where to resort for instructions. •
Such. Is the aggregation—called the Organization of Secretaries, constituting the Secretaries Section of the A. B. A. This relation springs
not from lineal consangunity ; it is rather a state of conjugality, and,
unlike some similar relationships, is happily one of congeniality. No
distinct department of American Bankers' Association activity is committed by the A. B. A. to the House of Secretaries, hence this report need not concern itself with any particular account of the deeds
done in the body. The Secretaries congratulate Secretary Farnsworth,
and 'congratulate all the sister Sections, and bid them all press forward until they become' as great as the Section to which this report
relates; and congratulates also the whole American Bankers' Association- foe its,marvelous development and unparalleled achievement which
dates mainly from the institution and adoption of the Secretaries Section into the big family. We here plight our faith and pledge anew
our fealty, reinlist not for sixty days, but for the war; and stand
ready to perform any duty, wear any uniform, or hold any office whenever or _wherever the A. •B. A. may stand in need of expert and
highly professional services.

In the matter of statistical reports of clearings, we have made some
progress.' The attempt of the clearing house section to have reports made on total transactions instead of on actual clearings has
been such that we have found by comparison in some cities that
where the actual transactions have increased the clearings have decreased—thus showing the necessity for the installation of our
method. We are glad to report that some progress is making in that
direction. Bradstreet's Agency is now obtaining reports on that
basis from some twenty-five cities, and as other cities are brought
in line those statistics will become of much greater value than are
the present clearing house statistics.
In the matter of country clearing houses, I am glad to report that
New York has adopted the system, and this has been largely because
of the efforts of our Section. Yesterday we listened to a most interesting programme at our meeting. Indeed, it has never been my
pleasure to attend a ineeting where we had better addresses. On the
whole, we feel that our Section has bcome well established, and that
we are making as good progress as could reasonably be expected,
although we had the misfortune to lose our secretary, Mr. Wolfe,
who resigned in June to take a position with a national bank in Philadelphia that he had left some years before to come with us.

PRESIDENT LAW: We will next listen to the report of the
American Institute of Banking Section, which will be presented
by Mr. Robert H. Bean, of Boston, Mass., the President of the
Institute.
Mn. ROBERT H. BEAN, President of the American Institute of
Banking Section: I present to the Convention the following:

[For the text of the report of this committee see pages 119
to 121.]

Report of the American Institute of Banking Section.
[The report of this Section is printed on pages 118 to 119.]
PRESIDENT LAW: The report of the Currency Commission
would be next in order, but Mr. Hepburn, its chairman, is not
present.
GENERAL SECRETARY FARNSWORTII: I have received from Mr.
Hepburn the following letter:

Report of the Currency Commission.
[A letter from A. Barton Hepburn, the Chairman of the Currency Commission is printed on page 114.]
PRESIDENT LAW: Next in order is the report of the Committee on Law. In the absence of the chairman of the committee,
I will ask General Counsel Paton to read the report.
GENERAL COUNSEL PATON : Mr. Crabtree, the chairman of the
committee, is not able to be present at the Convention on account of illness in his family, and he has sent on this report,
which I will now read.

Report of Committee on Law.
[The full report of the Committee on Law may be found on
pages 117 to 118 of this publication.]
PRESIDENT LAW: I note that Mr. Van Vechten of the Clearing House Section is present, and I will call upon him to make
a report for that Section.
REPORT OP THE CLEARING HOUSE SECTION.
Ma. RALPH VAN VEOHTEN Mr. President and Gentlemen: In the
absence of the officers of the Clearing House Section, I beg leave to
make an informal report.
The membership of the Section has increased to 185, largely through
the efforts of our chairman, Mr. Vincent. It takes in now practically every clearing house in the United States. We have continued
our work on the numerical system, until it is now in use on 90 per
cent, of the checks and drafts in the reserve cities and the larger cities of the country, and in from 75 to 80 per cent, of the smaller
cities. The Numerical Committee has been continued.
In the matter of clearing house examinations, I regret to say that
there has been no progress made during the past year excepting in an
educational way. No new cities have taken up the matter of appointing examiners. I think this is mainly because of the passage of
the Federal Reserve Act, and many bankers are in doubt as to the
wisdom of appointing a clearing house examiner. However, we believe that there is bound to be a close co-operation between State
and Federal examiners and clearing house examiners, and that there
will be no effort on the part of the Federal Reserve Boards in the
various districts to discourage clearing house examination. As a matter of fact, the examination of the clearing house examiners is as
different from the ordinary examination as an apprisal is different
from an ordinary audit. The work of the clearing house examiner
is more in the line of valuing securities, based upon local knowledge
gained through the experience of the examiner in the particular city.
We believe there is no question as to the ultimate co-operation of the
and the Federal Reserve Sp4m, but temporarily
clearing house system.
it is halting the wtrk.




PRESIDENT LAW: This is a very interesting report, gentlemen.
We will now receive the report of the Committee on Federal
Legislation, which will be presented by Mr. W. H. Bucholz, of
Omaha, Nebraska:
MR. W. H. BUCHOLZ, Vice-President Omaha National Bank,
Omaha, Neb.: Mr. President and Gentlemen of the Convention.
The following report, omitting certain paragraphs, was made at
the spring meeting of the Executive Council:

Report of the Committee on Federal Legislation.

THE PRESIDENT: As the hour has arrived at which we were
to have Mr. Estabrook's address, we will postpone until after
his address the consideration of these two sets of resolutions
which the Chairman of the Legislative Committee Las just presented to you.
I had the pleasure last summer of hearing again Mr. Estabrook, who is a member of the New York bar, and I took early
opportunity of inviting him to address this Association. He is
a very unusual orator. A man who was born in Nebraska, who
made a success in Chicago, and then answered the call to New
York, where he is now living. He is a prominent member of the
American Bar Association and we are very fortunate in the
fact that he addressed the American Bar Association at Salt
Lake City just recently and in that way was out on the Coast
very nearly at the time this Convention met.
Mr. Estabrook will now address you. (Prolonged applause.)
Mr. Estabrook will speak on the subject "Self Defense," a
subject never so interesting to us as it is at the present time.

"Self Defense" by Henry D. Estabrook.
[Mr. Estabrook's address, entire, will be found on pages 94
to 98.1
Ma. CORNELIUS A. PUGSLEY, Peekskill, N. Y.: I am sure I
voice the sentiment of this great Convention when I move a vote
of thanks to the eloquent speaker of this afternoon for his admirable address.
MR. J. J. SULLIVAN, Cleveland, Ohio: I second the motion,
and couple with it that our thanks be expressed by a rising
vote.
THE PRESIDENT: You have heard the motion and the suggestion. All in favor will rise. (All rise.)
MR. CORNELIUS A. PtiosLEY: Mr. President and Gentlemen of
the Convention. Great public questions and policies that are of
vital importance to the nation should ever receive the earnest,
thoughtful consideration of the American Bankers' Association.
It seems eminently fitting that we should deal with public questions not only as bankers and as citizens of a mighty nation,
but as trustees, in a measure, of the mighty forces of finance,
business and industry. Nearly one hundred million people have
their savings in our keeping, and are deeply interested in all
that concerns the preservation and security of our republic,
and I believe that this great association should earnestly support it. Our National Government is directing practical efforts
to secure proper national defense. No true American citizen is
for war, with all the attendant evils that follow human passion
as expressed in modern warfare, and I would not for one moment suggest that we become a warlike people, but preparedness
for war may be the surest guarantee of peace, provided we do not
bcome preoccupied with warlike measures and policies, and because of our supposed preparedness seek to show our power.
John Hay was right: "No chip on the shoulder, no swaggering
before the world, but a firm stand and deeds when deeds are
necessary." I believe the best, the most valuable service the
bankers of the United States can render thir country at this
time is most heartily to sustain the administration at Washington in its efforts for practical national defense. (Applause.)
And it is a pleasure to me to present the following resolution
and to move its adoption:

BANKING SECTION.
RESOLUTION APPROVING PREPAREDNESS FOR NATIONAL
DEFENSE.
Resolved, That the American Bankers' Association in convention assembled at Seattle, Wash., believing that National Defense is of vital
importance in our National life, strongly approves and pledges support
to our several State Governments, as well as to our National Government in all efforts to secure practical preparedness along the lines
of national defense.
I move the adoption of this resolution.
(Motion to adopt the resolution seconded from various parts
of the hall.)
THE PRESIDENT: You are all familiar with the provision of
our Constitution which requires that unanimous consent must
be given before the adoption of a resolution, unless it has been
put before the Association for thirty days prior to the meeting.
However, if there is no objection, we have a perfect right to
pass the resolution at this time.
Hearing no objection, I will put the question on the adoption
of the resolution. All in favor say aye; opposed, no. (One
voice) "No."
The motion is not technically carried unanimously.
Ma. DELANo: Mr. President, no objection was made to submitting the resolution to a vote, and this one belated negative
vote does not overrule the fact that it was carried by a large,
practically unanimous vote.
THE PRESIDENT: I declare the motion to adopt the resolution carried.
We are now ready to take up the report of the Committee of
Twelve.
Is Mr. Goebel on the floor?
(No response.)
RESOLUTIONS REGARDING RESERVES OF NATIONAL BANKS
ADOPTED.
We will now take up the resolutions which were recommended
by the Committee on Federal Legislation [see the report of this
committee on page 119], the consideration of which was postponed until after Mr. Estabrook's address.
(General Secretary Farnsworth then read the first of the
resolutions referred to, the one concerning the reserves of the
member banks of the Federal Reserve aystem.)
Gentlemen, you have heard this resolution. Is there any discussion of it? If not, all in favor of its adoption will say aye;
opposed, no. The ayes have it and it is adopted.
INCOME TAX RESOLUTION ADOPTED.
(General Secretary Farnsworth read the second resolution,
the one regarding the income tax.)
What is the pleasure of the Convention with respect to this
resolution? The Chair hears no suggestion from the floor and,
unless some motion is made, we will pass it.
Ma. HINSCH: For the purpose of disposing of it, I move its
adoption.
(The motion was seconded.)
PRESIDENT LAW: It has been moved and seconded that the
resolution be adopted. Are there any remarks? If not, all in
favor of the resolution will say aye; opposed, no. The ayes
seem to have it, the ayes have it, and the resolution is adopted.
GENERAL SECRETARY FARNSWORTH: I would call attention to
the program for to-morrow. There will be a report of the Agricultural Commission and action upon the report, and addresses
by Professor Newbill and Miss Rausch, also a professor, of the
University of Washington, and an address by Rev. W. W. Diehl,
of Hinckley, Illinois, on the subjects named on the program
that has been arranged for this symposium.
In the afternoon there will be a report of the Committee of
Twelve, which was appointed to confer with the Federal authorities in respect to certain amendments to the Federal Reserve
Act, and at 3 o'clock ex-President Taft will address the Convention.
Then there will follow the regular routine business of the last
hours of the convention.
PRESIDENT LAW: Before entertaining a motion to adjourn, I
wish to say that the program for the Agricultural Symposium
includes what I understand will be some very interesting addresses. One of the speakers, Miss Rausch, is said to be one
of the most celebrated women platform speakers in the country.
A motion to adjourn until to-morrow morning is now in order.
MR. C. A. PUGSLEY, of New York: I move that we do now
adjourn.
(The motion was seconded.)
PRESIDENT LAW: All in favor of the motion will say aye;
opposed, no. The ayes have it and the Convention stands adjourned until to-morrow morning, and we will meet promptly at
half-past 9 o'clock.
Adjourned to Thursday, September 9, at 9.30 a.m.
SECOND DAY'S SESSION.
THURSDAY, September 9, 1915.
PRESIDENT LAW: The Convention will come to order.
The excercises of the day will be opened with prayer by the
Reverend Dr. Matthews of this city, and I know you will all




13,1

be interested in knowing that he is the pastor of the largest
Presbyterian Church in the United States.
PRAYER.
BY REV. M. A. MATTHEWS, D. D.; PASTOR FIRST PRESBYTERIAN
CHURCH, SEATTLE.

Kind Heavenly Father, we are grateful to Thee for the preservation of our lives until the present moment. Pardon evrey sin that
we
have ever committed. Grant us, Holy Spirit, Thy presence
to lead
us in all that we are now undertaking to do.
Wilt Thou bless the President of this Association, his
officers, the
members of his committees, and all who are in authority
with hint
over this great body. Wilt Thou bless everyone
connected with itf
every delegate, the family of every delegate, the institution
repre
,
sented by each, and the great cause entrusted to thee,
Thy servants.
Wilt Thou give them the eonscienceness that they are Thy
stewards'
and into them has been reposed the greatest confidence,
the greatestresponsibility. And wilt Thou give them strength and wisdom
ancf
power to lead us in correct thought, in correct acts, and in
correct:
attitudes toward them and toward that which Thou hest
entrusted
to these by which we are to carry on the commerce and the businese
of this country.
Bless the absent members: Those who may be ill; keep each
and
every one now separated from his home and from his city,
guide
these when they will have finished this work in their further
journeys, and permit them to be again reunited with their loved
ones who
are absent and to the work entrusted to them. Guide Ns
through this
day. Bless each one who speaks. Give him wisdom and
power to
say the thing which ought to be said. And, at last, when
Thou has
finished Thy will with us in this world, gather us to that
Beautiful
Home which Thou bast builded for us.
We ask this •in the name of the Father, the Son, and the Holy
Ghost, Amen.
AGRICULTURAL SYMPOSIUM.
PRESIDENT LAW: The program arranged for today IS
an
"Agricultural Symposium," under the management of Mr.
B. F.
Harris, who is the Chairman of our Agricultural Commission.
You are all familiar with the work of this Commission, which
is making strenuous efforts to keep a closer understanding between the banker and the farmer, and a larger measure of cooperation for the mutual benefit of both parties. You are also
familiar with the periodical which is published under Mr.
Harris' supervision; and I want to call your attention specially
to the fact that seventy thousand copies of the Banker-Farmer
are being issued at this time. There are great possibilities for
good in this work, and the indirect benefits accruing therefrom
are really beyond computation.
Mr. Harris has arranged a most interesting program for
today. Speeches will be made by people who have given long
and consistent thought and study to these problems, and the
only thing disappointing is that every seat in the Hall is not
filled at this time. Mr. Harris is going to make the introduction
of the speakers, and I will now turn over the conduct of the
proceedings of the Symposium to him.
Mr. B. F. HARRIS, of Champaign, Illinois: Mr. President,
Members of the American Bankers' Association, Ladies and
Gentlemen: The usual formal report has been prepared and will
appear in the proceedings, but I desire to add a few words
that
may not be in the report, and also in the hope of killing
a
little time so that we may have the sort of an audience
here
that ought to be present this morning for the splendid
program
that has been arranged for this great cause.
The Agricultural Commission, as many of you
know is not
provided for in our Constitution. It is created
by the Convention,
it only lives at your pleasure from year to
year, and you have the
splendid opportunity of pushing along the
Commission or of retiring it, and, especially, the opportunity
to get a new Chairman when you want one; and I want to say
in that connection
that I really ought to go off the Commission
this year, and that
if you do not send me off, I am not
going to stay longer than
the succeeding year. There are .several men on
the Commission
who are just as devoted to the cause as I am,
and it is better
in every way that one of those men should
take the position
next year. Now, this is not a one man movement,
or a seven
man movement by any means. The movement
is so large, and
it has spread so splendidly that if it
only depended on one
man or even on seven men it would not be worth
while. Further
than that, the Banker-Farmer has made a
great impression
throughout the country. We can tell this in a very
practical
way through the money that is coming in from
bankers for
subscriptions. The Banker-Farmer is just finishing its
second
volume.
While I had most to do and gave largely of my time
to the
production of the first volume, the Finance Committee
was
good enough to give us an associate editor, who,
like many
other associate editors, has been the real editor and
is the
man most largely responsible for the editorial
work in the
second volume.
You will have an opportunity this afternoon, if you
wish to
continue the commission.
The greatest work, as the commission feels that
we have
done, is what has been accomplished through the
BankerFarmer. We have an amazing correspondence from bankers
and
many outsiders, and we are able to give some helpful
maces-

132

BANKERS' CONVENTION.

tions. The commission comes before you each month with the
Banker-Farmer, trying to tell you what the bankers throughout
the country are doing for the great cause of better agriculture
and a better rural life. Citizenship expresses it all.
If our Banker-Farmer movement "has sounded a new note
in National life," as a great Chicago daily states, and Boston's
oldest daily enthuses on our "Hyphen of ProMise," and a conspicuous New York paper opines that our Banker-Farmer platform may be "the soundest bit of economic thought there is
and most of the press of the country endorses your efforts in
this great work in similar terms—will all this not encourage
you to press on with greater energies!
Some of the authorities feel that our efforts are among the
most effective and far reaching of all the agencies at work for
a better agriculture and rural life.
Our Banker-Farmer program proceeds on the theory that if
we are to be a truly great and permanent nation, we must build
up a great national life; that while this work lies all about
us, the very largest field is in the country surrounding our
country banks. And all this is to come through real, aggressive
citizenship and hearty and wholesome co-operation—the two
chlefest planks in our platform.
And, speaking of citizenship and a new and real national life
in these severe days—when all Europe is drunken, bereft of reason, and civilization is almost at a collapse—makes one feel that
this most influential and representative of all associations of
American business men should here in National Convention assembled take some high stand and help to define and express
American public opinion in these crucial times. Private opinion
is crystallizing with the usual apathy, but public opinion is inarticulate—except as the press voices it. The business men—
not the politicians and the jingoists and partisans—must speak
for and help guide their government.
Our nation and its next Congress is confronted with the most
portentous problems of this or any generation. The nation needs
all the patriotism and unselfish strength and spirit of our people
not alone to be equal to our own necessities and preservation,
but to stand for the great verities, for all that our progenitors,
and we and others like us, have done for humanity. A great
annual meeting of serious men, it seems to me, is not worth
while or mention in these epochal days if it neglects to say or
to do some helpful strong service for the nation—and service
makes us all akin.
Here is a platform greater far than our splendid BankerFarmer platform.
The real size and importance of this Association will not be
measured by its great membership and the vast aggregation of
capital it represents, but by what it stands for—what it does. .
_ This nation must come to a wise, orderly and thorough consideration of American problems, of, by and for unhyphenated
Americans. If we are to be the great and permanent democracy,
.then must we be equal to and aroused to the tasks as well as
the rewards of self-government.
• As a great Chicago daily has well said (the Chicago Tribune):
"There ought to be a great propaganda in this country, a propaganda which should sweep away all the lesser propagandas now
vociferous throughout the land—a propaganda of heart-whole
Americanism. America needs Americans in this day, and in the
days. to come."
, Here is a platform greater far than our splendid BankerFarmer platform, and one upon which we must all stand promptly, unitedly, firmly, fearlessly.
Why should this greatest of all business organizations stand
. here in this hour inarticulate?
And right here, parenthetically, let me say that since I wrote
these words on my memorandum, this Association has not been
inarticulate, for yesterday we had that splendid resolution which
was offered by former Congressman Pugsley, of New York, and
which the Convention unanimously adopted. Its clear voice
would and can awaken and reassure this nation. Then, too, In
• nearer and narrower view, we should speak to the people of
"
,
thrift, for the vast waste and wiping out of the world' capital
• will require us to help and suffer largely in its refinancing—will
require us to find the funds with which warring Europe may pay
us for the food and munitions she must have of us—thus diverting much of our capital from the constructive and creative channels it would otherwise follow.
So a financial, as well as a political, day of reckoning must
shortly come, and we must labor with a thrift and efficiency as
we have never labored before.
Whole-hearted A mericanism—prepared from every standpoint,
should be our slogan.
And now a word about our program. We have a program to- day that goes to the root of things. Some one criticised it that
it was a far cry back to banking, but I want to say to you
that the welfare of the average man and woman is what makes
banking successful. The Department of Agriculture has recognized the wonderful opportunity to do service, and many of the
• progressive educational institutions of the country have established agricultural departments in their work.
The first speaker this morning will be Mr. T. J. Newbill, who
.Is in charge of the junior work for boys and girls in the Uni-




versity of Washington, whom I now have the pleasure of presenting to the Convention.

Boys and Girls," by T. J. Newbill.
[Mr. Newbill's address will be found on pages 108 to 109 of
this publication.]
Mr. B. F. HARRIS: On behalf of the banker we must recognize that the banker is leading in offering the prim; for Ift.e
Corn Clubs and the Pig Clubs of the boys, and the canning and
other clubs of the girls.
Except for an address on a banking subject by one of our
few women bankers, the American Bankers' Association has
never had the privilege of being addressed by a woman. And
it is our great pleasure to present to you today, Miss Mary F.
Rausch, Assistant Professor of home Economics,.at the University of Washington, in Seattle, who will talk on another
fundamental subject: "Thrift in the Home," and I hope she
will have time to tell us something about these new groups.

What a Good Home Means to the Community, by Miss
Mary F. Rausch.
[The reader will find Miss itausch's address on pages 101
to 105.]
Mr. H. S. HAWEs, St. Louis, Missouri: Mr. Chairman, would
it be out of order at this moment to present a special resolution
of thanks for that most wonderful and inspiring address. Every
man who has heard it here must go home with a deeper thought,
and his heart must beat higher; and every woman here must
feel she has a duty to perform. and that it is her duty to
follow behind the instructions set forth in this address, and
that to do so would raise every life. I move a rising vote
of thanks.
(Seconded by Mr. Leslie Butler.)
THE CHAIRMAN: I am sure nothing could be more in order
than such a vote of thanks. All in favor will signify by
•
rising.
(All rise and applause).
THE CHAIRMAN: Think of the marvelous results of tile work
which Miss Rausch is doing in going about this splendid State
holding these three-day Meetings in different parts of the
country! And then think, too, what the banker and his wife,
by co-operating, can do to introduce such work in their own
home community.
We have one more speaker on our program this morning,
and just before introducing him, I want to call attention to
these six banners which are hanging around on the stage and
from the balconies, which were used at our July conference in
Chicago, They were borrowed afterwards by three State
Associations, lastly by Wisconsin and shipped here by Wisconsin in order that we might have them here to display the
sentiments of this Association.
All throughout the United States we are finding vacant
churches. There is a wonderful work that the country cnurche
can do, not alone in the line of the country churches' direct
work as we know it, but in teaching and speaking in the direct
,
terms of the soil. And Doctor Diehl, who spoke at Chictv..o,
will close this splendid program with an address on what the
country church can and must do—Docroa W. W. DIEHL.

"What the Country Church Can and Must Do," bylltev.
W. W. Diehl of Hinckley, Ill.
[Dr. Diehl's address will be found on pages 99 to 100.1
Ma. LESLIE BUTLER, of Hood River, Oregon: I would like to
make one remark apropos of this splendid address to which we
have just listened. I live in Hood River, Oregon, in a community
where we have been trying just these things that the spe.aker
has been talking about. We have built up a community church
there; we have endeavored to inculcate into our farmers the
necessity and the value to them of breeding pure bred stock, and
I want to say that our efforts have been most successful and I
cordially endorse all that has been said on this important subject.
MR. FRED W. HYDE, Jamestown, N. Y.: Mr. President and
Gentlemen: Great as is our admiration for Miss Rausch's address, and without any desire to detract in any way from the
unanimous expression that we gave her by our vote, I think we
must remain loyal to ourselves, and I therefore move that we
give an affirmative vote of thanks to Prof. Newbill and to Dr.
Diehl for the magnificent addresses which they have delivered
before this Convention.
(The motion was seconded.)
CHAIRMAN HARRIS: Gentlemen, all in favor of the motion
which has been made will say aye; all opposed, no It seems
to be unanimously carried.
Ma. TITHE: Mr. Chairman, let us make it vociferous. Let us
have an AYH!
CHAIRMAN HARRIS: All in favor of the motion will say aye.
It is now doubly carried. (Applause.)
Ma. HOLLIDAIn: I would like to say that in all my experience
in attending these meetings this has been the most interesting
and profitable of any, and I sincerely hope that we will continue

BANKING SECTION.
this committee and go forward in this grand work. I feel that
it is the greatest work that the American Bankers' Association
has ever undertaken.
CHAIRMAN HARRIS: Having heard these three addresses, gentlemen, you have some idea of what occurred during our two
days' conference in Chicago last July.
Now, with the deep appreciation of the Agricultural Commission extended to each of these three speakers, and expressing our
thanks to the administration, and particularly to President Law
for the support and encouragement he has given us, I as the representative of the Agricultural Commission now surrender the
gavel to the President of the Association for the further business
that is to come before the Convention. (Applause.)
MR. ROBERT F. MADDOX, of Atlanta, Ga.: I am sure that we
have all greatly enjoyed this Agricultural Symposium. Now,
if it is in order, I have a set of preambles followed by a resolution, that I would like to introduce on another subject. May I
do so, Mr. President?
PRESIDENT LAW: By unanimous consent, it may be introduced.
There being no objection, the gentleman from Georgia may read
it.
RESOLUTION LOOKING TO A MODIFICATION OF COTTON CONTRABAND ORDER.
MR. MADDOX : I beg leave to offer the following and move
•
its adoption:
Whereas, The cotton industry is one of the greatest sources of
wealth of this country, and it, as a result of the war now existing
abroad, has already suffered seriously; and,
Whereas, The crop of 1914 was marketed at low prices, with consequent loss and hardship to the cotton planters; and,
Whereas, Following the advice of recognized financial and commercial authorities, the planters greatly reduced the acreage in cotton
this year, and, in their endeavor to promote as far as lay within their
power the general welfare; and,
Whereas, The present declaration by certain sovereign powers that
cotton is contraband; and,
Whereas, The President of the United States and the Federal Reserve Board have shown a commendable zeal in the premises; therefore, be it
Resolved, That this Convention commend the President of the United
States and the State Department for the efforts which have already
been made looking to a modification of the said contraband order, and
that it is the hope of this Convention that these efforts will be continued until the threatened peril to this great industry has been
averted.
PRESIDENT LAW: In the matter of the introduction of resolutions from the floor of the Convention, the Constitution of
the Association says this:
"The presiding officer shall, without debate, submit the
following questions to tile convention: Shall the resolution—
or the subject matter proposed, as tile case may be—be considered by the convention."
Now we are going to vote upon this question: Shall this
resolution presented by the gentleman - rom Georgia be conf
sidered? All in favor will say aye; opposed, no. The ayes
have it, and the resolution is before tile convention for its
action, and the gentleman from Georgia is at liberty to make
any remarks that he wishes in support of it.
MR. MADDOX : .1 can only say that we in the South, we very
much appreciate all that tile Agricultural Commission has done;
it is no more interesting to the people of the West and the
Northwest than it is to our people in the South. Now, we have
been making progress slowly down our way. Since the European
war began, I suppose the South has suffered more heavily
than any other portion of these United States. We have one
chief staple, and, while the price of that has fallen to the
lowest point it ever sold for in years—in fact, below the cost
of production—our friends of the West and Northwest have
been enabled to sell their wheat at a dollar and a half a
bushel. I believe the time has come in this great Republic
of ours when there is no sectional feeling, when prejudice has
disappeared, and when it is recognized that any misfortune
.
that affects the people of one section, likewise affects the people
of the entire country.
Therefore, sir, I have offered this resolution.
PRESIDENT LAW: Does the resolution meet with a second?
Mn. It. S. Hewm, of St. Louis, Mo.: I take great pleasure in
seconding the resolution.
PRESIDENT LAW: Gentlemen, you have heard the resolution,
which has been moved and seconded. Are there any remarks
upon it?
Mn. JAMES K. LiNcit, of San Francisco, Cal.: I fully sympathize with the purpose of the resolution as I understood it, but
I want to feel sure that there is nothing in it which might embarrass the President of the United States in the course which
he is pursuing, and therefore I would request that it be read
again.
Mn. MADDOX: The matter to which Mr. Lynch refers has ben
very carefully considered by us, and we do not see how this
resolution can be objected to. Tile resolution reads:
Be It Resolved, That this Convention commends the President of
the
United States and the State Department for the efforts that have
already been made looking to a modification of the said contraband




133

order, and that it is the hope of this Convention that these efforts
will be continued until the threatened peril to this great industry ,is
averted.
Ma. LYNCH: I think that is satisfactory.
PRESIDENT LAW: All in favor of the resolution will say aye;
opposed, no. Gentlemen; the resolution is unanimously adopted.
Mr. Secretary, have you any announcements to make?
GENERAL SECRETARY FARNSWORTH: Nothing at this time, sir,
PRESIDENT LAW: It is customary to appoint a committee to
draft resolutions expressive of the appreciation of the Convention for the hospitalities and courtesies received, and I will
therefore appoint as such committee the following gentlemen:
Mr. James T. Dismukes, of St. Augustine, Fla.; Mr. Charles F.
Blinn, of Boston, Mass., and Mr. Theodore E. Wiedersheim, of
Philadelphia, Pa.
I cannot declare an adjournment of this morning's session
until I add my word of appreciation and delight to these most
inspiring addresses; and I congratulate Mr. Harris and I personally thank each of the speakers who have so delighted us.
Gentlemen, the Convention will resume its sessions at 2
o'clock sharp.
Adjourned until 2 p.m.
AFTERNOON SESSION.
THURSDAY, 2 P.M., SEPTEMBER 9, 1915.
PRESIDENT LAW presiding.
PRESIDENT LAW: The Convention will come to order.
We have reached on our program the matter of the
report of
the Insurance Committee; and in the absence of
Mr. Oliver
Sands, of Richmond, who is Chairman of that Committee,
the
report will be made by Mr. H. P. Beckwith, of Fargo,
North Dakota.

Report of Insurance Committee.
[The report of the Insurance Committee is
printed on
page 121.]
PRESIDENT LAW: Gentlemen of the Convention, what
dis.
position will you make of the Report of the Insurance
Committee?
Mn. J. B. PIIELAN, of North Dakota: I move that
the report be approved and adopted and the committee continued.
PRESIDENT LAW
The chair would suggest a division of that
question.
PIIELAN : Then I move the adoption of the report.
(The motion was seconded).
PRESIDENT LAW: All in favor of this motion will say
aye;
opposed, no. It is carried.
MR. PHELAN : Now I move that the Committee
be continued for the ensuing year.
MR. P. W. GOEBEL: I desire to amend that motion
so far
as to provide that the same gentlemen who are now
on the ,
Committee be continued. I offer this amendment because
those
men have done good work, they have worked on
the subject
for several years, and if we were to change the
personnel of
the Committee now, it would take the new men six
months or a
year to become familiar with the work.
Ma. PHELAN : I accept the amendment to my motion.
MR. GOEBEL: Then I second your motion if my
amendment is
incorporated in it.
PRESIDENT LAW: The General Secretary calls my
attention
to the fact that before acting upon this
we should hear the
report of the Committee of Twelve, appointed
at the Richmond
Convention.
COMMITTEE OF TWELVE FOR DEALING WITH
FEDERAL RESERVE
REGULATIONS FOR ADMISSION OF STATE BANKS,
DISCONTINUED.
Mn. GOEBEL : The Chairman of the
Committee had to leave
for his home yesterday, and he requested
me to present the
report. You all remember that this Committee
was appointed
by the Convention a year ago at Richmond,
and is therefore a
Convention Committee. It was composed of
representatives of
each of the classes of institutione composing
membership in
the Association in order to facilitate regulations
of the Federal
Reserve Board, so as to make it desirable
for state banks and
trust companies to enter the Federal Reserve
System. The
Committee has had three meetings, and has made
some recommendations to the Federal Reserve Board.
We soon found
that it was a mistake to appoint such a
committee, as all
the matters that could come before the
Committee might be
much better looked after by the Committee on
Federal Legislation, which is a Constitutional Committee of
the Association.
For that reason about all that I want to
report is that the
matter is settling iself. The Federal Reserve
Board has issued
its first set of regulations, and the Committee
on Federal
Legislation is amply qualified to look after matters.
I move, Mr. President, that this Committee be
discontinued
and its membership discharged.
(The motion was seconded).
PRESIDENT Law: Gentlemen, you have heard the
report made
on behalf of this Committee and the motion that
it be discharged—with the thanks of the Association, of course.
All
in favor of that motion will say aye; opposed, no.
The motion
is carried.
Now the question will be put upon the motion
last made

BANKERS' CONVENTION.

134

by the gentleman from North Dakota, that the Committee on
Insurance be continued for another year with the same membership. All in favor of that motion will say aye; opposed, no.
The motion is carried, and that committee is continued.
AGRICULTURAL COMMISSION CONTINUED.
MR. A. 0. WILSON (President of the Clearing House Section):
Mr. President and Gentlemen: The Agricultural Commission is a convention committee, and therefore can only be continued by action of this convention. Those of us who were present this morning are, I am quite sure, thoroughly convinced
that the Commission should be continued. I regret that every
one now in this house was not present this morning at the
Agricultural Symposium.
I move that the Agricultural Commission be continued, and
that the appointment of the members of it be referred to the
Administrative Committee with power.
MR. B. E. SMYTHE, of Bronxville, N. Y.: I second that
motion.
GENERAL SECRETARY FARNSWORTH : I Wish to call the attention of the convention to the fact that at a meeting of
the Executive Council, held at Old Point Comfort, in May of
this year, the Council unanimously recommended to the Association the continuance of the Agricultural Commission.
PRESIDENT LAW: Gentlemen, you have heard this motion and
the statement of the General Secretary. All in favor of it will
say aye; opposed, no. The motion is carried and the Agricultural Commission is continued.
I understand the General Secretary wants to make some announcements.
GENERAL SECRETARY FARNSWORTH: Sir Richard McBride,
Premier of British Columbia, has sent the following telegram:
"It would have given me the greatest pleasure to be with
you. May I add British Columbia's sincere greetings and best
wishes for your convention." (Applause.)
(The General Secretary then read invitations from the San
Diego Clearing House Association, and from the Salt Lake
City Clearing House Association, inviting delegates in attendance
at the convention to visit those cities, if possible, on their return home, and promising to secure hotel accommodations and
_entertainment for all persons who could find it convenient to
accept the invitation.)
PRESIDENT LAW: Just before we adjourned for luncheon a
Committee on Resolutions was appointed. I understand that
Committee •is now ready to report, and I will call upon Mr.
Dismukes, its chairman, for the report.
REPORT OF COMMITTEE ON RESOLUTIONS.
Ma. JOHN T. Dismurcus, of St. Augustine, Fla.: Mr. President, Members of the Convention, and the ladies who honor
this occassion with their presence. It is my pleasure to have
been appointed on a committee which has attempted to set forth
their appreciation of the courtepies which have been extended
to this body by the State of Washington, the City of Seattle,
and more especially the ladies of Seattle. I have attended many
conventions of this Association, having only missed one in the
last eighteen years, and it is one of the brightest recollections
in my memory and one of my hopes for the future that I will
he able to attend upon these occasions as long as I am allowed
to live, and I hope to live a long time. These occasions give a
person the opportunity to meet people from every section of
our grand old Union. I say that advisedly, because I fought
and bled—I didn't die, happily—in the Confederate Army, but
it is a pleasure to me to meet the old veterans who fought on
both sides (Applause), and I do not know of any city where I
ever attended a convention where there was so much joy expressed in all the surroundings, especially in the beautiful
flowers which reflect the gladness of the hearts of the people
among whom we have been entertained upon this occasion.
The hospitality has been so generous and the perfume from
the flowers so overpowering, that I am at a loss to express
further what my feelings really are, and so I come down to
the cold facts as enunciated by the Committee of which the
President did me the honor, by placing my name first, of
making me chairman:
We, the undersigned Committee, beg leave to offer and suggest
the adoption of the following:
Resolved, That the American Bankers' Association appreciate the
courtesy extended by the State of Washington, through its Governor,
and the courtesy of the city of Seattle, through its highest officer,
to the bankers who personally, and through their Committees have
done so much for the members of the Association, but especially are
we gratefully appreciative of the beautiful and elaborate entertainments tendered by the ladies of Seattle to the visiting bankers and
their wives and daughters, with whom will linger memories as sweet
as the flowers which frame the pathway to each and all of the entertainments, to the whole people of Seattle, to the press of the city and
the United States, to the various speakers who have favored us with
such splendid addresses, to the business and trade organizations of
Seattle, its clubs and all others who have contributed to the warm
welcome so generally extended and so happily enjoyed.
The members are particularly appreciative of the courtesy extended
to each of its members by the various officers of the Association during their stay in Seattle; also to the various officers for the faithful




and efficient manner in which the work of the Association has been
conducted during the past year.
This report is signed by the other members of the Committee, Theodore B. Wiedershein, Charles P. Blinn, Jr., and myself.
PRESIDENT LAW: What is your pleasure in respect to the report of the Committee on Resolutions?
MR. W. E. PURDY, of New York: I move that the report be
approved and the resolutions adopted.
(The motion was variously seconded.)
PRESIDENT LAW: All in favor of the motion will say aye;
opposed, no. The motion is unanimously carried and the resolutions adopted. (Applause.)
WELCOME TO EX-PRESIDENT TAFT.
PRESIDENT LAW: Ladies and Gentlemen, this is much more
than an ordinary session of our Association. This magnificent
audience reflects the attitude of this country towards one of its
citizens whom we have never and can never compensate adequately for the big official tasks of all sorts which he has performed in all latitudes and in all longitudes (applause) ; therefore it has seemed appropriate to invite the Governor of the
State of Washington to introduce him, and Governor Lister has
kindly consented to do so.
But, as representative of the American Banking Association,
your Chairman wishes to say just a word about how Americans
love a good sportsman. (Applause.)
They love a man who can lose gracefully. They love a man
who can meet with triumph and disaster and treat these two
impostors just the same. (Applause.) Mr. Taft's personal qualities, as well as his record as an important servant of the people, have endeared 'him to us all. And to-day he is much more
generally admired and liked than ever before in his great career.
(Applause.)
A great judge must be not only a learned lawyer, but also a
devoted and genuine lover of justice. There are many thousands
of us who hope that at some time Mr. Taft, as Chief Justice
of the United States, will have the opportunity to utilize for the
benefit of the public his comprehensive legal training and his
large talents. •
I take great pleasure now in asking Governor Lister, of the
State of Washington, to introduce Mr. Taft. (Applause.)
GOVERNOR ERNEST LISTER: Mr. President, our Distinguished
Guest, Members of the American Bankers' Association, Ladies
and Gentlemen: The appalling conditions existing in which so
many of the nations of the earth are involved, arg bringing
about a condition that will materially add to the responsibilites
of the United States; and as a result of those conditions the
United States, rather than Europe, in the very near future, will
become the financial center of the world.
That condition adds work to the bankers of this great country; and the proper solution of the problem by you will decide
whether or not the condition will remain a permanent one.
I believe its solution is in good hands, and that you will exercise such judgment that we will remain the leading financial
center of the world. In connection with this great problem it is,
indeed, well that we should have the advice of those to whom
has been given the opportunity to gather information that will be
of value.
There is no citizen of the United States who has had greater
opportunity than has the distinguished guest of to-day, and
every good citizen of the United States appreciates the fact that
while the greater part of his life up to the present time has
been spent in public service, he still feels that his responsibility
to his country calls for a continuance of that work. And, feeling that responsibility, he stands ready to address organizations
such as yours, and the people of this great country, so that
we may have the benefit of the knowledge he has, and be benefited by that knowledge.
We of the State of Washington feel signally honored at his
presence within the borders of the State. I am not going to
take much of your time this afternoon—appreciating that all
present are here for the purpose of listening to the former President of the United States.
It has been said by the President of your organization that
the actions of the former President who is with us to-day, since
the election held a short time ago, have endeared him to the
people of this country. That feeling reaches far beyond party
lines, and the people of the United States, regardless of what
their party affiliations will be, are pleased to honor former
President Taft.
It is with great pleasure, at this time, that I present to this
audience—not an audience entirely of the State of Washington
—but an audience representing the four corners of this great
combination of States. I, with you, am now about to enjoy the
address of former President William Howard Taft.

Economic and Political Summary of the Generation Just
Closing, by Ex-President Taft.
[Ex-President Taft's address is given at length on pages 88
to 93.]
KANSAS CITY SELECTED AS PLACE FOR NEXT CONVENTION.
PRESIDENT LAW: The next item is invitations for next Convention.

iIiANKING SECTION.
GENERAL SECRETARY FARNSWORTH : Under a change in the
constitution, consideration of invitations for the next Convention is referred to the Executive Council, but as a matter of
courtesy to the organizations which have extended invitations
they are presented to the Convention.
I have several communications which have come from various
organizations in different cities. I have an invitation from the
New Jersey Bankers' Association, asking that the Convention be
held in Atlantic City; from the Clearing House and Associated
Banks of Kansas City, Mo.; from the Commercial Club of Kansas City, and from the Mayor of that city.
PRESIDENT LAW: Does any member wish to say anything in
regard to these invitations?
MR. R. S. HAwEs, of St. Louis, Mo.: As a Missouri banker I
desire to urge upon the assembled delegates here to speak with
their members of the Executive Council in behalf of the great
metropolis of the Central West, Kansas City. It is the gateway
to the Golden West; situated in the center of our country, surrounded by the most fertile of all fields, peopled by men and
women of noble nature and generous hospitality; a city builded
on the hills by men of sterling worth. If the Convention by
your suffrage is placed in that city in 1916, you will receive
there the hearty hand-clasp of every man from Missouri. The
hotels are large and ample in number; the banks want you;
the city wants you, and we men from the State ask you to
come that we may show you.
PRESIDENT LAW: Are there any further remarks?
MR. ELWOOD S. BARTLETT, of Atlantic City, N. J.: Mr. President and fellow-members of the American Bankers' Association:
The Bishop of London once said that a good formula for making a speech was to stand up, speak up and shut up. I have always felt that was very good advice, but upon this occasion I
find that it is very hard to follow the third part of that advice,
for I am speaking in behalf of my home city.
I present to you an invitation from the Atlantic City Bankers' Association, from the presidents of every banking institution
there, from the Mayor, the Chamber of Commerce, the Hotelmen's Association, the Atlantic City Publicity Bureau, and the
President of the New Jersey Bankers' Association, inviting you
to hold the next Convention in that Queen of all seaside resorts.
To the great majority of you Atlantic City needs no introduction; it has a world-wide circle of friends, but to those who
perchance may never have been there I would say that it is the
greatest convention city in this country. During the last year
226 conventions of various kinds have been held there, and it has
averaged 156 conventions per year for the last ten years. Atlantic City is within one hour of Philadelphia and three hours of
New York City. Its principal hotels, which are located along
the famous boardwalk, can accommodate 10,000 visitors, and
there are 250 other hotels in the city. So you see the hotel accommodations will be more than sufficient. The boardwalk extends along the ocean front for ten miles, and through the
heart of the city It is 60 feet wide. It is entirely unobstructed
on the ocean side except for four piers, the shortest of which
extends out 1,000 feet and the longest 2,500 feet, and upon these
•
piers are located our convention halls.
I most cordially extend to you an invitation to come to Atlantic City next year, and bask in our delightful sunshine and
breathe into your lungs the life-giving ozone which is always
with it. (Applause.)
MR. FRED W. HYDE, of Jamestown, N. Y.; I move that the
selection of the place for holding the next Convention be left
to the Executive Council.
Mn. J. J. SULLIVAN, of Cleveland, 0.: Before a vote is
taken, I desire to say that next year Cleveland will present to
the Association an invitation to hold its Convention of 1917
in that city.
Mn. SOL WEXLER, of New Orleans, La.: Mr. President and
Gentlemen. I do not think it is wise to depart from the time
honored custom of selecting the place for the next Convention
on the floor, and I move that the next Convention be held in
Kansas City, Mo. I think it is only proper that the gentleman
who is to be the Vice-President of the Association should have
the privilege of taking his seat on his native heath.
Mn. A. J. FRAME, of Waukesha, Wis.: I will second the
nomination of Kansas City, but I desire to say that at the
request of the Merchants & Manufacturers' Association of Milwaukee, that city very earnestly expresses the hope that the
1917 Convention be held there.
Mn. J. W. PERRY, of Kansas City, Mo.: I had not intended
to say anything, until after our friend from the wide boardwalk
made his speech. Now, we have no boardwalk in Kansas City
that is 60 feet wide. We don't need any. We have not as
many hotels perhaps as Atlantic City, but I want to assure
you that such hotels as we have will be placed at your disposal
without any raise in rates, and that every home in Kansas City
will be open for your entertainment if you decide to come there
next year.
Mn. BARTLETT: Regarding the increase in rates charged by
hotels, permit me to say that the Atlantic City hotels do not
practice that sort of thing; on the contrary, the Hotelmen's
Association contributes 10 per cent, of the gross receipts that




135

• they take in from Conventions towards entertaining the
delegates.
MR. W. B. HARRISON, of Oklahoma City, Oklahoma: I would
like to second again the motion made by Mr. Wexler in behalf
of Kansas City. Oklahoma will send not less than 500 people
to the Convention if it is held in Kansas City. Kansas, Missouri and Iowa will also send large delegations. And I personally know that the Kansas City people have made arrangements to entertain 10,000 people, if that number come. I
believe that the attendance at the convention if it is held in
Kansas City will be at least three times that at the Convention
here assembled.
•
Mn. WExLER: I will amend my motion and move that we
recommend to the Executive Council that it select Kansas City
as the next place of meeting.
Mn. SULLIVAN: I will second that motion.
PRESIDENT LAW: The question before the house is the motion
of Mr. Wexler that Kansas City be recommended to the Executive Council as the place to be selected for the holding of the
next Convention. I think that motion is in accordance with
the constitution, and therefore I will put the question upon it.
All in favor of that motion will say aye; opposed, no. The
motion is carried.
(One delegate voted no).
Mn. FIAwEs: Gentlemen of the Convention, on behalf of
Kansas City, I thank you.
PRESIDENT LAWS Next is "Unfinished Business."
GENERAL SECRETARY FARNSWORTH: No unfinished business,
Mr. President.
PRESIDENT LAW: Communications from the Executive Council.
PRESIDENT LAW: Is there anything coming under the head
of Resolutions?
GENERAL SECRETARY FARNSWORTH : No communications.
NOMINATIONS AND ELECTIONS.
PRESIDENT LAW : Next is report of Committee on Nominations,
which report will be presented by Mr. Edens.
MR. W. G. Mors: Mr. President and Delegates of the American Bankers' Association: At a meeting of your Nominating
Committee held yesterday in the ballroom of the Hotel Washington at 4.30 p.m., in which forty-four members of the Committee were present, the following persons were unanimously
nominated for the positions named in your Association for the
ensuing year:
For President, James K. Lynch, Vice-President First National Bank, San Francisco, Cal.
For Vice-President, P. W. Goebel, President, Commercial National Bank, Kansas City, Kan.
That is signed by two of the members of the Committee; and
this morning, after this report was formulated, the Delegate
from Alaska, Mr. Samuel Blun, of Valdez, qualified as a member
of the Nominating Committee and joined in the report, thus
making it a unanimous report.
PRESIDENT LAW: It becomes a duty of the Chair to announce
that it is not incumbent or necessary that this Convention shall
adopt this report. They have a perfect right to adopt it or to
reject it. They have a perfect right, also, to nominate anyone
from the floor; but it has been our custom to have names presented in nomination in this way.
MR. H. P. BECKWITH: I move you that Mr. Lynch be elected
President of this Association and Mr. Goebel elected Vice-President of this Association, and that the Secretary be instructed to
cast the ballbt of flits Association for these gentlemen as officers
of this Association for the ensuing year.
NOTE.—Under the new constitution, the Convention did not
.
elect other officers than President and Vice-President; the VicePresidents for the various States being selected and elected by
the delegations from the States.
Ma. EDENs: I second the motion of the gentleman from
North Dakota, and would suggest that the word "Unanimous"
be introduced into his motion; and the Committee would be
glad then to support the motion.
PRESIDENT LAW:
You have heard Mr. Beckwith's motion
and the amendment. Are there any remarks? The Chair
would feel that it would be better to vote upon these names
separately; and if Mr. Beckwith allows it I will put it in that
way. Mr. Beckwith moves to adopt so much of the report of
the Nominating Committee as relates to Mr. James K. Lynch,
being President for the ensuing year. All in favor will say
aye; opposed, no. It is carried.
Mn. EDENS: I move the Secretary cast the unanimous vote
of the Association for Peter W. Goebel, Kansas City, Kansas,
for the position of Vice-President of this Association for the
ensuing year.
Mn.
: I move the Convention cast its vote for Peter
W. Goebel.
Mn. J. J. SULLIVAN: The motion usually made and acted
upon in a case of this kind is that the Secretary be instructed
to cast the ballot of the Convention as a whole for the gentleman named. That has been the custom of this Convention
for years; and I make that motion.
(Motion seconded.)

136

BANKERS' CONVENTION.

PRESIDENT LAW: You have heard the motion of Mr. Sullivan;
all in favor say aye; opposed, no. Mr. Goebel is duly elected.
GENERAL SECRETARY FARNSWORTH: The General Secretary
casts a vote for Mr. Peter W. Goebel, of Kansas City, Kansas,
for Vice-President of the American Bankers' Association for the
ensuing year.
PRESIDENT LAW: Mr. Lynch!
(PRESIDENT-ELECT LYNCH comes to the front of the stage.)
PRESIDENT LAW: Mr. Lynch, it is with a peculiar pleasure
that I pin this badge upon you and notify you of your election
to the Presidency of this Association. First, on account of the
great service which jon have rendered to this Association in
patit years; and, secondly, on account of my admiration of your
manliness and ability.
PRESIDENT-ELECT LYNCH:
Gentlemen of the. Convention,
Ladies and Gentlemen: The King of Israel once said to his adversary, "Let not him that girdeth on his armor boast as he
that putteth it off." I have no warrant to make you a speech.
You have heard your retiring President give a modest account
of his stewardship, If he had told the work he has done for
this Association during the year of his Presidency, he might be
accused of boasting by those who do not know the innate
modesty of his character.
You heard yesterday the trumpet-call to the manhood lit
America, given by Mr. Estabrook, of New York. There was
not a man nor a woman in the audience who was not stirred to
the core by his utterances. You have heard the honored former
President of our United States give a *ell-considered analysis
of the results of the generation which has passed----the things
which they have done and the effect of them. You have no
time to listen to a speech from me. I have but to say, "Thank
you!" Thank you on behalf of the Pacific Coast, which you
have honored in bestowing upon one of its Native Born Sons,
the highest honor which an American Banker can have. And
on my own behalf, Gentlemen of the Convention, fervently and
earnestly, I thank you. Mr. Goebel, of Kansas City, our VicePresident. He needs no introduction at my hands. I have seen
a great deal of his work and I know he is the kind of man who
does not advertise, but he is there "with the goods." He is
not one of the leaders that carries bells, but one of the wheelers
that helps to pull the wagon.
(President-Elect Lynch pins Vice-President's badge on VicePresident-Elect Goebel.)
VICE-PRESIDENT-ELECT Goknuf.: Gentlemen of the American
Bankers Association, I am deeply gratified for the very high
honor to which you have advanced me. I appreciate it more
than I can tell you; but I also appreciate the traditions of the
American Bankers Association, which say that the Vice-President shall never be heard when the President is about. For
that reason, I simply, again, thank you, and say no more.
PRESIDENT-ELECT LYNCH: Mr. Arthur Reynolds of Chicago
will now come forward; and he needs no introduction to this
audience at my hands.
SILVER SERVICE FOR RETIRING PRESIDENT LAW.
MR. ARTHUR REYNOLDS (Addressing President Law): Mr.
Law, I can appreciate that it is with relief and regret that
you lay down the arduous duties imposed by the office of President of this great association. Relief, that your work has been
successfully terminated; and regret, that the time has come
for you to give up such pleasant duties.
You have sustained the dignity of the Association, and your
efforts have reflected great credit upon yourself.
As a mark of approval of the membership of this Association,
and with the wish that you carry home with you a slight token
of their sincere friendship and affection, I have been requested
to present to you this silver service. And it is hoped that
through its use you may be reminded of the good-will of all
of us. No matter over what road your activities may lead
you in the future, it is our wish that your path may be strewn
with roses, and that health, happiness and prosperity may
attend you and all the members of your family.
PRESIDET LAW: Mr. Reynolds, and gentlemen of the Association; I cannot say what I would like to say. I do not know
how.
It has been a great pleasure and a privilege to serve you
as your President. I have appreciated the honor. I hardly
think there has been a day since I became President that I
have not given the matter some thought and attention; and if
my poor efforts have met with your approval I am doubly
honored.
I want to say just one word about the other men who have
worked in this Association with me: They are workers; you
have a splendid organization in the office from the General Secretary down, and I believe I have had the friendship and support of every one of them. Some of them are so capable that I
have always wondered how we could keep them, as I know they
are in demand in other fields where there is greater remuneration.
In regard to this beautiful silver service which you have presented to me, I thank you most heartily for it. I do not need
that to make me think of your kindness; but still I value it very
highly. But most of all, I value the strong friendships I have
made among the members of this Association through my offi-




dal connection with them. This silver might be stolen or
burned, but the memory of those friendships nothing can ever
take away. (Applause.)
GENERAL SECRETARY FARNSWORTH: I Wish YO announce that
there will be a meeting of the new Executive Council at T.30
to-night in the ballroom of the Hotel Washington.
MR. J. J. SULLIVAN: Mr. President, I think we owe it to the
bankers and to the citizens generally of Seattle to tender them a
vote of thanks.
FRESIDENT-ELECT LYNCH: That has already been done, Colonel.
MR. J. J. SULLIVAN: I beg your pardon; I was absent during
part of the time.
PRESIDENT-ELECT LYNCH: But there is no objection to giving
them a vote of thanks a second time, for I think they are certainly entitled to it.
Ma. FREI) W. HYDE, Jamestown, N. Y.: I move you, sir, that
.
the Convention be now adjourned without date.
(Motion seconded.)
PRESIDENT-ELECT. LYNCH: All in favor of the motion to adjourn say aye; opposed, no. It is carried and the Convention
adjourns sine die.

