Full text of The Northwestern Banker : March 1931, 36th Year, Number 524

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C H A R L E S N. STAN TON
President, Stock Yards National Bank and
Stock Yards Trust & Savings Bank, Chicago

A N N U A L IN V E S T M E N T E D IT IO N
( P A G E S 23 T O 71)

■

A Correspondent Service
developed from
69 years experience

FOREMAN-STATE NATIONAL BANK
Foreman -State Trust A nd Savings Ban k


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33 NORTH LASALLE STREET

N o rth w e s te rn B an k er
Des Moines

The Oldest Financial Journal West of the Mississippi
M A R C H , 1931

Number 524

36th Year

Just Between Us
“ T H E ID E S O F M A R C H ”
Comes the springtime— and what
a time it is in the life of the country
banker. Farmers and country folk
move, March first, things are astir,
and Mother Earth begins to awaken
from her winter sleep which means
a new crop soon.
Speaking of moving, Mr. Macy,
perpetual humorist, and country
banker, lkewise has experienced
that Ides of March feeling.
He
tells about it on page 16 of this
issue.
Entitled, “ W e ll-W e ll-W e llIt’s Moving Tim e,” it brings you a
smile for the month.
Be sure to
read it.
O U R S P E C IA L IS S U E
This issue for March is the annual
Investment Edition of the N O R T H ­
W ESTERN
BANKER.
Begin­
ning many years ago we began pub­
lication of such a number annually,
believing that the importance of
proper bank investments in every
banking institution warranted it.
W e feel we were not mistaken.
On the contrary, the importance of
not only bank investments, but the
need of the public for more and bet­
ter investment advice, has made it
necessary for the banker to know
more and more about investments of
all kinds.
W e believe the reader will find
this issue fully up to the standards
of previous investment editions.
Only writers and financial authori­
ties of outstanding ability have been
asked to contribute to this number.
W e recommend every article to the
reader knowing he will find them in­
formative, and educational.

C L IF F O R D DE PU Y
Publisher
GER ALD A. SN ID E R
Associate Publisher

In This Issue

♦

Across from the Publisher

d

Frontispiece, “ Madam Le Brun and Daughter”

8

Evolution of U. S. Investments

9

By Max Winkler

Character Sketch, Charles N. Stanton

10

It’s Moving Time Again”

11

By Roscoe Macy

Cartoons of the Month

12

The Bond Outlook for 1931

13

By H. G. Parker

Farms and Farming

14

News and Views

20

By Clifford De Puy

SPECIAL INVESTMENT SECTION

^

♦

Insurance

73

Bankers Wants

77

South Dakota News

78

Nebraska News

80

Minnesota News

84

North Dakota News

87

Iowa News

88

Index to Advertisers

•

ONE

OF

TH E

100

•

DeBuy Banking Publications

R. W . M O O R H E A D
Editor

W M . H. M AAS
Vice President
1st National Bk. Bldg.
Chicago
F R A N K P. SYM S
Vice President
25 W est 45th Street
New York

L. D. V A N D O R AN
Associate Editor

F. S. L E W IS
Special Representative
840 Lbr. Ex. Bldg.
Minneapolis, Minn.

M em ber, Audit Bureau of Circulations
M em ber,
Financial Advertisers Association

23-71

OMAHA
MINNEAPOLIS

MILWAUKEE

Northwestern Banker, published monthly by the DePuy Publishing Company, Inc., at 555 7th Street, Des Moines, Iowa.
Subscription, 50c per copy, $3,00 per year. Entered as second-class matter at the Des Moines post office. Copyright, 1931.


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Northwestern Banker March 1931

4

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6

The Investment Trust
i d e a is growing in
America.
It had its original inception in England and
Scotland and Investment Trusts in those countries
are of long standing and have a most excellent
record behind them.
In this issue of the N o r t h w e s t e r n B a n k e r is a
survey of the attitude of middle-western bankers on
this important subject.
It is interesting to observe that 84 per cent of
those replying to our questionnaire expressed the
opinion that the Investment Trust idea is sound and
in the opinion of 72 per cent, there was an increas­
ing public interest in Investment Trust securities.
The problem which now confronts bankers is to
analyze carefully the various investment trust com­
panies ; their management and their method of
operation.
An important item to watch is the item of
“ loading” which covers the expense of management
of Investment Trusts.
Obviously there will be some trusts started whose
management will not be sound and as a result they
will fall by the wayside.
However, the Investment Trust whose board of
directors and officers are composed of men of high
standing and whose articles of incorporation are
such that the investor is protected in every way
possible, should make an enviable record of profits
for their stockholders.
The big fundamental idea back of Investment
Trusts is that they represent diversification in the
leading industries of America.
The individual Investment Trust unit which may
sell for anywhere from $6 to $15 per share, repre­
sents a composite of certain leading industries in the
country and this is the great value of Investment
Trusts from the investment angle.

The Investment
Trust Idea


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That Investment Trusts are here to stay goes
without saying. That they are now growing in
public favor our survey also indicates, but whether
they continue in this favorable position in the minds
of the public and in the minds of the bankers, will
depend entirely upon the success which trusts have
during the next year or so under present business
and financial conditions.
The twelfth annual mid­
Growth o f the
winter conference of the
Trust Business Trust Company Division
of the American Bankers Association was held last
month in New York.
The figures presented at that gathering indicate
that the trust business is growing very rapidly in
the United States.
A recent survey shows that during 1930 over 560
institutions reported that they had been appointed
trustee under living trust agreement in 9,092 cases,
whereas the year before they had been appointed
in 6,295 cases and that the aggregate value of prop­
erties received in 1930 was $1,013,769,436, com­
pared with $603,926,218 in 1929, this being an
increase of 44 per cent in the number of appoint­
ments and an increase of 67 per cent in the value
of properties in new living trusts.
This would be an indication that men and women
who have become discouraged with their own in­
vestment problems, are more and more turning to
trust companies to relieve them of their investment
problems,
If this is true, as the figures would indicate, it
is more vitally necessary than ever that managers
of trust departments and officers who are re­
sponsible for handling these funds, must constantly
increase their knowledge of investments and of
markets in order to successfully handle the vast
sums which are being entrusted to them.

7

Also of the $108,000,000,000 in life insurance
now outstanding, more than $4,000,000,000 is pay­
able to trust companies and banks as trustees to be
administered in accordance with the terms of life
insurance trust agreements.
With greater and greater responsibilities being
added to the trust departments of institutions, the
burden of satisfactorily handling these vast sums
will constantly increase with the years and we are
confident that the financial institutions of America
will assume this responsibility willingly and sat­
isfactorily.

Cooperating W ith
r'i
i
,
Correspondents

In testifying before
the subcommittee of

the Senate Ballking

and Currency Committee, Melvin A. Traylor, presi­
dent of the First National Bank of Chicago, said
that lie was opposed to any plan to force banks
into the Federal Reserve System because he be­
lieved that there were many problems which the
small unit bank has to study which could not be
coordinated with the requirements set up for the
Federal Reserve members.
Certainly if any one thing has proved itself in
American banking it is the fact that the larger
banks which have a number of correspondent banks
throughout the country, have given them valuable
service, valuable suggestions and valuable coopera­
tion in the past, and there is no reason why this
same high degree of service will not be continued in
the future.
Mr. Traylor also believes that no bank owned
outside a particular state should operate branches
in it.

Independent Banking
Should Be Encouraged

John E Sul!l>' d1?’. Stra t e

Banking Com­
missioner of New Hampshire, opposes branch and
chain banks and believes that “ The control of a
great chain of banks is too large a responsibility to
be shouldered by one man or one clique. It pre­
sumes intellectual infallibility and moral perfec­
tion. I believe that independent banks; banks pri­
vately owned; banks closely in touch with the needs
and resources of their own communities are the
banks which should be encouraged. Their president
and their trustees become men of shrewd and pene­
trating judgment. One man here or one man there
may think wrong, but the majority think right.
That makes for the public good.”
The commissioner believes that diversification of
brains is just as advantageous in the banking busi­
ness as diversification of investments.
Nothing certainly could be more hazardous to the


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future of the United States than to have a few men
or a group of men control the banking resources of
the nation.
Mrs. Lorraine L.
Ferrer, president
of the Association
of Chicago Bank AVomen, has presented figures
which indicate that about 7,000 women are filling
positions as executives and managers in banks
throughout the country.
The three qualifications which make women suc­
cessful in banking, according to Mrs. Ferrer, are :
first, they must like people ; second, they must
think mathematically ; and third, they must be able
to subordinate themselves to their organizations.
That women have been a real success in banks is
the testimony of hundreds of banking officials
throughout the country who rely extensively upon
their women associates in managing the affairs of
their institutions.
It is also interesting to observe that women own
as high as 50 per cent or more of the stock of our
great corporations and that 40 per cent of the in­
vestment house customers are women.

W om en in Banking
and Business

The Organized
•

in o ri

y

If y °u think the organized minority in political
life t|oesnq yield tremen­

dous power, just consider the recent Bonus Loan
bill which was passed over the President’s veto
simply because an organized minority did its effec­
tive work with senators and congressmen.
In spite of the fact that the United States Treas­
ury was in no position to assume this obligation and
in addition to that the United States was just be­
ginning to emerge from a very severe business de­
pression, congressmen who were more interested
in votes than they are in economics, passed this un­
necessary piece of legislation.

Dividends From
Police

We have advocated
in these columns be­
fore the advantage of
a well organized state police. Recent figures, com­
paring eastern and western states, show that there
were 20 bank holdups in seven eastern states with
state-wide police protection, as compared with 164
similar attacks upon banks in five central and far
western states where they do not have the advan­
tage of speedy coordinated action of state-wide po­
lice. Certainly these figures indicate that state
police represent a valuable asset to the community
and if well trained and organized, should produce
an operating profit for the state in which they are
located.

Northwestern Banker March 1931

8

“ MADAM LE BRUN AND DAUGHTER”
One of the most noted of modern portrait studies is that of Madam Le Brun and her daughter done by
Madam Le Brun herself. It now hangs in the Louvre Gallery, Paris, where it is universally admired by
thousands who view it every year.

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Red Oak, Iowa

9
“ W e have given Latin America a political Monroe doctrine— Is not the
present most opportune to give our southern neighbors an economic Monroe
doctrine? ”

Evolution of U. S. Investments
in

L A T IN A M E R IC A

W

R ITIN G for a leading New York
upon to discuss the inferiority o f the
By M AX WINKLER
daily, a Latin American states­
Latin
race. Similarly, to the South Amer­
Vice President, Bertron, Griscom & Co., Inc.
man and economist informs Ins
icans, we were still something of a myth
readers that, in the course o f the past
as recently as 1906, when Uncle Sam made
hundred years, there have been in Latin
his dignified and impressive debut at Rio
neighbors seek to accomplish it by the
America no less than 437 revolutions.
de Janeiro in the person o f his distin­
bullet.
This is at the rate o f almost M/2 revolu­
guished son, Elihu Root, who told South
Much at Stake
tions a year, and is equivalent to about
America: “ We wish for no victories but
22 revolutions for each o f the 20 Latin
RAZIL was the latest addition to the
those o f peace; fo r no territory except our
American republics.
To be sure, not
revolutionary or rebellious Latin
own; for no sovereignty except the sover­
every one deserves to be termed a revo­
American countries, having been preceded
eignty over ourselves.”
lution, because the majority o f these soby Argentina, Bolivia arid Peru. Our
Until 1919, the British pound sterling
called rebellions would, if they occurred
southern neighbors have not as yet learned
was the only emblem o f credit and currency
in the United States, be recorded as elec­
to appreciate that it is much easier to let
value for all those nations. Their good
tions.
loose the beast than to lasso it. We, on
relations with London, where a govern­
It has been maintained that much en­
the other hand, are obliged to give serious
ment in need o f money could be sure o f a
couragement was afforded to disgruntled
consideration to future business relations
square deal, remained steadfast through
sections in Central and South America
with our neighbors and to the question as
many financial tribulations, and Paris was
when Washington, as well as leading
to how safe are the enormous funds al­
the Mecca for all educated men and
European powers, extended speedy rec­ ready invested in Latin America. Doing,
women.
ognition to the revolution­
Three Phases
ary governments estab­
lished
in Argentina,
"T h e strangest and perhaps, most regrettable thing, is the
N A N A L Y S IS o f the
Bolivia and Peru. The en­
economic evolution of
complete silence on the part of all those American bankers
couragement was greatly
Latin America, and our
u h o have underwritten and distributed American bonds. Is
increased when it was
economic and financial re­
it true that a banker s responsibility ceases with the sale of
learned that, no sooner had
lations with the various
an issue?
Would it not be advisable if, from responsible
Uribura
displaced
IriLatin American republics,
quarters, a reassuring statement were issued occasionally, re­
goven as the ruler o f A r­
reveals t h r e e
distinct
minding the investing public that countries, even though they
gentina, American bankers
phases :
lie south of the Rio Grande do not, as a rule, withhold pay­
advanced a $50,000,000
1.
The prelimin
ment m respect of contractual obligations?”
loan to the Argentine Re­
velopment stage, extending
public.
Whether or not
to 1880 and largely politi­
Rio Grande do Sul would have postponed
under normal conditions, an annual busi­
cal in its aspects. The wars for national
its long-planned rebellion against the fed ­ ness o f about $2,000,000,000, and having
independence gave the first occasions for
eral government o f Brazil, had it not
at stake, in one form or another, more
borrowing in foreign markets. Chile and
been for the policy pursued by our gov­
than $5,500,000,000, it is obvious that
Colombia contracted the first public loans
ernment, is open to argument.
every one of our 130,000,000 people is in 1822. The revolutionary governments
Since time immemorial, there have been
affected by whatever drastic changes our
o f Peru and Central America followed.
those who inclined towards blaming the
Latin neighbors may decide upon. The All these loans were underwritten and sold
government for whatever difficulties beset
United States can no longer view with
in London, and the terms were rather
the nation. They expect, fo r example, the
equanimity economic disturbances in the onerous. The net proceeds were used for
party in power to provide employment
sister republics south of the Rio Grande.
munitions and other Avar materials, and
fo r everyone, to create profitable orders
Less than two decades ago, the over­
only very small amounts o f actual money
to industry, to regulate the inexorable
throw o f a government in Argentina; a reached the Latin American countries.
economic laws o f supply and demand, and
revolution in Peru or Bolivia ; a general
In the forties and fifties o f the past
to bring about advances in the price o f
strike in Uruguay; a financial crisis in
century, AA^e Avitness the beginnings o f do­
commodities and stocks. Failing to do
Colombia; civil war in Brazil— would per­
mestic industry and the investment o f p ri­
these things, the government is accused
haps have given rise to heated discussions
vate capital from Europe in mines and
o f inertia and negligence, and while we,
in lecture halls or classrooms. A Nordic
commercial enterprises.
Later, loans
in the United States, attempt to change
congressman or senator o f the old school
Avere floated largely for the purpose o f re­
conditions by the ballot, our southern
Avould, in all likelihood, have felt called
funding or adjusting earlier obligations.

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B

A

10

The Head oi the Stock Yards
National, Chicaso
(See Cover Photo)

HP HE

Union Stockyards, in Chicago, are an “ attraction” for

visitors from all parts of the world.

Royalty and layman, rich

and poor, come from far distant points to see the world’s greatest
plant of its kind.

Immediately, as you enter, you see the im ­

posing structure and replica of the original Independence Hall,
which houses the Stock Yards JNational Bank, largest stockyards
bank in the country.
H P HERE is a human sort of atmosphere felt immediately as you
enter this institution.

There are no bars or tellers cages.

Every officer is “ out in front” and at once accessible.

The gentle­

man whose title is president of this bank and its affiliate— The
Stock Yards Trust & Savings Bank— is Charles N. Stanton, whose
likeness is shown on the cover page of this issue of TH E N O R T H ­
W E ST E R N B A N K E R .
O N SE R V A T IV E , but friendly to the “ Nth” degree, in his deal­

C

ings with customers and friends of the institution, President

Stanton has a wide following and retains a loyalty among his as­
sociates which is envied by the heads of many organizations.

Born

goods; stabilization o f currencies; advanc­
ing public revenues; and a tendency to in­
crease public debts for purposes o f im­
provement. It was in the course o f this
period that Latin America Avas brought
into somewhat closer contact with the eco­
nomic systems o f Europe and the United
States, especially the United States. No
longer a borrowing or pioneer country,
but one Avith surplus Avealth and money to
lend, the United States became the lead­
ing factor in the economic life o f her
southern neighbors.
The first introduction o f the United
States dollar on a someAvhat large scale
Avas during the war, when American in­
dustry made a determined bid for the trade
Avhich Germany had built up with South
America. Our merchants Avere inexperi­
enced, and their credit negotiations did
little to help the creation o f good relations.
Therefore, after the Avar, the tendency
Avas to look to Europe for needful im­
ports.

The “ norteamericano” Avas no longer a
myth. He consumed huge quantities of
coffee, bananas, manganese, etc., and sup­
plied ingenious farming devices and cheap
automobiles which did as good service as
the expensive cars from Europe. But he
Avas not popular because his ways d if­
fered from all precedents, and he Avas
suspected o f contempt fo r those whom he
arrogantly termed “ Latin Americans.”

in 1874, his first job after finishing his education, was that of a
bank teller at the age of twenty-two years.

old Royal Trust Company and at different times was affiliated
with the Cook County State Savings Bank and the West Side Trust
& Savings Bank.

H

E W E N T to the “ Yards” in October, 1909, and three months
later was elected president of The Stock Yards Trust & Sav­

ings Bank.

A

He started with the

In 1927 he was elected president of the Stock Yards

National Bank.

T

New Era

HEN Avas born a wonderful neAV era

in which dollars— millions o f dollars—
tens and hundreds o f millions— were o f­
fered to the governments and industries o f
the southern nations by that same in­
comprehensible “ norteamericano”
Avho,
not so many years back, Avould bicker over
ninety days’ credit on a hundred dollars’
Avorth o f merchandise.

Respect and gratitude filled the hearts
o f Brazilians, Argentinians, Chileans,
Peruvians, and the rest, fo r their mani­
is a member of the South Shore Country Club, Olympia Fields
festation o f good will and confidence. For
Country Club. Bankers Club of Chicago and the Saddle and Sirloin
eight years, the golden stream flowed in.
Club.
Interest rates gradually diminished. O f­
fering prices o f bonds greAV more favor­
able fo r the borrowers. Agriculture and
industry in South America boomed.
Roads and hydroelectric installations
the stabilization of political and financial
Having borrowed on ruinous terms, bonds
grew
apace.
conditions.
Loans
to
Latin
American
were destined a priori to go into default.
Thousands o f young men from those
governments were offered in London and
Had lenders accorded more equitable
countries came here to learn our language
Paris, and, to a less extent, in Berlin.
treatment to borrowers, it is more than
and commercial methods. Our engineers
The development o f our southern neigh­
probable that Latin American defaults
and business experts journeyed south by
bors
during
this
period
was
almost
ex­
would not have occurred with such fre­
invitation.
Presidents o f the United
clusively under European influence. The
quency as they did throughout the sec­
States exchanged visits with the presi­
participation
o
f
the
United
States
was
ond half of the 19th century.
dents o f those republics. Good relations
2.
The second phase may be regarded still insignificant.
and mutual confidence became firmly
3.
The
third
stage,
commencing
in
1914,
as the period o f transition, extending from
established.
may be defined as the period o f applica­
1880 to the outbreak o f the W orld W ar
Then, suddenly and without warning, a
tion
o
f
scientific
and
intensive
methods
to
in 1914. This period was characterized
dreadful
thing happened. The fountain
extractive industries. This phase Avas
by industrial development on a larger
o f credit dried up. The NeAV York fo r ­
characterized
by
the
rise
o
f
local
manu­
scale, and by an increasing trade with
eign bond market, expensively organized
facturing; by a marked advance in both
Europe. It witnessed also the beginning
through years o f educational campaigns,
volume
and
value
o
f
foreign
trade;
the
o f foreign, mostly European, invest­
(Turn to page IS, please)
quickening o f the domestic interchange o f
ments, the accumulation o f wealth, and

H

IS hobby is golf.

He has two children, a boy and a girl.


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11

W ell, W ell, W ell!
"It's Moving Time Again77
By ROSCOE MACY
S T H IS is written, another First
o f March— moving time on the farm
is almost upon us. I can remem­
ber when this was a day o f hurrying and
scurrying; we’d come down to the bank
at daybreak, rush all day from here to
there and back again, and finally lock the
front door about dark, with the whole day’s
business still to be balanced up after
supper.

A

In those days, the country banker spent
a good share o f the first o f March in mak­
ing out deeds and mortgages, covering
transfers o f real estate. More recently,
the clerk o f court and the county sheriff
have been getting all this business away
from us— about our only part in the p ro­
ceedings is the matter o f releasing our
second mortgage in order to save some­
body the expense o f foreclosure on the first
lien. The sheriff gets twenty cents a mile
for driving down and serving the fore­
closure notices; we used to cover just as
much distance, in repeated trips from the
counter to the typewriter and back again,
for about the same fee, and we had to do
our travelling on foot.
A Lot of Fun
I T USED to be a lot o f fun, in the old
I days, to watch the footings mount on
March first. Even in a vest pocket bank
like ours, the individual debits on that
day would sound like the Chase National,
or the Federal Reserve— “ 000’s omitted,”
you know. This year, we’ll probably cash
two or three cream checks and sell the
barber a package o f nickels, and then,
about two in the afternoon, we’ll yawn a
couple o f times and put a sign on the door
telling any stray customer to phone the
house if we’re needed for anything before
closing time.
Not that the first day o f March has lost
all its terrors for the country banker. Not
a bit o f it. The bank that makes loans
to farm tenants on chattel mortgage se­
curity sometimes finds that around March
first, these are the quickest o f all its assets.
Too darned quick, as a matter o f fact.
Loaded in a late model truck, they can
travel as fast as sixty miles an hour, and
occasionally do. Which wouldn’t be so
bad, except for the fact that they’re usually

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travelling away from the bank, instead of
getting closer.
I ’ve often thought that someone with a
knack fo r handling animals could make a
fortune training collateral bloodhounds
fo r country banks. Dogs, you know, that
could take one sniff at the chattel mortgage
in your note case, and then go out and
tree all seven o f Bill Jones’ cows, to­
gether with their natural increase, as
specified in the mortgage.
W e’ve tried employing a “ chattel mort­
gage detective,” to “ shadow” live stock on
which we hold a lien. This fellow did
pretty well, until one day we saw a truck
drive through town with Jess Stanley’s
“ 1 muley cow, named Betsy,” as a pas­
senger. W e had a purchase price mort­
gage on Betsy, but it had been given a
long time ago— farther back than Betsy
could be expected to remember. Well, we
got our chattel detective on her trail, and
he did a pretty good job o f shadowing.
He shadowed Betsy clear to Chicago, and
finally wired us, from one o f the big pack­
ing plants, for instructions; it seems that
Betsy was disintegrating too rapidly for
him, and he was at a loss to know whether
to shadow her liver or her brisket. They

were going in opposite directions, and he
didn’t know which to follow.
Now, that’s the proposition that con­
fronts the country banker, these days,
when moving time rolls round. How shall
we keep tab on our chattel mortgage seworked out to solve this problem, but for
some reason, I am more enthusiastic over
these schemes than are my associates.
Quite a bit more. F or example, I can’t
persuade them to adopt the plan o f brand­
ing our security when we take a mortgage,
the way they do out west. I admit this
scheme wouldn’t work out so well on a
stack o f hay— or even a crib o f com. But
our directors think it has its objectionable
features, even in the case o f live stock;
they say it’s unreasonable to ask any cow
to submit to being branded, “ Mortgaged
to the Merchants-Prudential State Savings
Bank and Trust Company.” One director
estimates it would take no less than three
cows, end to end, and that even then some
o f the “ Company” might run over on to
the bull. Personally, I can’t see any harm
in that, but that’s the reception my schemes
get here at home. They’ll be sorry some
day, when they see me out branding
curity ? I have a lot o f ingenious schemes
Northwestern Banker March 1931

12
mortgaged sheep for the Federal Inter­
mediate Credit Bank.
“Not Com plain in g ’
OT that T am complaining. I ’ll soon
have my patent Mortgage Jack on
the market, leading me to financial inde­
pendence. You see, it is sometimes the
case that our mortgage is so heavy that

N

the poor mortgagor, when he gets ready
to move the first o f March, finds lie is
unable to move his property. It is too
heavily encumbered. In such cases, my
patent mortgage jack, with ratchet attach­
ment, will be sufficiently powerful to lift
at least a corner o f the mortgage, so the
property can be moved.
One o f the worries we used to have to

face on March first, was the interest pay­
ments our customers had to make to real
estate mortgage loan companies.
This
worry has now disappeared; instead of
interest, the loan companies are now ac­
cepting rent— when the tenants are able
to pay it.
Yes, business is quiet— so quiet you can
(Turn to page 19, please)

C A R T O O N S of the M O N T H

And W h a t Is This W a r About?
— Ireland in the Columbus “ Dispatch.”

Copyright, New "York Evening Journal, Inc.

The Happy Hunting Ground
— Harding in the New York “ Evening Journal.”

Another W allop
— Byck in the Brooklyn “ Times.”

Northwestern Banker February 1931

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Federal Reserve Bank of St. Louis

His Balkans
— Kirby in the New York “ World.”

13
T MIGHT just as well be
stated

frankly

at

the

affected to a very impor­
tant extent by earnings,
but should favorably affect
higher grade issues as well.
With the transitory un­
favorable influence largely eliminated, the
bond market should be able to reflect to a
much greater extent the favorable funda­
mental factors.
In so far as the money market is con­
cerned, conditions could hardly be better.
We currently have call money loaning
freely in New York at 4% per cent.
There is such a plethora o f time money
that funds are borrowable fo r four
months at from 1% to 2 per cent and
fo r six months at from 2 to 2% per cent.
The rate on ell classes o f rediscountable
paper is iioav 2 per cent, the loAvest figure
since the reserve bank Avas organized.
The rate on bankers’ acceptances eligible
fo r rediscount at the reserve bank are
1% per cent bid, 1 % per cent asked for
from 30 days to six months. Further
indicative o f the ease o f money is
the announcement just made that the
treasury department requires only 1 per
cent interest on goArernment deposits.
W ith reference to the commodity price
situation, conditions are again conspic­
uously favorable to the bond market. The
index average o f approximately 550
commodities, compiled by the United
States Bureau o f Labor statistics stood
at 78.4 at the end o f 1930, the lowest
figure since January, 1916. A t the close
o f 1929 the index at 94.2.
Taking the m atter from another angle

The Bond Outlook

beginning of this article
that to prophesy what the
bond market will do in
1931 is a hazardous undertaking. As this
is written, during the second Aveek of
February, there are several unusually
important contingencies Avhose probable
effect on bond prices it is practically im­

for 1931
By H. G. PARKER

possible to 'estimate.
On the one hand we have a funda­
mental situation that is indisputably
sound in so far as money market condi­
tions, the amount o f funds available for
investment and the commodity price sit­
uation is concerned.
These are three
factors AA'hich ordinarily have most to do
with governing the value o f sound fixed
interest bearing securities.
Opposed to these influences we have a
financial community Avhich does not ap­
pear to have fu lly recovered from a se­
vere case o f nerve shock, a Congress
which in its expiring* days has developed
as its main ambition the successful prose­
cution o f raids against the public treas­
ury, and world-wide business depression
which, in so fa r as this country is con­
cerned, is the Avorst experienced in 60
years.

Constructive Factors

Vice President
Standard Statistics Co.

Inc.

From the end o f January, 1930, to the
end o f January, 1931, total security in­
vestments o f member banks increased
from $5,529,000,000 to $6,843,000,000.
At the end o f January a year ago hold­
ings o f government loans represented
45.8 per cent o f the total whereas at the
close o f January, last, the percentage o f
government loans represented only 41.3
per cent o f the total. On the other hand
other securities increased their ratio to
total investments from 54.2 per cent to
58.7 per cent.
Net Demand Deposits
ET demand deposits of member
banks increased $731,000,000 during
this period and time deposits $186,000,000, a total increase o f $917,000,000.
Total net and time deposits at the close
o f January, 1931, amounted to $20,779,000,000, an increase o f $917,000,000 over
the same time a year ago. It is found
that the ratio o f government loans to

N

/C O N S T R U C T IV E factors promise to
v._AA'ield the greater influence. Oppos­
ing forces may be considered largely
transitory. There is a stronger feeling
o f hopefulness in financial circles that
it is found that by taking
most o f the Aveak spots in
the average fo r 1926 at
the banking structure have
100, the purchasing poAver
been eliminated.
"T h e pace of recovery in bond prices will then be governed
of a dollar in December,
Considering the fa ct that
in large part by the size and number of new issues. During
last, AATas 127.6. The favor­
1,134 state banks and 169
the past year issuing houses frequently badly misjudged the
able influence o f these fac­
national banks, a total of
absorptive capacity of the market. Because of this, promis­
1,303, AA'ith deposits in ex­
tors should not be mini­
ing rallies were soon checked.”
cess o f $900,000,000 Avere
mized.
Fundamental con­
forced to suspend in 1930,
ditions favorable to an ad­
total deposits decreased from 13.70 per
which set a, n ev high record fo r bank
vance in the bond market are stronger
cent to 10.78 per cent and the ratio o f
mortality, and further considering the
than they have been in years. In addition,
severe test that banks generally ex­ other securities increased from 14.30 to
it is to be doubted whether there has ever
17.80 per cent.
perienced because o f the comparatively
been such a large total o f idle funds
hig'h proportion o f frozen loans, plus the
awaiting reasonable assurance that they
A s this is written, there is great
break in bond values in the last quarter
can safely be placed in the bond market.
promise that whatever bonus legislation
o f 1930, it seems reasonable to suppose
Providing no further damaging legis­
is finally enacted by Congress will not
that mortality among banks this year
lation is enacted at this session o f
be nearly as disturbing to the general
will be comparatively small.
Congress, and there is no extra session,
bond market as Avas at first feared ; that
financial confidence will be fortified, busi­
there will not be an extra session and
It is AA*ell to emphasize this prospect
ness recovery should be speeded and
that Ave shall be able to go on Avith a
because, as it noAV must be generally un­
funds again flow into the bond market.
greater feeling o f security until next
derstood, it Ava,s the necessity o f banks
The pace o f recovery in bond prices
December Avhen the next Congress meets.
to increase their liquidity that Avas
will then be governed in large part by
mostly responsible for the sharp set-back
It cannot be said that business has yet
the size and number o f neAV issues. Dur­
in corporate bond prices during the clos­
definitely turned fo r the better but the
ing the past year issuing houses fre ­
ing months of the year. So anxious were
Avorst o f the depression has undoubtedly
quently badly misjudged the absorptive
banks to switch from long term to short
been reached and the foundation for
capacity o f the market.
term issues that the bond market at times
definite improvement is being laid. W h en
was practically demoralized.
It is well known that a very large
we come to the turn o f the half year, or
amount o f neAV financing is Avaiting fo r
In connection Avith the holding’s o f
to the beginning o f the last quarter at
more propitious market conditions. It is
government loans by member banks,
the latest, we should see business im ­
to be hoped that issuing houses will not
figures on holdings at the close o f Jan­ provement in progress. This Avill have
again overtax the market’s ability to ab­
uary make a curious comparison Avith a stimulating influence not only on second
sorb neAV issues.
and third grade bonds Avhich are always
the same date last year.