Organization of National Bank Section
At the Conference of National Bank representatives On Tuesday, September 7, a new section of the American Bankers' Association was organized, to be known as the National Bank
Section, and the following officers were elected:
President, Fred W. Hyde, Cashier of the National Chautauqua County Bank, Jamestown, N. Y.
J. S. Calfee, of St. Louis, Mo., was elected Vice-President;
and the following were elected members of the Executive Committee:
J. Elwood Cox, High Point, N. C. Oliver J. Sands, Richmond, Va.; W. H. Bucholz, Omaha, Nebraska; H. E. Otte, Chicago, Ill.; J. W. Spangler, Seattle, Washington; W. M. Van
Deusen, Newark, N. J.
The formation of this Section was subsequently approved lar
the Executive Council of the American Bankers' Association.
BY-LAWS ADOPTED DE VIZ NATIONAL BANK SECTION.
Section 1. Any National Bank, member of the American Bankers'
Association, shall be eligible to membership in this section.
Section 2. The administratiotz of the affairs of this section shall be
vested in a President• and a First Vice-President of this section, and
an Executive Committee of six members who shall serve until their
successors are chosen and appointed.
Section S. The President and the First Vice-President and also the
ex-President for a period of one year following the expiration of his
term as president, shall be members ex-officio of the Executive Committee. All other ex-Presidents shall act in an advisory capacity to
the Executive Committee, and may attend its meetings and participate in its deliberations, without, however, being entitled to vote or to
reimbursement for expenses incurred in attending meetings.
Each State shall be entitled to a Vice-President of the Section; such
Vice-President shall be elected by the National Bank representatives,
whose banks are themselves members of the National Bank Section
of the American Bankers' Association, in attendance at the annual
Convention of the State Bankers' Association of their State. In the
event of failure to so elect the Vice-President shall be appointed by
the President of the Section. These Vice-Presidents shall hold office
from the annual meeting of the Section next following their eleotion or appointment until the next annual meeting of the Section. The
State Vice-Presidents shalr act in an advisory capacity to the Executive
Committee, but shall not be entitled to vote.
Section 4, The Executive Committee shall select its own Chairman
from among its members, and shall also select a Secretary of the Section, subject to the approval of the Executive Connell of the American
Bankers' Association, who may or may not be a member of the Seetion.
Section 5. The Executive Committee shall be elected at the annual
meeting by the members of the Section, two being elected each year
to serve for a period of three years. At the first election after the
organization of the Section, two members shall be elected to serve for
one year, two for two years, and two for three years, and thereafter
members shall be elected for three-year terms, except in case of a
vacancy, which shall be filled by an election for the unexpired term.
No officer or member of the Executive Committee•shall be eligible for
re-election until one year following the completion of a full term of
office.
Section O. The Executive Committee shall have the entire administration of the affairs of the Section between annual meetings, and
may adopt all necessary rules covering the business of this Section.
Section 7. This Section shall meet annually at the time and place of
the Convention of the American Bankers' Association.
Section 8, The Executive Committee may be called together at asIy
time by the Chairman.

Meeting of Executive Council.
Immediately following the adjournment of the Convention, the Executive Council met, with the newly elected President of the Association—James K. Lynch, Vice-President, First National Bank of San
Francisco, California—in the Chair.
New members of the Council were installed, and the first business
taken up was the election of General Secretary, Assistant-Secretary
and General Counsel, and the present incumbents were each unanimously re-elected.
A contest deteloped for the office of Treasurer, there being three
candidates in the field: N. P. Gatling, Vice-President, Chatham &
Phenix National Bank of New York; E. M. Wing, President of the
Batavian National Bank of La Crosse. Wisconsin, and McLane Tilton,
Secretary of the Alabama Bankers' Association, Pell City, Alabama.
Mr. Wing was elected on the sixth ballot.
FORMATION OF NATIONAL BANK SECTION APPROVED.
Routine reports were then presented, and the formation of a new
Section in the Association, to be known as the National Bank Section,
was formally ratified and approved.

KANSAS CITY PLACE OF NEXT CONVENTION.
Kansas City. Missouri, was decided upon as the place to hold the
next Convention, and it was informally agreed to set tile date from
September 21 to 26.
The Council then adjourned.

TRUST COMPANY SECTION
AMERICAN BANKERS' ASSOCIATION
Twentieth Annual Meeting, Held at Seattle, Wash., September 7, 1915

INDEX TO TRUST COMPANY PROCEEDINGS
Trust Powers of National Banks, H. M. Campbell Page 137
Report of Executive Committee
- Page 142
Report of Committee on LegislationPage 142
Report of Committee on Protective Laws
- Page 143

Report of Secretary Detailed Proceedings
Address of President Cutler Obstacles to Reserve Membership

-

Page 143
Page 144
Page 144
Page 147

Can Congress Confer Trust Powers Upon National Banks?
By HENRY M. CAMPBELL, of Campbell, Bulkley & Ledyard, Counsellors at Law, Detroit, Mich.
We are living in an age of miracles. The dreams of
ferring of unrestricted powers upon executive
officials.
centuries are being realized, and much is transpiring
Any one at all familiar with the history of attempts
that has never been dreamed of at all. The fascinating •at popular government in the
past must appreciate that
tales of the Arabian Nights no longer stir the blood.
until our present representative form of constitutional
Aladdin's lamp has been consigned to the scrap heap
government was established, all such attempts failed,
beand Puck's boast that he would put a girdle about the
cause the individuals intrusted with power (for such
earth in forty minutes would not get him a job as
is human nature) inevitably in the end exercised it
for
messenger boy in a modern wireless plant. Who so 'bold
their own aggrandizement, to the destruction of the
as to predict what the•future may hold for us and our
liberty of the people who conferred the power upon them.
children! But all of these miraculous changes are
Hasty and radical changes in the fundamental principles
taking place in the physical world. Throughout the
upon which our system of government rests, and under
march of the centuries man's nature has remained pracwhich, for the first time in history, a popular governtically unchanged. His.impulses, his passions, his amment has survived and prospered, are dangerous experibitions, his loves and his hates, his tendencies towards
ments, which can only result in harm. For any man,
good and evil are essentially the same to-day as they
or body of men, to make, construe and execute the law
were in the days of Solomon. The story of Cain finds
is violative of the very basis of our form of government.
its counterpart in the pages of almost any daily newsI am no enemy of improvement or progress; but there
paper. Esau still sells his birthright for a mess of
are certain great principles which long experience has
pottage. The veneer of civilization is thin and it is not
shown are essential to the stability of popular governfar down to the caveman. The ambitions of Alexander,
ment, and which cannot safely be ignored. Every govCaesar, Napoleon and Kaiser. Wilhelm are much the
ernment must include within its scope—at least if it
same and the motives of Croesus can with difficulty be
is to possess suitable stability and energy—the exerdistinguished from those of the great magnates of later
cise of the three great powers upon which all governdays. No improvement has yet been made in the prement is supposed to rest, namely, the executive, the
cepts of the Holy Scriptures, which are as true and
legislative and the judicial powers; and in a free govapplicable to-day as they were twenty centuries ago.
ecnment, such as ours, it is essential that these powers
It is the function of law to regulate human action
be 'kept separate and in different hands. The mainfor the benefit of the community. This involves restraint
tenance of this distinction has proved to be the most
upon the liberty of the individual, the necessity for
effective check upon arbitrary power yet devised. One
which is as urgent to-day as in the past. That restraints
of the earliest declarations of this great conception of
are necessary is universally admitted; but what the repopular government is found in the constitution of the
straints shall be, how far they shall go and what form
Commonwealth of Massachusetts, and reads as follows:
they shall take are questions involving wide difference
"In the government of the commonwealth, the
of opinion and endless discussion. The bewildering
legislature shall never exercise the executive or
changes which are taking place in the physical domain
judicial powers, or either of them; the executive
seem to have engendered a spirit of unrest in the people,
shall never exercise the legislative or judicial
and a tendency toward making changes in the laws
powers, or either of them; the judicial shall never
which govern them—often apparently merely for the
exercise the legislative or executive powers or either
sake of change, without sufficiently considering whether
of them; to the end that it may be a government of
the changes are desirable or not. Little attention is
laws, and not of men."
being paid to fundamentals or the lessons of the past;
Thus is recognized the inalienable right of every
and many radical experiments are being made with the
citizen that he shall be governed by law, and not by the
governmental system of the country, the effect of which
unrestricted will of man, and that the laws which are
it is difficult to predict. In line with these experiments
to govern him shall be prescribed in an orderly manner,
is the constant effect to escape from constitutional reby representatives who are immediately responsible to
straints Imposed upon the making of laws, and the conhim.




138

BANKERS' CONVENTION.

The increasing tendency throughout the country to
chafe at legal restraints and to vest individuals with governmental powers—executive, judicial and legislative—
which have heretofore been exercised only in accordance
with constitutional provisions, cannot be attributed to
the doctrines or influence of any particular political
party, but rather to the delusion on the part of many
unthinking persons, that by conferring unrestricted
power upon individuals, the government is brought that
much nearer the people. It is an adoption of the
socialistic principles of paternalism and a rejection of
those principles of individual freedom out of which
the wonderful prosperity of our country has developed.
Departments and commissions have been endowed, under
the guise of regulation, with powers distinctly legislative
and judicial, as well as executive in their nature, and
not infrequently those regulations have been extended
far beyond the authority intended to be conferred upon
the department or commission issuing them. There has
thus been grafted upon our governmental system a mass
of regulations, having the effect of laws, and carrying
with them all the penalties which follow a violation of
laws, which have been made by individuals acting without rule or guidance other than their own unrestricted
will. It is of such methods that Mr. Justice Matthews,
of the Supreme Court of the United States, has said:
"The very idea that one man may be compelled
to hold his life, or the means of living, or any material essential to the enjoyment of life, at the mere
will of another, seems to be intolerable in any country where freedom prevails, as being the essence of
slavery itself."—Ywick Wo. vs. Hopkins, 110, U.
S. 356.
When the Federal Reserve Act was pending in Congress, there was added to it, at the eleventh hour, a
paragraph covering subjects which up to that time had
never been dealt with by national banks or the Federal
Government. This paragraph is designated Section 11
(k). It consists of only four lines, but it confers upon
the Federal Reserve Board powers which, if sustained,
give to that Board domination over a multitude of our
most intimate domestic affairs—affairs which are wholly
foreign to the national banking business and which heretofore have been regulated exclusively by the local laws.
It reads as follows: The Federal Reserve Board shall
have power
Sec. 11 (k)—"To grant, by special permit to
national banks applying therefor, when not in contravention of State or local law, the right to act
as trustee, executor, administrator or registrar of
stocks and bonds, under such rules and regulations
as the said Board may prescribe."
In discussing this paragraph, I wish it to be distinctly understood that I am not undertaking to criticise
the members of 'the Federal Reserve Board, or their
methods or motives, in exercising the powers attempted
to be conferred upon them. I do not question their
patriotism or ability, and I have no doubt that they are
making every effort to prescribe such rules and regulations as in their judgment will be best adapted to regulate the exercise by national banks of these new powers
thus attempted to be conferred upon them. My indictment is.against the system, not against the individual
members of the Board.
From the beginning of our government, fiduciary
trusts have been defined and regulated by local law;
the administration of estates has belonged exclusively to
the states where the property of the deceased Is located,
and the subjects upon which the inhabitants of a state
may contract have been prescribed by state authority.
The state laws pertaining to these matters fill volumes
of our state statutes. They vary in the several states
according to local requirements and are the result of
years of effort on the part of the representatives of the
people affected by them. By virtue of this brief para-




graph of four lines, if valid, all these statutes may be
set at nought and the Federal Reserve Board, at its
pleasure, may authorize such national banks as it may
select to exercise all of these powers, under such rules
and regulations as it may prescribe, which rules and
regulations must prevail over any state law; otherwise,
the exclusive control of the Federal government over its
own system of banking would be destroyed, as "it is
well settled that the United States statutes relative to
national banks constitute the measure of the authority
of such corporations, and they cannot rightfully exercise
any powers except those expressly granted, or which
are incident to carrying on the business for which they
are established."—First National Bank vs. Converse, 200,
U. S. 438.
The importance of an early determination of the
validity of this paragraph cannot be overestimated.
In order to arrive at a solution of this problem, three
questions must be considered:
First.—Has Congress itself authority, under the
Federal Constitution, to confer upon national banks the
right to exercise the powers stated in Section 11 (k)?
Second.—If it can lawfully do so itself, can It delegate
such authority to the Federal Reserve Board?
Third.—If neither the Federal Reserve Board nor
Congress itself can confer such powers upon national
banks, have the states, or any of them, consented to the
exercise of them, and if so, will consent on the part of
the state be effective?
First.—The authority of Congress to create a corporation with power to act as trustee, executor, administrator and registrar of stocks and bonds, or which is
practically the same thing, to confer such power upon
an existing corporation, must be found in the Federal
Constitution. The United States Government is one of
limited powers, and Congress possesses only such powers
as are expressly enumerated and such incidental or implied powers as are necessary to give effect to the powers
expressly conferred. This proposition has been recognized since the foundation of the Government. An examination of the Federal Constitution 'discloses that there
is no express authority in Congress to create corporations for any purpose. It has, however, implied authority to create them when they are appropriate instruments for carrying into effect the powers of government
expressly granted. Early in, the history of the government, the question of the establishment of a United
States Bank arose, and the power of Congress to create
such a corporation was sustained on the ground that the
bank was one of the instrumentalities of government
"necessary and proper for carrying into effect the powers
vested in the government of the United States."—McCulloch vs. Maryland, 4 Wheat. 316.
The limitation of the authority of Congress to such
matters as are national in character and necessary
to the administration of the affairs of government is
graphically put by Alexander Hamilton, in an opinion
given by him when Secretary of the Treasury, on the
constitutionality of the charter of the first bank of the
United States, in which he says:
"It is conceded that implied powers are to be
considered as delegated, equally with express ones.
Then it follows that as the power of erecting a corporation may be as well implied as any other thing,
It may as well be employed as an instrument or
means of carrying into execution any of the specified
powers, as any other instrument or means whatever.
The only question must be in this as in every other
case, whether the means to be employed, or in this
instance, the corporation to be erected, has natural
relation to any of the acknowledged objects or lawful ends of the Government. Thus a corporation
may not be erected by Congress for superintending
the police of the city of Philadelphia, because they
are not authorized to regulate the police of that

TRUST COMPANY SECTION.

139

city. But one may be erected in relation to the
pressly denied to the Federal Government. The tenth
collection of taxes, or to the trade with foreign counamendment to the Federal Constitution reads as follows
tries, or to the trade between the states, or with the
"The.powers .not delegated to the United States .
by the Constitution, nor prohibited by it to the states
Indian tribes; because it is the province of the Federal government to regulate these objects, and beare reserved to the states respectively, or to the
people."
cause it is incident to the general sovereign or legisIn this connection it may be pointed out that if the
lative power to regulate a thing, to employ all the
powers specified in Section 11 (k) were among those
means which relate to its regulation to the best and
incident to an ordinary banking business the section
greatest advantage."
-26 Harvard Law Review 672.
would be unnecessary. The adoption of the section is of
The right of Congress to create national banks rests
itself a legislative admission that national banks, withupon the same grounds and is subject to the same limitaout additional authority, have no right to exercise the
tions—Davis vs. Elmira Savings Bank, 161 U. S. 283.
powers which it is sought to confer upon them.
No one will contend that the right to act as trustee,
The answer to the first question must be that Conexecutor, administrator or registrar of stocks and bonds
gress itself has no authority to confer upon national
is in any sense necessary to the administration of the
banks the powers specified in Section 11 (k).
affairs of the Federal government. Neither is such right
Second.—Conceding, however, for the purposes of the
an integral or essential part of the business carried on
argument, that Congress may create a corporation posby national banks. It is not a banking function. Theresessing the capacity to act as trustee, executor, adfore, Section 11 (k) cannot be sustained upon any theory
ministrator or registrar of stocks and bonds, or may add
of implied powers.
such powers to those already possessed by national banks,
between banking and acting as trusThe distinction
an entirely different question is presented when Congress
tee is fundamental. In the case of the bank the relaattempts to delegate its legislative authority to the Feddepositor is that of debtor and
tion between it and its
eral Reserve Board.
creditor. The depositor, in effect, agrees that his money
The creation of a corporation is peculiarly an act of
shall pass to the bank and become its own to be used
sovereignty and involves a legislative discretion which
by the latter for its own profit. The obligation of the
can only be exercised by the constitutional agency created
bank is an absolute one to repay the amount of money
deposited, and the depositor is not concerned in the in-' by the people for that purpose, that is to say, by the
Legislature itself. The act of conferring additional corvestment of the moneys which the bank may make. On
porate powers upon an existing corporation is of the
the other hand, the relation of the trustee and the cestui
same nature. The principle that'this power can only
que trust is precisely the reverse. Only the technical
be exercised by the Legislature itself is best stated in the
control of the trust property is vested in the trustee.
language of Mr. Justice Cooley, the greatest authority
Equitably and beneficially the property belongs to the
upon constitutional law since Marshall, as follows:
•cestui que trust. The trustee cannot use the trust prop"One of the settled maxims in constitutional law
erty for his own profit or mingle the trust funds with
is that the power conferred upon the Legislature
his own. His obligation is to hold and account for the
to make laws cannot be delegated by that departparticular property for the benefit of the cestui que trust.
ment to any other body or authority. Where the ,
If after exercising reasonable judgment, a loss occurs,
It falls upon the trust fund, and not upon the trustee.
sovereign power of the state has located the author- The definition and regulation of trusts has always
ity, there it must remain, and by the constitutional
belonged exclusively to the state. The same is also true
agency alone the laws must be made until the Conof the administration of estates and the making of constitution itself is changed. The power to whose
tracts. Mr. Justice Field, of the Supreme Court of the
judgment, wisdom,and patriotism this high prerogn- ,
United States, in a leading case, says upon this subject:
tive has been entrusted cannot relieve itself of the"The several States of the Union are not, it is
responsibility by choosing other agencies upon whom.
true, in every respect independent; many of the
the power shall devolve, nor can it substitute the
rights and powers which originally belonged to them
judgment, wisdom or patriotism of any other body
being now vested in the Government created by the
for those to' which alone the people have seen fit to
Constitution; but except as restrained and limited
confide this sovereign trust."—Cooley's Constituby that instrument, they possess and exercise the
tional Limitations, 6 ed., p. 137.
authority of independent states, and the principles
The. answer to the second question must be that
of public law to which we have referred are appliCongress cannot delegate its authority to the Federal!
cable to them. One of these principles is that every
Reserve Board.
state possesses exclusive jurisdiction and soverThird.—Let us next consider the effect of consent on'
eignty over persons and property within its territhe part of the state legislature to the exercise of these
tory. As a consequence, every state has the power
powers by national banks.
to determine for itself the civil status and capacities
As already pointed • out, the States possess exclusive
Of its inhabitants; to prescribe the subjects upon
dominion over the subject-matter under consideration.
which they may contract, the forms and solemnities
This arises from the Tenth Amendment of the Federal
with which their contracts shall be executed, and
Constitution, by which the powers not delegated to the
the rights and obligations arising from them, and
United States are reserved to the States.
the mode in which their validity shall be determined
The questions here to be considered are: Have the
and their obligations enforced, and also to regulate
States, or any of them, consented to the exercise of their
the manner and conditions upon which property
sovereign powers by the Federal Reserve Board; and
situated within such territory, both personal and
if they, or any of them, have done so, is such consent
real, may be acquired, enjoyed and transferred."—
effective?
Penover vs. Neff, 95 U. S. 722.
Evidently Congress itself, when it adopted the secBecause of this plenary control, a state may authortion, was conscious, in a vague and general way, that it
ize a trust company to engage in banking, in addition
was trespassing upon a field heretofore exclusively occuto conducting the usual trust business, or a state bank
pied by the States, as it provided that the powers conto exercise trust powers; but the legislature of a state
ferred shall only be exercised "when not in contravenmay not surrender its sovereign authority by consenting
tion of state or local laws."
that Congress may exercise authority over persons and
No State in the Union has yet passed a law surrendproperty, jurisdiction over which has been retained under
ering to the Federal Government without reservation the
the Federal Constitution by the several states, and excontrol and regulation of Trust Company functions, if




Clo

140

BANKERS' CONVENTION.

exercised by national banks. In such enabling acts as
the State is, exhave been passed the supervision by.
pressly or by necessary implication, reserved. In Iowa,
Vermont, Virginia and Washington statutes have been
passed 'permitting national banks, when authorized by
Federal law, to exercise the same powers and perform
the same duties as are- conferred upon domestic Trust
Companies by the laws of those States. Indiana permits
them to accept and execute trusts under the same rules
and regulations that govern domestic Trust Companies,
but whether the term "trust" includes the power to act
as executor, administrator or registrar of stocks and
bonds may be doubted. Ohio similarly permits them to
accept and execute trusts, but expressly prohibits them
from acting as executor or administrator. In Utah a
corporation not organized under the laws of the State
may do business by filing articles, etc., and a resolution
of the board of directors accepting the provisions of the"
State constitution. On the other hand, the States of
Colorado, Florida, Missouri, New York and North Carolina expressly prohibit the exercise of trust powers by
any corporation except when organized under the State
law.
In most of the other States the laws provide for the
organization of domestic Trust Companies, which exercise their powers under strict supervision and regulation,
no reference being made to national banks.
Here the question arises whether such laws do not
Indicate a public policy on the part of the State prohibiting any corporation except when organized under
Its laws, from exercising powers such as are expressly
conferred upon a domestic corporation. As to this question there is a variety of opinions among the official
legal advisers of the States. The Attorney-Generals of
Mississippi, Oregon, South Carolina and Tennessee express the opinion that on complying with the laws of the
State, it would not be contrary to public policy for
national banks to exercise the powers stated in Section
11 (k).
The Attorney-Generals of Alabama, California and
Texas are of the opinion that national banks cannot act
as executors or administrators in their respective States,
but do not express any opinion as *to the right to act
as trustee or registrar of stocks and bonds. The Attorney-Generals of Illinois, Georgia, Kansas, Michigan,
North Dakota, Oklahoma, Rhode Island, South Dakota
and Wisconsin all express the opinion that it would be
In contravention of the laws of their respective States
for national banks to exercise the powers specified in
the section. The Commissioners of Banking of Pennsylvania and of Massachusetts hold like views; and the
counsel for the Federal Reserve Banks of Philadelphia,
Chicago, Richmond and Minneapolis, when called upon
by the Chairman of the Federal Reserve Board, have
also expressed the same opinion as to the states included
In their respective districts.
On principle the latter opinions are undoubtedly
sound. A corporation cannot act as trustee, executor,
administrator or registrar of stocks and bonds unless
expressly authorized to do so. When a State provides
for the incorporation of Trust Companies, with various
safeguards for the protection of the public dealing with
them, such as the deposit of securities, examination by
public officials, tules as to the character of investments,
etc., other corporations not subject to such restrictions
and over which the State has no control are, by necessary implication, prohibited from exercising such powers.
In some of the States this prohibition is expressly stated.
The adoption of a Trust Act, therefore, is in itself a
declaration of a policy which would be contravened by
the exercise of such powers by a corporation not subject to the State laws. In at least one of our States
such has been declared to be the legal effect of similar
laws by the Supreme Court of the State. (New York
Mortgage Co. vs. Sec. of State, 150 Mich. 197.)




In those States where the Constitution requires corporations to be organized - under general laws, thereby
preventing the granting of special charters, or other
discriminations, it may also be contended that.the Federal Reserve Board, in exercising its power to grant or
refuse special permits, contravenes 'a public policy indicated by constitutional provisions prohibiting discrimination in the granting of corporate franchises and'
privileges.
The section itself does not purport to authorize the
Federal Reserve Board to confer upon national banks
the right to exercise the powers stated in the same manner as may be permitted by the States for domestic Trust
Companies, I. e., subject to State regulation. If the
board should undertake to grant permits to national
banks upon such conditions, their action would be inconsistent with the section itself, and also would not be permissible under the Federal system, for it .is well settled,
as I have already pointed out, that the United States
statutes alone constitute the measure of the authority of
national banks.
On the other hand, a State legislature cannot, simply
by its own act, impair the sovereignty of the State by
surrendering control over matters respecting which the
State, under its Constitution and that of the United
States, has supreme sovereign power. Sovereign power
can neither be delegated nor surrendered, much less can
a legislature transfer such sovereign control to the Fedral Government—government of limited powers and
possessing only such authority as is prescribed by the
Constitution. To do so would, in effect, be to permit
the State legislature to amend the Federal Constitution.
In other words, it is impossible to give effect to the
section without violating the constitutional rights of the
States. Two sovereign powers cannot exercise exclusive
authority over the same object any more than two solid
bodies can occupy the same space at the same time.
The answer to the third question must be that no
State has consented to the exercise of the powers specified in the section upon the terms and conditions there
stated, and that consent on the part of the State, even if
granted, would be ineffectual.
In, addition to the legal aspect of the case, there are
substantial reasons why the Federal Reserve Board
should not be vested with the broad powers attempted
to be conferred by the section. Before the theory of
Section 11 (k) can be carried out, an amendment to the
Federal Constitution would be required, under which the
States surrender their sovereign authority over many
of their local affairs, and permit Congress to designate
by whom and in what manner such affairs shall be administered. Such an amendment would not accord with
our traditions, and would constitute an unwarranted
invasion of rights which have heretofore been jealously
guarded by the people. It is contrary to the spirit of
American liberty and dangerous as well, that any man,
or body of men, shall have the unrestricted power to say
to one bank, "You may act as trustee, executor, administrator or registrar of stocks and bonds," and to an;
other bank,"You shall not" or to dictate to the favored
bank the manner in which it shall make use of the
privileges thus granted.
It is inconceivable that the people of any State, if
they understand the situation, will consent that officials
not selected by the State, or responsible to it, shall define, regulate, limit or administer trusts to the exclusion
of the State authorities. It has already been abundantly
demonstrated by the course pursued by the various commissions and departments of the .Federal Government
that the inevitable tendency on the part of bureaucratic
officials entrusted with power is to stretch their authority to the utmost limit; and, as Section 11 (k) confers
greater discretionary power upon the Federal Reserve
Board than has ever before been granted to any commission, it is not to be expected that the people of any state

TRUST COMPANY SECTION.
will willingly relinquish to the board the control over
trusts which they now possess.
There are already indications of a disposition on the
part of the Federal Reserve Board to ignore the restrictions imposed by the section.
At the outset, the members of the board, in their
circular letter of April 5, 1915, announced their intention, in passing upon applications for permits, to take
into consideration:
First.—" Whether or not the exercise of these powers,
or any of these powers, will be in contravention of State
or local law."

141

be made by future boards of this discretionary power.
What the board may give, the board, or a subsequent
board may take away.
There is also something repugnant in the idea that
a man from one part of the country, unfamiliar with
local needs, possesses the power to impose his ideas upon
a far distant community with which perhaps he has
nothing in common, and of whose ideas and necessities
he is ignorant. Local self-government is not a matter of
grace and favor, but of constitutional right.
Certainly it is not unreasonable to question the wisdom of conferring such great powers upon any set of
individuals, however wise or disinterested they may be,
second.—" Whether the applying bank is in proper
particularly when they are not selected by the people
condition, and is equipped to handle this class of busiwhose interests are affected, and are not responsible to
ness, and whether a permit will, under the circumstances,
them.
prove of benefit to such bank."
I have been unable to discover any general
In connection with the first proposition, the policy of
demand
on the part of the people for this surrender • of their
the board was stated as follows:
right to regulate their own local affairs. Before any
"There are probably no States whose statutes in
permits were issued by the Federal Reserve Board,
the
terms prohibit national banks from exercising these
chairman telegraphed to each of the Federal Reserve
powers, and few which expressly authorize their
Banks, asking them to obtain the opinions of their
reexercise. The question under consideration, therespective counsel as to the eligibility of national banks
fore, cannot be determined by ascertaining merely
to act in trust capacities under the laws of the various
whether a State law specifically prohibits or speciStates in their districts. All of these opinions have
not
fically authorizes national ,banks to act as provided
been made public, but at least four of them, given to the
by Section 11 (k), nor is it within the province of
Federal Reserve Banks of Chicago, Minneapolis, Richthe board to pass upon the constitionality of the
mond and Philadelphia, were to the effect that it would
section. In general, the board will grant permits
be in contravention of the laws of each of the States
in accordance - with this section when the exercise of
in the district to issue permits to national banks—opinthe powers granted does not contravene the general
ions which have been subsequently ignored by the Fedpolicy of the State laws as indicated by the statutes
eral Reserve Board.
dealing with banking institutions and other corporaAbout this time the legislatures of forty-one States
tions, and will refuse permits in those cases where
were in session. By a curious coincidence, bills were
such exercise will be clearly in contravention of the
almost simultaneously introduced in most of these states,
general policy of such State laws."
seeking to secure consent to the exercise of fiduciary
A very plausible policy if lived up to; but little atpowers by national _banks. In most instances, however,
tention seems to have been given in practice to this
these efforts failed, and either the bills were defeated
phase of the question, except in cases where the State
or action upon them was indefinitely postponed. This
statute expressly prohibits the granting of the powers.
was the case in Connecticut, New Jersey, Pennsylvania,
Permits have been freely given, without judicial deterNorth Carolina, Maryland, New York, Kansas, Nebraska,
mination, in Illinois, Kansas, Michigan, New Jersey,
Minnesota, Michigan, Missouri, Delaware, Utah, Cola
Oklahoma, Pennsylvania, Rhode Island, South Dakota
rado and Montana, and possibly in others. The Federal
and Wisconsin, in which States either the Attorney-GenReserve Board disclaimed any responsibility for the
eral or counsel for the Federal Reserve Bank of the discampaign; but however that may be, the result demontrict in which the State is located, or both of them, have
strates very clearly that it is not the public which is
given adverse opinions: In Michigan and Illinois legal
demanding or is likely to approve of the innovation.
proceedings are pending in the Supreme Cotirts of those
I am fully convinced that the time is far distant
States to determine the question.
when the people of this nation will willingly surrender
The second proposition is significant as emphasizing
their sovereign authority over these matters to the unthe arbitrary character of the powers conferred. It
restricted will of the appointees of the Federal adminrests solely with the board to determine, at its pleasure,
istration; and I am more and more impressed with the
whether to grant a permit would be for the best interwisdom of those provisions of the Constitution which
ests of the applying bank. This opens a wide field for
insures to all the people the priceless privilege of governspeculation as to the possible use or abuse that might
ing themselves, according to their own requirements.




Committee and Officers' Reports
Section.
Report of Executive Committee, by Uzal H. McCarter,
Chairman.
To the Members of the Trust Company Section of the American
Bankers Association.
GENTLEMEN: Your Executive Committee in submitting this, its
annual report, to the members of the Section, begs to felicitate
the organization upon the prosperous condition of the Section
as regards its membership and to congratulate it upon the successful manner in which the problems of the past year have
been met, not only by the individual institutions constituting
our association, but also by the banking fraternity at large.
The past year has been full of anxiety for the banker in that
the existing turmoil throughout the world brought with it new
conditions, for the solution of which precedents were lacking.
That actual disturbance did not arise in some instances was
undoubtedly due to the confidence felt by the public in the
inherent strength of the financial institutions and their ability,
in an emergency, to avail themselves of the provisions of the
Federal Reserve Act for rediscounts and the obtaining of such
additional currency as might be necessary. Bankers may differ
as to the character and the operations of the machinery through
which these benefits may be obtained, but the public looks only
for results, regardless of the system employed in obtaining
them.
Money has been plentiful during the entire year, with the
result that profits have been correspondingly low. As a rule,
the manufacturer has been working on half time, or less, during
the greater part of the year, except in those special cases arising
through "war orders" and while it is difficult to accurately
forecast the future in its business aspects, there are many who
believe that, generally speaking, trade will not improve for the
manufacturer Until either new tariff legislation has been obtained or sufficient time shall have elapsed to permit business
to adjust itself to met present tariff conditions.Dull business conditions mean heavy deposit lines for the
Trust Companies. That, in turn, necessitates the careful consideration of the question as to the profitable employment of
funds on hand. In this connection the caution which this
Committee would extend at this time is important. It urges
extreme conservatism not only in the extension of your business,
but also in the handling of it when it has been obtained.
The various subcommittees of the Executive Committee have
been faithfully engaged in performing their several tasks and
detailed reports of their activities will be submitted for your
consideration.
The Executive Committee has been most busily employed
during nearly the entire year. In that time many matters requiring the combined wisdom and judgment of the entire Committee have arisen and most cheerfully have its members responded to its calls, freely giving their time and service to the
interests of the Trust Companies of the Country.
FEDERAL RESERVE LAW GRANTING TRUST POWERS TO BANKS TO
BE TESTED.
The most important matter to receive the attention of your
Executive Committee was the consideration of that portion of
the Federal Reserve Act in which the granting of Trust powers
to National Banks is sought to be permitted. Your Committee
believes the granting of such powers to National Banks to be
unconstitutional, and, taking that view of the matter, it appeared, through its Legislative Committee, before the Federal
Reserve Board in Washington and stated its views as to the
constitutional doubt. It, at the same time, requested the
Federal Reserve Board to seek the advice of the Attorney
General of the United States upon the whole question. The
Federal.Board declined to take that step. It contended that
it was no part of its duty so to do, and insisted that the burden
of proof rested upon those raising the question of constitutionality. Then there seemed to be nothing left for your Executive
Committee to do but to test th) question of constitutionality
in the Courts, and at a special meeting called for the consideration of that question, with a quorum present, the officers were
instructed to retain the Counsel and Wish the matter as rapidly
as possible, carrying it, if needs be, to the United States Supreme
Court for final adjudication. It was agreed in this connection
that the expense of the litigation is to be borne by the Trust
Companies individually and that it is not to be paid out of
the funds of the Section. This action of the Executive Committee was subsequently confirmed at the spring meeting of
the Committee, when a more general attendance was present and
will, I trust, meet with your approval at this Convention.
In compliance with their instructions the officers retained




Trust Company

the services of the Honorable John G. Johnson, of Philadelphia.
and the Honorable Henry M. Campbell, of Detroit, to represent
the Section in its test of the constitutional questions involved,
and in their selection the Committee feels it has obtained Counsel of the highest eminence and ability, who will diligently and
expeditiously prosecute its contention.
The Section is most fortunate in having Mr. Campbell present
as its guest today, and he will fully explain the progress of the
litigation up to the present time.
Your Committee has given the whole Federal Reserve Act in
its relations to Trust Companies the fullest study and consideration. Again, through its Legislative Committee, it appeared
before the Federal Reserve Board and made suggestions as to
the necessity of certain changes in the Act before, in its judgment, Trust Companies as a class would join the Federal _Reserve System.
It also raised the question of certain regulations issued by
the Federal Reserve Board and made some suggestions in relation to them. While the Reserve Board has met your Committee's suggestions in some particulars, nevertheless it is the
judgment of your Committee that tne Federal officials have not
as yet gone far enough in this regard to permit it to advise the
Trust Companies of the country to join the system. On the
contrary, it is the judgment of your Committee that certain
necessary changes in the Act itself, as well as in the regulations
of the Board, ought to be made, before the Trust Companies
should consider entering the Federal Reserve System.
Your Committee has met, in its deliberations, the consideration of these questions with an open mind and with the belief
that there should be one banking system governing all classes
of financial institutions. It has been treated by the members
of the Federal Reserve Board with the greatest courtesy and
consideration and it is with unfeigned regret that it has been
unable to arrive at a conclusion different from that which is
here submitted. In its judgment it would be well for the Section to refer the subject to the new Executive Committee for
further consideration and study, and it accordingly makes that
recommendation.
The so-called Model Trust Company law adopted at the last
Convention in Richmond has been published in the Bulletin
of the Association, and distributed to the members. It is again
earnestly commended for adoption to those States where there
is not in force, at the present time, legislation requiring State
supervision of Trust Companies.
To the Trust Company official as well as to all bankers and
others the future is clouded. Never before in the recollection
of the present generation was the necessity for patriotism to
our country and loyalty to our President so necessary, and
while it is the earnest hope and prayer of every thinking man
that war may be averted by our country, it is the firm conviction of your Committee that, if such a catastrophe should occur,
the bankers of the United States will prove their devotion to
their country by a united and concentrated support—financial
as well as moral—of those upon whose shoulders the respon
sibility of carrying on the war may fall. '

Report of Committee on Legislation.
Mr. President and Members of the Trust Company Section:
At the annual meeting of the Trust Company Section of the
American Bankers Association which was held on Tuesday
afternoon, October 13, 1914, at Richmond, Virginia, your Committee on Legislation was increased to seven members, three
of whom were to be members of the Special Committee of twelve
to be appointed by President Law, of the American Bankers
Association, under a resolution authorizing "a Committee to
confer with the authorities at Washington to secure the adoption
of such amendments to the Federal Reserve Act as shall make it
more desirable for State Banking Institutions to join the
Federal Reserve System."
The members of the Legislative Committee are also members
of the Executive Commitee of the Section and a separate report of the Legislative Committee necessarily covers a great
deal of the ground which has already been presented to you in
the Report of President Cutler and the Report of the Chairman
of the Executive Committee.
The most important subject that came before your Committee
was the conditions under which the State Chartered Institutions are permitted to enter the Federal Reserve System. A
meeting of the Committee was held on Monday evening, the 7th
of December, at Willard's Hotel, in Washington, and on the
following day your representatives presented certain suggestions
to the Committee on Admissions of State Institutions of the

TRUST COMPANY SECTION.
Federal Reserve Board, all of which has been amply covered in
the report submitted to you a short time ago by Chairman
McCarter. The result of the meeting was that the Federal
Reserve Board modified to some extent its Rules and Regulations
and interpreted certain portions of the Act with the aim of
making membership in the Federal Reserve System more attractive to the State Chartered Institutions.
The question of joining the Federal Reserve System must, of
course, be left to each individual member of this Section, but
it seems to your Committee as though the Act should in some
of its requirements be amended aml clarified so that the State
Chartered Institutions will have their privileges and rights
embodied in the law and not be subject to the Rules and
Regulations of each incoming Federal Reserve Board.
You will no doubt recall that, prior to the enactment of the
Federal Reserve Law, Messrs. Jackson and Mason appeared
before the Senate Committee and contended that it was beyond
the power of the Federal Congress to grant to the National
Banks the right to act as Executor, Administrator, Trustee and
in other fiduciary capacities; however, they failed utterly to
convince the Committee. The fiduciary powers mentioned are
under certain conditions granted to the National Banks by the
Federal Reserve Act and it is the opinion of your Legislative
Committee that this portion of the Act is unconstitutional and
as it has already been stated to you the Trust Company Section
has retained Messrs. John G. Johnson, of Philadelphia, and
Henry M. Campbell, of Detroit, to test this portion of the Act,
and although it may take several years to secure a final decision,
we feel convinced that our contention of the unconstitutionality
of this provision will be maintained.
All of which is respectfully submitted.
UZAL II. MCCARTER.
RALPH W. CUTLER.
F. H. GOFF.
OLIVER C. FULLER.
A. A. JACKSON.
JOHN W. PLATTEN.

Report of Protective Laws Committee.
NEW ORLEANS, August 28, 1915.
Forty-three States and the Island of Porto Rico have held
regular legislative sessions since the Richmond Convention,
and in several States special sessions have been called.
A majority of the bills introduced affecting Trust Companies,
were drawn either for the purpose of enabling these institutions to take such action as would permit them to become members of the Federal Reserve Associations, or else were directed
against the extension of such Trust Company privileges as the
Federal Reserve Board seems desirous of granting to its - members.
Nearly all of our States now have laws authorizing investment in stock of the Federal Reserve Banks, and in some States
authority has been definitely given to accept paper maturing at
a future date, and to purchase and sell the acceptances of others.
Colorado has authorized its banks to establish Trust Departments and requires that trust funds should be kept separate.
Connecticut Trust Companies must now maintain a reserve
fund of 1,2 per cent on demand and 5 per cent on time deposits,
not less than four twelfths of which must be in cash. Idaho,
North Carolina and Vermont have limited the use of the word
"Trust." The States of Missouri, Montana, New Mexico and
South Dakota adopted new banking and Trust Company laws.
The preparation of the Missouri law was largely under the
direction of a former president of this section, and the law is
worthy of being used as a model by other States. The South
Dakota law provides for the guaranty of deposits. The state
of Louisiana has appointed a Commission to revise its banking
laws. Oregon has named a Commission for the purpose of
drafting a Trust Company law for presentation at the next
session of its legislature. Washington has provided for administration of banks and Trust Companies by State Bank Examiners, and the code relating to false entries by Trust Company
officers makes the crime a felony instead of a misdemeanor. Massachusetts now requires National Banks, empowered to act as
Trustee, to make annual return to Tax Commissioner of property
which would be liable for taxation if held by any other Trustee
in the commonwealth.
Trust Companies in Detroit and Pittsburgh• have been especially active in their opposition to Paragraph K, Section II,
Federal Reserve Act.
Eight States, Michigan, Arkansas, South Dakota, Iowa, Kansas, North Dakota, Oregon and West Virginia have passed new
blue sky laws regulating the sale of securities.
The handling of this feature of protective legislation by the
Investment Bankers Association has been so efficiently conducted that, aside from keeping in touch with the work, your




143

Committee has not participated In the opposition to these
measures. Members of the Commitee have, in several instances, conferred with local interests in the various States
where new legislation was contemplated.
The question of the desirability for obtaining legislation in
all States permitting a Trust Company to accept and execute
trusts in any foreign State as well as in the State in which
it is created, has not been determined, and several States, including North Carolina, have specifically denied such a privilege.
Respectfully submitted,
E. E. FOYE,
E. D. HULBERT,
C. .0. PATCH,
LYNN H. DINKINS,

Report of Secretary.
To the Members of the Trust Company Section:
GENTLEMEN: I am pleased to report a year of growth and endeavor to serve the interests of our membership throughout the
country.
The reports of your Executive Committee and of your several subcommittees show the major activities of your officers. Serving as
Secretary of these various committees I have at all times endeavored
to carry out the work entrusted to me, and it is unnecessary to
further refer to what has been well set forth in these several reports which you have heard. I am pleased to report that the membership has shown very gratifying and continual growth. On September 1, 1913, we had a membership of 1,363.
The new Constitution adopted at that time made it necessary for some 510 companies enrolled in both the Trust Company Section and the Savings
Bank Section to elect in which Section they wished to remain.
Over sixty per cent, elected to remain in the Trust Company Section,
so that on September 1, 1914, we had a membership of 1,201. Under
the amendment to the Constitution adopted at that time enrollment
was allowed to associate members. That amendment provided that
companies doing both a Trust and Savings Bank business could enroll
in both Sections so as to receive the advantages of such enrollment,
but could only vote in one Section. Under that provision 148 companies have enrolled as associate members and with the increase of
twenty-three members our total enrollment to-day is 1.372.
I am gratified to report that our finances are in more satisfactory
condition, as shown by the financial report annexed hereto. The credit
balance of $969.01 has been transferred back to the general funds
of the Association. There is also on the general books of the Association a credit balance of $1,430.64 from the profits of the books of
"Forms for Trust Companies."
On Map 7 last there was held the Fifth Annual Banquet of the
Trust Companies of the United States, members of the Trust Company Section of the American Bankers' Association. From press comments 1.pd letters and statements from many of those present, it may
safely be said that this banquet was perhaps even more successful and
enjoyable than those of previous years. Beyond question this Trust
'Company Banquet takes rank with any banking function of the year.
This is evidenced not only by the demand for seats by Trust Company
institutions, but by the gratifying demands from other financial institutions. At this dinner there were present over six hundred representative Trust Company officials, bankers and others coming from
thirty-five different States in the Union. For the information of those
of our members who have not attended any of these banquets, it is
proper to say that the entire expense is met by the subscriptions of
those present and no expense whatsoever attaches to the Section or to
the American Bankers! Association.
It has been my pleasure and duty during the year to further the interests of the Section in every direction possible, both by articles and
interviews contributed to the financial press and by correspondence and
interviews with many of our members. Your Secretary's office is always
.
open and we are always pleased to see any of our members and to
answer to the best of our ability any and all questions that may be
brought to us.
September 1, 1914, to August 15, 1915, Inclusive.
CREDITS.
By appropriation of Executive Council
$8,500.00
By sale of Trust Company Proceedings
42.40
By sale of New York State Banking Law
5.00
$8,547.40
DISBURSEMENTS.
galaries
$3,795.40
Proceedings 1914
975.03 •
Executive Committee meetings
955.63
605.04
Rent
Postage, statiorery and printing
488.79
Convention expenses
144.40
272.39
Legislative Committee
Trawling expenses
133.54
125.00
Incidentals
Telephone and telegrams
49.61
New York State Banking Law
18.00
15.56 $7,578.39
Express
Credit balance

$969.01

Detailed Report of Proceedings.
Twentieth Annual Meeting TRUST COMPANY SECTION, Held at Seattle, September 7, 1915.
Seattle, Wash., September. 7, 1915.
The Trust Company of the American Bankers' Association
convened on Tuesday, September 7, 1915, at 10 a. m., and was
called to order by the President, Ralph W. Cutler, President of
the Hartford Trust Company of Hartford, Connecticut.
PRESIDENT CUTLER: The twentieth annual meeting of the
Trust Company Section of the American Bankers' Association
will please come to order. We will have the pleasure of listening to a prayer by the Rev. Carter Helm Jones, of this city.

PRAYER.
BY REV. CARTER HELM JONES, PASTOR OF THE FIRST BAPTIST CHURCH
OF SEATTLE.
Almighty and most merciful God our Heavenly Father. We call
upon our souls, and all that is within us to-day to bless Thy holy
name. We thank Thee that Thou are creator, preserver and server,
inspirer and saviour of men. We thank Thee that Thou art our
father, and that, like little children, we can come and lean upon
Thy great heart and listen to the music of Thy loving heart of peace.
We thank Thee for our fellowman. We thank Thee for Him who
came and taught us not only to love God the Father, but to love our
neighbors and so establish in a broad and beautiful way the universal
brotherhood of man. We thank Thee for human society. We thank
Thee for commerce, which is the high interchange between man and
man, between mind and mind, between heart and heart, between life
and life. We thank Thee that competition is more and more giving
way to co-operation. We thank Thee for the glory of helping one
another.
Bless now, on this glad day, this meeting of men solemnly charged
with significant responsibilities. We thank Thee for the great Association they represent. We thank Thee for the important Section in
which they meet. We pray that Thou wilt bless the institutions they
serve, and the country, the nation, and the world. 0! God give them
wisdom, and grace, and courage, and patience, and that beautiful
courtesy which they have won through the years that binds them one
to another. We pray that their ideals may always be lofty, that they
may always put manhood above money, character above coin, life
above lucre. And as they come to our beautiful city we pray that
Great grace may characterize their meetings and joy come .into their
hearts.
God bless our land and country. We thank Thee for all the way
Thou bast led us. We thank Thee for this beautiful intermingling of
varying races and nations that have made the composite power of our
great Republic, and may we not, as the pharisee, lift our eyes and
thank God that we are not as other nations, but walking softly, walking humbly, walking gratefully, we thank Thee that while the nations of the earth, so many of them have been swerved into the maelstrom of martial passion, and into awful international strife that
peace is upon our borders.
0! God may we preserve peace—a peace that is based on justice
and righteousness in the forum of brotherhood. And upon Thy servant
the President of the United States of America may such unusual wisdom and grace come that he shall be enabled to guide us, and lead
us that we may become, the leaders of the sisterhood of nations In
that way that makes for peace and righteousness and brotherhood.
And to Thy name, the name of the Father, the Son, and the Holy
Spirit, be present and everlasting praise, Amen.
PRESIDENT CUTLER: We shall be glad now to listen to an
address of welcome by Mr. Shorrock, of Seattle.

Address of Welcome, By E. Shorrock, President of the
Northwest Trust & Safe Deposit Co. of Seattle.
Mr. President and Gentlemen: There have been those who have suggested that the welcome which Seattle Bankers would extend at this
time would be of a somewhat mixed character, and that the best we
should do would be in some degree to play the role of Mother Hubbard
of Nursery fame.
I do not deny that there was some hesitation on the part of the
Banks to incur the responsibility involved in extending hospitality to
so large and distinguished a gathering; at the same time it may positively be asserted that since the decision was finally taken, no stone
has been left unturned to make every preparation suitable for the
occasion. I have yet to learn that hesitation in incurring responsibilities is not Infrequently the best assurance that once they are
assumed they will be fully met, and I confidently expect that your
verdict at the end of the week will be more than favorable.
It is true that Seattle, like many other cities in the country, is
not now at her best from the point of view of business prosperity,
though she is holding her own with most of her neighbors. Moreover,
we are bearing some heavy burdens due to the rapidity of our growth,
and to the great improvements we have made in the past ten years.
We have, however, something to show for our expenditures. If you
seek a monument of our past and present citizenship, we can only say:




"Look around." We are not in a position to embark upon any new
undertakings, or to try new municipal experiments. We have, however,
not wasted our patrimony in riotous living, but have laid the foundations of a great city. If this has somewhat strained our resources,
we believe that our children will rise up to bless those who have borne
such a burden to such an advantage. Naturally, we have surroundings not to be surpassed by those of any other conunercial city in- the
world, and, commercially, we believe the future of Seattle and the
Northwest is more than assured.
In addition we believe that the moral tone of the community, a
matter which is always of interest to bankers, stands high, and that
we are in the forefront of development in this direction.
On behalf of the Bankers of Seattle, I invite, you to form your own
judgment of these things, as we most heartily welcome you to all that
has been provided for you.

Reply to Address of Welcome and Annual Address of the
President, Ralph W. Cutler.
Mr. Shorrock and Ladies and Gentlemen:
It is my pleasant duty on behalf of the Trust Company Section of
the American Bankers' Association, representing more than 1,200 companies, and especially on behalf of the members present—most of whom
have traveled great distances to be with you—to respond to your address of welcome, and to thank you, Mr. Shorrock, for your cordial
greeting.
We desire also to thank the citizens of Seattle and the trust corn- '
panies and banks of the city for the' generous hospitality so delightfully extended to us. Your preparations for our entertainment are so
perfect that we shall, without doubt, enjoy ourselves to the extent of
our capacity while we are with you—and shall carry away the memory of a most delightful sojourn.
We are glad that Seattle is an American city, and that we Americans can take a proper measure of pride in her prosperity and progressiveness. Her title might well be "A Cosmopolitan City of Accomplishments." The men of Seattle do things for the good of the
•
city, and do not hesitate at trifles when considering the welfare of the
whole. You are working on a definite city plan—for the far future.
Is a hill in the wrong place! You take down buildings; sluice the
hill by hydraulics; carry away the earth in immense pipes to fill up
the undesirable tide lands; mace areas for useful purposes; put the
buildings back on the lowered site, and by doing all these things you
increase the grand list of the city for the benefit of the community.
Is a larger deep-water front considered desirable? You build a
canal-lock connecting your beautiful Lake Washington with Puget
Sound, and thereby increase your water-front sevenfold. Your electrical possibilities are almost limitless.
You have wonderful parka and playgrounds. Schools in plenty, a
growing university, pure water from the distant mountains in great
abundance, so that your city, with its miles and miles of smooth bottleyards, can be kept clean and sanitary.
Your vital statistics show that you seldom or never die—the rate
being the record for the United States.
Do you want music'and the fine arts? The best talent in the world
comes to you.
By your steamship lines and your railroads you can reach every point
on the globe. Where expense is involved you never hesitate. In
fact, you set its all a tremendous example of what courage and brains
can accomplish. You don't wait for things to turn up—you do things.
In a fitting verse by an unknown author, I salute you:
Somebody said that it couldn't be done,
But he, with a chuckle, replied,
That "maybe it couldn't," but he wouldn't be one
Who would say so, till he'd tried.
So he buckled right in, with a trace of a grin
On his face. If he worried, he hid it.
He started to sing as he tackled the thing
That couldn't be done—and he did it.
There are thousands to tell you it couldn't be done;
There are thousands to prophesy failure;
There are thousands to point out to you—one by one—
The dangers that wait to assail you;
But just buckle in, with a bit of a grin,
Then take off your coat and go to it;
Just start in to sing as you tackle the thing
That "cannot be done," and you'll do it.
Fellow Members of the Section:
On this twentieth anniversary of the birth of the Trust Company.
Section, I desire you to make a brief mental comparison of present
conditions with those prevailing at that time. In the first instance,
preparation by the Trust Company Section of a "Book of Forms,"
gathered from many sources In a most painstaking manner, and from
which the best was .selected, has helped to bring order out of chaos,
and to standardize the methods of conducting business. The forms
used by up-to-date trust companies are now clear and simple, and make.

TRUST COMPANY SECTION.