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Northwestern Banker March 1931

14

FA RM S A N D

F A R M IN G

By C. A. CRAIG
Farm

THE COST o f producing an acre of
corn remains practically the same whether
10 or 100 bushels be raised.
The cost o f producing a bushel o f corn
varies considerably with the yield. There­
fore, the farmers o f the middlewestern
states are striving to reduce their bushel
costs by producing more corn per acre.
One o f the outstanding movements along
this line is the corn yield contest in Iowa
which had 867 entries in 1930. Fred N.
Rupp, o f Cherokee, won the trophy for
showing the highest percentage above
average. He crossed Krug corn, originally
from W oodford county, Illinois, with an
early strain of Reid’s Yellow Dent to win
first in the open-pollinated class and first
over all on a percentage basis.
In each o f the 12 districts in Iowa hy­
brids, produced by crossing two inbred
strains, outyielded the open-pollinated
varieties.
In Nebraska variety tests under direc­
tion o f the extension department o f the
University o f Nebraska showed that hy­
brids outyielded open-pollinated strains in
some instances but the university people
did not consider that the commercial hy­
brids were practical.
Hogue’s Yellow
Dent proved the most dependable o f the
varieties tested in Nebraska.
County test plots in Iowa give hybrids
the advantage although Krug corn has
been a consistently high yielding variety
in the southern half o f the state.
R U R A L E L E C T R IF IC A T IO N OC­
CUPIED a prominent place on the pro­
gram o f farm and home week at South
Dakota State College. Speakers told of
the possibilities o f electricity not only for
the home but in handling o f many farm
tasks.
CORN BELT FAR M E R S have been
setting new records in February fo r start­
ing o f spring work. Plowing and disking
has been done in many instances while
other farmers have been raking cornstalks
and getting ready fo r regular spring
work. In some instances tiling has been
done preparatory to draining land that
ordinarily is too wet to farm.
Most o f the farmers have done the work
with the idea that more cold weather could
be expected before spring actually put in
an appearance but with the belief that
they would be ahead of the usual routine
should the spring prove to be rainy—
and most o f them are hoping fo r some
good soaking snows or rains before
A pril 1.
Northwestern Banker March 1931

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Editor

Middlewestern farmers are seeking new varieties o f corn to produce more
bushels per acre. Fred N. Rupp, of Cherokee, Iowa, is shown here with
some of the corn he raised and the cups he won in making the highest per­
centage above the average of all entries in the Iowa state corn yield contest.

TH ESE A R E TIM ES when some farm­
ers throw up their hands and say that
farming can’t be made to pay while
others dig in just a little harder, plan a
little more intelligently and work a little
bit more diligently.
The annual agricultural outlook report
as formulated by the economists o f the
United States Department o f Agriculture
and o f the various states doesn’t hold out
much hope fo r the farmers o f the middlewest to ride to prosperity this year on any
smooth path.
Commodity prices are at a low level—
in some cases below the pre-war level.
The outlook fo r immediate improvement
in most instances is none too bright al­
though the economists have held out the
hope o f probable improvement in general
business conditions and consumer demand
fo r farm products the second half o f the
year and with this trend, if, and when it
does come about, should come better prices
for farm products.
The note o f optimism is strongest fo r
the livestock farmer and grain farming
looks none too bright fo r the year 1931.
Hogs and beef cattle look like the farmers
best bet fo r this year with every prospect
for some improvement in the now demoral­
ized egg market. The outlook fo r dairy

places to improve immediately is not good
although in the longtime aspects the
economists have pronounced the position
o f the dairy farmer as being fundament­
ally sound.
Increase in legume acreage has been
recommended in almost every section be­
cause the growing o f clovers helps further
a livestock production program, helps
build up the soil and helps, too, by p ro­
ducing a crop which is short due to the
drought o f last year.
In some ways it looks like an off year for
the farmer as compared with the two or
three years previous and yet the farmers
o f the middlewest are comparatively well
off. In some parts o f the south there is
actual want and suffering and hunger.
The agriculture o f the middlewestern
states is certainly on the soundest founda­
tion o f any in the nation and the good
farmers are going to succeed this year
just as they always have done. Intelligent
planning, courage and hard work will pull
them through even though prices be low
and the situation not entirely to their
liking.
Take the case o f three farmers who
have told me o f their business affairs the
last few weeks.


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Federal Reserve Bank of St. Louis

15

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Northwestern Banker March 193Í

16
One man is an extensive cattle feeder.
Last year he lost money because he bought
his feeders too high. This year he ex­
pects to make money on the cattle in his
feed lot because he bought them right in
the first place and in the second place he
is putting on the gain at a minimum of
cost and making full use of roughage. He
can afford to sell the cattle at present
low market levels and make money or
could even stand to have the cattle mar­
ket drop a little more without hurting
him. H e’s not complaining, he’s “ sawing
wood.”
Then, there is the dairyman who lives
near a middlewestern town o f about 4,000.
He has a retail outlet for his whole milk.
This year he is getting 10 cents a quart
fo r the milk but says that he is making
more money than he did last year when
he received 12 cents. Cheaper feed is
the answer in this case, too.
Another example o f what can be done
by the right kind o f planning is the case
o f the vegetable grower in northern Iowa
who made enough out o f his potatoes
raised on peat soil to enable him to take
a hunting trip to Canada, buy a new car
and go with his wife to Florida for a
vacation trip. His onions were a total
loss or nearly so because he could find
no market fo r them but the potatoes more
than made up for it. He is said to spend
$150 an acre on fertilizer but his crops

are increased enough to make up for that
expenditure and more, too.
There are many more instances that
might be cited.
Practically every cow
testing association has several examples of
dairymen who have increased their effi­
ciency by weeding out their unprofitable
cows. Some o f these men are finding that
they can make a little money with butterfat at less than 30 cents a pound where
with their old methods even 50 cent butterf at left them with no profit.
Lowered feed costs, lower labor and
wages and increased efficiency are going
to help the farmer who works and plans
to make this year a success.
Hogs to many farmers are worth but
$6.50 on the farm at the time this was
written and corn is worth 50 cents. Many
farmers who recall the days when hogs
were selling at from 9 to 15 cents a pound
in Chicago say that no profit can be made
now in pork production. But the cornhog ratio is 13 to 1 with the prices just
quoted and that is considered as a situa­
tion in which feeding will pay.
Some farmers are going to give up and
quit during the year 1931; others are
going to plan so well, work so hard and
reduce their production costs so much that
the end o f the year will find them more
firmly entrenched than ever before. It
may prove a severe test but the men who
emerge from this test triumphant with

success are going to set a new pace on
middlewestern agriculture when the in­
evitable pendulum swings back and prices
o f farm commodities point upward again.
CULTURAL A SP E C T S o f farm life
have come to be an accepted part o f the
rural organization program.
Music by
farm men and women played an important
part in the program o f the annual farm
and home week short course at South
Dakota during February.
Giving o f one-act plays by three county
farm bureaus was a feature o f a similar
program at Iowa State College early in
February while a rural orchestra contest
and a rural male quartet contest added
to the interest o f the Iowa Farm Bureau
federation meeting at Des Moines in
f1anuary.
The Iowa 4-H Club boys were given a
pretty steady diet o f music during the
recent convention at Ames and liked it
so well that music appreciation will he
one o f the projects o f the Iowa club
boys during 1931.
C. L. BLANCHAR of Serburne was
declared the champion corn grower of
Minnesota when he won sweepstakes on
both 10 and 50 ear entries in the state
corn show.
Carl Holden o f Williamsburg captured
similar honors in the Iowa corn show.
Despite the dry summer o f 1930 corn
show entries were above normal.
SE V E N T Y-SE V E N Nebraska counties
had 4-H clubs organized in 1930 and in
49 o f them there are full time extension
of summer 4-H club agents.

I o w a IJ H io (f r a j)Iiin ? j C o m
5 1 5 T W E N T Y E IG H TH S T R E E T

i> « s

<rfounded by
G E O R G E H. R A G S D A L E
EDWIN G. RAGSDALE

Northwestern Banker March 193i

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Federal Reserve Bank of St. Louis

S EC R E TA R Y

p a n y

THE DROUGHT OF 1930 has extended
into 1931 and threatens to become a serious
menace to livestock production and to
crops. Many Avells and small streams on
which farmers depend for water for their
livestock have failed and some farmers
have had to sell their livestock.
The most serious threat to crops to date
has been to winter wheat and to clover
and alfalfa seedings. The damage has
been due in part to the lack o f subsoil
moisture and deficiency during the fall
months and partly due to the lack o f
usual snow covering during the winter.
As far north as central Iowa and Ne­
braska, farmers have in many instances
been able to disk and plow in the fields in
February although these cases have been
isolated and no general field work has been
done that far north.
Either the corn belt looks forward to a
wet spring or else it looks forward to
crops somewhat curtailed by lack of
moisture.
Nature may take a hand with the prob­
able wheat surplus for 1931 just as she did
in regard to what looked like an almost
certain corn surplus in 1930.

17

Executive Offices Central Trust Company o f Illinois

E v e r y business item we handle for your
bank, receives the same watchful attention
from us that you yourself w ould give.
In fact, from the immediate supervision
o f our officers dow n to every last detail in
all o f our 49 departments, it is our responsi­
bility to act for you as your Chicago office.


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C O M P A N Y O F IL L IN O IS
2 0 8 S o u t h La S a l l e S t re e t

CHICAGO
Northwestern Banker March 1931

18
Evolution of U. S. Investments
in Latin America
(Continued from page 10)

V I E W OF A B A N K R E C E N T L Y F IT T E D UP B Y US

DO YOU K N O W
T H A T AN UP TO DATE, W E L L EQUIPPED BANK
ENCOURAGES N E W ACCOUNTS AND INSTILLS
CONFIDENCE IN OLD CUSTOMERS?

SEV EN R EA SO N S
W H Y YOU SHOULD BUY FIXTU RES FROM FISHER
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Ample capital to handle any contract.
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Personal and careful attention to all orders.
Very low manufacturing costs.

THE FISHER COM PANY
C H A R L E S C IT Y , IO W A
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W e have an attractive portfolio showing work we have manufactured.
If interested we will be pleased to mail you one.

V I E W OF A B A N K R E C E N T L Y F IT T E D UP B Y US

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

collapsed. Underwriting houses, invest­
ment corporations,. and foreign bond
brokers, scrapped their bond depart­
ments in order to devote all of their time
to a stock market orgy which lasted sev­
enteen months.
South American governments were be­
wildered by this changed situation, which
New York bankers were finding it ex­
ceedingly difficult to explain. Relations
were still good, but there was an under­
current o f resentment, particularly on the
part o f provinces with unfinished roads
and public works, for which funds were
actually promised, subject to market con­
ditions. It cannot be said that there is
good understanding, when one o f the par­
ties does not understand. Unemployment
set in. Demand fo r native products de­
creased. Governments were found want­
ing, because they could no longer keep
promises. Discontent grew, and so< did
the desire to change conditions by the old
method characteristic o f Latin Americans
-—a method which, on the whole, had laid
dormant fo r several decades. The unex­
pected happened: Resort to the bullet!
More than one-fifth o f our foreign com­
merce is with the Latin American repub­
lics, and well over one-third o f our com­
mercial investments abroad, is in Latin
America. It is, therefore, but natural
that we should feel concerned over what
is happening south o f the Rio Grande.
It is axiomatic that, to those who have
an unimpressive past but a promising fu ­
ture, the present is difficult. This view
would seem to be true in the case o f our
southern neighbors, despite alarming and
generally untrue reports from the south.
Wholesale Default Unusual
EVOLUTIONS in Latin American
countries have rarely, if ever, resulted
in wholesale repudiation or default o f
governmental obligations. On the con­
trary, there are records to the effect that,
during a revolution in a South American
republic, each o f the two opposing parties
remitted debt requirements to the bank­
ers. The Riograndeses who had been
fighting the dictatorship o f Washington
Luiz in Rio, and the harmful coffee valori­
zation policies o f Prestes, are at least as
respectable as their fellow citizens from
Sao Paulo or Rio de Janeiro. A victory
by Rio Grande do Sul does not imply that
our packing interests in Brazil, or Amer­
ican-owned public utilities, will cease
functioning. As a matter o f fact, it is
generally preferable that rebels—-if we
may term them such—-should win a South
American revolution, because all con­
cerned are then heroes after the event;
whereas, if the government wins, the reb­
els are traitors and are dealt Avitli ac­
cordingly.

R

19
In the meantime, Latin American bonds
held by thousands o f investors throughout
the country, are establishing new lows
each day. Some o f the bonds are quoted
almost below the coupon which they carry.
I f an abnormally high yield is a criterion
as to a nation’s solvency, few, if any,
Latin American governments are solvent.
Of course, not all Latin American issues
may be termed high class investments.
However, not all Latin American issues
may be termed hopeless speculations.
There are among them sound bonds and
bonds o f doubtful value, just as we have
all kinds o f obligations in the railroad list,
in the public utility division and among
industrial securities. What we merely
lack, is a source o f dependable and impar­
tial information concerning the status o f
the various Latin American issues.
The strangest, and perhaps most regret­
table thing, is the complete silence on the
part o f all those American bankers who
have underwritten and distributed Latin
American bonds. Is it true that a bank­
er’s responsibility ceases with the sale o f
the issue? Would it not be advisable if,
from responsible quarters, a reassuring
statement were issued occasionally, re­
minding the investing public that coun­
tries, even though they lie south o f the
Rio Grande, do not, as a rule, withhold
payment in respect o f contractual obliga­
tions? And, if our bankers identified
with Latin American finance are unable,
or unwilling, to correctly appraise the sit­
uation, I am definitely o f the opinon that
Washington should assume the leadership.
We have given Latin America a political
Monroe Doctrine. Is not the present most
opportune to give to our southern neigh­
bors an economic Monroe Doctrine?

E V E R Y C H E C K O F Y O U R S IS A M O V IN G

A D V E R T IS E M E N T . . .

a continuous reflection of your service and standing . . .

as it

passes down the line of customers and contacts.
A n d that reflection is a fa v o ra b le one, if you r check is w ell

“ It’s Moving Time Again”
(Continued from page 12)
almost hear a quotation drop. But maybe
we’re just lucky and don’t know it. There
were a few years when this section o f the
country appeared to have a corner on bank
prestidigatory ability. W e were the cham­
pion sleight-of-hand bankers. On Mon­
day evening, Grassville, fo r example, had
a bank. Tuesday morning, Presto ! The
bank was gone! Just like that— and a
notice pasted on the front door to prove it.
The hand was quicker than the eye, and the
liability was quicker than the asset.
Now, though, we seem to have lost some
o f our cunning, but the public fo r which
we used to perform has learned our best
tricks. Arkansas, Florida, and a dozen
other states, have taken the spotlight away
from us. Maybe it’s a good thing we
aren’t having quite so much to do this
first o f March.
Benevolence is the distinguishing char­
acteristic o f man. As embodied in man’s
conduct, it is called the path o f duty.
— Mencius.

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designed
W ith

and

p rod uced

on La M onte

your nam e and em blem

N atio n a l

incorp orated

S a fe ty P ap er.

into the La M onte

background of color and distinctive w a v y lines, your check has
individuality.

It stands out. W ith La M o n te ’s safety . . . crispness

. . . smartness, your check has ch aracter. It does its duty.
You can put La M onte to w ork for you . . . cap ture the
goodw ill
checks.

and

ap p re cia tio n

of

your

customers with

And w e 'll g la d ly help you.

La

M onte

Ask us for sam ples of La

M onte P a p e r . . . in all its attractive tones . . . and for help in re­
designing your check. O u r service is free.

G e o rg e La M onte & Son,

61 B ro a d w a y, N e w York.

LA
F R E E — A n unusual
sa m p le

b o ok o f checks, C-14, m ad e

on La M o n te N a tio n a l S a fe ty P a p e r.

N A T I O N A L

F O R

M O NTE
S A F E T Y

P A P E R

C H E C K S

Northwestern Banker March 1931

20
led into believing that the institution was
a part o f the United States government,
Of course we have a law’ now which
prevents any bank from using any name
similar to this one.

I JUST RETURNED from a three
weeks’ trip to New York where I called on
investment bankers and financial institu­
tions and I am happy to report that there
is a distinct feeling o f improvement among
practically all of the men with whom
I talked.
At least the suicide statistics seem to
be less and the stock market for the first
time in about a year proved that it could
climb out o f the depth o f despair and that
is something.
1 A TTEN DED TW O BANQUETS the
same evening in New York and by multi­
plying the number o f guests present by
the charge per plate, I realized that over
$20,000 had been invested in these two
banquets, so perhaps the depression isn’t
as severe as some people thought,
The first banquet was the annual Trust
Company blow-out given at the Hotel
Commodore, where 1,100 people sat down
to the tune o f $10 per plate and the other
was the New York Patent Law Association
annual banquet given at the Hotel Astor,
which was. presided over by my brotherin-law, Richard Eyre, who is president of
the association.
Of course I only partook of the food
at the Trust Company banquet and g*ot
over to the Patent Law Association in time
to see the General Electric Company pre­
sent some of their very latest inventions,
— the most recent being an automatic fire
extinguisher.
In case your wife would like to see just
what we did have to eat at the Hotel Com­
modore, I am printing the menu below.
Also don’t ask me what the “ Intermission
o f Ten Minutes” was for because I am still
on a ginger ale diet.
Coupe o f Fruit Sultane
%
Potage Florida
Paillette Palermitaine
*
Celery

Salted Nuts
*

Olives

Broiled Delaware Shad with
Roe Maitre d’Hotel
Potato Marquise
*
Intermission of ten minutes
*

Grilled Fresh Mushrooms on Toast Colbert
Roast Poussin a la Broche
New Pease au Beurre
Salad Margot
Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Courrone o f Strawberries Melba
Douceurs
Java
*
Apollinaris
Cigars

Perrier
Cigarettes

I f you don’t think—
ROME C. STEPHENSON, president
o f the American Bankers Association,
knows how to win the women, you should
have heard him reciting poetry, love son­
nets and telling the life story o f Dorothy
Dix at the annual dinner o f the Association
o f Chicago Bank Women at the Union
League Club not so long ago.
When Rome goes a-roaming he has the
Romans beat a mile.
I H A V E JUST finished reading “ M or­
gan the Magnificent” and if you haven’t
read it I recommend it to you highly.
The most interesting part o f the book to
me was the early history o f the American
railroads and the part that Morgan played
in financing them.
When you recall that between Buffalo
and Albany there were ten different rail­
roads with about as many different gauges
fo r their roadbeds, you can realize the
chaotic condition that existed “ way back
when.”
I W A S IN V IT E D down to Washington
last month to have a visit with the Federal
Farm Loan Board and strange as it may
seem, I found them a regular bunch o f
fellows. They are sincerely trying to assist
the Federal Land Banks and the Joint
Stock Land Banks in working out their
problems, which in turn will benefit agri­
culture and the American farmers.
The members o f the present board in­
clude Paul Bestor, chairman; Floyd R.
Harrison, John H. Guill, Lewis .T. Pettijolm, Albert C. Williams, George C. Cook­
sey and Chester Morrill.
THE TESTIM ON Y furnished during
the examination into the affairs o f the
Bank o f the United States, furnished front
page copy most o f the time while I was
in the skyscraper city.
Among other interesting things brought
out was the fact that the former banking
superintendent o f the state of New’ York,
George C. Van Tuyl, Jr., and at the time
the bank closed, a director of the institu­
tion, saw nothing wrong in granting
the name to the bank “ Bank of United
States,” although many people w?ere mis­

THE BEST IN VESTM ENT TRUST
story which 1 heard when I w?as in New7
York, was told by the vice president o f a
fixed trust organization, who had called on
the president o f a large southern bank.
The president had agreed to take on the
trust and had purchased a substantial
block to start the ball rolling. The same
day that this was happening in the presi­
dent’s office, one of the bank’s customers
came in and asked the cashier about the
advisability o f buying this particular fixed
trust and the cashier said, no, he didn’t
think it was a very good investment and
advised him ag’ainst it.
I TRIE D V E R Y HARD to check up on
the unemployment situation on Broadway
and I found that most o f the unemployed
were lined up going to the theaters, the
speakeasies and waiting to pay “ a dollar
per” to see Charlie Chaplin in “ City
Lights.”
TRUST BUSINESS, unlike many
others, suffered no drop during 1930, but
on the contrary the year brought trust com­
panies distinct advances in all lines, ac­
cording to figures presented at the 12th
midwinter trust conference by Gilbert T.
Stephenson, president Trust Company D i­
vision American Bankers Association,
“ The growth o f trust business, in both
number o f items and value o f assets con­
stitutes the brighest page in the history
o f American business during 1930,” de­
clared Mr. Stephenson, who is vice presi­
dent o f Equitable Trust Company, W il­
mington, Delaware.
The results o f a just completed survey
o f the business done by trust companies
during the past year show that 48,812 trust
companies and banks reported being nom­
inated as executor or trustee or both under
wills that have not yet become operative,
as compared with 36,193 in 1929, he said,
representing an increase o f 35 per cent.
The same rate o f increase was maintained
in the number o f appointments as executor
or trustee or both under wills offered for
probate during the year. These rates of
increase wrere the same as for 1929 over
1928, Mr. Stephenson said, showing that
the trust companies and banks maintained
their momentum.
“ The number of appointments to execu­
torships or trusteeships or both under will
has not been materially affected by busi­
ness conditions because they are really the
result o f nominations made in previous
years,” he said. “ In fact, the stress and
strain upon men o f affairs during 1930
may have increased the mortality rate
which may account in some measure for
the increase in appointments.”

21
BD

T H E IN C R E A S IN G P O P U L A R IT Y
O F FIXED IN V E S T M E N T TRUSTS
Elsewhere in this issue there appears a very interesting survey
on investment trusts conducted among bankers by this publi­
cation and associates. Of the bankers answering, 84 per cent
expressed their belief in the soundness of the investment trust
idea and 72 per cent testified to the increasing public interest
in this class of securities.
This house is offering a special dealer contract for banks to
handle the shares of two of the leading and most conservative
fixed investment trusts.
CORPORATE TRUST SHARES lias a portfolio of 28 stocks of
companies with combined assets of over 23 billion dollars and
surplus of over 6 billion. Moody’s composite portfolio rating
“ A ” . More than 12 million Corporate Trust Shares were sold
in 1930.
N A T IO N W ID E SECURITIES C O M PA N Y has a portfolio of
77 stocks of America’s most progressive companies. The sum
invested in each security bears a direct relation to its present
investment status and the importance and prospects of the com­
pany. Sponsored by Calvin Bullock.

W e suggest that bankers interested in investment trusts
write our Burlington office for complete information about
the two we handle. Our March list of bonds suitable for
bank investment will also be sent to you, on request.

W . D. H an n a and Com pany
BONDS

FOR

INVESTMENT

Burlington, Iowa
Pioneer Bank Building, Waterloo


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

The Higley Building, Cedar Rapids

The Laurel Building, Muscatine

Northwestern Banker March 1931

22

INTERNATIONAL
In France

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10, 25, 50, 100, 1000, 2000 Corporate Trust shares, ställda tili innehavaren och

försedda med 7,-àrskuponger, betalbara den 30 juni och 31 december.

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KUPONGERNA ARO BETALBARA I STOCKHOLMS ENSKILOA BANK, STOCKHOLM
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but paid in stock of a company other
than the parent company.
Distributions which represent the
value of other stock dividends, stock
rights, and the proceeds of the 6ale of
any excess 6ub divided shares are n
subject to British income tax. The d
tribution on Corporate Trust shares for
months ending June 30, 1930, of

of <

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■

7VUT OV STOCK DIVIDENDS.
An Interesting contrib u tion , though
not necessarily o f general application,
to the question o f the liability to British
Incom e tax o f d ivid en d s received in the
form o f stock from foreign c om p an ies*
com es in a statem ent by the spon sors in l
this cou n try for the Corporate Trust— 1
an
A m erican
“ fixed
trust ”
trust 1
form ed la st year.
T h is Is the statem ent:
A ccording to the ruling o f H.M. Inepector of Foreign and Colonial di
dendj, only that part of the distribute
on Corporate Trust shares which comes
under the following heads is subject to
British income ta x: —
1. Cash dividends on the underlying
•tocks.

o\4¿‘

. . „ v * sV
et^

| $1.1.5, being not subject to tax.
« “ Parent com p a n y .” we are inform ed,
m eans a com p an y in w h ich the trust
i holds stock. That Is to say. if. for in ­
stance. the A m erican T eleph on e and
;raph C om pany, in
w h ich the
i trust holds slock , declares a d ivid en d in
form o f stock o f one o f its subsidiaries,
the proceeds o f this stock d ividen d, d is­
tributed hy the trust to b’ n tish share| holders, is liable to British in com e tax.
But if the A m erican T eleph on e and
Telegraph C om pany declares a dividend
In the form o f its ow n stock, there is r
lia bility in respect o f the p roceeds d!s
I tn bu ted through the trust.

In England

.* « *

CORPORATE TRUST SHARES
are internationally advertised, internationally sold and enjoy
an international market. In the year 1930 alone, more than
1 1 m illion shares* were issued and sold — a volum e
exceeding that o f any other trust.
Price a t the market

S M IT H , BURRIS & CO
Central Syndicate Managers

1.20 S o u t h La S a l l e
D e t r o it

*Does not include duplication resulting from resales.

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

St r e e t , C h ic a g o
O maha

23

S P E C IA L IN V E S T M E N T S E C T IO N
(P A G E S

23-71)

THE BOND MARKET OUTLOOK
HOSE investors who feared
the hond market had gone
into the discard and become
passe, while the stock market
boom of 1928 and 1929 was raging,
have been pleasantly surprised.
Naturally the stock market be­
came the center of interest during
this period in view of the sensa­
tional advances in the various
stocks. In fact, the so-called “ new
era” idea became so firmly estab­
lished in the minds of some that
many felt that the bond market
would never again become of in­
terest.
These “ new era” ideas
have been heard before, but even­
tually the Law of Action and Re­
action has asserted itself and the
cycle has been completed in more
or less the same manner as usual.
The decline in the bond market
which began in the early part of
1928 lasted for nearly a year and a
half. The Dow Jones average of
40 bonds, with which you are
all undoubtedly familiar, declined
from around 991/2 to below 92, a
very substantial decline for bonds.
As all students of investment
know, the bond market usually de­
clines some time in advance of the
stock market, as a result of high
money rates. This steady decline
in bonds which usually warns
speculators that a turn in stocks is
in prospect failed to excite any
great comment.
This was due to
the fact that the stock market con­
tinued upward so long after bonds
started to decline, and also to the
feeling that in the “ new era” we
were in, the old economic laws
were obsolete. The smash in the
stock market in 1929 shows clearly
that the cycle theory still operates.
Bonds began to work upward
during the latter months of 1929
and this trend continued until
October, 1930. Then rumors re­
garding the dangers in the banking
situation began to be heard. The

T


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

By LEROY D. PEAVEY
President, B absons Statistical
Organization

LEEOY D. P E A V E Y

situation became so unsettled that
many banks sold bonds to get in a
more liquid position. As a result
of such sales we witnessed a very
severe decline in bonds for some
weeks.
Banks and other institu­
tions are our largest bond buyers
and the decline became more or
less of a panic in bonds due to a
lack of bids for the bonds which
were being thrown over.
After
the year end difficulties were
safely over, the bond market
again resumed its upward trend
as would naturally be expected
with the existing low money rates.
The recovery in bonds from the
December lows, which by the
way, represented unusual bargain

prices, was again interrupted be­
fore the end of January.
This
time the veterans’ bonus plan
was the disturbing factor. If the
plan were put through in its orig­
inal form and it became necessary
for the government to raise some
$3,400,000,000 it would obviously
have been an adverse factor on the
bond market. In fact, the compe­
tition with corporation and other
types of financing in prospect
would naturally result in unset­
tling the bond market for some
time. A more logical viewpoint
is now being taken and the pro­
posal to increase the immediate
borrowing power of the service
certificates seems far more logical
than the original plan. The pres­
ent bonus bill should cause no
material disturbance to the bond
market, and if this goes through
we may look for a more orderly
bond market which is logical un­
der present conditions.
Of course, we are all more in­
terested in the future than the past
and nowhere does this apply more
forcibly than in the securities
markets. Whether we buy for in­
come or profit it is desirable, and
for that matter essential, that we
buy with an advancing trend of
security prices in view, if we are
to he successful in our invest­
ments. Barring unforeseen devel­
opments in the bonus bill and as­
suming that the present plan
passes, this should result in reliev­
ing the pressure on the bond mar­
ket. W ith the purchasing power
of the dollar steadily increasing,
the outlook for bonds appears
promising. In fact, present low
price levels in many commodities
and products should furnish a dis­
tinct stimulus to a strong bond
market. W e believe that bond in­
vestors can look forward with
confidence to the prospects for
this form of investment.

Northwestern Banker March 1931

24

How Bankers V ie w Investment
T R U ST S

CHART NO. 1

Do you think that the investment
trust idea is sound?

Northwestern Banker survey shows
rapid development of this

CH AR T NO. 3

Do you understand the distinction
between the fixed type of trust,
the management type, the trading
corporation
and
th e
holding
corporation?

type of investment

YES

YES

84%

57%

NO

NO

16%

C H A R T NO . 2

43%

In your opinion is there an increas­
ing PUBLIC interest in investment
trust securities?

N THE entire investment history o f the
United States, no development has
been so rapid and far-reaching as that
o f the investment trust. Obtaining the
investment trust idea from Great Britain,
where it has been used fo r many years,
American investment houses only a few
years ago transplanted it to American
soil after adapting it to different con­
ditions and changing its features to con­
form to the wishes o f the American
investor.
That they have evolved a type o f in­
vestment that has a strong appeal to in­
vestors o f this country is evidenced by
the amazing growth of the investment
trust during the past few years. The
year 1930 was outstanding in this respect.
In order to analize the popularity of
this new type o f investment, the N orth ­
western " B an k e r last month made an ex­
tensive survey o f investment trusts. In­
formation was obtained from two thou­
sand banks in Iowa, Nebraska, Minnesota,
North and South Dakota, Wisconsin, In­
diana, Illinois, Kansas, Colorado and
Michigan. Bankers Avere asked the follow ­
ing questions :
1— Do- you think the investment trust
idea is sound? 2— In your opinion, is

I
The answers to these questions appear
' in chart form on this page, and are self
explanatory.
A brief comparison, how­
ever, o f these answers with answers to
some of the same questions asked a year
ago in the N or th w ester n B a n k e r in­
vestment survey, are very interesting.

there an increasing public interest in
investment trust securities? 3— Do you
understand the distinction between the
various types of investment trust— fixed,
trading corporation, management and
holding corporation ? 4— Which types do
you favor? 5— For your customer’s in­
vestment are you more favorably im­
pressed by investment trust securities
than you were a year ago? 6— Are you
inclined to feel that you will soon be
selling investment trust securities to your
customers ?

C H AR T NO. 4

In answer to Question No. 1, “ Do you
think the investment trust idea is sound?”
— 67 per cent last year answered yes, and
33 per cent no. This year 84 per cent
answer yes, showing many converts to the
investment trust idea.
In Question No. 4, which asks bankers
to express their favorite type o f invest­
ment trusts, last year’s answers brought
these percentages : Fixed, 35 per cent ;
management, 35 per cent; holding cor­
poration, 29 per cent ; trading corporation,
one per cent. This year’s figures show
a striking trend toward the fixed trust,
.with 63 per cent favoring it. The man­
agement type this year shows 28 per cent
preference, a loss o f seven per cent over
last year. The holding corporation lost
in public favor, slipping from 29 per cent
to five per cent. The trading corporation
showed a three per cent gain, a total o f
four per cent o f the bankers favoring it.