145

for great efficiency in handling
estates and trust funds. This process
Report of the Executive Committee by Thal H.
of evolution is still going forward
McCarter.
, and Trust Company officials are
quick and eager to adopt any improve
[The report of the Executive
ment which has been worked out
Committee is printed on page
successfully.
142 of this publication.]
Advertising has made great strides, and is being effectively
PRESIDENT CUTLER: Gentlemen,
conyou have heard the report
ducted on a scale which would
of the Executive Committee.
have seemed impossible even ten years
What action will you take upon
ago. By judicious work in this directio
it?
n, and by results accomplished, to which Trust Companies can point
Mn. MCCARTER: Mr. Preside
with pride, the public
nt, it occurred to me this mornmind has at last become convinc
ed that the settlement of an estate, or
ing that as there may be somew
hat differing views among our
the execution of a trust by the
Trust Company rather than by the
membership and in order that
we may not duplicate discussion
Individual, or even the family lawyer,
is the surest and best way to
on the situation if there is anybod
y desiring discussion on the
secure the exact fulfilment of the wishes
of the decedent. Whereas,
report, I would suggest that
many years ago, even the officers themsel
the question of the adoption of
ves may have felt some doubt
the report be postponed until
as to the perfect efficiency of the Trust Compan
after Mr. Campbell has delivy to accomplish all it
ered his address. I think that
was organized to do, I feel confiden that,
will enlighten us more, and
t
at this time, as the result
one discussion will cover both
of actual experience all doubts have been dispelle and
questions.
I venture the
d;
PRESIDENT CUTLER: If there
statement that, almost without exception, the wills of officers of Trust
is no objection, we will pursue
that course. What action shall
Companies represented here to-day designate the particular Trust Comwe take, gentlemen?
MR. JOHN H. HOLLIDAY (Presi
pany with which they are connected as the instrument to carry out their
dent Union Trust Co. of Indianapolis, Ind.): I move that
wishes. Otherwise, I should feel like claiming the methods of
action upon the report be postthat
.company were imperfect in some important particular.
poned until after Mr. Campbell's
address.
Voluntary Trusts—seldom established twenty years ago—are be(The motion was seconded.)
coming more and more popular with persons of wealth who desire
PRESIDENT CUTLER: All in favor
to
will say aye; opposed, no.
be relieved of the personal care of their property. Here the
The motion is carried.
Trust
Company is absolutely perfect.
MR. MCCARTER : May I speak
once more, Mr. President, for
Our trust officers to-day are almost invariably, and quite necessarily,
the purpose of reading a telegr
am that I have just receive
lawyers of marked ability and legal training, the best to be found
d
in
from Mr. John W. Platten, Presid
ent of the U. S. Mortgage
their community.
& Trust Company of New York,
Registration of stocks and bonds has become so much a matter
one of the members of
the
of
Executive Committee, who unfortunately
everyday business with large corporations that Trust
was unable to be here
Companies are
having been detained at the last
used, without question, for such purposes in almost every
moment by important business,
instance.
and whom we had expected would
This system has added a great safeguard against the
address the convention in
over-issuance of
connection with Mr. Campbell.
securities, and the transfer agent has often proved
•
to be a valuable
cheek on attempted fraud.
PRESIDENT CUTLER: The convention
will be glad to receive
The registration of commercial paper is develop
the message.
ing along practically
similar lines, and will grow to be an ordinary
Mn. MCCARTER : The telegram,
business custom as time
in addition to being the
goes on.
longest one I ever received, contain
ing 459 words, is replete
A very important idea in Trust Compan
with figures which make me dizzy.
y affairs has come into prominence with the establishment of the "Clevela
It is addressed to the chairman
nd Foundation" in the
of your committee and reads
city of Cleveland, Ohio, under a plan formula
ted by Judge P. H. Goff,
as follows :
president of the Cleveland Trust Compan
y—my predecessor in our
Section. Announcements of the establishment
NEW Yons, N. Y., September '7,
1915.
of Foundations have
Uzite H. MCCARTER, Esq.,
been made in:
Chairman Executive Committee, Trust
Milwaukee (Wisconsin Trust Company),•
Company Section, A. B. A.
New Washington Hotel, Seattle. Wash.:
St. Louis (St. Louis-Union Trust Company),
It is a source of great regret to me
Los Angeles (Security Trust and Savings Bank),
that I shall not find it possible to attend the convention, and especial
Spokane (Union Trust and Savings Bank),
ly the meetings of the
Trust Company Section in order to
Chicago (Harris Trust and Savings Bank).
express my thanks and appreciation for the very courteous invitation
The plan has been proved to be practical and
extended to me to make a
efficient. You are all
few remarks at the annual meeting
familiar with the general scheme. In my opinion
of the Section.
, it seems especially
Having Just completed the compila
adapted to cities where the population is
tion of the total resources of
between two hundred and
fifty thousand and a million, and to communities
the Trust Companies of the country in
where many men of
connection with the publicalarge means, having made their fortunes at home,
tion by our company of the forthcoming
and being actuated
edition of the "Trust Comby a spirit of benevolence, loyalty, and civic
panies of the United States," I am able
pride, desire to estabto give you the latest figures.
lish a fund to be used locally, for the uplifting and
The total resources as of June thirtiet
education of men
h, nineteen hundred and
and women, and the upbuilding and beautifying and
fifteen, amount to six billion three hundred
developing of the
and thirty million dollars,
city of their birth or residence. The Trust Companies,
an increase of four hundred and six
by their very
million dollars over those of
organization and prominence, are peculiarly adapted
June thirtieth, nineteen hundred and fourteen
to foster and care
, which figures compare
for such public-spirited gifts, and I believe the idea
with an increase of three hundred
will ultimately
and thirteen million dollars
be adopted in many more cities of our country.
in
the total of eleven billion seven hundred
anti ninety-five dollars
Our safe deposit vaults are at present estimated to contain
resources of the national banks during
more than
the corresponding period.
thirty-five billion dollars in property under our cotitrol
The percentage of increase for the
and care. This
Trust Companies is more
is many times the amount in our charge when the
than
Section was organdouble that for the National Banks
and the total resources of
ized, and represents more than one-fourth of the visible
the
wealth of the
Trust Contpanies are equivalent in
volume to fifty-four per cent,
United States.
of
the total resources of the Nationa
l Banks, as against forty-th
Our Annual Trust Company Banquet, in May has become
ree
an important
per cent. in nineteen hundred and
eight.
function in the business year, and serves to bring togethe
r Trust ComWhen we consider the signific
ance of these figures and recall
pany officials from all over the country at a time
remote from our
that
subsequent to the outbreak of the
Convention when, should concerted action be necessa
European war the New York
ry, it could rea(1City
Trust Companies alone participated
ily be taken.
to the extent of thirty-s
even
Per cent. in the one hundred million
Compared with conditions prevailing two decades
dollar New York City loan and
ago, these intwenty-three per cent. of the forty-fi
stances—and many more which doubtless may occur
ve million dollars subscri
to you—show the
bed
by New York financitil institutions
intelligent and dignified progress the Trust Companies
to the one hundred million
in your Section
dollar
gold pool and the prominent part
have made in this short space of time.
taken in the financing of foreiga
bills, the belief is justified that the
They now have an established position in public confiden
Trust Companies are destined
ce and esteem, attained by fair treatment, and hold a field
to play a still broader and increasi
the invasion of
ngly important role in
the
which, at present threatened by a rival interest, would
country's financial activities.
be a serious
menace to our well-merited prosperity.
It, therefore, seems of vital importa
nce if the fullest develop
In the world's work substantial progress has been
ment
of the nation's resources is to
made by your
be accomplished, that every
Section during the past year. It is not my purpose
step
be taken calculated to co-ordinate
to anticipate the
along acceptable lines the
reports of the Secretary of the Section, and the chairme
country's
now more or less disconnected financia
n of your iml units, the necessity
portant committees. These gentleman have all prepare
being
for further and concerted action
d complete deto secure amendments by Congres
tails of the work which has fallen under their special
s
care, and you
of the Act* which will render it desirabl
e for State Institutions to
will find their several reports to be of great interest.
become members of the Federal Reserve
Many important matters have claimed the earnest and
System.
prompt attenExpressing the hope for a successful
outcome of the labors of
tion of your executive officers and the Executive Committ
the
ee. As you
Section.
will presently be- officially informed, it was deemed imperat
ive during
(Signed) jona W. Femme
the past year to take immediate action looking toward the
,
protection
President, United States Mortgage
and Trust Company, New
of most vital interests, threatened by the operation of
York.
the Federal
Reserve Act, and affecting all Trust Companies. Althoug
PRESIDENT CUTLER: Gentlemen,
h in taking
inasmuch as Mr. Platten
this step considerable expense was involved, we did not
was requested and expected to
hesitate, so
address the meeting today,
great was our faith in your cordial co-operation and support
would
it not be wise to accept this telegr
.
am as his address and
And now that we are once more assembled in Convention,
make
it part of our proceedings?
we come
before you to render an account of our stewardship, and we
trust that
LYNN II. DINKINS (President
you will be satisfied with the performance of the duties you
Interstate Trust & Banking
have comCo., of New Orleans, La.): I
mitted to our charge.
make that motion, sir.
(The motion was seconded.)
PRESIDENT CUTLER: The next order of busines
s is the report
PRESIDENT CUTLER: Gentle
men, you have heard the
of the Executive Committee which will be presented
motion.
by Mr.
Is there any discussion of
it? If not, all in favor
Uzal H. McCarter, the chairman.
of the
motion will say aye; oppose
d, no. The motion prevail
s.




146

BANKERS' CONVENTION.

Next in order is the report of the Committee on Legislation,
which will be presented by Mr. John H. Mason, Vice-President
of the Commercial Trust Company, of Philadelphia.

"Can Congress Confer Trust Powers Upon National Banks,"
by Henry M. Campbell.

[The full text of Mr. Campbell's address may be found on
pages 137 to 141.]
Ma. MCCARTER: I move that the thanks of the Convention be
Report of the Committee on Legislation.
expressed to Mr. Campbell for his most instructive address, and
report is given on page 142.1
[This
that the same be received and filed and the officers of the SecPRESIDENT CUTLER: What will the Convention do with this
tion instructed to publish it in pamphlet form and distribute it
report?
to the members of the Section.
THEO. G. SMITH (Vice-President International Trust Co., of
JAMES C. CUNNINGHAM (Vice-President for the State of WashCol.): I move that it be received and placed on file.
Denver,
ington): I heartily second that motion.
motion was seconded.)
(The
PRESIDENT CUTLER: It was a real pleasure to hear this adPRESIDENT CUTLER: All in favor of the motion will say
dress, and what impressed your President more than anything
no. Carried.
aye; opposed,
else was the tone of confidence and sincerity which was woven
Next is the report of the Committee on Protective Laws.
into the fabric of it. All in favor of the motion which has been
made will say aye; opposed, no. The motion is carried.
Report of Protective Laws Committee, by Lynn H. Dinkins.
Now, gentlemen, we will have the privilege of discussing this
each.
[We print this report on page 143.]
subject. Speeches are limited to five minutes
PRESIDENT CUTLER: Gentlemen, you have heard the report
MR. FRANK W. BLAIR (President Union Trust Company, of
, Mr. Campbell
of the Committee on Protective Laws. I think those who have
Detroit, Michigan): Mr. President and Gentlemen
his logic is so conserved upon the Committee realize the very large amount of
has covered the ground so thoroughly and
that there is some
work that has been put into the report not only this year, but
vincing that no one here can doubt, at least,
Federal Reserve
during past years; and I feel sure that you will all vote to
question as to the legality of section K of the
time, thereaccept the report and place it on file, and, with such a motion,
Act. It does not seem to me out of place at this
the information
I would suggest a vote of thanks to the chairman and the other
fore, to call attention to some of the results for
you will include
members of the Committee for their very painstaking and
of Trust Companies. What I want to say to
efficient services.
quotations from several court decision.
trusts were
E. L. JOHNSON (Vice-President of the Leavitt & Johnson
Years, ago, when the requirements were simple, all
population and
Trust Company, of Waterloo, Iowa): I make a motion to that
managed by individuals. As the country grew in
in magnieffect, M. President.
in wealth business enterprises grew even more rapidly
to say
(The motion was seconded.)
tude and complexity. It then became advisable—not
the most
PRESIDENT CUTLER: All in favor of the motion will say aye;
necessary—to create an agency capable of executing in
opposed, no. The motion is carried.
efficient manner trusteeships which could not be effectively
The next business in order is the Report of the Secretary,
handled in the old way and which at times required the employby an
which will be presented by Mr. Philip S. Babcock, the Secretary
ment of larger amounts of capital than could be secured
authorizof the Section.
individual trustee. This requirement led to legislation
ing the performance of trust functions by Corporations organized
Report of the Secretary.
varied in
for the purpose. In the several States such legislation
[The Secretary's report appears on page 143.]
the manageform, according to the nature of the laws governing
PRESIDENT CUTLER: Gentlemen, what action will you take in
life. The
ment of trusts and the requirements of business
respect of the report of the Secretary.
s, which
growth through the years of this class of institution
MR. MASON: I move that it be accepted and filed.
evidence
came to bear the name of Trust Companies, is ample
(The motion was seconded.)
It should be
of the value of the services performed by them.
PRESIDENT CUTLER: It is moved and seconded that the
ed by
borne in mind that this growth has always been accompani
report of the Secretary be accepted and filed. All in favor of
demarcaa clear defining of the trust field and a clearer line of
is carried.
that motion will say aye; opposed, no. The motion
It should be
tion between trust business and banking business.
MR. MASON: So that we may expedite matters, as I am
and
borne in mind, also, that it has been followed by laws,
in the fessure all the delegates here will want to indulge
corpochanges in laws, placing an increasing obligation on the
if they can,
tivities provided for them by the Seattle Bankers
the Conrate management of trusts. Such laws are based on
I would move that a Nominating Committee of Five be apand common
stitution of the United States and on the experience
names
pointed by the President, which Committee shall receive
sense of business and have been crystallized by usage.
in writing from the delegates present from which they shall
recogCongress now endeavors to obliterate this business
select five persons as members of the Executive Committee
business
nition of the Trust Company and merge those lines of
for the term ending in 1918, said Committee to report back to
which as above stated have by experience and usage defined
this convention for our action.
themselves as being separate and distinct.
This will mean that it will be necessary to take a recess of
The effort of Congress is as Mr. Campbell ably sets forth
a few minutes for each member to express his views on a
not only contrary to the constitutional rights of the State,
piece of paper and hand the same over to the Nominating
but is contrary as well to the development of the law accordCommitte, and then the Nominating Committee can continue
,
ing to its principles as notably defined• by Mr. Estabrook
to do their work while the rest of the business of the conwhen he says that the development of the Law Merchant was
vention is being carried on.
according to its principles and quotes Justice Holmes' "The
PRESIDENT CUTLER: IS the motion seconded?
Life of the law has not been logic; it has been experience."
(The motion was seconded.)
Board
It has in attempting to lodge in the Federal Reserve
All in favor of the motion will say aye; opposed, no. It is carthemselves
.
.the power to authorize national banks to take unto
ried, and I will declare a recess of ten minutes.
s or
fiduciary relationships heretofore restricted to individual
PRESIDENT CUTLER: The convention will be in order. I will
under
g Committee:
institutions organized for the purpose and operating
to
appoint as Members of the Nominatin
the trust
charters or authority granted by the State in which
so
John H. Mason, Vice-President Commercial Trust Company, Philaproperty was located, aimed at a change of a character
and
delphia, Pa.
revolutionary that, of necessity, it demanded our attention
Hoge, President Union Savings & Trust Company,
action on the
James D.
action. Prompt attention and equally prompt
Seattle, Wash.
part of the Executive Committee of the.Trust Company Section
G. Bumstead, Director Title Guarantee & Trust Company,
of paraWilliam
resulted in the proceedings to determine the validity
Jersey City, N. J.
graph "K."
Henry A. Bell, President Citizens Trust Company, Paterson, N. J.
Congress being entirely without authority to confer fiduciary
Theo. G. Smith, Vice-President International Trust Company,
powers on National Banks all acts performed by the latter
Deliver, Colorado.
when working under permits granted by the Federal Reserve
The principal topic for your consideration at this ConBoard are ultra vires and void.
tention is the exceedingly vital question of the relation of
Thompson, in his excellent work on corporations, says:
the Trust Companies to the Federal Reserve Act—with all
of
"Perhaps the most general statement of the doctrine
which that implies—and I hope that, after the stated address
is unultra vires is that a contract of a corporation which
upon the subject, you will discuss it from every point of view.
govern.
authorized by, or in violation of, its charter or other
The problem presents differing phases in the various sections
purpose of
ing statute, or entirely outside of the scope of the
of the country, and, if concerted action on the matter is deemed
at all
its creation is void in the sense of being no contract
advisable at this time, in my judgment, it should be treated by
It; such a
because of a total want of power to enter into
The Trust Company Section in a comprehensive manner, and
in a
contract will not be enforced by any species of action
in the desire to act solely for the best interest of the Trust
good
court of justice; being void ab initio it cannot be made
Companies—not only in the large cities—but also all over the
no
by ratification, or by any succession of renewals; and
United States.
performance on either side can give validity to the unlawful
And to this end I bespeak your most careful and broadcontract, or form the foundation of any right of action upon it."
minded consideration of the whole question.
and
It seems proper, therefore, at this time to give caution
It is a pleasure to introduce to you Mr. Henry M. Campbell,
warning as to the outcome of what may arise from the enof Detroit, Michigan, who will address us upon the subject,
deavor of national banks to perform trust functions.
"Can Congress Confer Trust Powers Upon National Banks?"




TRUST COMPANY SECTION.

147

Suppose for instance a corporation gives a trust mortgage
MR. BRECKENRIDGE JONES (President of the Mississippi Valley
to secure a bond issue and later defaults and that, when the
Trust Co., St. Louis, Mo.): I would inquire .whether any of
bank endeavors to foreclose, some stockholders of the corporaus have the privilege upon our own initiative and at our own
tion opposes the action on the ground that no legal authority
expense, for example, of reprinting these addresses and sendrested in the bank to accept or administer the trust. The
ing them out. I have in mind that not only banks, but lawyers
effect of such a defence to the foreclosure might be far reachand judges of our courts would be interested in the subject, and
ing, but at the very least, there would result a delay beyond
I think it Would ha-re a good effect to send these addresses to
i
the usual time required for foreclosure, while the matter was
such people.
being carried through the court, which would cause large exPRESIDENT CUTLER: Undoubtedly, Mr. Jones, members would
pense and possibly serious .loss to the bondholders.
have that privilege.
Or, suppose a bank acting as trustee should convey title to
One of the members of the Executive Committee, Mr. Hulbert.
a piece of vacant real estate to a purchaser and the latter
has prepared an address for us, but being unable to come to
erects a building upon it. A dissatisfied beneficiary of the
Seattle, he has sent it on, and Mr. Henry F. Bell has kindly
trust might cause the title to be attacked and, even if he
consented to read it to the convention.
eventually did not succeed in causing the property with its
Ma. HENRY F. BELL: Mr. President and Gentlemen: The
improvements to be returned to the trust estate, the purchaser
address, which I have been asked to read is as follows:
would be put to trouble and expense.
Other hypothetical cases will suggest themselves to you at
Three Important Obstacles to Federal Reserve Membership,
once.
Is it not astonishing that some of our national bank friends,
by E. D. Hulbert.
in the face of this situation, are accepting trusts and for the
The rules .recently promulgated by the Federal Reserve Board for
sake of a small fee, are subjecting their clients to the possibility
the admission of State Banks to the Federal Reserve System contain,
of litigation and to serious pecuniary loss as well? It cannot
so far as I know, everything that State banks have asked for. So
be said in their behalf, that they are proceeding without a
far as the Federal Reserve Board is concerned. I believe it has done
realization of possible results, as the widest publicity has been
everything that it ought to do or can properly do to give this country
given to the briefs of our counsel and the opinions of other
"A unified banking system, embracing in its membership the welleminent authorities.
managed banks of the country, small and large, State and National."
If losses occur, mind you, they will fall upon the trusts
I believe practically all comniercial bankers are strongly desirous
and not upon the banks, as it is doubtful if the latter are
of having this condition brought about, but there are some objectionsubjecting themselves to danger. The Supreme Court in the
able things in tile present situation which it is not in the power of
case of Central Transportation Company vs. Pullman Company,
the Federal Reserve Board to correct. I wish to refer particularly
139 U. S. 24, at page 48, says:
to three, namely, the multiplicity of control, the granting of trust
"Charter of a corporation, read in the light of any general
powers to National banks and the prohibiting of common directors.
laws which are applicable, is the measure of its power, and the
At present there appear to be four distinct departments of the
enumeration of those powers implies the exclusion of all others
Government having separate control over member banks. No one
can tell where tile authority of one leaves off and the other begins.
not fairly incidental. All contracts made by a corporation
There are the Treasury Department, the Comptroller's Department,
beyond the scope of those powers are unlawful and void, and
the Federal Reserve Board and the Federal Reserve Banks. State
no action can be made upon them in the courts, and this upon
banks entering the system would still be subject to the control and
three distinct grounds: The obligation of every one contracting
supervision of State authorities, making an additional master. I
with a corporation to take notice of the legal limit of its
hope this will finally be settled by placing the supervision and conpowers; the interest of the stockholders not to be subjected to
trol of the member banks of each district in the hands of the
risks which they have never undertaken; and, above all, the
Federal Reserve Bank of that district under the supervision of the
interest of the public, that the corporation shall not transcend
Federal Reserve Board. This would practically extend the present
the powers conferred upon it by law."
system of Clearing House Examinations to all member banks and I
Whether or not liability rests upon officers performing such
believe no one familiar with this system will question the statement
illegal acts I am not prepared to say.
that it is immeasurably superior to any supervision that can be
Looking at the matter from an ethical point of view, does
exercised by the Comptroller's office. I believe the office of Compit not seem, therefore, that there rests on the national banks
troller of the Currency has always been filled by exceptionally able
an obligation to desist from attempts to exercise trust functions
and competent men, and the examinations conducted by that office
until it has been determined definitely that they have the legal
have been as thorough and intelligent as we can ever hope for under
right to do so? With the serious doubt of the constitutionality
any political system. Yet failures of National Banks have been so
of Paragraph "K," so emphatically before them, I cannot concommon as to discredit our whole banking system.
ceive how they can accept trusteeships at this time without
Our experience with Clearing House Examinations, however, has
violating the principles of square dealing. No reputable bank
demonstrated that bank failures can be prevented by proper superwould sell a bond or other security the value of which was
vision. I believe there has not been a single failure under that
doubtful. Is it not just as incumbent upon them to look to
system and we all know that under its operations a great many
the protection of their clients in the one case as in the other?
banks, both National. and State, have been cleaned up and put in good
Ma. MCCARTER : Mr. Sharrock has suggested to me an amendcondition which had gotten into unsatisfactory shape under political
ment to my motion which was carried a while ago, with respect
supervision.
to the publication of Mr. Campbell's address, and I would like
I am aware that the new rules intend to place the supervision of
to amend my motion—with the consent of the gentleman who
the State banks entirely in charge of the Federal Reserve Board,
seconded it—and make it include Mr. Blair's address as well,
and it must, of course, be assumed that the present Secretary of the
so that both addresses will be incorporated in pamphlet form
Treasury and Comptroller of the Currency assent to this, as they are
distributed to all members of the American Bankers' Assoand
both members of the Federal Reserve Board. It does not seem quite
ciation.
clear, however, that future Secretaries and Comptrollers will be boun4
Ma. CUNNINGHAM: I seconded the original motion, and I
by this action as the law only says that the Federal Reserve Board
cheerfully second this amendment to it.
will
may authorize the Comptroller of the Currency to forego examinaMR. MASON: While this has in view a very desirable end, I
tions of State banks. It seems to me it would be much more satisthink it would be a mistake for this Section to send out these
factory if all member banks were treated alike in this respect.
addresses to the members of the American Bankers' Association
Regarding the exercise of trust powers by National Banks, so far
generally. It would be treading on their toes perhaps, and I
as I know, no one pretends that tills was put in the law to sem
think we should confine our activities, especially at the present
any public purpose. No one pretends that such service can be performed by National Banks any better or as well as it is being
time, to the members of our own Section.
Mn. MCCARTER: The National Banks have not hesitated to
performed by trust companies organized under State laws. According to the best legal advice we can get, this part of the law is
come into our domain and tread upon our toes. Why should
unconstitutional. A Movement has been started by our trust comwe hesitate about this? I think the time has gone by when
pany organization to test the constitutionality of this section of the
diplomacy is going to gain anything. Right is going to win
law. It seems to me there should be no hesitation in doing this as no
upon this question. I urge my motion, Mr. President.
question of public welfare is involved except, perhaps, on the side
MR. SIIORROCK : If I may a so, I would state that the
of the trust companies.
reason I suggested this is that it involves a legal question.
The most serious objection of all is the prohibiting of common
It is not a matter of mere opinion. It seems to me that it is
directors. Congress has decreed that where there is a common
well for the members of this Association to learn just what
ownership of stock there may be common directors, but that where
the situation really is, and what is aimed at by this motion is to
the ownership of stock is not common there shall be no common
disseminate information. It is not to attack anybotly or anydirectors of member banks. This, manifestly, Is intended to legitimize
thing. It is to disseminate information to those who at the
those cases where National Banks have organized trust departments,
present time may entertain different opinions, that is all.
calling such departments separate corporations, although no certifiPRESIDENT CUTLER: If there is nothing further to be said the
cates of stock are issued and there is not much to indicate that the
question will be put. All in favor of the motion will say aye;
department is a separate corporation, except a statement to that
opposed, no. The motion prevails.
effect on the back of the stock certificates of the National Bank.
The question now comes on the original resolution as amended.
This, of course, is done for no otter purpose than to enable the
All in favor of the resolution as it is now amended will say
National Dank to do, through its trust department what it could
aye; opposed, no. The ayes have it, and the resolution as
not do as a National Bank, and such trust companies automatically
amended is adopted.
become members of the Federal Reserve System, without




becoming

148

BANKERS' CONVENTION.

,
Mr. Campbell referred to? If so, are they being raised together
it
or is one method being taken up first? I presume that
would follow that if it was found that this measure is unconstitutional, everything would necessarily fall because that would
put a stop to anything which the State had done.
MR. CAMPBELL: I would say that all the questions which
are involved in these proceedings will of course depend upon
whether the Act is in contravention of the State law. If it is,
then under the terms of the Section itself the. Federal Reserve
Board would be without power; and undoubtedly the State
court would prefer to dispose of the question on that ground
rather than to go into the broader question of the constitutionality of the Section. But if it should happen that the State
court should be of the opinion that it was not in contravention
of the State law, then the question of constitutionality is presented, and only in that event. I am inclined to think that in
almost every case that question will be disposed of in accordance
with whether the Section is found to be in contravention of the
am trying to
State law or not. I would like to get a case, I
conframe up one now, where the question would be solely the
stitutionality of the Act itself.
that after
MR. MASON: I suppose everybody here realizes
by the Conthe amendment which I think will be passed
any action
vention this Section will be without power to take
on the
in the premises. What has already been done has been
that
initiative of certain individual Trust Companies believing
ed by Mr. Campbell to say
PRESIDENT CUTLER: I am authoriz
Companies
it was for the best interests not only of the Trust
ask him any questions he will enthat if any members desire to
for the
themselves, but—at least, I for one—believing it was
•
deavor to answer them.
nd
best interests of the National Banks. I cannot understa
ask Mr. Campbell what is the
MR. JONES 5 I would like to
when
why they are willing to assume these responsibilities
n?
present status of the litigatio
do so.
there seems to be so much doubt as to their right to
Mn. CAMPBELL: There are two proceedings now pending. One
If it is not out of order, I move that it is the sense of this
-General of Michigan, in the nature
was brought by the Attorney
meeting that the action taken by the individual Trust Companies
of a quo warranto proceeding against a national bank. Proto test the constitutionality of Section K of the Federal Reare rather lengthy, and the case is
ceedings of that character
serve Act be approved of as being in the best interests of the
just about at issue now and will probably come before the court
Trust Companies of the United States.
an action of a little different nature,
in October. The other is
(The motion was seconded.)
but it raises the same question. It is also an original proceedPRESIDENT Cumma: Is there any discussion of this motion?
of Joliet
ing. That is in Illinois. The First National Bank
MR. StiosaocK : In the event that the amendment suggested
it applied to the proper State offiwas granted the powers and
by Mr. Mason as being likely to carry is adopted by the Ameriy to grant licenses to Trust Companies
cial who has authorit
these
license.
can Bankers' Association, will the expenses incurred in
for a license, and that official refused to issue the
n Bankers'
litigations be borne by this Section or by the America
by way of mandamus to the Supreme
Then the bank applied
In
Association.
Court for an order compelling the issuance of the license.
American
and argue
Ma. Mesos : I can answer •• that certainly the
that case we are privileged to appear and file briefs
. This Section
Bankers' Association will not pay tile expenses
have practically arranged for similar proceedings
the case. We
to use its
es do more
will not pay'the expenses either. It has no power
in Massachusetts, in which State Trust Compani
be paid out of the
money for such a matter. The expenses will
Banking business than is done by Trust Comof a National
s, and as
in one or two
voluntary contributions of individual Trust Companie
panies in perhaps any other State. Possibly
in the East have pracmatter of fact certain Trust Companies
proceedings will be instituted. You see, each
other States
question of
tically agreed to stand the expense.
State may present a little difference so far as the
will be
MR. McCitrum: I might say that an opportunity
law is concerned. In some States there is an express prolocal
ly step up to the
afforded to all Trust Companies to eventual
in other States there is a limited consent, and in still
vision,
the
Captain's desk and settle (Laughter).
other States nothing is said about the matter. Of course,
motion
PRESIDENT CUTLER: Gentlemen, all in favor of the
constitutional question lies back of them all. We were in hopes
no. It is carried.
to
Made by Mr. Mason will say aye; opposed,
the Federal Reserve Board would co-operate with us
that
San Antonio Loan
, the bank interMa. EDWIN CHAMBERLAIN (Vice-President
expedite the trial of these cases. In Michigan
City, re& Trust Co., San Antonio. Texas):
ested, which was the First National Bank of Bay
the report
and take the onus
Would a motion be in order to accept and file
quested the Federal Reserve Board to appear
to date they have
made on behalf of the Executive Committee?
of the litigation upon its shoulders, but up
PRESIDENT CUTLER: Yes, sir, if no further discussion is denot done so.
something on
sired the chair was about to suggest such a motion.
Ma. CUNNINGHAM: I had thought of saying
ntly and fully
Ma. CHAMBERLAIN: I move that the report made by the
this subject, but it has been covered so intellige
and filed.
particularly to
chairman of the Executive Committee be received
that many of us who give our attention more
as it has been
(The motion was seconded.)
the commercial side are satisfied to rest the case
report
MR. JONES: There is one recommendation in that
presented.
time; and that
Mind is the
that I do not think we want to make at this
One of the strongest matters that occurs to my
not to join
of these
is that the Trust Companies are recommended
fact that if the Federal Reserve Board can do many
it seems
the Federal Reserve System at this time.
things that it is said it can do and is trying to do, why,
dation, if you will
has. For
Ma. MCCARTER : That is not a recommen
to me that would be giving up rights that the State
Trust Companies.
certain
pardon me. It is merely advisory to the
instance, the State creates a Trust Company with
framed as to avoid
State has
MR. CHAMBERLAIN: My motion was so
powers to do certain 'things in the State. Now the
moved that the report
ons, and
any such recommendation. I simply
its own examiner to examine into its own instituti
of course, if it is carried,
with a
be received and filed. That motion,
how can the Federal examiner come in and interfere
committee.
for a long
carries the report over to the new
domestic matter of that kind. I have had in mind
Pa.: The remark which
cannot be
Mn. D. F. GUINAN, of Mahonoy City,
time that the making of this Federal Law general
line of thought with me that I
ons in
has just been made creates a
done; that is, it cannot be made to cover State Instituti
ng this question. I believe the
for
think is uppermost in discussi
the way that it does national institutions. The reasons
ed is that of co-operation with
es have
spirit that should be manifest
this are obvious. We all know that our Trust Compani
than combating it.
exthe Federal Reserve Law rather
to do with local matters. The Federal Government does
we are not combating the
a
MR. MASON: I would say•that
ercise authority through many channels. I happen to be
What we are striving to do is
Federal Reserve Act in any way.
member of our State Board of Regents, and I know that there
a provision in that act. Many
way
to test the constitutionality of
are many Federal laws that we come in contact with in the
tile Federal Reserve Act, but
underof us are cordially in favor of
of getting funds from the government, but they do not
ionality of
there is a question in our minds as to the constitut
take to say what we shall do with those funds. We get funds
Portion of'it.
in California
a certain
from the same source that the agricultural colleges
that we should
for
MR. JONES: I heartily accord with tile idea
and Florida get them, but we are too far North to use them
As to whether
ns differ
meet this matter in a spirit of co-operation.
the propagation of the same fruits. • You see, conditio
in under the
Trust Companies and State Banks should come
in the different States, and I do not think that a general law
not to come in,
act or not, is a question. If they are advised
could be made applicable to all the verying local conditions.
do not like to vote
why, reasons should be given. Personally, I
MR. SHOnnOcK : As I understand Mr. Campbell, there are
want to see this
is
upon this proposition as it stands. I do not
two methods by which this matter is being dealt with: One
es not to
section put forth a recommendation to Trust Compani
that of the Constitut!onal provision under the Federal Law, and
nts
go in to the Federal Reserve System until certain amendme
the other is the power of the States. Now, I would inquire if
indicating
have been made to the Federal Reserve Act, without
both of those questions are being raised in the proceedings that

of the Act relating
stockholders or being subject to the provisions
a great majority of
to supervision or reserve. On the other hand,
common with National
independent trust companies have directors in
Banks and other trust companies.
such directorships
Every one familiar with the subject knows that
banks unless
interfere in no way with the competition between these
control of these
there is somewhere in the background a common
there were no
institutions which would exist just the same if
the few instances where
' common directors. In fact we know that in
ns, those who
there is common control of great linarcial institutio
them.
exercise the control are not directors in any of
Act is a
I am strongly of the opinion that the Federal Reserve
involving the
real reform in our banking system and that panics
be unknown
general collapse of credit and suspension of payments will
next crisis
in this country in the future. I believe that when the
be comapproaches, State banks doing a commercial business will
It will
pelled to join the Federal Reserve System for self-protection.
voluntarily
be far better off for all concerned to have them enter
general,
before that time arrives. Before any such action becomes
are not to be
however, trust companies must feel assured that they
penalized.
It was expected when the Federal Reserve Act was passed that
amendmany amendments would be necessary. I believe a few simple
ments to cover the points outlined above would be entirely in the
Interests of public welfare and would bring the desired results.




TRUST COMPANY SECTION.
what those amendments are. That would be putting us in
the position of antagonism to the system. I have been studying
the question as to whether the company with which I am connected should go in or not, and I have some reasons why I have
hesitated about it, but if I was going to come before the public
with a recommendation that the Trust Companies should not
go in I would feel it incumbent upon me to give the reasons
why, and to state what amendments to the law I thought should
be made:
Mn. CHAMBERLAIN: I think the motion I made covers fully
what Mr. Jones suggests. My motion was simply that the
report of the chairman of the Executive Committee be received and filed, which would carry the report over to the new
Executive Committee for action, and we would not be approving
any recommendation that it contained in the report made by
the Executive Committee at the Old Point Comfort meeting, in
the spring.
Ma. MCCARTER: The Executive Committee has given this
matter a great deal of study during the past year, but as charman of the Committee I am not prepared today to state all of
the reasons why Trust Companies should not go into the Federal
Reserve System. I have my individual view about it. Mr. Jbnes
has his. Every man in the room who has studied the question
has his individual views upon it. Now, all that this report
says is that the Executive Committee is not prepared at the
present time to advise Trust Companies to enter the System
until certain amendments shall have been made to the Act.
What those amendments are to be can only be determined
after a sufficient observation of the workings of the System.
I think it would be premature for us to attempt to schedule
the objections. Maybe six montns from now that can be done.
MR. JONES: But the question whether Section K of the Act
Is constitutional or not has nothing to do with whether
we
shall come in or stay out, has it?
Mn. MCCARTER: Certainly it has.
• PRESIDENT CUTLER: Gentlemen, this discussion should
be confined to the motion made by Mr. Chamberlain,
which is the
question directly before the meeting.
Mn. MCCARTER : I entirely agree with Mr.
Chamberlain's .motion, and I hope it will be passed.
PRESIDENT CUTLER: Wap Mr. Chamberlain's motion seconded?
MR. JONES: If it was not, I will second it now.
PRESIDENT CUTLER: Then if there is no further discussion I
will put the question on the motion made by Mr. Chamberlain.
All in favor of it will say aye; opposed, no. The motion is
carried, and the report of the Executive Committee is received
and filed.
Mn. McCAuTga : For those kind words, on behalf of the Committee, I thank you. (Laughter.)
Ma. MASON: I move that we adjourn for luncheon and
reconvene at half-past 2 o'clock.
(The motion was carried.)
PRESIDENT CUTLER: All in favor of the motion will say
aye;
opposed, no. The motion is carried, and the Convention stands
adjourned until half-past 2.
Recess was then taken until 2.30 p.m.
AFTERNOON SESSION.
PRESIDENT CUTLER: The Convention will come to order.
The first business this afternoon will be a general discussion
of any topics that may be proposed. Has any member anything
to suggest undef this head?
Mn. LYNN II. DiNiciNs, of New Orleans, La.: I wish to
direct the attention of the Section to the proposed amendment
of By-Law VI, under the caption "National and State Legislation." Under the terms of the amendment it is proposed to
curtail the activities of Various committees that have to do
with legislative matters, and to require that all matters of
legislative interest be first submitted to the Law Committee
of the A B A for approval before being pushed by the Section.
I desire to offer a motion that the representatives of this
Section on the Executive Council of the American Bankers'
Association be directed to oppose any such amendment; and I
especially move that Mr. McCarter be directed to remain in
Seattle until this question has been disposed of and instructed
to work and vote against the amendment first, last and all the
time (laughter and applause).
(The motion was seconded.)
MR. MASON : I presume Mr. Dinkins' motion refers to the
amendment which will be introduced in the convention of the
American Bankers' Association. Now, I have a very warm
spot in my heart for Mr. McCarter and I know that he wants
to get away. The Executive Council of the American Bankers'
Association has already approved that amendment, and it will
go before the Convention and will undoubtedly be passed.
The incoming Executive Council, of which I have no doubt
Mr. McCarter will be a member, will have nothing to do with
that amendment. So we are powerless to express our views
and cast our vote in the general convention when it passes
apon the matter.
Mn. DiNicnis: We all know that Mr. McCarter is an able
debater, and, while I regret that he will not have an opportunity to oppose this amendment in the Council, I suggest that




149

he be required to remain in Seattle and oppose it on the floor
of the Convention.
MR. MCCARTER: Permit me to say that I shall leave Seattle
to-morrow morning, and will be unable to remain to participate
in that convention. However, there are many men with broad
shoulders and big fists here, and I think it is the duty of every
Trust Company man—of every member of every Section outside
of the National Banking Section—to oppose an amendment of
this kind. It seeks to curtail the autonomy of the Section, and
makes us subservient to the general body. Some day they will
go too far. They have taken many steps already in this direction, and it is attempts of this sort that will do more to disrupt interests in the general affairs of the American Bankers'
Association than any other thing. Those of you who are in
town to-morrow should attend the convention, and when this
amendment comes up, vote against it even though you don't
speak against it.
MR. DINKINS: The amendment reads plausibly, and I question whether with just the facts presented in the proposed
amendment any of us would seriously object to its adoption;
but we think that behind it is an intention to restrict the activities of this Section.
MR. W. C. HEIVENHEIMER, of Jersey City, N. J.: It seems to
me that this amendment only affects proposed legislation.
Nothing is said in it about our instituting any action to test
the constitutionality of the Federal Reserve Act.
PRESIDENT CUTLER: Gentlemen, is there further discussion?
If not, all in favor of the motion made by Mr. Dinkins, that
the members of this Section be present in the Convention and
oppose the passage of this amendment will say aye; opposed,
no. The motion is carried.
Now we will proceed with the regular order, which will be
the roll call of the States. The reports of the States VicePresidents are always very interesting, and many of them come
a long distance for the purpose of appearing before the Convention and reading their reports.
The roll call then proceeded and the following States responded:
ROLL CALL OF STATES.

ARIZONA.
REPORT OF VICE-PRESIDENT FOR STATE OF ARIZONA.
The past year for the Trust Companies of the State of Arizona has
been one of prosperity, taken as a whole.
The first part of the year, on account of the very low price of copper, due to the temporary cessation of exports, was extremely hard,
and we were all down-hearted, and thought the year would be a bad
One, but in about ninety days the embargo on copper was -lifted, and
the price went up at once to a figure that enabled all good properties
to work, and even the prospects could ship.
Deposits have held up better this year than for some years past. All
of the Trust Companies showing a substantial growth.
The people of the State of Arizona are slowly but surely learning
what a valuable institution a Trust Company is in a community, and
the Trust feature of the Trust Companies in this State shows by the
large increase that this Department is more fully appreciated by the
Public than ever before.
Our Legislature attempted to pass some most radical legislation, but
the Senate contained some solid men, business men, and bankers, and
the rank bills concocted by the House were killed by our Senate. It
was foreseen that this would be a socialistic crowd, and before election
some good men were forced to make the sacrifice, give up their business,
and go into politics. If this precaution had not been taken, the banks
and Trust Companies might have been harassed, and perhaps put out of
'business through improper and manifestly unfair laws.
Regretting my inability to be present in person, I am,
Yours very truly,
N. E. PLUMES.
COLORADO.
DURANGO, COLORADO, August 7th, 1015.
Secretary of the Trust Company Section, American Bankers'
Association, New York City.
DEAR SIR: I am pleased to report for the State of Colorado as
follows, viz.:
From the accompanying transcript made from the report of the
State Bank Commissioner it will be seen that there were twenty
Trust Companies in the State in 1914 and only nineteen in the year
1015. Notwithstanding the decrease in number, the total resources
show an increase for this year about one and one-fourth million
dollars. The proportion of Trust Companies to other banks in the
State is small, there being over two hundred banking institutions of
various kinds in Colorado. Those who have reported to nie individually speak very hopefully of their prospects. The principal business
in all of them is probably the Savings Department, there being no
exclusive Savings Banks as I recall at the present time in Colorado.
The growth of the Trust Company business in the larger cities, such
as Denver, Pueblo and Colorado Springs, has been very considerable
and I believe that with the continuous and gradual development of
the State and the natural and constant increase of wealth and
deposits, Trust Companies will be made use of more and more and
are bound to rapidly increase in size and influence. Our laws are very
favorable to Trust Companies and the tendency is more and more to
make use of their service rather than the Commercial Banks,
and.
investors are 'Looking more than ever to Trust Companies for advice

150

BANKERS' CONVENTION.

There has been one
and for the purchase of investment securities.
the amendment to our
Important event during the year, which is
National and State
Trust Company law by the legislature permitting
conformity with the
Banks to enjoy Trust Company privileges in
inclination of National
Federal Reserve Act. I doubt very much the
business and also
Banks to perform any considerable Trust Company
estates to have them
doubt the desire of investors and managers of
and improvement
do so. The Trust Company records of increase
y for such companies;
show rather a decided need in the communit
our large cities has
and the general character of service rendered in
Trust Companies
been such as to place them in line with the large
of the United States.
Respectfully submitted,
JOHN L. MeNEIL,
Vice-President for Colorado.
CONNECTICUT.
Conn.:
C. S. Bytes, Treasurer, The Soymour Trust Co., Seymour,
of
As vice-president of Connecticut of the Trust Companies Section
following
the American Bankers' Association, I am pleased to make the
brief report:
t.
The past year has been very unusual in many ways in Connecticu
but, owing to
General business, as a whole, has been below normal,
and
abnormal,
the European situation, certain lines have been very
inthe last six mouths of the year has seen many of our industries
capacity, all of which has
creased to double and treble their normal
anding the
indirectly helped many other lines. However, notwithst
have
uncertainties of the first part of the year our Trust Companies
official reports available
shown a very gratifying growth. The last
.67, and with
show an increase in assets for nine months of $6,421,992
the year, the increase
the large increase shown the latter part of
for the full year, one
will, no doubt, be well over eight million dollars,
have also shown a
of the largest in our history. Surplus and profits
Trust Companies
substantial increase. There have been seven new
1, 1914, and one
organized and opened for business since September
a net gain of six, or a
State Bank retired by consolidation, making
.
total of fifty-nine State Banks and Trust Companies
are only three, and Trust
State Banks in Connecticut, of which there
Companies are practically identical.
and Trust Companies
The Connecticut Association of State Banks
Banks and Trust Comwas organized January, 1915, and forty-two
was a legislative year in
panies are represented therein. As this
banking laws,
Connecticut, there were a number of changes in our
principally as follows:
a double to a
Our State Banking Department was changed from
made a legal insingle-headed commission form. Acceptances were
deposits in National
vestment under certain restrictions. Savings
Savings Banks,
Banks were indirectly taxed the same as our Mutual
.
and savings deposits in State Banks and Trust Companies
to be examined in
Under certain conditions, State institutions are
New pledge of stock
future in conjunction with the Federal examiner.
to conform to the Fedlaw and our reserve fund law was amended
ns may join the Federal Reeral Reserve Act, so our State institutio
to have taken advantage of the
serve System. However, none appear
privilege up to the present time.
of our Trust Companies are
The Trust and Judiciary Departments
the State.
showing a very substantial increase through
referred to by one of my
The educational and publicity campaign
our people are beginning
predecessors is apparently bearing fruit, and
equipped to handle Trust Funds
to realize institutions organized and
advantage than the individual.
and estates can do so to much better
rather slowly, we are looking
While general business is picking up
the Trust Companies will, no
forward to a good full business, and
share.
doubt, as in the past, get their full

effective
fled by the thirteenth legislature, which modification became
Companies to
during the present year, permitting banks and Trust
use of the
purchase Federal Reserve Bank stock, and restricts the
eight
word trust. Of the eleven (11) Trust Companies in the State,
American
(8) are members of the Trust Company ,Section of the
Bankers' Association.
Respectfully submitted,
R. L. SHEPPARD.
KANSAS.
A.
Ma. PHILIP S. Beacooic, Secretary Trust Company Section, A. H.
I beg leave to
DEAR Sin: Replying to your letter of July 15th,
Comsubmit the following report showing the condition of Trust
a brief history of the
panies in Kansas at the present time and
work done during the year:
State at present have
Trust Companies actively engaged in the
.03. The
,
combined resources of. $3,529,753.03. Liabilities $3,529,753
interesting, but in brief,.
growth of Trust Companies in Kansas is
are growing in popular
all I can say is that the Trust Companies
Banks and the
favor. There is no friction between the Kansas
the banks in the larger
Trust Companies. The tendency now is for
in one good strong comcenters to combine their common interests
needs of their cuspany in their locality to care for the growing
tomets along Trust Company lines
ons is now assure&
In short, the successful future of these organizati
in our commonwealth.
SCOTT HOPKINS.

IDAHO.
SEATILE, WASHINGTON, September, 7, 1915.
OF TRUST COMPANY SECTION,
REPORT OP VICE-PRESIDENT FOR IDAII0
OF AMERICAN BANKERS' ASSOCIATION.
Portland, Oregon.
(Trust Officer, Title and Trust Company,
Secretary, Idaho Trust Company, Lewiston, Idaho.)
Formerly
infancy, and while there are
In Idaho the Trust business is in its
to the supervision of
(11) institutions in the State subject
eleven
powers, there are but two
banking department which have trust
the
trust business, one in Lewiston,
(2) which are actively pushing the
and the other in Boise.
scattered and engaged principally
The population of the State is
mining and the manufacture of timber,
in agriculture, stock raising,
character; therefore, it is not proband is necessarily rural in its
operate in that State with any large
able that a Trust Company can
to the practice of Trust funcdegree of profit if it restricts itself
four principal cities of the State,
tions, except it be in the three or
educational campaign.
and there conducts a long and active
organized under the general corUntil 1911, Trust Companies were
In 1911 the original of the
poration act, and by special charter.
Except those companies doing
present banking law went into effect.
are authorized to do a banking
a title business, all Trust Companies
the exception of the two combusiness under this law, and with
in the State treat their Trust
panies mentioned, all Trust Companies
powers as a species of side-line.
a minimum capital of a Trust ComThe banking act provides that
($50,000), regardless of the
shall be fifty thousand dollars
pany
forth the usual purposes
of its place of business, and sets
population
incorporated, otherwise the Trust
which a Trust Company may be
for
same regulation as the banks. This
Companies are subject to the
Regulation is no doubt due to the
apparent neglect of Trust Company
which they do. The act was modismall volume of Trust business




Topeka, Kansas.
MAINE.
ROCKLAND, MAINE, August 13, 1915.
sent out under
GENTLEMEN: In accordance with a circular letter
Company
date of July 15, 1915, by your Secretary of the Trust
roll call or
Section, American Bankers' Association, under the
by the ViceStates, the following clause is found: "To be answered
with the
President of the Section in brief written reports dealing
the prehistory of the Trust Companies of the several States during
ceding year and with the conditions under which they are now operating and other matters now pertaining to them." As Vice-President
of the Trust Companies Section for the State of Maine, I beg leave
to submit the following report:
in office has
So far as I am able to learn none of my predecessors
in the way
ever made any report, and therefore Mae is no guide
at
of information or forms as to prior knowledge on the subject
my command.
of
The fiscal year for Trust Companies in Maine ends in October
that
each year, and the last full Bank Examiners' Report closes in
24, 1915,
month of 1914, with a supplementary report ending April
history
from which all available data can be obtained. Taking the
1895
and growth of Trust Companies in the State we find that in
0.00
there were seventeen Trust Companies with a capital of $1,400,80
and surplus deposits representing gross assets of $6,641,586.99.
This in October, 1914, about twenty years, had grown to forty-six
Trust Companies with eighteen branches and a capitalization of
$3,665,409.00 and gross assets of $66,371,362.27.
The report of April 24, 1915, not only shows no gain in assets but
this
a shrinkage of some $60,000.00 from the previous six months,
with the profits under normal canditions, being (Inc almost wholly
of investments to
to a depreciation in values, and a scaling down
market prices, representing in many cases large amounts. Two of
the smaller Trust Companies have been in the hands of receivers
for two or three years past, and an additional one was overtaken
by financial trouble in May last.
One new Trust Company and three branches represent the gain in
organization in the past year.
'raking into account the business depression prevailing, with few
exceptions, in all lines of endeavor throughout the country, it can
be reported that the Trust Companies of Maine are in a sound and
prosperous condition.
The Bank Examiner informs me that during the last session of the
Legislature, closing in March of the present year, nothing was taken
from or added to the powers and duties of Trust Companies in
Maine. By his ruling all Trust Company directors must now be the
bona fide owners of not less than ten shares of stock.
Respectfully submitted,
E. A. BUTLER,
Vice-President of the Trust Company Section of Maine.
MARYLAND.
REPORT OF L. S. ZIMMERMAN. PRESIDENT, MARYLAND TRUST COMPANY,
BALTIMORE.
A comparison of recent reports of the Trust Companies of Maryland with those of the previous year indicate a healthy condition,
and quite generally an increase in business and earnings. Naturally,
this is very gratifying in view of the unsettled conditions which have
prevailed during the period and the uncertainties of the immediate
future. Comparatively little new business has been undertaken, the
general attitude on the part of most of the Companies being to foregopromises of large profits in order to conserve resources.
There has been no legislation affecting Trust Companies in this
State, this being an off-year in the meeting of the Maryland
Legislature.
Up to the present time no Trust Company in the State has made application for membership in the Federal Reserve Association, and
there are no indications that such action is under consideration.

TRUST COMPANY SECTION.
The efforts which have been and are being
made to educate the
general public to understand that Trust
Companies are in position
to render service to all classes are showing results,
and there is a
noticeable increase of the use of these instituti
ons by people who have
not heretofore availed of their services.
MISSOURI.
Mn. JAMES E. BROCK, of St. Louis:
As Vice-President for Missouri, I
have the honor to report that there are
sixty-seven Trust Companies
in our State, with total resources
.
of $155,122,775.67; capital, $20,623,600; surplus, $17,835,101.01; net
undivided profits, $4,946,297.75,
and deposits of $167,433,941.91, of which
$30,000,000 are savings deposits. There is a gradual growth
in the popularity of the Trust Companies over individuals in the acting
as trustees in all fiduciary relationa.
At the annual Convention of the Missouri Bankers' Associati
on in
May a committee was appointed to consider
the matter of the relation of State Banks and Trust Companies to the Federal
Reserve System. There are 1,348 State Banks and Trust Companie
s in Missouri,
and up to this writing only two have joined the Federal Reserve
System.
While the general financial and commercial conditions
in the commonwealth are sound, there seems to have been no inoculati
on of the
"watchful-waiting" germ to the end that all lines of
business are
practically at a standstill. Capital remains timid, while
money has
accumulated and is stagnant in the larger banking centers,
and the
general depression continues with no indication of early relief.
NEBRASKA.
REPORT OF R. C. PETERS, PRESIDENT OF PETERS TRUST COMPANY OF
OMAHA, NEBRASKA.
Since my report last year at Richmond, there has been a meeting of
our State Legislature and there was considerable attempted adverse
legislation. In the first place, there is a law which makes mortgage
s
of our State tax exempt to the mortgagee, provided there be a
clause
in the mortgage to that effect. A large portion of the business
of our
Trust Companies in the State is derived from the negotiati
on of farm
loans. Quite a number of our State banks took advantag
e of this law
and placed their capital in farm mortgages, so they
did not pay any
tax. This law was attacked, and as a compromise
an amendment was
added to our general revenue law, taking from banks
and Trust Companies the right to deduct the securities from their
assessment. This,
however, I think should be satisfactory.
The most serious attack made against our State Trust
Company laws
occurred during the last days of the Legislature, after
the expiration
of the time for the introduction of new bills, by the
legislators themselves through a Governor's bill to ratify, in this State,
the clause in
the new Federal Reserve Law, permitting banks to exercise
full fiduciary
powers, which would grant to both State and National
banks powers
of a Trust Company, regardless of capital and any other
safeguards that
were enacted in our Trust Company Act of 1911, which law
is a stringent one and gives stability to the Trust Companies
organized under it.
The introduction of this law, this past winter, to enable
all banks to
act in the capacity of Trust Companies, was introduced
with no publicity, and it was introduced as the Governor's bill. It
was discovered
by mere chance, and our company put forth strenuous efforts
to prevent
its becoming a law after it had successfully passed all committe
es in
both Houses with full recommendation, except the final Sifting Committee of the Senate, and, as it was a Governor's measure, it was
liable
to become a law, but by effective work it did not pass the Sifting Committee. The Trust Companies should have had a hearing before
this
measure was introduced.. However, there may be an explanation
for
this, as there are only three Trust Companies, I believe, in the State,
which do not have affiliations with commercial Banks, and the rest
of
the companies did not act, so it left it to us to defeat the measure.
Our position as a Trust Company should not be submitted to the
vicissitudes of a Commercial Bank; that a Trust Company's is a dead
man's
business and the Commercial Bank's is a live man's business; that
one
leaving his estate wants it to be left where it is not subject to any
of
the vicissitudes of a Commercial Bank, and the laws cannot be any
too stringent with reference to it.
Our Trust Companies are growing; it is a matter of education in
our State, and this law is a new one, but more executors and trustees
are being appointed now than when the law was first passed, and the
time is not far distant when the business will be a large one in our
State, as we have a prosperous community and there will be a great
many large estates.
The crops in the State were good this year. We have had excessive
rains, but on the whole conditions are excellent. The city of Omaha
is
showing a remarkable growth—more than for many years—and
the
growth is very substantial. Our bank clearings, building permits
and
post office receipts all show a large increase.
OHIO.
GEORGE F. Hem. of Cleveland, Ohio: Mr. President and Gentlenien:
The Trust Companies of our State have for some time
felt the
necessity of having an organization of their own for the purpose
of
studying subjects pertaining particularly to trust companies,
and a
meeting was called for June 22nd last at Cedar Point, the day
preceding the meeting of the Ohio Bankers' Association, for the purpose
of forming an organization of the Trust Companies of the State.
This
meeting was well attended, and an association was formed under
the
name of "The Trust Companies Association of Ohio "; a
constitution was adopted, and officers and an Executive Committee elected.
From the reports which we have received it is apparent
that the
Trust Companies of the State have been prosperous; deposits
have
increased, and there has been a fair demand for money.