Which o f the follow ing types of
trust do you favor?
F IX E D

CH AR T NO. 5

63%

For your customers’ investment
are you more favorably impressed by
investment trust securities than you
were a year ago?
YES
49%

NO
51%

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

M ANAGEM ENT
28%

I
I

H O L D IN G
C O R P O R A T IO N
5%
T R A D IN G
C O R P O R A T IO N
4%

C H A R T NO . 6

Are you inclined to feel that you
w ill soon be selling investment trust
securities to your customers?
YES
28 %

NO
72 %

N orth A merican T rust Shares
The Largest Fixed Trust
In the year 1930, when investors were more careful, critical and
conservative than ever before, more than $102,800,000 of NORTH
A M ERIC AN TRUST SHARES were purchased— a larger sum than
was invested during 1930 in any new issue of corporation bonds
(excepting two major issues) or of stock offered generally to in­
vestors in the United States. On January 1, 1931, investors hail
purchased over

1150,000,000
U IA HE rapid growth and farflung popularity of this trust, is
proof of the wide appeal of a grouped common stock in­

Railroads

vestment, available for all classes of investors at a moderate

Atch., Top. & Santa Fe
Railway Company
Canadian Pac. Ry. Co.
Illinois Cent. R.R. Co.
Louis. & Nash. R.R. Co.
N. Y . Central R.R. Co.
Pennsylvania R.R. Co.
Southern Pacific Co.
Union Pacific R.R. Co.

original charge.
The certificates of this trust embody all the safeguards of the
most conservative investment trust practice.

underlying N O R TH A M E R IC A N TRUST SHARES.

Oils

sents an investment with exceptional stability, diversity and
surety of income.
Other factors which have influenced purchasers of this trust
have been the liberal re-investment program; no penalty when
certificates are presented for conversion into deposited stocks or
cash, and the soundness of providing for continuing adminis­

Industrials
Amer. Radiator & Standard
Sanitary Corp.
American Tobacco Co. (Class B)
duPon.t (E. I.) deNemours
& Company
Eastman Kodak Company
of New Jersey
General Electric Co.
Ingersoll-Rand Company
National Biscuit Co.
Otis Elevator Company
United Fruit Company
U. S. Steel Corporation
Westinghouse El. & Mfg. Co.
Woolworth (F. W .) Co.

trative expenses, including trustees fees, through payment to the
depositor of interest on the reserve fund and accumulations.
N O R T H A M E R IC A N TRUST SHARES are distributed by
more than 1,200 investment dealers and banks throughout the
United States, Canada, England and Continental Europe. W e
offer an attractive arrangement for bankers desirous of handling
these shares and will be glad to send details on request.
A t its present attractive price, we recommend North A m eri­

Utilities
American Tel. & Tel. Co.
Cons. Gas Co. of N. Y .
Western Union Tel. Co.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Bought

as a group and held together, in a fixed trust, this group repre­

Royal Dutch Company
(New York Shares)
Standard Oil Company
of California
Standard Oil Company
(New Jersey)
Standard Oil Company
of New York
Texas Corporation

H

Twenty-eight of

the soundest common stocks in the world are the security

can Trust Shares as an exceptionally attractive investment at
this time.
Price about $6.75

a r r y

H.

Po lk

6? C

o m p a n y

INCORPORATED

M EM B ER OE DISTRIBU TO RS GROUP, INC.
Insurance Exchange Bldg., Des Moines, Iowa
Our current list of high grade bonds can be had on request.

Northwestern Banker March 1931

26

E A Y V AN C E

W h en O ur ^Business Headache
B
PA SSES

USINESS and finance throughout the
world is, today, in the mood o f a man
who wakens after a night o f revelry
with empty pockets and a splitting head­
ache. We are in a state o f disgust with
what wTe have done in the past. Most of
our thoughts begin with “ never again” and
end with a description o f almost any past
activity.
Probably such periods are good fo r our
immortal souls; certainly they are an in­
evitable aftermath o f the revels. How­
ever, we have all noticed certain charac­
teristics o f the resolutions formed in such
a time. In the first place the violently
negative ones tend to disappear with the
headache itself. In the second place fo r ­
ward plans conceived in a throbbing head
rarely stand the analysis o f a brain which
has had time to clear up.

B y RAY YANCE
Chairman, Yosem ite H olding Corporation
N ew Y ork City

that we will do the same thing over again
before another ten years have passed into
history.
2. Never again will we countenance the
extension o f practically unlimited credit
for speculative purposes. Well, nobody
ever did countenance it under just that
name. In 1919 we found an excuse in the
necessity o f floating the final liberty bond
issues. In 1927, 1928 and 1929 we were
helping the rest o f the world to get back
Let us take a look at some o f our stand­ on a gold basis. Next time we shall find
some other equally plausible excuse to'
ing “ never agains” which are likely to dis­
cover up the real operation and the bor­
appear when the headache gets better:
rowers o f the credit will attend to its
1.
Never again will we have a wild orgy
speculative use.
o f speculation. W e resolved the same
3. Never again will we deceive our­
thing with equal violence and equal sin­ selves with a belief that, through the supe­
cerity in 1921. Probably some individuals
rior wisdom of our generation, we have
kept the resolution and probably some placed our business and financial situation
beyond the danger of another panic and
others will keep it this time but, for the
depression.
Probably, we shall never
community at large, it is still more likely
Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

/ /

again use the same arguments to deceive
ourselves. In 1919 we relied on the Fed­
eral Reserve System and on the turning o f
the United States from a debtor to a credi­
tor nation. In 1929 we spoke o f a “ New
Era” in which big business guided by a
combination o f its own executives and o f
government officials could never cease to
be prosperous and to make the rest o f us
prosperous with it. When we get ready
fo r the next spree we shall find some new
illusion to which our faith will be pinned.
As indicated in the immediately preced­
ing paragraphs, I give little weight to
these “ never agains” for the simple reason
that human nature is the least changing
thing in a constantly changing world.
That human nature seems to be the source
o f so many troubles that it might be better
if we could eliminate it. I do not knoAV,
for neither personal observation nor his­
tory can give me any light on the subject.
It is equally possible that without it we
should lose the urge and drive which have
changed the rest o f the world to our de­
cided advantage. A t any rate it is here
and we must make our plans with it as
part o f the background.
The three ideas discussed up to this
point have no very serious bearing upon
our plans or our actions for the near


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Federal Reserve Bank of St. Louis

27

The Standard of All
Investment Value
Irrespective of fluctuations in the investment barometer, Iowa
municipal bonds remain as ever the standard of sound values
for bank investment and for banks’ clients.
Municipals are not subject to the whimsical ups and downs of
general business conditions.
tax system itself.

They are as secure as the Iowa

For yield, and marketability, Iowa municipal

bonds afford the ideal investment for bank reserve, and for
resale to bank customers.
By specializing exclusively in municipal bonds, the Carleton D.
Beh Company has become one of the largest investment bouses
in this field in the midwest.

Its clients, numbering hundreds

of Iowa’s leading banks, enjoy the benefit of its superior facil­
ities for analyzing, buying and selling— and deal with the con­
fidence which only a specialized service ot this kind can give.

W rite for latest list of attractive offerings.

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Investment Securities
Suite 518 Liberty Building

D E S M O IN E S , IO W A
Dial 4-8161

Northwestern Banker March 193Î

future but in our present “ morning after’’
success will be not the acquisition o f new ing o f “ buy now” campaigns is sufficient
mood we have acquired another set o f
wealth but the conservation o f that which
to restore normal conditions. The size o f
we already have. The quick and at least any probable public building program is
ideas which have a very immediate effect
on action and are, therefore, to be taken superficially satisfactory answers to this hopelessly too small for the problem. A
“ buy now” campaign fails through the
much more seriously. Each o f the ideas in question have already been expressed. It
twin difficulties of lack o f purchasing
this group comes so close to being a spe­ is contrary to the very nature of human
beings and it is contrary to the history o f
power among a large percentage o f our
cialized expression o f one general idea
either the United States or of the world in population and a failure to arouse the
that they may well be discussed as a group
motive o f self-interest on the part o f those
rather than separately. For that matter general.
It would he foolish to lose sight o f these
who have purchasing power.
my list is by no means complete and
basic points. Recently “ realistic” histor­
The buying which springs from a motive
should be taken as illustrative rather than
all inclusive. Briefly, I would list them as ians and biographers have rewritten both
o f self-interest has always been the buy­
follow s:
our histories and our biographies and have ing which has terminated a period of de­
1. Never again will we provide or assist proved to their own satisfaction that the pression and will almost certainly be the
in the financing o f housing accommoda­ human race has never produced a really
chief factor in ending the present one. It
tions beyond the demonstrated needs of
great man and that the race, instead of
is a motive which makes some section o f
existing population.
having a glorious past, has really wasted
the population buy more than current
2. Never again will we buy articles or
its time on earth in a series o f sordid or needs through a belief that bargains are
qualities of goods to which we have not meaningless squabbles. Yet in it all they
offered today as rhev will not be offered
been accustomed— nor will we encourage fail to explain how men have come from a again fo r several years.
That buying
others to do so.
position little better than that o f beasts to
gives employment and purchasing power
•!. Never again will we build or assist
their present state. It seems to me that
to those who do not have it today and pros­
in the financing o f factories, utilities,
all they have done is to lose the value o f perity naturally restored in a degree which
mines or any other establishment to fu r­ historical perspective and to lose us in the
can never be even approximated through
nish goods or services for
artificial means. Therefore,
which immediate and dem­
this theory o f a period of
onstrated demand is not in
SOME “ NEVER A G A IN S”
stagnation,
this attitude of
sight.
“ never again” will we act
/. Never again will we have a wild orgy of speculation.
4. Never again will we
on an expectation o f im­
If e resolved the same thing with equal violence and
buy a stock or other form
provement” is not a theory
o f security at a price which
sinc erity in 1921.
to be disregarded but the
is not easily justified by
2. Never again will we countenance the extension of
most powerful and most
both its current earning
practically unlimited credit for speculative purposes.
practical force h o ld in g
power and its record.
W
ell,
nobody
ever
did
countenance
it
under
just
that
b
a ck the beginnings of
5. An underlying b a sis
business improvement.
name.
of all these ideas, never
3. Never again will we deceive ourselves with a belief
again will we allow our
Is Now Expansion
that through the superior wisdom of our generation,
business success to become
Possible?
1lependent upon improve­
we have placed our business and financial situation
FIND many men whose
ment in either the current
beyond the danger of another panic and depression.
thinking goes this far
level o f business or the
but who find it impossible
Probably we shall never again use the same argu­
general standard o f world
to see any basis for a pe­
ments to deceive ourselves.
living conditions.
riod o f new development
From the long range out­
and expansion. It is easy
look this group of “ never agains” may be
mass o f past details just as the mass o f
to see that the practically unlimited de­
left to the reactions o f human nature just
present details clouds our vision o f the mand first fo r military supplies and later
as safely as can those o f the gronp pre­ future. As a matter o f fact, history says for immediate peace replacements sup­
viously discussed. However, from a prac­ in immistakable terms that, when we are ported the 1915-1919 expansion. It is ap­
tical viewpoint they must be considered as
uncertain we must give the benefit o f the parent that the great building shortage,
essentially different. The first group has doubt to an expectation o f progress rather
the development o f radio, the expanded
to do with what action we now think we
than to an expectation o f stagnation.
use o f motor transport and the electrifi­
shall take at some time in the distant
cation o f domestic appliances and produc­
Basis for Expansion
future when an actually present prosper­
tive machinery supported the 1922-1929
ity tempts us to become careless, extrava­
R E A LIZE very keenly that to many the prosperity. Where then can similar sup­
gant and greedy. The second has to do
foregoing will sound like an indefinite ports fo r a 1932— ? period o f expan­
with immediate actions and plans at a time and idealistic way o f looking at a very
sion be found ?
when millions o f self-respecting men and
In all honesty a part o f the answer to
definite, practical and pressing problem.
women are feeling the bitter pinch o f un­ It is, however, a very practical part o f the
this question must be taken on faith. How
employment and other millions watch their problem o f getting the wheels o f prosper­ many people knew in the early part of
capital slip away through the expenses o f
ity into motion for it leads to and condi­ 1914 that war was about to bring us a
businesses whose gross incomes have fal­
tions the most immediate and practical
great period o f prosperity? How many
len below even the most rigidly reduced
method o f business expansion.
appreciated its significance during the
expenses.
No one seriously doubts that the supply
second half o f 1914? We sincerely hope
Briefly stated, this second group o f ideas
of our every day wants at an average and that our next prosperity will not be due to
centers around the one idea that the world
steady rate would mean a great expansion
military demands but, even if our present
in general and the United States in par­ from present employment condition and
diplomatic muddles end in open war, we
ticular has entered a long period or “ major
profit levels. But we have had abundant have learned that our present surpluses of
cycle” o f stagnation or even regression in proof that neither an artificial expansion
commodities, labor and productive capac­
which the measure of outstanding business
o f public construction nor the hectic urg­ ity would soon be profitably employed.
Banker March 1931
Digitized forNorthwestern
FRASER
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Federal Reserve Bank of St. Louis

I

I

29

I NVES TMENT TRUSTS
Investment Trusts of the proper type offer the most attractive
investments in America today embodying safety of principle, mar­
ketability and attractive yearly appreciation.
W E RECOMMEND THREE NATIONALLY KNOWN
INVESTMENT TRUST SHARES

N A T I O N -W I D E S H A R E S

ALLI

For the 9 years ended May 1, 1930, NATION-WIDE would have
shown an average yield of 13.19% on the original investment and
in addition to this yield it would have shown an appreciation of
over 26% per annum.

UNITED STATES E L ECT I C L I G H T & POWER S HARES
For the 10-year period ended February 1, 1930, UNITED States
ELECTRIC LIGHT & POWER SHARES would have shown an
annual yield of over 8% on the original investment and in addition
to this yield it would have shown an appreciation of 37% per annum.

SELEC TED IN C O M E S H A R E S
(A distributing tvpe trust.) For the 10-year period ended December
31, 1929, SELECTED INCOME SHARES would have shown an
average yield per year of 21.45%.

c\/ietor§ ,.

A

COMPANY, Inc
DES MOINES, IOWA
( i '/ Y

-

Branch Offices A t Cedar Rapids, Creston, and Sioux City

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Federal Reserve Bank of St. Louis

Northwestern Banker March 193i

30
But let us take the more reasonable sup­
position that the world will remain rela­
tively peaceful. How many men believed
in 1921 that radio would become a great
industry within a very few years? How
many truly appraised the coming growth
in domestic and industrial use of electric
power? How many even approximated
the truth about the coming motor boom?
I f your memory answers these questions
with larger percentages, go back and read
the 1921 files o f newspapers, business pub­
lications and economic services.
We may suggest today a resumption in
the development of transportation and use
o f gas which was interrupted by the panic
o f 1929. W e may at least guess that the
radio and airplane industries are not
really overgrown but are set for amazing

growth as the motor industry was in 1921.
W e may say the same thing o f dozens of
household or business appliance industries.
No matter how fa r we carry the list Ave
may be sure that the next period o f expan­
sion will be supported by dozens o f factors
which Ave have never considered or have
considered and rejected as too neAv and
uncertain.

One Outstanding Probability
UT not all o f the supports for a neAv
era of expansion need be taken on
faith.
Great business expansions are
based on development o f mass demand and
these developments may be seen by careful
analysis before they get much public rec­
ognition or have widespread effects. One
of these mass movements Avhich A v a s under

B

C h a rter M e m b e r
l\ew Y o rh C learing H o u s e
A sso cia tio n

Em inently qualified

by its

119 year record, conservative
policies, nation-wide contacts,
and neighborly spirit to serve
those who require New York
c o r r e sp o n dent

f a c il iti e s.

CHATHAM I’ l l i:\IX
NATIONAL BANK AND TRUST COMPANY
NeAV Y ork
M A IN
O F F IC E : 149 B R O A D W A Y
16 B ra n ch es in l\eiv Y o r k C ity
E sta b lish ed
1812
:
Resources M ore T h an
$ 3 0 0 ,0 0 0 ,0 0 0

Banker March 1931
Digitized forNorthwestern
FRASER
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Federal Reserve Bank of St. Louis

way before the panic and Avhich bids fair
to Avork something o f a revolution in
American life during the next ten years
is the surge o f population from congested
urban areas into less congested suburban
areas.
For at least a quarter o f a century prior
to 1925 the great movement of American
population was from rural areas to urban
areas and always the density o f popula­
tion greAV greater. Detached houses gave
way to solid roAvs.
One fam ily houses
gave Avay to two or three fam ily flats.
These in turn Avere superseded by apart­
ment houses and, finally, the newer hous­
ing projects abandoned the four to sevenroom apartment in favor o f the one to
four-room type.
This crowding together arose from a va­
riety o f causes.
Opportunity to make
money or to have pleasure Avas greater in
the cities. Commuting over railroads pri­
marily designed for long distance travel
was slow, inconvenient and expensive. But
within the cities land values soared and
the building trade in a machine age stuck
definitely to hand labor Avith ever rising
wage scales. Under these elements o f eco­
nomic pressure the space standard of
American housing fell loAver and loAver
until today it is as noted in the preceding
paragraph.
Even before the panic a reverse move­
ment which is clearly shoAvn by the latest
census had begun.
The movement is so
pronounced that Ave need not guess at its
existence. WTe can only estimate its causes.
Undoubtedly, one o f the greatest is the
automobile. Positively, it offers a quick
and comfortable means o f transportation
to and from business.
Negatively, the
families who keep cars in the congested
areas find their enjoyment curtailed and
their storage expenses high. Then there
is the spread o f the high class picture
theater closely approximating the central
houses. The radio brings good music or
frivolous entertainment to the most re­
mote home areas.
The spread o f golf
makes many choose between commuting
to the city or commuting to the country
club.
The railroads have made great
strides in reducing the time and trouble
o f commuting. A ll in all, pleasure and
culture are moving to the suburbs and,
while most business clings to the con­
gested areas, the trouble o f making the
daily trip groAvs less.
Right up to the panic of 1929 one tre­
mendous factor tended to restrain the su­
burban tide. That was the cost o f build­
ing. From 1910 to 1929 the cost o f food,
clothing, motor cars and practically every
item on living costs fell but declining
prices o f building materials were offset by
ever mounting labor costs and without
any increase in labor output so that the
old pressure to live in smaller space was
actually increased as other costs of living
declined. N o a v that the last barrier has

31
been modified the tide o f flow from city to
suburb will have fresh impetus.

Better Customers
H IS is not merely a matter to shift
land values. The urban families mov­
ing to the suburbs will not only demand
new houses, they will demand houses using
more building material than went into
each city apartment. They will need more
furniture, will use more electric light and
power and more heat in these more spa­
cious homes. More automobiles will be
needed and more frequently used, there­
fore, more quickly replaced. More labor
saving devices will be needed in larger
homes where servants are scarce or not
part o f the living standard. Schools,
roacls, sewer systems, churches, neighbor­
hood stores; all these must be built. A
hundred things which do not suggest
themselves here will follow this apparently
certain migration.
In short, although it is commonly ac­
cepted that American residential building
is overdone and although that may be true
at 1929 costs, it can hardly be denied that
from a space standpoint our housing
equipment is far below our other living
standards. Practically every factor which
•produced this unbalanced situation has
been removed and it requires little faith
to believe that a mass movement toward
better housing conditions will be a tre­
mendous factor in our next prosperity.

T

EIG H T YEARS AFTE R THE CIVIL WAR, when U. S.
Grunt teas President of the United States, the Daven­
port Water Company was organized. In 18i 3 ground
was broken for the erection of the first pump house
and system of mains.

W e recommend for conservative investment:

$1,600,000

Davenport W ater
Company
First Mortgage 5 %

Gold Bonds Due 1961

Financing Is Possible
A TU RA LLY , the question arises, how
can a population just impoverished
by a great panic carry on a mass move­
ment toward high living standards? Like
all similar questions it might be answered
by a reference to the movement which fo l­
lowed 1921. Fortunately, it can be an­
swered much more positively than that.
Interest rates are at low levels and money
seeking investment is available in large
amounts wherever risk is reasonable. Real
estate mortgage bonds based on specula­
tive building and high costs are not in
good standing but installment mortgages
on small homes occupied by their owners
have been and still are a prime form o f
investment. When we add to this the
great lowering o f building costs the con­
clusion that the movement is financially
possible can scarcely be avoided.

N

Price

9 3 1/ 2

and Interest to Yield 5 .4 4 %

Davenport Water Company supplies water without
competition in Davenport, Iowa, having a population of
60,728.
The Bonds are secured by a first mortgage on all the
fixed property of the Company. Net earnings for 1930
amounted to over 3.1 times annual interest require­
ments of the Bonds.
All of the Common Stock, except director’ s qualify­
ing shares, is owned by American W ater \Vorks and
Electric Company, Inc.
Write for descriptive circular

Foreign Possibilities
R OBABLY, the final argument o f every
man who fears that we are entering a
long period o f stagnation arises from the
fact that the present depression is world
wide. As a matter o f fact, in that respect
it differs from no other great depression
which has ever affected the United States.
Certainly, to take the illustration most fa ­
miliar to this business generation, one can­
not conceive o f the present depression in
Europe as more severe than the post-war
prostration in 1921. Even the Chinese

P


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Federal Reserve Bank of St. Louis

c C U N D * 1 V C.
§
§
§
§

Investment Securities
American Bank Bldg.

Phone Kenwood *83

D A V E N P O R T , IO W A

f
§
§
§
§
§
§
§
§
§
§
§
§
§
§
§

§
§
§
§

§
§
§
§
§
§
§

§
§
§
§
§

§
I

§
§

§
f
§

_______________________________________

§.

Northwestern Banker March 1931

32
difficulties with silver prices are much the
same. Silver was worth almost twice as
much per ounce at the bottom of that de­
pression but the price from which it fell
was more than twice as high at its level
before this decline so that the percentage
o f decline was actually larger. Further­
more, the world level o f commodity prices
at bottom of the 1921 depression was so
high as to reduce the purchasing power of
an ounce o f silver to very near its present
level.
In one part of Europe there exists the
possibility of opening new markets beyond
anything this generation has ever seen.
That possibility lies in Russia. I am fully
aware that to many Americans, Russia
means nothing but unfair and ruthless

competition. I am even inclined to be­
lieve that under present conditions the
appraisal is justified. But there is no
other country in the world whose present
indicates so little of her future. In
Stalin’s own words, Russia has set out
to starve, freeze and deny her people
everything except bare existence for a pe­
riod o f five years (three o f which are
past) in order that they buy and build
within that five years the equipment to
equalize seventy-five years o f progress by
other nations. During the process her
artificially created surplus must be traded
for foreign machinery, no matter what the
cost in prices o f the Russian goods.
What the outcome fo r Russia will be,
I da not pretend to know but it takes little

gift o f prophecy to say that it must be
one o f three things:
1. The whole experiment may collapse
through the failure o f human beings to
stand the strain. Negatively, that would
be to our advantage fo r Russian dumping
would cease but no positive good would
come o f it during the next fewT years.
2. The experiment may end in civil or
international war.
The immediate and
long range effects would be like those o f
any other war.
3. The operation may be a success—
and if that happens the patient will
probably die. By that I mean that, if the
Russians starve and freeze through to
even approximate success for their plan
we may expect to see one o f those re­
actions which affect nations as well as
individuals. Production will lag, con­
sumption will rise without much regard
for cost and, incidentally, communism
as we know it today would be killed more
surely than by any other method which
could be devised.
Whatever happens in Russia will apparently mean a cessation of current
dumping and lead to benefits ranging
from a halt to dumping o f goods on the
markets o f other countries up to the pos­
sibility o f creating a great market within
Russia itself.

Su nunary
OMING back to the point from which
we started, business and finance in
the United States are today in a mood of
repentance fo r the excesses o f 1929.
Naturally, but very unfortunately, most
o f the ideas growing out o f the mood are
o f a negative character. Some o f them
may be dismissed fairly lightly because
they have no real effect on immediate
action and will probably be forgotten be­
fore they have a practical bearing on any
business action.
However, along with them goes another
set o f ideas which centers around the one
basic idea that the economic life in
America and, fo r that matter, in the
whole world has entered a long period o f
stagnation or possibly even o f retrogres­
sion. I have no fear that these ideas will
not disappear over a period o f years but,
in the meantime, they are very seriously
influencing immediate plans and actions
in a way to prolong the widespread
misery o f the current depression. In fact,
I think the attitude o f mind is well ex­
pressed by the title o f the article, ‘‘Never
Again.” They are not justified by the true
picture o f current conditions but their
influence on action lays a brutal and need­
less burden o f suffering upon the unem­
ployed and I have tried to show what I
firmly believe; that they are costing in­
dividuals who have capital or the control
o f capital one o f the great opportunities
such as occur not more than once in a
decade.

C

INDUSTRIAL BONDS
In

purchasing

the securities

of

large

scale industrial concerns, the commercial
bank er strengthens his investment account
and d ¡versifies his list.
recommended

Industrial bonds

by this firm are at all

times representative of the soundest in­
vestments in this* field........................

METCALF, COW GILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bldg., D e s M o i n e s , la.
Chicago

Sioux City

Cedar Rapids

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Sioux Falls

Write to Our
Nearest Office

33

Industrial Bonds

A. W E L L IN G T O N TAYLOR

Interest Rates and the Bond Market
By DEAN A. WELLINGTON TAYLOR
N ew

York University

OR a long time it has been an accepted theory o f invest­
ments that low rates o f interest have a beneficial effect on
bond prices, and that whenever interest rates go down
there is a. general tendency fo r bond prices to go up. This
theory is based on the observation that whenever short term
interest rates go down, institutional buyers o f bonds such as
commercial banks, savings banks and insurance companies,
increase their holdings of bonds with the result that the price
o f the latter tends to go up. As a matter o f fact, during the
last year investments o f reporting member banks have in­
creased by over $1,300,000,000 as may be seen from the table
below.

F

Investments o f all Reporting Member Banks

(In millions o f dollars)
U. S. Government
Securities

End of —

January,
June,
December,
January,

1930.................
1930.................
1930.................
1931.................

2,722 '
2,877
2,992
3,231

Other
Investments

Total
Investments

2,807
3,204
3,701
3,612

5,529
6,081
6,693
6,843

This table shows that the holdings o f government securities
increased by $509,000,000 from January, 1930, to January,
1931, while other investments increased by $805,000,000. In
spite o f the purchase o f large quantities o f bonds by banks,
bond prices on the whole did not rise.
A careful analysis, however, o f the movement o f bond prices
in recent months indicates that the movement was not uni­
form. High grade bonds rated as Triple A, have shown a
substantial increase, while second grade bonds have shown a
substantial decline in many instances reaching a new low.

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Federal Reserve Bank of St. Louis

Movement of High Grade Bonds
HE upward movement in prices o f high grade bonds shows
that they were affected to a large extent by the low rate of
interest.
Interest rates in the New York Money Market
throughout 1930 were very low and in many instances lower
than for a number o f decades. The movement o f interest rates
in New York may be seen from the table below.

T

Movement of Interest Rates in New York City
Commercial
Paper— 4-6 Mos.

January, 1930................
June,
1930................
December, 1930................

4% -5
3 )4-3%
2% -3

Treasury Bills,
3 Months

3% -4
l% -2 %
1%

Call Loans,
Renewal Rate

4.64
2.62
2.23

The low rate on call money was the result o f a slackening
in demand fo r funds to be used fo r stock exchange purposes,
clearly shown by the sharp decrease in the volume o f broker’s
loans. The banking institutions, not being able to find an
outlet fo r their surplus funds in the call money market, en­
deavored to place these funds in bonds which could be liqui­
dated at any moment without substantial loss to the bank.
This is the reason fo r the purchase o f the high grade bonds and
explains in turn the upswing o f these prices.
The movement o f second grade bonds, however, was down­
ward. This decline may be attributed to a number o f factors.
First, the world wide business depression lias affected the
earning power of a number o f corporations and in many in­
stances it was believed that if this depression should continue,
the earnings o f the corporations would decline to such a point
that the corporations in some instances at least would not be
Northwestern Banker March 1931

34

in a position to meet their debt service.
Just what corporations might so suffer
could not be foretold, so all o f the lower
grade bonds were affected. The second,
and perhaps more important reason, fo r
the decrease in second grade bonds, is to
be found in the abnormal banking situa­
tion which prevailed throughout the
country during the past year. It is well
known that bank failures during 1930
were very large, amounting to about
1,300 banking institutions, including one
large institution in the South and one
large bank in New York City. Bank
failures have an adverse effect on the
movement o f bond prices. This is due
to the fact that whenever a banking in­
stitution is in difficulty, or its liquidity
is impaired, it endeavors to rectify the
situation by the selling o f bonds held in
its portfolio. Similarly, after the banks
have been forced to close their doors,
the Superintendent o f Banks or the Con­
troller o f Currency sells those assets
which can be easily liquidated in order
to obtain ready cash. The above ex­
planation would imply that the weaker
institutions have held a comparatively
large number o f second grade bonds.
While it is impossible statistically to
prove this statement, the follow ing facts
would seem to substantiate the above
statement. Interior banks as a rule have
a large volume o f time deposits on which
they pay a high rate o f interest. It is
quite customary throughout the country
fo r smaller banking institutions to pay

a return o f 4 per cent or more on time
deposits. In order to earn this high re­
turn at the time when commercial paper
and acceptances are low and when the
demand fo r funds fo r business purposes
is not very large, these institutions, in
order to break even, are forced to buy
bonds yielding a high return.
Most
bonds, however, with a high return do
not have the same safety and stability in
price as high grade bonds, the return
on which at the present time is about 4
per cent. It is well known that banks
are large holders o f bonds and that the
buying o f bonds by banks has a marked
effect on the movement o f bond prices.
Hence, whenever these banks are in dis­
tress and are forced to sell, the volume of
offering will be large, while the demand
is light, and the result will be a sharp
decrease in the price o f bonds o f this
type.

Outlook
HE outlook fo r the future movement
o f bonds depends upon two condi­
tions. First, upon the movement o f in­
terest rates, and second, upon business
conditions which will prevail throughout
the country. Interest rates at the pres­
ent time are very low, but it is to be ex­
pected that any improvement in business
conditions will result in an increased de­
mand fo r funds and in consequence a
slight increase in interest rates. I f this
takes place, one may assume that high
grade bonds, the return on which at the

T

present time is very low, will remain at
their present point or at least will not
show a further increase. Second grade
bonds, on the other hand, have such a
high yield at the present time that an
upward movement in interest rates, even
o f one or two per cent, will have but lit­
tle effect on their prices. The movement
o f the prices o f these bonds will, there­
fore depend primarily upon business con­
ditions and the earning power o f the re­
spective corporations. I f business con­
ditions should improve, and it is generally
expected that some improvement will
take place during the present year, the
earnings o f most corporations will in­
crease, which in turn will have a favor­
able effect on the price o f these bonds and
their movement in this respect will be
very much like the movement o f prices of
preferent shares.
Another factor in
connection with second grade bonds is
the banking situation. It is generally
agreed that the banking situation in the
larger cities has been cleared up and that
no recurrence o f events similar to those
which took place last December is antici­
pated. Similarly it is believed that the
interior banking situation has been sta­
bilized to a very large extent and that
the improvement in business conditions
will favorably affect them.
One may, therefore, conclude that
while high grade bonds will remain at
their present high level, second grade
bonds should show a substantial improve­
ment during the present year.