151

RHODE ISLAND.
REPORT OF A. J. POTHIER, VICE-PRE
SIDENT, TRUST COMPANY SECTION
A. B. A. FOR RHODE ISLAND.
The Trust Companies of Rhode
Island are in first-class condition, conservatively managed, and have
added $2,109,124.84 to their assets
during the year ending June 30,
1915.
A. J. POTHIER, Vice-President.
SOUTH CAROLINA.
SEPTEMBER 1, 1915.
Mn. PHILIP S. BencocK, Secretar
y Trust Company Section, A. B. A.
DEAR SIR: I beg to submit this
as my annual report.
Very little affecting the interest
of Trust Companies has occurred
in South Carolina during the
last year. No legislation has been
enacted on this subject worthy
of mention. The business of Trust
Companies in this State has been below
normal, owing to the fact that
few new enterprises have been
inaugurated during the last twelve
months.
This report is necessarily brief.
I could amplify it in words, but
I could not convey more than is
above stated.
Respectfully submitted,
JOHN F. FICKEN.

RICHMOND, VA., August 10, 1915.
P. S. Bancocx, Esq., Secretary
American Bankers Association,
5 Nassau Street, New York, N. Y.
My DEAR Ma. Bancocx: Replying to
your letter of July 15th, I shall
not be able to attend the convention
of the Association to be held
September 7th at Seattle.
I am sending you, as Vice-President
from Virginia, a short statement which can hardly be called a report
nor be found to contain
any matter of general interest. It is justified
only by the desire that
Virginia be represented on roll call.
Very truly,
E. L. BEMISS.
VIRGINIA.
E. L. REMISS, PRESIDENT RICHMOND
TRUST AND SAVINGS COMPANY,
INC., RICHMOND.
Upon the roll call the Vice-President of each
State is requested to
give a brief report of Trust Companies in
his State during the past
year.
The matter is somewhat involved for this
State by the difficulty in
determining just what institutions are in fact
Trust Companies. The
name alone does not suffice to answer this
question.
In the State of Virginia there are
twenty-four financial institutions using the word "Trust" in the
corporate name. Of these
thirteen are members of the American
Bankers' Association and
*registered as affiliated, in one form or
another, with the Trust
Section. It is not probable that
fiduciary transactions with more
than five of these are relatively an
important part of their business,
so that it is apparmt that with respect
to some of these twenty-four
institutions the word "Trust" in their title
is a misnomer.
Furthermore, some National Banks have
availed themselves of the
license under the Federal Reserve Act to
enter into the Trust Companies' field of operation. The assumpti
on by them of Trust Company
functions was authorized by a special
act of the Virginia Legislature
this year.
This situation has been the subject
of informal discussion by some
of the leading Trust Companies of
this State, with the conclusion that
as the fundamental functions of
the Trust Company are clearly distinct from those of the Commerci
al Bank, the operations of each of
these institutions should, as far
as possible, be kept within its Own
sphere.
For this reason, while our Trust
Companies are generally in hearty
sympathy with the Federal Reserve
System and believe that every
Commercial Bank should become a
member of that system, they do
not
believe that Trust Companies should
do so because in such event they
would have to accept restrictions that
would greatly curtail the value
of their services to the public. It,
of course, follows that they also believe that Commercial Banks should
not enter the field of fiduciary operations.

The financial system of our country
will be nearer perfection when
our institutions are divided into two
general classes, one of which will
embrace those designed to take care
of commercial matters of the
country depending upon short-time
liquid assets, and the other to
comprise those that will promote developm
ent, assume trusts and undertake matters requiring time for their
accomplishment.
Because no such principle as this has
prevailed in Virginia, it is
not possible to give comprehensive
statistical data of the business
of Trust Companies during the past year,
but in general terms it may
be stated that their business has increased
and prospered. They have
conducted, independently and in co-operation,
an energetic campaign
of publicity resulting in awakening the public
to the advantages of the
corporate executor and fiduciary. This has
brought a marked increase of business of this kind to the Trust
Companies during the
past year. There has also been a notable
growth in the use of Trust
Companies as registrars of stocks and other
securities and as financial
agents for corporations.
In conclusion, I may state that there is a
feeling of assurance that
our field is good and a determination to
energetically develop it.
WASHINGTON.
of Spokane, Wash.: During the year
1914
there were organized in this State twenty-n
ine State Banks and five
JAMES C. CUNNINOIIAM,

152

BANKERS' CONVENTION.

their names and three
Trust Companies. Two State Banks changed
the State Bank Examiners
liquidated. The last annual report of
Companies and 254 State
showed that there were thirty-three Trust
total resources of all the
Banks doing business in our State. The
increased during the year
State Banks and Trust Companies have
just how much real Trust
largely. There is no way of ascertaining
present time, but I
business there is in the State at the
Company
report to give a full
it will be possible in the next annual
believe
had in contemplation the forand complete statement of it. We have
tion. Practically all the Trust
mation of a Trust Company Associa
to the Clearing House AssoCompanies in the larger cities belong
zed to act as depositaries
ciation. The Trust Companies are authori
Quite a number of the leading
of State funds as well as court funds.
as depositaries for postal savTrust Companies have been designated
ings funds.
have applied for memNone of the Trust Companies in our State
h some of them may conbership in the Federal Reserve Bank, althoug
clude to do so in the near future.
the list.
PRESIDENT CUTLER: This completes
provide that when State
SECRETARY BABCOCK : Our By-laws
by the State Associations, their
Vice-Presidents are not elected
ive Committee. Now, the
selection should be left to the Execut
Arizona, Connecticut,
following States have made nominations:
New Jersey, Ohio, South
Delaware, Maine, Massachusetts,
will be glad to have sugDakota, Virginia, and the Committee
other States.
gestions for Vice-Presidents for the
will be a business meeting
I am asked to announce that there
an Bankers' Association, in
the Council Club, of the Americ
of
this room at 5 o'clock.
l Club?
MR. HoLLIDAY : What is the Counci
ed of ex-members of the
SECRETARY BABCOCK : It is compos
an Bankers' Association.
Executive Council of the Americ
red in the Trust Company
All delegates who have not registe
, are requested to do
n, at the registration headquarters
Sectio
once.
so at
ary Farnsworth to announce
I am asked by General Secret
ed their courtesies
addition to the clubs that have extend
that in
Club and the
booklet that was distributed, the Elks
in the little
es who will come
also wish to welcome any delegat
Press Club
to their quarters.
with tile point which has
MR. SIIORROCK : In connect,on
n which may
sed today—that is, the possible frictio
been discus
be offered in the
to the amendment that is going to
arise, due
er be one of a Committee
Convention, I move that Mr. McCart
o consider and rece himself to be the chairman—t
of five—h
ary up to the time of
such steps as may seem necess
commend
and protect the interests of
the next Convention to safeguard
ies.
trust compan
seconded?
PRESIDENT CUTLER: IS that motion
to be any more
: I do not think there is going
Mn. MASON
year. However,
there has been during the past
conflict than
n will have what it has never
I think the Trust Company Sectio
on Federal Legisa representative on the Committee
had before,
and I think it unAmerican Bankers' Association
lation, in the
appoint any committee.
necessary to pass a motion to
was not seconded. Now,
PRESIDENT CUTLER: The motion
?
tee on Nominations ready to report
is the Commit
: Yes, sir.
MR. MASON

the Execuposed upon him; there has never been a meeting of
during his
tive Committee at which he has not been present
efficient in
three-year term of office, and he has been most
a matter
every respect, and I desire to make this testimonial
of record in the proceedings of the Conirention.
y
Mn. RHODES: I am very much pleased at the complimentar
d
remarks of the President and the way they have been receive
a real
by the Convention. I can only say that it has been
you that I
pleasure to me to serve the Section, and I can assure
for the
shall be glad to do everything I can in the future
Section as I have in the past.
now in
PRESIDENT CUTLER: Nominations for President are
order.
MR. HOLLIDAYS: I take great pleasure in placing in nomina
II. Mason, Vice-Presition for the office of President Mr. John
of Philadelphia. Mr.
dent of the Commercial Trust Company
t of this
Mason has exhibited great industry in the interes
he has spared neither
Section, as is known to all of you, and
The Presidents of
time nor labor in striving to advance it.
been men of high
this Association have from start to finish
say that I am taking
character and ability, and I venture' to
if elected to this
no chances in predicting for Mr. Mason that,
the equal, at least, if
office—as I feel he will be—he will be
ed him.
not the superior, of some of those who have preced
s parts of the
(The nomination was seconded from variou
house.)
tions? If not, I
PRESIDENT CUTLER: Are there other nomina
the nominations closed.
declare
cast one balMR. HEpPENHEIMER: I move that the Secretary
for the election of Mr. Mason.
lot
(The motion was seconded.)
aye; opposed, no.
PRESIDENT CUTLER: All in 'favor will say

The motion is carried.
Mr. President.
SECRETARY BABCOCK : I have cast the ballot,
Mason elected
PRESIDENT CUTLER: I declare Mr. John H.
Heppenheimer
President for the ensuing year, and I appoint Mr.
and Mr. Johnson to escort him to the chair.
do not know
PRESIDENT-ELECT MASON: Gentlemen, I really
up about
what to say. Of course, there was nothing fixed
to be elected.
this. (Laughter). Nobody had any idea that I was
I can say is
Mr. Holliday, of course, fixed it all. Now, all
I am, but I will
this: That I cannot live up to what he says
try the best I Can.
.
LOviNG Cup roil RETIRING PRESIDENT CUTLER
floor? Mr. Cutler, you have
Mn. MCCARTER : May I have the
on the Executive
served the Association through two terms
ent, and have served it
Committee, and three years as Presid
no labors too
nobly and well. No hours have been too long,
most efficiently
arduous, but what you have always responded
n I present to
and courteously. Now, on behalf of this Sectio
it we do so
you this loving cup, and in asking you to accept
hope that tile
not in view of its intrinsic value, but in the
ter will ever
metal of which it is made being enduring in charac
which you are
bring to your mind the affectionate regard in
American Bankers'
held by the Trust Company Section of the
Association.
is extremely
Ma. CUTTER: Mr. McCarter and Gentlemen: It
s my appredifficult for me to find words in which to expres
this cup and
TIONS.
ciation of this testimonial. I shall ever treasure
REPORT OP COMMITTEE ON NOMINA
I have
hold it as a memento of the delightful companship
members here to-day
ed by various
Out of thirty-six names suggest
here enjoyed.
for membership on the
ng nominees
, is
the Committee reports the followi
PRESIDENT MASON: The next order of business, I believe
will expire in 1918:
Executive Committee whose terms
nominations far Vice-Presidents.
England Trust Company,
New
esiArthur Adams, Vice-President of the
Mn. DINKINS: I desire to place in nomination for Vice-Pr
Fidelity Trust
Boston, Mass.
dent Mr. Uzal H. McCarter, President of the
ty Trust Company, New York.
he will make an
James M. Pratt. Vice-President Guaran
Company, of Newark, N. J.. I am sure that
in Trust Company, Milwaukee,
made an excepOliver C. Fuller, President Wiscons
exceptionally good Vice-President, as be has
tee.
Wisconsin.
tionally good chairman of the Executive Commit
Interstate Trust & Banking Company,
Lynn H. Dinkins. President
(The nomination was seconded.)
nominations? If
New Orleans, La.
PRESIDENT MASON: Are there any further
International Trust Company,
Theodore G. Smith, Vice-President
not, I declare the nominations closed.
of the Section for
Denver, Colorado.
(On motion, the Secretary cast the ballot
-President.)
comthe election of Mr. McCarter as Vice
Hoge, who was appointed on the
er elected ViceI may state that Mr.
PRESIDENT MASON: I declare Mr. McCart
We had four members, but
of any other man who
mittee, we were unable to find.
President in a shorter time than that
nomination of Mr. Smith—Mr. Smith
only three voted for the
ever held the office.
gentlemen, that I appreciate
voted against himself.
MR. MCCARTER: I assure you,
What is the pleasure of the Conven
have done me, and I will
PRESIDENT CUTLER:
with my whole heart the honor you
report?
serve you in the position to
tion with respect to this
endeavor to do the best I can to
I move that the Secretary cast one ballot
Mn. MCCARTER : •
which you have elected me.
men.
of this Section be
for the election of these gentle
Mn. HOLLIDAY: I move that the thanks
carried.)
to the people
(The motion was
ed to the banks and Trust Companies, and
extend
the motion will say aye;
ous hospitality to the
PRESIDENT CUTLER: All in favor of
generally of Seattle for their very courte
is
carried, and tile Secretary
opposed, no. The motion is
members of this Convention.
es.)
directed to cast the ballot.
(The motion was seconded by various delegat
cast the ballot
resolution of thanks
BABCOCK : Mr. Preside* I have
SECRETARY
PRESIDENT MASON : All in favor of this
ously adopted.
as directed.
will manifest it by rising. It is unanim
declare these gentlemen duly
business scheduled
PRESIDENT CUTLER: Then I
Gentlemen, I believe this concludes the
s on the
ates the service
declare this meeting of the
elected. (Applause.) This termin
for this Convention, and I now
t members.
faithful and efficien
sine die.
Committee of one of its most
Trust Company Section adjourtied
been. faithful to every trust imMr. Herbert A. Rhodes has




CLEARING HOUSE SECTION
AMERICAN BANKERS' ASSOCIATION
Annual Meeting, Held in Seattle, Wash., September 7, 1915
INDEX TO CLEARING HOUSE PROCEEDINGS

Reserve Banks and Clearing Houses, Russell Lowry Page 153
Clearing House Balances, 0. H. Wolfe Page 156
Reserve Banks and Country Checks,L.F.Kiesewetter Page 158

Clearing House Examinations, Breckinridge Jones &c.Page 161
Clearing Houses—Country Banker's View
R. F. McNally

Page 165

Relations of the Federal Reserve Bank to the Clearing
House Organization.
BY RUSSELL LOWRY, Deputy Governor Federal Reserve Bank of San
Francisco.
The Federal Reserve system differs from any other
banking system in the world in this: That it was not the
result of a long and gradual development, but sprang into
existence full-armed, like Minerva from the head of Jove.
Without experience, without precedents for guidance, it
has stretched its limbs cautiously, put out a timid finger
here and there, and thus gradually is finding its powers
and the functions wherein these powers should be employed. Its traditions are in the making, and it is the
unusual privilege of those identified with its beginning,
to assist in molding plastic policies into definite and permanent form. In this experience I am reminded of certain years I spent at a great university which, by the
power of millions, .had •been created almost over night.
We felt painfully the lack of those traditions that influenced student life at Harvard and Yale and Princeton,
and set about acquiring traditions ready-made. We had,
I recall, an annual celebration called Ivy day, when we
used to plant ivy that we hoped one day would cover all
the college buildings. And we sang songs to Alma Mater
—probably the youngest matron of this sort extant—and
sentimentalized over the "dear old college halls" when
the workmen had scarcely removed the last scaffolding
from the buildings.
Not so keen, perhaps, about making traditions, but with
the same sense of dealing with the unformed, the plastic, the potential, the men who compose the Federal Reserve Board and the management of the twelve reserve
banks are fully alive to the importance of establishin
g
at the outset only such policies as will endure the test
of
time, and are avid for facts and principles and
opinions
that will contribute to the wisdom of their present
decisions, which mean so much for the future success
of the
system. Under these conditions one cannot be a
historian, because there is no history to record. And one
assumes with reluctance the role of prophet. The
alternative is to give present facts and suggest possible
future
tendencies.
Tucked away inconspicuously at the bottom of Section
16 of the Federal Reserve Act is this innocent
little
clause:
"The Federal Reserve Board * * * * may
at its




discretion exercise the functions of a clearing house.for
Federal Reserve banks, or may designate a Federal Reserve bank to exercise such functions, and may also require each such bank to exercise the functions of a clearing house for its member banks."
It is evident from the wording of this sentence that the
framers of the act had no definite idea how the clearance
function was to be exercised, but they foresaw a time
when the domestic credit business of the whole country
would be focused and cleared with the highest possible
'efficiency through the machinery of the Federal Reserve
system, necessitating the slightest possible use of actual
coin or currency. In considering the means by which this
end will be reached, or is being reached—one never can
be certain of using the right tense in these days of rapid
change—it is desirable to analyze the activities of clearing house associations with a view to determining how
far their functions can be utilizeu in the new banking
system, and to what extent the reserve banks may profitably supplant the local clearing houses in the operation
of such functions.
Clearing houses were established primarily to facilitate
the exchange of checks between banks, to offset debits
with credits, and lessen the labor of handling coin.
Through organization for this purpose, they have gradually assumed other powers. In some instances they have
been utilized for the clearance of country checks, as well
as local items. They have been made depositories of
money, against which certificates were issued for convenient use in settling balances. In times of stress they
have been the means of uttering clearing house certificates
based on values other than money, such as bonds and
bills receivable. They have by mutual consent employed
examiners to see that proper banking methods were
being used by the member banks. By concerted action
they have in some cases extended aid to solvent banks
unable to convert their assets quickly, and thus have been
able to avert serious trouble. Instances have occurred
where the government itself has been saved temporary
embarrassment by the action of clearing houses in extending loans. During the financial disturbances of 1914,
It was the clearing houses which facilitated prompt ac-

154

BANKERS' CONVENTION.

sfully in
cot- for a short time, it would offer its notes succes
lion in responding to the call for a gold pool and the
gh the Federal Reserve banks
the open market, althou
ton loan fund. Generally speaking, the clearing house
might be called upon temporarily, if the needs of quick
been powerful agencies in stabilizing
•associations have
been directed un- action were urgent.
'financial affairs, ancl their energies have
monoFifth: Clearing house examinations. Clearing house
selfishly along broad and patriotic lines. In his
for the National examiners are employed in eight of the Federal Reserve
graph on "Clearing Houses," prepared
cities, and no change in this arrangement has taken place
Monetary Commission, Mr. J. G. Cannon said:
simply as a la- since the Federal Reserve banks were organized. In San
." The clearing house, which was begun
sts in
Francisco, owing to the coincidence that the clearing
bor-saving device, has united the banking intere
house examiner was selected as governor of the Fedof sympathy- and
various communities in closer bonds
the office was vacated and has not
has developed into a marvelous instrumental- eral Reserve Bank,
Albion and
been filled. In none of the Reserve cities is the Federal
nity from the evil
ity for the protection of the commu
subjected to the examination made by the
effects of panics and of bad banking. Clearing houses Reserve bank
e
clearing house examiner, but in one instance the Reserv
g force that ultimately
are gradually becoming a weldin
the position that as a member of the
bank has taken
will bring to the business of this country the centralizaof its
clearing house it should receive the full advantage
tion which it so greatly needs."
Clearing house association in respect
membership in the
Without doubt Mr. Cannon was justified in his conclu
, and that such
to independent accounts or examinations
sion that the extension of clearing house organization
considered for the benefit of the direcwould solve the question of unifying the American bank- examination be
tors of the Reserve bank.
ing system. It was upon this theory that the Aldrich
erd by
While the Federal Reserve banks are empow
plan was formulated. The result, however, was different
of member banks for
by Mr. Cannon, Mr. Aldrich and the law to make special examinations
from that anticipated
as to the condition
l
the purpose of informing themselves
National Monetary Commission. Instead of a centra
credit extended to them.
the lines of
banking control vested in the clearing houses and there- of those banks and
at present the
ss
this function has not been developed and
fore mainly under the control of the bankers, Congre
d amount of informaReserve banks rely upon the limite
saw fit to pass the Federal Reserve Act, which dis,
al bank extion submitted to them by the regular nation
tributes the control with a fair degree of impartiality
oller of the Currency,
aminers. Inasmuch as the Comptr
among the bankers, the business public and the govern
of the Fedwho directs these examinations, is a member
ment.
improbable that in future
, it is not
What is to be the future of the clearing house organ- eral Reserve Board
to the Fedness
his office will become more closely attached
ization under the new regime? Is its period of useful
the various national bank exand its energies be merged with those of the eral Reserve Board and
now to end
become directly subordinate to the Federal
Federal Reserve banks, or will the two instrumentalities aminers may
y's Reserve banks in whose districts they work. Should this
-operate together for the general welfare of the countr
the power and
in detail, taking
change take place, it will tend to lessen
business? Let us examine this question
ng house examiners and gradually
ntal
usefulness of the cleari
up first what might be callled the minor or incide
their office may disappear altogether.
functions of the clearing house:
bank examinaSpeaking abstractly, a untfied system of
The issuance of clearing house loan certificates
First:
g system is dees designed to stais desirable just as a unified bankin
tions
and the use of other protective measur
panic. sirable, and it is only a question of time when the triple
bilize the. financial situation and check incipient
cy, the State
ed
supervision of the Comptroller of the Curren
If the Federal Reserve banks perform their intend
tment and the Clearing House Association
ng house
Banking Depar
function, no further use will be found for cleari
authority. Logically
of dewill be merged into one supervisory
certificates. Banks desiring currency for'payment
t that authority should be the Federal Reserve Board.
withou
positors may readily obtain a supply practicallly
State, are chiefly
e bank.
Bank examiners, whether national or
limit through discounting with the Federal Reserv
observance of the law, and in case of percomconcerned with
Instead of submitting their paper to a clearing house
of closing the bank
will
sistent evasion have no remedy short
mittee composed of their business competitors, banks
so severe that they will often wink at the
of supply
—a measure
come to an impartial and disinterested source
. An examiner
evasion rather than apply the remedy
for their needs for circulating medium.
a
s for collection
and frequently does, a bank that maintains
may find,
Second: The fixing of uniform, charge
avoids excess loans and
but it is
proper percentage of reserves,
of checks doubtless will continue for some time,
author- otherwise keeps within the law, and yet is in a condition
bound to disappear eventually in the face of the
y.
charge so rigid and unsatisfactory as to be a cause of anxiet
ity given to the Federal Reserve Board to fix the
examiner
from patrons whose In such a case the examiner is powerless. An
to be collected by member banks
legal
e bank. for the Federal Reserve Board, while paying heed to
-checks are cleared through the Federal- Reserv
application
would concern himself with the
l Reserve system
observances,
While it is not likely that the Federa
liquid quality of
es—
of correct banking principles and the
will wholly eliminate collection and exchange charg
able to exert
d—it may be the bank's investments. He would also be
and indeed there is no reason why it shoul
h the power of the Federal Rethese a strong pressure throug
admitted that one purpose of the act is to reduce
of redisthe work- serve bank to grant or withhold the privilege
'charges to a basis of cost, or nearly so, and in
ations count.
ing out of this purpose local clearing house associ
Without doubt this prim scale of
Sixth: Clearance of checks.
will find it difficult to maintain their unifor
house will continue, even
mary function of the clearing
s.
charge
fel- in those cities where Federal Reserve banks or their
Third: The relief of clearing house banks by their
so simple, effective
branches are located. No other device
unnecessary in the future, since the
low members will be
of sup- and inexpensive has been found or is likely to be found.
Federal Reserve bank provides exactly the means
attended. In the settlement of balances, however, the Reserve banks
plying such relief, and contact with it will be
has been demonif the
may be utilized to advantage. This
with much less publicity and humiliation than
the payment of differences is
competi- strated in Boston, where
troubled member were obliged to go to his own
Bank. After the daily
made through the Federal Reserve
tors.
bank gives its checks on
ment exchange of checks, each debtor
Fourth: The extension of loans' to the govern
the clearing
l Reserve Bank to the manager of
ed as an obsolete activity of the clearing the Federa
may be regard
to his credit with the Fedhas house, who deposits all checks
house, since in more than fifty, years the government
writes his own
Reserve Bank of Boston, and then
ed to such an expedient. Undoubtedly if the eral
not resort
of credit balances, thus drawing out
money checks in settlement
government of the United States desired to borrow




CLEARING HOUSE SECTION.
his entire balance each day. This plan, which obviates
the .necessity of carrying gold or currency to or from the
clearing house, is so simple that it ought to commend itself to all bankers in Federal Reserve cities. Aside from
the saving of carrying charges and the loss by abrasion
of gold due to handling, banks would not be restricted to
the use of gold in the settling of balances, but could draw
against a credit created by depositing Federal Reserve
notes, or legal tenders, or New York exchange, or by rediscounting commercial paper. An obstacle would arise,
of course, if many members of the clearing house were
not members of the Federal Reserve bank, but this could
be overcome by having the non-member banks clear
through national banks.
Seventh: Clearing country checks. In all of the Federal Reserve districts the plan of intra-district check collection has been established, but the plan has not been
In operation long enough to permit of conclusive generalizations. It is a reciprocal arrangement and provides
that member banks which consent to have their own
checks charged against their accounts with the b'ederal
Reserve bank without deduction for exchange, may have
the privilege of depositing and receiving credit at .par
for checks on other member banks assenting to the plan.
In eleven of the districts checks are credited and debited
when received. In District Twelve it was deemed wiser
to start with a plan of deferred debit and deferred credit,
entries being made in accordance with a time schedule
based upon the time required to forward the check to its
destination and receive returns for it. This relieves the
member banks from any necessity for keeping balances
with the Reserve bank in excess of legal reserve requirements, and is a more equitable arrangement in this district, where distances are enormous and transportation
facilities inadequate. It is interesting to note that this
district has a larger percentage of assenting banks than
any other execpt two, where check collections were inaugurated without asking consent of the member banks.
About 150 banks are on the par list of the Twelfth District, and although the plan has been in operation for a
month, it has been used scarcely at all. Does this mean
that it is a failure? By no means. We have accomplished our object so far as the 150 banks are concerned
by setting up a standard of par, and if this standard is
maintained without the necessity of our actually handling
checks, so much the better. It is perfectly natural that
country banks should prefer to send items to their city
correspondents, where they receive immediate credit at
par and 2 per cent, interest on the balance thus created
rather than to send them to the Federal Reserve bank,
where they obtain credit only after sufficient time to
make collection.

155

direction. In New York a country clearing department
has been inaugurated following somewhat the plan successfully employed in Boston, Kansas City, and other
points. Doubtless this is the best solution of the problem. Let the local clearing houses handle the checks,
which they can do with greater economy and efficiency
than the Federal Reserve banks, especially in view of the
fact that Reserve banks comprise within their membership only a portion of the commercial banks of the country. Let the Reserve banks be the agency for the settlement of differences. That is, for the ultimate adjustment
of debits and credits and for the stabilization of collection charges so far as this can be accomplished.
Perhaps the most significant and admirable movement
for bringing about the ultimate settlement of bank credits
was the establishment of the Gold. Settlement Fund at
Washington. Much credit for the idea is due to a former secretary of the Clearing House Section of the American Bankers' Association. You are no doubt familiar
with the plan, which involves the deposit with the Federal Reserve Board at Washington of not less than $1,000,000 gold from each Federal Reserve Bank. Every
week the balance due to and from Federal Reserve banks
by other Reserve banks are cleared through the Gold
Settlement Fund by the simple process of wiring the
amounts of such debits and credits and having book
entries made in accordance. Any Reserve bank wishing
to transfer money to any other Reserve bank, may do so
at any time through this fund, and thus are obtained in
respect of exchange, at least, all the practical advantages
of a central bank, which some people still believe is preferable to twelve independent reserve banks.
It is doubtful if bankers fully realize to what extent
the Gold Settlement Fund is intended to revolutionize the
machinery of domestic exchange. Any bank anywhere in
the United States may transfer funds to any other point
in the United States with the utmost facility and promptness and at a minimum of expense through the Federal
Reserve Bank of its district. A bank in Seattle, for instance, desiring to make a large payment in Cincinnati,
may do so by authorizing the Federal Reserve Bank of
San Francisco to charge its account and transfer the
credit to the account of the Cincinnati bank on the books
of the Federal Reserve Bank of Cleveland.
The amount of gold in the Gold Settlement Fund has
gradually risen since the beginning of the plan and now
stands at about $54,000,000. This money is in gold order
certificates payable to the Federal Reserve Board, and is
kept by the Board in a safe within the vault of the United
States Treasury. Deposits with or withdrawals from the
Gold Settlement Fund are made by the Reserve banks
through the nearest sub-treasury, and thus the entire system is carried on with a remarkable saving of labor and
expense.

Our interpretation of our function in the matter of
check collection is that we should be an agency of regulation rather than of clearance or collection. Our principal use, as we see it, is to assist in the settlement of
credit balances growing out of the handling of checks
rather than to assist in the actual handling of these
checks. It would not be good banking for a bank in Spokane to send to us for collection a check on Seattle. It
would be better for the Spokane bank to send the item
direct to the drawee bank in Seattle and have the proceeds transferred to its credit on tbe books of the Federal Reserve Bank IM San Francisco. This plan can be
extended further with great advantage and economy of
time in the handling of all checks, wherever payable. A
bank in Spokane, for example, receiving a check on Mobile, Alabama, might send that check direct to the payee
bank in Mobile, with instructions to have the proceeds
transferred through the Federal Reserve Bank of Atlanta
to the Spokane bank's credit in the Federal Reserve Bank
of San Francisco.

"It has been suggested that a general cash office might
be established in which each bank should place a sum in
specie proportionate to its capital which would be carried
to its credit in the books of the office. Each bank would
be daily debited or credited in those books for the balance of its account in all the other banks. Each bank
might at any time draw for specie on the office for the
excess of its credit beyond its quota; and each bank
should be obliged to replenish its quota whenever it was
diminished one-half, or in any other proportion agreed
on."

One effect of the establishment of intra-district collections by the Federal reserve banks has been to stimulate the activities of the local clearing houses in a similar

After the lapse of eighty-four years Mr. Gallatin's plan
has been put into effect, and it is impossible to foretell
what a saving will be effected in actual shipments of coin




In this connection it is interesting to quote a suggestion made by Albert Gallatin in a pamphlet published in
1831, entitled "Suggestions on the Banks and Currency
of the Several United States in Reference Principally to
the Suspension of Specie Payments." This is the quotation:

156

BANKERS' CONVENTION.

and currency and in the stabilization of rates on domestic exchange.
The clearing house organization, though shorn of much
will
of its former power as an agency of centralization,
ined for its primary purpose, namely, to effect
be mainta
and
the exchange of checks and drafts between banks,
ment of balances resulting from such exchanges.
the settle
In the process of settlement it will have the aid and
ion
co-operation of the Federal Reserve bank. An extens
checks is
of clearing house operations to take in country
ng
a logical development, and in the settlement of resulti
be helpbalances the Federal Reserve system will again
be
ful. It ought to be possible, and sooner or later will
possible, for any bank to handle a check on any other
bank in the United States and to count upon the colleca minition of that check with the utmost dispatch and
of expense through the harmonious working of the
mum
and
clearing houses, the twelve Federal Reserve banks,
Gold Settlement Fund.
the
The clearing house associations can serve a most value banks to
able purpose in co-operating with the Reserv
fic credit methods. The adopbring about more scienti
greater
tion of standard forms of financial statements,
ing such statements periodically,
Insistence upon obtain
of credit to
more careful checks against undue extension
l these ends can be attaihed by concertain borrowers—al
ery for such
certed action only, knd the available machin
clearing house organization. Alaction is provided in the
and, where
ready an example has been furnished in Clevel

the clearing house has adopted resolutions making standard certain forms of statements recommended by the
Federal Reserve Bank of Cleveland, and agreeing to require these statements in the future from .all commercial
to
borrowers—to the end that banks may be in position
of rediscounting iacilities to the greatavail themselves
est possible extent, and thereby provide against future
contingencies of whatever nature. Similar action is likely to be taken in some of the larger cities on the Pacific
Coast.
t of
The next step, logically, might be the establishmen
of credit information, in which
a great central bureau
a buthe Reserve banks could play a helpful part. Such
indebtedness of all large borrowers
reau, where the total
ly ascertained.
at any given 'moment could be instant
removing the guess work and unwould go far toward
cial paper.
certainty that attends the handling of commer
bank credits upon a More safe and stable
It would place
the honest borrower,
foundation and be alike helpful to
bank and the Federal Reserve bank, for
the commercial
ence on definite
credit is founded on confidence, and confid
there is no influence more powerful in
knowledge, and
ination of facts.
maintaining stability than the wide dissem
assembling, organization and distribution of
The proper
is a task big
facts pertaining to commercial credits
ant enough to engage the united forces
enough and import
tions and the
of the banks, the clearing house associa
e banks working side by side for their
Federal Reserv
common advantage.

Settlement of Clearing House Balances.
elphia National Bank.
BY 0. HOWARD WOLFE, Assistant Cashier Philad
at my disposal to
I shall not attempt in the brief time
the mechanical and accounting details
go very deeply into
making clearing house
incidental to present methods of
shall I take up your time discussing
settlements, nor
methods which
those features of other, and I trust better,
as
ted for your consideration. You are all
may be sugges
matters. The particular reafamiliar as I am with such
from this short paper
son, however, why I shall omit them
the four years' experience I
Is that I am satisfied, after
progressive ideas are
have had as your secretary, that
a lack of understanding of
never held up because of
here, for example, imforms and methods. Does anyone
g house associations repreagine that the several clearin
ue to pay balances
sented here year after year, who contin
each day and carried about
in cash that is counted twice
because they do not
the streets from bank to bank, do so
ory and issue currency cerknow how to operate a deposit
the banks in 500
tificates? Does anyone suppose that
country exchange checks individsmaller cities in this
and settle with
ually instead of through a clearing house
at irregular intervals because
each other individually
a clearing house settlethey don't know how to make up
often beim SItriink with the humor
ment sheet? I have
we, the representatives
of the situation as year after year
clearing houses, come to these anof nearly two hundred
faces as if seeknual meetings and sit here with solemn
while one earnest speaker after another
ing information,
is operated. For
explains how a country clearing house
in this country and for more than
almost twenty years
clearing houses have been
fifty years in England, country
carrying out their functions in full daylight.
successfully
men, but a change
No, it is not information we need, gentle
e.
of mental attitud
t minister of the GosI once heard a sincere and earnes
sermon that the real Christian is not he in
pel say in his
into heaven occupies
whose mind the tfiought of getting
will
of the stage. If you will permit me, I
the center




paraphrase that thought and say that the making of
money is not the sole idea in the mind of the broad-gauge
banker. There are many, unfortunately, who prefer to
see no good in any measure, as for instance the Federal
Reserve Act, that for the moment curtails profits and dividends. We are so optimistic at times that we are reluctant to make provision against any contingency that
seems to be remote. Yet, if we look about us we see everywhere evidences of the thought that men take against
emergency and disaster. There is a fender on every trolley car, life preservers on every ship, fire escapes on every
building, a lock on every door, probably an accident insurance policy on the life of every man in this room, and
so on without end. Everyone of these things costs money;
some of them are required by law, and we would not be
without them. Yet we all hope that not one of the protective devices I have mentioned will ever be used.
American banking methods and systems, however, have
been somewhat characterized by a lack of safety valves,
fire escapes and cyclone cellars. We have been too ready
to go up in balloons without taking a parachute along.
We seem not to have altogether outgrown our pioneer
ways, which is not surprising when we consider that banking in this country. is less than four generations old and
there are men in this room who were living before the
first clearing house was established in the United States.
What I am driving at is we do not always give sufficient
consideration to underlying principles of banking and
banking safeguards which are based on fundamental economic laws as old as humanity itself. To some. banking
is a matter of books and accounts; to others it is a process of note shaving; to still others, present company, of
course excepted, successful banking consists in getting
your depositors to send their checks all over the country
and then deduct IA of 1 per cent, on the remittances. To
others—and may their number increase to many thousands more than this room now holds—banking is at once

. CLEARING HOUSE SECTION.

157

a sciAnce, a public service and an honorable proThe fact that State banks are members of clearing
fession.
house associations, but do not belong to the reserve sysI mention these conditions half in jest and half in earn- tem,
is not a serious objection to a plan of settlement
est, because they explain the great variance to be found
through the reserve banks. The law provides that non
to-day among clearing house associations in the matter of
member banks may not share in the direct benefits of the
conducting their operations--chiefly the settlement of bal- system because
they do not contribute to its ownership,
ances. It may be said that the fundamental purpose of
not because there is any antagonism per se against
the
the clearing principle—the offsetting of debits with credits
non-member. Neither member banks nor the reserve
—is to avoid the necessity of using money. Similarly we
banks can avoid intimate business relations with nonfind that clearing houses try as far as possible to settle
members; indeed, the reserve banks are already members
balances on the same basis, that is, by book entries rather
of the local clearing houses which, with the exception
of
than by cash payments. The methods followed to accom- Boston,
include State banks and trust companies. When
plish this end may or may not be open to question. Credit the $100,000,0
00 gold pool was organized last September
inflation is a danger guarded against by more kinds of
both national and State banks were asked to
subscribe
banking laws than any other single tendency toward
by the Reserve Board. The policy of that body from
the
weakness. The clearing house is a plan whereby we ex- outset has been one
of co-operation with, and not antagchange not money but credit and credit instruments. It onism for, the
non-member institution. Therefore, I refollows, therefore, that settlements in credit are not setpeat, we need not question what attitude the Reserve
tlements at all. It is sound banking to insist that all
Board will take if a plan to use the reserve banks
as a
clearing house settlements should be in terms of reserve settlement agent
is taken up with them. As a matter of
or reserve money and not in terms of credit or credit fact, the principle
has been laid down that there is nothmoney. We find that many associations recognize this ing in the act itself that
prevents the reserve banks from
principle in not permitting national bank notes to be used
accepting non-member checks for clearance if they
should
In the settlement of clearing house balances. In Philadel- decide to do
so.
he act provides that the reserve balms
phia, as in some other cities, we settle in gold alone.
may exercise the functions of clearing houses
for their
A very general system of settlement is the use of drafts
members. The settlement of balances is surely one
of
against a reserve agent in another city. While not so
these functions, and since member banks cannot escape
good a method as the cash settlement, it is entirely sound
the relation of creditor and debtor with non-members, it
since it is upon a reserve basis. After Noyember, 1917, would
certainly serve the interests of member banks if
however, if not before that time, it will be necessary to
the reserve banks shoulld assist in a convenient and ecoadjust this method somewhat since after that time banks nomical
method of making settlement.
may not hold the reserves of other banks. This brings us
The plan I would propose is an adaptation of one alto a consideration of the use of the facilities of the Fedready in use in several of the smaller clearing houses. It
eral reserve banks for the payment of all clearing house
can be described in a very few words: The debtor banks
balances in the future. Such settlements whether made
draw their drafts on a reserve agent in the nearest reby transfer in the event of all members of the clearing
serve or central reserve city to the order of the
clearing
house being members of the Reserve System, or whether
house manager. The manager sends these drafts to the
made by check would be made in accordance with sound
depository bank in the reserve city and issues his drafts
principles and would avoid the use of currency for this
against the deposit in favor of the creditor banks. While
purpose altogether. There would, furthermo-e, be a dethe Federal Reserve Act makes no specific provision for
gree of uniformity hitherto unknown. At the present
a deposit by a clearing house manager consideration must
time there are five different methods of settlement in combe given to the fact that this official merely represents an
mon use and any number of peculiar combinations of
association of banks already—for the most part—memthese five methods.
bers of the system. I do not hesitate to say that such deBoston is the only city, so far as I know, which uses
posits would be accepted by.-the reserve bank acting as a
the Federal reserve bank for the settllement of balances, clearing house depository
. It would be necessary, or at
although St. Louis and Dallas make a partial use of their
least desirable, for debtor non-member banks to draw
reserve banks. In Boston only national banks are memupon clearing house or member institutions in the city
bers of the clearing house, so that there was no difficulty
where the reserve bank is located, although member banks
Involved. In letters written by each Federal reserve bank
would draw only upon the reserve bank. Since State
to your Chairman, Mr. Vincent, the opinion was uniformly
banks may continue to carry reserves with other banks
expressed that the reserve banks were willing to co-oper- there would
arise no question as to the soundness of the
ate as far as possible in the settlement of clearing house
plan. In making settlement in the reserve bank cities, it
balances, but the fact that some members of the local asmay be suggested that the same plan is practical providsociation were not members of the system seemed to pre- ing the non-memb
er banks carry a clearing account with
sent a difficulty. Since the same problem arises in the a member bank, as
indeed most of them do. This would
-case of all clearing houses, whether or not they are in the
enable them, when debtors, to give the clearing house
same city with the reserve banks, we need not consider
manager funds acceptable for deposit other than actual
the two situations separately.
currency.
As I stated earlier in this talk, it is idle to protest that
This, briefly, is the substance of the plan I wish to suga practical solution of the problem is difficult. Nor can it
gest for your consideration. It is offered in the interest
be urged that because the law does not specifically pro- of convenience„ economy
and sound banking, and with
vide that the reserve banks may act as settling agents
confidence that sooner or later the clearing house associthat they are, therefore, prohibited from doing so. I may
ations will adopt it or something similar. The next step,
-say here, if we expect the law to cover and provide for
then, willl be to make all clearing house settlements by
every contingency, the Federal reserve banks would
book entries on the ledgers of the reserve banks without
need no directors nor officers, and in fact we could do
the use of even drafts or checks. Has it not occurred to
away with the Reserve Board, as well, operating the sysyou that after all a check is only one method of passing
tem with a.set of adding machines and a force of girls to
the credit of A to the credit of B? and that "float," that
-run them. As our friend, Mr. McKee, of Los Angeles, element of cost all bankers
should seek to reduce, arises
•sald in his now famous letter: "We have been given
solely because we still use the mails'to carry the bit of
a Federal Reserve System, but we don't know how to
paper, the authority to transfer credits from one point
-play on it," if we permit a mere technicality to stand be- to another? When
banks wake up to the fact that men's
tween us and a perfected system of clearing house set- thoughts and wishes are
now communicated by electricity,
ttlements.
and not by ox-cart, as the' once were, drafts, as between




BANKERS' CONVENTION.

158

raph and telephone
banks, will give way entirely to teleg
ers.
transf
week a clerk
That condition is already at hand. Each
enable
Washington receives twelve telegrams which
at
of the pen to adjust the settlehim with a few strokes
and important
ment balances of the most interesting

banks through
clearing of the country, that of the reserve
at Washington. It is time, inthe Gold Settlement Fund
d take
ry
deed, that the clearing houses of the count shoul
s upon a more
thought of putting their own settlement
the way now
modern and uniform basis, especially since
presents itself.

erve Banks or
-To
Collecting Out-of wn Checks by Federal Res
Country Clearing Houses or Both.
Ohio National Bank, Columbus, Ohio.
BY L. F. KIESEWETTER, Vice-President of the
bank, and made all
a city kept their cash at the same
e, in a
It has been a difficult matter to correctly outlin
checks, no money would be
their payments by means of
investigating
en them. A varifew words, the subject which I have been
required or used for transactions betwe
I have been pursuing in
and the line of thought which
er, occurs immediately when
ation in the problem, howev
tion of country
He explains what
doing so. Fully realizing that the collec
a second bank opens for business."
received much attention and
checks is a topic which has
banks have been established,
many
le, practical men, has been done, after
discussion from able thinkers and capab
ition, thus: "The conto take care of the check propos
es for guidance in preparI have gone to just such sourc
given birth to an arrangement
venience of business has
nt to you.
s of a city, for cering the few thoughts which I wish to prese
which makes all of the banking house
as I know them, every transit
I have addressed, so far
establishment. This is actain purposes, virtually one
charge any conmanager in this country who has in his
complished by a City Clearing House."
ry check collections. Setting aside
e of business'"
siderable volume of count
You note that he says, "the convenienc
t, the policy
the necessitypersonal prejudice, the force of environmen
the requirements nor the custom nor
-1--not
ss, there is
of the institution, and the nature of its busine
nience of business." Not knowof business—" the conve
g these transit
mind when he wrote the
a surprising unanimity of opinion amon
ing what meaning Mill had in
line that I wish to direct your
managers. It is along this
fully intended to use it, we learnword, but believing he
ally so situated
"fitness, suitableness,.
thoughts for a few moments. I am person
that "convenience" is defined as
been sufficiently large nor
that my experience has not
freedom from discomfort or trouadaptation, propriety,
ssion of what
which gives comfort or is
varied to enable me to get a good impre
ble, ease in use or action, that
. Relying, therefore, upon the
transit work really means
necessity, that which is handy, an acsuited to wants or
in position, by
advice of those who are competent and
commodation.",
, to give information, I submit to
can business man in,
ability and experience
Checks are sent out by the Ameri
ns. You
their opinio
will continue to be sent ;.
you the -result of this canvass of
settlement of his accounts and
resembles faintmatter to train him to do.
have all seen a composite picture, which
it will be rather a difficult
not look like any
g us; we are asking ourselves,
ly each of the subjects taken and does
otherwise. He is not askin
—a composite
it? We are, if we are
one of them. That is what I have in mind
what are we going to do about
dual's name and
opinion—which will mention no indivi
to take care of them by the
sensible, going to arrange
d, with no contribunot reflect exactly his conclusions.
most direct and least costly metho
t men are all alert
It is easily seen that these transi
an exchange wall about their
tions to those who build
t in their work, keen
every check or draft that
to the possibilities of improvemen
locality and levy tribute on
be of assistance, and
for any suggestions which will
entrance to the place. This is about
presents itself at the
to them which
sound in theory as an,
adroit in their grasp of propositions made
as reasonable in process and as
It has been decidedly inwill affect their own situation.
our State by which our Municiarrangement we have in
their replies. I
le, in my own County
teresting and stimulating to have had
pal Bonds are taxable. For examp
they have taken to go
am much indebted for the trouble
absorbs 30 per cent. of the bond,
the tax on local bonds
ssing themselves
that the.municipallinto details as they have, and for expre
owner's income. The consequence is
did.
so fully and personally as they
rate of interest, when they borties have to pay a higher
Section
increase returned to,
I take it that the work of the Clearing House
row, and do not get much of this
be related to Clearing House
and so do.
should, to a large degree,
the bonds are not listed
them because many of
ting
economy that, is it not,
rs, and I believe that this subject of collec
matte
Good political
ing House, not pay taxes.
purposes, taxes its own
checks, whether in a city, through a City Clear
whereby a county, for revenue
about
a district covering a greater territory round
or in
debt?
sion in your meetings.
is one thing which we
a city, is also pertinent for discus
In discussing this subject there
of what we
not weary you with any definitions
is,—we cannot get away from
I shall
must bear in mind and that
nge, time
can get away
mean when we use the word check, draft, excha
of time any more than wke
d pay exchange, the element
transit, exchange charge, who shoul
the fact that funds or credit
in
from the force of gravity, or
the relation between
s or drafts represent, can
who should pay for time in tr.ansit,
or whatever else it is that check
all be defined in
transpoted from place to place
"float" and reserves, etc. These may
not be transferred or
solved the
one,just as the transfer
technical terms, and still we shall not have
without some cost, if only a slight
freight charge. The charge on
problem.
of commodities involves a
ical Econis so slight; but on the
I forget the author's name who, in his "Polit
one orange in a carload shipment
Science of Exchanges." Usomy" wrote, "Banking is a
. Relatively speaking, the furerable
quite right. carload it is consid
more the freight. The.
ing exchanges in a very broad sense, he was
ther the oranges are shipped the
wer sense, and still apply
It may also be used in a narro
gets away from its place of payfurther a check or draft
ng business. John
quently and the more
to a considerable part of the banki
ment, the more time it takes conse
not remind you how extenStuart Mill wrote: "I need
to its resting place.
it costs to get it back
g all payments, extold, may be of great
sively the custom has spread of makin
A Country Clearing House, I am
on bankers. If all persons in
cept small ones, by orders




CLEARING HOUSE SECTION.

159

assistance both as to reducing time
in transit and ex"The check clearing feature of the Federal Reserv
e
change costs. We have had Clearing House
s in our cities
Act should have been omitted. Doubt very much whethfor many years, and no one would
offer the ridiculous
er it will be successful in operation. Collecting of
checks
proposition that they be discontinued. In
the more heav- through Clearing Houses may work
no hardship in denseily populated sections, cannot the sphere
of collections be
ly populated areas; but where distances
are great and
extended? The machinery is there, used
but for a small
exchange rates high, it is useless to expect
Federal Repart of the day. I am told that the only
differences be- serve Banks to absorb these charge
s. The Federal Retween a City Clearing House and one for cleari
ng country
serve Act will not do the impossible for our
benefit."
checks are the elements of time and the funds
in which
"The establishment of country Cleari
ng Houses in the
settlements are made. As to the latter, the
difference is large trade centers is the best
solution to the problem. If
not so great after all. We settle many of
our clearing balthe Clearing Houses turn out to be
the best collecting
ances in exchange. Time, then, seems to be the
only addagency that is good reason for having
them do the coled factor in the calculation and it can be
determined
lecting and let the Federal Reserve
Banks be Reserve
definitely. The days in transit multiplied by the
amount
Banks."
of the items gives the size of the "float,"
a sum which
"The Federal Reserve Banks should
even the Federal Reserve Banks have found
- be depositories
to be so
for the reserves of their members, should
large as to absorb all their cash resources. For
be banks of remember
discount and banks of issue. They should
banks to carry sufficiently large balances
be kept septo cover, it is
arate from country Clearing Houses."
said, would be prohibitive. That is what
experience has
"We are not enthusiastic at the present time
taught in a short trial.
over the
prospect of the absorption of the countr
Let me introduce here some of the testim
y department of
ony of those
our Clearing House by the Federal Reserve
whom'I have consulted. It is as follows:
Bank of this
district. The Federal Reserve System, if it
"The first step towards organizing a countr
is going into
y Clearing
the collection business, should be modified so
House is to get the majority of banks, both
that it will
city and coun- include all
commercial banks. This would enable a
try, to agree that present methods of check
comcollection are
plete collection plan to be devised. Any limite
not only conducive to unsound practices, but
d arrangeare also unment is not satisfactory."
necessarily costly. There should be a countr
y Clearing
"The opposition to the work of installing a
House in every important business center."
simpler collection system consists of (first), the fact that
"Only through discussion by bankers themse
most State
lves will
banks show no disposition to co-operate with
the problem be ultimately solved."
the Federal
Reserve Banks, and (second), reluctance on
"The present system is antiquated. Some
the part of
means
the country.banks to surrender revenue obtain
should be devised to eliminate our cumbersome
ed through
and exexchange. Until these objections are overco
pensive method of shifting payments back
me, a series
and forth.
of Country Clearing House agencies would
Yet it is difficult to equalize these inequalities
be a decided
by a flat
advantage to both business and banking."
rule. It took seven years of unremitting labor
before the
"In the matter of a country Clearing House
country Clearing House for New England becam
, the smalle an acer banks are usually much in favor of It; but
complished fact."
the larger
banks with important transit departments
"The difficulty with the Federal Reserve Banks
and consideris that
able volume of items are opposed to it from
their scope is limited, being almost entirely confin
ed to
selfish reasons. (The writer might well have accuse
National Banks."
d both small
"The Federal Reserve Banks have not develo
and large banks of being selfish.) It is felt
ped a
that transit
very comprehensive collection scheme. We must
items are a leverage for attracting bank
accounts. But
turn to
th organized Clearing Houses to extend their
the establishment of country Clearing House
zone of ops in reserve
centers will be beneficial to members and the
erations to include country checks. We shall
be glad to
public."
favor any such proposition, as country Cleari
"A country Clearing House in this distric
ng Houses
t (this writer
have come to stay."
is in the West) independent of the Federal
Reserve Bank
"The larger banks much prefer their present
would not be worth while."
method
of direct handling for important items, and
"We have a country Clearing House which
these direct
is handling
connections between banks must be maintained.
all of the one bank towns and a number of the
Federal
two bank
Reserve Banks should stay out of the collection
busi- towns where reasonable rates have been secured. It has
ness."
not gone into the three or more bank towns
and has not
"The Federal Reserve Banks have made a
start and. waged an extensive fight for exchange reductions. The
thequestion had beter be left largely to them
country check should, and eventually will
to work
be, handled by.
out; but it will be necessary to solve the proble
country Clearing Houses, for this is as
m that
logical an evoluthe Federal Reserve Board or Comptroller of
the Cur- tion as the city Clearing House. It is just as certain that
rency issues an order directing every member
the Federal Reserve Banks will never
bank to
be able to cope
remit for its check at par."
with the situation. They do not have
enough funds to.
carry the 'float.' This can only be
"While we have heard a number of objections
done through Clearto the
present collection plan of the Federal Reserve Banks
ing Houses, where each bank assumes
, any
its share of the
attempt to establish country Clearing Houses should
burden."
be
deferred until the system operated by the forme
I think I have quoted sufficiently to give
r has
a good general
been given a thorough trial.. Banks in reserv
idea of the tenor of the replies.
e cities
would lose more business than the saving in
exchange
A summary by cities shows that nine
have country
would warrant."
Clearing House Departments, of more or
less complete"The theory of having bank checks at par for the
ness, in operation; four are favorably inclin
ened; two have
tire United States does not meet with the approval
adopted resolutions, but have not carried them
of the
out; four
smaller banks."
do not believe the proposition workable; in
one sentiment
"There seems to be an irreconcilable difference of
is divided; in two, the subject has never
opinbeen brought
ion as to whether it is to the best interests of
up and one has not reached any conclusion.
all concerned that arbitrary and often exorbitant rates
of exAnother quotation, which is an interesting
suggestion,
change should be paid to those who see fit to
charge
Is as follows: "As to whether country Cleari
ng Houses
them. Furthermore, we have been permitted to
count as should collect items, or Federal Reserv
e Banks, is not
reserve uncollected checks for so long that we
now seem
amenable of solution, scarcely of discussion.
Whichever
to resent any method which seeks to correct
this situa- can accomplish the best results should
have the field, and
tion."
it may be that we shall need both, for a time
at least, un.




160

BANKERS' CONVENTION.

tion of
ment, would inform such localities where collec
ve System betil the State banks in the Federal Reser
as to what is being done in other
checks is a burden
ry Clearcome much more numerous."
parts of the country, and what advantages count
y agreed by those who answer the
It is unanimousl
s over present arrangements; this is
ing Houses posses
between country
not able
question that the exchange of items
supposing that the bankers in such places are
a long way in the future. It could be
Clearing Houses is
em out for themselves. Some of us are
and are work- to work the probl
la, plan
a
possible only when zones are esetablished
apt to wait until someone else prepares formu
under the Clearing House plan.
ing satisfactorily
ver else we wish to call it, which we
in my pos- or system, or whate
Parenthetically, let me mention that I have
g it into praccan borrow or adapt to our needs by puttin
results of the operation of one large
session the actual
, a piece of machinery which some
tice. In other words
to go over the
country Clearing House; I shall be pleased
which
one else has tried and found satisfactory, and
anyone sufficiently Interested; they show a
details with
excellent recommendations, just as we
comes to us with
I did not feel
very considerable saving over old methods.
or labor-savbuy an adding machine or some other time
to quote the figures in so public a Manner. Let
at liberty
am afraid that we shall be disappointed
ing devise. I
in, issued
this matter of
me also read from the Federal Reserve Bullet
If we expect such a result. It seems that
1915, from the report on the "Establishment
August 1,
checks has to be worked out for each case.
collecting
the question
as usual it lies
of Intradistrict Clearance System,"—" On
Joint effort brings about good results, but
retory system as opposed to non-mandatory,
of a manda
who are to be benefited to make the effort
non-mandatory, with those
the rewards for
ports show that eleven districts now have
and arrangements, whereby they reap
Of
a mandatory system of check collections.
and one
ity or skill. Reading between the lines one
their ingenu
tory, three
y lies in action
those districts whose system is not now manda
comes to.the conclusion that the remed
a
state that they believe the introduction of
distinctly
by the affected banks; possibly through alto be taken
while seven
.
mandatory system would be undesirable;
ready existing Clearing House Associations
qualthemselves, in some cases, with More or less
express
replies I received indicate that these men are
The
of a mandatory
se they have been
ification, in favor of the introduction
closely in touch with the topic becau
ary if
to a
m, most of the banks regarding this as necess
syste
ng it over; that some of them are influenced,
thinki
The report states
the plan is to become fully effective."
they are too close to It; that
degree, by the fact that
m out of a little
which will be of
that 2,373 banks have joined the syste
they are deeply interested in anything
—about 31 per cent.
over 700 National Banks
many sides to the question;
assistance; that there are
are fragmenng; that
I turn these thoughts over to you; they
the local conditions have an important beari
as a story of the impressions that
tary and are intended only
on theory will not always fit; that
plans or systems based
the subject matof necessity
gained in a rather short investigation of
what is suitable for one locality will not
to quote in a connected form
ter. I have attempted
se somewhere else; that, while general
serve the purpo
in the institutions
er, do not
what practical men who are employed
principles may be enunciated, these, howev
ry checks appear for treatment have
where most count
weight, except in a very general way,
carry so much
to much weight. So
ns.
told me; their views are entitled
over practical and local consideratio
officials of the Federal Reserve Board
are those of the
pamphlet, Mr. George E. Roberts wrote the
In a recent
not had time nor opantagonism, disand Banks. These latter I have
following: "If ill conditions exist, if
igate; such views had much better be
portunity to Invest
disorder prevail where there should be harcontent and
that they be freely
e for business
presented by them; it would be well
mony, and co-operation, there is troubl
consulted if this Section sees fit to go
and frequently
matter where the blame may properly belong;
men, no
to do what
more seriously into the subject.
and whether we like it or not, we are bound
satisfied with the results in our collection
If we are
to better the conditions among which we must
we can
to realize usable
that inevitably
departments, with what it is costing us
live. We cannot escape the responsibility
need to
from out-of-town items, there is no
exchange,
es to our place in affairs."
attach
places where bankers
can
agitate the question; but in those
I believe the Clearing House Section of the Ameri
e costs,
satisfied, where they may wish to reduc
are not so
rs' Associat:m should accept and undertake the
Banke
service, the question may
n of this matget quicker and more direct
responsibility of assisting in the investigatio
and pressed toward a trial.
may
well be raised
of collecting or clearing country checks. Some
ter
may be something
This whole proposition, therefore,
al Reserve Act furnishes the soluthink that the Feder
to work out. It would
rfor the Clearing House Section
many are of the opposite opinion. Your membe
a wide field open for cultiva- tion;
seem that there is not alone
has, it would seem, in this line of
ship, Mr. President,
crop being harvested
fic, unselftion, but there is prospect of a good
endeavor, a wonderful opportunity for scienti
ed effort. It would be interestfrom earnest, well direct
banking institution in these United
ish service to every
by the President of
ing to have a committee appointed
States.
would take the matter under advisethis Section which




CLEARING HOUSE SECTION.

161

The Clearing House Bank Examination System.
BY BBECKINRIDGE JONES, President Mississippi Valley Trust Co., St. Louis.
Mr. Chairman and Gentleman: It was indeed a surprise to me after I had been away from home some two
or three weeks and arrived in San Francisco to receive
notice from Mr. Wilson that he had drafted me for this
duty. I think he suggested me to lead off in this discussion because he thought I knew so little about it that it
would excite a good deal of discussion from those who
were better posted. I have been on the Committee of
Management of the St. Louis Clearing House nearly a
year, and so my practical experience with the examiners
there has been much more limited than that of many of
you gentlemen here. But in the line of trying to excite
discussion, which is what I understand Mr. Wilson wants
me to do, I may tell you just a few things that I have
observed in connection with the subject of clearing house
examinations in our city.
When the matter was first suggested I felt rather not
favorable to it; I saw some objection to it. But as a
great majority of our men in the clearing house were
favorable to it we put it on for a trial. Some difficulties
that had been suggested about it were that it would give
the Committee of Management undue information as regards the business of the other banks. Considerable importance has been given to that not only in our city, but
as I have heard from bankers from other cities. It is
true, of course, that the Committee of Management do
get a lot of information about the business of other
Institutions, but the rule as we have it is that unless the
clearing house examiner finds that a bank is not all right
he simply reports to the Coinmittee of Management that
he has examined that bank and there is no need for any
action of the committee. That is all that we do know
about examinations. If the examiner finds that the bank
is in bad shape, why, then, he reports to the committee
In a general way any faults that he has found. They are
brought up before the Committee of Management in
detail, and the committee then gives certain instructions
or if the matter is sufficiently complicated they request a
conference with the officers of the bank; or they will
make certain suggestions to the examiner and leave him
to convey those suggestions to the bank, with the suggestion that if they prefer they can have a conference
with them. In every instance as far as my experience
has gone those conferences, and we have had a number
of them, have been entirely friendly and entirely satisfactory and have always ended with the bank feeling
that there was a disposition on the part of the Committee of Management not to embarrass but to assist;
awl I have yet to find a single instance or to hear of one
;n out city where there has been even the suggestion of
any unfair advantage being taken by any of the Committee of Management of the information they have been
gabiing by reason of being members of the committee.
So while I have felt that there was some objection on
that score at the .start I am very glad to say that the
several years we have had the examiner before I was on
the committee I knew of no trouble of that kind and
since I have been on the committee my impressions on
that line have been confirmed. And I believe that that
Idea of fear of the knowledge that it gives the competitor
has been given undue importance and need not be feared.
There were other suggestions as to having a central
bureau of information, that that would be unfair to some
houses because it put it within the power entirely of the
examiner or the Committee of Management to break the
credit of a house; because the ideas of credit are not
always according to the same standard. One man may




think that such and such a statement entitles a bank to
credit and another may think it does not. If the examiner happens to be narrow or severe he might make a
report and get that information in the clearing house
In a way that would be very unfair to one institution
and put the institution at the mercy of some arbitrary
examiner. Of course, I might say in passing, and I am
speaking now to you, because a number of you gentlemen here have not the clearing house examiner in your
cities, that you may know just how it is.
Of course, the information that goes to the Committee
of Management is absolutely secret. It is not given to
the other members of the clearing house. Never, has
there been a call from the clearing house from the
Committee of Management, so that the information that
has gone to the examiner and from him to the Committee of Management has not gone out to all the members of the clearing house, and we have had no difficulty
along that line. Of course, the examination through the
Federal Reserve Bank would not meet the case in cities
such as we have, because only half the members of the
clearing house are members of the Regional Bank. And
I believe that the examination is not only of the. clearing house banks, but also of those with only a few members. And I think there are fifty-seven institutions subject to examination under our clearing house rule, but
only sixteen or seventeen members of the clearing house.
So that with half the members not members of the Regional Bank there would be no opportunity for the
Regional Bank examination to take the place of the
clearing house examination.
There was considerable fear on the part of the 'clearing house examiner in St. Louis that with the establishment of the Regional Bank the clearing house
would go out of business practically. And so there was
an application entered in which the clearing house examiner became the cashier of the Regional Bank. They
were ready to leave the ship, thinking there would be
nothing left of the clearing .house. But the clearing
house has not only maintained its importance in the
matter of examinations, but the clearing house has extended its work along the country checks being cleared,
and as far as we can see now there is no suggestion of
the clearing house being minimized or its usefulness lessened in any way by reason of the Regional Bank being
established.
I have made these suggestions merely as a preliminary,
and following the line that Mr. Wilson has suggested,
that I would conduct this discussion, I am going to take
the liberty of calling on the representatives of several
cities here that have a clearing house examination and
ask them to make reports that would be information not
only to the other cities that have clearing house examiners, but to many of the cities where possibly the
examination by clearing house may be established.
I find Chicago on the list first, and without naming
any individual from Chicago on behalf of the meeting I
ask some gentleman from Chicago to make a report as
to the working of the clearing house examination in his
city.

MR. VAN VECIITEN OF CHICAGO: Gentlemen, our system in Chicago
has been in existence for nearly ten years. I think I can truthfully
say, and I believe that Mr. Moulton will corroborate it, that there is
not a banker in Chicago who would go back to the old system. The
principal advantage of the clearing house examination is the fact that
it acquaints tile directors of the banks with the affairs of that particular bank. There is no other system heretofore devised that does
that so effectually. In Chicago, the examiner makes out a detailed
report of the condition of the bank, one copy of which he retains for

162

BANKERS' CONVENTION.

his files and the other copy of which goes to the bank itself. In addition to that he makes out a very brief report which goes to the clearing
house committee. The clearing house committee report only deals
with the savings features, but this detailed report covers practically
every item in the affairs of that bank. After the examination the
examiner addresses a letter to each member of the Board of the bank
under examination, stating that this report is on file with the president
of the bank and asking that particular director to go over it and
acknowledge to him that he has done so, acknowledge to the examiner
that he has done so. The result of that is that the directors come
to know a great deal more about the affairs of the bank than they
will in the ordinary course of business by attending meetings. Even
the members of the executive committee of the bank, who are familiar
with its affairs, or acquainted with the details of securities and
Investments that otherwise might not come to their knowledge through
the absence from meetings or through inadvertence or through failure
on the part of the officers to make reports. That, I think, is one of
the strongest features.
Another feature of almost equal importance is the fact that In all
our larger cities there are so many accounts that are common to nearly
all the banks of those .cities. Lines of credit which are of a local
nature and are perhaps of vast importance in the particular community which are under no sort of control except through this method.
In other words, if we wish to ascertain whether a certain corporation
Is expanding too fast, whether it is using too much credit beyond
what we think is reasonable, we call on the clearing house examiner,
who gives us those figures without disclosing the name of any bank,
but simply gives us the figures or a memorandum, and we know the
extent of that particular corporation's credit at that particular time.

reference to tile clearing house and the Federal Reserve Act will ultimately operate very smoothly, and harmoniously, and profitably.
I will say that in the matter of standardized statements from borrowers, we have had that in Cleveland for some time 'now, as was said
by Mr. Lowry; and we are in perfect harmony with all the bankers
there. It worked out properly, and I think it will be productive of
great good and saving to the fraternity at Cleveland.
As to the matter of clearing house examinations, we have had a
clearing house examiner at Cleveland for three and a half years, and
we are very well pleased with the examiner and with the working
of the system. Mr. Van Vechten explained the workings of the clearing house examinations very fully, so fully, in fact, that I know I
could not add anything to it. What he has stated regarding the
workings of the system in Chicago applies to Cleveland. We have a
good man, who has given careful and intelligent attention to the examination of all the banks, National Banks, and Trust Companies and
Savings Banks. As I have said frequently in the past, after becoming
familiar with the examination, so long as that system continued in
vogue in Cleveland, there will be no failure of a bank in the city of
Cleveland. So strong is my belief in the system that is in operation
with us, and so strongly do I believe in the intelligent discrimination
of our examiner, that no bank can fail. As was stated by Mr. Van
Vechten, if a bank is found to be weak in any respect and the examiner acquires advice, he submits the statement to the Clearing House
Committee, not the clearing house, but the Clearing House Committee,
which consists of five members, of which I happen to be one, and he
submits the information and we diagnose the case, and we give advice
that we feel is necessary. And the operation of the system has been
truly admirable and worthy of emulation by every one of you gentlemen.

(Applause.)
Ma. WILSON, OF Los ANGELES: Gentlemen, as for myself, I am a
little bit bashful. But we have with us to-day one of the greatest
bankers in the United States, and one of the finest bankers of Los
Angeles, who can treat this subject better than I can. I refer to Mr.
Jess.
MR. .floss; Gentlemen, I hope no one will take Mr. Wilson seriously.
He knows, however, that I am an enthusiast on this question of special
examiner. It is a matter that we have tried out as fully in Los
Angeles perhaps as any other city of the United States, and perhaps
have extended the system further, because we not only have the banks
of the city of Los Angeles under the supervision of our special examiner, but we have got the outside banks. We have got a very large
number of banks in the State of California outside of the city under
the same supervision. We have extended the examiners organization to
Include banks outside of the city. We concluded that it is quite as
essential for us to know the condition of those banks that are in our
suburbs as it is to know the condition of the banks that are in the
city. I look upon the mission of the special clearing house examiner
as a compliment to that of both National and State examiners. He
is intimately acquainted with the conditions that prevail in the
I am very glad to have heard Mr. Lowry's talk, and I want him to
locality that be presides over. He knows intimately the character
know that I appreciate the spirit of it. I do not think there is any
of the business men and the accounts, and he is better able to judge
conflict between a system of clearing house examinations and a sysmany things than are either the State or National examiners. With
tem of governmental examinations, whether carried on under the direca good special examiner the clearing house committee of a city is in
tion of the Federal Reserve Board or of the Federal Reserve Bank or
receipt of advance information that enables them to lock the door
of the Comptroller of the Currency. The examiners in Chicago cobefore the horse is stolen, and there is no excuse, with a good examoperate. A recent examination of our bank was made simultaneously
iner, for any bank to inconvenience its depositors if all do their duty.
by the clearing house examiner and by the Government examiner, and
MR. JoNEs: Let us hear from Philadelphia.
both profited by it. I thank you.
MR. WOLFE: There is nothing that I can add for Philadelphia, except
Ma. Jim: Just for information, let me ask this: In our city it takes
to say that Philadelphia, I think, if I - am not mistaken, was the
an examiner a year to get around. If we asked what is the credit
second clearing house to adopt the clearing house examination sysor the line of credit outstanding of a certain concern, how does the
tem. The system that we have there is identical with that in Chiat that?
examiner get
cago, St. Louis and Cleveland and other cities. There is just one
Incident that did occur in Philadelphia some time ago that may interMR. VAN YEOMEN: He calls up all the banks and knows where the
accounts are, and calls for the information.
est you gentlemen if you are not familiar with it, aside from the
testimony that is given here to-day. We had a trust company fall
Ma. Hirtsos, or CINCINNATI: Gentlemen, I regret very much to
in Philadelphia some years ago. You may remember it. The trust
state at the present time that Cincinnati does not enjoy having a
company has since been reorganized and is open for business. At
clearing house examiner. We were one of the first cities to put in an
that time a great many depositors came to the national banks, as
examiner, but it was unfortunately just at the time the Federal Reperhaps happens in most every city where there is a failure in a
serve Bank had been established, and our examiner had an opporState bank. Then about a year or two later another trust company
tunity to better his condition and resigned. But owing to the fact
failed and more depositors came to the national banks, and the result
that there was some ambiguity as to whether or not the clearing
was that a great many of the trust companies, not a great many, but
house examination could be conducted under the Federal Reserve Act
many of them afterwards joined the clearing house. Why? Because
satisfactorily, we concluded to wait, and we are still waiting. The
they got the benefit of the clearing house examination; that Was the
system, however, is one that I can endorse, especially as it is apprimary reason. So that to-day I think that any bank in Philadelphia
vlied to different matters. Shortly after the inauguration of the systhat is not a member of the clearing house, and therefore does not have
tem, one of our banks got into trouble. When we knew of the trouthe benefit of the clearing house examination, is not in nearly so good
ble we called upon the Government to look in. The result was that the
a condition to hold its own in a stringency as those banks that are
banks of the city of Cincinnati undertook to guarantee the deposits of
members of the clearing house association. I do not know whether
this bank after making a thorough examination of the institution,
that has been the experience in other cities or not, but we have seen
and for three months we ran the bank. I was personally one of the
it there, and whenever there is the least trouble with State banks
directors temporarily of that institution. I turned up each morning
who are not members of the clearing house immediately there Is a
at nine o'clock, and was on the job from nine to ten, and then again
flood of all depositors to the banks that are members of the clearing
from four to five in the afternoon. We liquidated many of the loans,
house, because those are protected by the examination.
and got the bank .into such good condition that at the end of three
MR. ROACH: I cannot add anything to what has been said already
months stockholders came in and put in a million dollars, and we
about the clearing house examination. We have of course found it
turned the bank back to them, and the bank is in a prosperous convery satisfactory. I know of no reason why It should be changed in
dition to-day. I personally would favor the employment of an examany particular.
iner, and I think that will probably be done at a very early date. I
Gentlemen, I am very glad to say a
Mn. CRANE, of Minneapolis;
thank you.
brief word on the system of the clearing house examinations that was
MR. JONES: We would now like to hear from Cleveland.
put in operation in Minneapolis. Shortly after tile system was put
COLONEL SULLIVAN, OF CLEVELAND: Gentlemen, I regret that I was
In operation in Chicago I believe the Minneapolis bankers recognized
late getting into this meeting, and hence was deprived of the very
immediately the benefits of the system of special examination under
great pleasure that I should have had, I am sure in listening to my
the clearing house auspices, and within a few months after Chicago
friend, Mr. Kiesewetter, on the general subject of his address. I
established their system Minneapolis had one in operation along very
very much enjoyed the address of Mr. Lowry, and I heartily concur
similar lines. Very shortly after our system was very thoroughly
In all of the salient features of the address. • It was well thought out,
established, St. Paul requested that she be permitted to join with us,
and it was well and admirably expressed. The general idea in it was
and since that time a system of examination has existed in both cities
very good and worthy of your serious consideration. I think that his

Now, another matter. During one of the recent stringencies one of
the smaller banks was being talked about. The bank was perfectly
sound. But this talk reached a bonding company which was on the
bank's bond for city deposits. The bonding company sent out word
to its representatives to withdraw from that bond. You know what
would have been the result of such a withdrawal at such a time.
Mind you, this was during a severe stringency. The representative
of the bonding company came to me and asked my advice about it,
and I asked him the names of his directors, his local directors, and
he submitted them and I said, "You go to this man," who was
president of one of the banks. I went to this local director and I
said, "Will you recommend that this bond be continued?" He
says, "I will recommend that the bond be continued if the clearing
house examiner will tell me that the bank is sound." He called up
the examiner over the telephone and the examiner said that the bank
was absolutely sound. The director immediately telephOned to the
New York office of the company and the bond was continued. Now,
things of that kind are mentioned as an illustration of the possibilities of the system and its benefits. Those things are coming up
all the time. We, in Chicago, would not be without the system.




CLEARING HOUSE SECTION.

163

jointly under the same examiner. We were very
fortunate in securing
expense account came within our estimate of seventy-fiv
a very capable man for that work, Mr.
e hundred dolKerst, who had been State
lars. Any time that any little thing is reported
bank superintendent, and our system was thoroughly
to the examiner
organized and
by any bank that some other bank has done something
that is unhas been an unqualified success. We have been obliged
to make some
ethical, the examiner immediately takes it up,
and it is nipped in the
changes following the organization of the Federal Reserve
Banks, due
bud right there. It is not allowed to grow
and become exaggerated.
to the fact that Mr. Kerst was made Federal Reserve
Agent, awl
It is taken in hand at once, and I want
to say that there never has
only recently examiner in chief in charge of the bank
examiners for
been a time in tile history of Spokane banking
when their banks were
the control of the currency for the Ninth District. We have
secured
in such perfect harmony as they are at
the present time. Thank you.
a very competent man to take his place, and we are carrying
on our
Ma. FuLTox, of New Orleans: Unfortuna
examinations in the same way as heretofore.
tely for the people of New
Orleans, the New Orleans Clearing House Associatio
Following Mr. Sullivan's suggestion, I want to say that
n was somewhat
the years
dilatory in taking up the matter of
that our examination system has been in operation we have
the clearing house examination,
not had a
and after one or two rather disastrous
bank failure in either Minneapolis or St. Paul, and I
failures there we decided that
do not believe
we ought to have a clearing house
it would be possible under our present arrangements for a
examiner. The great trouble was
bank to get
that one of the banks did not trust
so deeply into difficulty as to inconvenience its depositors,
the other and we thought that
or in any
the board of managers would get too
much information about the other
way reflect upon the banking system. Our methods of examinati
on
banks' affairs. This, however,
are very similar to those in Chicago. The examiner, perhaps,
proved to be nothing but a myth.
carries
After we have had an examiner for
three years I do not think that
his criticisms a little further than they do there, in that a complete
there is a banker in the city of New
Orleans that would want to go
report is made to the directors, and the examiner by calling
the
back and not have an examination.
We consider it one of the best
Board of Directors together and going over in detail everything
which
things that we have got. We have an
excellent examiner. One of
the examiner can criticise. And in that way he has found it
always
our neighboring cities made him a very tempting
easy to correct bad methods, or to work out any proper improveme
offer to leave us in
nts
May, and for the last few months we
were without an examiner.
in the individual bank. I think that we have had only very few
occaBut fortunately we have been able to get him
back and he has been
sions where it has been necessary to take to the Clearing House
Comin his position since the first of December. I think
mittee any unfortunate situation, and in every instance those have
every city should
been
establish the system without delay. We have
found the information
worked out very satisfactorily. I can say that I am sure
that the
obtained of great value to us. The system is modeled
banks of Minneapolis and St. Paul would feel that they had
after that of
lost one
Chicago.
of the most important adjuncts to our Clearing House system if
we
Mn. EDDY, of Portland, Oregon: The clearing house
were to in any way abridge our Clearing House examinations.
examination in
Portland has proven to be very valuable, particularly
Ma. MARTIN, of Spokane: Mr. President, this is the first time that
from the standpoint of the double borrower. The banks there have
I have ever attended a National Convention, and the amount of eduworked close
together in that respect. Mr. Loveland, here, the
cational work and constructive work that this session has been doing
examiner, has worked
out a very good system as to the manner in which
or rather done to-day, is amazing to me. And on behalf of the assothey report the
double loaning or double borrowing to any bank who
dated bankers of Spokane, I want to thank the president of this
wanted to get
the information in that respect. If we want to find out
Section and his committees for the good work that they are doing, and
on any particular day how much one particular borrower is
hope that they will continue. In looking over the different Sections
borrowing we cal/
up the discount department, and every day the discount
of this Convention, I have come to the conclusion that this is the
department
reports to Mr. Loveland the amount that borrowers borrow
money-making Section. This is the Section that I notice that
over five
some of
hundred dollars, and it keeps his records up to date.
the leading bankers of the United States are associated with
We all feel that
and are
the examinations and the assistance of Mr. Loveland
to-day. This society is very good, and hereafter whenever
gives us someI am
thing that we could not dispense with under the circumstan
identified with any National Convention it will be with
ces. The
this Section.
details of the working out of the system are considerab
I want to say a word to those gentlemen here who
ly similar to
have not got an
those of Chicago and other cities that have been explained
examiner in their city. The question was raised with
to you.
us six years ago.
MR. DOMINIQUE, of Milwaukee: I can add nothing
For five yeare we were discussing the feasibility
further to what
of having an examMr. Van Vechten has given. Our system is similar to
iner. But we were all conservative or skeptical
that of Chicago,
or afraid of each other
except that ours is handled by chartered accountants.
—afraid that some information in our bank would leak out
But in time
which would
we will have our own examiners.
injure us. And not until a year ago last July did we
secure an examMn. PERRY, of Kansas City, Missouri: Our examinati
iner. We secured a man who was thoroughly trained
ons are very
in banking both on
similar to those that have been described, with possibly
the Canadian side and on this side. He is a quiet, unassumin
the excepg, pertion that we go a step further in a regulatory way.
severing gentleman whom we all trust, and to-day we would
It was thought
think
Possible by our clearing house to regulate payment
as much of discharging our cashiers as to lose the services
of interest on
of Mr.
deposits. The clearing house ruled that no bank should pay
McLean. We have in our association gone so far as to
more than
take up
two per cent. after 1909 on bank accounts, or more
public charitable donations, for instance, and political donations.
than three per
As
cent, on certificates of deposit. That rule is enforced and
you know a great many banks are drafted each year with
for a violacertain
tion of that rule we fine that fellow five hundred dollars
donations. In Spokane they are all referred to the clearing
and collect
house.
the money. Another thing that we have that is probably
There is a committee that once a year makes all the
dissimilar
donations to
is the report that our examiners make to us of past
the charitable institutions. They are not parsimonious in their
due items of
donaloans to officers and directors and of stocks and bonds
tions, but they give to each charitable Institution that which
and of loans
they
above a certain amount, according to the size of the bank.
think they deserve. In regard to information leaking out, that
We haven't
susenough confidence in each other that we want the advice
picion has been entirely dispelled. Instead of secrecy with regard
of our friends.
to
And I do not believe that there is a man in Kansas
certain borrowers, in regard to certain men who were doing
City that resents
business
a thorough examination of his institution. I do not
at several banks, instead of throwing about them the cloak of secrecy
believe that anyone has ever objected to telling the whole story.
we are now anxious that this situation be made known to all
When the bank
of the
examiner comes up with a bad report he makes
banks, and double borrowers are very well known.
such explanations
as he has to make before the clearing house committee
Answering Mr. Jones' question about giving out information,
, and from that
the
the clearing house committee take it upon themselve
examiner gives out the amount of money that any one firm
s to offer such
might
advice as the situation demands. If that
advice is not followed, of
borrow. He does not necessarily say how much he has borrowed
at
course our authority ends. But we say that you
each different bank, but the banks know how much he has.
are now in the hands
Mr. Mcof the National Bank examiner and we will
Lean made his report to the Executive Committee of the
tell the department at
clearing
Washington that we will no longer be
responsible for that institution.
house in July of this year, and with the consent of the Executive
And the rule is that they do exactly what
we ask them to do. And
Committe I am going to read a part of his letter:
• for that reason also any bank in Kansas
City that is a member of the
"Since assuming the office of Clearing House Examiner for the
Clearing House Association or one of
our associated banks, we feel
Spokane Clearing House, I have examined your members with one
that they are good because we are going to
make them good.
exception, and all the associated banks, and am glad to report that
Mn. KiEsnwurTEn, of Columbus, Ohio:
We have had the clearing
there is nothing in the local situation generally or at present in the
house system in Columbus, Ohio, for three or
four years and it has
condition of any member or association to cause uneasiness. I found
been quite successful. Two little banks which
might have caused conlittle precedent to guide me in shaping the affairs of the office, alsiderable inconvenience to their depositors and
caused a feeling of
though I feel greatly indebted to the Clearing House Examiners of
distrust possibly with regard to the larger
institutions in the city,
Tacoma, Los Angeles, San Francisco, and Portland for valuable sugwere reported by the clearing house
examiner as needing attention
gestions. It is my belief that we have gone much further in Spoand as being so unfortunate that they could
probably not relieve themkane in the exchange of information than have other cities, especially
selves through their own means. So the clearing
in regard to double borrowers; and I hope and believe this action
house took them over
has
and paid the depositors and are working
them out upon the recombeen fully justified in every way and especially by results. While
it
mendation of the examiner. We would under
no consideration, I hope,
may be hard to call to mind specific cases where direct benefits
can
go back to a situation where we would not
have a clearing house
be traced to this office, no doubt more confidence exists among
the
examiner, because his reports are much more
complete. They take
members of this Association from the knowledge that direct informahim a good deal longer to prepare than
any report that a State or
tion is obtainable. The tendency to credit street information has about
National examiner does make. Ile lives with us
all the time. He
disappeared. The disposition shown by Spokane bankers in bringing
knows all of the borrowers. He is in a much
better position to test •
about sound principles of banking is very gratifying. The
work of
and certify the quality of the assets of the members
axaming the different banks has been necessarily slow. I hope, howand non-members
of our association. In the last analysis that is
ever, that we will accomplish much more in this respect the coming
what your bank is
good for anyway, the quality of your assets, not the
year, and plan to make at least two examinations during the year of
ethical verification of the fact—that you have so many thousands of
the associated insfitutions, and keep in close touch with their plans.
dollars in loans,
so many thousand bonds, so much due from banks,
I wish to emphasize the necessity among the bankers in this Clearing
and so much in
cash. Any bookkeeper could do that. The quality
House of sound banking principles and sound banking practices.
of your assets is
Whatmuch more important and your National or State examiner
ever this office may have accomplished has been done through
does not
your
state upon them as completely or as satisfactorily as
co-operation, and only through your co-operation and confidence
the clearing
in
house examiner. We are thoroughly well satisfied with
your examiner, and each other can material results be obtained."
it and I do
not think that under any consideration we would change to
the old
And then, in regard to the expense account, I want to say
that the
way.




164

BANKERS' CONVENTION.

entirely outAngeles, we call it the banks in our outer zone. They are
to what has been
voluntary
MR. JONES: I would like to add just one word
side of Los Angeles and their coming in would be entirely
Clearing House examinaus to
said. Of course, in endorsing this system of
on their part. We did not ask them to. They came and begged
examiners are perfect. We hear
them if
tion we do not mean to say that all
come and examine them. We told them what' it would cost
regard to matters that do not come
it. They said
some criticism from bankers in
they wanted to pay for it and we would come and do
the examiner had made
them. So
before the Committee of Management, that
they did not care about the cost but to come and examine
;
for instance, that has been occasionally reported
an arbitrary ruling,
the first year they made an agreement that they would pay all expenses
wrong, and
have found sometimes that the examiner was
of that time they
and we
and We would make the examination. At the end
we have found that
in its
other times we have found that he was right; and
drew up another agreement that was for three years. That is now
d out a little as well as
without
at times the examiner needed to be broadene
second year. The first year we had thirty-one banks, and
occasion not long ago
came in.
the banker, or to be checked up some. I had
any solicitation on our part the second year five others
me how many of a *certhirtywhere an examiner called me up, and asked
We now have twenty-two banks in the city of Los Angeles and
party owned that was placed with us as
in places
tain kind of bonds a certain
six banks outside of the city of Los Angeles. Those are
him why he asked that question. He said some
to know
collateral. I asked
so near to Los Angeles that it is very difficult for people
to answer the
is now, we
institution wanted it. I told him that I would refuse
whether the banks are in the city or outside. As it
see how
so that within a zone of
, as we had a bond department and I could readily
question
have let the light of day into the banks,
at any time and
for a bank to close
It would be very valuable to me if I could call him
twenty miles of Los Angeles it would be difficult
I did not see that that
those with the examget information about bonds, and further that
its doors. We know absolutely as much of
said that I will deWe have had testimony
had any relation to a question of credit. So I
inations as we do of these in the city.
to report it to the
they would not do
cline to answer that, and I will be glad for you
from many of the banks in the, outer zone that
and let them give a ruling. Later, he
it cost. During the times
Committee of Management,
without that examination no matter what
he had consulted the Committee on Management,
on our heads in about
reported to me that
of 1914 in August, when we were all stood
when the report came
and that they had said at first to go ahead, but
the war news we were somewhat
ee. twenty-four hours on account of
I had objected to answering the questions, the Committ
the banks immediately outback that
interested as much or perhaps more in
he said he would
they had become
of Management said they would refuse. Therefore,
side of the city than we were on the inside, because
think he ought to ask
which meant increased
revise his conclusion, and he said he did not
to develop their plans to protect themselves,
every morning we had
that question.
difficulties for the banks in Loa Angeles. So
question of examclearing houses In those
Now, on this question of examination, it is the
a report from these cities and various
deal to do with keeping
satisfactory and very
Illation by the Comptroller that had a great
Cities as to conditions, and it was very
into this: That as far
Banks without the Federal System. If the
ng; so that it finally resolved itself
great cilafir of the State
reassuri
:a
Regional Banks the State Banks
concerned they did not ask for
'examinations were to take place by the
as the banks on the outside were
d to the same sort of diffithat system we would have
'would feel that they were not subjecte
anything. So that if we had not had
National Banks. You may send an
were in Los Angeles. We did
culties. For instance, take the
been perhaps not in the condition we
and we continued to pay gold
as I knew of one occasion when
'examiner from Texas up to Minnesota,
not have to call time on safety deposits
We hope to extend the syswere to come into St. Louis from
to everyone that came and asked for it.
ltbat has been done. Suppose a man
of Los Angeles, and when we
about our local laws. And if he
tem and to take in the entire county
Vlorida. The man knows nothing
we
will be no difficulty with
us up by a national yard stick
do feel that we are pretty secure and there
comes in and attempts to measure
particularly for those outcriticism. I therefore think that the
any bank. One of the things that we did
would be naturally exposed to
Reserve Board
d that those men were
or the Federal
side banks was this:' It was always contende
Federal Reserve Act should be amended
our time going around
institution, if it be examined, must
not good bankers. So we put in a good deal of
should make a ruling that any State
system and as to
ced in or familiar with the laws
and talking to them and advising them as to their
be examined by an examiner experien
we do feel that we are
ion is made. If we did that I think
what they should do to complete it. And
of the State in which the examinat
I have heard urged by a great
making progress with the banks on the outside.
it would remedy an objection, which
bank examination and the
myself was an objection to a
Ma. HOLLISTER: Do you always have the
many others, and which I have thought
laws
Company bank under State
State examination separate?
State institution, especially a Trust
will be for the
believe the tendency
MR. JESS: Yes.
going into she Federal system. I
the rule that any Clearing
Banks, and that we will have
Ma. HmscH: In Cincinnati we adopted
examinatlons to go through the Regional
information from a bank as soon
s there are familiar with the
director
House would be allowed to call for
no difficulty then, because the
the examination of the Clearing
, and the tendency will be for
as they did subject themselves to
local conditions in their own districts
the Regional Banks, and to a cerHouse Examiner.
the examinations to go through
that about eighteen
importance of the Comptroller's office in
MR. VAN VECIITEN : I might say for Chicago
tain extent to minimize the
under State
that there will be great resentment on
months ago there was a failure of a chain of five banks
that regard. I have no doubt
aid
. None
who wants to maintain the prestige
supervision. Four of those banks were in the outlying districts
the part of the Comptroller,
I believe there is a
is there. But
that time the
importance of his office while he
of them were members of the Clearing House. Since
reports to somebody not
members
having to make
outlying banks have been tumbling over themselves to become
great deal of resentment in
We would like to have it through the
of the Clearing House.
in touch with local sentiment.
Banktakes place and one or two other changes,
Regional Banks. When that
Ma. LOvELAND: In regard to the question of expense, the State
be in a very short time for the State
of banks there
I believe that the tendency will
ing Board of Oregon has permitted the superintendents
Trust Companies of the cities, to
ion in lieu of one
institutions, the large banks and
to accept the Clearing House Examiners' examinat
system, but not until this question of
for the city of
come into the Federal Reserve
that is in use, so that he only makes one examination
is made in
further and progress
examination is determined a little
Portland.
Reserve Boards get where
until Federal
the method of handling it and
MR. JONES: I believe there is little we can talk about in the bankthe law and not by their own will as
of
I feel they should be, bound by
ing business upon which we can agree so well as upon this subject
State Banks or Trust Companies, they
y ento the power to be exercised by
Clearing House examination. I think it seems to be very generall
believe the law is all right. I think, of
will continue to stay out. I
dorsed, and I ant sure I expect it of those cities that have the system,
or Trust Company whether organized
glad
eourse, that the State Bank
that the system will be extended to other cities, and we will be
subcharter should have a right to come in,
on and'
under a State or general
to feel that our brethren in other places have the protecti
nine
But then Congress put in
House
ject to general rules and regulations.
benefit for themselves as well as for us by having this Clearing
ons, and which expressly inthings that had to be in those regulati
examination. Are there any further remarks on this?
power, and not
has a legislative
tended to exclude others. Congress
Ma. SULLIVAN: We have seven National Banks and twenty-eight
when the Federal Reserve Board
examthe Federal Reserve Board. But
State Banks, and they are all members, and all subject to this
part of your charter do you propose to
We wanted
asks the Trust Company what
ination, and we could not put them out if we wanted to.
, it is none of your business. The Federal
of
exercise, in light language
About tweaty-eae Savings Banks are not members
them in.
rued that law. They are asus in the imReserve Board, I think, have misconst
the Clearing house. But they are all co-operating with
that is one
powers that are beyond their reach, and
its operation
suming certain
portance of the Clearing House examination, and with
institutions out when they ought to
all of its ramifithing that is keeping the State
in Cleveland we are so thoroughly pleased with it in
I have been in touch with a great
would not abandon
be in. The one unified system—and
cations that if it cost three times its cost to us we
country, and I am satisfied that
to every city in
many of the State institutions of this
it. That is our standpoint. I commend it strongly
in this system—and I hope that
there is a general wish to co-operate
the country.
to enable them to come in, and when
to you. I am very
some few changes will be made
MR. JONEs: Mr. Chairman, I return the meeting
will be a great many of the larger
the movement starts, I think, there
much obliged to you, gentlemen.
y.
will come into that system regularl
institutions who
ter a question on the
MR. PERRY: I would like to ask Mr. Keisewet
discussion on the question
Ma. JONES: Now, is there any further
the Federal Reserve
matter of exchanges in the Kansas City district,
examination?
and as a result the Federal
of clearing ho-use
Banks are clearing up all member banks,
ing Mr. Jess)
BR, of Grand Rapids, Michigan: (Address
e
Ma. HOLLIST
Reserve Bank of Kansas City was running ahead. How to overcom
operations of this system to the
would
You were speaking of extending the
that is a problem confronting us. If anyone can solve this we
I presume you will have both
country adjoining Los Angeles. Now,
have him to do so.
like to
of Los Angeles. Would they be
Federal
State and National banks outside
Ma. WoLina: Mr. Perry, did I understand you to say that the
clearing house examiner?
s they are
subject to this examination of your
Reserve Bank is running a debit on account of the exchange
are twenty different banks outside of the
Ma. jass: Yes. There
handling of the Kansas City Clearing House?
the control of our city, and they
d the Federal
city. In all, thirty banks under
MR. PERRY: No, the Federal Reserve Board requeste
es the
National banks and State banks and trust compani
All items are
include the
Reserve Bank to put in a universal clearing system.
they do in the cities.
member banks. And
same as
cleared at par of the member banks through the
work
one word in regard to the
district, so that it
I wish Mr. Wilson would give us
as a result other banks do not do that in their
of the city of Los Angeles, and give
Kansas City of creathe has been doing for us outside
puts a burden on the Federal Reserve Bank of
of the extended plan. Mr.
n
they cannot do. There
testimony as to the successful operatio
ing an exchange to clear all those items which
rs in the country. He has been the
g coming in. They
Wilson is one of the best examine
is no way of creating an exchange without somethin
we want to hear from him.
times. There is only one
pioneer in this work. So
run behind two or three million dollars at
to the will of my superior. Regarding this,
the Kansas City banks themMR. WILSON: I bow
way we find of solving this, and that is
of banks outside of the city of Los
as we call it, the examination




CLEARING HOUSE SECTION.
selves, making the deposits to overcome that difference. Now the
question is, Is there some other way to do it?
Mu. Woise: There is no other way to do it now. We are in a
period of transition. The country bank will keep the maximum
amount with the Federal Reserve agent to cover his deposits. If the
time should come when the country bank will keep with the Reserve
Bank, his maximum amount, rather than his minimum, it should be
possible. Until the majority of the State Banks are in the system it
Is going to be lopsided, because the country banks cannot put in the

165

non-member checks, because practically every check now is a member
check. Another thing that has held the system up at the present time
is the fact that not all the Reserve Banks are co-operating to the extent that the bank of Kansas City is. There is no reason on earth
why all the Reserve Banks should not be doing just what you are
doing in Kansas City. But in the majority of cases they do not want
to antagonize their own members. In some districts the members
charge pretty high exchange rates, and they are very reluctant
to
see any of that go. Therefore their Reserve Banks are collecting it.

.Clearing House Organizations from the Standpoint of a
Country Banker.
BY It. F.

MCNALLY, CASHIER CITIZENS NATIONAL BANK, CHILLICOTHE,

Read" before the Clearing House Section of the American Bankers'
Association, Seattle, September, 1915.
In the State of Missouri, excluding the reserve cities, St. Louis,
Kansas City, and St. Joseph, there are fifty-nine banking points where
there are three banks, and thirty-six where the banks number four or
more. In four of these ninety-five places there are Clearing House
associations. Doubtless these figures are a fair average for the country as a whole. One of the things that stand out in our financial
history has been the development of the Clearing House in our larger
cities; such an aid in the 'transaction of the day's business is taken for
granted, and it would be hard to imagine any of those cities doing without such an entirely satisfactory safeguard and convenience. The
writer is not in possession of any statistics on the subject, but he
questions if there ever has been a Clearing House in this country go
out of existence, that at any time had a spark of vitality in
it or
had been intrusted with any functions 'worthy of mention.
The surprise is that the Clearing House idea has made
such little
progress in the country towns. After fourteen years'
experience as
cashier in a town of less than 8,000 population, with
four banks until
a year ago, when the number was increased to five,
the writer not
only believes in the perfect feasibility of
the idea, but strongly is of
the opinion that any town, regardless of its size, that has
three banks
should have such an association. Banking problems know
no geography. They may be of far greater degree in the city, but
there the
bank officer does not, as is the case in the country, have
to contend
so noticeably with the unregulated competition, the personal
equation
carried to the "n "th degree, the calm insistence on the part
of
customers that each must be treated as a particular exception to any
banking rules, and the many little vexations that make business
harder
to transact because of the impotence or more likely the timidity
on
the part of country banks that stands in the way of making and
enforcing reasonable regulations in the handling of their business.
In reciting what has been accoinplised in Chillicothe, Mo.,
since
the organization of our Clearing House sixteen years ago, most
of the
points touched upon will be passed over by the city banker because
he cannot imagine conditions being otherwise. However, it must be
noted that with unrestricted competition strange things are possible,
and there is not one of the things we have brought to pass in Chillicothe
but what is of importance In nearly every town our size, and in many
of larger growth.
The constitution and by-laws of the association provide for
the
annual election of officers, rotation in office so that no officer can
succeed himself in the same office, representation for each bank
in
the list of officers, and prescribes the manner of making regulations
for the clearing house, which must be done
by unanimous consent.
As there are no penalites for the infraction
of rules or withdrawal
from the organization it can be seen that It operates
under a sort
of gentlemen's agreement that may be terminated at
any time. It
is significant to relate in this connection that the rules are strictly
enforced and that the association grows stronger nad more helpful
every year. Assessments are made for running expenses, and, except
for extraordinary purposes these assessments hardly ever run over
ten dollars a year per bank.
In the first place, on a modified scale of course, we use
the same
method for clearing checks that is employed in the large cities. For
a month at a time each of the five, banks in turn is made
the meeting
place of the Clearing House. At a fixed hour each
day the representatives from the banks meet at the clearing bank
and the checks
are exchanged. The debit or credit, as the case may be,
is paid to
or by the clearing bank. Payment is optional in gold,
currency or
exchange. By custom, except in the case of .very small
differences,
exchange has come to be used almost exclusively
in payment. Meetings of the association during that month are held In the
directors'
room of the clearing bank.
The banks open at 9 a. m. and close at 3:30 p. m.
As a surprisingly large number of small towns have no regular opening
or closing
hours this is quite an item. All legal holidays are observed.
Excepting on Christmas and the Fourth of July, it is amazing to see the
number of banks that fall to take advantage of these days of
relaxation that mean so much to their working forces.
Probably the regulation that has meant most to us is the
provision
for a fitted schedule for exchange and collection charges.
Before the
Association came into being, drafts were written for
nothing and
collection charges did not exist, except for the out-of-town
maker of
a draft, who could not help himself. No charge is made correspondent
s




MISSOURI.

for their remittances, nor the railroads, post-office, and the express
companies, who otherwise would send their currency out of town.
With these exceptions the rule is iron-clad, and applies even to
the
officers of the banks. It can readily be seen that this is found
to be
a neat source of revenue in the course of the year, and certainly it has
reached a respectable total in sixteen years. It is also apparent
that
both for the bank and the customer it is most advantageous to have
a fixed regulation of this kind.
Take the much-discussed letter from the Comptroller of the Currency on overdrafts. The two National Banks submitted this letter
at
the first meeting of the Clearing House, and invited the co-operation
of the three State Banks in the abatement of this evil, a grievous one
by the way that can be handled only by an uncompromising attitude on the part of the country bank. The banks viewed the matter
alike, and in the name of the Clearing House drew up a pronouncement, stating unequivocally that after March 15 overdrafts would no
longer be permitted. This was published in the local papers, and
printed copies were sent all customers. To the surprise of the banks,
the customers almost as a unit gave their hearty approval to this move,
so with practically no trouble, the overdraft here has almost ceased
to exist as may be shown from the comparison of a total of $6,063
for all the banks in the statement of March, 1914, against a total
of $385 for the June statement of this year. These latter, it might
be explained, are hang-overs still in the process of collection, not
always an easy task, as no doubt all of us have had reason to learn.
No interest is paid on daily balances except on county and city
funds and bank accounts. A uniform rate of three per cent, is paid
on time certificates et - deposit which must run at least six months.
We have no savings departments. Customers are not enticed from
their allegiance by the allurement of a better rate on loans. And
that bogy of public funds which has caused so many feuds and
aroused such unwise and bitter competition by reason of the location of treasurers' accounts does not disturb our serenity.
In time of financial stress our assoeiation has fulfilled its function
in the same efficacious manner as in the cities. Perhaps at these
times more than any other, have we found it distinctly of advantage
to have that dependable co-operation so valuable in the adjustment
of delicate situations.
•
We have had many opportunities in a civic way to be of aid. More
than once have we been responsive to sweet Charity's call, as was
the case last winter when we took in hand the raising of a relief
fund for the Belgians. By rood example and by concerted effort on
our part several hundred sacks of flour were sent as the contribution
from our county to this worthy cause.
Many other instances could be cited to show the good we
have
accomplished by our association and the tangible benefit we
have
derived from it. It eas meant much to us measured by
dollars, it
has meant more in the friendly feeling and the united front
it has
made possible. We do not claim that the millenium has dawned
for
us in Chillicothe, we admit that our competition has not yet
become
tile denatured article that would leave life without zest ,that would
tend toward a hide-bound conservatism reaching out to stifle the
growth of enterprise, that would develop such a feeling of self-complacency as would make us financial Pharisees giving thanks, we
are
not like the banking publicans who stand outside the Clearing House
and who feel unworthy or unable or unwilling to come within. We
simply have learred to recognize that every banking point has its
problems, that these problems are best solved when the banks can
and do trust each other so that there may result an active coordinated force for good that will make possible the regulation
of
what should be regulated, the encouragement of what should be
encouraged, and the elimination of what should be eliminated.
There are great possibilities in store for the country Clearing
House. The advent of the Federal Reserve System gives a new
status to the out-of-town check. It will soon have to be recognized
that it is unprofitable as well as economically unsafe to send for
collection to a city correspondent in some cases several hundred miles
distant a cheek drawn on a point a few miles away. Such neighborhood items, as they may be termed, could be handled to great
advantage through tile country Clearing House. Perhaps the time
is not yet ripe for the working out of this idea, but there seems to
be a great deal of thought given to the most satisfactory way of
collecting such items and this may be one solution.
Unquestionably, good judgment is shown by those banks who expressly prohibit their officers from signing bonds, but think how
much peace of mind could be gained and pecuniary loss averted by

166

BANKERS' CONVENTION.