Safeguarded Speculation
The Short Term Fixed Trust
HE fixed investment trust device,
which has enjoyed a phenomenal
growth in popularity since the stock
market break in 1929, has hitherto been
almost entirely restricted in its appeal to
long-term investors.
Its adaptation to
the wants o f more speculative buyers,
who seek rapid appreciation in the value
o f their security holdings through judi­
cious purchasing, constitutes a partic­
ularly interesting recent development.
The fixed trust can be made to fit the
requirements o f the speculator through
its organization for a short period o f time
at the bottom o f a major reaction in se­
curity prices. Buyers o f such short-term
fixed trust shares, by holding them
through the period o f the rise in general
security prices, will thus be able to take
advantage o f holding a group o f selected
common stocks during an upward move­
ment in the security market cycle without

T

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

By JULES I. BOGEN
Associate Professor of Finance, N ew York
University, Technical Advisor to the
Glass C om m ittee investigating banking
and finance for the U. S. Senate

running the numerous risks which attach
to speculation in individual common
stocks.

Major Advantages
H E RE are several major advan­
tages derived from limiting the life
o f a fixed trust o f this type to three years
or less.
The most basic o f these is the
cumulative experience o f the past, which
indicates that major cyclical movements
in stock prices last an average o f five
years, and that a period o f about two and
one-half years is approximately the
shortest major upward move experienced
over a period o f decades. Hence, to ex­

T

tend the life o f a short term fixed trust
beyond such a period is to run a distinct
risk o f the buyer’s carrying them on the
down-grade, when the security markets
are in the midst o f general liquidation.
Another major advantage in the short
term o f such a fixed trust is the difficulty
o f foreseeing trends in individual com­
panies and industries, outside o f the lim­
ited number o f great basic enterprises
o f the country, over a longer period. The
long-pull investment type o f fixed trust,
by picking only such outstanding and
basic issues, can afford to extend its ma­
turity over two decades or more. But the
fact is that maximum possibilities o f ap­
preciation frequently inhere in compara­
tively smaller and less well-seasoned en­
terprises, whose shares during a period of
rising prices will usually enjoy a rela­
tively greater and more rapid advance
marketwise.
However, once such stocks

35

Helping Iowa to Lead in
Road Building
From 25 miles of paving in 1920, Iowa has advanced to 3350
miles of hard surfaced highways in 1930.

In the financing of

this construction, and of other desirable municipal improve­
ments, the house of Bechtel has been a leading factor.
For example, consider the 1930 record when Iowa led all other
states in paving primary roads with a mileage of almost 1050
miles.

More than a third of this work was financed through

bonds sold to us.

It required 22 other firms to purchase the

bonds financing the remaining two thirds.
During 39 years of service to Iowa municipalities, industrial
concerns, banks and investors, this Company has built an
enviable reputation for sound, constructive co-operation and
consistently high grade securities.

Isn’t this the type of con­

cern you, as an Iowa banker, are looking for when you invest?
Our record and our bank clientele are conclusive proof of the
high quality of our offerings and the value of our service.

Write our Davenport office

[

without obligation, for our
l a t e s 1 list

of

offerings.

Geo. M. B eclitel 6 r Co.
1891
BechtelBuilding, D
avenport,Iow
a.
Established

First Iowa Trust Bldg.

Equitable Building

Burlington

Des Moines

I O W A ’ S

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

O L D E S T

A N D

Grand Opera House Bldg.

L A R G E S T

Dubuque

B O N D

H O U S E

Northwestern Banker March 1931

36

The N orthwestern Banker
Has been the dominant financial journal in its territory for thirty-six years.

Its

unquestioned leadership is erected upon the solid foundation of editorial
excellence.

The N orth w ester n B a n k er first analyzes the desires
and needs of its hanker subscribers, then gives them
articles and information which will prove most help­
ful in the successful operation of their institutions.
Each article is written by a recog n ized a u th ority in
his particular line.

Novices and theorists find no

room in its columns for the advancement of untried
ideas.
Its various departments are well-balanced.

Space is

allotted each phase of banking in proportion to its
importance.
In 1930, 8 3 p e r cen t of all expiring subscriptions were
voluntarily
conclusive

renewed.
proof

This

one

that N o r th w ester n

fact

alone

B a n k er

is
sub­

scribers find it an invaluable publication.

If you are not already a subscriber, send us your check for only Three Dollars
for a whole year’s subscription.

You will find it an investment which will pay

you big dividends.

The N orthwestern Banker
CLIFFORD DE P U Y
Publisher
GERALD A. SNIDER
Associate Publisher

DES MOINES

R. W . MOORHEAD
Editor
L. D. VAN DORAN
Associate Editor

O NE OF THE DE PUY BANKING PUBLICATIONS
Is
W M . H. M AAS, Vice-Pres.
1221 First N at’ l Bank Bldg.
Chicago


Northwestern Banker March 1931
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

FRANK P. SYM S, Vice-Pres.
25 W est 45th Street
New York

F RANK S. L E W IS , Manager
840 Lumber Exchange Bldg.
Minneapolis

37
have advanced in the market to discount
favorable developments, their sale may be
immediately advisable, for in modern in­
dustry changes are frequent and rapid,
and the rise and fall in the prosperity o f
individual corporations may all take
place within a period o f several years.
While a short term is thus one necessary
qualification o f a fixed trust designed to
interest the speculative security buyer,
very careful diversification is o f equal
importance. Diversification is a necessary
safeguard in all security buying.
Even
the most experienced and expert financiers
can foresee the future only in a partial
and uncertain fashion, but by spreading
one’s funds over a series o f different
commitments, larger returns from some
may be counted upon to offset disap­
pointing results in any one or more other
cases.

Investment Service
Backed by Banking
V i e w p o i n t --In investment matters, this Com­
pany is especially qualified to
meet the needs of bankers and

In the short-term trust designed to se­
cure maximum appreciation, it is even
more likely that one or more o f the issues
included will act disappointingly.
On
the other hand, past experience shows that
the majority o f any group o f selected
common stocks purchased after a major
general price decline will show large re­
turns. Hence, as long as the individual
issues in such a trust are chosen with a
special view to picking stocks that have
undergone a large measure o f deflation
in the market, and the principle o f a bal­
anced diversification is carried out to
cover various industries and types o f en­
terprises, adverse developments in any
one issue will not interfere with the suc­
cess o f the trust as a Avhole.

conservative investors.
Officers and directors of the Com­
pany are men of long experience
in both the investment and bank­
ing fields.

largest bank and the Northwest
Bancorporation,
latter’s

investment

the

companies,

brings to your investment prob­
lem many direct channels of in­

HE short term o f life o f such a fixed
trust, together with the application
with special care o f the principle o f diver­
sification, give its sponsors a wider de­
gree o f latitude in choosing their port­
folios. F or example, the Enhancement
Series of ABC Trust Shares was made up
with particular emphasis upon the follow ­
ing fa ctors:

T

formation.

A well diversified

group of selected securities are
always on our list.
May we assist you?

1.
Substantial
deflation
marketwise
shall have been completed at the time of
inclusion o f any given stock in the trust.
In this way, hangover liquidation during
the early part o f a period o f rising prices
is avoided. Also, those securities which,
because they have not been subject to
heavy liquidation, are not in the bargain
class are also left out.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

including

the Iowa-Des Moines Company

Diversification

2.
Prospects for early recovery o f
earning power as business conditions in
general improve. The earning power o f
a corporation during a period o f depres­
sion is often a very inadequate clue to
what it can do in the event o f a general
upturn in activity. Hence, the fact that
current earnings are small is not as sig­
nificant for the inclusion o f stocks in a
short term trust as the likelihood o f a
rapid upturn with the return o f pros-

As affiliate of Iowa’s

Write

for our list and for details
of our service in buying or
selling securities for your
account.

Io w a - D es M o i n e s C o m p a n y
^affiliated ja;ith

IOWA-DES MOINES NATIONAL BANK & TRUST CO.
N O RTH W EST

Combined

and the
B A N C O R P O R A T IO N

Resources

Over

$495,000,000

Northwestern Banker March 1931

38
majority of listed stocks were selling
perity, even though such higher level o f
lower than they did at the beginning of
earning power is not held indefinitely.
3.
In addition to short term and bal­ that year, a survey at the time showed.
Hence, some device for automatically
anced diversification, a third important
eliminating issues as they enjoy a major
feature o f a fixed trust designed for
speculative appreciation is the elimina­ advance because o f pool activity or
otherwise, is desirable.
tion o f individual stocks in the trust after
One system devised is to require the im­
a short rise in their market prices has
mediate and automatic elimination o f an
occurred. The nature of the stock market
issue when a certain percentage rise has
is such, that various issues reach their
been attained. However, it is very difficult
high prices at different times during a
to secure the best results by such an abso­
general advance. Thus, in the bull mar­
lute automatic device. Hence, it has been
ket of 1928 and 1929, numerous individual
thought best in one case, ABC Trust
stocks touched their high points in the
Shares, Series E, to compel elimination o f
early months o f the rise, and declined
issues which show an enhancement of 150
persistently thereafter. About the time
per cent in value from the price prevail­
that the market was considered as being
at its peak, in the early fall o f 1929, a ing at the inauguration o f the trust, while

after a stock has appreciated 100 per cent
the trustee may sell on the advice o f an
investment board which includes inde­
pendent experts in close touch with chang­
ing market and business conditions.
W e might ask, what will be the ex­
perience o f the security buyer with this
device over the life o f the trust? By
making past experience our guide, we can
trace it in this way. He will, o f course,
get the dividends paid by these companies,
which should give him a 6 per cent return
at the start, which will increase as improv­
ing business brings larger earnings and
thus larger corporate distributions. As
security prices move upward furthermore,
various issues, especially those deflated to
an especially low level, will rise to prices
where they will be eliminated from the
trust and the proceeds turned over to the
holder o f the short term fixed trust cer­
tificates. Such special distributions will
involve capital appreciation o f at least
100 per cent on his investment to the
holder. Finally, at the close o f a threeyear period, when presumably the major
reaction in security prices has not yet
gotten under way, the stocks remaining
in the trust will be liquidated, so that the
security buyer is automatically taken out
of the mai’ket, and can then wait until the
next period o f general deflation creates a
similar, safeguarded buying opportunity.

Decline in Inventories
Inventories o f 644 corporations in
twenty-seven different lines o f industry
and miscellaneous at the close o f 1930,
amounted to $1,016,213,746 and were in
the aggregate 17.64 per cent less in dollar
value than at the close o f 1929, and 5.65
per cent less after adjustment, for esti­
mated price recessions, according to a
preliminary survey made by Ernst &
Ernst, accountants. The dollar value of
sales o f the same companies for 1930, the
survey shows, was $6,411,904,456, a decline
o f 15.12 per cent from 1929.
The study is o f interest, it is said, in
consideration o f possibilities of any busi­
ness improvement which might come
through a necessity of replenishing such
inventories as have been depleted below
requirements fo r current business levels.
No conclusions are attempted, the bulletin
states, because o f the inadequacy o f the
data, in some respects, especially for cer­
tain lines o f industry.

PUBLIC
UTILITY BONDS
Public

Utility

securities

mentally of interest to
investor.

are

funda­

every banker-

Perhaps some of your custom­

ers’ utility bonds have been called for
payment.

If so, our current list of re­

Strong Medicine

commendations will solve the problem
of re-investment.

.
W rite

to O u r

N e a r e s t O ffice

METCALF, COW GILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bldg., D e s M o i n e s , la.
Chicago

Sioux City

Cedar Rapids

Banker March 193Ì
Digitized for Northwestern
FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Sioux Falls

Two farmers met on the road and pulled
up. “ Sam,” said one, “ I ’ve got a mule
with distemper. What did ye give that
one o f yours?”
“ Turpentine. Giddap.”
A week later they met again.
“ Say, Sam, I gave my mule turpentine
and it killed him.”
“ Killed mine, too. Giddap.” — Montreal
Gazette.

39

Public Utility Bonds

Protecting Your Bond Account

from Inventory Losses
OT many years ago bankers ontside
judgment be exercised in formulating an
By WARREN F. SARLE,
o f our large business centers gave
investment program and bonds be care­
Assistant Manager, Bond Department,
little consideration to bonds as a
fully selected to meet its requirements.
Northern Trust Co., Chicago
suitable investment for a portion o f their
Under present market conditions an av­
banks’ deposits. Little, if anything, was
erage return of between 5 and 5y2 per
ever heard of the classification o f a bank’s
cent is easily obtainable from a well di­
reserves into primary and secondary.
versified bond account without a single
Particularly in the rural districts, funds
bond in the list of lower security or mar­
for which local commercial demand was
ketability grade than is ordinarily re­
not immediately anticipated were invested
flected in a rating of “ A .”
in mortgages secured by improved local
In the following table is set forth av­
farm and town real estate. Many bank­
erage yields at market prices as of Feb­
ers, and particularly those in small com­
ruary 2d, fo r 40 bonds o f outstanding
munities, looked Avith disfavor upon most
security and marketability grade, ten in
investments outside o f their own imme­
each group, respectively, railroad, public
diate localities.
utility, industrial, foreign and municipal.
Times have changed. Today assets of
The diversification percentages, while
a well managed country bank include
hypothetical, are conservative. It will be
cash on hand, cash deposited with a num­
observed that the average yield from an
ber o f correspondents in other towns and
account diversified according to these per­
cities, money on call, bankers acceptances
centages and containing only high grade
and commercial paper o f various compa­
bonds could at the time o f these quota­
nies enjoying a good credit standing. All
tions be around 5.43 per cent.
o f these are liquid to a high degree and
Group
tYield
Percentage
5.18%
Railroad
25%
therefore can be relied upon when funds
5.03%
40%
Public U tility
are needed on short notice. However, the
5.61%
Industrial
15%
Foreign
7.88%
10%
W
A
K
B
E
N
F.
SABLE
normal return from these assets is rela­
*4.95%
M unicipal (4.36)
10%
tively low and at the present time is sub­
A verage 5.43%
stantially below the rates which many to definite programs taking advantage o f
t A verage fo r 10 bonds in each group.
* Taxable equivalent yield.
banks pay on time deposits. The bank’s additional safety by employing the prin­
Furthermore there are bonds in these
investments in local enterprises are in the
ciples o f diversification.
Security and
form o f customers’ notes, both secured marketability have either been ignored or respective groups perfectly suitable in
and unsecured, from which the return is possibly misrepresented at the time the safety and marketability for bank ac­
larger. In no case are they of long ma­ bonds were purchased. Invariably much counts which are currently selling to yield
turity nor do they, according to good bank­ consideration has been given to yield as somewhat more than the averages stated
ing p r a c t i c e , represent
above but they must be
loans for capital expendi­
selected with great care.
tures. Because o f short
The proper selection of
“ The truth oj the old proverb 'a little knowledge is a dan­
maturity and in some in­
bonds as wel 1 as the formu­
gerous thing has been demonstrated in the management of
stances being payable on
lation o f an investment
bond accounts of many banks and in some cases has been
demand these assets should
program is a technical task
responsible to no small degree for serious difficulties resulting
be relatively liquid.
and should be done by a
in substantial losses on the part of the depositors!”
For that portion o f the
trained investment banker.
bank’s funds not invested
I f this talent is not avail­
in the assets mentioned above, the bank reflected by numerous bonds bearing high able locally, the city correspondent should
must find employment which is profitable coupons and selling at a discount under most certainly be consulted.
and from which they can be readily with­ present market conditions and the scarcity
Unlike customers’ notes, commercial
drawn in an emergency. During late years o f United States government, railroad and
paper and bankers’ acceptances, bonds
many banks have turned to bonds fo r this high grade municipal bonds which or­ usually represent loans fo r capital ex­
purpose, some with considerable success dinarily give a lower return.
penditures and are, therefore, made for
while others would perhaps be in a better
longer terms. Fluctuations in the market
Yield Is Important
position today i f they had purchased no
prices of prime bonds are usually the re­
bonds whatever outside o f those o f the
OST assuredly yield is an important sult o f changing rates for money. In a
United States government.
consideration in purchasing bonds declining money market the prices of
In reviewing the bond lists o f banks and one of very satisfactory proportions prime bonds tend to be stronger and vice
which have been less successful in this can readily be obtained with all the nec­ versa.
Obviously the number o f years
phase o f their business, it is readily ap­ essary safety and liquidity fo r the invest­ before maturity determines to a large
parent that litt’ e thought lias been given ment of bank funds if sound investment degree the range o f price fluctuation

N


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

M

Northwestern Banker March 1931

40
which takes place in sympathy with money
rates. A 5 per cent bond selling at 100,
due in one year, needs only to decline
about one point to raise its yield to ma­
turity to 6 per cent while a 5 per cent
bond selling at 100, due in 25 years, must
decline 12.86 points to increase the yield
to 6 per cent. Therefore, as a protection
against serious inventory changes, a bond
account should include a substantial per­
centage o f short term bonds.
A Further Safeguard
S A further safeguard against de­
clining prices during periods o f high
money rates, it is a more or less common
practice among conservative bankers to
set up a reserve against their bond ac­
counts. This account is credited with all
so-called profits from the sale o f securi­
ties and the amounts of interest amortized
against bonds purchased at a premium.
Then in case o f forced liquidation during
periods o f high money rates when bonds
may be sold below their cost prices, the
losses are charged against this bond re­
serve account. A s bonds purchased at a
premium mature, the premiums can also
be charged against this reserve. F or ac­
counts in poor condition containing many
high coupon bonds having a limited mar­
ket. which are bid at substantial discounts
even during periods o f low money rates,
it might be advisable to credit all interest
above 4% or 5 per cent to this reserve
account.
A sound bond purchased at a discount
will in theory approach 100 as the ma­
turity date draws nearer. In purchasing
bonds fo r a bank account nothing more
than this in the way o f appreciation should
be sought. I f through changing money
rates or further improvement in invest­
ment status, the bonds should be called
at 100 or better before maturity, it can
be looked upon as a natural economic re­
sult o f benefit to the bank. When com­
mitments are confined to only high grade
and readily marketable bonds purchased
at all stages o f the business cycle results
o f this sort are not at all unusual.
Prices o f United States government
bonds follow money rates more closely
than do prices o f any other bonds in that
they are the most secure and enjoy the
widest market.
Furthermore, they are
acceptable fo r rediscount and their re­
turn is free from taxation under the fed­
eral income tax law as applied to banks.
These characteristics stamp them as be­
ing particularly suitable fo r the invest­
ment o f a portion o f a bank’s funds.
Many bank accounts today contain
numerous bonds which are either con­
vertible into stock or carry stock purchase
warrants. Unfortunately most o f these
were acquired in 1929, when stocks were
selling at much higher prices than at the
present time. These “ hybrid” bonds are
generally subject to the same radical mar­
ket fluctuations as the equity securities

A

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

LEAD ER S^?

m jH J S T R Y
s h a r e s " !1?

A

F O I. I. « W
T

H

!

> E W

L V

E

L E A » E »

S

Il E S I G \

E

II

A

S C I E A T I F I C A
Il A E A A C E El

I T El

A

II

T B U S T

S E AT S I H I. E

E E I M I A A T I O X
T IT IS E

II

I. L Y

F I X E

■W E S T M E A T
W

A

F E A -

I» E 15 T A I A I A G

Banks and dealers are
invited to write for
further information

TO

ITS

I» O IS T F O E I O .

G en era l Shares C o rp o ral ion
îîîl 1 S o u th L a S a l l e S t r e e t , C h ic a g o
Ne w Y ork

M in n e a p o lis

L o s A n g e le s

41
into which they are convertible. There­
fore, as a rule, when the prices o f prime
bonds are strong, the prices o f convertible
bonds are on the decline approaching the
time when the market price may more
truly indicate their real investment worth.
It is extremely difficult to appraise the
true investment value o f convertible bonds
during periods o f high stock prices which
are the times when they are usually
brought out. They are designed to appeal
to purchasers seeking speculative profits
as such individuals are numerous during
these periods. For these reasons in par­
ticular, convertible bonds as a class do
not lend themselves satisfactorily to con­
servative investment o f banks funds.
Among other classes o f investments not
generally considered suitable fo r conserv­
ative bank accounts, but which are more
or less conspicuous in many lists, are socalled real estate and special assessment
bonds. With comparatively few excep­
tions bonds o f this class have a very lim­
ited market and periodic checking o f their
investment status is extremely difficult, if
at all possible, even for those living in the
immediate locality where the properties
are located. F or these reasons especially,
bonds o f these classes are rarely accepted
as collateral fo r loans.
Technical problems involved in the suc­
cessful development and management o f
a bank’s bond account are indeed numer­
ous. The few principles briefly discussed
in this article no doubt seem very ele­
mentary to many bankers but, surprising
as it may seem, they are among those most
commonly ignored. Every banker is en­
titled to a profitable return fo r the use of
his depositors’ funds but he must con­
stantly bear in mind that in obtaining this
return undue risks must not be taken.
The depositor is justified in demanding
that every precaution, including the many
phases o f diversification as well as expert
skill in the selection o f bonds be employed
in the loaning o f his funds which he has
placed in the custody o f his local banker.
The truth o f the old proverb, “ A little
knowledge is a dangerous thing,” has been
demonstrated in the management o f bond
accounts fo r many banks and in some cases
has been responsible to no small degree for
serious difficulties, resulting in substantional losses on the part o f depositors.

T

HE securities o f the
Arkansas

Valley

Natural Gas Company
and the Illinois'Kansas
Natural Gas Company,
provide an investment
highly satisfactory to the
discriminating investor.
They combine the desk'
able qualities o f safety,
yield and marketability.
We

invite

inquiries

on

your
these

securities w h i c h

we

heartily recommend.

Overworked
“ W hy don’t you get out and hustle?
Hard work never killed anybody,” coun­
selled the philosophical gent.
“ Y ou’re mistaken dar, boss,” replied
Rastus, making a touch. “ Ah’se lost foah
wives dat way.” — Pathfinder.

Long Drawn Out
Patient— “ One dollar fo r drawing one
tooth. You earn your money lightly. A
whole dollar for a few seconds’ work.
Dentist— “ I f you like I can draw it more
slowly.” — Der Wahre Jakob, Berlin.

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

COMPANY
E. RAYMOND DUTRO, President

American Bank Bldg.

DAVENPORT, IOWA

Northwestern Banker March 1931

42

HE rapid rise o f the fixed investment
trust to a commanding position in the
securities business has been accom­
panied by constructive improvements in
its structure. As a result o f this evolution,
investors are better enabled to purchase
securities which are based on sound invest­
ment principles.
A popular fallacy has developed in con­
nection with this rapid growth, manifest­
ing itself in the contention that the
portfolios o f all fixed trusts are alike. A
moment’ s study, hoAvever, shows that this
is not the case. While all companies in-

T

By ROBERT L. LEOPOLD
Vice President
General Shares Corporation
(Sponsors, Leaders of Industry Shares)

eluded in fixed trust portfolios are sound,
the degree of diversification afforded
through the scope o f operations o f these
companies should be carefully considered.
To obtain a wide, geographic diversifica­
tion, a non-competing network o f rails,
utilities, and oils, together with a group o f
industrials serving necessity demands,

|E A R E pleased to announce the enlarging of
our Bond Department, including the instal­
lation of an exclusive wire to New York for
the handling of bond quotations and orders. This
department is at the service of all of our branch
offices through our private Avire system.

B

I^a m s o n

ro s

Established 1874

. & Go.

Members of Leading Exchanges

STOCKS
GRAIN
COTTON
BONDS

L eased W ire s
T e l. W A B a sh 2400

2200 Board of Trade Bldg.

CHICAGO

CORPORATE TRUST SHARES

28

Stocks

. . . Instead of

1

The owner of a single stock participates in the earnings
and growth of only one company. By investing the
same amount of money in Corporate Trust Shares he
participates in 28 companies—all leaders in American
industry. Thus his principal is securely diversified and
his return stabilized. Moody’s composite portfolio
rating “ A . ”
Price at the market
Full details on request

S h e M a n c h e ttfB o n d C o
Incorporated 1910

39 South La Salle Street, Chicago
NEW YO RK

DETROIT

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

PHILADELPHIA

ST. LOUIS

should constitute the grouping o f portfolio
stocks.
It is not only Avhat industries are in­
cluded in the portfolio, however, but Iioav
much representation is given each com­
pany— and not only what companies in
that industry, but Iioav much o f an invest­
ment in each com pany?

Balancing the Dollar
UST as it is necessary to diversify
the investment in different industries,
it is important to balance the dollar in each
company o f the group that is ultimately
chosen. This balanced diversification is
possible only through varying the number
o f shares o f each portfolio company. In
this Avay, the heaviest investment may be
placed in the most important companies
and the percentage in the different groups
may be properly controlled. This is not
possible if the same number o f shares o f
each portfolio company is used and in
many such cases, therefore, the Aveighting
is out o f balance.

J

Another decided advance in the con­
struction o f fixed trusts has been the pro­
vision for the elimination o f companies.
The early fixed trust provided that com­
panies had to be eliminated at some specific
time after a dividend had been passed.
HoAvever, in many cases it is advantageous
to retain the stocks o f companies Avhich
have temporarily discontinued disburse­
ments, provided the outlook for the com­
pany is such that it is assured that divi­
dend payments will be resumed. In other
cases, to hold a security until the dividend
has been passed means that the major
damage has been done and a serious loss
must be taken in the sale o f such security.

A more recent development in the
elimination clause is based on earnings
and provides that if the earnings o f a
company are lorver than the average of
the three or five preceding years, na­
tionally-known statistical corporations
may be consulted regarding the retention
or elimination o f such company. I f these
statistical organizations favor the elimi­
nation o f said companies, the trustee then
sells the stocks and pays out the proceeds
of such sale at the time of the semi-annual
distribution. Obviously, such a provision
carries all the benefits of the earlier clause
and renders it possible to eliminate a stock
before it passes a dividend, but does not
make it mandatory to do so because it
passes the dividend. Certificate holders
are,
therefore,
adequately protected
against unexpected adverse developments
that might affect the investment rating of
companies comprising the portfolio.
The increasing popularity o f the fixed
trust has caused banking institutions
throughout the country to approve such

43
trust shares for collateral loans. Ob­
viously, fixed trust shares, in representing
a proportionate interest in common stocks
which are actively traded in on the prin­
cipal exchanges, constitute as sound a
basis fo r collateral loans as the under­
lying companies themselves, provided pro­
visions are made for the conversion o f
such trust shares into cash with the trustee.
This provision has been included in most
o f the fixed trusts and, therefore, mar­
ketability is assured at all times fo r the
certificates which are themselves actively
traded in any “ over the counter” markets,
as well as on certain local stock exchanges.

Cash Conversion Charge
I T IS important to ascertain whether or
I not a charge is made by the trustee or
the depositor fo r such cash conversion, as
in some eases a charge o f 25 cents or 50
cents lessens the collateral value. How­

ever, with a great many trusts there is no
charge whatsoever fo r this service.
It is generally believed that the popular­
ity o f a fixed trust will tend to increase as
more o f the investing public are each day
being educated to the advantages o f hold­
ing such shares. A single investment in a
number o f the leading industries o f the
country certainly affords security o f
principal, excellent opportunity fo r lib­
eral income and market appreciation.
In conclusion, the following points for
consideration are helpful in deciding upon
the proper trust to recommend to clients :
1. How is the investor’s dollar dis­
tributed between portfolio companies?
2. What safeguards are provided for
the elimination o f companies before it is
too late?
3. What conversion privileges are pro­
vided to insure collateral value and liqui­
dation without charge?
4. Are provisions made for the pav-

Poet Pete— “ Burglars broke into my
house last night.”
Friend— “ Yes? What happened?”
Poet Pete— “ They searched through
every room, and then left a $5 bill on my
bureau.” — Pathfinder.
“ Did I leave an umbrella here, yester­
day ?”
“ What kind o f an umbrella ?”
“ Oh, any kind, I’m not fussy.”— Boston
Transcript.

N o. o f
S h a re s

Shares
^ I ^H E 33 basic American corporations comprising Leaders
A of Industry Shares have attained recognized leadership in
their respective industries. They have been selected for the
following reasons, among others—their large financial re­
sources*; stability of earning powerf; their consistent dividend
records^; their experienced managements and their promising
outlooks. The portfolio has been given a high degree of bal­
ance through broad diversification and scientific weighing of
the number of shares of each corporation.
To maintain a high investment quality of the portfolio for
the life of the Trust, a continuous protection feature provides
against deterioration of the standard now obtaining by retain­
ing the original securities only so long as they continue to
meet the required standard.

Special Dealerships Available to Iowa Banks
Total Assets, $ 2 0 ,4 8 3 ,0 0 0,00 0 .0 0 .
Combined surplus, $ 4,7 30 ,7 0 0 ,0 00 .0 0 .
D ividends to stockholders last year over ONE B IL L IO N D O L L A R S .
An unbroken dividend record of 28 years.

u l l

C om pan y

M o o d y ’s

R A IL SR a tin g
4 The Atchison, Topeka & Santa Fe Ry. Co1. Aa
2 Atlantic Coast Railroad Company . . . A
2 Illinois Central Railroad Company . . . A
4 The New York Central Railroad Company A
2 Union Pacific Railroad Company . . . . A
PU B LIC U T IL IT IE S
8 American Telephone & Telegraph Co1. . . Aa
2 Commonwealth Edison Company . . . . A
8 Consolidated Gas Company of New York A
4 Southern California Edison Company Ltd. Baa
12 The United Gas Improvement Company . A
2 The Western Union Telegraph Company . A
OILS
4 Standard Oil Company of California . . Aa
4 Standard Oil Company of Indiana . . . A a
12 Standard Oil Company o f New Jersey . . Aa
4 Vacuum, Oil C om pany.................................. Aa
IN D U S T R IA L S
4 Allied Chemical & Dye Corporation . . . A
2 American Bank Note Company . . . . A
4 American Radiator & Standard Sanitary
C o r p o r a tio n ....................................................Baa
6 The American Tobacco Company (B ) . . A
8 E. I. du Pont de Nemours & Company . . A
16 General Electric C o m p a n y .........................Aa
2 Ingersoll-Rand C om pan y............................. A
4 International Harvester Company . . . . A
12 National Biscuit C o m p a n y ...........................Aa
8 Otis Elevator C o m p a n y ............................. A
4 The Proctor Gamble Company . . . . A
4 Sears, Roebuck & C om pany........................... Baa
2 Standard Brands Incorporated....................B
8 Union Carbide & Carbon Corporation . . A
2 United Fruit C om pany.....................................Baa
8 United States Steel Corporation . . . . A
8 Westinghouse Electric & M fg. Co-. . . . A
4 F. W . W ool worth Com pany.........................A

Leaders of Industry


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Federal Reserve Bank of St. Louis

Even the W olf Feels Pity’s Pangs

T H E F IX E D P O R T F O L IO
M oody’s Composite Portfolio Rating A

A S c ie n tific a lly B a la n c ed P o r tfo lio

H

ment o f the trustee for the life o f the
trust ?
5.
Are the profits o f the depositor, both
visible and invisible, reasonable?
Answers to the above questions will
rapidly eliminate certain undesirable in­
vestments and leave a residue o f sound
securities fo r final analysis.