lest the
that need of keeping careful watch on our financial soils
thistles of the dead beat take root in our assets.
is
The reason we have so few Clearing Houses in our small towns
demonnot because they are not needed for their worth is too clearly
not on
strated, not on account of the expense which is negligible,
that,
account of a spirit of indifference for we are too progressive for
although
but chiefly because we are afraid to trust our competitors,
we ourselves invite the trust of others. Whatever else may be said,
it must be recognized that true co-operation is impossible unless
ing.
there is evident a trust in each other on the part of those co-operat
"Learn
One of our thriving Missouri towns has adopted as its slogan
be well worth
to know your neighbor, you may like him." It would
the while for the banks in many of our small towns to experiment
with the suggestion "Learn to trust your competitor, then he will
trust you."
As our friend, Mr. McKee, of Los Angeles, said in his now
famous letter: "We have been given a Federal Reserve System, but
a mere technicality to
we don't know how to play on it," if we permit
of Clearing House settlestand between us and a perfected system
claims.
would be visible
ments.
What an enlargement and general improvement
of Clearing House associatowns should insist on
The fact that State Banks are members
In the credit files if the banks in the small
banking „tions, but do not belong to the Reserve System is not a serious objects from borrowers. Would not the cause of better
statemen
Banks. The law
towns by mutual agreetion to a plan of settlement through the Reserve
be greatly advanced if all the banks in those
share in the direct benefits
y in asking for stateprovides that non-member banks may not
ment should rid themselves of that hesitanc
to its ownership, not
to making loans.
of the system because they do not contribute
ments and insist on them as a prior condition
against the non-member.
Houses it would be
because there is any antagonism per se
If there were more of the small town Clearing
can avoid intimate
ity to pool exNeither member banks nor the Reserve Banks
possible to form groups. Here would be the opportun
Reserve Banks are
of the member banks could
business relations with non-members, indeed, the
pense and employ examiners, so that each
which, with the excepalready members of the local Clearing Houses
their own auditors, as is the case in many of
have examinations by
Companies. When the
bills receivable and an audit
tion of Boston, include State Banks and Trust
our large cities. Take the one item of
September, both National
where the shrewd
$100,000,000 Gold Pool was organized last
kind would be of immense value. This is
of this
Board. The
he may obtain a total credit
and State Banks were asked to subscribe by the Reserve
borrower who scatters his loans so that
co-operation with,
policy of that body from the outset has been one of
would find himself at a disadvanto which he is in no wise entitled
on. Therefore, I
at the disposal of an imand not antagonism for, the non-member instituti
tage. With full information as to credits
Reserve Board will
limit borrower could be sternly
repeat, we need not question what attitude the
partial Clearing House Examiner, the
settlement against is
checked up, and the untake if a plan to use the Reserve Banks as a
kept in hand, the doubtful borrower carefully
has been laid
taken up with them. As a matter of fact, the principle
very probably exposed and made harmless.
safe or rascally borrower
the Reserve
down that there is nothing in the act itself that prevents
that all the good that has been and can be accomIt may be stated
clearance, if
ClearBanks from accepting from members non-member checks for
small towns is possible without the aid of a formal
plished in
Banks
they should decide to do so. The act provides that the Reserve
done, it is true, by the existing House organization. Much can be
. The
the various banks, and
may exercise the functions of Clearing Houses for their members
of a friendly feeling among the officers of
ence
since membe arrived at that will cover
settlement of balances is surely one of these functions, and
more or less definite understandings can
nonber banks cannot escape the relation of creditor and debtor with
however, and at best they are
local conditions for a time. In such cases,
banks, if the
by this looseness of
members, it would certainly serve the interests of member
decidedly isolated, there is no advantage gained
al method of
Reserve Banks should assist in a convenient and economic
only too easily shattered.
method and understandings of this kind are
making settlement.
a vacancy by a too impetuThe starting of a new bank, the filling of
in use
arise from a most trivial cause
The plan I would propose is an adaptation of one already
ous personality, the difference that may
in a
or inspiring unethical conin several of the smaller Clearing Houses. It can be described
yet capable of starting unfair suspicion
deadly
drafts on a reserve
shatterers of
very few words: The debtor banks draw their
of these things may be harmony
duct, any
order of the
hand to iron out such difficulagent in the nearest reserve or central reserve city to the
virulency unless there is an agency at
to the deposthat in the true Clearing House
Clearing House manager. The manager sends these drafts
ties at the start. Experience shows
the deposit
re of honest deliberation, candid
itary bank in the reserve city, and issues his drafts against
there is almost invariably an atmosphe
se.
in favor of the creditor banks. While the Federal Reserve Act makes
discussion, and fair-minded compromi
that a Clearing House if started
no specific provision for such a deposit by a Clearing House manager,
It is feared by some timid souls
merely
money trust, thus begetting an
consideration must be given to the fact that this official
might be regarded as a sort of local
part—memthe banks in the mind of that commurepresents an association of banks already—for the most
even deeper hostility against
be
agency of bank boards of directors
bers of the system. I do not hesitate to say that such deposits
nity. It is true that thanks to the
House depository.
for the
accepted by the reserve bank acting as a Clearing
banker once characterized as "organizations
which a Missouri
non-member
not be imparted," it is hard
It would be necessary or at least desirable for debtor
dissemination of information that should
ons in the city
from becoming more or less pubbanks to draw upon Clearing House or member instituti
,
keep Clearing House deliberations
to
banks would
as a salutary preventive against
where the reserve bank is located, although member
lic. In a way, this may be regarded
after all, this is a small disadvantage
draw only upon the reserve bank. Since State banks may continue
too drastic regulation. And,
as
ion that keeps competition within
to carry reserves with other banks there would arise no question
If there is gained an added co-operat
presence of that bitter personal feelto the soundness of the plan. In making settlement in the reserve
bounds, that makes impossible the
prodisplay itself in such bellicose mien that
bank cities, it may be suggested that the same plan is practical
ing which has been known to
member
of the day's routine.
viding the non-member banks carry a clearing account with a
encounters, legal and fistic become part
coClearing House
bank as indeed most of them do. This would enable them, when
s the good made possible by
Nobody question
le for
debtors, to give the Clearing House manager funds acceptab
not the movement be agitated
operation in the city, so why should
a virgin field for misdeposit other than actual currency.
country. The average small town is
in the
for
the towns are organized then the
This, briefly, is the substance of the plan I wish to suggest
sionary work of this nature. When
convenience,
be the next step. If the
your consideration. It is offered in the , interests of
county and regional Clearing House may
sooner or later
brother in hand and give the moveeconomy and sound banking and with confidence that
city banker should take his rural
g similar.
arranged to have the topic disthe Clearing House associations will adopt it or somethin
ment his approbation, if it could be
settlements
laying stress on the practical
The next step, then, will be to make all Clearing House
cussed at State and group meetings
and a
without the use
towns should be singled out
by book entries on the ledgers of the reserve banks
benefits to be derived, if certain
that after all
for them, so great
of even drafts or checks. Has it not occurred to you
financial evangelical campaign outlined
sort of
of A to the credit
this adaptable age that it would not be
a check is only one method of passing the credit
is the power of education in
all bankers should
that should have a Clearing House
of B, and that ” float," that element of cost
very long before the small town
still use the mails to carry
rather than the rule.
seek to reduce, arises solely because we
but has It not will be the exception
from one point
financial problems, with the rapid
the bit of paper, the authority to transfer credits,
In these days of unprecedented
fact that men's thoughts
it stands out indisputably that
to another? When banks wake up to the
economic changes attendant on them,
ty and not by ox-cart
of finance must have co-operation as
and wishes are now communicated by electrici
the sound and successful system
will give way entirely
deal these days about intensive
as they once were, drafts, as between banks,
its corner-stone. We bear a great
when
at hand than we realize
to telegraph and telephone transfers.
farming. Perhaps the time is closer
around the
a clerk at Washa tendency to hover
That condition is already at hand. Each week
the margin of profit will show such
as manifested in closer cowith a few strokes
vanishing point that intensive banking,
ington receives twelve telegrams which enable hint
our study more than ever
worth
the most interesting
operation, rural and urban, will be
of the pen to adjust the settlement balances of
reserve banks
that in our business there is not
and important clearing of the country, that of the
before. We appreciate full well
Burbank who is going to gather
time, indeed,
through the Gold Settlement Fund at Washington. It is
going to be evolved any financial
thought of putHow many of us from the small
that the Clearing Houses of the country should take
grapes of thorns or figs of thistles.
thorns
entirely free from those
and uniform basis,
ting their own settlements upon a more modern
towns can say that our banks are
impositions that we feel we have
especially since the way now presents itself.
that shoot so vigorously from the
how well do we realize
should not, and
to submit to knowing we

competition is keen for
Clearing House regulation, especially where
officers affected to have
accounts of this nature, forbidding the bank
the making of personal
anything to do, directly or indirectly, with
or attractive the account.
bonds, no matter how alluring the temptation
have a plethora of
It often happens that some banks in a town
same place suffer from a
loanable funds, while other banks in the
the banks themselves, and
scarcity. Would it not be much better for
false pride and when such
the community at large as well, to sink
carry each other instead of
a condition obtains have the local banks
city. This is an arrangesending their bills payable to some far-off
when the proper Clearing
ment not at all difficult of accomplishment
es for the taking care of
House spirit has been aroused. Syndicat
easily formed, and a
bond issues or public loans can also be the more
not infrequently is
healthy spirit of independence in local matters
e from a Clearing
built up. It naturally follows that a committe
boards of equalization,
House is treated with much more respect by
nt of taxes, than
or other bodies having to do with the adjustme
to present •their
would be the case if the banks as individuals had




SAVINGS BANK SECTION
AMERICAN BANKERS' ASSOCIATION
Fourteenth Annual Meeting, Held in Seattle, Wash., September 7, 1915

INDEX TO SAVINGS BANK PROCEEDINGS
Liquidity of Savings Investments, G. E. Edwards
Railroads and People, William Sproule
People and Railroads, John Wesley Hill
Report of Secretary - Report of Committee on Methods and Systems
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Report of Law Committee
Report of Committee on Postal Savings Banks
Detailed Proceedings
Address of Robert H. Bean
Address of President Knox

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Liquidity of Savings Bank Investments.
BY GEORGE E. EDWARDS, President Dollar Savings Bank, New York.
The success of any great movement affecting the people and their mode of living depends, in the main, upon
the measure of its usefulness.
It matters not whether the idea of establishing savings banks in this country originated in New York,
Boston or Philadelphia, the fact remains that in the year
1816 there was created an institution which has become
the bulwark of American capital—the accumulator of
the people's thrift—the savings bank.
•
Out of the original idea there have grown two classes
of savings institutions, mutual and stock. The mutual
savings bank, without desire for profit, has never
departed from strict conservatism in its investments;
the stock savings bank, built upon the fundamental of
securing for its stockholders a* sufficient return on the
capital invested, has, generally speaking, adhered to the
same principle of conservative investment. Both have
had one common purpose—to encourage the people to
save.
In the deposit liabilities of these institutions during
the last two decades there has been rapid growth, caused
not entirely by the deposits of the thrifty, but in a large
measure by the deposit of investment funds of the comparatively rich. To be prepared to meet in times of
stress the demands of both classes of deposits causes
much anxiety to savings bank managers.
There is, therefore, no question before the bankers of
the country to-day commanding more thought and attention than the liquidity of loans and investments. The
savings banker is equally interested with the commercial banker in securing for his depositor a full
measure of safety, and very properly should seek to
increase the usefulness of his institution, both to his
customers and his community.
Preserving in the highest degree the integrity of savings banks, provisions should be made so that in times
of emergency they can expeditiously convert into cash
the necessary portion of their securities and pay their
depositors upon demand. Thereby the usefulness of the
institutions will be increased.
When permanency of investment was the order of the
day it was only necessary to choose the safest class of




securities, invest the deposits and await maturity.
Panicky conditions taught savings bankers new lessons.
It became necessary, therefore, for managers of savings banks to study situations and give much more attention to the investment market than they had when saving banks were in their infancy.
After the panic of 1837 the mutual savings banks, for
the first time, realized the importance of accumulating
a permanent surplus fund. Prior to that time the
larger portion of their funds was invested in State bank
stocks, or in notes secured by such stocks as collateral.
They had been accumulating profits, and every three
years paying them out to their depositors in the form
of dividends. That panic taught them the necessity of
laying aside a certain proportion of their earnings as a
reserve fund to be used in the event of another crisis,
or if their securities depreciated in value such fund
would have to be first exhausted before there could be
a general scaling down of deposits. Then, too, they
learned that distributing their risks would be advantageous. Wisely they changed their policy, and such
change in a large measure protected them during the
panic ot 1857.
The financial upheaval of 1873, which affected all
savings banks, was not without its lesson. From it the
banks gained much knowledge concerning mortgage loan
investments.
At the first meeting of the Savings Banks Association
of the State of New York held in 1894 the situation of
the New York savings banks during the panic of the
previous year was discussed, and summed up as follows:
"After July 15th (1893) it was found that the withdrawals were constantly increasing, while the scarcity
of currency made it exceedingly difficult for banks of
deposit to respond to the calls made upon them. Large
amounts were being withdrawn from banks in New York
and Brooklyn, with a rapidly increasing tendency on the
part of depositors to take alarm and create a run, while
it was found impossible not only to sell securities except
at a sacrifice, but more than all, to obtain the currency
needed to pay the deposits.
"It was decided to at once advise the banks to enforce

168

BANKERS' CONVENTION.

the provision in the Savings Bank Law made for just
such an emergency as then existed, and demand notice
from depositors as was provided for by the by-laws of
each bank, it being suggested that a sixty-day notice
would be sufficient. This action resulted at once in a
heavy demand from depositors, though the rule was not
put in force until the time agreed upon had elapsed.
Depositors gave notice of withdrawal on the average of
about 3 per cent. of the deposits.
"Our experience during the late (1893) panic, together
with the rapid accumulation of moneys in our hands,
showed conclusively that something must be done, and
that speedily, to scatter the risks now being assumed.
In many cases the entire debt of municipalities in the
State is being carried by the savings banks, while we
are forced to invest more and more in mortgage loans
secured by real estate, both at the cost of increased risk
and added volume of an unavailable securifk in case of

referred to as liquid, and in time of emergency depend
upon such loans rather than upon the required notices
of withdrawal?
In an address delivered in New York City, May, 1908,
Mr. John Harsen Rhoades expressed the proper idea,
saying:

financial depression."
The conditions so clearly set forth at this meeting
were such .that steps had to be taken to bring savings
bank investments abreast with the necessities of the
tittles, and from 1893 to 1898 the banks were insistent
in their demands upon the State legislature for an
enlargement of the security list by permitting investments in railroad bonds. The bank managers believed
that in the event of financial stress this class of securities would be readily marketable. Upon the enactment
of the desired law the banks bought largely of such
securities, so that to-day more than $289,000,900, or
almost 12 per cent. of their deposits, is invested in railroad bonds by New York savings banks.
But the enlargement of the investment field did not
by
produce the situation which was so ardently desired
bankers. It did not bring about the main
all good
requirement of good banking—ability to pay liabilities
upon demand. It did not do away with slow liquidation of securities and the necessity of requiring notices
of withdrawal from depositors.
In 1907 Mr. Andrew J. Mills, of the Dry Dock Savings
Bank in New York City, expressed the ideal as to savings bank investments—the ideal which has been sought
by savings bank managers since 1816. He said there
were three cardinal principles governing such investments:
First: Security, as absolute as human judgment can
determine.
Second: The first being assured, then the security
yielding the largest income.
Third: Availability, so that in case of necessity the
security can be disposed of without needless sacrifice.
The last includes the ability to pay on demand, for
on
In the final analysis it is the ability to pay depositors
condemand that constitutes good banking and inspires
fidence. Your funds may be invested in securities of
the highest order, yoffr loans made with the greatest
care, but if, whenever there is a depression, depositors
are required to give notice of withdrawal, their confidence is shaken and they will eventually cease doing
business with savings banks and deposit their moneys
with institutions which will pay without notice.
from
It has been stated that "Panics do not develop
depositors, that they will not ultimately get
the fear of
will
their money from banks, but from the fear that they
be able to get it when they want it." That is the
not
can
fundamental of the depositor's confidence--that he
his money when he wants it.
get
It is the understanding of the depositor that his money
Is payable upon demand and the presentation of his
pass book. Confronted with the requirement of a notice
,
of withdrawal, he learns that his deposit is not pay.
able on demand, but thirty or sixty days after demand
of
Not only in fairness to depositors, but as a matter
policy, would it not be far wiser to invest a portion of our
funds in shortrthne loans, of the character generally




"Is it not the function of a Savings Bank to receive
the savings of these people, to invest them with the
greatest care, and to manage - the affairs of the bank in
such a way that the principal of all shall be to the best
knowledge and belief of the officers and trustees at all
times intact? Certainly this is the understanding of
the depositor, whether he be intelligent or otherwise!
Safety of principal—payable on demand—should be the
aim of every savings bank officer and trustee. Unfortunately, in this great country of burs owing to our defective currency system, we are visited occasionally by
severe panics, and so we are forced to reserve the privilege of demanding a thirty or sixty-day notice, the purpose being to give our banks time to sell such securities
as are necessary, and also to give time for the panic to
subside and the depositors to recover from the fright.
I look upon the ninety-day clause as I do upon the
clearing-house certificate of a national bank—an unfortunate necessity."
The entrance of the Federal reserve bank into our
financial system did away with one unfortunate necessity—the clearing-house certificate. That other unfortu
depositor,
nate necessity—notice of withdrawal from the
.
should have passed away by virtue of the same measure
notice of
It is a Mistaken belief held by many that the
aging the
withdrawal is for the purpose of discour
that
depositor from withdrawing his funds. We know
reason. We know that the bank requires
that is not the
meet the
time to convert its securities and thereby
it.
demands upon
of their
If savings banks invest a certain proportion
short-time obligations which can be readily
deposits in
a proper
converted into cash in- the open market, or if
ent to the Federal reserve law is made, no
amendm
time within which to convert securities will be necessary—notices of withdrawal will be a thing of the past,
and depositors in savings banks, like depositors in other
banks, can be paid upon demand.
It is only recently that the word "liquid" has been
attached to securities. Until August of last year the
call loan secured by stock exchange collateral was
thought to be easily convertible into cash in the event
be
of an emergency. Such, however, has not proven to
the case.
Certain •short-time loans would admirably meet with
Mr. Mills' three principles—as to security—as to yielding good income and as to availability in case of necessity, without needless sacrifice. But to make such
securities available without sacrifice, amendments to
various laws governing savings banks are necessary.
g
With many different banking institutions handlin
ng
savings deposits, some under strict State laws requiri
and
Investment in only the highest class of securities,
of commerothers under laws which permit the mixing
tion
cial deposits with savings deposits, without segrega
of investments, it may seem that anything approaching
uniformity in the investment laws is incapable of
accomplishment.
Absolute uniformity probably cannot be secured, but
conferences and discussions between ourselves and with
the law makers will bring about a clearer understanding of the requirements, and secure, at least, more uniform laws relative to savings bank investments, at the
same time providing ample reserves for the security and
accommodation of depositors.
The particular function of a commercial bank is to
supply funds to carry on the trade and commerce of
the country. The particular function of a savings bank,
aside from the encouragement of thrift, is to supply
funds for the improvement and building up of comThe one
munities and for other legitimate enterprises.
credit and the other capital.
furnishes

SAVINGS BANK SECTION.
There is a tendency on the part of some savings banks
in different sections of the country to disregard these
fundamental principles of banking. While the invested
funds of savings banks are ultimately deposited in commercial banks and used for commercial purposes, nevertheless, in investments savings banks should not encroach upon the field of • commercial banks. While
avoiding such encroachment, and looking always to
the
safety of the funds in their care, savings banks managers should carry at all times as a secondary reserve,
a goodly percentage of short-time and readily convertible assets. Regulation of the investments of savings
banks should be developed along these lines.
In the opinion of the Federal Reserve Board:
"The acceptance is the standard form of paper in the
world's discount market, and both on this account,
and
because of its acknowledged liquidity, universally commands a preferential rate. By reason of its being readily
marketable, it is widely regarded as a most desirable
paper in the secondary reserves of the banks, and will
help to provide an effective substitute for the call loan.
"Such acceptances are available as collateral against
the issue of Federal Reserve notes, and the Bank will
sanction a slight preferential in favor of acceptances
bearing the endorsement of member banks."
A recent law of Connecticut gives mutual savings
banks the right to invest 3 per cent, of their deposits
and surplus in such acceptances, thus recognizing the
safety and liquidity of this class of securities.
In an argument before the legislative committee,
it
was said:

169

tion of the country is to invest a certain proportion of its
funds in short-date maturities, such as serial municipal
bonds or railroad equipment obligations.
This policy supplies the bank with a large amount of
cash every year amounting to approximately 5 per cent.
of its resources. In addition, the managers aim to have
on hand usually about 6 per cent. in cash with an income
of approximately 5 per cent, of the resources. By so doing they have a fairly large percentage of money coming
in every year.
It has also been the policy of this institution
to carry a
large block of United States bonds—at present having
nearly 7 per cent, of its resources invested in the 4's
of
1925. These holdings, through the circulating privilege
which the bonds still enjoy, would supply the bank quickly with an amount of currency equivalent to face
value
by the loan or sale to a national bank with which
it does
business. To this may be added its mortgage loan liquidations, which often amount to about 5 per cent. of
the total
amount of mortgage loans. In these several items,
that
bank has a comfortable percentage of liquid
assets—about
25 per cent. of its deposits.
This serves to illustrate, in a measure, the necessity
of
investing in such securities as would be acceptab
le by a
Federal reserve agency when currency is required
. If all
savings banks followed the policy of the bank
referred to,
it is certain that unexpected demands Would cause
no disquietude, if the Federal Reserve Act sanctioned
the acceptance of such or similar securities as a basis for
cur"The desirability of making these acceptances a legal
rency.
investment for savings banks cannot probably
The different taws of the several States, relative to inbe better
set forth than by quoting paragraphs 3 and
4, which
vestments and the various classes of institutions permitappear on the 8th page of a booklet, Bank Acceptan
ces,' ted to receive
savings deposits, make it difficult to formuissued by the Guaranty Trust Company of New
York,
and by simply • adding the word savings,' they
late a definite plan which will insure liquid assets, and
would
read as follows:
any suggested plan must always take such non-uniformity
"(3) (Savings) banks having surplus money which
of laws into account.
cannot be readily employed at the time, can invest it in
It seems to me that as an aid in arriving at a plan, it is
prime acceptances which can either be held until maturity
or sold in the open market, should such action be
essential:
found
necessary.
First—That the Federal reserve banks should be given
"
(4) Acceptances of well-known institutions will
power to accept the colllateral of savings banks for curand more be sought as short-time investments, and more
will
rency. This may be done through member banks authorbe especially valuable for such a purpose, principally on
account of their ready marketability."
ized to act as intermediaries.
Of course, any form of security which would be acceptSecond—That State laws should'be enacted permitting
able by the Federal reserve banks as a basis for Federal
the investment by savings banks in certain securities acreserve notes, would be in effect liquid. Under the proviceptable to the Federal Reserve Board.
sions of the Aldrich-Vreeland Act, which is supersed
That savings banks would derive no benefits from direct
ed
by the Federal Reserve Act, there was issued during
membership in the Federal reserve system is clear. The
the
fall of 1914 in round numbers $368,000,000 in
currency. Federal Reserve Law was designed with a direct comOf this amount, $54,230,000, or 14 per cent. of the total,
mercial object, and inasmuch as the savings banks do not
was secured by State, county and municipal bonds.
transact a general commercial business, they can derive
Much
of the currency issued against these securities was
no benefit from actual membership.
obtained indirectly to assist in financing savings
It is not my purpose to suggest any classes of securities
bank requirements.
as being available for obtaining currency, when needed
In New York the savings banks hold more than $469,But upon this point valuable suggestions have been re000,000 of bonds of the United States, States, municipali- ceived from savings banks in all
sections of the country.
ties and other civil divisions.
In connection with the preparation of this paper an inAs the Aldrich-Vreeland Act expired by limitation on
quiry was made, "as to whether it is a good policy for
June 30, 1915, these high-class obligations do not now
savings banks to invest their funds in certain loans which
command the privileges to which such eminently safe incould be readily turned into caSh in the event of an emervestments are entitled.
gency, and what proportion of their securities should be
At present time securities of this class are decidedl
of a liquid character." I trust that the digest of the any
non-liquid, and would assuredly, in the event
of an emer- swers to this inquiry which has been distributed this aftgency, have to be sold at a sacrifice in order to
obtain cur- ernoon will receive merited attention.
rency. In the Eastern States, of the vast sum
of $2,200,The opinions as to the kind of securities in which sav000,000 on deposit, only $50,000 is invested
in two and
ings banks funds should be invested are varied, but there
three name paper, which would probably
be acceptable for
is practical unanimity of opinion that every bank should
rediscount under the Federal Reserve
Law. Practically
have a good percentage of its funds invested in readily
the entire sum is in mortgage loans and
bonds. It will be
convertible securities.
seen, therefore, that under existing conditio
ns the sayMassachusetts, which has most progressive laws relaings banks of the East are substantially
without liquid
tive to mutual savings banks. permits them to invest in
securities.
certain classes of notes. The treasurer of one of the
Some managers of savings banks have,
however, inbanks of that State says that such notes provide the bank
vested in securities which, in a degree, provide
liquid aswith liquid assets and that the bank. during stringent
sets.
periods of panics, has not been obliged to sell bonds, the
The policy, for example, of a certain bank in
this secpersonal loan maturities taking care of all extraordinary




170

BANKERS' CONVENTION.

vestments in high grade commercial paper and loans of
short maturity, under proper restrictions, would afford
depositors of savings banks reasonable protection and
should enable them to enjoy the benefits of the reserve
banks.
From the Middle West and Western States, where stock
savings banks are in the large majority and the laws relative to investments are rather liberal, objections are
urged to long-time investments, the investment in shorttime self-liquidating notes and securities advocated, and
attention is callled to the necessity of the abolition of
withdrawal notes.
The Pacific States have but one mutual bank in a total
of 179 savings banks. With the exception of California.
the laws of the States of this group are liberal compared
lateral.
with the laws of the Eastern and New England States.
the section of
A composite of the opinions received from
California has a most complete and conservative savings
which New York is the centre, is that under suitable rebank law, under which, by an amendment taking effect
policy for savings banks
strictions it might be a desirable
August 1 of this year, savings banks are permitted to disto invest a certain proportion of their assets in a form
count or purchase commercial paper of the kind and charthan is now the case where all
more readily convertible
actor made eligible under the Federal Reserve Act, to an
of their investments are made in bonds. Savings banks
amount not in excess of 5 per cent. of the bank's deposits.
condition if a fair amount of their
are in a far better
Liquidity of assets, with some arguments in favor of infunds are invested in short-term obligations instead of
vestments in commercial paper, is strongly urged by the
. To be able to liquidate promptly
long-time securities
Pacific bankers.
should be the desire of every savings bank officer, because
From the opinions received, which fairly represent the
when an emergency will arise whereby
he never can tell
is
views of the savings bankers of the United States, it
his institution may be called upon to pass over to the declear that every savings bank should invest a proper proamount of money.
positors a large
portion of its funds in securities readily convertible into
Long-term bonds have usually been considered liquid on
cash. With such liquid assets it would be free from the
salability of the same under ordinary conaccount of the
fear of a run, and in disturbing periods would not have to
ditions. Under extraordinary conditions, however, it is
depend upon depository banks or rely upon the extension
to sell them, except at a very considerable
not possible
of the time of payment afforded by notice of withdrawal.
loss.
It is to be hoped that Congress, which expects through
general feeling of financial men in that section is
The
the instrumentality of the Federal reserve system, to
be held by savings
that commercial paper should not
make the country panic proof, and the several States will
banks of a mutual character.
pass laws whereby the demands of ten millions of savings
there is but one mutual
In the Southern States, where
bank depositors will be provided for. The enactment of
bank in 190 savings banks, the opinion prevails that bank
such laws will be productive of better banking and that
admitted to discount
and trade acceptances, of a character
unfortunate necessity—the notice of withdrawal, like the
the regulations of the Federal Reserve Board, conunder
clearing-house certificates, will lbe a thing of the past.
both safe and liquid and that institute a class of paper

demands. A former State Banking Commissioner does
not believe in too large a proportion of long-time bonds
and considers commercial paper a satisfactory asset if
proper standard is established by custom and practice. A
Connecticut banker recalling that the original draft of
the Federal Reserve Act provided for loans secured by
United States, State or municipal bonds, expresses the
opinion that loans to mutual savings banks or their depositaries upon such securities would carry the banks
through any disturbing situation.
New York probably has the most restrictive laws regarding savings bank investments. Most of its almost
$2,000,000,000 of resources are invested in bonds or loaned
upon mortgages. Only about $60,000 is loaned upon col-




SAVINGS BANK SECTION.

171

"The Railroads and the People."
BY WILLIAM SPROULE, President of the Southern Pacific Company
The subject assigned me by your Committee is "The
hundred thousand shareholders and about a million and
Railroads and the People." I like that statement of
three-quarters of employees. This figures roughly one
the subject, particularly the conjunction "and," because
shareholder to three employees. So little is thought
there is more in conjunction between the railroads and
about the shareholder that I would wish to say more
the people than most of the people realize. The subject
about him, and I take this opportunity to tell you that
would not be correctly stated if it had been entitled
if you will average the railroad shareholders according
"The Railroads or the People," although that would
to the railroad mileage they would stand within seven
better fit the tongues of the glib.
hundred yards of each other along every mile of steam
A recent writer about banks and railroads has said
railroad in the nation. This means that throughout the
that the great American public is not unfair—that, in
United States each shareholder would be in plain sight
fact, it is eminently fair where reasonably well informed, of two other shareholders along the right
of way, under
but has been misled, confused and only half informed
conditions of normal vision. Yet because of the free-a
ndat the best. That both parties to the controversy are at
easy way in which the public has attached to railroad
fault, the Government for too much publicity of the
properties the names of well-known men, the people genwrong kind, the railroads for too little publicity of the
erally have a vague belief that the railroads are
owned
right kind. That elementary education on these great, by a very few wealthy people.
The facts run to the conlive, national subjects, education that can be grasped by
trary. The railroads are owned by a great army
of the
the busy man, is the one great need in the present juncpeople; people who have put of their savings into railture. That without it the questions cannot be settled
road shares until six hundred thousand of them are
right; and no question is ever settled right until it is
direct owners. It requires no argument, unless we argue
settled with justice to all concerned.
the obvious, to show that if the savings of the people
It may be assumed, accordingly, that it is wise for us
who have thus entered into railroad ownership prove to
to address ourselves to the duty of setting before the 'be secure, and the returns to them as
the owners of the
people a few elementary facts and principles, rather than
money prove to be attractive, there will be little trouble
to spend the time in deploring unhappy conditions. In
in obtaining from them and others like them more money
the end it is the people who regulate and rule, under our
for improving the railroads which now serve the people,
theory of government in this nation.
and for extending them into sections whose development
The primary relation of the railroads and the people is standing still because of the lack of railroad service.
is that the railroads sell transportation to the people.
As a question of public policy, is it not fundamentally
To many minds this relation disposes of the subject. sound that the rights of these hundreds of thousands
of
The common notion is that the people have nothing more saving and prudent people should be given as serious
conto do with it than may be necessary to obtain their
sideration as any other factor in the railroad question?
transportation at the lowest price. If the buyers of
Is it not obvious that there should be accorded to them
bread had a voice in the fixing of its price, bread would
the same full measure of solicitude which is extended to
be cheap indeed. If the buyers of meat had a voice in
other human factors prominently before us in all inthe price of meat, it would not be long before the price
dustrial discussions?
would drop so low that the farmer would find it without
But there are still other hundreds of thousands of the
profit to grow livestock. But the people have indeed a
people who have a personal interest in the railroads.
voice in the fixing of rates for transportation, and the
Those whom our political saviors call the Common Peobuyer of transportation concerns himself little with the
ple (why they are called common I do not know) are the
question as to what effect the price has upon the railchief users of the savings banks of this nation. These
roads. The price is seldom low enough to satisfy the savings banks
have for their depositors about eleven milpurchaser. If he is satisfied, his satisfaction with any
lions of the people. These depositors rely upon the abilgiven transportation rate or rate condition is only tem- ity of the savings
bank to earn with safety and certainty
porary. The mere lapse of time suffices to create fur- enough money
on their deposits to pay to the depositors
ther demands that the service be rendered for less money. a satisfactory rate of
interest, with such a banking profit
This follows the impulse of self-interest, and we all
added as will maintain the integrity and solvency of the
know that this impulse is not always safe or sound.
bank without question. These savings banks carry beThere is an epigram that in a kingdom of the blind
tween eight hundred and nine hundred millions of dollars
a one-eyed man is King. A hard task before the rail- in railroad bonds and stocks.
Upon the earnings derived
roads is on the one hand to correct the impressions from them these savings banks
properly, and in accordwhich serve for opinions among people blinded by what ance with the laws of
their respective States, are dependappears to be their self-interest, and on the other hand, ent for an important part
of their income, and their into contend against that kind of one-eyed domination of
come is for the benefit of their depositors. To state it
the railroads which keeps one eye upon popular opinion
another way, if these railroad securities owned by the
without an eye for vision for what is necessary to bring
savings banks were to be averaged among the depositors,
the greatest good to the greatest number. Yet there is
each depositor would have an interest in the railroads of
a conjunction of interest which so far has hardly been
between seventy-five and eighty dollars. Every deposiperceived, but which is sufficient to warrant the rail- tor is thus interested in
exercising his influence to preroads and the people in taking counsel together for provent decline in the values of the securities which safemotion of the common safety. Let us see why. Allow
guard his deposit. Is it not plain that it is unfair, and
me to give you a few figures, here and there, which I
In fact dangerous as a matter of public policy, to lose
will state in round numbers because they serve the pres- sight of the interests of these
hosts of people, who have
ent purpose without needless detail.
a personal though indirect relation to the railroads? Is
There are in the United States over a quarter of a
It not rather the function of the Government in its sumillion miles of steam railroad, which have about six
perior knowledge to be watchful of their interests, even




172

BANKERS' CONVENTION.

when they themselves may but dimly realize their own
interests and rights with respect to these things?
It is hardly necessary to refer to State and other banks
and trust companies, whose holdings in protection of their
depositors and in the conduct of their business count up
to several hundred millions of dollars more.
The aspect of the subject carries us into still wider
fields. Among the large holders of railroad securities the
life insurance companies are of vast importance to the
people. Nearly every man of family carries insurance
of some sort. It is the duty of the insurance companies
to find profitable investment for the millions confided to
them by their policy-holders, and what form of investment should be more secure and more profitable than
that which appertains to the greatest industry in this.,
country or in any other, the American railroads. In the
United States there are over thirty-four million life
insurance policies. Every holder values dearly his insurance, whether for himself or those dear to him who may
later be dependent upon the proceeds of that insurance,
and so every policy-holder is interested in the railroads
and the stability of their securities. When the efficiency
and standards of railroad properties are impaired and
their income cut, the path of reduction leads to the income of the insurance companies, and it is upon that
income the insured must rely. Let the policy-holder
bear this in mind. I will not dwell upon fire, accident or
other insurance, since similar relation exists with

expenses of operation increased 200 per cent. The number of employees increased 118 per cent., while the compensation of employees increased 213 per cent. I will
state it another way. With the rates of 1904 as a unit
the railroads would have earned about one hundred and
sixty millions of dollars more than the earnings of 1914.
While the railroad revenues were thus reduced in the
sum of one hundred and 'sixty millions of dollars, the
compensation paid to employees was in the same time
increased by something over one hundred millions of dollars. This process cannot continue indefinitely. As an
economic question it is impossible that the compensation
of employees can continue to increase while the compensation of the employer continues to decline. There are
in consequence millions of people, consisting of railroad
can
employees and those dependent upon them, who
justly insist that the interests of the railroads be nurtured rather than ignored in the adjustment of trans-

respect to them.
As already stated, there are over a quarter of a mil.
lion miles of steam railroad in the United States, with a
roSter of about one and three-quarter millions of men.
This is a vast army, even in these days of vast armies
that affect us with awe. This army of the people relies
directly upon the railroads for its livelihood. It has the
right to adequate consideration by the Government. This
consideration it has only in part received. There has
been no recognition of the fact that working hours may
be shortened, conditions of labor may be made ideal,
safety may be attained, crews may be stuffed full to
overflowing, and yet the prosperity of this army of the
people fail simply because the railroads lack the ability
to earn enough to keep the man at work, much less to
expand, improve and extend the lines and the service.
It is to the direct interest of the employees and the millions dependent directly upon them for their subsistence
that the railroads have prosperous earnings.
It is to the further interest of the employees that the
shareholders also have prosperous returns, for the employee cannot safely forget that averaged over the American system of railroads one shareholder means three
employees. To maintain and operate the railroads takes
not the shareholder alone or the,employee alone, it requires them both and they stand as to numbers only in
the ratio of three to one: Theirs is in reality a common
interest in obtaining adequate earnings. It is not exaggeration to say that danger to the railroad as employer
cannot forever, or for long, be averted by the employee.
No matter who own the railroads, earnings and expenses, or income and outgo, are two blades of a shears.
One blade cannot for long cut into gross earnings without bringing into activity the other blade which cuts expenses. Of expenses over 45 per cent. are for wages.
In fact 70 per cent, of all the disbursements of the railroads (even when taxes, interest and dividends are included) are for the three items of wages, fuel and supplies. The railroads give good wages ungrudgingly. The
contentions are rarely upon the wage schedule itself, but
upon needless and embarrassing and complicated incidentals. What the railroads have to contend and urge,
notwithstanding their desire to pay their employees well,
is the plain fact that the railroads have not adequate
Income out of which to 'pay these wages. In the two
decades from 1894 to 1914 the revenues from operailon
of the steam railroads increased 183 per cent., but the




portation questions.
phases of
So we could move along into the various
and the
human activity, only to find that the railroads
common to an extent the people
people have interests
will
do not yet realize. When they do realize it they
might to the fact that the railroads'
wake up in their
a
prosperity is their prosperity. The people will rise to
it is the function of the Government to
knowledge that
be watchful of their interests as a whole, and then the
one-eyed man no longer can be king. The people will demand breadth and scope and constructive purpose; they
will demand that both sides and all sides of the railroad
question be given equal and unprejudiced consideration.
They will insist, in the interests of all the people, that
the railroads be maintained in a condition of physical and
financial strength and that they be released from "the
s
tyranny of prejudice" and relieved from the paralysi
uncertainty.
of
Whether it be the shareholder, the bank depositor, the
holder of insurance policies, the railroad employees and
their people, or the public generally, all will do well to
remember that amid the loose and casual talk about
• watered stock and over-capitalization it is no longer
seriously contended that the railroad properties of the
United States are worth less than the amount of their
capital. Yet the earning power of the railroads upon the
capital employed has so declined that at the present time
out of every $100 of gross earnings which comes into the
treasury $14 has to be set aside to pay interest upon bonds,
although the bonds bear but a moderate rate of interest.
These bonds were taken upon faith in the earning power
of the properties and were issued in compliance with the
laws of the land. They are held in this country and
abroad, and this young and great nation can well see to
It that the earning power of its railroad activities is
maintained. Especially is this so since it is known
throughout the world that the railroads have been under
governmental scrutiny and control for more than a generation. It is true railroad financial administration may
be criticised in spots, and just criticism is wise, but they
are like certain dramatic points in a picture, they catch
the attention but they do not tell the story. The people
instead may be invited to survey the whole history of
American railroading, from its pioneer beginnings,
through unmapped difficulties and -through periods of
crisis when great administrators pledged their personal
fortunes to save the properties, down to the present moment; and in a wide survey of fifty years it will be
acknowledged that as a bank may fail without imperiling
the banking system, so the long ordeal through which the
American rairoads have passed still finds the moral basis
of railroad management upon a very high plane in which
the American people may take becoming pride. In 1004
these railroads killed one passenger in carrying eightyone millions the equivalent of one mile. Ten years after,
in 1914, but one passenger was killed in carrying four
hundred and ninety-five millions of people the equivalent

SAVINGS BANK SECTION.
of one mile, or the whole population of the nation five
miles. In the same year, 1914, thirty-five thousand millions of passengers and two hundred and eighty-eight
thousand millions of tons of freight were carried the
equivalent of one mile, and at a cost per passenger and
per ton of freight which compares more than favorably
with the great empires of the world. I have purposely
stated in such terms these figures ,which are so large as
almost to bewilder.
There is just one thing which the railroads and the
people cannot escape in any event, namely, taxes. Railroad taxes have risen from less than sixty-two millions
of dollars in 1904 to one hundred and forty millions in
1914. That is, they have risen 127 per cent. in this tenyear period,, until now out of each $100 the railroads
collect they have to pay in taxes $4.60. This means that
of their net incomes, after paying their operating expenses only, the railroads have to pay in taxes $16 out
of every $100, and that is before paying any interest
on money borrowed or a dividend to any shareholder.
The railroads expect to pay their share of the taxes,
but the variety and extent of taxes paid by the railroads
Is of interest to the people simply in this: that the increasing burdens of railroad taxation now aggregating
over one hundred and forty millions of dollars have to
be met by the railroads out of their earnings. Consequently it is in the public interest that the margin
between operating income and operating expenses be
wide enough to enable just taxes to be paid and just
compensation given to employees, without impairing the
physical property and equipment which should be maintained at a high standard of excellence.
As matters stand to-day, a comparison of the ten-year
Interval 1004 with 1914 shows that the operating
revenues of the railroads increased 54 per cent., while
taxes and operating expenses which do not include wages
increased 66 per cent.; the net revenue remaining to pay
wages and for other purposes increased by 49 per cent.
Of this 40 per cent., which represents an increase of
six hundred and eighty-seven millions of dollars, 68 per
cent., or five hundred and fifty-five millions, was the increased expenditure for wages, although the number of
employees increased only 31 per cent. and mileage of the
railroads operated increased less than 17 per cent.
"Youth will be served." A young nation and vigorous
country demands development. Investment precedes construction and construction precedes development. The
money can be had if the people who own the money believe the investment safe and the returns desirable. If
assured of this, railroads will be built. The people with
savings to invest judge by the treatment accorded the
savings already invested. An adequate return to the
shareholder who puts his money in the railroad business




173

should be assured him. He should have the greater assurance because, being private money devoted to public
service, that service is regulated by government itself
and government thereby can fairly be held sponsor for
adequate returns. We must come to a point or basis at
which railroad rates shall be deemed fair and not subject to the attack of anyone who chooses. The no-bottom
basis of the present is false in principle and dangerous
in practice. Sooner or later the agencies of government
will have to stand behind the stability of railroad revenues, not for the benefit of the railroads merely, but in
the public interest.
In this nation the people are the.
source of all power.
The popular will is, and will be, reflected in the treatment of the railroads at the hands of government. At
times that popular will has amounted to wilfulness as
in the treatment of a wayward child, but the railroads
were young then and parental regulation was inexperienced. We have all grown older together. Experience
Is the only teacher. We are learning that the greatest
industry in this nation, affecting directly millions of employees and shareholders, and affecting indirectly many
millions more of security holders and those dependent
upon the credit and income those securities afford, cannot be affected injuriously and yet the rest of the business of the country go unscathed. When to the conditions of the present in the railroad business, involving
so many millions of men and money, are added the uncertainties of the future; when to the cumulative-force
and effect of successive reductions, extending throughout
several decades, there are added the uncertainties of reductions (none know how many or how great) which may
come this year, next year or the year succeeding; is it
.
any marvel that the business of the nation is repressed
and that all business men stand in suspense and deep
concern as to what the future holds for them?
It is time for the railroads and the people to take
counsel together, for the uncertainty which touched the
railroads first has reached to all the people. This nation
needs prosperity more than it needs anything else. No
business prospers by repression. The effects and influences of government should be stimulating or they are a
failure. The American people prosper together. When
we prosper we are all prosperous. "The pursuit of life,
liberty and happiness" has prosperity for its reward,
the railroads and the people in conjunction and alike.
The common sense of the people can be relied on to
bring about the conditions that make prosperit-. They
are merely looking for light. When they find it we shall
have enlightened prosperity, all the brighter for the dark
uncertainties through which we have been passing.
There is no room for pessimism; the country is all right
and the people are all right. We are in their hands.

BANKERS' CONVENTION.

The People and the Railroads.
BY DR. JOHN WESLEY HILL, President International Peace Forum of New York.
In addressing this convention of bankers I feel somewhat like the owner of a little lumbering railroad in
Michigan, who asked for an exchange of passes with a
big railroad. "My road," he said, by way of explanation, "is not as long as yours, but it is just as wide,"
and so I would say, while my financial interests are not
as extended as yours, and my business experience is much
more limited, yet, as a patriotic citizen, my sympathetic
Interest in the cause you represent is as broad as yours,
and this is my plea of justification for appearing before
you.
The fact that I have personally less at stake in the
great problem of prosperity places me on a level of interest with the great mass of the people, permits me to
speak without exposure to the suspicion of the influence
of a stimulating element, and therefore makes me free
to declare the truth, as Pat announced upon the witness
stand that he would tell it, "without hope of punishment
or fear of reward."
I appear here this morning as attorney for the people,
to voice their rights in relation to the railroads. What
are these rights? They are twofold. First, honest, economical, undiscriminating service upon the part of the
railroads. Second, the firm, fair and intelligent regulation of the railroads by the Government. This last condition is necessary to the execution of the first, for if
the railroads are not intelligently and fairly regulated
they will neither render efficient service, nor afford the
people safe and profitable opportunity for the investment
of their savings.
The poor man may have but a few dollars in the savings bank or in railroad stock, but it is his entire accumulated capital, and it must not be jeopardized by
dangerous agitation or destructive legislation. It is the
product of his toil, the fruit of his frugality, the prophesy
of a compounded return which spells the difference between the savings bank and the poor house. This initial
deposit or investment of the average man is the germ of
a possibility which, if permitted to develop, will expand
Into financial efficiency and add another individual unit
to the wealth-producing power of the nation. Thus the
small investor of to-day becomes the capitalist of to-morrow. To ignore this inter-relationship of interest, to
exalt one class of business above another, to encourage
farming and fetter banking, or to regard railroads as far
removed from the interests of the people, possessing no
rights the public should respect, is in its final analysis
an assault upon the rights of the humblest toilers in the
land. The blow aimed at the man higher up inevitably
reacts from the man lower down. Business disaster
strikes all alike. Some may beat it better than others,
but it is surely not the man of small means or small
earning capacity who can better stand up under the blow
at big business. He is the first to feel the crash and the
last to fecover from it.
Now then, bearing in mind the rights of the people
-with respect to the railways, how have these rights been
recognized and protected on the one hand by the railroads
and on the other by the Government which regulates
them?
For a number of years the management of our railways has been under fire, and not without justification.
Juggling, watering, rebating and piratical plundering
have subjected the railroads to suspicion on the part of
the people—to investigation, indictment, prosecution, conviction and penalization upon the part of the Government. Granting this, we shOuld not forget, however, that




the shippers who put all kinds of pressure upon the railroads to secure unfair concessions, and the government
which forced the railroads to maintain cut-throat competition, must bear their share of responsibility and culpability for the evil conditions permitted to develop in
the past. That these evils have been largely eliminated
no one acquainted with the facts will deny. Government
regulation, coupled with the voluntary co-operation of the
railroads, has accomplished wonders. From the extrvagance, waste, discrimination, mismanagement, appalling
catastrophes and inefficiency of this wild period in railroading, the railroads have been tamed into a strength
and efficiency without a parallel in the world, and this
in the face of the fact that they are paying the highest
wages in the world.
In Germany, where most of the railroads are owned
by the Government, the average annual wage of a railway employee Is $404. In this country, where the lines
are all owned by private capital, the average wage of a
railway employee is $810, or over twice as much as in
Germany. In spite of this enormous difference in wages,
the average freight rate per ton per mile in this country
is only 7.2 mills, while in Germany it is 13.7 mills.
In other words, our railways pay twice as high wages
as the German lines and charge only half as high an
average freight rate. We hear a great deal of German
"efficiency" in general, and much of what we hear is
true; but, in view of such figures as these, it is clear
that our railways are very much more efficiently managed than theirs.
Then regarding over-capitalization, it must be conceded that this is not true of most of them. It is well
within the bounds of truth to say that the number of
railways in this country, which represent an investment
exceeding their capitalization, is substantially greater
than the number whose capitalization exceeds the investment they represent. Our railways are capitalized for
$64,000 a mile, those of Germany for $117,000, those of
France for $149,000, those of the British Isles for $277,000. We find then no real ground of complaint regarding the financial management of most of the railroads.
That the people themselves have taken this attitude
In the past is indicated by the confidence they have shown
in railway securities by investing in them.
Now, the railroads are not, as 18 frequently charged,
owned by a few men in Wall street.
I am not a statistician, but I have been looking at some
figures that are public property, figures which are not
old and discredited by recent developments, but brought
down to date, and they tell a story which "he who
runs may read."
These figures show that on the first of August of the
present year 1915 the total deposits in savings banks and
savings departments of Commercial Bank and Trust
Companies in the United States reached the enormous
agregate of eight and a half billion dollars. The number of banks is placed at 28,690 and the number of depositors at 24,189,489, an army mustered from the ranks
of the common people, whose savings constitute a large
proportion of the 'business capital of the nation. In addition to these deposits in savings institutions, there are
34,000,000 policy-holders in life insurance companies. It
is this vast army of depositors in savings banks and investors in life insurance policies for whom I am speaking
here to-day. They are the direct or indirect owners of
the railroads. They hold a large proportion of railroad
stocks and bonds. As to the direct ownership of stocks.

SAVINGS BANK SECTION.
there are available statistics which show how many persons held them on June 30, 1914. The Bureau of Railway
Economics recently compiled statistics furnished by the
railways to the Interstate Commerce Commission as of
that date. These statistics show that 1,287 railway companies with 254,387 miles of line, have 622,284 stock-holders of record. The amount of stock owned by them is
$8,685,764,125, or an average of $13,958 per stockholder.
There are two and one-half stock-holders to every mile
o frailway, and the average amount of dividends received
by each of them annually is $625.
Talk about the railways being "owned by Wall Street."
They are our most democratically-owned institutions.
But the direct investment does not tell the entire story.
There is an indirect ownership by the public which is
equally, if not more, important than the direct. This indirect ownership comes through Savings Banks, Life Insurance and Trust companies. When one of these institutions receives money and agrees to return it with interest or dividends or maturing endowments, it is required by law to secure the depositor by investing the
funds in securities which the law approves as safe.
In accordance with these requirements, the mutual and
stock savings banks and life insurance companies now
hold nearly two and one-half billion dollars in railroad
bonds. This vast sum belongs indirectly to the depositors. Outstanding railway securities of all kinds are estimated, in round numbers, at twenty billion dollars,
equal to the combined savings of the world.
This almost incomprehensible aggregate of values is
held very largely by "we, the people." The securities
were purchased in good faith by investors at home and
abroad, and by the savings banks and life insurance
companies who hold them as security for the people's
money. If their value is impaired, confidence is destroyed, savings are lost and untold suffering ensues.
We have a right, therefore, on behalf of the people, to
examine some of the losses, direct and indirect, inflicted
upon the people during the past few years. Some of these
losses have resulted from the financial mismanagement
of individual railways, as in the cases of the Chicago &
Alton, the New York, New Haven & Hartford, the St.
Louis & San Francisco and the Rock Island.
The proper steps should be taken either by the passage
of new laws or the stricter enforcement of those already
existing, to stop such mismanagement and hold to personal accountability and punishment those responsible.
But the losses of investors in our railways in recent
years have not been confined to those who unfortunately
have put their money into the securities of roads which
have been mismanaged.
There has been an enormous shrinkage in the value of
railway securities generally. This shrinkage has been
due to declines in net earnings, which must be accounted
for on some other basis than that of inefficient management on the part of the railroads. In the state of New
York alone the railroad bonds held by the Life Insurance
companies have shrunk, in the course of a decade, a little
more than $110,000,000, during which period the value of
railroad bonds and stocks has depreciated from 10 to 20
per cent. Allowing for a shrinkage of only 10 per cent.
from what is callled the "peak year of 1906" on $20,000,000,000 of railroad securities, we are confronted by a
depreciation of $2,000,000,000.
The responsibility for this rests somewhere, and if
not on the railroads, where should it be placed? It cannot be charged to the public, for public traffic and travel
have greatly increased during the past decade.
The explanation of the decline in the net earnings of
the railways is to be found in the fact that they have
suffered from increases in expenses and taxes which
their management have been powerless to prevent, while
the regulating authorities have refused to permit the advances in rates necessary to offset them.
Specifie figures are here in order. Effective federal




175

regulation of railways began in this country in 1900.
In the eight years to 1914 the average wage per employee
on our railways increased from $611 to $810, or 33 per
cent. The average taxes per mile increased from $336
to $568, or 69 per cent. With increases of 33 per cent.
in the average wages per employee and of 69 per cent.
in taxes per mile, while traffic per mile increased only
20 per cent. ,you would naturally expect that the railways
might become embarrassed if they were not granted some
compensating advances in rates. But, as a matter of
fact, in 1907 the passenger rate was reduced in most of
the States from 3 to 2 cents, while there was also
a decline during these eight years in the average freight
rate.
There could be but one effect from these increases in
expenses and taxes and reductions in rates, viz.:
depreciation. While in the eight years before 1906
the net
operating income per mile of the railways
increased
$1,124, or 54 per cent., in the eight years after 1906
it
actually declined $339, or 11 per cent. This decrease of
11 per cent, in the amount of net operating income
with
which to pay a return on the investment in the railways
was accompanied by an increase of 20 per cent., or from,
$59,624 to $71,551 in their investment in property per
mile. In 1906 the average percentage of returns earned
on the invesetment in the properties was 5.39 per cent.;
in 1914 this had shrunk to 3.99 per cent. Under
such
conditions financial catastrophe was inevitable, as the
Irishman exclaimed, when he saw the mighty flood of
water falling at Niagara, "Faith, and what's to prevent
it.
Little wonder that we have harvested a large crop of
railroad bankruptcies! There are now in the hands of
receivers in this country no less than seventy-seven railways having a total mileage of 37,937 miles and a total
capitalization of $2,052,000,000. In other words, the
mileage in the hands of receivers in this country exceeds
the total mileage in existence in any other country in
the world except Russia.
I hold no brief for the railroads, but, in behalf of the
people, I may confidently demand the same justice for
the railroads as for all legitimate industry.
Fully one-half of our hundred million population, directly or indirectly own the railroads, the maintenanc
e
and operation of which is the very life blood of our industry. finance and social progress.
If conditions are not right in this country for railroad prosperity, or if there is anything in the attitude of
the government which is prejudicial to this prosperity,
the sooner we discover and rectify it the better it will be
for the interests of the entire country, for we should
not
forget that any injury inflicted on these highways
of
travel and commerce and economic solidarity must react on the people. If the railroads constitute the jugular
vein of .our national prosperity, that vein cannot be
tapped without draining the financial blood of the people. Bleeding was once employed by medical science in
the treatment of apoplexy and kindred disease. The
patient was bled white in order to save his life. Well.
if there is even a modicum of virtue in such treatment,
surely the people have suffered enough bleeding through
depreciation of railroad securities to prevent for many
years anything like swollen fortunes, capitalistic congestion or the slightest suspicion of a glut in their prosperity.
It is unnecessary for me to speak of what the railroads
have done for our mighty, continental empire. As a
nation we are not much older than the railroad industry.
When our fathers achieved independence, it was a
problem with them how far our lines of settlement could
extend towards the west, away from the Atlantic
Coast
line and the water highways of the great rivers. Even
the luminous intellelet of Daniel Webster could not
pierce the illimitable distance to the Pacific Coast
and

176

BANKERS' CONVENTION.

prise and efficiency, while the latter not only invades the
fundamental rights of the citizen, but reduces him to
a factual in a deadening bureaucracy.
Granted the railroads have made serious mistakes, departing in some instances far from the pathway of fair
dealing and business probity. This does not justify
their confiscation or absorption by the State. The entire
system of railroading should not be assaileld on account
for rattle snakes and Indians.
of exceptional wrongs. These irregularities have been
solved the problem. Step by
The railroads came and
righted by remedial legislation. The ploughshare of restep, as they developed, they carried the wave of civilizaform has turned a deep furrow, reorganizations have
sun. What do we not owe sotion towards the setting
been effected, incompetent and dishonest managers and
cially, industrially and politically to the railroads?
manipulators have been eliminated. Interlocking direcd this great Union in its inCould we have maintaine
torates ended, and a new era has been inaugurated. The
tegrity without them? They have reduced the popUlagovernment has done its part in this work of recontion of this vast continent into a closely related, thorstruction. Much of its legislation has been actuated by
oughly compacted neighborhood. There are no distant
a sincere desire to correct abuses. Great good has been
places, not a spot large or small enough in which to hide
accomplished, more good must be done and will be done.
a social, business or political secret. They have anniNo tight and loose rule of proceedure can be established.
hilated time and space and condensed our remotest
The railroads cannot grow in straight jackets. New
little narrow
boundary lines into the opposite sides of a
conditions, new regulations, but there should be some
street. Consider the enormous land wealth that they
definite co-ordinating policy on the part of the governhave developed. When the first crude railroads were
ment in relation to the railroads in order to guarantee
built a few million dollars would have measured the
the restoration of their prosperity.
value of our agricultural resources; but in the year 1900
The government should not make the fashion plate
the census showed the value of our farm land, improve.
of the French milliner its model for railroad regulation
ments and implements to be more than $17,000,000,000,
goes into seclusion at the close of
That artistic genius
and by the next census they had exceeded thirty. billion.
each season, and by some system of intregal calculus,
The railroads found the wealth of the United States estior special spectrum analysis discovers that the plume
mated at less than $3,000,000,0000; it is now conservawhich pointed towards the horizon in the'Spring should
of this genertively estimated at $150,000,000,000. We,
point towards the zenith in the Summer, and as a rehave seen the railroads pushing their way through
ation,
suit our American ladies are paying every season hunwild areas of uninhabitable prairie land. Their builddreds of thousands of dollars for the attitude of a
ers were practical statesmen of a higher order. At
feather.
the possibilities of
their own risk they have discounted
Railroads cannot be built on that sort of a basis. Milthe future and provided a highway over which the setwhich he could ship his
lions cannot be expended in improvements upon the untler could come in, and over
certainty of the attitude of a government commission.
products back to the growing cities of the East and to
Workingmen should not be given employment under one
Europe, thus enabling the fruit growers of California
ruling and turned out into the streets under another.
to market their crops on the Atlantic seaboard; the wool
The employe has not as many lives as a cat; he has but
growers of the West and the cotton growers of the South
one life, and all he asks is an opportunity to provide for
to market their products, and indeed enabling every prohimself and those dependent upon him by steady employt the land to market his product at his
ducer throughou
ment. Permanency is the condition demanded by the
own door and thus become a competitive factor in the
employer and the employe. Anything short of that reworld.
commerce of the
sults in confusion and disaster. Prosperity cannot be
The magician of the Oriental tale who caused the palbuilt upon the caprice of the moment. Factories cannot
a single night was but an ant, rearing a
ace to rise in
be successfully operated upon a four years' basis. Busitiny hill in the sand, compared to the wonder-working
ness cannot thrive in the dark. Railroads have a right
instrumentality which has evoked cities and communito know what to expect. Blind alleys make poor terties from a barren wilderness, bound together into one
minals for trans-continental systems. They must have
social organism the people separated by thousands of
an open field, a fair chance and a square deal. That is
miles, providing for them a market and an outlet for
the meaning of democracy, whether applied to people
their unconsumed surplus, and . bearing the ever-increasor industries—equal opportunity for all. And if this
ing burden of a nation's commerce at an average expense
nation is to continue as the embodiment of representative
to the consumer of .729 of a cent per ton per mile, for
democracy we must avoid anything and everything sathat is the average charge on all the freight carried by
voring of despotism, draw a line of demarcation between
the railroads in the United States.
that all this service has been
regulation and strangulation, between government by
It must not be forgotten
commission and government by the people, and develop
rendered by the railroads under the system of private
our national resources and genius, our industries and
ownership.
institutions through that personal initiative and sense of
communities of Europe already
In some of the older
justice and love of liberty which is as far removed from
occcupied by dense poulations the experiment of governsocialism upon the one hand as it is from anarchy on
tried, but with results far short
ment ownership has been
in rapidity of development, efficiency of management, the other.
We are just emerging from a period which huts been
perfection of facilities and cheapness of freight and pascharacterized by an excess of legislation. Agitators and
senger rates in comparison with the accomplishment of
demagogues have precipitated an avalanche of legislaour privately-owned lines of transportation.
tive "cure-alls" guaranteed to bring the millennium.
people are not clamoring for government ownerThe
Thirty-two States have enacted drastic business regulaon means for their inship. They know what confiscati
tions against outside corporations. In 1913 more than
Whether the proposition be modified by comterests.
two thousand laws were passed in Congress, and more
or whether outpensation, based on physical valuation
than 60,000 in State legislatures, while in the Sixtyand-out expropriation, both assail the institution of prithird Congress, 30.000 bills were considered, together
in irreparable loss, not
vate property and must result
with eighty amendments to the Constitution of the United
only to the railroads but to every stock and bondholder.
States, the subject matter running from the election of
to public ownership, knowing
The people prefer private
Supreme Court justices to a proposal to authorize a gov.
full well that the former encourages individual eater-

slope
imagine populous and prosperous States upon that
of the continent.
In a memorable speech in the United States Senate,
he characterized the great Columbia River and Oregon
as
territory embracing this great State of Washington
worth a boundary fight." The interior of the con"not
tinent was generally regarded as a mere desert, fit only




SAVINGS BANK SECTION.
eminent, whenever it has reason to suspect that fortunes
have been improperly obtained, to bring an action for
recovery. Let us hope that we are near the end of this
legislative craze. Surely we have had sufficient opportunity to discover its inefficiency. The need of the hour,
both in relation to the railroads and all business, is encouragement. Bills of lading ate better indicators of
prosperity than Bills of Legislation. The time is at
hand for an era of construction. We are hearing much
about progress nowadays, mere motion is not progress.
The little fellow on his hobby-horse in the nursery
imagines that lie is making a two ten record, when he is
only wearing out the carpet. That is not progress—it is
friction. Neither is there real progress in "exceeding
the speed limit." An old Hebrew prophet exclaimed,
"He that believeth shall not make haste. Haste makes
waste." Better to go slow and arrive on schedule time
than to rush into wreck and ruin. Socialism is joy
riding in the dark. Progress is heading in the right
direction. You would not call yonder avalanche roaring
down the side of a mountain a progressive, because it
bears with it a sign board labeled, "Excelsior." Progress means growth and production. Destruction is not
progress. An old fellow went to a surgeon in New York
the other day for the diagnosis of a large growth on the
side of his head. The doctor examined it carefully and
said: "It is a wen. It must be removed immediately.
Your life is in danger." The patient stretched out on
the table and said,"I am ready, hurry up." The surgeon
did hurry—that was his mistake—and becoming confused In the operation, cut off the old fellow's head
leaving the wen on. That is Socialism. Any maniac
can thrust a crowbar into a piece of complicated machinery, any fool can scatter firebrands, any fanatic
can wage a warfare against law and order, and constitutional authority, but that is not getting anywhere.
You would not burn down a building in order to disperse the rats. You would not sink yonder ocean steamer
in order to remove the barnacles. Put her in the dry
dock for scraping and repairs, and then push her back
Into the sea where she belongs. Keep the ship in the
sea and the sea out of the ship and you have navigation
and commerce.
It is high time to call
halt upon the headstrong and
headlong carriage of so-called Progress, much of which
Is thoroughly reactionary. The reactionary would worship the devil on account of his antiquity. The revolutionary wearies of Gol Almighty because He is "From
everlasting to everlasting." Between these extremes
we find real Progress, slow, tedious, sure-footed and
determined, a Progress rooted and grounded in the
arduous greatness of things achieved, which does not
break with the precedence of the past, but "proves all
things, and holds fast to that which is good." And my
countrymen, the time is ripe for just this order of
Progress. The iconoclast has done his work. The
levelers have succeeded. The hour for the builder has
arrived. The opportunity for real statesmanship is at
the door. This is a National conviction. The people are
awaiting the call of exalted leadership. They realize
the necessity for a change of front in the attitude of
the government towards business activity and prosperity.
Business must be given a chance. It should not be kept
on the witness-stand indefinitely. GovernMent by Commission is headed toward tyranny. It is only a matter
of time when it will bring up there.
Practically all of the forty-eight States of the Union
have Commission in some form or another for the regulation of railroads, while upon the other hand. the Interstate Commerce Commission of the Federal Government
has well nigh unlimited power to fix rates. Between
the State and National Commission there are wide conflicting and confusing differences. These differences are
so conflicting that the railroads are frequently in the
position of the two travelers on the western plains in




177

the early days. They saw a buffalo bull charging upon
them and fled for safety, one of them springing into a
tree and the other barely dodging into a cave as the
infuriated beast went roaring by. Then the man in
the,cave jumped out, whereupon the bull rushed back,
when the man jumped in, and as the bull passed by the
man jumped out; the bull came back and the man
jumped in, and the bull rushed by and the man jumped
out; whereupon the man in the tree shouted, "You
infernal fool, you, while you are in there why don't you
stay there!" to which the man below answered, "What
the devil do you know about this cave? There is a bear
in there."
Between the bull and the bear of State and Federal
regulation there is naught for the railroads but to
jump in and out, backward and forward, in a vain
attempt to escape the penalties of conflicting tribunals.
It is hardly surprising in view of such confusion, that
railroad managers are having difficulty in financing and
operating their lines. It is no wonder that the credit
of these roads is sometimes impaired, and that they
are hard pressed to pay their employes the wages they
demand. Any business man can appreciate the gravity
and difficulty of a situation compelling him to pay a
rising scale of wages, taxes and other expenses, with
decreasing earnings and no power of his own motion
to impose a fairly increased charge for his goods or
services.
To an outsider, a layman if you please, viewing the
situation from the standpoint of common sense, it would
seem that unless the strangle-hold of so-called regulation is withdrawn from the railroads, giving them a
chance for respiration and recuperation there can be but
one outcome, viz: the government ownership of railroads. In other words, if a government will not permit
the railroads to make fair profits, enough to protect
their investors and to meet their expenses, the only
alternative is for the government to take -them over
and operate them. This would be the last step this
side of State Socialism. It would inevitably he followed by State ownership of the land, and with the
fundamental instrumentalities of production and transportation in the hands of the Government, individualism
would cease to be a factor in the development of our
civilization.
There has arisen, of late years, a class of pseudopolitical economists whose trend of thought is all in
the direction of the idea that the Government must
support the people. Paternalism may be a captivating
dream to the indigent and improvident, but it is
abhorrent to men of industry, enterprise and selfreliance. The Government has nothing with which to
support the people save what it takes froth them in the
form of taxes. It is tile people who support the Government and provide it with the funds necessary to administration. But in order to pay their taxes the people
must have control of their own earnings and property.
The industry and business of the country is the creation
of individual effort. Our national progress has been
through the evolution of the individual and the combined energy and intelligence of the people, aided by
legislation protecting and conserving individual rights.
The citizen thus protected in his rights of initiative,
property, investment and enterprise can not only
Provide for himself, but furnish ample funds with which
to support and maintain the Government. But If the
Government is to expend the money which he pays in
taxes ill restricting his ability to make money, nothing
remains but the confiscation of his property, and his
enslavement as the servant of the State instead of his
pr(sent status as an independent producer.
The American people are confronting the greatest
industrial, commercial and political era in their history.
We will require the very highest industrial efficiency in
order to seize and utilize great opportunities which

178

BANKERS' CONVENTION.

existing conditions are opening before us, and our industrial efficiency and prosperity will depend very largely
upon the efficiency and prosperity of our transportation
system. The railways are the arteries of our commerce,
and you can just as well,expect a man with hardening
of the arteries to maintain his health, energy and activity as to expect a Nation with crippled and decadent
railways to maintain and increase its industrial efficiency.
Therefore, one of the first steps which should be taken
to increase our National efficiency is to so readjust the
rates and earnings of our railways as to enable them
adequately to improve and expand their facilities. I
do not say this in behalf of the railways, I say it on
behalf of the people. The interests of the railroad and
the people are identical. When the railroads prosper
the people prosper. When the railroads suffer the people must pay the toll. It is their funeral. In the interest of the people they should be subjected to wise and
fair regulation and control; but also in the interests of
the people they should be afforded the opportunity and
means with which to well and adequately serve the
people.
We are at the parting of the ways. The old world is
wallowing in the waste and welter and barbarism of
war. What the outcome will be it is not for us to
prophesy. Neutrality is the word for our country. We
are far removed from the conflict, geographically,
politically and ethically. Some lessons, however, are
striking and apparent. Preparedness is no protection
against the outburst of war. Armed peace is an
anomaly. Military budgets are not insurance " policies
but explosives. Thirty years ago these warring nations
began to invest in armaments which were labeled,
"Peace Insurance," and during this period they have
paid out hundreds of thousands of millions of dollars.
Their total indebtedness at the present time being fortyfive billions of dollars. And now at a time when they
need insurance they discover that their policies are
worthless, indeed that they are not insured at all. They
are in the condition of the Jew broker in New York
who one day when business was a little slack, in toying
with a silver dollar 'accidently swallowed it. When
throwing up his hands in despair he exclaimed, "Mein
Gott, Mein Gott, I am a dollar in and a dollar out, and
I can't balance my books!" These fighting nations are
billions in and billions out, and in the meantime we
know, and the whole civilized world knows, the wisdom of the words of Charles Sumner when he declared,
"Armaments beget suspicion, suspicion begets fear, fear
begets murder."
So long as militarism is the basis of civilization, so




long as civilization must be propped up with bayonets,
it may be necessary for our Nation to furnish its quota
of bayonets. Self-preservation is the first law of Nature.
The nation which cannot, or dare not, or will not, defend
itself is unworthy the name of Nation. But, my
friends, at such a time as this it is for us to point the
way towards universal peace. Our citizenship is
heterogeneous. The ends of the earth meet here. It
requires all the blood of the world to constitute one
real, typical American citizen, whose citizenship is
unique and independent, not hyphenated, but condensed
into one magnetic word which spells Democracy—
Americanism. This, is our citizenship and he who would
boast of any other, who would change or modify it, is
unworthy the protection of that flag which glorifies
our history, symbolizes our liberty, proclaims our mission and brings to pass the dreams and hopes and
prophesies of all the past!
Toiling beneath this solemn standard of national
pride and honor, it is for us to hold aloft the scales of
justice, fit symbol of equity and honor and fair dealing
among the nations of the earth, to reassert the authority
of reason as against the bloody, arbitrament of the
sword; to insist that there is a legal remedy for every
wrong; that war is an assault on law and order, a
ghastly conspiracy against civilization and a lapse into
the starless night of Barbarism.
Standing upon such a basis of righteousness, maintaining peace at home and amity with all the nations
of mankind, possessed of the greatest physical basis for
an enduring Empire the world has ever known, orphaned
of the solemn instinct of antiquity, yet compensated in
area for all that we lack in age, environed with mountains of silver and gold, boundless in resource, illimitable in energy aid enterprise, possessed of a continental
empire, threaded with a thousand lines of trade and commerce; a land of Edens and El Dorados; beautified with
lakes like inlaid seas, and irrigated with rivers like
rolling lakes; standing here upon the threshold of our
possibilities with a population more intelligent, patriotic,
peaceful and prosperous than can be found anywhere
else on this footstool of Almighty God, it is for us to
Illustrate the power and possibilities of American
Democracy; to demonstrate the stability of popular
Government; to show how labor and capital can toil
together, each recognizing the necessity of the other and
both toiling for the common good, and in this atmosphere of industrial tranquility to develop that industrial
Independence, commercial supremacy, political stability
and religious integrity which shall give to us an enduring place among the Nations of the World.

Committee and Officers' Reports Savings Bank
Section.
Report of the Secretary, Savings Bank Section, Milton
Harrison.

W.

Mr. President •acid Members of the Savings Bank Section:
In the short time I have been your secretary I have endeavored to
carry out the work of the Section in every direction.
From the last annual meeting until February 1, 1915, the office was
under the very efficient management of E. G. McWilliam. who at that
time resigned to become manager of the New Business Department of
the Security Trust & Savings Bank, Los Angeles, California.
In the interim between February and my incumbency, the detail
work of the office was ably carried on by our office assistant, Miss
Waine, with the aid of 0. Howard Wolfe, then Secretary of the Clearing House Section.
Mr. McWilliam set an interesting example for his successor. The
service he rendered in connection with the campaign of education for
the encouragement of thrift has been productive of excellent results.
This great work I trust will be successfully carried on with the spirit
in which it was instituted.
The opportunity for service in the Section seems almost unlimited.
It is my desire to get into closer contact with the members of the Section, through requests for information and suggestions from them, serving them in every possible way.
Our appropriation for the past year's work was $11,000. The expenditures for the year amount to $8,112.27, leaving a credit balance
of $2,902.13, according to the statement attached to this report. The
large credit balance is explained by the Section being without the services of a Secretary for three months.
In conclusion, I desire to express my appreciation to the officers
of
this Section and its Executive Committee, as well as my associates in
the General Offices of the Association, for their assistance at all times
in the routine work of the Section.
Respectfully submitted,
M. W. HARRISON,
Secretary.
FINANCIAL STATEMENT SAVINGS BANK SECTION
September 1, 1914, to August 14, 1915, inclusive.
CREDITS
By appropriation of Executive Council
From sale of slides (Thrift Publicity)

111,000.00
14.40
$11,014.40

DISBURSEMENTS
Salaries
Postage, Stationery and Printing, including Thrift
Publicity
Proceedings, 1914
Rent
Executive Committee Meetings
Traveling Expenses
Convention Expenses
Telephone and Telegrams
Extra Office Help
Office Supplies
Gold Badge
Express and Cartage

$3,437.52
1,771.03
1,324.46
604.92
392.20
238.61
244.34
44.34
27.00
17.30
5.50
5.05
8,112.27

Credit Balance

$2,902.13

Report of the Methods and Systems Committee.
Mr. President and Members of the Savings Bank Section of the
American Bankers Association:
During the past year the results of our previous years' activities
have
become evident. Societies have sprung up for the purpose of encouraging the people to save their money and conserve their
resources; State
Bankers' Associations are conducting campaigns to further
frugality;
chapters of the American Institute of Banking are teaching
the people
to be thrifty, and thrift seems to be the order of
the day.
WORK OF TIIE OFFICE.
Opportunities for greater constructive service
in the work of the Section are constantly increasing. Through the efforts
of this Committee
new school savings banks have been established
all over the country.
Requests daily have come into our office for
information concerning
school savings banks, which have been supplied accordingly.
We have
endeavored at all times to assist our members by sending
them material
for carrying on local thrift campaigns. An organization and
functional
chart of the Savings Bank Section has been prepared, and will be
supplied to any member desiring one.
THE Boox OF FORMS.
There were one thousand copies of the book of forms printed
last
year. Seven hundred and eleven of the books have been sold and
paid
for, 12 remain still unpaid; 204 on baud at the printer's; 1
on hand at
the office; 10 have been given away complimentary and 2 were
sent to
Washington for the copyright, making a total of 1,000
copies. We
have received $2,853 for the sale of the books
-708 at $4 each and 3




at $7 each. The expenses incidental to the
publication and sale of the
books amount to $3,065.27, leaving a debit balance
of $212.27. If the
balance of the books on hand were sold at $4
each we would receive
$1,000.26, leaving us a credit balance of
$787.99. There is now on
hand in the Special Fund of the Savings
Bank Section with the General Association, out of which was appropriated
the expenses for the
publication of the book of forms, a balance
amounting to $1,429. The
amount received from the sale of the -books
has been added to this
special fund to offset the cost of publication,
and is included in the
$1,429. The original balance of the special fund
was $2,391.63. $750
of which was appropriated to cover the expenses
of a movable thrift
exhibit described hereafter.
•
SCHOOL SAVINGS BANK STATISTICS.
With relation to the gathering of statistics as reported
at the Richmond meeting, we secured the co-operation of the
Comptroller of the
Ourrency to the extent of receiving from the banks,
through him, the
names of the schools operating the school savings system.
We communicated with the schools regarding their statistics, and the
responses
were very gratifying. A comprehensive card system for following
up
and receiving these statistics is maintained in our office. These statistics have been completed, and were sent to the Comptroller of the Currency for his next annual report the first part of last July,
and also
were published in the August JOURNAL-BULLETIN. The results
show
that there are 1,925 school savings banks, with 398,540 depositors and
$1,792,640.10 on deposit.
The inestimable amount of good which these school banks have done
in inculcating in the minds of the children habits of thrift is too
obvious for any further comment.
Mr. Joseph R. Noel, of the North West State Bank of Chicago, and
also a valuable member of this committee, has done excellent service
in
connection with the Chicago school savings banks. Through his efforts
sixty-one schools in Chicago have established savings banks, all
having
the same system of operating the bank. Quoting from a recent
report
by Mr. Noel, it is interesting to note that "each bank is conducted
by
six pupils of the seventh and eighth grades, who rapidly
become Proficient as bank clerks. They and the depositors receive valuable
training in banking methods, business practices, care and accuracy, in
addition to forming habits of saving and thrift. They are under the supervision of one teacher for the entire school, who is known as the
treasurer of the school bank. The bank is open for only thirty minutes
a
week, from 8.30 to 9.00 a.m. usually each Tuesday morning the
school
is in session. The forms used and the methods followed as
nearly as
possible are identical with those adopted by regular banks.
Five days'
notice of withdrawal is required, and a parent's consent must
be obtained before money may be withdrawn." He further states: "That
13,638 pupils have saved *27,115.94 (an average of nearly $2 each);
that of this amount they withdrew $10,254.60 (38 per cent.) for
their purposes, leaving a balance of $16,861.34 (62 per cent.) still
in
the bank. An analysis of the replies to a questionaire which Mr. Noel
sent out to fifty-four schools in Chicago, with a view to finding out
the exact situation with relation to the banks in each school, was
written by Mr. Abraham London, a teacher in Public School No. 122,
Brooklyn, New York, and is embodied in a pamphlet which the Savings
Bank Section has recently published to be used as a text-book on school
savings banks in a nation-wide campaign for establishing school banks
in co-operation with the Chapters of the American Institute of Banking. An article by Mr. Noel and one by Mr. Hawley, together with the
complete aforementioned statistics, and Mr. London's analysis comprise the contents of the pamphlet.
Mr. N. F. Hawley has also made splendid progress in the Minneapolis
public schools, in establishing new school banks and encouraging the
children to save more money in those already established. His stamp
method has been used successfully in a number of other cities, particularly St. Paul, where the State Savings Bank employs four collectors,
who visit the schools once a week. The children make their deposits
with them. The equivalent of each deposit is evidenced by stamps
pasted on folding cards, which are then returned to the children. When
the account amounts to $5 the children are asked to transfer the stamp
card to an interest-bearing account in the regular savings bank. The
collectors report daily to the bank and their total collections are kept
in one account on which no Interest is figured.
Mr. Meakle, another member of this Committee, is doing good work
in New Jersey, where the school savings bank movement is making
some headway.
Reports received from Mr. Charles S. Norris, who is conducting the
work amongst the schools in Boston, indicate an increase in deposits
and number of depositors.
The New York Board of Education is seriously considering the granting of additional compensation to the teachers having the supervision
of the school bank, as also a uniform system of conducting the business
of the bank. The plan used in the Chicago schools seems to be the
most popular.

TEl REWARD OF THRIFT FILM.
The Reward of Thrift film, which was described in the report of this
Committee in Richmond Lot year, was released September 15, 1914,
through the General Film Company, which has forty-eight branches
located in the principal cities of this country. A canvass was recently

180

BANKERS' CONVENTION.

who have
made in order to obtain the approximate number of people
and accordseen this motion picture. The result was very gratifying;
ing to the figures received the film has been shown in 2,746 theaters,
Manager of the
and taking the estimate of Mr. P. I. Waters, General
people at each
General Film Company, of an average attendance of 600
y had
theater, 1,647,600 people have seen the film. This has undoubtedl
was rea remarkable effect in teaching the people to save. A letter
thrift motion
cently sent to Mr. George Ade with relation to a new
picture, and he has promised to write one of his famous fables in slang
showing how ridiculous extravagance is, through his regular contract
ted
with the Essauay Company. The Essanay Company was communica
the
with, and they have promised to give us further details concerning
matter before the picture is released.
MOVABLE THRIFT EXHIBIT.
A movable thrift exhibit, entered into in co-operation with the Interwas one
national Committee of the Young Men's Christian Association,
exhibit
of the features of our thrift work during the past year. The
folding
consists of a copy of the "Reward of Thrift" film and a large
sections
screen containing seven panels. Six of these panels of two
illustrating the
each are fitted with pictures, or rather colored posters,
composed
results of both thrift and extravagance. The center panel is
for
of a set of small pictures which revolves and is electric lighted;
y in
example, showing at one instant an old couple living comfortabl
a spendthrift,
their home after a life of saving and the next instant
exhibit is
whose money has been spent on all kinds of luxuries. The
parts of the
going to all the branches of the Y. M. C. A. in different
Wisconsin, and is
country, and has been shown in Illinois. Indiana and
for the exnow in the upper part of New York State. The itinerary
fall and winter
hibit is being prepared at the present time for next
. In letters we have
and will be published in the JOURNAL-BULLETIN
Associareceived from the secretaries of the Young Men's Christian
they state that it is exceedtions where the exhibit has been shown,
ingly popular with the young men,
TALKS ON THRIFT.
services of T. D.
The committee thought it wise to dispense with the
to write the "Talks
Macgregor and has employed William II. Kniffen
with all matters conon Thrift." Mr. Kniffen, being well acquainted
having a thorough knowlcerning Thrift and Savings banking, as also
assuredly increase the popuedge of tile history of savings banks, will
1,200 names on our mailing
tarty of our "Talks." We have about
monthly letter is mailed
list who receive these articles each month. A
list. This letter is designed
with the "Talks '' to each bank on the
with the Section, and is a part
to bring the banks into closer contact
of our campaign of service.
THE COLLEGE SAVINGS BANK.
for the purpose of.
for a few local savings clubs, a campaign
Except
thrifty has never been attempted
encouraging the college boy to be more
boy is given up as
college
in ally college or university. It seems the
With the purpose of merely
a hopeless subject, even before he is tried.
arranged with the Wesleyan University
making an experiment, we have
National Bank, to conduct a
of Middletown. Conn., and the Middletown
university campus, commencsavings bank in the college store near the
n with the operation of the
ing this coming November. In conjunctio
in the university,
bank there will be a course of eight lectures given
the middle of November, on
one every three weeks, commencing about
as: "The Importance
Thrift "Practical Economies." Such subjects
Institutions "; "Thrift
of Thrift ";"The Various Classes of Banking
comprise the course. We
and Savings ";"Thrift anti Socialism " will
enter his sophomore year
have already secured a young man who will
detail work of the bank.
at Wesleyan next year to take care of the
National Bank have asThe officers and directors of the Middletown
Shanklin of the Unisured us of their hearty support, and President
systems used in the operaversity is enthusiastic over the plan. The
are now in the'hands of
tion of the bank have been completed and
on. If the plan is
the Middletown National Bank for their considerati
encourage their
successful by the end of next year. it is our purpose to
For this year it is
establishment in other colleges of the country.
merely an experiment.
THE 1916 CENTENNIAL OF SAYINGS BANKS.
savings bank centennial in
The matter of fittingly celebrating the
at this time. While we should
1916 should come up for our attention
money, yet we should conduct a
not consider a lavish expenditure of
with the importance of the
celebration which is at least commensurate
for your consideration a
event. Your Committee, therefore, submits
tentative plan for celebrating the centennial:
purpose of a savings bank
With the object in mind of the original
g a place of deposit
to encourage the people to be thrifty by maintainin
mosey, we should conduct an
where they could systematically save their
means for teaching the
energetic thrift compaign, using every available
in a Thrift Congress, to be
people to save, and closing December, 1916,
where the first meeting
appropriately held in the City of New York,
ways and means for the
took place in November, 1816, to consider
operation of a saving bank.
DETAILS OF THE PLAN.
be conducted in forty
First—A systematic thrift campaign shall
Chapters of the American
cities in the United States, through the
cities. These forty chapters
Institute of Banking located in those
Savings Bank Section by
have all been enrolled as members of the
Bankers' Association.
virtue of their membership in the American
appointed, or will appoint, a
Each of these chapters have already
this work.
Public Affairs Committee to take full charge of
held during the
At the Chapter Presidents' dinner and conference
San Francisco,
Convention of the American Institute of Banking in
McWilliam, presented a
the Section, through the courtesy of E. G.
the Thrift
paper on "How Chapters Can Co-operate in Helping
and
Propaganda." A very lively discussion of the subject ensued,




It seemed to be the sense of the conference that the Chapters would
do all in their power to help conduct the campaign in co-operation
with the Savings Bank Section.
Second—The entire campaign shall be so organized that the responsibility for conducting it would be centered in the Chairman
and the Members of each Chapter Public Affairs Committee, who
shall report monthly to the National Chairman of the Institute
Public Affairs Committee. The National Chairman will work in
co-operation with a Committee which shall be appointed by the
President of the Savings Bank Section.
This Committee shall be called the Savings Bank Centennial Committee, to consist of six members: the President of the Savings
Bank Association of New York State, the President of tile Savings
Bank 'Association of Connecticut, the President of the Massachusetts Savings Banks Officers' Club, and two others who are members of Executive Committee of the Savings Bank Section, towith the Secretary of the Section.
I I gether
State Bankers' AssociaThe Secretaries of the various
lThird
of the
tions, who have also been enrolled as associate members
co-operation with the Institute
Savings Bank Section, shall work in
Chapters in their respective States.
periFourth—The State Vice-Presidents of the Section shall write
of the Public
odical letters of encouragement to the Chairman
Affairs Committee in the Institute Chapters in their States.
each month to
Fifth—The Secretary of the Section shall write
the Chapters,
every Chairman of the Public Affairs Committee of
that way.
keeping in personal contact with them in
of the Savings
Sixth—Suggest to the banks which are members
for the enBank Section to institute local publicity campaigns
with the Institute
couragement of thrift, and have them co-operate
Chapter in each of their cities.
be written each month
Seventh—The "Talks on Thrift" will
a History of
with the centennial particularly in mind. In this way
by combining the
Savings Banking can be very easily arranged for
Thrift Contalks in book form, and distributing them during the
gress as souvenirs of the centeninal.
Thrift"
Eighth—Continue to send letters with the "Talks on
and
each month, encouraging the banks to "further frugality,"
asking for their suggestions.
PamphNinth—Have printed 20.000 to 30,000 Industrial Thrift
have
lets for distribution by the National Civic Federation, who
industrial
kindly consented to do so, to tile employees of certain
pamphlets will be given out
corporations of the country. These
The attensimultaneously with an address by a Chapter speaker.
the necessity for
tion of the employer wit be forcibly brought to
some Way for helping
teaching thrift to his workman and finding
him to save.
1916
THRIFT CONGRESS TIIE FIRST PART OF DECEMBER,
THREE DAYS.
Bank Section of
Tenth—Consisting of members of the Savings
and Connecticut, and
the Savings Banks' Associations of New York
as delegates, tothe Massachusetts Savings Bank Officers' Club
Associations in
gether with representatives of other Savings Bank
the United States.
in the City
An invitation should be secured to hold the Congress
Banks.
of New York from the New York City Savings
FIRST DAY:
of New York.
• Evening: Reception by tile officials of the City
SECOND DAY:
New York
Morning: Joint meeting of the Savings Bank Section,
Bank AssoState Savings Bank Association, Connecticut Savings
ciation and the Massachusetts Savings Bank Officers' Club.
Reports of
Afternoon: 'American Institute of Banking Meeting.
Thrift work for the year. Address.
Evening: Banquet.
THIRD DAY:
Thrift Conference.
Morning and afternoon luncheon given by the New York Savings
Banks of New York City.
ADJOURNMENT.
endeavor and
All of the foregoing is merely the result of the earnest
working in the
hearty support and co-operation of those who have been
It is our desire
Interest of the section since its organization in 1902.
advancement of the
to serve all of you at all times, and for the further
field of savings banking.
Respectfully submitted,
V. A. LmittsstEn,
Chairman.

Report of the Law and Segregation Committee.
N. F. HAWLEY, CHAIRMAN.
banks or other institutions
The tendency to organize mutual savings
which shall do a savings bank business only is growing less. There are
n of mutual savings
a number of States which permit tile organizatio
for
banks in which no new bank of that character has been organized
y so few exclusive savings banks
sonic years. In the West particularl
than the
have been organized that they are quite the exception rather
rule.
tendency to
On the other hand, there has been a rapidly growing
and to trust comadd savings departments to National and State banks
segregation of assets
panies. This is being done quite as much where
s are usually
Is not required as where it is. Such savings department
places certificates
Issuing regular savings bank pass books. In many
pass books. Especially
of deposit are being turned into savings bank
on the part of
is this true in the towns and cities. It is recognized
depositing of small
the bank that the pass book plan encourages the
that greater consums, while on the part of the depositor it is found
is cultivated.
venience is subserved and the inclination to save

SAVINGS BANK SECTION.
We must all, whether representatives of mutual savings banks or
departments in commercial banks, frankly recognize these conditions.
We all are desirous of encouraging habits of thrift. If in certain parts
of the country there is little or no tendency to form new mutual savings banks, we should recognize that fact and support the method
which seems best to subserve the end. If people will no longer organize
mutual savings banks in new communities, but will establish savings
departments, then we should all bend our best efforts to the organization
of as many such departments as possible rather than that people should
go without proper places to put their small savings. An enlargement
of this argument is not necessary.
But it does not follow that the mere organization of a savings department in a commercial bank is all that is necessary. Such a place
for the savings of the people will not invite or secure their deposits
unless it is surrounded by grater protection and better safeguards
than are usually afforded commercial deposits. The Savings Bank Section has strongly and repeatedly placed itself on record on this point.
But in view of the rapid transition that is taking place, have we
performed our whole duty by merely stating our position and by simply giving advice on the matter? Have we no further obligations?
Should not a definite program be undertaken for the determination of
the kind of laws and methods that will best protect deposits placed in
savings departments of commercial banks and endeavor to secure their
adoption?
Such a program should be prompted solely in the interests of greater
safety and only with the desire to improve savings department methods,
make greater safety and consequently increase the inclination of the
people to save money, with the resulting growth of deposits. Every
bank in seeking its own best self-interest will, when it is most wisely
advised, conclude that the safest methods will bring the largest deposits and eventually the greatest profits.
In support of such a program it is suggested that a committee of
'this Section shall consider the situation in each _State separately, and
endeavor to get the support and co-operating of sufficient influence in
such State to bring about a recognition of the necessity of proper
laws therefor, and if possible the segregation of assets representing
or securing savings deposits; and if such support and co-operating cannot be secured, then to undertake a campaign of education, having in
view time securing of local opinion in favor of the best and •safest
savings bank methods in the State concerned.
If such a program is adopted we should not be discouraged if our
progress is slow, because. we must recognize that in many States there
is at present little realization of the necessity and wisdom of greater
protection to the ordinary savings bank depositor.
The principle of segregation is already recognized in a number of
States. It would seem a reasonable expectation that in time it will
be adopted in other States. It will be well if we can get such adoption before any lesson or compulsion of disaster shall come.
This suggestion of a more active attitude on the part of our Section
is submitted for the consideration of its membership, with the recommendation that the same be adopted.

Report of Committee on Postal Savings Bank Legislation.
SEATTLE, SEPTEMBER 7, 1915. ,
Mr. President and Members of the Savings Bank Section:
The Sixty-third Congress made no change of moment affecting the
Postal Savings System, except that non-member banks were disqualified under the Federal Reserve Law from hereafter becoming depositories of Postal Savings Funds; funds already on deposit in such nonmember banks may or may not be allowed to remain, the present
policy of the Department being to leave these old deposits undisturbed.




181

When we met in Richmond last October we reported that the Presi-,
dent had just vetoed the bill known as the "Moon" bill (H. R. 7907).
This bill at first proposed to amend the existing law by permitting a
person to deposit an unlimited amount at any time in a Postal Savings
Bank, but no interest was to be allowed on sums exceeding $1,000.
The bill was subsequently amended in the Senate and the limit of
Interest-bearing deposits was at first fixed at $1,000, and gave the
Board of Trustees of the Postal Savings System discretionary power
to receive an additional $1,000 without interest. As finally passed the
limit was fixed at $500 upon which interest should be paid, and an
additional $500 at the discretion of the Trustees but without interest.
The bill as passed also provided that Postal Savings funds might be
deposited in banks which were not members of the Federal Reserve
Association; this latter provision was not acceptable to the President
and the bill was vetoed. Another bill was promptly introduced by Mr.
Moon (H. R. 18842), meeting the President's objection. This bill
died in committee. A similar bill was introduced in the Senate by
senator Bankhead (S. 6770), fixing the Unlit at $1,000 upon which
interest should be paid and an additional $1,000 without interest. This
bill was not reported out of the committee to which it was referred.
but was a little later on inserted as a rider in the Post Office Appropriation bill. It was finally eliminated from this bill, as the committee wisely decided to exclude all matters not strictly items of appropriation.
The limitation of $500 therefore still exists, but it is understood that
the Sixty-fourth Congress will enact legislation raising the limit of interest bearing deposits to $1,000 'and giving discretionary powers to
the Board of Trustees to accept an additional $1,000 without interest.
From the knowledge acquired by your committee in its efforts to have
the original Moon bill amended, and from a frank interchange of views
with the Director of the Postal Savings System, we feel that the desire of the Trustees for this increase of authority is not unreasonable and will not work any hardship upon our savings banks. We have
been assured that it is not the policy of the Postal Savings System to
compete with the existing agencies for saving, but endeavors only to
Supplement them, and in so far as we are able our members should
co-operate with every effort to cultivate the thrift habit of our people.
Owing in great measure to conditions brought about by the war in
Europe, deposits in Postal Savings Banks have largely increased during
the past year. On June 30, 1914, there were 388,511 depositors and a
total of $43,444,271 on deposit; on June 30, 1915, there were 528,000
depositors and a total of $65,600,000 on deposit, an increase of 36
per cent in the number of depositors and of 51 per cent, in total deposits. Some of this increase, however, is due to the progressive administration of the system in exploiting the banking-by-mail idea and
in securing the co-operation of other Governmental agencies in the
gratuitous distribution of Postal Savings Bank literature. These methods, through drawing public attention to the subject of saving and in
thus accentiag the importance of thrift, are helpful means of promoting the cause for which this Section stands and in the opinion of
your committee have not wrought any damage to our members.
However, we must at all times keep a watchful eye upon the constantly recurring efforts to amend the Postal Savings Law. We should
be broad enough to co-operate in making any changes for the common
good, but should carefully guard the interests we represent from governmental encroachment.
Respectfully submitted,
EDWARD L. ROBINSON,
B. F. Sent,'
Wit. E. KNOX,
Committee.

Detailed Report of Proceedings.
Fourteenth Annual Meeting SAVINGS BANK SECTION, Held at Seattle, Wash., September 7, 1915
SEATTLE, WASH., September 7, 1915.
The Savings Bank Section convened in the Moore Theater,
Seattle, Tuesday morning, September 7, at 10.30 o'clock, with
the President, William E. Knox, in the chair. The proceedings
in detail follow:
THE PRESIDENT: Ladies and gentlemen, as is customary, we
will open these procedings of the Savings Bank Section with an
invocation, which will be delivered by the Reverend Doctor
Leonard.
DR. A. W. Latorteao: Open the door of our hearts, Almighty God,
and grant we might bid Thee enter and take up Thy dwelling place
In the poor house of our soul; that our lives may be pure and noble
in Thy sight; and grant us. 0 God, Thou Saviour Divine, that magnificent comradeship as in days of old; be Thou our friend and our
saviour. 0 spirit of God, Thou who didst breathe upon the waters
and bring forth light, shine Thou into our dormant lives and may
everything there be radiant with Thy presence. Blessed trinity of
power and of love, undergird every one now in Thy divine presence,
and may we be given strength to deal with the problems before us.
We thank Thee that these men representing great and far-reaching
Interests pause at the very threshold of their deliberations and recognize God in their lives.
Give unto each one of us a realizing sense of our personal accountability to Thee. We ask that in all of the deliberations of this
great assembly of persons there may be given to each one a consciousness of duty from the standpoint of service. Minister Thou
unto those who have made the arrangements; and upon those to
whom we look as our leaders in the direction of the work may Thy
spirit divine descend. We pray for those who in this Section to-day
shall consider subjects that are of far-reaching importance, not only
to our own nation, but to the world; and as we face these problems,
we ask for a sincerity of purpose, and for an attitude of selfcontrol that will enable us to hold ourselves steady in the path of
righteousness whatever be the name of our vocation. Minister Thou
unto him who is the representative head of this nation. As a people
we pray we may be held steady in the face of suffering and disaster;
and as Thou didst with the leaders of our people in the days that
are gone by let there be a continuance of Thy guidance in these later
days. We pray that peace may very speedily come in all the world;
that nations may cease their warring, and that men may live together
in a common brotherhood as established by Christ Jesus our Lord.
Minister, we pray Thee, to the Governor of this State; and to the
governors of all the commonwealths of our nation. Bless those who
have authority over us in any position; give them that strength and
spirit that shall be necessary for righteousness; and in our exultation may we so conduct ourselves, undergirded with Thy love, that
we may serve and not seem to live for the pleasure of ourselves. We
ask Thou wilt guide every one upon whom to-day rests great burdens;
and those who shrink from the burdens of to-day, undergird them
with strength; and be Thou with those who tremble in the presence
pain. Lead Thou us on in the way of truth; forgive us for what
we. have been, and consecrate us for what we are, and what we shall
be; bless us, in the Name of the Father, and the Son, and the Holy
Spirit to whom we shall give all the praise, world without end.

.of

THE PRESIDENT: Mr. J. H. Edwards, Vice-President of the
Dexter-Horton Trust & Savings Bank of this city, has an address of welcome for us, which I am sure we shall all be hippy
to hear. I have the honor of introducing Mr. Edwards.

Address of Welcome, by J. H. Edwards.
It is a pleasure and a privilege to be called upon to extend on behalf of the banks and bankers of Seattle an official welcome to these
members of the Savings Bank Section of the American Bankers' Association.
Y:m may well Le proud of having the largest Section of the Association and, further, in knowing that you come into closest touch
with the greatest number of home makers in the land.
Lincoln once said, "God must love the common people, He made so
many of them." It is your good fortune to serve that element.
As custodian of their hard-earned dollars you hold a sacred trust and
nobly have you fulfilled the obligation. Likewise it is your duty to
strive to inculcate in the minds of our countrymen the fact that thrift
and saving should go hand in hand with industry.
The scope of the plans outlined by your Secretary in a recent bulletin
for the Encouragement of Thrift, embracing School and College Savings Banks, the monthly "Talks on Thrift" for publication, addresses
•on kindred topics in day and night schools and moving picture films, is
very comprehensive and deserves the active support of every banker
and business man.
You have at this time many vitally interesting problems to consider, not only in banking but in commercial and economic conditions.
Changes and adjustments are in progress, and some are essential to the
prosperity and well-being of the whole people. It is a time when all
should strive for the best and go forward with optimism.
May I be pardoned if I say that the bankers and peopel of Seattle
alike are "proud of being citizens of no mean city" and of what
bas thus far been accomplished?




This inland sea at our feet was first explored in 1792 by Vancouver,

an English naval officer, and many of the bays, islands and mountains

I I

hereabouts were given their present names by him.
In 1852 the first white settlers landed on the site of this city and
for several years they strove with the Indians for mastery in this
,
land of prcmise. The year following the first settle:11 NA here the Territory of Washington was created and also the first plat of this city
way filed.
These early settlers had a premonition of the future importance of
the town they had founded, for they modestly called it New York,
Later it was named Seattle, after a
adding Alki—" by and by."
friendly Indian chief. By 1880 it contained 3,500 inhabitants, and today we claim over 300,000 population. Thus you note the growth of a
single generation.
The charm of the region, together with its wealth of resources, have
lured a multitude of energetic people from every section of our country. We stand ready to welcome a great many more, and especially
each of you, as permanent residents among us.
Our geographic location, always promising, has now become strategic.
To tIL) north Alaska, tardily coming into its own, and to the west the
Orient, with its hundreds of millions of people, offer unlimited opportunities for commercial intercourse and development, and Seattle stones.
at the gateway to both.
Moreover, the opening of the Panama Canal gives us entrance to
many other countries and to all our ports on the Atlantic Coast.
We greet you as fellow workers, but even more as friends and brothers, with the hope that your sojourn in our midst will prove so pleasant that in the halls of memory there may linger such recollections
iv, will draw you to us again and again both in thought owl in rerson.

THE PRESIDENT: Mr. Edwards, as representative of the
Seattle people and bankers it is a very great pleasure to listen to your words of welcome. I think- all of us from the
provincial East which, we who live there, are apt to consider
the main part of our country, forgetting, indeed not knowing,
what lies west of us. To us from that East, it has been a
revelation, journeying for days as we have across the prairies
and seeing wheat in every direction for miles and miles, as far
as the eye could see; and then traveling through the mountains, through your beautiful cities, to the city of Seattle where
the warmth of your welcome testifies very strongly to the size
of your hearts, and where the beauty of your city testifies to
the strength of your knowledge and industry, it is a pleasure
for us, from other parts of the country, to come to a city
like this and meet these people, and meet these bankers; and
the great thing in doing that is the feeling that comes over us
that East or West, North or South, this country of ours is
a magnificent heritage; and it is for us, as one people, to
give a good account of our stewardship. We are a young
country yet, and as the days go by, and the years roll along,
we can see before us other millions and tens of millions of
people coming to inhabit these great plains we have come
across, and who built up not only this city, and the cities
already started, but those who will build new cities; and we
have a duty towards those people, and that is the duty to
plan not for the present only, but for the future. It is our
duty not to think of ourselves only, but to think and work
so that this country may be a better country to live in, that
our, children, and our children's children, looking back, may
bless us for what we have done.
Now, we are at a very important period, I think, in the history of this country. We are facing many grave problems, and
those problems we have to solve to the best of our ability. We
shall probably not solve all of them; but we certainly must
make an effort to solve most of them; and that is the reason
and the main reason, for this meeting to-day. We think the
railroad problem and the relation of the railroads and the 'people with each other, and the way their interests are being
bound up together, is a very grave problem; and whether we
adjust that problem sanely and wisely, or whether we are led
astray by all sorts of stronge doctrines, is going to make an
immense difference in the future welfare of this country. I
know the people who are here to-day will be interested; and I
know the papers we will hear here to-day will be interesting;
I know they will sink deep into the minds of the hearers. I
know that, from one end of the country to the other, they will
be heard, and commented upon, and attention will be given to
them. I ask your very respectful attention for what is to be
said, knowing that this is not the only audience that will hear
them, we are just a few representatives; but the larger audience is bound by the confines of the country only; and not only
by the confines of the country, but the things which are said
here to-day will be heard throughout the world; the plans that
may be considered here to-day I have no doubt whatever will
have a far-reaching result. Work together, therefore, East
and West, from New York to Seattle, and from the Gulf to

SAVINGS BANK SECTION.
Alaska, as one people, willing and ready to discuss these subjects. We will have a word of greeting from our President, Mr.
Law, of the Bankers' Association.
MR. WILLIAM A. LAW: Mr. President, Ladies and Gentlemen:
It is indeed a pleasure to say a word in response to the
address of welcome which we have just heard, and to express,
just at the outset of our meeting, with a deep sense of appreciation, which we all feel for the large and charming hospitality that you are showering upon us. We are accustomed
to seeing big things done on the Coast, but we realize that you
do not confine your activities to material things, but that you
give equal attention to the finer things of life. That is why
we see such magnincent streets that you have created, that
would be a credit to a city of ten times your population. That
is why we envy you your magnificent park system which your
magnificent city has arranged here. I do not think anyone can
visit the city of Seattle and observe the people without the
feeling that the men who are planning it are planning with the
larger events that will happen five or five hundred years from
now; and it is a great regret that we will not be here to see
what will then be the result of these labors.
In regard to the Savings Bank Section, I want to put on
record here that nothing in connection with the activities of the
American Bankers' Association has been more gratifying to me
personally, than the practical and valuable work now being done
by the Savings Bank Section. This is a department of banking
that is not conducted for the gain of the stockholders, but
rather for the educational, moral and economic results to the
community.
Savings Bank officers are therefore in a peculiar sense the
trustees of their depositors, many of whom are ignorant, suspicious and of slender means, hence an exceptional burden of
responsibility rests upon the Savings Bank Management, not
only in the use of proper means for encouraging thrift, but
also in the rigidly careful selection of only the soundest and
safest investments for the funds under their control.
These features put you in close touch with the basic problems
of life, such as the cost of living; the employment of labor; the
education of children in our public schools; the influence of the
press and the pulpit toward thrift; the increase of Governmental extravagance; the growing debt of municipalities; tne decreasing value of our best railroad securities; the difficulties
of railroad financing; the values of urban real estate, as affected
by the growth of municipal population and the development
of local transportation facilities; the duty of employers to
encourage saving on the part of their employes as a step
toward home owning and better citizenship; the evolution of
National traits as affected by our habits of living and conduct.
All these are fertile fields, which it is your function and privilege and duty to investigate and cultivate. It has well been
said that "all advances in civilization and appliances for
economizing labor have been brought about at each step of
development by the members of communities who have been
capable of thrift and who have measured up to something they
have made the foundation of greater things."
Let me briefly call your attention to the admirable work
being done to encourage thrift by educating public school
children in its methods and benefits. Statistics recently compiled show that this work has resulted in the opening of nearly
one million saving accounts by school children, the total deposits amounting to nearly two million dollars. In this important work San Francisco leads the country with Pittsburgh
second.
The Savings Banks of the United States represent no inconsiderable amount of available capital for prime investments.
The saving bank idea originated only one hundred and six
years ago in England. Several far-sighted Philadelphians soon
recognized its advantages and in 1816 originated the first savings bank in America, the Philadelphia Saving Fund. Today
this institution is a notable example of prudent and efficient
management. It has deposits in excess of one hundred and
twenty-one million dollars belonging to over two hundred and
eighty-three thousand depositors, of whom only one hundred
have as much as ten thousand dollars—the maximum limit—
the average deposit is $430. Forty-three thousand new accounts were opened last year, and as many as five hundred
and eighteen in one day, yet this institution makes it a rule
to do no advertising either in periodicals, newspapers or
through the mails, but its new business comes from its excellent reputation and the good will of its depositors and friends.
As President of the Association, let me extend my
hearty
good wishes for the success of your celebration next year of
the Centennial of the establishment of American Savings
Banks.
THE PRESIDENT: We will now have the pleasure of listening to a brief address by Mr. Robert II. Bean, who a week or
two ago in San Francisco was elected President of the American Institute of Banking. Some fifteen or sixteen years ago,
when the American Institute of Banking was first started, I
had the honor of being one of the charter members of the first
chapter, and the president of the institute at that time would
have met, presiding at the organization meeting, with possibly
one hundred men ; while today it seems that there is an organi-




.

183

zation with a membership of ten or fifteen thousand with
chapters in sixty cities in .the United States, so that you will
see it is no small thing to be entrusted with the presidency
of an institution like that. I have the pleasure of introducing Mr. Bean, ladies and gentlemen.
MR. BEAN: Mr. President, Ladies and Gentleman, and Members of the Savings Bank Section:

Address of Robert H. Bean, President of the American
Institute of Banking.
Mr. Chairman, Ladies and Gentlemen: It is an honor to be your
guest this morning and bring to you the greetings of the American
Institute of Banking. To represent such a body is always an
honor
and a privilege, but there is a particular significance in the opportunity of meeting with the directors of thrift, the Savings
Bank Section of the American Bankers' Association.
The Institute is a university of men, the youth of the profession
of
banking, students in the world of finance devoted to and
absorbed
in the development and conservation of ability, seekers of
an opportunity for service in the business in which they are employed
and to
which they are devoting the best years of their life. Its members,
of
which there are more than 15,000, struggle daily with the constantly
changing phases of law, economics and finance, and with
ever increasing interest seek to arrive at that stage of efficiency which will
demand
the recognition which they have honestly aspired to and
deserve.
That the process of time will bring into place the young
men who
are to-day training for the high places of honor and
responsibility in
the financial world no one would care to deny,
and the recognition
which is given the Institute in the Convention now
assembled, and
particularly the Section which meets this morning,
is a source of
gratification to its administrative officers. Your Section
meets at the
outset of a year which will prove to be of tremendous
importance, not
only to the Savings Banks but to every agency
concerned with the
financial situation in the entire country. Your efforts will
interest
and concern our people, the wage earner and the capitalist,
and because of its vast import upon the national welfare will
command support and should, in advance, guarantee a measure of
success far beyond your greatest hopes.
Yours is a problem, first, of education in the matter of thrift
and,
second, of the scientific application of such methods and
systems as
will most rapidly and satisfactorily create in the mind of every
citizen receiving a daily wage for his service a desire to save.
The time Is long past when we should face squarely the
issue of
thrift and its tremendous effect upon the welfare of individual
and
community. We have lived is: a period of reckless extravagance
for
so long a season that it is fast becoming a habit. The babe
has been
brought out of the cradle with a firm grasp upon the purse
strings
of the parent and reared in a greater or less degree to
know only
and strive after the best of everything without much regard
for
the cost or the struggle to provide the necessary funds to
pay for
the luxuries enjoyed.
•
This is commendable in itself but it is almost certain to
lead to
extravagance in later years and a constantly lessening regard
for the
thrifty example of past geners tions in conserving that
which is vital
to h ippiness and the enjoyment of things necessary to one's
existence.
If the people of our time saved in proportion to the
earnings as
did the people of early days the total of national wealth
as represented by the deposits of Savings Banks would make
us a Gibraltar
among nations.
It is true that the present condition may be natural to
all peoples
and that this nation is no more to be charged with
being a spendthrift than any other, but this does not lessen the argument
that it
is time to call a halt or face the consequences of our continued
disregard for this prime necessity for prosperity.
The statement is often made that the majority of people save only
when compelled to through fear of suffering or absolute necessity.
This may be true, but if so our problem of inducing saving through
the education of our citizens to the real value of saving becomes
just
so much more difficult.
Saving through fear or pressure or need is not healthy either to
the individual or the community.
A service to one's self so dependent upon the whim of mind
or the
turn of- so-called luck affecting one's affairs is close akin to the
policy of caring for tile health when ill and neglecting it
when in
normal condition. The desire to save which comes to an
individual
or community of individuals through a process of
education and
systematic practical training must be encouraged and developed
with
a persistency which will not permit of anything but
ultimate success. Every dollar laid aside through an earnest desire to add
that
mite to the nation's store is worth a hundred accumulated
to meet
some anticipated exigency only to be withdrawn and scattered
if
the need •hoes not materialize.
America faces a day not far distant when its resources
will be
taexd as at no time since tile close of the Civil War.
A period of industrial :levelopment both here and abroad
will soon
be opened and capital for such reconstructive purposes at
the close
of the war now reaching a crucial stage will bring the price
of those
in possession of it.
Vast sums will be needed to rebuild and rehabilitate the
stricken
portions of the scene of the present carnage and the
accumulated
riches of this nation in its Savings Banks will be the
foundation
from which will be drawn the sinews in this new day of
peace.
To increase then the savings of our people that we may
more surely
be ready for this great opportunity is the thing toward
which we
must bend our energy. To educate he wage earner to conserve
some
portion of that which is acquired, because of the sound sense
involved
in such a policy is the plan ever before the Savings Bank interests,
and particularly at this time of adversity in other lands.

184

BANKERS' CONVENTION.