.¿ e C

o m

i f i u m

y

IN C O R P O R A T ED

I n v e s t m e n t S e cu r ities

214 Sixth Avenue, DES MOINES

Northwestern Banker March 1931

44

The Future oí General Management
I
TRUSTS
follow the course laid out fo r them by the
prophets o f doom. There were almost no
failures, and so few mergers as to cause
comment. It had been expected that there
would be a long list o f weak companies
in search o f stronger sponsorship. The
actual smallness o f the list is, perhaps
an evidence of unexpected ability on the
part o f general management investment
companies to withstand extremely adverse
conditions. In addition it is possible to
say that the earning record o f most o f the
companies during 1930 was excellent, very

NVESTM ENT companies (or, if you
like, investment trusts) rode into this
country and to enormous popularity on
the crest o f the greatest stock market
boom in history, remained with us, but
minus the popularity feature, during the
1930 deflation period, and at the present
time may be said to be gathering mo­
mentum toward an era o f sound ap­
preciation, during which their real use­
fulness will become increasingly apparent.
General management investment com­
panies did not during 1930 by any means

B y STERLING PILE
President, hisuranshares Corporation
o f Delaware

few o f them suffering heavily from re­
ductions in dividend income, many not at
all. Giving due consideration to the
steady downward trend o f the market
during almost the entire period, most of
these companies handled their assets with
credit.
Year of Readjustment
O F A R as 1930 was concerned the in­
vestment companies must regard it as
a year o f readjustment— a period of
severe trial which was met and is now
past history. A very different situation
now confronts them, one which gives
promise o f renewed vigor provided the
problems presented can be met suc­
cessfully. Statisticians point out that the
average yield at market prices o f all
dividend paying industrial common stocks
listed on the New York Stock Exchange
at the low point o f December 17, 1930,
rose to about 9.3 per cent as compared
with previous record figures fo r over
thirty years o f about 9.4 per cent in 1921,
9.5 per cent in 1917 and 7.9 per cent in
1907. Added significance is given these
figures by comparing them with the yield
o f high grade bonds during the same
periods. Such bonds yielded less than 4.5
per cent in December, 1930, about 6 per
cent in 1920, over 5 per cent in 1917 and
nearly 5 per cent in 1907. In other words
there was a greater excess o f stock yields
over bond yields in December, 1930, than
at any time in the past thirty years. From
these comparisons it appears that the re­
action from the highs o f 1929 resulted in
an extraordinary depression which may
prove to have been unjustified.
A comparison o f present day economic
conditions with those o f 1921 will he
illuminating and has a distinct bearing on
the problems o f investment companies. In
1921 production figures went far below
present schedules, especially as respects
steel and iron, coal, automobiles and
kindred industries. Enormous inventory
losses were suffered in addition. Due to
vastly improved transportation facilities
inventories have been enormously re­
duced in recent years and losses have been
reduced correspondingly. In the main
leading domestic corporations are in much
better financial shape than in 1921. Many
o f them retired their senior indebtedness
during 1928 and 1929 and built up large
(Turn to page 62, please)

S

M UNICIPAL BONDS
I
Obligations representing public taxing
power

are

inherently

character.

conservative

in

M unicipal bonds deserve a
I

place in eyery bank’s investment pro­
gram.

Our

mendations
W rite
N ea rest

municipal
are available

bond

recom­

on request.

to O u r
O ffice

METCALF, C O W G ILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bldg., D e s M o i n e s , la.
B b j

Chicago


Northwestern Banker March 193f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Sioux City

Cedar Rapids

Sioux Falls

45

Municipal Bonds

The Intrinsic Merits of Public
SECURITIES

TATE and high grade municipal obli­
o f adequate resources which, beyond any
gations justly occupy a pre-eminent
doubt, will be an adequate basis fo r taxes
position in the field o f investment
necessary to pay the charges on all in­
securities. The inherent qualities o f safety
debtedness. When legality o f issuance is
B y B. J. LARKIN
which characterize civil securities have
assured, and ability to pay is beyond ques­
V ice President, Halsey, Stuart & C o .
given them a high standing in the eyes of
tion, civil loans represent an outstanding
conservative individual and institutional
type o f security and must be regarded as
investors which may logically be expected no defense based on irregularity o f is­ second only to United States government
suance is possible, the bondholder is
to be maintained in future years.
obligations from the standpoint o f safety.
almost certain to obtain a judgment for
The obligations o f our sovereign states
There are periods from time to time,
the amount he has requested in his suit.
are dependent fo r their payment entirely
such as we are witnessing today, when
It then becomes obligatory upon the proper
upon the good faith o f the issuing state.
financial difficulties develop in the admin­
officials o f the municipality to provide
While state bonds are most frequently pay­
istration o f some few o f our municipalities,
means to pay the judgment, which is gen­
able from taxation, either general or spe­
which by many are accorded more im­
erally through levy and collection o f a
cial, the proceeds from which are ample
portance than is justified. We are now, or
sufficient tax. I f the defaulted bond is not
to meet principal and interest charges, a
at least we have been, in the throes o f a
a general obligation, but is payable only
holder has, usually, no legal recourse in
world-wide depression which has mani­
from a special fund, the procedure is sub­
the event o f a default, since a state o f
fested itself by many difficult economic
stantially the same except that after
circumstances. We have in this country
the United States cannot, without its con­
judgment has been obtained, the municipal
sent, be sued by an individual, to enforce officials can only be required to make pay­ been harassed by an exceptionally long
payment o f its obligations. However, the ment from the special fund and to raise and severe agricultural depression. Our
desire on the part o f our sovereign powers
that fund in so far as such is possible. farming classes have been sorely pressed
carefully to preserve their credit and the Obviously, legality plays an important and inmany instances resources have been
full realization o f the dire consequences part in the safety o f public securities, and reduced to a minimum. In our urban
which would follow the
communities,
commercial
failure to meet their ob­
and industrial activities
ligations promptly, have in
have likewise declined and
‘'Over one billion, three hundred million dollars of perma­
recent years proven suf­
resources impaired. Real
nent (long term) bonds of the states and municipalities of the
ficient incentives to avoid
estate, which forms the
United States and its possessions have been issued and sold
any possibility o f financial
principal basis o f taxation
each year for the past seven years. Public financing has in­
delinquency.
in our states, has been par­
creased at a seemingly astounding rate. In this connection it
Municipal bonds, the ob­
ticularly
depressed,
so
should, however, be remembered that an amount equal to
ligation
of
the
cities,
that in some sections pres­
probably one-third of the total new issues sold have matured
towns, counties, school dis­
ent realty values do not
and have been redeem ed!”
tricts and other political
even justify the tax to
subdivisions o f our states,
which they are subject. A b­
are fundamentally different from state
the necessity fo r approval o f issuance by normally heavy tax delinquencies and
bonds in that their payment is enforceable
a thoroughly competent municipal bond at­ greater difficulty on the part o f municipal
through legal proceedings. Municipalities
torney cannot be overemphasized.
officials in enforcing payment o f tax
are authorized to incur indebtedness by
liens are natural consequences o f these
A bility to Pay
the constitution and statutes o f the state
conditions. In addition to these difficul­
T W IL L also be apparent that a com­ ties there has been an unprecedented wave
in which they are situated and similarly
the state laws prescribed the manner in
munity’s ability to pay its obligations
o f bank failures which has resulted in
which payment shall be made and en­ is o f paramount significance. An iron­ substantial losses not only to individual
forced. The obligations o f the political
clad legal instrument, is o f negligible depositors but also in many cases to
subdivisions o f the state may be secured value unless it represents a contract made municipalities having public funds on
by the full faith and credit o f the issuing by a responsible borrower. I f the bond deposit.
community or may be payable solely out is payable only from some special fund
As a result o f these circumstances, sev­
o f a special fund without pledge o f the such as the revenue from a municipally eral o f our less favorably situated munici­
community’s general credit.
Obviously owned public utility, or from special as­ palities have found themselves tempo­
there is a material difference in security sessments levied upon the specific p rop ­ rarily embarrassed financially. The state
between these two types o f obligations erty benefited by the improvement fo r o f Florida, following the collapse o f its
and the holder can only look to an enforce­ which the bond is issued, it must be estab­ real estate boom which was of exceptional
ment o f those rights which he possesses. lished that such special fund will during magnitude, has doubtless suffered more
In case a default occurs in payment of a the life o f the obligation be ample to meet than any other state. Indebtedness, which
general obligation bond fo r which a p o­ all principal and interest charges. In the its political subdivisions willingly assumed
litical subdivision’s full faith and credit case o f a general obligation bond secured when valuations and population figures
are pledged, suit may be instituted in by a community’s full faith and credit, it were at their peak, is very burdensome
the proper court to compel payment and is, o f course, essential that the issuing under present conditions o f low real
i f the bond has been legally issued so that political body be o f stable character and estate values, relatively small popula-

S


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Federal Reserve Bank of St. Louis

I

Northwestern Banker March 1931

46
tions, and decreased commercial and agri­
cultural activity. Some o f the most un­
fortunate municipalities have even at­
tempted repudiation o f their bonded debt,
claiming* that payment is impossible un­
der present difficulties o f tax collections.
Tt is significant to note in this connection,
that in those instances o f refusal on the
part o f municipalities to meet their ob­
ligations which have been adjudicated the
courts have consistently held in favor o f
the bondholders and have given no heed
to pleas o f poverty by municipalities.
Thus it is established that, although pay­
ing ability may be seriously impaired,
municipalities must nevertheless do their
utmost to fulfill the contract represented

by their leg-ally issued evidences o f in­
debtedness.
W here Defaults Occurred
F IN A N C IA L difficulties have also rer cently occurred in several communities
o f other states, particularly North Caro­
lina and Tennessee. In the great major­
ity o f such cases, delinquencies in the
meeting o f payments have been due pri­
marily to the failure o f some bank which
served as depository fo r the community’s
funds.
The greater percentage o f de­
faults has taken place in cities, counties
or districts where resources are neither
large nor diversified so that the loss o f any

Why a
]\[ew
Financial
Service
?

•

— because it is different
— because it is original
—Paul Clay's forecasts of the bond market,
stock market, money market, and trade out­
look are based on a scientific method which
includes the economic, the technical and the
psychological indications.
—stock recommendations are based on a valua­
tion formula mainly responsible for the
victory of the appellants in the famous
$30,000,000 Ford Motor Case tried before
the Board of Tax Appeals.
W e sh a ll be g la d to s e n d d e ­
ta ile d d e s c r i p t i o n u p o n req u est.

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

cash on hand immediately disrupted the
community’s budget.
Much publicity is always accorded the
financial difficulties o f our communities.
Generally speaking, and under ordinary
circumstances, a default in payment o f a
civil loan is a rare occurrence, and it is
fo r that reason, no doubt, that such hap­
penings make good news and are worthy
o f full comment by the press. To the lay­
man, such publicity doubtless brings a
measure o f skepticism concerning the
safety of all public loans. To those fa ­
miliar Avith municipal finance, on the
other hand, who realize that the legally is­
sued obligations o f a sound community
must be paid, reports o f difficulties in the
status o f a municipality’s finances are of
no great concern unless paying ability is
substantially and permanently impaired.
Over one billion, three hundred million
dollars worth o f permanent (long term)
bonds o f the states and municipalities of
the United States and its possessions have
been issued and sold each year fo r the
past seven years. Public financing has
increased at a seemingly astounding rate.
In this connection it should, however, be
remembered that an amount equal to
probably one-third o f the total neAV is­
sues sold have matured and have been re­
deemed.
While state and municipal indebtedness
may appear to be increasing very rapidly,
consideration must be given the rapid in­
creases which have taken place in popula­
tion, wealth and consequent paying abil­
ity. Today’s higher living standards de­
mand extensive public improvements,
and public improvements themselves cre­
ate Avealth, and in many cases produce
monetary revenues.

New Orleans Office
Smith, Burris & Company, Inc., an­
nounce the opening o f an office in the
American Bank building, New' Orleans,
La., in charge o f William S. Rembert,
vice president.
Smith, Burris & Company are the cen­
tral syndicate managers fo r the distribu­
tion o f Corporate Trust Shares and sev­
eral other investment trusts. Complete
wholesale service, heretofore only avail­
able in Chicago, Detroit and Omaha for
the central section o f the United States,
has thus been extended to NeAV Orleans.
This local organization has been formed
better to serve the many investment houses
and banks throughout Louisiana, Ala­
bama and southern Mississippi.

Buy Him a Dish Mop
Customer: “ I want a nice present for
my husband. W hat do you advise?”
Shopkeeper: “ May I ask Iioav long you
have been married, madam?”
Customer: “ Oh, about fifteen years.”
Shopkeeper: “ Bargain counter in the
basement, madam.”— Leeds Mercury.

47

W hy Fixed Trusts Meet the Present
Investment Demand
E H A V E just passed through an
era o f several years, duration,
which has been full o f experiences
for the investor. In the long run it will
prove to have been a helpful experience
and an experience whose results should
have an enlightening influence, notwith­
standing the many losses which unfor­
tunately were entailed. Many investors,
as a result o f these experiences, are still
bewildered to know why the securities they
purchased, often with the savings o f a life
time, did not behave better. Since they
purchased their securities, sufficient time
has elapsed fo r certain inherent deficien­
cies, either in the securities themselves or
in the investor’s general policy, to become
evident. This applies to bonds, notes, pre­
ferred and common stocks.
The investor o f average size for years
has felt dissatisfied with the meager return
he was making as compared with the fo r ­
tunes being made by the wealthy on their
investments.
A large number o f these average in­
vestors, realizing their need for safety

W

B y ROBT. I. RHEINSTROM,
General Manager, Republic Shares
Corporation

o f principal, had purchased bonds. Dur­
ing a period o f business expansion and
general prosperity, these investors ob­
served the steady increase in value o f the
common stock o f the companies whose
bonds they held, while the market price
o f their bonds remained stationary, or, in
some cases, declined. They felt they were
not getting a just share o f industry’s in­
creasing earnings. It was only natural,
then, that thousands o f these investors
turned to the purchase o f common stock.
The whole public became “ stock minded”
and financial pages o f the newspapers were
studied on every corner. F or a while, all
went well. Then came the turn of the
market in 1929 and many investors of
moderate means saw their profits suddenly
vanish. They were bewildered, for the
time being at least, as to just what had
happened, and why.
But out o f this experience the average

investor has drawn certain more or less
definite conclusions. He still has full con­
fidence in the future prosperity of Ameri­
can business enterprises and knows that
he should share in that prosperity through
common stock ownership.
I believe, however, that the era through
which we have just passed has proven to
many an investor o f average size that he
is unable to equip himself so as to properly
discriminate in the selection o f his securi­
ties and that because o f his comparatively
smaller means he is unable to diversify
his holdings, which qualities have been two
o f the main stays in the investment struc­
ture o f men o f wealth.
The average investor has further
learned that he cannot with safety rely on
the information passed around about this
security or that, and that he must con­
fine himself to securities which are spon­
sored by institutions which have behind
them men experienced over a period of
years in the judgment o f business credits
from an investment point o f view. Banks
are safeguarded in making their commer-

Specializing in the Distribution of

Iowa Municipal Bonds
AND

Fixed Type Investment Trusts


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Corporate Trust Shares Priced at Market

Prices and Concessions on Request

Jackley-Wiedman & Go.
Register and Tribune Building
DES M OINES

Northwestern Banker March 1931

48
cial loans through having officials, who
are in close contact with persons to whom
they make their loans and who know how
to judge commercial credits. A similarly
close range contact with the institutions
whose securities are being sold and a
knowledge o f investment credits is neces­
sary in the judging o f securities. The re­
sult o f these experiences has been that
the average investor has commenced to feel
that to obtain safety and adequate return,
lie must place his funds in the securities
o f large concerns, the position o f which
concerns in national and international
business has over a period o f years been
definitely established and which concerns

have an unbroken record o f profit making
and dividend paying. Such concerns year
in and year out pay dividends on stocks
with the same continuity as they pay in­
terest on bonds.
Diversification
GAIN, the average sized investor has
learned that diversification, which is
the second main stay in the investment
policy of the wealthy man, is equally neces­
sary to his successful program. The de­
mand for a security which would ansAver
all o f these requirements led to the intro­
duction o f the Fixed Investment Trust.
The Fixed Investment Trust, therefore, in

A

Illinois Local Improvement Bonds
Fit the Present Investment Needs of Banks

Short Maturities— Tax Exemption— 6 % Yield

Descriptive Circulars on Request

L ansford ® & Company
Securities
33 North La Salle Street, Chicago
Specializing in Illinois Local Im provem ent Bonds
Exem pt from all Federal Incom e Taxes

V -----------------------------------------------------------------------------^
M U N ICIPA L O W N ER SH IP
5y2%
TRUST CE R TIFIC ATES
Series “ K”
Maturities— 1932 to 1939 incl.
These Trust Certificates evidence an ownership in a deposit of municipal securities
held by the Iowa-Des Moines National Bank & Trust Co., as Trustee.
Nine series of these Trust Certificates have heretofore been issued by this Com­
pany, all of which are either entirely paid off, or are paid well in advance of sched­
uled maturities.
FREE

FRO M

FED ERA L

IN C O M E

TAX

These Trust Certificates give a very favorable return on
present market levels.

Price -— Par to yield 5.50^0

form and at this time caters to the psycho­
logical demand, the extent o f which is evi­
denced by the hundreds o f millions o f dol­
lars being invested in this type o f security.
The demand is here and it should and must
be satisfied. The extent o f the demand has
brought into being many trusts, most o f
which are distributed through investment
banking dealers throughout the country.
As the demand grew, so did the science o f
the grouping o f these stocks develop so
that some o f the trusts offered in the last
few months have been able to effect
changes in the grouping o f stocks and in
the balancing o f the moneys invested in
each stock in the portfolio so as to obtain
maximum yield as well as maximum safety.
As time goes on there will be other ramifi­
cations o f the Fixed Investment Trust
idea but it is at all times important for
the investor to acquaint himself with the
features in these trusts and with the stand­
ing o f the persons who are sponsoring
same. There are different types o f fixed
trusts and in the case o f certain recent
offerings the sponsors have gone to great
length to properly train and equip sales­
men who are able to select the type best
suited to the requirements of each type
o f investor.
W e are now entering an era, which be­
cause o f the enlightened methods noAV
being used by modern security distributing
organizations will be o f great benefit to
the investor (be he large or small) in the
protection o f his securities.
Securities
henceforth will be merchandised.
The
merchandise will have to stand up just as
do the other items purchased Avith the
public’s money. A n d the salesman whether
knoAvn to the investor or not Avill have to
have at hand the information necessary
to prove that his security is what he repre­
sents it to be and that it is suited to the
particular needs o f the nrvestor whose
business he solicits.

Therefore, the experiences which Ave
have lived through recently Avill in the
long run prove to have been for the better
and fo r the enlightenment o f the investor.
A strong demand fo r such improvement
and enlightenment has already developed
and is now being supplied by the Fixed
Trust which has behind it proper sponsor­
ship. Such fixed trusts, because o f their
high degree o f investment merit, are cer­
tain to become increasingly popular, and,
in the writer’s opinion, will establish them­
selves as a permanent feature o f American
finance.

Banker’s concessions allowed.

How the Scrap Began

BALLARD-HASSETT CO,
Investment Securities

1114-1120 Commonwealth Bldg.

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

D E S M O IN E S

She: I ’ve just read that a man out in
the west exchanged his Avife for a horse.
You wouldn’t exchange me for a horse,
Avonld you, dear?
H e: O f course not; but I ’d hate to
have anyone tempt me with a darned good
car.— Passing Show, London.

49

Current Questions on Fixed Trusts
HE placing o f common stocks in
trust and issuing certificates o f inter­
est in them has attained proportions
and variations giving rise to many ques­
tions o f comparison from an increasing
number of investors. Most o f these ques­
tions fall under a few heads.
The kinds o f fixed trusts at the present
time may be in general classified: Dis­
tributive fixed trusts in which stock divi­
dends right a n d /o r split-ups accruing
to the deposited stocks are sold by the
trustee and the proceeds distributed to
the holder o f the stock certificate; cumu­
lative fixed trusts in which the stock
dividends and split-ups or the larger part
o f them are retained by the trustee as a
part o f the deposited property; semi­
fixed trusts which have provisions for
the sale o f a stock from the deposited
property and the reinvestment o f the p ro ­
ceeds into other stocks in the original
portfolio which is more extensive than is
found in the more rigid type o f trust.
Common to the distributive and the
cumulative fixed trusts is the question o f
the elimination provision. In some a de­
posited stock which passes its dividend
must be eliminated within a recited time
in other trusts it may be eliminated in
the discretion o f the depositor company
which notifies the trustee to sell.
In regard to the distributive type there
arises the question o f a reserve fund de­
signed to stabilize the semi-annual dis­
tributions resulting from the accumulated
cash dividends and proceeds from the
sale o f stock dividends, split-ups and
rights, at a return figure higher than
would result from cash dividends alone.
Common to all fixed trusts is the question
o f the “ loading” or the difference between
the actual proportionate cost o f the de­
posited stocks and the offering price of the
trust shares.

T

This subject is somewhat complicated
OAving to the various methods o f setting
forth the items o f brokerage, between the
distribution dates o f the trust shares and
the different Avays o f splitting the charge
into distribution, issuance and service
charges, etc.

In the matter o f the selection o f the
portfolio the companies represented are
familiar to the banker and the funda­
mental factor is diversification for the
stability of earning power.
The basis o f the marketability of all
trust shares is primarily the provision for
exchange o f trust certificates fo r the de­
posited stocks and the accumulations
thereon.
The question o f interest alloAvance on
the reserve fu n d a n d /o r accumulations
held b y the trustee between distribution
dates is considered in relation to the total


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

B y EDWARD P. WELLS
President, Distributors Unified
Service, Inc., Chicago

loading costs and the initial payment of
trustee charges fo r the life o f the trust.
The maximum amount o f such interest
applicable to each share may be estimated
by figuring interest on the average an­
nual distribution.
The two factors which have resulted in
the comparatively large acceptance o f
fixed trusts are diversification o f the in­

vestment and trust service in broad com­
mon stock ownership. In small purchases
there may be a saving over the purchase o f
the individual stocks because o f smaller
brokerage costs; in large purchases it is a
matter o f the desirability of single certifi­
cate OAvnership and trust company service.
There has never been such a solicitation
o f the public to buy the stocks o f our
greatest corporations nor such a promul­
gation of equity investment Avhen stocks
were at relatively Ioav levels as has re­
sulted from fixed trusts.

VALUABLE
D IST R IB U T O R SH IP S
OPEN

TO

BANKS

W e are prepared to offer an attractive connec­
tion to banks interested in representing the high­
est type investment trusts in their communities—

Nation-Wide
Trust Certificates
Series B
-— a cumulative semi-fixed trust representing a
participating ownership in 77 great corporations
scientifically diversified among basic industries.
The oldest unit Type Trust in the United States.
A n active market is maintained throughout
America and Europe.
Daily quotations are
contained in leading newspapers.
S p e c i a l c o n c e s s io n s to b a n k s
W r i t e f o r d e ta ile d in fo r m a tio n

C. B. K L O P P E & C O .
Iowa Wholesalers of "N atio n - W id e" and "U selp s"

335-36 Insurance Exchange Bldg.

Des Moines, Iowa

Northwestern Banker March 1931

50
committees and members o f the board.
The forthcoming convention will, there­
fore, be one day longer than last year’s
meeting and members o f the board of
governors will accompany delegates to
the convention on the special convention
trains.
The Investment Bankers Association has
customarily held its annual May meeting
o f the board o f governors at White Sul­
phur Springs. A recent addition to the
hotel at that place makes it possible to
accommodate the larger convention meet­
ing. The association’s committee that se­
lected the place of convention is :
Charles D. Dickey, Brown Brothers
Harriman & Company, Philadelphia;
George N. Lindsay, Bancamerica-Blair

Investment Bankers Convention
The twentieth annual convention of the
Investment Bankers Association o f Amer­
ica will be held at the Greenbrier Hotel,
White Sulphur Springs, W . Va., Novem­
ber 1 to 5, 1931. The first two days,
November 1st and 2d, will be devoted to
meetings o f the board o f governors and
committees. The opening session o f the
convention will be November 3rd with
subsequent sessions November 4th and
5th. An effort was made at the associa­
tion’s 1930 convention to shorten the con­
vention period one day by having the
board of governors arrive twenty-four
hours before the delegates. This arrange­
ment interfered with conferences between

In s t it u t io n a l
Institutional

bond

B onds
issues increase

the
Ü
»

growth and supplement the welfare of

if
the community. M e tc a lf Cowgill & Co.,
Inc., has participated

in the develop­

ment of many middle western institutions
through constructive financial operations.
W rite

to O u r

N e a r e s t O ffice

METCALF, COW GILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bldg., D e s M o i n e s , la.
Chicago
Banker March 1931
Digitized forNorthwestern
FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Sioux City

Cedar Rapids

Sioux Falls

Corporation, New Y ork; Albert E. Schwabacher, Schwabacher & Company, San
Francisco ; Sidney R. Small, Harris, Small
& Company, Detroit ; Kelton E. White,
G. H. Walker & Company, St. Louis;
Alden H. Little, executive vice president,
Investment Bankers Association o f Amer­
ica, Chicago.

Continental Illinois Election
At a meeting o f the board o f directors
o f the Continental Illinois Bank and Trust
Company o f Chicago, held recently, the
following changes were made in the official
roster of the bank:
Roger C. Hyatt was elected a vice presi­
dent. Walter J. Delaney, C. M. Smits and
T. Philip Swift, second vice presidents,
were elected vice presidents. John W .
Baker, David Handler and Charles J.
Klink were elected assistant cashiers. E.
E. Freund, assistant secretary o f the trust
department, was transferred to the com­
mercial department as an assistant cash­
ier. C. E. Ronning, secretary of the trust
department, was made personnel officer of
the bank, a newly created position. R. M.
Kimball, a second vice president, was
elected a second vice president and secre­
tary o f the trust department. C. E. Clippinger and Leroy F. Pape were elected
assistant secretaries.
W oodbury S. Ober, a second vice presi­
dent o f the Continental Illinois Company,
was elected secretary and treasurer o f
that company at a meeting o f its board
recently. Frank L. King, comptroller of
the bank, was also made comptroller o f the
company.
Roger C. Hyatt, prior to his election as
a vice president of the Continental Illinois
Bank, practiced law in Cleveland as a
partner o f Hon. Newton D. Baker. Be­
fore that he was a vice president o f the
Union Trust Company o f Cleveland. In
1921 he went to the First National Bank
o f Cleveland as a vice president and on
completion o f the work o f consolidating
that bank with others into the Union Trust
Company, he continued as a vice president
o f the consolidated bank. Prior thereto,
he practiced law fo r eight years with the
firm o f Tolies, Hogsett, Ginn & Morley,
the last four years as a partner. Mr.
Hyatt was born in Ithaca, New York, in
1891. He was educated in the public
schools o f that state and at Cornell Uni­
versity.

Needed Room
“ Lady,” said the policeman, who had
motioned her to stop, “ how long do you
expect to be out?”
“ What do you mean by that question?”
she demanded indignantly.
“ W ell,” he replied, sarcastically, “ there
are a couple o f thousand other motorists
who would like to use the street after you
get through using it.”-— Cincinnati En­
quirer.

51

Real Estate Bonds
Answering the Question:

JUST W H A T IS A N
INVESTMENT TRUST?
SK any man on the street how many
investment trusts there are in
America and the answer will be
anywhere from a few hundred to thou­
sands.

A

Just what is a true investment trust?
A true investment trust is organized for
the primary benefit o f the investor and so
set up that all profits except a satisfactory
fee for management are returned to those
whose money is entrusted in the fund. A
close parallel o f such investment trusts is
found in the trust departments o f our
trust companies and banks. So close is
this parallel that the voluntary trust as­
sociations, organized in the Commonwealth
o f Massachusetts, are in the main amen­
able to the same laws, particularly those
regarding the liabilities o f the trustees.
Imagine if you can a trust solicitor ap­
proaching a prospect fo r a million dollar
trust account and in the course o f the con­
versation mentioning that aside from the
usual five or six per cent charged fo r man­
agement, the trust company will expect a
“ rake off” on all profits exceeding a cer­
tain amount; also, that there are certain
bonds to be issued against the trust’s as­
sets which would be a direct lien on his
property and these bonds are to be repaid
through the money which his account
earns. How fast would such a trust de­
partment grow?
A recent study o f P oor’s 1930 Manual of
Investment Trusts shows that o f 315 socalled investment trusts listing their cap­
ital structures, only 50 have a single type
o f security outstanding which participates
100 per cent in all the assets o f the trust.
There are a few others who issue a single
class of shares but which have management
contracts or warrant rights that may
cause a dilution o f the shareholder’s
equity. The more popular form seems to
be the issuance o f not only Class “ A ” and
“ B ” common stocks, one or the other of
which is reserved entirely for the organ­
izers, but several classes o f preferred
stocks, cumulative, non-cumulative or con­
vertible and in some cases bonds to lend
the air o f solidity to the entire structure.
With the participation o f all these other
classes of securities in the earnings of
such a trust, what is the common stock
equity, sold to the public, actually worth ?

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

B y FRANKLIN L. TORNEY,
Director of Public Relations
Slayton-Learoyd, Inc.
Boston

F R A N K L IN L. TORNEY

The True Picture
N IN VESTM ENT corporation re­
cently formed stated that Class “ A ”
securities offered to the public were to re­
ceive all dividends up to six per cent o f the
income before participation o f the Class
“ B ” securities. It was estimated that “ in­
come should average approximately ten
per cent per year based on the interest on
cash in the portfolio, dividends received,
stock split-ups, rights and profits from
the sale o f securities,” all o f which were
to be sold and applied to income. As it is
quite possible that the true income esti­
mated for this company should be about
four per cent, that is, the items o f interest
on cash and cash dividends received, the
remaining six per cent may be considered
in the nature o f distribution o f capital
itself. This would be so considered in the
average bank or trust company. On the
expected 10 per cent “ income,” six per
cent o f which is actually capital, the Class
“ A ” shareholders will receive the first six
per cent in its entirety, the remaining four
per cent is to be divided, 90 per cent to

A

Class “ A ” shareholders and 10 per cent to
Class “ B ” shareholders represented by the
management fo r which presumably no
money was paid.
Using their own figures of outstanding
Class “ A ” stock and income expectancy,
the shareholders who pay all the money
going into this trust, should receive ap­
proximately 96 cents per share per year,
whereas the Class “ B ” shareholders will
receive $2.66 per share fo r organization!
Question: “ What is the common stock
equity worth in this company ?”
There has been much talk during the
last year about the value of publicity in
the publication o f portfolios. The full
light of publicity should shine on every in­
vestment trust. There should be no secrets
as to major operations. The trust com­
pany renders a report o f its stewardship
to each beneficiary at intervals. The in­
vestment trust should be compelled to do
the same. The State o f NeAv York takes
cognizance o f this fact in the following
report recently issued:
“ While we cannot always prevent
breaches o f trust in advance, there is every
reason why this state should require that
those companies which act in a semifiduciary capacity should render to their
shareholders at frequent intervals a full
account o f their stewardship, including a
detailed list o f their security holdings.
Examination of the history o f a number of
these trusts which fall into serious difficul­
ties shows that had the shareholders been
advised fo r three months o f conditions,
they might have had an opportunity by
prompt action to save something from the
wreckage. Moreover, the certainty that
their management would soon be exposed
to a critical review might exert a whole­
some influence on the directors and thus
prevent over boldness or even actual dis­
honesty.”
Inasmuch as Massachusetts Investors
Trust has so many times been used as a
model may we be allowed to say that since
its organization in 1924, and in the face
o f openly expressed disapproval from
other trusts, this trust has published every
90 days, not only to its own shareholders
but to the public at large, the full details
o f the portfolio, not alone the list of
stocks held, but their cost. It publishes
Northwestern Banker March 1931

52
the purchases and sales during the
quarter; rights, split-ups, stock dividends,
extra cash dividends; in fact, all major
points o f interest to the investor.

W hat the Commission Said

Protection
extra protec­
tion is provided by a special
Certificate Reserve over and above
our legal liability, set aside on a
scientific actuarial basis as added
assurance of th e p a y m e n t of
Investors S y n d ic a te Installment
Investment Certificates as they
come due. This reserve now ex­
ceeds $4,000,000, and increases
as outstanding Certificate obliga­
tions increase.
u b s t a n t ia l

S

ASSETS OVER $40,000,000

M unicipal bonds represent
the Finest type of sound in­
vestment
secondary

for

your

bank’s

reserve

funds.

W e are always in the market
to buy or sell bonds of this
type.