Every new depositor secured under such a campaign as this will,
in a great majority of cases, continue, to be a saver and au active
agent of the Association in its work.
It is a matter of coincidental interest that the year in which the
most energetic work should be done is also the centennial of the
establishment of savings banks in this country.
In this important movement which will soon be under way the
American Institute of Banking stands ready to co-operate. Through
the sixty Chapters scattered through every important city, your
Section has a channel through which it may work with almost certain
promise of success.
May I suggest and even urge that every bank here represented and
the . Section through its administrative afters call upon the local
chapter for assistance in whatever plan may be determined upon.
The earnest co-operation of the Institute Is offered to the Savings
Bank Section in the splendid work they are entering upon in the
coming year.
Meetings devoted to thrift may be arranged and speakers secured
through the Committee on Public Affairs for missionary work ani,ong
schools and large centers of employment.
In short, it is the desire of the Institute to work with the Savings
Bank Section as if it were its own undertaking, and whether it be
in the North, South, East or West the results should be worthy of
our combined efforts to promote, encourage and direct Thrift for
Thrift's sake.
THE PRESIDENT: A year ago, when the war broke out on the
other side of the water, and when this country found itself face
to face with a very tense financial situation, the question uppermost in the minds of a good many men in the banking business
was, what to do to bolster up the courage of the American people, so that they would have faith in the value of their own
securities. Many of us agreed that the thing undoubtedly
more than anything else was to say some words of encouragement to the railroads; and to get some indication from the Administration of its attitude towards the railroads that would
lead the railroads to suppose they were to have fair treatment;
and a few of us meeting in New York at that , time did what
we could at that time, which was not very much; because at
that time had we taken any active and open part in the discussion of railroad affairs, it might have led to a feeling of uneasiness upon the part of the public; but it seemed to us that,
when the country got over the immediate effect of the war, that
if the American people could be brought to see it, that this
was an opportune time to lay before the American people fairly
and squarely just what the relations of the railroads and the
people are, just how the railroads are dependent upon the people, and equally how the people are dependent upon the railroads; and so, in looking about for some one to present this
subject, I went • to Mr. Frank Trumbull, the Chairman of the
Executive Committee of Railroad Heads in New York City, and
Mr. Trumbull immediately said, "The man that you want is
William Sproule, President of the Southern Pacific." He said,
"lie is a good fellow, he knows his business and can make an
address even on railroads that will interest every one." And,
he said, "if you can get Sproule you don't want anybody else."
After some little difficulty Mr. Sproule gracefully came down,
after having at first said he was so busy he could not possibly
but I have found that it is the men who are so busy
do it;'
that they cannot possibly do anything more, that do these
jobs when they do, and they generally do it so well that it is
done better than anybody else can do it; and this will be no
exception as' to that rule. I have the honor of presenting to
you Mr. William Sproule.
Mn. SenouLE :, I thank you, Mr. Chairman, for your most
courteous introduction to this audience, and I thank you for the
reception. I will tell you a little secret: On my coming out,
our Chairman saw this in my hands, and he said, "For God's
sake, don't read it." (Laughter.) If I were as graceful on
my feet as your Chairman is, I would not read it; but as the
matter stands, I shall make the reading of it as inoffensive to
you as I possibly can. Without further parley I shall begin:

"The Railroads and the People" by William Sproule.
[Mr. Sproule's speech complete will be found on pages 171 to
173 of this publication.]
TIIE PRESIDENT: I doubt if anybody ever listened to an
address on a technical subject that made even statistics attractive, that was more attractive than this one. I am sure it has
been a very great pleasure to listen to Mr. Sproule. I have a profounder respect now than I had before for the judgment of the
gentleman who told me Mr. Sproule was the proper man. Mr.
Sproule was just the man,. and he has done his job just as I
knew be would do it. I am confident that what Mr. Sproule
has said here today will be of immense educational value in
all sections of the country, and not only to the Savings Bank
people, but to the people of the country at large.
We have with us as representing the people's end of this
symposium, Dr. John Wesley Hill. We thought it might be a
good plan to have a layman who was not even a Savings Bank
man, who would tell us just what the people thought about the
railroads, the thinking people of whom he is a very good
representative. I have the pleasure of introducing to you,
although many of you do not need any introduction to him, inasmuch as his name is a household word in many sections of




the country, and in many American homes, Doctor John Wesley
Hill.

"The People and the Railroads" by Dr. John Wesley Hill.
[Dr. Hill's address is printed on pages 174 to 178.]
THE PRESIDENT: Ladies and gentlemen, we are all indebted
very much to Doctor Hill for his brilliant and illuminliting and
successful address. I am sure he has given me a new vision of
the relation of the people and the railroads. He has painted
for me a new picture of what the railroads have done for the
people, and I think he has pointed out, as did Mr. Sproule, a
line along which we can work to bring about better relations
between the railroads and the people.
Now, there are two or three of our men who might wish to
say a word on this subject. I will first call on Mr. Welton. Is
Mr. Welton in the room? (No response.)
-suer, will you say a few words?
Mr. Let
Mn. V. A. LERSNER: Mr. President, if I had had any intention to speak to this question before, after listening to the unusual manner and the quality in which it has been presented
by the two principal speakers this morning, I find myself in
the position of the struggling lawyer in the city of New York
who had sat for many weeks in a minor criminal court waiting
for an assignment to a case by the judge. One day, very unexpectedly, the judge said to him, "Counsellor McMann, will
you take an assignment of this case?" The court waited and
waited and finally the court said, "Counsellor McMann, will
you take an assignment of this case? Will you take this case?
Answer me one way .or the other."
"Your Honor," he replied, "I meant no offense; I was trying
to catch my breath to answer you."
And so, anyone who has heard these addresses would have a
becoming timidity against adding one word or one thought to
what has been said. And we, of the Savings Bank Section,
ought to be congratulated, and we ought to congratulate our
administrative officers, for making such a meeting as this possible. It goes without saying that with those of us in the
Savings Bank business, the railroad situation, through the
medium of its securities, could well engross our consideration,
and .in calling a meeting of this kind, I believe' we have deliberately given our 0. K. and approval to remedial legislation to
the railroads. We feel it is only justice for them to obtain it.
One can listen, as I have had the pleasure on two or three different occasions, to railway representtrtives of the desirable
kind—and there are many such--and understand. their endeavors to have correct and just legislation extended to them.
I was very much impressed in listening to one railroad man,
in mentioning the multitudious phases of taxation, incidental to
all legislation. He said there was no legal difficulty in the way
of Congress passing a law which would give the National Government the absolute control, as far as railways were concerned. Being asked why it was not done, he said, "It was
due to timidity and cowardice on the part of our Congress."
I think in view of that fact, and the multitude of facts which
.
have been so well presented to us today, that we can well go
out and work for not only prosperity, but fairness and justice
and intelligent treatment.
TILE PRESIDENT: One word from 'the Honorable Mr. Hum-.
phreys, who has represented this State in Congress and who
will soon represent it in another capacity, I firmly believe.
HONORABLE W. E. HU]stritnElfs: Mr. Chairman, Ladles and
Gentlemen: This is an unusual pleasure to be asked to talk to
bankers. I never felt so humble nor so proud in my life.
Never before in my life have I had the unusual experience of
touching elbows with real money.
know nothing about banking; I know nothing about railroads, and according to the legislation in Washington City. for
the last few years, I am especially qualified to talk about it
(laughter).
When we had railroad legislation under consideration
in Washington recently, the railroad men were barred from
Washington. They were not permitted ,to appear before the
Committees. They had some information on the subject, and
so of course, they were rejected, but the long-haired agitator,
force and
who settles all questions on the soap-box, was out, in .
welcomed. The dreamy professor who did not know how to
.
write a check, or if he did, he did not have sufficient money in
the bank to have it acknowledged, was the man called on to
furnish information in regard to banking.
In regard to shipping and marine matters, the shipping
men of the country were not called to Washington. They were
given to understand that their presence would not be received
with favor and the legislation in this time of our mighty
emergency was turned over to a land sailor who has not been
outsido of the Committee room in Washington, for a quarter
of a century. And a man who has been a professed lobbyist
for twenty years, assisted by distinguished cornfield statesmen who have never grown tall enough to look over a few
stalks of corn to see the pumpkin in the same field with him.
I agree with Doctor Hill that we have had too much
legislation. I think we have too many laws, and too little
prosperity in this country to-day. I think what we need is less
legislation and more business. As Doctor 11111 pointed out,

SAVINGS BANK SECTION.
Congress, in Washington, the State Legislatures, our city
councils, have all been turned into incompetent machines, grinding out class prejudice, socialistic ideas, and half-baked legislation in the way of law. And I verily believe that outside
of the legislation affecting appropriations and necessary for
the conduct of the business of the Government, that this nation
would be better off to-day if we had not enacted a single law
within the last five years. I believe the best thing Congress
can do next session, outside of making necessary appropriations,
should be devoted to .repealing many of the laws on the
statute books. A business man said to me the other day,
"Mr. Humphrey, there are so many laws on the statute books
which affect business, that after I have read them I do not
have time to attend to my business." (Laughter).
Government by Commissions has led to universal distrust
and business depression.
There never was a more crooked and cruel fallacy than that
you could benefit the laboring man by driving his employer into
bankruptcy. Let us hope the day of the death of such talk
in this land is at hand.
THE PRESIDENT: There are still members of sanity and of
sense among the gentlemen who occupy our legislative halls,
as we have just seen. May Heaven send us more, is our
prayer
I think I may extend, on behalf of the members •of this
Section, and of our friends who are visiting us, the very hearty
thanks of the Section to both Air. Sproule and to Doctor Hill,
for their very able, illuminous and excellent addresses. If that
is your pleasure we will signify the same by standing and
then we will call the meeting adjourned.
Recess until 2.30 P. M.
AFTERNOON SESSION, 2:30 P. M.
The meeting was called to order by President Knox.
THE PRBSIDENT: Well, gentlemen, the President of this Section will now inflict upon you his annual address, which address is very short, fortunately.

President William E. Knox's Annual Address.
The Savings Banks of the United States are approaching the completion of a century of useful and honorable service to the nation,
and are lool'ing forward to a fitting celebration of that event in 1916.
Looking backward over the years, he who runs may read, in the
growth and prosperity of the Sayings Banks, the growth and prosperity of the nation. With the one idea of service to the people
uppermost, the Savings Banks have gene quietly and steadily about
their task of encouraging the people to thrift.
is gratifying to
find that through all the records of the Savings Bank Section
there is
no evidence that any selfish motive has ever actuated any of its
members and the same is true of all the Savings Banks of the country—
the ideal which they have striven for has been that they might
serve
honestly, conscientiously and efficiently their various
communities.
So it is with a feeling of satisfaction that we approach our hundredth
year, and look forward to the beginning of our second century.
We have largely outgrown the attitude of days gone by, when every
bank was sufficient ,unto itself, and have learned that many
things
affecting the welfare of Savings Banks can best be accomplished
by
united action. The result of this change of attitude is
shown in
the existence of the Section of the American Bankers'
Association,
and in the Savings Banks' Association of the various States.
There are two or three matters of much import that
particularly
call for our consideration at the present time.
The first is the growing and concerted effort which
are making,
we
through our "Thrift" campaigns, to impress upon our
citizens the
importance of "thrift" as a habit and a principle—not
only to the
individual, but to the community and to the Nation.
Hand-in-hand
with that campaign is marching the School Savings Bank
system. In
all parts of the country, the banks, with tile hearty co-operation
of
the local school authorities, are introducing miniature savings banks
into the schools. The results are encouraging, and we are looking
forward with confidence to the (lay when, in every public
school in
the land, a practical course in "thrift and savings" will be a part of
every child's education.
But it is not only with the education of the children that our responsibility ends. There is another field of education
which we well
might enter, and that is the education of the savings bank
depositor.
The addresses which we heard on "The Railroads and the
People" will
I am sure, be of decided benefit in this direction. Whether
he realizes
it or not, the savings bank depositor has a vital
interest in the welfare of. tile railroads. There are in the United States
10,500,000 savings bank depositors; every one of them is, to some
extent, a partner
of the railroads, because of the fact that the vast amount
of $859,000,000 is invested by the Savings Banks in railroad
bonds.
Every law that is passed affecting the railroads
has an effect upon
the investments held by the Savings Banks as the trustees
of the people.
If this fact were kept clearly in view by our
legislators it would go
far toward having a steadying effect upon them, with beneficial
results
for all parties concerned.
It is quite proper to eliminate, and we are eliminating,
the abuses
of power and privilege that have, in the past, crept into the
management of railroads. But, on the other hand, we must not
attempt, while
abolishing tile privileges of the few to embark on what
has been called
the impossible and inequitable task of creating privileges
for the
many.
The present controversy between the Post Office Department
and the
railroads over the parcels post question is a case in point.
It would




185

seem to an impartial outsider that the question of fact, as to whether
the railroads are being fairly paid or not, ought easily to be arrived at,
and I totally misjudge the temper of the American people if they do
not insist that the railroads (in case it is proved that they are underpaid) be suitably compensated. The American people has no desire
to accept any service for which it does not make an adequate return.
Heretofore the Savings Banks have kept silent as to the affairs of the
railroads, but, in view of the vast interests they represent; in view
of the millions of depositors whose trustees they are, it would seem to
be only proper that they ask to be heard. The Savings Banks have
no axe to grind. The Savings Banks hold no brief for the railroads,
but it is their plain duty to use all proper means to protect the interests
of their depositors.
I venture to hope that they will be willing to act in any way that
will bring about a better understanding between the railroads and the
various legislative bodies. And I believe, too, if the railroads and the
lawmakers can only get together, with a sincere desire to work for
the common good, in a spirit of mutual confidence and forbearance,
that the railroad question will be settled fairly and equitably to the
lasting benefit of the people.

TIIE PRESIDENT: We will now listen to the report of the
Secretary, Mr. Harrison.

Report of the Secretary, Milton W. Harrison.
[The report of the Secretary is printed on page 179.]
THE PRESIDENT: We will now have the report of the Methods and Systems Committee, by Mr. Lersner, who is the Comptroller of the Willamsburgh Savings Bank of Brooklyn, New
York. At this time I would like to interject that at an Executive Council meeting yesterday, with the consent of the members of the Executive Committee, I appointed a Nominating
Committee, so as to save our time this afternoon, and give the
Committee a chance to look over the field before reporting nominations for officers for the ensuing year; the members of that
Executive, or rather Nominating, Committee were Mr. McWilliams, Mr. Nowell and Mr. Stevenson, who will report at the
proper time in the proceedings. Mr. Lersner, gentlemen of the
Convention.

Report of the Methods and Systems Committee.
[The report of this Committee appears on page 179.]
THE PRESIDENT: Gentlemen. of the Convention, you have
heard the report of the Committee, what is your pleasure regarding it?
(Moved by Mr. Ruder, and seconded by Mr. Dinkins, that
the -report of the Method and Systems Committee be received
and placed on file with the thanks of the Section.)
Ma. JOSEPH R. NOEL: Does that carry with it a concurrence in the recommendations? I think that should be embodied in the motion.
THE PRESIDENT: If the maker of the motion is agreeable
to that, and the seconder also agrees with it; that that motion carry with it the approval of the recommendations as
far as it can, if it be agreed to.
MR. RUDER: Yes, I accept.
MR. DINKINS: We accept.
THE PRESIDENT: Are you ready for the motion?
(Motion put to viva voce vote and declared carried.)
THE PRESIDENT: We will now hear the report of the Membership Committee which will be read to us by Mr. George
E. Edwards.
Ma. EDWARDS: Mr. President, and gentlemen of the Section, I will now read the report of the Membership Committee, which is as follows:

Report of Membership Committee.
[We have found it impossible to obtain a copy of this report.—Ed.]
(Moved by Mr. Beckwith and seconded by Mr. Lersner that
the report of the Committee be received and placed on file).
(Motion put to vote and declared carried).
THE PRESIDENT: We will now have the report of the Law
and Segregation Committee presented by Mr. N. F. Hawley,
Vice-President of the Section.

Report of the Law and Segregation Committee.
[The report of this Committee may be found on page 180.]
(Moved by Mr. Robinson and seconded by Mr. Lersner that
the report be adopted, and that the recommendations contained
in the report be endorsed as representing the sentiments of
this body).
(Motion put to vote and declared carried).
TIIE PRESIDENT: The report of the Special Committee on
Postal Savings Legislation, Mr. E. L. Robinson, Vice-President
of the Eutaw Savings Bank, of Baltimore, Maryland, will now
be read:

Report of Committee on Postal Savings Legislation.
[The report of this Committee appears on page 181.]
Ma. DINKINS: I move you, Mr. Chairman, that the report be
received and placed on file. In doing so I desire to state that
I was fortunate enough to be placed in the position—or, rather,

186

BANKERS' CONVENTION.

I have information that the work of that Committee, the successful work of that Committee, is one of the achievements of
this Association in this Section; the members of that Committee went before Congress; they spent some time in Washington before the committees; and not only achieved the success
which that report shows, but for one, for this Section, I wish
to assure that Committee of the warmest appreciation for the
work and the success which the Committee obtained which is
due to the work of that Committee, as members of the Committee and as personal portions of the Committee. I think the
whole Section is indebted to that Committee for that successful work. It is unusual for any committee to go before a committee in Congress and to have as much success as these gentlemen have obtained. I therefore move the adoption of the report.
Ma. HAWLEY : I desire to second the motion, and if it is
necessary, I desire that it be added to the motion, that the
Committee be extended or continued, and if the motion is not
necessary, that will follow; but I think that the motien should
be enlarged to include that the Committee be continued in this
matter until the close of the subject.
THE PRESIDENT: Yes.
Ma. DINKINS: The motion is that the report be received and
placed on file, and then add to the motion that the Committee
be continued in office.
MR. HAWLEY : I second that motion.
(Motion put to vote and carried.)
THE PRESIDENT: We will now listen to Mr. Edwards.
"Liquidity of Savings Bank Investments" by George E.
Edwards.
[We print the report of this Committee on page 167.1
MR. HAWLEY : Mr. President, to follow up the idea embodied in Mr. Edwards' paper, I have been requested to submit this motion, which I introduce:
These recommendations are made, of course, predicated upon
the permission to be given the Savings Bank' provisions which
are in the Federal Reserve Act, and which are qualified to
rate as commercial banks and to receive the same considerations, to receive currency, in other words, from the Federal
Reserve Board. It should not be expected that the privileges
they obtain shall be any greater or better terms than commercial banks themselves obtain. Those qualifications are not necessary to be stated here. This is simply a request that Savings
Banks be permitted, of course upon proper conditions and
qualifications, to carry currency through the intermediation
of the bank member of the Federal Reserve, and that such
security may be obtained. I submit the motion to you.
MR. LERSNER: I move that the very admirable and attractive paper of Mr. Edwards be received and placed on file
and that the request or resolution offered by Mr. Hawley be
approved.
THE PRESIDENT: You have heard the resolution, gentlemen. As it stands, the resolution is offered for the purpose
of provoking or eliciting the opinion of the members of the
Savings Bank Section who are present, if they care to give
their views upon that subject. If there is anyone who would
like to discuss the question, the opportunity is now offered.
Ma. McVAx : I would like to inquire whether this will cross
purposes with the other efforts being made and put forward to
secure the admission of the State Savings Banks under the
Federal Reserve Act, or is it in consonance with the other
efforts put forth?
THE PRESIDENT: I do not see how it could conflict in any
way, and if we should pass the resolution as the sense of this
Section, then it must meet with the approval of the Executive
Council of the Association, and be presented in full Convention, and it is quite probable it may not receive tile approval of the Executive Council; and if presented upon the
floor of the Convention, it may not pass the Convention. But
it seems to me that it is an effort in the right direction. The
Savings Banks have nothing less, if this goes through. It gives
them, if successful, another means of getting currency in
time of stress. Personally, I doubt very much whether our
efforts will be successful; as the Federal Reserve Bank is
only supposed to issue currency on short time liquidated paper,
30, 60, or 90 day paper, and this would be far past the principles underlying the Federal law. I have certainly a doubt
as to whether it would pass or not; but if it did pass, we have
gained something. If it doesn't, we have not lost anything.
But I think that the Federal Reserve Bank, and some of the
Government officers, and officers of the Federal Reserve Bank
have expressed themselves as being heartily in approval with
anything that would help the Savings Banks in time of stress.
As it is now, our only chance for curreney is the depository
bank; and in time of stress they would probably have all
they could do to attend to their own wants; and I do not think
it is fair, although they are willing to accept the burden as
part of the general burden, to ask them to look after their
own wants, and besides looking after their own wants, to shoulder our wants onto them. If by the passage of such law as this
resolution would ask for, the burden could be shifted directly
to the Federal Reserve Banks, and not shouldered entirely by




our depositary banks as it now is, that, it seems to me, would
be the proper view of the situation, as I se it.
: This resolution does not say whether it goes in,
Ma.
with the endorsement of the bank, it is not—I suppose it has
to be endorsed and guaranteed by the bank itself.
THE PRESIDENT: If that has gone as far as that, if they do
pass the resolution, I have no doubt they will add such provisos as they see fit, to make it reach the situation.
: It might be absolutely necessary to have that.
Ma.
THE PRESIDENT: It would seem to me it would be, because
when they present paper for re-discount now, it must bear
their endorsement; and this must take the same course.
MR. ROBINSON: This is a very important matter coming before us for our consideration; and I doubt whether all of the
members present have a correct idea of the subject matter of
the resolution; and I would therefore suggest that it be read
again so that we may know just what this resolution is offered
for.
(Resolution read by the Secretary.)
Ma. ScHmun: This motion has been seconded, hasn't it?
THE PRESIDENT: No, it has not.
MR. Sumner: Mr. Chairman, I second the motion.
MR. NOEL: I may be misinformed about the situation, but if
I understand it correctly, this is all subject to the action of
the Convention proper.
THE PRESIDENT: Absolutely. Before its acceptance, it has
to be submitted to the Executive Council for approval, and if
they approve it it is then submitted to the Convention, and it
is then handled according to the by-laws of the Association.
MR. NOEL: Would it not therefore be well to incorporate
into the motion a suggestion to the effect that we recommend
the adoption of this resolution subject to adoption by whatever the body may be?
THE PRESIDENT: That is in the motion.
Ma. NOEL: That is in the motion already?
THE PRESIDENT: Yes.
MR. ROBINSON: I think it was first made subject to the
scrutiny of the Law Committee.
THE PaEstrun: Yes, and then the Executive Council before it can be presented to the Convention for action, must
approve it, and then it is taken before the Convention and
submitted to the.Convention for action.
MR. ROBINSON: I am under the impression it has been thoroughly threshed out before, in the discussions which took
place while the Federal Reserve Law was in process of getting through Congress. The needs of the mutual savings
banks were put before the Committee, and the mutual savings
banks had several able advocates at the time, and their needs
were certainly at that time put forward. I think it has been
suggested that, inasmuch as these Federal Reserve notes are
all predicated upon their prompt redemption in gold upon
demand that we can hardly expect the Federal Reserve Board
to issue notes payable upon demand upon the credit hypothecation of securities which are due in 5, 10, 15, 20 or 30 or
40 years I have an idea this matter has already been gone
over carefully and conscientiously by the Federal Reserve
Board; and It is practically impossible to ask or to have the
bill amended in such a way. I think inasmuch as the matter has been already passed upon very carefully, that we
ought rather to go slow about committing ourselves to a
proposition that many of us believe is economically unsound.
THE PRESIDENT: Is there any further discussion?
MR. McVAY : I hesitate to speak so frequently, but I do not
want to be considered backward, either, Mr. Chairman. But
if this resolution should go through, it should go through
after it is duly considered and when it says what we mean.
It not only makes a request for certain legislation, but it
makes at least one pronunciamento or statement of facts that
I am somewhat reluctant to vote for, and that is in the little
phrase where it says that the Savings Bank may demand notice
in times of great National peril; and the word "National,"
a great
at least that ought to come out; because this is
country, and different sections of it are affected differently
at different times. I know there have been times when savings
banks throughout the East have been demanding notice, while
those in the West have not; and vice versa probably. But there
may be times when banks in the South might be affected by
conditions that did not prevail in the North; or governed by
conditions either local or district; and consequently I dislike to vote either for such a provision that Savings Banks
should not demand notice except in times of great National
peril; I think it should be proper for banks ill certain localities
to demand notice when there is not perhaps a National peril.
THE PRESIDENT: The point is well taken. Is there anybody else?
MR. DINWOODY (Ohio): If this resolution is subject to being
approved by the Committee, or approved by any other body, as
it seems ultimately it must be done; and how are we going to
get any benefit or enforce this resolution if they have got to
put it up to another body after having passed it, for approval
and adoption?
THE PRESIDENT: The laws of the Association require a submission to the Executive Council and that has already been done
by this Committee, and is to be done by the Executive Council.

SAVINGS BANK SECTION.

187

MR. DINWOODY : If that has been done, the resolution to be
a man or an institution which will issue paper of that kind
of any effect--it would be in effect immediately or go over until
could not afford to allow that paper to go to protest; and we
next year?
consider that, in Louisiana, the best investment for a bank in
THE PRESIDENT: It will go immediately before the Convenorder to secure quick returns. The idea, you know, is, that if
tion.
a man can get his money, why, he does not want it; as
a
MR. DINWOODY : That's what I want .to find out.
matter of fact, the most of our Savings Bank depositors are
Ma. HawLEY : As I stated, I submitted that resolution by rewomen; and naturally they are very, very timid about their
quest, and in view of the statements made, and of the relucsavings; but whenever they know they can get their money,
tance manifested upon the part of some of the members present
there is no further anxiety upon the subject. Fortunately
for
to approve of everything stated in it, I will suggest, or rather,
my institution, we have never placed any restrictions upon
our
Mr. President, move that it be re-submitted to the Committee
depositors, either commercial or savings. We say to them,
on Law, or some other particular committee, if there is not a
"Whenever you want your money, come and get it's';
and we
general approval of it. I am not in favor of everything in it
have never in our experience 'felt the slightest disposition
or
myself.
evidence of a run. When the trouble came on in 1907, as soon
MR. TETER: I would like to second the motion, and in doing
as it appeared, I gave notice to the men in the office
to say to
so may I have a moment, Mr. President?
any of their friends, that if they felt any anxiety about their
THE PRESIDENT: You may.
money, to come and get it; and we did not have a single
MR. TETER : I regret very much to have come in late to
withdrawal; nor did we have any withdrawal beyond
those in
this important session where you have honored me as an
the usual course of business. I think there is nothing more
officer; but I have been so tied up with another matter, that
important for the welfare of the Savings Bank than to make
it was impossible for me to come any sooner. I have been
some kind of an arrangement which will enable them in
their
asked by the Secretary to say a few words with reference to
States—it is not necessary in my State—but in other States,
the question of the safe investment of Savings Bank funds;
to enable them to invest a certain amount of their funds in
but I will spare it. I think, however, that Mr. Hawley's mosecurities that insure immunity from loss; and I do not believe
tion, or substitute motion, whatever it is, ought to carry,
any possible harm can come of it; I don'st believe the men
as it is necessary that the resolution go before the Associwho manage the greatest institutions of this country are unation proper for a checking up on this matter. Right here,
wise enough to invest in any securities that they cannot realize
now, I must suggest that we begin to advise ourselves of our
on. But whether we believe in the Regional Bank System or
own responsibility. We must do that; and we must be sure
not, we have connections with other banks. Now, my bank is a
that, we want this to go through, even if you do have to subcountry bank; while it is a suburb of New Orleans, across
the
mit it to a higher power later on. That must be arrived at
river—I have two banks, one in Greta and one in Kenna;
and
as an ample foundation. Then as to the main point itself,
we have a city depositary in Chicago, New York and St. Louis;
I shall not take up your time at this late hour in discussing
and if we are not able to arrange to comply with the conditions
It. I was prepared to say very definitely that I believe that
of the Regional Board, we can do our share through our
city
the Savings Banks of the United States must come eventually
depositaries. We have the collateral that is acceptable to them,
to the mountain instead of the mountain coming to them. I
and they can get the money themselves when it is needed;
and
believe that liquidated currency must be based upon liquid
I think all our correspondents and the correspondents of every
assets, and that commercial paper, representing transactions
one will be familiar with the character of the collateral we
which clear themselves, are to-day the only liquid assets aside
can offer them in order to obtain from the Regional Bank over
from our cash, that banks posses. If it means, instead—I
them such funds as we need. In other words, if I would say to
am speaking to the point, am I not, Mr. Chairman?
my correspondent in Chicago that I wanted so much money,
THE PRESIDENT: Quite to the point.
and that my collateral was so and so, they would have confiMa. TETER (Continuing): In my institution, I have tried to
dence in the selection of the collateral because they know and
keep the balance of these securities in that way. I carry
do business with us; and I think it would be the safest thing
many bonds, according to the size of my institution; and
in the world to allow the Savings Banks in different sections of
I have always found when I wanted to use bonds myself was
this country, in different States, to invest their money in quick
the time when I could not afford to use them; and that comassets; I do not think there is anything better that you can do
mercial paper, in two crises, and I have been the senior
in the country; I do not think there is any subject before the
officer of my institution during both times, have been the one
Convention which will accomplish a greater end than to have
thing that we could depend upon, and depend upon absolutely.
that resolution passed and adopted before the Regional Board.
Just another word. Another institution in Chicago, in the
Ma. SMITE: Coming from one of the principal intermountain States,
panic of 1907 liquidated twenty million dollars worth of
the State of Utah, the laws of Utah regarding Savings Bank investcommercial paper within three months, with only one case of
ments are liberal. The last legislature we were successful in having
five thousand dollars, which was not paid. That, of course,
a law passed which provided that Savings Banks could invest their
as you all know who handle bonds, was a trifling shrinkage,
funds in such bonds as the Board of Directors saw fit. Now, in the
considering the fact that perhaps even the whole of the five
Savings Bank in which I am cashier, we have never yet seen fit to
thousand dollars was not entirely lost, as was the case with
carry but a certain amount of commercial paper. We have none of that
bonds in that very time. In one sale of twenty million dollars
class of paper in the intermountain country; we have to go East to get
worth of bonds, at such a time, there would have been a
it; and even in view of that, we don't feel justified in being without a
severe loss many times exceeding five thousand dollars. Now,
certain percentage of our deposits in commercial paper, and another
I am not trying to offset this, but I am simply raising these
percentage in stocks and bonds which are listed upon the New York
market. Now there is not in our country any commercial paper. That
points to indicate that you are treading upon a tremendous
is, when I say none, it is only a small percentage which can be used
problem, and unless you have had an opportunity to canvass this
by the Federal Reserve Board. I am not asking you that Congress
motion thoroughly, I believe that a reference back to tbe Comshould pass any law permitting them to issue currency upon bonds
mittee, or whatever it is, with the recommendation that the
running over a series of years from the time they are taken; and I
whole subject should be gone into thoroughly, would be the
do not believe it has become necessary to ask Congress to pass a thing
best thing. Personally, I believe that the Savings Bank
we know they are not inclined to do, and which would be a reflection
should have authority to carry a reasonable amount of comupon us, to ask them to do something that we have no faith in and
mercial paper.
do not believe in.
Ma. DINKINS: The idea seems to be that the Savings Banks
THE PRESIDENT: Inasmuch as the author of the resolution has asked
should be allowed to invest a certain amount of their money
for its withdrawal, and that the seconder has agreed to do so, out
in liquid securities. One statement made by Mr. Edwards seems • of courtesy to him, it should be done. Do
I understand that?
to me will justify why I believe that that is the proper thing
Ma. ROBINSON: Do I understand that the withdrawal of it refers
to do. When the people are sure that they can get their money
it back to the Committee?
when they want it, they will have no disposition whatever to
Ma. IlewLEY; Yes, refers it back to the Committee—everything in
withdraw it. In the State of Louisiana the laws are very libthis resolution is referred back to the Committee.
eral as to Savings Banks. There are no restrictions placed.
Mr. SCHMIDT: Inasmuch as I seconded the motion, I am perfectly
willing to agree to that, that it be referred to the Committee. I
upon them as to the amount of investments, or as to the
would like to say a word in this connection before I sit down. Now,
amount of liquid character of assets; and the result of that is
I think this is a move in the right direction. I come from Oregon,
that Louisiana has on deposit in the Savings Banks more than
from the agricultural section of that State, and I am connected with
four million dollars more than any other State in the Union.
a National Bank also. Now, I am perfectly able to believe the truth
In our sister State of Mississippi they make it necessary that
of what was said here a while ago, as to different conditions existing
in order to foreclose a mortgage, one year shall elapse after
in different sections of the country. It was my privilege to be In
the mortgage becomes due before the property can be sold. In
Chicago last year just about the time the war broke out, and I
the State of Louisiana, when a mortgage falls due, the property
was somewhat amazed to see notices posted up in Savings Banks
can be sold within ten days without any advertisement, or any
requiring depositors to give a certain length of time of notice to them
other ceremony except to notify the parties that unless the
before they could get their money. I at once telegraphed my people
money is paid within ten days the property will be sold.
out here and told them what the conditions were there because I
Now then, we use in Louisiana collateral, that we call comexpected that that condition would prevail throughout the whole
mercial paper, but which the Board do not consider commercial
country. We did not even feel a ripple of it out here on the Coast;
paper. We can handle 30, 60 or 90 day paper, notes of merat least, not in Oregon. There was no demand made upon us for
chants, and enterprises of different kinds, lumbering interests,
money and the depositors in the Savings Banks did not ask for
and so forth; and I don't think in the experience of any banker
money at all. It is different in different sections; and to some
in Louisiana has any of that paper ever gone to default; and
extent I differ with the gentlemen who read the paper, from New




188

BANKERS' CONVENTION.

York. I think one main element of people is they have confidence
in the management; and if it is generally known, as has often been
said, that if people know they can get their money any time, they
do not want it. That is true all the way through. If the people
know that they can get their money when they want it, they do
not want it; but if they cannot get it, they want it awful bad.
Last year, Secretary McAdoo was here, and when be was in Portland, I took occasion to see him, and I asked him what the chances
were of having changes made in the Federal law so that Savings
Minks could become a member, and he said that the Federal Reserve Act was not intended to take in Savings Banks, and that
Congress would have to pass an amendment to the original bill or
law before Savings Banks could come in, and he expressed himself
as being favorably disposed to have such an amendment added to
the law.
Now, I think this motion is a move in the right direction, that we
should urge Congress to adopt this law; they do not have to adopt
the suggestion, but it is simply to call the attention of Congress to
such a situation. As a Savings Bank we keep a certain amount of
our assets in liquid form. We know the necessity for it, and if Congress would pass such an act we would at least have the benefit of
the requirements of such an act. I think we should call the attention
of Congress to the situation and undoubtedly attention will be given
that will relieve the situation, and that is all we need. You know
what the effect of the Vreeland-Aldrich measure was last year, and
you know how it affected us. It is an American maxim that people
do not want their money as long as they can get it, and if some measure could be passed by Congress which would make it possible for Savings Banks to realize upon their assets—of course there would be a
limit to the amount to be required to be paid into the Reserve Bank—
I think it is a move in the right direction and I am in favor of it, and
I will certainly consent to the withdrawal of the resolution.
Turn PRESIDENT: The motion is to withdraw the present resolution
and refer it back to the Committee.
refer it to the ComMR. HAWLEY: I made the motion which was to
mittee.
Tun PRESIDENT: , You mean to our own Committee on Law and Segregation, is that it?
that ComMR. ROBINSON : With full power to take whatever steps
mittee thinks wise.
MR. HAWLEY: I will consent to that.
has beep
TILE PRESIDENT: You have all heard the motion, that it
consented to, that this motion be withdrawn and the whole matter
referred to the Committee. Is that your pleasure, that the motion pass
and that the gentleman who made the resolution consents that it be
withdrawn and referred to the Committee on Law and Segregation? Do
you consent to that?
Ma. Dirixtris: For immediate action?
immediate action with
THE PRESIDENT: I do not see how we can get
is all that
power to act. If they can get it to the Committee that
will be accomplished.
MR. Diructris: What good is it then?
from now.
THE PRESIDENT: It Would come up a year
come up a year from
MR. DINKINS: Do I understand that it would
now? I do not think we should postpone action.
the SavMa. MeNVILLtem : Do I understand it, Mr. President, that
ings Banks are absolutely barred from joining the Federal Reserve
System should they desire to do so?
of the fact that they have no
THE PRESIDENT: Absolutely, because
portion
capital stock, and consequently cannot subscribe a certain
of their capital stock to the Federal Reserve stock.
the
Ma. McWitumt: Do I also understand, Mr. President, that, in
commercial
main, Savings Banks are barred from the purchase of
paper?
and also in
Tim PRESIDENT: That is absolutely so in our State,
other States.
it seems to me this resoluMR. MeWittlem : Naturally, therefore,
banks in the East which
tion is an important matter to mutual savings
Federal Reare, as I have it, barred from the privilege of joining the
of
serve Board if they so wish, and also barred from the purchasing
if
commercial paper, which we in the West are entitled to purchase
we desire.
THE PRESIDENT: Yes.
of
Ma. MoWnztem: And it seems to me that we should not dispose
subject to
this matter without giving consideration to a very important
personally
mutual savings banks in the East, and therefore I would
pigeonhole the•
like to see some action taken upon it which would not
it up at this Conmatter another year, but would, if possible, bring
vention.
results
Mn. LERSNER: It seems to me we have gotten most excellent
namely, the
in the form of legislation through a Special Committee,
myself can see no reason
Committee on Postal Savings Legislation. I
same way as the Comwhy this Committee could not proceed in the
possibly obtain some
mittee on Postal Legislation has proceeded and
machinery which has been
definite results without going through the
referred to.
taken. As Mr. Smith
Tun PRESIDENT: I think that point is well
the passage of a law like
has been saying, I think the possibility of
and the Association was
this, even if we agreed upon it unanimously
It seems to me,
unanimous here concerning it, is somewhat remote.
that it would be wise
if you will pardon me, speaking from the Chair,
matter up with the Fedto refer it to a Committee who may take the
out some amendments
eral Reserve Board and see if they could thresh
and acceptable to us, and
to the law which would be acceptable to them
about delay. As a
relieve the situation. Something has been said
think it makes any
matter of fact, in that kind of a matter I do not
is absolutely impossible
difference, a delay of six months or a year. It
exactly what we want.
now, it seems to me, that we can get through
on Law and
I think if the matter were referred to the Committee




Segregation, that they have power to confer with the authorities on
the Federal Reserve. Board and see if there is some possible way to
arrive at a solution and relieve the situation. That, it seems to me,
would go further and accomplish better results. I may say I think
this paper has accomplished all it has really intended to do, and that
is to stir up the question In your minds and set you to thinking about
it, so we can all think about it; and it takes the course intended,
being referred back to the Committee, and the Committee can and no
doubt will be glad to receive suggestions from us which will bear upon
the subject, and if they go about the matter as our Committee they
will be more likely to accomplish some good result.
Mn. LERSNER: From all that has been said upon the subject, I gather
that we are not fully agreed upon the measure being presented to the
authorities.
are not.
Then why refer it to a Committee and ask them to do
something that we are not agreed upon?
Mn. SMITH, Utah: May I submit this? I think there is a chance, as
I said a while ago, that the main body will pass the resolution, agreeing to ask for legislation. Then we have everything to gain and nothing to lose. If we make some step forward we are that much better
off. As far as I am concerned, I think we have made more progress
heze and I am not in favor of abandoning it. I would rather go ahead
has centered
a little. Isn't this true, that the diversity of opinion
are
around the paragraph as to the character of the securities which
to be asked the Federal Board to take, in this short paragraph that
and character
currency may be obtained upon security of the kind
described in the legislative measure?
THE PRESIDENT: We
Mn. LERSNER:

THE PRESIDENT:

Yes.

on the exact
Mn. SMITH, Utah: Then we probably could not agree
this, but if you
reformation of that paragraph in so large a body as
some progress.
referred it to a committee I think that would be making
as agreed
I think if it is referred to a committee with power to act
it would be
beforehand, that they should amend that paragraph so that
economists
sure of acceptance and would appeal to the best political
would be
and to our financial men whose ideas are correct, so that it
express our
accessible to everybody. In other words, may we not
this paraopinion and give a direction to the Committee as to how
not
graph should be amended, and then I do not see why they could
like to see
thresh it into shape. The other part is good, except I would
the word "National" stricken out, as I said a while ago.
Ting PRESIDENT: The object of that is this. In the East, we have
bonds,
in New York and several other States bought bonds, long-time
any
such as approved under the Vreeland-Aldrich Act; we haven't
the prescommercial paper. Any bank having commercial paper under
to get
ent law can make arrangements with its own intermediate bank
of opening
a discount; and this whole discussion was for the purpose
commercial, paper, and under the
a way where the bank that had no
come within
law of the State could not invest therein, might possibly
It is a hard proporeach of the benefits of the Federal Reserve Act.
are so different
sition to put up for the whole country, when our laws
what makes it imand the investments are so different; and that is
kind.
possible to thresh out a thing of this kind in a meeting of this
we are asking to do something
MR. McVey: Do L understand that
that the law does not permit a Regional Bank to do?
THE PRESIDENT:

Yes.

that.
McVer : It seems to me we can't accomplish anything like
legislation.
It seems to me better to secure that authority through
can act
Tug PRESIDENT: I think that will be eventually done if we
on this resolution that way.
some light on the subject if
MR. LERSNER: I think it might throw
the members.
Mr. Edwards would relate his conversation with some of
to a committee with power
MR. SMITH, Utah: I think its reference
way to accomplish
to draft such a bill as required might be a better
think
the idea by the use of proper language in this resolution, and I
it is a step forward to get a committee of that kind to act upon this
matter, and if they do not do anything for a year, they can bring it
In then with their recommendation.
we have—I think we are
THE PRESIDENT: That is my idea, that
biting off more than we can macerate.
Mn. LERSNER: It can't be done.
THE PRESIDENT: It can't be did.
MR. PETER: I think that this ought to be referred to a committee
next
to be studied for a year, and to be brought before the Convention
year with it outlined in better shape.
be
Tits PRESIDENT: There ought to be a motion that this matter
referred to a committee appointed to study the matter.
Ma. TETER: Have you a standing committee?
Tits PRESIDENT: We have a standing committee.
motions before
MR. PETER: As an amendment and substitute to all
be referred to a
us upon this subject, I now move that this question
n as necescommittee for such correspondence and study and investigatio
a year hence.
sary, with instructions to report back to the conference
: I second the motion, all of the several motions.
Mn.
subject and conditions relating
THE PRESIDENT: For a study of this
thereto, with instructions to report back at the Convention next year?
In the meantime, the committee should do something
,MR. HAWLEY
in Congress, if it can, that should not be prohibited.
means.
THE PRESIDENT: Oh, yes, by all
MR. HAWLEY: I think you had better leave it as you did in the
the matter attention and the result was
Postal Committee. They gave
good as possible, and let us give the committee as much power as
possible.
Mn. BleWILLtem: I think so.
Mn, TETER: I made the motion run to what seems to be—I don't mean
to say upon this subject, but on the question of this new amendment
which would
to the Constitution of the American Bankers' Association,
;
Indicate that we will not have a right to do that between conventions
Of course, I am anticipating
that is why I made the motion as I did.
Mn.

SAVINGS BANK SECTION.
the passing of the amendment to the Constitution, and if it is defeated
then we will have the right.
THE PRESIDENT: That is, under the new proposed amendment, taking
away from the Sections the power to do anything without going to see
the main body?
Mn. TETER: Yes; and I made the motion in accordance with 'the
spirit of that resolution, and that may simply be tentatively accepted.
If that amendment don't go through, this committee can do what Mr.
Hawley suggests; but if that amendment goes through, as I understand
it, we cannot appear in any legislative place until what we have proposed has been apnroved by the Executive Council and the Convention
as a whole. That is right; I am entirely acceptable to that.
MR. DINKINs: It seems to me our Law Committee ought to agree
on some kind of action and formulate some kind of a document which
would be satisfactory to the savings bank people, and then let them
refer to the Regional Board to see that it is satisfactory to them.
THE PRESIDENT: The difficulty there would be that the committee,
with the best intentions in the world, might agree upon some amendment that they thought would be acceptable to the sectional membership, and then come back to the session and find it was not agreeable
to them at all. Now it seems to me the best way to do this thing is
to refer it to this committee, they to study it and refer back to us a
year hence the result of their deliberations. That would appear to me
to be the best method to pursue.
Ma. MoWimum: I would like to otter an amendment. I am heartily
in accord with the motion, but I would like to add the word "power"
—if the Board is limited by the power they liave they could not do
much, but the idea is to let them go as far as they can.
Tile PRESIDENT: You have all heard the amendment and we have to
put the amendment to a vote unless Mr. Teter accepts it.
Mn. Hemet: That was the original motion. Or what was it?
THE PRESIDENT: That it be referred to a committee with power.
Mn. HAwLEy: With whatever power it finds itself in possession of?
THE PRESIDENT: Well, I don't know as we can put it that way.
Mn, Nom: I don't think that ought to be.
THE PRESIDENT: Well, to the committee with power?
Ma. Nom: Yes.
Tim PRESIDENT: The motion will be put to vote.
(Motion put to vote. Carried.)
Ma. Nom : What position does that leave the resolution in before
the main body?
THE PRESIDENT: All we can do is to refer to our committee.
Ma. NOEL: Pardon me.
THE PRESIDENT: Referred to our committee. It is also provided in
our by-laws that if it passes here it may pass there; but not having
been passed here, it does not pass there. And then we will have to
withdraw from them entirely.
Mn. HAwrmr: The Convention has never seen the resolution and
sorneone will have to submit that to this Convention.
•
THE PRESIDENT: The gentleman instrumental in presenting it must
give the customary fifteen days' notice.
Mn. limns': We can withdraw it.
Ting PRESIDENT: The party who is responsible for it will see that
they are also responsible for its withdrawal. It was presented to them,
but it might possibly go over them, and even then we cannot go back
over fifteen days; so those responsible for it will know of how this
matter was handled and that it was presented under the law. The law
Is a peculiar thing when we consider it.
MR. LERsNER: In the midst of this discussion, I think this has been
lost sight of, that Mr. Edwards' paper be received and spread upon
our minutes; is a matter that has not been taken care of in the discussion of the law.
THE PRESIDENT: Mr. Edwards' paper will be received and placed on
file and placed upon the minutes of the session. Now what is your
pleasure, gentlemen?
(Motion put to vote and carried.)
NOMINATIONS AND ELECTIONS.
Tun PRESIDENT: The next business before this session is the report of the Nominating Committee, nominating the officers of this Section for the ensuing year, the committee having been appointed yesterday. I, will state that the appointment of a Nominating Committee does
not prevent any member from presenting the name of any other person
whom he desires to place in nomination for any office. The action of
the Nominating Committee is not in any way final, and I am merely
making a suggestion. Mr. McWilliams, the Chairman of the Committee,
now will make the report.
SEATTLE, SEPTEMBER 7, 1915.
Mr. President and Members of the &Wings Bank Section:
Owing to the wealth of excellent material to be found in the Savings
Bank Section, your Nominating Committee was confronted by a most
difficult problem.
However, after seeking much advice and after earnest consideration—
having only the best interests of the Savings Bank Section in mind—
we have the honor to place in nomination the following gentlemen:
For President, N. F. Hawley, Treasurer Farmers & Mechanics Savings
Bank, Minneapolis, Minn.
For Vice-President, Geo. E. Edwards, President Dollar Savings Bank,
New York City.
For Members of the Executive Committee to serve three years: J. H.
Edwards, Vice-President Dexter Horton Trust and Savings Bank,
Seattle, Wash.; H. P. Beckwith, Vice-President Northern Savings
Bank, Fargo, N. D.; James Dinkins, Vice-President Jefferson Commercial & Savings Bank, Gretna, La.
Respectfully submitted,
MR. LERSNER: I move that the nominations be closed.
(Seconded by Mr. Hawley; motion put to vote and carried.)
(Nominations declared closed by the President.)




189

MR. LERSNER: I move that the Secretary be directed to deposit a
ballot for the names nominated by the Nominating Committee.

(Motion duly seconded, and on being put to vote was declared carried.)
THE SECRETARY: I hereby cast one ballot for the names set forth
in the Nominating Committee's report.
THE PRESIDENT: Have you cast the bollot?
THE SECRETARY: I hereby cast a bollot for N. F. Hawley as Presiden, Mr. George E. Edwards as Vice-President, Mr. J. H. Edwards
and Mr. H. P. Beckwith and Mr. Dinkins as members of the Executive
Committee to serve three years.
THE PRESIDENT (Mr. Knox): I congratulate you upon your eleetien,
gentlemen. Mr. Hawley will now please step forward. Mr. Hawley
came forward.)
RETIRING PRESIDENT KNOX: It will be my greatest pleasure to pin
upon your bosom the badge of your office. It has been a pleasure, Mr.
Hawley, to act with you during these past three or four years we
have been associated together; and I might say, not only to you but
to the members of this Section, that you have been foremost in all
the good work that the Section has undertaken; and that you have been
wise in counsel, that you have been calm and deliberate in your judgment, and that you are a very worthy successor to a long line of
Presidents, of whom I am the last and the least.
INCOMING PRESIDENT HAwLicv: I find it a little embarrassing to rob
you of the humor with which you have been entertained by the retiring President, and I beg to tell you that you will find that absent
in the coming year. I have the honor to present Mr. Edwards: Will
you come forward, Mr. Edwards?
(Mr. Edwards comes forward.)
Ma. ILiwney: Mr. Edwards, I have the honor of presenting to you
the insignia of the vice-presidency of this Convention. In doing this,
I am going to promise you more work than I have done in the past
year, as much of that was absorbed by the retiring President and previous Vice-President, much to the benefit of the Association. But I
shall warn you to prepare yourself for some work that will aid much
the next Convention and as much as done by any Vice-President.
MR. EDWARDs: I thank you very much.
RETIRING PRESIDENT KNOX: I beg leave to usurp the functions of
your office for the moment while I perform another pleasant duty.
PRESIDENT HAWLEY: You may be President pro tern.
MR. KNox: I would like Mr. McWilliam to be so good as to step
forward.
(Mr. McWilliam comes forward.)
Mu. KNOX: Mr. McWilliam has done great work for this Section in
the years he has been our Secretary. It was a great grief to us when
he resigned, but it was a great pleasure to us that he should have
gone to a higher sphere of larger activity. Our grief at his resignation has been considerably assuaged by the fact that we have found in
Mr. Harrison a very worthy successor, and as the years go on he
may attain to something like the efficiency that Mr. McWilliam possessed. (Laughter.) He is young and he has not had the experience, but we .know very well that as the years roll by he will almost
reach the same altitude as our friend McWilliam. (Laughter.) We
have as a slight expression of our regard for the years that Mr.
McWilliam served us so well and faithfully as Secretary, to pin upon
his bosom a Secretary's badge. I do not believe he has one. We want
him to keep this and remember the days he worked so hard and got
so little from the Section. (Laughter.)
MR. MoWintrem: Mr. President, this is so sudden that I feel a good
deal like the fellow who was drawing a load of grain to town and had
to go up a steep hill and there was a hole in the wagon, and by the
time he got to the top of the hill he had lost all the grain; and Just
as he got over the top he got stuck in a naudhole; and he had not
noticed the loss of the grain. But when he got stuck in the mudhole he turned around to throw off his lead, and seeing nothing there
he exclaimed, "My God, how am I stuck in the mud with nothing
to throw out!" (Laughter.)
That is the way I feel, but I take exception to Mr. Knox's remark.
In fact, he has made me feel very much embarrassed here, but I take
exception to one remark that I did so much and got so little while I
served the Savings Bank Section. I can never pay you, gentlemen, for
all that I received from the Savings Bank Section. I learned from
you, gentlemen, more than I can ever repay; at least I had the opportunity, and it was my good fortune to meet men from all parts of the,
country, men of character and strength, that renewed my faith in
human nature and made me know that they were manly men, from
all parts of the country, who had some other interest in life besides
merely making money. My work placed me in touch with the gentlemen who have so kindly taken me into their midst. And so, altogether, I believe the debt will always be on my side, and if any of
you come to Los Angeles, I am sure Mr. McVay will back me up when
I say we will do all we can to make you happy while there.
Ma. KNOX: Now, I regret it very much, gentlemen, but in my eagerness to pin. that badge on Mr. McWilliam, when I saw him going out
the door, I was to get him before he got away, and I forgot that Mr.
Hawley had not presented Mr. Edwards to you in due and proper
form and had not given him any chance to say a word to the gentlemen of the Convention. Mr. Edwards, gentlemen. It gives me very
great pleasure to have you here, and I very much appreciate what you
have done this afternoon.
Ma. EDwARDs: Gentlemen of the Convention. I appreciate the honor
that you have bestowed upon me in this Convention. When Mr. Hawley, the President, refers to the work he proposes we should do in
the
corning year, being geographically located in close proximity to the
general offices of the Association, because I am in New York, I shall
be able to render, perhaps, more service as an assistant to the Secretary than if were located in some other part of the nation. However, it will be my effort during the period I occupy the position to do

BANKERS' CON VENTION.

190

all that I can for the savings bank institutions of this great country.
I thank you.
THE PRESIDENT (Mr. Hawley): Is there any further business to come
before the Section? If not, I have been requested by the Secretary to
announce that there will be a meeting of the Executive Committee immediately upon the adjournment of this Section. If there is no further
business
Ma. DussiNs: I think it will not be out of place to express the
gratification of this Section and their appreciation for the able manner in which the retiring President has conducted the affairs of his
office in this Section, and I think we should indicate to him our gratitude and appreciation of the work that he has done for the Section.
I move, therefore, that we tender an expression of appreciation and
gratitude of this Sectioni to Mr. Knox.
(Motion was seconded by several members and was thereupon put
to vote.)

THE PRESIDENT: Are there any remarks? If not, all those in favor
will say aye.
(The motion was declared unanimously carried by the President.)
Ma. Dimciris: I would like, along this line, to offer a motion that
it be the sense of this Convention that we tender to the bankers of
Seattle and their associates, and to the Reverend A. W. Leonard and
the gentlemen who addressed us here this morning, bur appreciation of
their efforts in our behalf that have made this Convention such a success. In putting that motion I shall ask for a rising vote.
(The motion was seconded by several members. Motion put to vote
and carried by a standing vote and declared unanimously carried.)
THE PRESIDENT: The motion is unanimously carried and the Secretary will be requested to give the thanks of this Convention to Seattle
bankers for their entertainment in our behalf. The meeting will now
be adjourned.
Adjournment.

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