The White-Phillips Co., Inc.
Investment Bankers

D A V E N P O R T , IO W A

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

INCE 1928 other investment trusts
and corporations have adopted the
policy o f publishing their holdings. The
New York Securities Commission says
further:

S

“ When a clear picture o f the asset value
o f investment companies is presented at
frequent intervals there is less danger of
distortion in the market value o f their
shares. A cogent reason fo r the frequent
publication o f the holdings in these com­
panies is found in the argument most often
employed in selling their securities which
is that the investor can thus diversify his
securities and spread the risk.
“ The whole point in this argument fails
unless the investor knows what securities
are owned by the investment in which he
is a stockholder so that he can arrange
accordingly his own other individual hold­
ings. The publication o f the portfolio
permits the stockholder to form an opinion
o f the way in which his money is being
handled and to withdraw if the policy o f
management does not suit him. It is sig­
nificant that in a comparatively small
number o f management trusts which
showed signs o f fraudulent dealings, there
was not one which published its holdings.
One very practical reason fo r the change
in policy o f 1928-29 when a few trusts pub­
lished their portfolios is that trust shares
are now selling fo r the most part consider­
ably below their asset value, whereas be­
fore October, 1929, they sold at 50 to 100
per cent above it.”
Apparently the New York Commission
feels that the mere publication o f port­
folio holdings should be sufficient to main­
tain the more proper balance between the
actual value o f their shares and the sell­
ing price. Perhaps this is true but the
experience o f Massachusetts Investors
Trust and others operating under similar
self-imposed restrictions points very
clearly to the value o f bona fide main­
tained bid and asked prices. With this
trust the bid has never been withdrawn
and is firm fo r any quantity o f shares
offered, always based on the net asset
value o f the portfolio.
The ordinary bid price is maintained
by the general distributors. In the event
o f an extremely heavy sales o f shares the
trustees o f the trust— under the terms of
the indenture— would be compelled to buy
back any number o f shares offered to the
extent o f the entire portfolio, on a basis
o f the actual asset value less one per cent.
Under this provision it would be possible
to liquidate the entire trust within 48
hours and return to the investors 99 per
cent o f the market value o f the underlying
securities. Compare this with the forced

liquidations o f banks which at times run
into years before final settlement.

Another Principle
NO TH ER principle which has been
recommended is that all securities
purchased fo r the portfolio be selected
from Approved Lists. To argue who is
to select securities fo r the Approved List
is more or less beside the point. Publish
the list and make it available to everyone
interested and this fact is its own pro­
tection, fo r each security entering this list
is subject to a close scrutiny o f those in­
terested in the purchase o f the shares of
this trust, and doubtful issues have no
place in such a list. Such doubtful securi­
ties, or those in which the management are
patently interested, would certainly start
a wave o f unfavorable comment which
would, in turn, cause an unloading o f the
shares by investors.
There are many who maintain that the
Approved List restricts management. Our
reply is, “ But why shouldn’t it be re­
stricted ?” The Approved List idea is com­
mon with banks and insurance companies
and with trust departments o f trust com­
panies, although they are rarely published
and there is no reason why it should be
included in the investment trust as a pro­
tection to the investor.
To those who seek information about
investment trusts we say, “ Look well to
the structure. How nearly does it ap­
proach the bank trust department ?”
A fter all, the main difference lies in the
fact that instead o f the maintenance of
many individualists o f holding, catering
to the individual requirements o f the in­
vestor, the true investment trust sets up
a single list o f investments under experi­
enced management and invites the in­
vestor to place his funds, together with
thousands o f others, in this one list o f welldiversified securities, subject to withdrawal
at any time he pleases. The management
o f investment trust stresses the one in­
vestment rather than the individual needs
o f the investor.
By concentrating on a single list o f wide
diversification the investment trust can ac­
complish profitably what is impossible for
the trust department ; that is, the adminis­
tration o f comparatively small amounts—
the accounts that the average trust depart­
ment does not care fo r— and render to the
investor the same type o f stewardship as
employed by the banks at approximately
the same figure.
The true investment
trust should operate at the same cost as
the trust department o f banks, namely,
a minimum percentage o f income rather
than half or one per cent o f capital usually
charged by investment corporations.

A

Without doubt the investment trust is a
permanent institution but how much legal
restriction is to surround it depends en­
tirely on the uses and abuses to which it
is subject.

53

The Science Back of Choosing a
UNDAM ENTAL value is the determin­
ing factor in selecting the companies
the securities o f which make up the
portfolio o f a fixed investment trust, be­
cause, as far as humanly possible, ade­
quate income must be assured and the
element o f chance eliminated for 20 years,
the average life o f a fixed investment trust.
The past history o f a company, however
excellent, should not o f itself qualify its
securities for a place in the portfolio o f a
fixed investment trust. Records alone, al­
though constituting an essential factor in
making a choice, cannot guarantee that a
company will maintain its stability and
continue to expand its business and earn­
ings. In the ebb and flow o f modern busi­
ness, managements, markets, rivalries,
tariffs and domestic and international
politics bring about changes and vicissi­
tudes, but where values are fundamentally
established, where they are integral with
the foundations o f this country’s com­
mercial pre-eminence, other considera­
tions may be regarded as subordinate.

F

Portfolio

consideration, the vital factor Avas the fu ­
ture o f the companies selected. In other
words, the companies chosen Avould be re­
quired to pass every test o f past and
present stability and, in addition, be rep­
resentative o f industries which are funda­
mental to the future groAvth and develop­
ment o f the country.
The survey divided itself into tAvo sec­
tions, the study o f industry in its broader
classification, and a specific study of cer-

B y LATHAM B. REED
Fundamental Group Corporation

survey was predicated on the theory that
while investment ratings o f securities based
on past performances should be taken into

lilil

St a b il it y of d epo sits
■a Factor in Bank Investing
Bank "A"

OW to determine where fundamental
values exist, and where they do not
exist despite figures eloquent o f past and
present prosperity, is an undertaking
which demands comprehensive study,
critical analysis and meticulous appraisal
o f a host o f factors, many o f them obscure
and apparently irrelevant. Because the
future o f many companies in many indus­
tries must be considered, a serious respon­
sibility attaches to the investigation and
decision. But the task is simplified, taken
out o f the dim realm o f prophecy and
brought within the scope o f modern meth­
ods o f statistical study by the fact that the
cornerstone o f the fixed investment trust
is faith in the future o f this country.
What remains to be studied is the indicated
course o f the major industries in relation
to the country’s normal progress and the
status o f the leading companies in the
great industries.
In the case o f Fundamental Trust
Shares, a fixed investment trust with the
details o f which I am familiar, the selec­
tion o f the 40 companies represented in its
portfolio was entrusted to a pioneer or­
ganization in scientific economic research
directed by Dr. Albert J. Hettinger, Jr.,
formerly Professor o f Statistics at the
Harvard Graduate School o f Business A d ­
ministration and economist to the Federal
Reserve Bank in Boston.
This organization undertook a general
and specific economic study fo r the pur­
pose o f selecting from American industries
the most attractive investments based both
on underlying values and promise fo r
continued progress in the future. The

H


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

DEMAND
DEPOSITS
17%

TIME DEPOSITS
■ ; 83% ;;

A Large Undertaking
T i m e d e p o s i t s in B a n k A

Bank " B"

am ount

TIME
DEPOSITS
39%

t o 8 3 p e r c e n t o f its t o t a l d e p o s i t s
. . . B a n k B ’s t i m e d e p o s i t s o n t h e
o th e r h a n d , a m o u n t t o o n ly

39 per

Average for State Banks in State

c e n t o f t h e t o t a l . . . B o t h fig u r e s
co n tra st w ith a n a v e ra g e o f

DEMAND DEPOSITS
61%

6 1 per

DEMAND
DEPOSITS
39%

TIME DEPOSITS
1 Í Í ! Í ! Í ¡ Í 1Í ! ! ¡ ¡ ! ¡ ¡ !

c e n t in t im e d e p o s its a m o n g se v e ra l
h u n d r e d s t a t e b a n k s in t h e s t a t e
w h e r e t h e y a re lo c a t e d .

although

f i

generalization should never take the place o f in-

vestigation into each situation, the presumption here is

that the deposits o f Bank A w ould be m ore stable than those
o f Bank B. The nature and history o f a bank’s deposits, in any
case, are factors which should receive careful consideration in
working out a sound investment policy.
This is just another point which Halsey, Stuart & C o. takes
into account in planning investment programs for its clients—
a service that is available to any interested bank. Additional
suggestions along these lines will be found in our folder,

Sound Investment Practice fo r the Commercial Bank, a copy o f
which will be sent upon request.

&, CO.

HALSEY, S T U A R T
IN

CHICAGO,

201 So. La Salle St.
AND

THE PROGRAM
THAT DOES MORE

B

P. M. Eastern Time

O

N

D

S

OTHER

NEW YORK,

PRINCIPAL

35 W a ll St.

CITIES

Every Wednesday Evening thousands increase their knowledge
o f sound investment by listening to the Old Counsellor on the
Halsey, Stuart & Co. program. Broadcast over a Coast to Coast
chain of 3 8 stations associated with National Broadcasting Co.

THAN
ENTERTAIN
9

C O R P O R A T E D

8

P. M. Central Time

T O

F I T

-

7

P. M. Mountain Time

T H E

I

N

*

V

6

P. M. Pacific Time

E

S

T

O

R

Northwestern Banker March 1931

54
for the future which had weight in the
selection o f this particular portfolio was
the relative worth attached by the com­
panies studied to scientific industrial re­
search.
In the portfolio are included
companies which maintain research de­
partments with personnel ranging up to
5,000 technicians, fo r the general purposes
o f improving quality o f output, service and
operation, reducing costs, developing ucav
products and creating new markets. Re­
garding the status o f science in industry,
Dr. E. E. Free, lecturer on science in the
School o f Commerce, Accounts and F i­
nance o f New York University, said in a
recent address to the New York Electrical
Society:

tain companies within each o f the major
industries which seemed to be in a position
to benefit most from economic trends and
from the continued development o f the in­
dustry itself. In addition to a complete
library of statistics on industries in gen­
eral and the companies within them, the
organization had made its own individual
studies of hundreds o f representative com­
panies which have been continuously sup­
plemented and kept up to date. Accurate
information, comprehensive study and in­
telligent interpretation o f facts cooperated
to arrive at a decision in regard to the
fundamental values represented in the
portfolio finally selected.
An interesting and additional provision

“ New businesses or old ones stand on
three legs like a three-legged stool. One
is finance fo r every stable business must
have a sound financial structure. A second
is public relations, including law. The
third is science and technology, for no
business can be stable nowadays without
adequate scientific basis. I f any one o f
these three legs is weak the business is in
danger. Usually it is the scientific leg
which is weakest fo r the average business
man knows much o f finance and something
o f law but very little of science or
technology.”
Business is awakening to a realization
that science has become the mainspring o f
industry. Ten years ago there were not
more than 200 industrial research labora­
tories in this country. Today 1,500 Ameri­
can enterprises maintain laboratories for
scientific research at an estimated cost o f
$200,000,000 a year.

Trend to “ Equity,” Securities

Government

Bonds

DOMESTIC

FOREIGN

-

-

High grade foreign government bonds

:

payable in dollars, may well be included
in a bank investment program.

Current

price levels in this field are attractive.
O u r recommendations are available on
request.
W rite

to

O ur

N e a r e s t O ffice

METCALF, COW G ILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bldg., D e s l M o i n e s , la'
Chicago
Banker March 1931
Digitized forNorthwestern
FRASER
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Federal Reserve Bank of St. Louis

Sioux City

Cedar Rapids

Sioux Falls

Harold E. W ood, vice president o f the
Foreman-State Corporation, speaking at
the annual meeting o f The La Salle
Street Cashiers recently, said “ The trend
o f public demand for securities is toward
‘equity’ securities. In 1929, 70 per cent
o f corporate financing was in common
stocks; and even though corporate financ­
ing in common stocks dropped to 32 per
cent in 1930, the public did not purchase
bonds, 70 per cent o f the bond sales in
1930 being to institutions and not to in­
dividuals.”
Mr. W ood said further, “ The bonds is­
sued in 1930 were largely o f the con­
vertible type because investors demanded
a right to the future o f the corporation
in which they were investing. Fixed
trusts came into prominence in 1930 be­
cause o f this public demand for equity
securities, but the present trend is toward
a modification o f this fixed trust to the
semi-management or management trust,
which will prove an unusually important
factor in future financing.”
The association elected the following
officers: President, Thomas J. McHugh
o f Lester, Carter & Company; vice pres­
ident, E. L. Mil wick o f Paul H. Davis &
Company; secretary, Sidney L. Parry,
Chicago Association o f Stock Exchange
Firms; treasurer, Lester L. Brons o f Rus­
sell, Brewster & Company.

That Explained It
D iner: “ Here, waitress, take this
chicken away; it’s as tough as a paving
stone.”
Waitress: “ Maybe it’s a Plymouth
Rock, sir.”
“ There is my friend Cohen, I wanted
you to meet— the one talking to the two
men.”
“ It’s too bad he has the palsy.”
“ That’s not palsy. He stammers.”

00

Government Bonds

We*re Cutting Our U. S. Debt
too
RAPIDLY
N o further payments on our
government debt should be
made for at least another ten
years.

B y WM. C. CORNWELL
Economist, J. S. Bache & Co.

W IL L IA M C. CORNWELL

T H A S always been considered a vir­
tuous thing for an individual to pay
his debts as rapidly as possible, but
this does not always apply to the debts o f
a government.
For instance, the United States govern­
ment has been paying its war debt to an
extent far beyond the requirements o f the
law on the subject.

I

This law was established by congress.
Soon after the termination o f the war,
that body took up deliberately the consid­
eration o f what amount should be set
aside each year out o f government receipts
as a minimum sinking fund fo r the pur­
pose o f reducing the government debt.
This law established the fact that the
war debt should not be drawn all at once
from the present generation. I f the treas­
ury had adhered strictly to the minimum
requirement o f the sinking fund, as orig­
inally determined upon by congress, it
would have reduced the debt in the ten
years under consideration by the amount
o f $3,187,468,300. As a matter o f fact,
debt retirement had been effected during

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Federal Reserve Bank of St. Louis

the ten years in an amount exceeding

$8,000,000,000.
It will thus be seen that during the last
ten years, the taxpayers have been paying
into the treasury a very much larger
amount for the reduction o f government
debt than was required by law.
This excess o f reduction has been in ac­
cordance with the policy o f the treasury
and the administrations up to date.
Once in the ten years, in 1928, the
President unexpectedly advocated rebat­
ing the whole treasury surplus to the tax­
payer. This reversal o f policy conflicted
with the treasury’s previous attitude. The
secretary gracefully acquiesced. He even
went so far as to say (it is reported) :
“ I believe in debt reduction along the
program settled after the war. I do not
believe in the payment o f a public debt
to the undue burdening o f productive in­
dustry. A balance should be maintained
fo r the debt reduction and tax reduction
which is fair to all interests in our coun­
try.”
This was certainly sound theory, but it
did not prevail in the following years.

A s shoAvn above, during the period un­
der discussion, the treasury has paid down
the United States debt nearly $5,000,000,000 more than Avas necessary, and a
large part o f this excess was obtained by
heavily taxing the people o f this genera­
tion.

A Questionable Policy
HE wisdom o f the policy o f loading

T

such an unnecessary strain upon the
taxpayers has often been questioned.
Some people belie\re that it is unjust to
add to the burdens o f the present genera­
tion vast amounts not required by laAV.

It is true that the war brought to the
United States amazing benefits. It placed
this country in the highest financial posi­
tion in the world, developing its resources
tremendously and showering prosperity
upon us, while all the rest of the world
was under the shadow o f acute depression
and suffering.
It is argued that these great benefits
will extend into the future, possibly the
very far future, and benefit future gen­
erations accordingly.
Northwestern Banker March 1931

56

Why, it is asked, should the burden o f
the war debts be placed so oppressively
upon present American populations, and
future generations allowed to go free?
Aside from that, it is fair to ask why
the sinking fund, already heavily over
supplied with funds, should not be sus­
pended in times like the present when
business is bringing burdens enough, due
to the depressed period through which we
are passing. Especially may this ques­
tion be asked when the sinking fund has
been largely increased beyond minimum
requirements, as shown above. Whether
such payments, unnecessarily absorbing
larger taxes, were wise or not, the coun­
try is certainly entitled to receive a pres­

ent benefit and relief from taxation in
these serious times.
But this is a temporary condition o f
things, and the rebound o f business is sure
to correct them when it comes. A com­
paratively small treasury deficit is negli­
gible when we consider that the treasury
has, in a sense, already overpaid many
hundred millions o f dollars on the debts
and the further fact that this is no time
to increase taxes. There is another fact to
be considered— namely, that there is no
real advantage to the public in retiring
the debt further.
H IS has to do with the usefulness o f
government bonds in banking and
other financial transactions.

T

J UST as the finest workmanship is
handicraft and creative, so Drovers
Service to banks is distinctive and per­
sonalized. It cannot be compared with
routine or mass handling- of important
items.

Every bank in the country, by owning
government bonds, obtains definite ad­
vantages and benefits which cannot be ob­
tained in any other way. This applies
also to the commercial community at large.
Government bonds constitute the only
long-term security acceptable any time
fo r rediscount. They have all the ad­
vantage o f currency without any o f its
weaknesses. They should not he can­
celled at all any further.
United States government bonds fu r­
nish a means by which, through buying
and selling, the federal reserve banks
have one means o f regulating the demand
fo r credit. They furnish a market upon
which savings banks can sell bonds when
all other securities are depressed, and buy
them back again as the most stable asset
in their portfolios.
There is nothing to take their place and
there is no need to levy taxes to provide
the sinking fund with cash to further con­
tinue the bond retirements.
However large the present treasury
deficit may become in this emergency, it
has back o f it at least a moral reserve of
many billions o f dollars, a goodly part of
which might have been used to relieve the
country o f overburdening taxation, in­
stead o f retiring debts ahead o f time.
The government debt o f the United
States has already been reduced enough
to allow an interim o f at least another
ten years to elapse before any further
taxation fo r the purpose is levied upon
the present generation.

Convention at Boston
Directors
W M . C. C U M M IN G S
President, Drovers National Bank and
Drovers Trust & Savings Bank
OSCAR G. F O R E M A N
Chairman of Executive Committee,
Foreman-State National Bank
H A R O L D E. F O R E M A N
Chairman of Board,
Foreman-State National Bank
F R E D E R IC K N. M ER CER
Vice President, Drovers National Bank and
Drovers Trust & Savings Bank
JO H N P. O L E SO N
Vice President, First National Bank of Chicago
JOSEPH E. O T IS
Chairman of Board, Central Trust Company
of Illinois
G ATES A. R Y T H E R
Vice President, Drovers National Bank
G. F. S W IF T
President, Swift & Company
HENRY VEEDER
General Counsel, Swift & Company
R A W L E IG H W A R N E R
Treasurer, Pure Oil Company

D

rovers
NATIONAL B A N K
TRU5 T#SA\TVG5 BANK

Union Stock Yards - Chicago, 111.

Northwestern
Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Boston in 1931— That is the decision
made by the Financial Advertisers A s­
sociation. The sixteenth annual conven­
tion will be held in the historical New
England city, September 14-17.
The
Statler Hotel will be the convention head­
quarters. Plans are already being made
so that- this conclave will always be re­
membered as one o f the most enjoyable
and instructive on record. Various local
committees have already been selected.
Ralph M. Eastman, vice president of the
State Street Trust Company, is chairman
o f the general committee.
Appropriate in name and ability, Myles
Standish, direct descendant of the illus­
trious figure o f Colonial days, will be
chairman o f the historic trips committee.
This will be a committee which will pre­
pare some o f the most interesting trips in
the history o f the association, as Boston
is a center o f historic interest.
Announcing their intentions, the Boston
members o f the association state: “ We
shall endeavor to blend the traditional New
England hospitality with a modern cor­
diality to make your visit a memorable
one. W e believe that everything possible
will be done to make your visit enjoyable
and instructive.”

57

THE RISE O F THE FIXED
TRUST

WO years ago not one investor in a
hundred— and not one banker in ten
— had ever heard o f the type o f in­
vestment known as ‘ ‘ fixed trust ’ ’ shares.
Today, these shares are talked about on
every hand, and their popularity has
constituted the one outstanding excep­
tion to the recent dullness prevailing in
the securities markets. So widespread
has the fixed trust business become that
an analysis o f the financial advertising
in one o f the metropolitan newspapers
recently showed that fixed trust adver­
tisements led every other classification—
both in size o f space and in number o f
advertisements.
The remarkable growth o f this type o f
security, in so short a time, places upon
bankers the obligation to analyze and
thoroughly understand this type o f in­
vestment. Hundreds o f banks through­
out the country are selling such shares
to their customers; and even those bank­
ers who have no intention o f distributing
such securities are certainly placed under
the necessity o f making an intelligent
recommendation to their clients.

T

Different in Principle

The strength and conservatism of
the sponsors is the important factor
in judging fixed trusts.

By WILLIAM C. FREEMAN,
Executive Vice President
The National Republic Co.
Chicago

A Concrete Example

A

W ILLIA M C. FREEM AN

is properly set up— may be on a parity
with the oldest fixed trust on the market,
since it automatically takes the character
o f the stocks composing it, and its ‘ 1divi­
dend record ’ ’ is the record o f these
stocks.
In most cases, well known statistical
organizations are consulted Avith respect
to the trust portfolio, and there are a
considerable number o f fixed trusts
whose selection o f stocks is very much

S A concrete exam ple o f the w orking

out o f these opposed policies, let
us suppose that a fixed trust held in its
p o r tfo lio one share o f A m erican T obacco,
which Avas recen tly split tAvo fo r one.
The capital accum ulation type o f trust
would hold the additional share and its
investors Avould in the fu tu re have the
benefit o f the earnings on that additional
share. The distribu tion trust w ould sell
the extra share received and distribute
the proceeds to its investors. This w ould
mean an augmented incom e to the in ­
vestor— but w ould in volve the sacrifice
o f the fu tu re return upon the share sold.

LTHOUGH the classification o f “ in­
vestment trusts” has been loosely
The proponen ts o f the capital accum u­
used to cover both the management and
lation type o f trust claim that the sale
fixed type o f trust—-they are in reality
and distribution o f the split-up share is,
entirely different in principle, and the
in effect, nothing but a return o f his
fixed trust is something entirely new in
original capital to the in­
financial annals. The de­
vestor.
They also poin t
velopment o f the holding
out that i f the p o r tfo lio
“It is usually the aim of corporation managers, when
corporation during t h e
Avas p rop erly selected and
shares are split up, eventually to put the added number of
past few years has accus­
w ell balanced in the first
tomed the public to think
shares on the same dividend basis as the original stock; and
instance, the sale o f oneo f corporations not only
this policy, of course, works to the advantage of the fixed
h a lf o f its holdings o f
as business enterprises,
trust which holds all such accruals.”
A m erican
T obacco
can
but also as investing in­
on ly result in a distu rb­
stitutions, and the devel­
ance o f such balance and an u nfavorable
opment o f management trusts— which
the same. Naturally, the stocks selected
change in the ratio o f diversification.
are corporations whose business is in­
are the market leaders and those Avhich
In this connection, it is perhaps fa ir to
vesting— was a natural and logical step.
appear to have the best chance fo r future
poin t out that it is usually the aim o f
The fixed trust, however, is essentially a
appreciation, and such a selection does
corporation managers— Avhen shares are
plan o f investment — supervised by a
not leave room fo r very great variation.
split up— eventually to put the added
trust company— rather than a business
The difference, therefore, between one
num ber o f shares on the same dividend
enterprise.
fixed trust and another does not usually
basis as the original sto ck ; and this p o l­
In brief, the fixed trust plan is simply
lie so much in the portfolio as in the
icy, o f course, Avorks to the advantage o f
to select a certain list o f securities— usu­
provisions o f the trust indenture. In
the fixed trust w hich holds all such a c­
ally all common stocks— and to invite
this respect, there are some rather im­
the public to buy shares in a trust
cruals.
portant variations.
W hile I consider the capital accumula­
deposit composed o f these securities.
Perhaps the most important o f these
tion plan distinctly preferable— some o f
Management thus ceases to be a factor,
variations lies in the distinction between
the most popular fixed trusts represent
and the principles which apply to the
the ‘ ‘ capital accumulation ’ ’ type o f trust
the distribution p la n ; and it is not hard
selection o f other types o f investment do
and the “ maximum distribution” type.
to understand why this should be, since
not apply. For example, we have often
In the typical capital accumulation
the latter plan enables the trust to make
been told that in buying common stocks
type o f fixed trust, stock dividends and
an important factor is the “ dividend
a very attractive rate o f current distri­
split-ups are retained so fa r as is me­
record” o f the stock purchased, and
bution to its investors. However, the
chanically possible. In the distribution
investors are cautioned to choose “ sea­
present tendency— as the public becomes
type, these accruals are sold as soon as
soned stocks. ’ ’ However, in the fixed
received, and the proceeds distributed to
better educated with respect to the fixed
trust field, tod ay’ s newest offering— i f it
the investors.

A


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Federal Reserve Bank of St. Louis

Northwestern Banker March 1931

58
trust idea— is toward the capital accu­
mulation type, and the m ajority o f the
newer trusts have adopted this plan.
W ith the increasing development o f
the fixed trust idea, the strength and
conservatism o f the sponsoring hankers
has become perhaps the most important
factor in judging these shares. The se­

OUR

OFFERING

LIST

WILL

BE

curity affiliates of one o f the larger Chi­
cago metropolitan banks and one o f the
more conservative Chicago bond houses
have recently sponsored the distribution
o f such a trust, and several important
and well known eastern institutions have
recently entered the field. Such sponsor­
ship may well bring about a permanent

MAILED

REGULARLY

UPON

REQUEST

G M A C o b lig atio n s
enjoy the protective background of highly liquid assets,
with credit factors widely diversified in region and
enterprise. Long regarded as a national standard for
short term investment, they have been purchased by
individuals, institutions and thousands of
banks the country over.
available in convenient maturities and
denominations at current discount rates

G e n e r a l M otors
A c c e p t a n c e C o r p o r a t io n
OFFICES

Executive Office

CAPITAL,

SURPLUS

"

IN

PRI NCI PAL

BROADWAY a t

AND

57TH

UNDIVIDED

CITIES

ST R E E T «

PROFITS

J^ew T or\ City

-

OVER

SA LESM EN
There is an opening in our organization for two or three
men who can point to a successful sales record. Expe­
rience in the sale of securities desirable but not essential.
We are prepared to make a very liberal commission
arrangement with men whose position is well estab­
lished in their respective localities and who can present
satisfactory evidence of their ability to sell. Details of
what we believe is an attractive offer may be procured
bycommunicatingwith Mr. Phippsat the address below.

P o r t e r

Fo x

Cr G o

$ 8 0 ,0 0 0 ,0 0 0

popularity fo r fixed trust shares— put­
ting them on a sound and conservative
investment basis.

A Prosperous Industry
The annual report o f the Cudahy Pack­
ing Company gives a clear-cut picture o f
a large company that has markedly in­
creased its profits during the past year.
Cudahy, though it does not approach the
magnitude o f Armour or Swift, is one o f
the Big Four, and to a considerable ex­
tent its report typifies the experiences o f
its leading competitors and o f the packing
industry as a whole. Further, it sustains
the general rule that the welfare o f the
packing industry is sympathetically linked
Avith that o f the live stock producers, Avho
throughout the past year have fared much
better than most other divisions o f agri­
culture.
On November 1, 1929, Avhen the fiscal
year embraced in the Cudahy report be­
gan, the stock panic was going strong,
though it had not reached its summit.
Thus everything set down in this report
has happened since the stock market
broke. Nevertheless the report shows a
gain o f more than 16 per cent in net
profits.
It is true that net sales have decreased;
but this is chiefly due to the decline in
the prices the company has charged and
it is offset by a proportionate decline in
the prices the company has paid for live
stock.
Reckoned according to volume,
the sales are almost equal to those o f the
preceding year. Incidentally, the mail­
order houses have met about the same ex­
perience— their volume o f sales has been
well maintained. Cudahy in 1930 charged
less and paid less. However, as it re ­
marks in its report, “ the farmer received
relatively higher prices for hogs and cat­
tle in 1930 than for any other products
o f the farm.”
The increase in profits Avas the result
o f neAV manufacturing and merchandising
economies, many o f which are o f a kind
that have also been effected in other lines
o f business which lack the inherent ad­
vantages o f the packing industry in a time
like the present. Naturally the opulent
report o f the Cudahy Packing Company
is by no means an example o f Avhat any
business under capable management could
have achieved in 1930. But it does em­
phasize the highly important fact that
some lines o f business have prospered. It
is an unmistakable spot o f brightness in
the general picture. — From Chicago
Journal o f Commerce.

IN CO RPORATED

In v e s t m e n t

S e g v r it ie s

1 2 0 S o v t h Lh S tille S t r e e t
TE LEPHO NE CENTRAL 2 7 0 7

Northwestern
Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

G h ig h g o

It is easier to act, even to act heroic­
ally, than it is to sit down and have an
idea.— John Erskine.
Aimin’ high means nothin’ if you’re
a rotten shot.

59

Common Stocks (or Bankers
B y PAUL CLAY,
President, Clay’s Economic Service
New York City

PAU L CLAY

leader, the investment expert, and the
economic advisor to his community. How
then shall he fulfill this quadruple role?
Being human, it presumably takes him
most o f a lifetime to master any one of
these four subjects; fo r this is the rule of
human powers. Hence it is plain that he
must seek the assistance o f experts in the
handling o f nonbanking problems such as
analysis o f stock values, and forecasting of
economic trends. Each o f these subjects is

CENTURY ago the only invest­
ments that were considered high
grade were national government
bonds; 80 years ago even municipal and
state bonds were regarded as speculations;
60 years ago the best railroad bonds were
so regarded; and as recently as 20 years
ago industrial stocks were thought to be
unfit fo r any real investor to hold. But
how the times have changed!
Now, gray-haired investors, whose
grandfathers would not buy a municipal
because it was too speculative, are actually
showing a preference fo r common indus­
trial stocks rather than bonds o f any
class. It was Edgar Lawrence Smith in
his epoch marking book on “ Common
Stocks as Long Term Investments,” who
first clearly and convincingly pointed out
the merits o f investing in the future
growth and prosperity o f the nation; and
then came the greatest o f all bull move­
ments lasting from September, 1921, to
September, 1929, to demonstrate the in­
vestment character of good common stocks.

itself so highly complex that success in it
is a life undertaking.
One cannot forget the summer and
autumn o f 1929 when Wall Street men of
the highest position and presumable un­
derstanding were unqualifiedly recom­
mending many individual stocks respec­
tively upon the claim that each repre­
sented what was called a “ special situa­
tion.” This phrase was used to mean that
the given stocks possessed such high merit
and such powerful financial backing that
whatever the stock market might do, it
would keep on going up. The fact that
every previous bear market had carried

A

TODAY’S
Outstanding Type of
S E C U R IT Y
A type of security has recently come into the
market that seems to have been made to order
for banks to sell— the fixed trust. Because the
fixed trust offers, in one investment, safety,
diversification of investment, certainty of in­
come, marketability, a good income return
and chances of price appreciation, there can­
not be any possibility of an unfavorable reac­
tion upon the part of the bank’s clients now
or at any future date.

The Banker’s Dilemma
IN CID EN TA LLY , this improvement in
I the merit and quality o f one class o f
securities after another, when taken to­
gether with the ever widening activities of
banks and bankers, have had the result of
placing many a banker in an embarrassing
dilemma. He has found himself prac­
tically forced to give to his depositors ad­
vice on their investments. This was not
so difficult as long as those investments
were bonds the qualities o f which could
easily be read; but during the past few
years since the public began turning
toward common stocks, the banker, to
meet the demands o f his clientele, must be
not only a banker, but also analyst enough
to discriminate between common stocks
which look just alike, valuation expert
enough to tell which are worth the price,
and economist enough to foresee any really
great change in the economic situation
which might affect stock values as a whole.
In brief, the complexities o f modern
life have made the banker the financial

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Matthews & Lewis Co. can supply your bank
with fixed investment trusts for resale to your
customers at a substantial profit— in fact, a
profit greater than you could secure from the
sale of bonds having the same high degree of
investment merit.
We shall be g la d to give you
complete details on the trusts
which w e can supply you.

®

M

atthew s

&>L e w i s C o .

Investment Securities
231 South La Salle Street
CHICAGO

Northwestern Banker March 1931

60
down with it all classes and grades o f
stocks and bonds was not then thought
to have any significance. Furthermore,
the claims regarding “ special situations”
were made so positively and by persons o f
such high prestige that they came to be
generally accepted. The practical lesson

o f that experience, now that the air has
cleared, appears to be that the banker, in
order to give the investment advice which
is demanded o f him, should have two par­
ticular types o f expert knowledge :
First, knowing o f expert valuation of
common stocks; and

Every Stock in its Portfolio is Rated “ A ” or “ Aa’
Lowest issue cost
of any similar trust

UTILITIES
RAILROADS
INDUSTRIALS
Am. Tel. & Tel. Co.
Am. Tobacco Co. “ B”
Atch.,Top. & S.Fe Ry.
Consolidated Gas Co.
Detroit Edison. Co.
Du Pont deNem. & Co.
Eastman Kodak Co.
General Electric Co.
Illinois Cent.R.R.Co.
Ingersoll-Rand Co.
Inter. Harvester Co.
Liggett & MyersT.“ B”
Louis.& Nash.R.R.Co.
National Biscuit Co.
N.Y. Cent.R.R.Co.
Otis Elevator Co.
Pennsylvania R.R.Co.
Proctor & Gamble Co.
Southern Pacific Co.
Stand. Oil Co.of Calif.
Stand.Oil Co. (N.J.)
Stand.Oil Co.of N.Y.
Texas Corporation
Union Pacific R.R.Co.
United Gas Impr.Co.
U. S. Steel Corp.
West. Union Tel. Co*.
Westinghouse E.& Mfg.
F.W.Woolworth Co.

N ATIO N A L
IN D U S T R IE S
SHARES
Series A
lu ll particulars upon request

W ALTER M. TOOLE
C O M P A N Y I NC .
Wholesale and Retail Distributors
for Iowa and Nebraska
Equitable Bldg.
Des Moines, Iowa
Phone 4-4289

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Second, knoAvledge o f the best methods
o f financial forecasting.
Nature of Value
GEN ERATION ago the conventional
method o f judging a stock was by
means o f a study o f its book value. Later
experience has proven, however, that book
values contain all the fictions and errors
which get into balance sheets either by de­
sign or by error. Consequently, they have
lost prestige especially during the past ten
years. Yet any generally accepted substi­
tute for them has not yet been agreed
upon. A t different times and in different
cases various departments o f the internal
revenue bureau have used more than 53
different valuation formulas.
However, the drift o f recent years has
been away from balance sheets and toward
income statements— meaning that values
are more and more widely determined by
earning power rather than by book assets.
The writer, in the Ford Motor case and in
other valuation cases wherein he has given
expert testimony, used a valuation fo r­
mula resulting from his 25 years o f re­
search— which may be summarized briefly
as follow s:
(1)
“ Financial Strength” was first de­
termined by means o f a whole set o f finan­
cial ratios;
(2)
“ Earning Power” was next deter­
mined by a study o f earnings, o f the rate
o f increase therein and o f the variations
thereof— so that this earning power might
be substituted fo r the actual current earn­
ings to give more accuracy to the valua­
tion.
(3)
“ Earning Multiples” meaning the
multiples or ratios of values to earnings
in the cases o f hundreds o f stocks over long
periods o f years were then tabulated and
compared.
(4)
“ Variation o f Multiples” meaning
the rule o f this variation was thus discov­
ered. It was found that the greater the
financial strength the higher the multiple;
but it was also found that the two did not
vary in exact proportion.
(5)
“ Valuation.” The valuation o f any
particular stock is thus obtained by multi­
plying its corrected and computed earning
power by the particular multiple o f value
to earning power as indicated by the finan­
cial strength o f the given corporation.
The merits o f such a valuation— o f
which this is the barest outline with many
important factors and details omitted—
need only be mentioned in order to be un­
derstood. (1) Such a valuation reflects
almost every possible feature o f both the
balance sheet and the income statement,
because while many o f these ratios used in
determining financial strength are drawn
from the balance sheet only, many others
are based upon items from both balance
sheet and income statement. (2) Earning
power is much safer as an investment
guide than current earnings, since it is not
subject to violent changes such as the 20

A

61
per cent gain in 1929 and the 30 per cent
decrease in 1930. (3) For these and other
reasons such a valuation is probably the
most accurate possible summary o f the
merits o f a stock. (4) As might be ex­
pected, the value o f a stock thus deter­
mined will often begin rising a long time
before the price does so, or begin falling
long before the price suffers a collapse.

In short, common stock investments are
for those bankers Avho are especially
equipped either in their own organization
or else through outside connections, to
know how to evaluate these stocks and how
to judge the great danger signals and
great buying opportunities. Probably the
time will come when every large metropoli­
tan bank will itself be so equipped with
economic and valuation departments.

A Fortified Position
BVIO U SLY, the banker who pro­
vides himself with such detailed
knowledge o f values, as leading bankers
have begun to do in many financial cen­
ters, is in a fortified position. He is bet­
ter able to select stocks fo r estates under
his care or for recommendation to his de­
positors— in cases o f course where such
estates or depositors call for common
stocks. He is better able also to judge the
collateral under loans and to manage his
own personal and investment accounts.
Financial Forecasting: To many it is
not apparent that a banker even in his
advisory capacity needs any knowledge of
financial forecasting. Admittedly, he does
not need any knowledge o f what has so
often passed under this name. Neverthe­
less, there are times when credits become
so inflated as to render it certain that all
values will be seriously depressed. Some
such times were 1929,1906, 1902,1880 and
1856. The most important point is that
when such conditions arise they fore­
shadow a serious impairment o f the prices
and current values o f even the best and
most seasoned stocks.
Likewise there are other times when
credits and inventories are so thoroughly
liquidated and when the foundations of
prosperity are so well rebuilt that the
prices and values o f all stocks, good, me­
dium and poor are bound to enjoy a great
appreciation running from one to three
years.
Some such times were August,
1921, December, 1917, October, 1915, De­
cember, 1907, and November, 1903.
Now, since these major advances and
drastic declines affect all stocks regardless
o f intrinsic character— it follows that a
knowledge of intrinsic value is not in itself
and alone sufficient. The banker needs
also a working knowledge o f financial fore­
casting, meaning not the ability to predict
all the turns in the market, but rather the
ability to identify the great danger signals
and the great buying opportunities.
No doubt this very practical need may
explain why more has been written upon
the subject o f financial forecasting during
the past 15 years than was written during
the previous 150 years. Every university
in the country is giving great attention to
the subject; many banks, bond houses and
industrial corporations have their economic
departments; and each federal reserve
bank has an excellent research organiza­
tion. Besides these agencies there are pri­
vate institutions, some o f which have been
fairly successful in this work.

O


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Federal Reserve Bank of St. Louis

Danger After Age Forty-five
That the age o f forty-five years is gen­
erally accepted as the limit at which either
men or women can be safely sold life in­
surance without a rigid medical exami­
nation is indicated by a survey o f this
phase o f underwriting recently completed
by the American L ife Convention o f St.

Louis. This organization is the largest
life insurance association in the world. The
survey also revealed that the underwriters
are more willing to grant this form of in­
surance to unmarried women than to mar­
ried women.
Jimmie : Daddy, what was the date o f
the battle of W aterloo?
D addy: I don’t know.
Jimmie: You don’t know! And to
think that tomorrow I shall be punished
fo r your ignorance!
— Pearson’s.
W if e : What do you mean by telling
Mrs. Crewso’s husband you never ask my
advice about anything?
Husband: Well, my dear, I don’t. You
don’t wait to be asked.— The Outspan.

Lee, Higginson & Co,
Establishes! 1 8 4 8

137 W est Jackson Boulevard
a t L a Salle Street
BO STO N

CHICAGO

Higginson & Co.
Lee, Higginson et Ci?

NEW YO R K

LONDON
PARIS

Northwestern Banker March 1931

62
proaching an acute stage, although in
1921 credit accommodation could be had
only at exorbitant rates.

The Future of General
Management Trusts
(Continued from page 44)
cash balances which have served them in
good stead.
The foreign situation, which has been
widely discussed, is, by comparison vastly
better than in 1921, when a complete col­
lapse of currencies was threatened and the
most chaotic conditions existed. Economic
experts seem to agree that in general
economic conditions in all o f Europe, with
the exception o f Great Britain, were bet­
ter at the worst period o f 1930 than at
the best period in 1920 and 1921.
Domestic credit conditions during the
past year have never reached anything ap­

Governed by Facts
HE above recital o f facts should not
be interpreted to mean that another
period o f rapid development is at hand.
A fairer interpretation would be that the
uncertainty o f 1930 will give way to a
more normal state of affairs and that for
the next few years at least the country
may be expected to respond more in­
telligently to actual facts than has been
the case for some years.
Conditions in truth are such that it will
be interesting to weigh the possibilities o f
the future as they may affect investment

T

RAILROAD BONDS
I

The railroads

I

permanent public necessity.

in

this

country

are

a

They are

>j

the nation’s commercial

arteries.

The

if

vast investment in these securities today

11

indicates their strength.

l|

recommended by this firm are worthy of

j|

a place in your bank’s list....................

Railroad bonds

W rite

to O ur

N ea rest

O ffice

METCALF, COW GILL
AND COMPANY, INC.
2 0 7 E q u i t a b l e Bl dg., D e s M o i n e s , la.
Chicago

Sioux City

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Cedar Rapids

Sioux Falls

companies. There are many indications
abroad that the investment companies are
determined to overcome the one tran­
scendent error o f the past, namely the
raising o f new capital and the immediate
investment thereof in equity issues at
boom prices. There are other serious
problems which must be met, and it Avili
be interesting to watch the developments
o f the next few months to note how
various managements propose to solve
them. Most managements recognized the
existence o f such problems long before the
deflation began, but none regarded them
seriously, in the mistaken belief that other
considerations were o f primary im por­
tance.
I f the American public can readily be
persuaded to put new capital into invest­
ment companies o f the general manage­
ment type at a time such as the present,
it is more than probable that over the
ensuing period such investors will be fully
satisfied with the results. But the fact is
that unless some strong measures, such as
may be looked for, are taken, no new
capital will be forthcoming until the
cream has already been skimmed from
any rise in equity values which may come
during the next few years. In other
words, investment companies are coming
to recognize the fact that it will be nec­
essary to find the means to raise capital at
a time when investments can be made ad­
vantageously, and furthermore to avoid
the immediate use of capital that is raised
in boom periods, except as it may be in­
vested in senior securities. A t the mo­
ment these appear to be practices com­
paratively obvious and likewise easy to
put into operation. But the truth is that
the American public will need to be per­
suaded to invest new capital today, and
later, when such capital can be raised
more easily, managers will be expected,
as they were in 1929, to grasp every pos­
sible opportunity for speculative profit.
It is encouraging to know that man­
agements are fully aware o f these prob­
lems, and that constructive efforts are
being made to correct the situation in so
far as possible. It may be expected that
the stronger groups will move far in the
desired direction and will be correspond­
ingly successf ul in establishing themselves
permanently in public favor.
Just what steps will be taken cannot as
vet be said, although it is believed that
many managements are already working
toward a more complete independence
from sales organizations.
Such pre­
liminary measures are likely to be fo l­
lowed by other moves calculated to in­
terest the public in management type
trusts once more, and to effect a renewal,
on a less spectacular scale, o f the normal
growth o f these companies.
That which “ can’t be done” is merely
something which we have not as yet
learned how to do.

Railroad Bonds

INVESTMENT TRUST TRENDS
By C. T. McCREEDY
Manager, Bank Service Dept.
Ames, Emerich & Co., Inc.

URING the year 1929 American
investors saw the greatest develop­
ment o f investment trusts witnessed
in any similar period up to that time.
The origin o f our companies operating in
this field began several years earlier, gain­
ing momentum as the great bull market
carried them forward so that by the fall
o f 1929 our domestic companies forged
far ahead o f their English parents, both
in number and volume o f securities dis­
tributed to investors in any similar pe­
riod. This new phase o f our investment
structure started as an off-shoot o f well
established British institutions, some of
Avhich have weathered wars, depressions
and all known types o f financial crises
and have been exceedingly prosperous fo r
half a century.
There is nothing complex about the
financial set-up o f a typical general man­
agement trust which was the first type o f
investment company to gain wide promi­
nence here. Capital structure usually con­
sists o f a substantial portion o f long term
debentures with the balance in preferred
and common shares. A typical English
company is capitalized on the basis that
for every $100 o f debentures $66.67 o f
preferred and $33.33 o f common are is­
sued, the object being to obtain a high
ratio o f senior money represented by de­
bentures and preferred stocks. Many o f
the well established companies pay as low
as 4.50 per cent on senior capital and in at
least one instance such funds have been ob­
tained at even more advantageous rates
than the British Treasury. Some o f our
domestic companies raised their entire
capital through the sale o f debentures and
common stock and those that sold pre­
ferred usually made that stock convertible
into common in order to facilitate its dis­
tribution. As yet funds have not gone so
largely into senior capital in our trusts,
but as the various companies become es­
tablished we can expect them to folloAV the
English practice in this respect.

D

The advantage of borrowing through the
medium of long term debentures and of
distributing a substantial amount o f pre­
ferred stock is, o f course, to provide a
1everage for the common shares, this
leverage being obtained by paying only
a fixed Ioav rate on money which should
earn enough to leave a substantial mar­
gin fo r the common shares. A n y soundly
managed trust having a ratio o f 50 per
cent or more o f senior capital AAdiich
calls for the payment o f not above


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Federal Reserve Bank of St. Louis

Above, the action o f a typical management stock compared with the stock 7s
actual liquidating value
4.50 to 5.50 per cent, obviously should he
successful over a period o f years. Under
anything like normal market conditions
there should be a margin o f earnings over
senior requirements each year. This mar­
gin has a cumulative effect and over a
long period has given the junior capital
o f English companies a tremendous earn­
ing poAver. In a rising market it means
that the common stock equity will increase
from tAvo to ten times as fast as the mar­
ket fo r the underlying securities in the
portfolio. In a prolonged market decline
the reverse is true so that equity in the
common stock declines faster than p o rt­
folio values.
The reasoning used in the formation
o f general management investment trusts
is that a capable managing board guiding

a floAv o f capital in the Avorld’s invest­
ment channels can insure a wider dis­
tribution o f risk and a larger, more de­
pendable income than a single investor
can hope to attain. Obviously there is
no basis for controversy over the funda­
mental principles o f safety through
sound diversification or maximum earn­
ings through the exercise o f expert finan­
cial judgment in varying a portfolio so
as to make the most o f changing invest­
ment trends. It is the old story o f not
putting all o f the eggs in one basket plus
the realization that the business o f invest­
ing one’s surplus to the best advantage
demands expert financial assistance.
W h at then is Avrong with our manage­
ment trusts today?
I f they Avere pat­
terned so closely after successful British

Northwestern Banker March 1931

64
companies which have weathered the
storms o f fifty years why do many who
sang their praise two years ago criticize
them today? A careful study will reveal
the fact that while mistakes have been
made both in organization and adminis­
tration the trend o f the world’s security
markets during the last year and a half
is largely responsible fo r the present un­
popularity o f this type o f investment
company. There has never been a time
when all o f the principal markets o f the
world have been so uniformly depressed
and, therefore, so unsatisfactory for
profitable investment. Some o f our com­
panies were almost completely invested
when the break in security prices came

so they had little or no cash available to
take advantage o f lower price levels.
Some went back into the market too soon,
loading up on common stocks, others used
better judgment, swinging from common
stocks to high grade bonds in order to
insure a dependable income. In spite o f
errors, the statements o f a few companies
at the end o f 1930 showed depreciations
in value as small as one-third o f the av­
erage drop in securities as shown by pub­
lished security price indices such as the
Dow-Jones averages. Certainly such a
record lends some support to the fact that
managing boards can be worth many
times their fee to owners o f investment
trust issues in a rising market. A close

examination o f the 1930 results show that
many o f the managements have conducted
the affairs o f their companies excep­
tionally well, especially when compared
with the deplorable results obtained by a
majority o f the individual investors op ­
erating in the stock and bond markets
during the same period.

^,iiiiiiiiiiiiiiiiiiiiiiiii::iiiiiiiiiiiiiiiiii|||||||||||||||,,|||,||,mi,l||ll,||||||||||||||||||||||,)||||m
|||||||||||m|||||||||m
||||1||)||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||^

A REPRESENTATIVE LIST OF
BONDS FOR INVESTMENT A N D SECONDARY

j

RESERVE ACCOUNTS

yielding from 5.00 to 8.70%
C. T. McCEEEDY
Approx-

C

h ester

W

ater

S e r v ic e C

Yield

o m pany

1st Mortgage 4 ]/2s, 1 9 5 8 .........................................

N

ew

Y o rk W a t e r S e r v ic e C
P o w er C

&

O hio W

S e r v ic e C

ater

labam a

W

e ste r n

W

S e r v ic e C

ater

W

ew

Y o rk W

ater

C

Mortgage 5s, 1951

..........

est

V

S e r v ic e C

W

ater

5.55%
o m pan y

1st Mortgage 5s, 1 9 5 1 .............................................

A

r izo n a

E dison C

1st

atural

G as C

Pur.

Prw .) 1941

C
&

W

ater

|
I

8.15%

S e c . C orp .

Coll. Trust 5s, 1 9 4 8 ................................................
¡

7.30%

o r p o r a t io n

Convertible Debenture 5s, 1 9 79 ...............................

P o w er, G as

8.20%

o rp.

Debenture 5s, 1 9 7 9 ..................................................
r i 'U t il it ie s

5.62%

o rp.

Mortgage 6s, (with C om . Stocfi

P eoples L ig h t feP P o w e r C
T

5.62%

o m pan y

1st Mortgage 5s, 1 9 4 8 .............................................

S o uth ern N

5.50%

o m pany

1st

ir g in ia

5-45%

o m pan y

1st Mortgage 5s, 1 9 5 7 .............................................

N

5.32%

o m pan y

1st Mortgage 5s, 1 9 5 8 .............................................

A

5 .2 5 %

o rp.

5s, 1 9 3 1 ...................................................................

8.70%

Above quotations are subject to prior sale and change in price
W r i t e fo r m o re specific inform a tion

on a n y

or all o f these issues

I
I
§

G.L. O u r s t r o m & Co.
|

\
\
1

INCO RPORATED

insurance Exchange Bldg.
Des Moines
O f f i c e s in

..

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

1

Board of Trade Building
Chicago

\
¡

p r in c ip a l c itie s

iiimmiiiimiiiiiii

HE lack o f interest in management
companies during 1930 reflects just the
opposite extreme from the clamor for
both debentures and shares which was
experienced in 1928 and 1929. Just how
severe this reaction has been is clearly
shown by an examination o f the market
action o f a typical management stock
compared with that stock’s actual liq­
uidating value. From September o f 1929
to about the end o f that year market
value was higher than liquidating value,
at times as much as 62 per cent higher.
From December o f 1929 to February of
1931 the shares have sold below actual
liquidating value as indicated by the
chart. This particular stock sold about
50 per cent below its break-up value on
one occasion.
During these dreary months the Ameri­
can investment trust appetite has been
satisfied almost exclusively by fixed
trusts, a type in which a definite selection
o f securities, usually confined to stocks,
is trusteed for the benefit o f certificate
holders. A certain number of shares o f
specified stocks are purchased in the
market, these shares comprising a unit.
Against each unit the trustee issues a
definite number o f certificates o f owner­
ship which are then sold by the distrib­
utor to the public at a price approxi­
mately 5 to 10 per cent above odd lot
prices plus a fixed charge for issue and
deposit. Shares comprising the unit are
bought as required and the price o f the
certificates reflects the current liquidating

T

o m pan y

1st Mortgage 5s, 1 9 5 1 .............................................

P eoples L ig h t

The Opposite Extreme

5.00%

4

65
value plus the charges. In some cases
certificate owners are permitted to cash
their investment by forwarding to the
trustee who then sells the collateral
stocks in the odd lot market. Holders o f
the complete unit are usually given the
privilege o f exchanging the certificate for
the deposited stocks, thus withdrawing
their investment from the trust.
Man­
agement plays little or no part in these
companies, except in the less rigid type
o f trusts where a provision is made that
a portion o f stocks may be eliminated, if
in the judgment o f the investment com­
mittee such action seems advisable.
There are fixed trusts confined entirely
to banks, railroads, public utilities and
chain stores, some operating in oil shares
and others whose funds are distributed
throughout a well diversified list o f high
grade equities in all o f the principal fields
o f investment.
Most o f the fixed trusts are set up to
operate fo r a period o f fifteen or twenty
years, although in recent months a few
have been organized fo r the purpose o f
taking advantage o f only one period o f
the business cycle.
These short term
fixed trusts embrace a period o f from two
to five years on the assumption that a
substantial recovery in the market fo r the
selected stocks should be witnessed during
that time.
It is usually found that the
conventional long term fixed trusts con­
fine their portfolios largely to “ blue chip”
stocks, so called because o f their present
high investment character, which usually
also denotes a high price per share. These
trusts, therefore, give the investor an in­
terest in very aristocratic stocks, whereas
the short term fixed trusts which have
been conceived during the last few months
choose more o f the lower priced shares
in which the speculative element is
somewhat greater. A comparison o f the
two types reveals the fact that while the
former seems to be more conservative on
a long term basis the short term trusts
may easily show greater appreciation in
value during the space of a few years.
In the first place the underlying stocks
in the short term trusts are mostly the
cheaper stocks in which the depreciation
has been relatively greater than in blue
chip shares.
The opportunity for re­
covery is, therefore, greater. And it
should also be noted that whereas the
stocks included in long term fixed trusts
are today most conservative it is another
thing to say they will retain their aristo­
cratic standing fo r fifteen or twenty
years. Traction company securities were
included in the most conservative ac­
counts not so many years ago, but today
those that remain attractive can just
about be counted on the fingers o f one
hand. Can anyone say that some o f our
present leading industries may not follow
the same road?

T

in part, to the disappointment on the part
o f investors in the record o f general man­
agement stocks and debentures during the
past year and a half.
When investors
saw paper profits mounting with each
passing week many o f them lost sight o f
the fact that the managers o f their re­
spective investment companies were not
an absolute guarantee against declining
markets. No matter how able or how
broad their contacts no management
should be expected to maintain bull mar­
ket earnings in such a world-wide col­
lapse as that which we have just wit­
nessed. The leverage provided by cheap
senior money works both ways so if a
particular management company has a

leverage factor o f four to one in a rising
market the equity in the common stock
will vanish about four times as fast as
the decline in the portfolio during a fall­
ing market.
Probably both fixed and management
companies will find a permanent place in
our field o f investment. Many investors
prefer to have a specific selection o f issues
wrapped up and delivered to them, one
which they know will remain about the
same in the future. This type o f com­
pany is new, however, so we have no his­
torical background by which to measure
its possibilities. W e have such a back­
ground fo r management companies and
it is now evident that the typical British

th

11
1

in Chicago

with its 190 Banks

in Chicago’s

workshop
. . . That great industrial
heart of Chicago made
up of the Stock Yards,
^Packingtown," and the
Central Manufacturing
District.

Combined Capital, Surplus and Profits
$ 3,750 ,000.00

Combined Resources
$ 30,000 ,000.00

TH E STOCK YARDS NATIONAL BAN K
THE STOCK YARDS TRUST & SAVINGS B AN K
cxf C H IC A G O

HE swing to this fixed type o f in­
vestment company can be ascribed,


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Northwestern Banker March 1931

66
type management trust is steadily regain­
ing popularity. It is irrational to con­
demn all o f these companies because a
few so far have proved weak and im­
perfect. It is also unreasonable to pre­
sume that the debentures o f good man­
agement trusts will continue to sell at
discounts ranging from 15 to 25 per cent
of par, especially when it is considered
that the asset value in most cases still
is above $1,500 per $1,000 o f par value.
In at least one instance asset value dur­
ing the first week o f February, 1931, was
$2,100 per $1,000 o f par value. It is not
logical to expect that management stocks
will long sell below actual liquidating val­
ues and there is already definite evidence
to refute the disparity between market

price and break-up value as shown in the
chart.
The stock market debacle o f 1929 and
1930 has taught some valuable lessons
and uncovered some unusual opportuni­
ties. Among other things it has taught
investment trust boards the vital im­
portance o f maintaining a • portfolio
largely in income bearing issues for the
protection o f debenture interest and pre­
ferred dividends. It has convinced them
o f the advisability o f publishing complete
statements and portfolio holdings once or
twice a year, so that investors are now
able to determine quite accurately how
their funds are being handled. A t least
a portion o f those investors who have ex­
amined the 1930 statements o f these com­

panies have decided that there is ample
reason fo r confidence in them.
Shrewd investors who can forego in­
come fo r a year or two are gradually
turning to general management trust
shares and the time is not far distant
when the most conservative accounts, in­
cluding the portfolios o f banks and in­
surance companies, will include invest­
ment trust debentures in substantial
proportions. This means a swing o f the
pendulum back from fixed trusts which
will gain momentum as soon as the lever­
age o f management companies’ senior
money begins to work again for the com­
mon stockholder.
Business will recover
eventually and forge ahead, earnings will
increase, security prices will rise, then
the management trusts will have an op ­
portunity to strengthen their equities
and build up reserves which will tide
them over the next m ajor decline, when
and i f it occurs.

Financial

C o m plete
In v e s t m e n t S

e r v ic e

This organization is equipped to render
a complete investment service to com­
mercial

bankers in local

or national

market securities. The recommendations
of this firm are based upon the particular
requirements of your institution or its
customers.

Current list, upon request.

M E T C A L F , C O W G IL L
AND C O M PA N Y, INC.
207
Chicago

E q u ita b le B ld g .,
Sioux City

D e s M o i n e s , la .

Cedar Rapids

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Sioux Falls

W rite to Our
Nearest Office

Conditions

Improving

Financial conditions in Clay county,
Minnesota, are considerably better than in
many other sections o f the northwest and
a general improvement in business is
noted, it was revealed at a meeting o f the
Clay County Bankers’ Association held in
Moorhead recently.
Collections are better and the county
was declared to be in a more sound condi­
tion now than fo r some time, while nearby
counties have not fared so well.
Twenty bankers attended the meeting
and every bank in the county was repre­
sented. A dinner preceded the business
meeting in the New Columbia hotel and
Oscar B. Rusness, president o f the group
and cashier o f the First National Bank in
Moorhead, presided.
Distribution o f the reward offered for
the capture and conviction o f the three
Baker bank robbers was authorized by the
association.
The major portion o f the reward, $625,
will go to a youth who saw two acetylene
tanks and a torch in a private garage in
Fergus Falls, reporting it to the sheriff.
Total rewards offered amounted to $1,250,
the remainder to be divided between
Sheriff O. J. Tweten of Otter Tail county,
and John Henkes, deputy sheriff. The
latter two will receive $312.50 each. The
Minnesota Bankers’ Association posted
$1,000 reward and the Baker State Bank
$250.
The man and two youths who burglar­
ized the bank on January 4 are now serv­
ing sentences.
“ What is the matter with that fellow
over there ?”
“ Someone just mistook him for Rudy
Vallee.”
“ No, I ’m referring to the one who’s so
downcast.”
“ That’s the one I mean.”

67

Foreign Bonds

T H E O U T L O O K F O R FO R E IG N
BONDS
fty

JO H N T . M A D D EN
Certain foreign bonds are selling
at bargain prices and should show
substantial recovery with improved
economic conditions.

Director, Institute of
International Finance
Dean, School of Commerce,
New York University

JO H N T. M A D D E N

P TO the end o f January, foreign
bonds quoted on the New York mar­
ket showed a continuous decline. At
times the rate o f this decline was very
rapid, and to some it appeared that the
American investor had lost confidence in
these securities or at least that foreign
securities were no longer enjoying the
favor o f the American investment public.
It will be helpful to analyze the reasons
for this decline and to inquire whether the
rapid depreciation that took place in the
prices o f most foreign bonds was justi­
fied. A careful analysis o f the foreign
bond situation reveals that prices Avere
affected by three specific factors: (1) the
general economic depression prevailing
throughout the w orld; (2) the adverse p o­
litical situation in many states; and (3)
the poor bond market prevailing in the
United States.
General Economic Situation: It is a
well known fact that the world-wide eco­
nomic depression which set in shortly be­
fore the collapse o f the New York stock
market in 1929 has no parallel during the
last three or four decades. This depres­
sion was accompanied by a sharp decrease
in commodity prices which was particu­
larly severe in the case o f raw materials as
well as agricultural commodities. The
fall in prices was especially detrimental
to the South American countries, all o f
which are raw material producing coun­

U


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Federal Reserve Bank of St. Louis

tries. Thus, for example, Brazil and Co­
lombia depend to a very large extent upon
coffee. Bolivia’s welfare depends almost
exclusively upon the price movement o f
tin in the world’s market while the wel­
fare o f Peru and Chile depends upon such
commodities as copper, oil, nitrates, cotton
and sugar.
Political Situation
HE adverse economic conditions pre­
vailing throughout the world had an
unsettling effect upon the political situa­
tion in many countries. Political unrest
was manifested not only in South America
but also throughout the continent o f Eu­
rope. The German elections o f Septem­
ber, 1930, which resulted in substantial
gains by the extremist parties, namely the
National Socialists (Fascists) and the
Communists, were an indication o f the
dissatisfaction with the existing economic
situation on the part o f a large number
o f the German people. The same dis­
satisfaction existed in other continental
European countries, but with this differ­
ence: that where political dictatorships
prevailed as they did in some o f these
countries a true expression o f public opin­
ion was more difficult. The economic de­
pression in South America was mainly
responsible for the overthrow o f govern­
ments in Argentina, Brazil, Peru, Bolivia,

T

and Panama. It is gratifying to note,
however, that in all these countries the
revolutions were accomplished with little
shedding o f blood and the United States
immediately recognized the newly estab­
lished governments.
The Bond Market in the United States:
While these factors in themselves would
have had an adverse effect on the move­
ment o f foreign bond prices, the poor
bond market prevailing in the United
States resulted in a sharp decrease in the
prices in all bonds except those rated as
triple A which o f course always find
strong support through institutional buy­
ing, and purchases by trustees and oth­
ers.
The bond market in the United
States felt the shocks caused by the large
number of bank failures, particularly the
failure o f a substantial middle-sized bank
in New York City, and the threat o f the
proposed bonus bill. It should be noted
in this connection that banks which are
in difficulty usually sell first those assets
which are most liquid and since the in­
terior institutions held a substantial,
amount o f foreign bonds, these were
among the first to be thrown on the mar­
ket, thereby depressing prices.
Recent Defaults
HE foreign bond market was further
affected in a smaller measure (a) by the
temporary suspension o f interest and

T

Northwestern Banker March 1931

68

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A pre-eminent Hotel
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ROOM A N D BA T H $ 3 UP
Banker March 1931
Digitized forNorthwestern
FRASER
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Federal Reserve Bank of St. Louis

amortization payments by Bolivia and (b)
by the unofficial announcement emanating
from Peru that a moratorium on its fo r ­
eign indebtedness might be forced in the
near future. While both the default o f
Bolivia and the announcement from Peru
had a disquieting influence on the bond­
holders it is not without profit to com­
pare the present situation with the major
depressions o f the nineteenth century. In
the last century an economic depression
o f the same relative magnitude as the cur­
rent economic crisis was followed by a
wholesale default o f foreign obligations.
Furthermore, many countries which de­
clared themselves in default were not in a
hurry either to reach an agreement with
their creditors or to make a settlement o f
their obligations. A t the present time,
the defaults are restricted to countries
which suffered most from the economic
depression. Thus Bolivia, whose revenues
in 1929 amounted to about 48,000,000
bolivianos, $17,414,400, Avere reduced in
1913 to 35,000,000 bolivianos and in 1931
the estimates show a probable income o f
only 29,000,000 bolivianos. A similar sit­
uation prevails in Peru. Bolivia, how­
ever, in contrast with the practice existing
in the nineteenth century, immediately
sent a commission to New York in order to
reach some settlement Avith the bondhold­
ers in the United States, an indication
that this nation is doing everything with­
in its power to maintain its credit stand­
ing in the United States.
Germany: German bonds are of par­
ticular interest in the United States; first,
because Germany has borroAved in recent
years in the United States more than any
other nation, exclusive o f Canada; and
secondly, because Germany is one o f the
large purchasers o f American commodi­
ties. Furthermore, Germany holds a key
position on the continent o f Europe and
any adverse development in Germany
finds itself reflected immediately in neigh­
boring countries. The prices o f German
securities in recent months Avere influ­
enced by tAvo factors: (1) an impression
commonly held that the German govern­
ment Avould ask fo r a moratorium on the
conditional part o f the Young annuity
and (2) the great gains made by the ex­
tremist parties. A careful analysis o f
these factors reveals that they have been
greatly overestimated in their adverse
effects. The declaration o f a moratorium
by Germany on the conditional part o f the
Young annuity should not weaken the
prices o f German bonds privately con­
tracted abroad but on the contrary, should
strengthen them. This conclusion follows
from the fact that the declaration o f a
moratorium by Germany would result in a
larger volume o f foreign exchange at the
disposal o f German banks which they in
turn could transfer into foreign currencies
fo r the payment o f principal and inter­
est on obligations privately contracted
abroad. Furthermore, since the possibil­

ity o f a moratorium was foreseen by the
Young plan and since Germany in making
use o f it Avould be acting fully in accord­
ance with the provisions o f this plan, it is
difficult to see how such rumors should ad­
versely affect the German bonds outstand­
ing in the American market. As regards
the gains made by the extremist parties,
it is also difficult to see how this should
have an adverse effect on German securi­
ties. With the exception o f the Commun­
ists whose political credo is well knoAvn,
all parties in Germany, including the Na­
tional Socialists (Fascists) publicly de­
clared that it is not their intention to
repudiate or default on obligations p ri­
vately contracted abroad. Hence, regard­
less o f the party that comes into power
in Germany, excluding the Communists,

..... 7 )
i\

.

For The Farmer
And The Banker
g . e il e r s
had a 20 acre field
that was earning him
only $100.00 per year
because it was too wet
for anything but poor
pasture. He tiled it at
a total cost of $475.00.
red

F

The next year that field
produced 70 bushels of
corn to the acre which sold
at 70 cents for a total of
$980.00.
Thus the first
year’s crop repaid the total
cost of tiling and left in his
bank account five times as
many dollars as the field
had ever earned him before
in one year.
Since then Mr. Eilers’ in­
come from that field has
varied some what with the
crop planted and the mar­
ket prices, but always it has
been several times as much
as before the field was tiled.
Tile drainage will in­
crease the income of your
customers who have wet
fields or spots on their
farms. Thus it will increase
the funds handled through
your bank, and so the
profits you earn.
Thorough tile drainage
will go far in solving the
farm problem of your trade
territory.

M ASON CITY BRICK
and TILE C O M PA N Y
Denison Building
M A S O N C IT Y ,

IO W A

69
there seems to be little danger that obli­
gations privately contracted abroad by
German political units or by German cor­
porations should fail to be discharged
punctually. As a matter o f fact during
the last two weeks American investors
seem to have adopted these views with the
result that German bonds have shown a
remarkable recovery.
The Outlook
HE outlook fo r foreign bonds at the
present time depends primarily upon
the economic conditions throughout the
world. A ny improvement in economic
conditions would immediately have a ben­
eficial effect on the bonds o f most coun­
tries.
Improved economic conditions
would immediately result in an increase
in the foreign trade o f the various coun­
tries, in an increase in the commodity
turnover, and hence in an increase in the
revenues o f the debtors. In practically
every country a policy o f rigid economy
has been instituted. Expenditures have
been cut to the minimum so that any im­
provement in the economic conditions o f a
country would favorably affect its budget
and would facilitate the meeting o f its
foreign obligations. Secondly, an im­
provement in economic conditions would
immediately result in an improvement in
the political situation and, as is well
known, stable political conditions always
have a beneficial effect on the obligations
o f a government. When improvement of
this character shall take place, is very
difficult to say. Most forecasts o f lead­
ing business men and bankers indicate
that world-wide economic improvement
will take place during the present year
and that toward the end o f the year eco­
nomic conditions throughout the world
will have reached a more normal level.
I f this shall prove true one may conclude
that certain foreign bonds are selling at
bargain prices in the American market
and that the prices o f these bonds should
show a substantial recovery with any im­
provement in economic conditions.

T

ceeding the base rate o f 70 cents per share
annually or 35 cents per share semi­
annually, the reserve fund is not touched,
and continues to earn interest at bank
rates. All o f this interest received is paid
to shareholders in cash semiannually as
part o f the regular trust share distribu­
tion.
“ I f receipts from the underlying stocks
fo r a six months’ period should not equal
the base rate o f 35 cents per share, an
amount would be taken from the reserve
fund sufficient to make up the difference
between the base rate and the amount re­
ceived. This would then be replaced in the
reserve fund from the first excess distri­
butions received from the portfolio stocks
thereafter. Records show that, assuming
the existence o f the trust since 1913, the
reserve fund would have been called upon
fo r this purpose in only two years, and in
both cases the amounts withdrawn would
have been made up in the next following

year from payments in excess o f the 70
cent base rate.
“ This practice is held to folloAV the
sound principal o f maintaining a bank ac­
count in cash which can be drawn upon to
supplement receipts from one’s work or in­
vested funds during lean years when
assured income is most needed. The same
result is attained automatically by the
trust.

“ It is a well known fact that in normal
times high grade stocks often command
prices in the market far higher than is
justified by the returns they pay in regular
dividends.
Investors buy these stocks,
however, knowing that over a period of
years they will produce a total return, con­
sisting in part o f extra cash dividends,
stock dividends, rights and extra shares is­
sued as a result o f splitups or exchanges
that will prove equivalent to a handsome
rate on the original prices paid for the
stocks.”

FOR MORE THAN
40 YEARS
W e have been serving Chicago for more
than 40 years— meeting the property, finan­
cial and investment needs of an increasing
and discriminating clientele.
There may be many reasons why a con­
nection with a conservative institution like
The Northern Trust Company would work
to the ultimate advantage of your hank.
We would like to act as
your Chicago correspondent

Protection of Income
“ Protection and stabilization o f the
shareholder’s return from his investment
is often as important as safeguarding the
principal itself,” is the opinion o f Cedric
H. Smith, vice president o f Administra­
tive and Research Corporation, sponsors
o f corporate trust shares. “ Hence the
creation of a cash reserve fund as an in­
tegral part o f the portfolio o f this trust,
■one o f the largest o f the fixed type.
“ For each 2,000 shares o f the trust there
is paid in not to exceed $1,000 in cash
which remains a part o f the trusteed
property in the form o f a bank deposit.
'So long as the underlying stocks continue
to produce a total return equal to or ex­

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Federal Reserve Bank of St. Louis

THE NORTHERN
TRUST COMPANY
Northwest Corner LaSalle and Monroe Sts.
CHICAGO

Northwestern Banker March 1931

70

Looking at the Bond Market from
N
BACK
STA G E

O SUBJECT is, at the moment, of
more general concern to bankers
than the bond market. Two fa c ­
tors bearing on the market at this time
are o f special importance. One is the
banking situation itself. The other is
the state o f credit— more particularly
the discrepancy in rates as between long
term and short term instruments. There
are additional factors entitled to con­
sideration, but these two are outstanding.
The December 31 statements showed
the country’s banks as a whole to be in
what was probably the most liquid con­
dition in their history. It was quite
common to see statements in which cash,
government obligations and other quick
assets amounted to 50 or 60 per cent o f
total deposits. Such a condition is not
only extraordinary but, to bankers, it is,
if greatly prolonged, very disturbing, fo r
it means a, substantial loss o f earning
power.

By

F R A N C IS F . P A T T O N

Vice President, A. G. Becker & Co.
Chicago

is likely to be fairly durable. As a mat­
ter o f fact, economists who follow closely
the influences affecting the bond market,
are very generally o f the opinion that
this movement o f banks funds, in com­
bination with other forces operating in
the same direction, will serve to maintain
a strong bond market for a year or
eighteen months at least. (This prospect
is subject, o f course, to fluctuations due
to transient or artificial influences.) It
is anticipated that in the course o f the
coming bond market, prices will reach a
level comparable to that o f the great
bond market which attained its peak in
1928.

Local Loans

OME question may arise as to whether,
in the event o f a strong business re­
vival, the demand fo r commercial loans
will not very materially diminish the
funds available for bond purchases, and
make these purchases, therefore, o f
A Typical Statement
small market significance. This does not
seem probable, on examination o f the
NE statement that is at hand is
facts and the reasonable prospects. In
fairly typical. It represents the
the first place, business, as a whole, is in
condition o f a bank whose total resources
very good cash position and not in need
are approximately $6,000,000. Of this
o f extensive bank support to finance a
amount cash, due from banks, govern­
moderate increase in activity. Moreover,
ment and commercial paper total nearly
even the most optimistic hardly expect
$3,000,000— half the total
resources.
the increase in activity to amount to more
Cash alone amounts to more than $1,500,than 25 per cent fo r the year. The fed ­
000. The net return on the sum total o f
eral reserve index o f industrial pro­
these quick assets is probably not greater
duction, which rose to 127 in 1929, had
than 1 y<¿ per cent. I f this bank’s cost
fallen in November o f last year to 84;
o f funds conforms to the general bank
the year end figure, when compiled, will
average— usually placed at 2% per cent
possibly show the index as low as 80. A
or more— it is obvious that the burden
F R A N C IS F. P A T T O N
fu ll 25 per cent increase
placed on the other earn­
this year, consequently,
ing assets is greater than
will hardly bring the in­
“ The market has shown since the first of the year a good
they can safely bear.
dex to a maximum o f more
tone, and an ability to digest new issues of large size. All in
There is, certainly, no
than 105. A t the rate o f
criticism to be made o f
all, it appears that we are going to have an active season in
activity represented by
the fact that banks are in
bonds and that investors will buy under conditions which,
that figure, banks will be
this ultra liquid condition.
apart from the character of security offered, makes investing
under no strain in taking
Rather, it is an occasion
attractive, namely, a rising market!”
care o f local loan de­
fo r the country’s very
mands, and will continue
lively gratitude. The state­
to have a lively interest in bonds.
will continue in this costly state o f ab­
ments show that bankers, recognizing the
tension in financial circles during the normal liquidity longer than conditions
Discrepancies in Yields
latter part o f 1930, promptly put them­ require. The tension that led to their
HE situation with respect to interest
unusual concentration o f liquid assets
selves in position to meet emergencies,
rates is closely allied to the banking
has already very largely passed. Bankers
possibly taking losses on some o f their
situation just described, but is worth
investments in order to attain an end are now looking about fo r safe and
reviewing on its own account. The
which was distinctly in the nation’s in­ profitable employment o f funds on which
variation between the yield on short­
they have already lost substantial in­
terest as well as their own.
term and long-term obligations at this
come. Bonds appear to be the logical
time is most striking.
W hy Banks W ill Buy Bonds
solution o f their problem.
The rates fo r short-term credits now
Once this great reservoir o f capital
UT banks are business institutions.
are approximately half what they were
begins to flow steadily into the bond
They must earn a reasonable profit.
a year ago. A t the time this is written
To fail in this common business goal is market we may be sure that prices will
prime commercial paper names are being
strengthen. And, since the transfer
at once to threaten their success as
offered at 2A/2 per cent; as a matter o f
from low-yield to higher-yield assets will
business concerns and their continued
fact, the firm with which I am identified
usefulness to their communities. It is presumably be spread over a period of
many months, the effect o f the movement has just sold paper at 2*4 per cent— the
hardly conceivable, therefore, that they

S

O

T

B


Northwestern Banker March 1931
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Federal Reserve Bank of St. Louis

71
lowest rate at which we have offered such
investments in the 38 years we have
been in business.
A year ago good
names were moving readily at 4% per
cent and 5 per cent. And bankers will
easily recall the days o f 1929 when
prime names virtually went begging at
6 per cent and 6T4 per cent.
The decline in yield has been even
greater in some other short-term instru­
ments. Call money, 90-day time money
and prime 90-day acceptances are cur­
rently quoted at rates 50 to 75 per cent
lower than prevailed at this time last y ea r;
the rates range from 1 and 1^2 per cent
on call loans to 3% and 3 % per cent on
acceptances.
In contrast with these extremely low
yields on short term credits, high grade
bonds are selling to yield from 4^2 per
cent to well over 5 per cent, and issues
that offer a very high order o f security
but lack the extreme marketability o f
the most sought-after types yield up to
6% per cent. These yields are ap­
proximately on a par with those obtain­
able 12 months ago.
The explanation o f this situation is per­
fectly apparent. It is found in the char­
acteristic reluctance o f capital to engage
in long term commitments at a time of
general uncertainty about economic con­
ditions. Banks, and private investors, as
well, for the past year have sought to keep
funds in liquid form, even at the cost o f
substantial loss o f income. As a result,
demand has been heavily concentrated on
short term instruments, while there has
been correspondingly less interest in long
term bonds.
This situation is merely one symptom
o f general lack o f confidence. Clearly,
therefore, it is temporary. As confidence
returns it will be logical to expect that the
gap between short term and long term
rates will narrow— by some increase, prob­
ably, o f the one and, very certainly, by a
decrease in the other. Evidence that this
latter development is already under way
is found in the strength which the bond
market has exhibited since the first o f the
year, and by the appearance o f new issues
bearing 4 and 4% per cent coupons.

occurred
market.

during the great bull stock

This study lends weight to the opinion
o f those Avho hold that 4 per cent or less
represents the real rental value o f money
in normal times, and that we are now
heading into an era in Avhich yields de­
cidedly below those Ave have been recently
accustomed to Avill prevail.
Whatever shades o f interpretation may
be placed upon the individual factors in
the situation, as a whole the evidence
points very convincingly to a strong bond
market.
Both underlying and technical
conditions support that view. The mar­
ket has shown since the first o f the year
good tone, and an ability to digest neAv
issues o f large size. A ll in all, it appears
that Ave are going to have an active season
in bonds, and that investors will buy un­
der conditions Avhich, apart from the char­

F IN TE RE ST to investors— banks
or individuals— who are considering
the purchase o f bonds, is a study recently
completed under auspices o f the National
Bureau fo r Economic Research. It showed
that since 1890 the yield on high grade
railway bonds have averaged under 4 per
cent during more than half the time. The
returns o f 4 % per cent and upwards Avith
Avhich investors are familiar appear only
during the latter part o f the period— from
about 1912 on. The peak was reached in
1920; since then the yield trend has been
sharply downward, subject to only two
important reactions, o f which the latter

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

At Cedar Rapids
Quotation ticker service o f the Chicago
Stock Exchange has been inaugurated in
Cedar Rapids, IoAva, Avith the office there
o f Lamson Brothers & Company, the first
to have the Chicago Exchange ticker.
Other cities in Iowa Avith Chicago E x­
change tickers are Des Moines and Daven­
port.
Cedar Rapids is the first ticker extension
to be made by the Chicago Exchange this
year.
First NeAv Yorker— I ’ve just seen the
Avorst play o f the season.
Second New Yorker— Huh! you should
kick— I ’ve just seen the best heavy Aveight
fight!

A re You Interested in
Getting M ore for Your
...........M O N E Y ?
Then You’ll Like Our Service
for It’s Designed to Give You
Greater ....
VALUE

IN

A D V ER T ISIN G

Because It Lasts Longer

ASK US!

Are Loiver Yields Coming?

O

acter o f security offered, makes investing
attractive, namely, a rising market.

T H E T H O S . D. M U R P H Y C O .
RED OAK, IOWA
T H E

B I R T H P L A C E

NEW YORK

C H IC A G O

O F

A R T

C A L E N D A R S

TORON TO

LONDON

Calendars— Direct Mail— Blotters— Holiday Greetings
Booklets— Fans— Maps— Gift Leather
Advertising Pencils

The 32nd Line Awaits Your Inspection.

It W ill Pay You to See It!

Northwestern Banker March 1931

72


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

For a third of a century John
W . A. Staudt of Canton, Ohio,
has devoted his entire time to
the sale of Royal Union policies.
Mr. Staudt is still just as enthu­
siastic about his business and
the Royal Union as he was on
that
ary

memorable
22,

sumed

day— Febru­

1898— when
his

duties

he

as

as­

Royal

Union State Manager for Ohio.
W e are pleased to pay public
tribute to the long, honorable
and serviceable career of this
outstanding

Royal

Unio n

agency executive.
Today the Royal Union pre­
sents the same great opportu­
nities to men of the sterling
type of J. W . A. Staudt who are
looking

for

permanent

and

profitable agency connections.
Royal Union Life Building
Comer Seventh and Grand Avenue
Ues Moines, Iowa

73

I n s u r a n c e

The W h y and Wherefore of

DEPOSITORY BONDS
VER one thousand banks have
closed their doors during 1930—
the greatest number and the larg­
est banking institutions in the history of
banking.

O

The amount o f funds on deposit guar­
anteed by surety companies in the form
o f depository bonds is unknown at this
time but the total loss will be staggering.
The loss to the surety companies in the
case o f the bank failure in Kentucky is
well over $3,000,000. The other day one
surety company paid $200,000 for its share
o f state funds guaranteed by bonds on
deposit in the Bank o f the United States.
Four others must pay a like amount, and
it takes a lot o f premiums at $5 or $10
per thousand o f deposits to make up a
cushion for such large losses.
The beginning o f this year saw the
greatest scramble fo r depository bonds by
banks to protect government funds in the
history o f the surety business, and the
scramble is still on. One o f the oldest
and most conservative surety companies
has flatly refused to write another deposi­
tory bond, nor will they accept re-insur­
ance from other companies.

By

H E N R Y SC A R BO R O U G H , Jr .
E d ito r’ s N o te :
T h e Northwestern
Banker is happy to an nounce early
p u b lica tio n of a special series of arti­
cles on general insurance topics by
H en ry S carborough, Jr., p rom inent
Chicago insurance brok er and writer.
T he article on this page is the first of
the series.
M r. Scarborough, w hose firm , Scar­
b oro u gh & C o ., specializes in bank
and financial insurance, says this about
his plans for future articles for North­
western Banker read ers:
“ In our years of w ork in the banking
insurance field, we have b een ever
m ore im pressed w ith the direct value
to the insured in taking loss preventive
m easures w herever p ossib le . W e shall
have articles from tim e to time on
specific losses, and loss preventive
m ethod s, and shall endeavor to show
the dollars-and-cents value in using
such m easures. W e shall also seek to
have articles of value and interest on
life insurance, fire and casualty in sur­
ance and insurance trusts.”

A prominent chain o f banks sent an
executive to New York to call upon the
presidents o f four surety companies and
he carried with him full detailed informa­
tion about each bank in the chain. There
is not a single branch office or agent in the
country authorized to execute a depository
bond without the home office going into
the present position o f the bank under
consideration, and then giving its author­
ization to the branch office or agent. The
next and really serious task is obtaining
re-insurance from other companies, fo r no
surety company today carries the entire
risk.

Lack of Re-insurance
OW each underwriter has his own
ideas about selection o f a risk, and
human opinion does not always agree, so
many a bank today is unable to get its
requirements in depository bonds because
o f lack o f re-insurance.

H E N R Y SC A R B O R O U G H , JR.

Then there is some gossip about certain
surety companies not being quite so liquid,
and o f course others will not consider them
for re-insurance. Hysteria and fear enter
into a situation already difficrdt, but out
o f it all the good old sound bank will

eventually get its bond from the conserva­
tive surety company, and heaven help
the rest! In the meantime let’s hope that
the city or county official who lias funds
to bank does better than the boys did down

N


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

in Asheville, North Carolina.
The
$8,000,000 o f city funds went down the
river with the Central Bank and left the
city flat broke.
Just what the small bank is going to do
is a serious problem and this is just an­
other added to their long string o f prob­
lems. North Dakota, where those banks
that have survived the battle o f the last
ten years are tried and proven, and where
most surety companies fo r some time have
said “ NO” to requests for surety bonds,
is seeking some relief by hoping for legis­
lation which will permit the banks to
pledge certain collateral to guarantee such
funds. The banker who is remote from
close contact with the insurance centers
might just as well make up his mind that
he will have to sell himself and his bank
to the surety company if he wants a bond.
A few principles o f underwriting used
by the insurance companies are not amiss
— The particular bank must render a com­
plete financial statement, giving detailed
information as to the bank’s assets, dis­
tribution o f the stock o f the bank, its cor­
respondent banks, and other connections.
The more detailed the information about
securities to all loans, and also the bond
account, the better. The character o f the
deposits is considered. Banks having more
than a certain percentage o f their deposits
(25 per cent is the general ride) made
up o f public funds are not considered
desirable risks due to the fact that politi­
cal changes might bring about sudden
withdrawals o f funds.
O f course, the
character and management of the bank, as
well as its past history, plays an increas­
ingly prominent part in the acceptance of
the risk; and if it shows a consistent de­
crease in surplus or a falling off in de­
posits, the insurance company will ordi­
narily reject the risk.
Locality has been a factor, but after
that mess in New York City the under­
writers are not giving so much thought to
the location o f a bank. However, if there
have been several bank failures in a given
community, it is going to be difficult for
the perfectly good and sound bank to con­
vince the insurance company that their
doors will remain open. The bond forms
are having recent changes instigated by
insurance companies fo r their further
protection, and the various states where
the depository bond is prescribed to pro­
tect public funds have taken some o f the
Northwestern Banker March Î9S1

74
teeth out o f the contract— there being no
other alternative.
Interesting Development
N IN TE RE STIN G development at
the moment is the unusually heavy
demand by depositors o f private funds
for depository bonds. These bonds are
issued without the knowledge o f the bank,
and the premium for such a bond is usu­
ally double that charged for bonds issued
on the bank’s application. All companies
are demanding the five-day cancellation
clause and, o f course, the bond is written
for the maximum amount o f funds on de­
posit. I f it is not, the company is liable
for such proportion o f the bond as the

A

limit o f the bond bears to the total net
deposit. I f the amount o f the deposit
exceeds the amount ot‘ the bond, there is
the usual clause for a pro rata distribu­
tion o f the salvage, and this is often a
point o f combat.
A t the issuance o f the policy, a premium
figured on the maximum amount o f the
bond is due and payable, and at the close
o f the contract period the premium is ad­
justed in accordance with the bank’s aver­
age daily balance for the period. The
minimum premium is one-half the annual
premium on the amount o f the bond, re­
gardless o f the average daily balance.
As o f January 2nd, new rates were es­
tablished that will be o f interest to all

banks. The ruling on life insurance funds
and fraternal orders is classified as public
funds and, as heretofore, all private funds
carry a one per cent rate. The new rates
are fixed by the capital o f the bank only,
banks o f less than $50,000 capital pay a
rate o f $10 per thousand. Where the
capital is $50,000 and less than $100,000,
the rate is $7.50 per thousand. $100,000
and less than $200,000, the rate is $6.00
per thousand, and where the capital is
$200,000 or over, the rate is $5.00 per
thousand. Patience on the part o f both
banker and surety company is required
during these testing times, and if the
banker can show that the chances will be
about 95 per cent fo r his bank remaining

W

h ile the

BOND MARKET

SAGGED
NWNL Bonds 1ncreased
in Value
to figures
published by numer­
ous responsible statistical
organizations
comparing
the average yield of Rail­
road, Public Utility, and
Industrial bonds by grades
of quality, all except the
highest grade bonds had a
lower market value at the
end of 1930 than at the
end of 1929. The market
value of N WNL bonds
went up. Both at the end
of 1929 and 1930 the Com­
pany’s bonds were worth
more at the “ market” than
the value at which they
were carried in the finan­
cial statement.

A

A T T R A C T IV E C O N T R A C T S

» » » for Banker Representatives
Banking and insurance go hand in hand. W e
offer alert banking executives a liberal con­
tract; flexible, modern life and accident and
health policies; and complete field cooper­
ation to help you sell and service your clients.
Investigate the Des Moines Life & Annuity
contract for bankers. W e’ll gladly go into it
in detail without obligation to you. Write us.

The Excess of Market Value over value at
which carried in statement of December,
1930, was $233,188.28 compared with $54,738.95 for December, 1929. The increase in
the difference between market value and book
value during the year, $178,459.33.

DES MOINES LIFE & ANNUITY CO.

No r t h w e s t e r n N a t i o n a l

J. J . S H A M B A U G H , President

LIFE INSURANCE COMPANY
O.J. ARNOLD,

D ES M O IN E S , I O W A

: xjc

IXX-----------X i C

z>uc

:x k~

.I-X k:

President

S T R O N G —' MinneapoUs.Minn. - L I B E R A L

X

Banker March 1931
Digitized forNorthwestern
FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

c c o r d in g

rxx:

:xx:

:x k _

75
open all business days during 1931 (holi­
days excluded) the underwriter way up
on the 46th floor o f some building near
old Broadway will authorize his bond, but
you must realize that the underwriter in
this case must pass upon the solvency o f
banks over the entire country, and most
o f these underwriters are from four to six
weeks behind in their work. Confidence
is established not without some right effort.

With Pan-American Life

Low Fire Loss

Sanford P. Drake, well known Des
Moines life insurance man, has been named
district manager at Des Moines fo r the
Pan-American Life Insurance Company
o f New Orleans. The appointment is ef­
fective at once and Mr. Drake now has
offices at 1113 Fleming Building, Des
Moines. His territory includes seventeen
counties adjacent to Des Moines.

Alliance, Nebraska, has put in a strong
bid fo r the lowest per capita fire loss in
the nation, with the report that its total
loss in 1930 was only $780, or a per capita
loss of 11.33 cents. The city fire depart­
ment answered fifty-three alarms during
the year. The town has been credited with
the lowest loss among Nebraska cities of
2,500 population and over.

Gains $25,000,000
A gain o f $25,000,000 in the total
amount o f insurance in force was reported
at the annual meeting o f stockholders o f
the Northwestern National Life Insurance
Company o f Minneapolis.
O. J. Arnold, president, declared the
company had made a most favorable
showing in the last year. He said that
bonds purchased by the company had
shown an increase o f $233,187 in value
over the amount at which they were car­
ried on the company’s books, indicating
the high character o f the investments the
company had made.
E. L. Carpenter, Thomas F. Wallace
and Mi*. Arnold were re-elected as direc­
tors fo r three-year terms. Other directors
o f the company whose terms did not ex­
pire are: F. A. Chamberlain, E. W .
Decker, C. T. Jaffray, A. F. Pillsbury,
Frank T. Heffelflinger and Theodore
Wold.

In Receiver’s Hands

County Bankers Elect

The Continental Indemnity Company o f
America, one o f the Darby A. Day group
o f companies, has been placed by the Cir­
cuit Court at Kansas City, Mo., in the
hands o f Superintendent o f Insurance
Joseph B. Thompson o f Missouri, pending
the appointment o f a permanent liquidat­
ing officer. On January 29 the secretary
of the company admitted in court that it
is insolvent.

The members o f the Kossuth County
Bankers Association held a meeting last
month, at the Algona. Hotel, at Algona,
with most of the banks in the county repre­
sented. It being the first meeting held in
1931, election o f officers for the year took
place.
The following were elected : L. F. Ken­
nedy, vice president o f the Farmers and
Traders Savings Bank, o f Bancroft, w-as

’5 0 a W eek
. . while sick or injured
P A ID B Y T H E

Twenty-fifth Anniversary
The Cedar Rapids Life Insurance
Company of Cedar Rapids, Iowa, will pass
their twenty-fifth birthday in June o f this
year. This company is one o f the com­
panies which substantially increased its
business during the year 1930.
It is interesting to note that one of the
leading producers with the Cedar Rapids
L ife Insurance Company is a man who
devotes only a part of his time to the
business o f life insurance, being a cashier
o f a bank in an Iowa county seat town.
The plans o f the Cedar Rapids L ife In­
s ta n ce Company for 1931 carry an ex­
pansion program, which will consist of
opening a number o f new general agencies
and vice president and agency director,
Jay G. Sigmund, announces that, inasmuch
as the sales staff of the Cedar Rapids L ife
Insurance Company has among its most
successful producers men o f banking ex­
perience that bankers will be chosen as far
as is possible fo r several important new
agencies, which will be opened in 1931.

Hermann Miller Honored
At the annual meeting o f the Iowa Fire
Insurance Company o f Waterloo, Iowa,
Hermann Miller, manager o f the company
for the past twenty-five years, was elected
vice president and manager. His son, Milo
H. Miller, who has been with the company
fo r the past few years, was named as­
sistant manager.

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Minnesota Commercial
Men’s Association
Under Its Double Benefit Health Policy and Its
“A ” and "PC Accident Policies

$5,000 in case o f loss o f life, or both feet, or both hands, or both
eyes, or one hand and one foot. $1,250 fo r loss o f
one hand or one foot or one eye.

Over 25 Years of Brilliant Success. Well Established.
Large Surplus. Over 30,000 Contracts in Force
Average
Annual
Cost for
25 Years

j Accident Policy “ A ” about................ ..$10.00

Accident Policy “ B” about....................
8.00
Health Policy, Single Benefit................ 12.00
[ Health Policy, Double Benefit_______ 24.00

Annual Cost Collected in Small Assessm ents at Intervals o f A bout
E very Three Months. Application Fee o f $2.00 or $4.00 Pays for
Protection in Advance to May 15, 1931.
Write for Application Blanks and Literature.

A. J. ALWIN, Secretary-Treasurer
E ntire Sixth F loor, E itel Building

Minneapolis

-

-

-

Minnesota

Northwestern Banker March 1931

76
elected president; Ed. Rahm, cashier of the
Peoples Savings Bank of St. Benedict, was
elected vice president ; Wm. Boyken, vice
president o f the Titonka Savings Bank of
Titonka, was re-elected secretary; W . Scott
Hanna, manager o f the Bank o f Luverne
o f Luverne, was re-elected treasurer.
E. R. Worley, cashier o f the Citizens
Savings Bank o f Lakota, is the retiring
president and Prank Williams, president
of the Iowa State Bank o f Algona, is the
retiring vice president.

tion. A bill has just been introduced in
the State Senate to permit insurance of
this risk in insurance companies also to
permit self-insurance by employers who
can qualify. This same bill was passed
by both houses in the twentieth legislature
but was vetoed. The present bill is op ­
posed by the labor commissioner o f North
Dakota.

North Dakota Legislation

The mid-western bank management con­
ference, under the auspices o f the
Bank Management Commission, American

Management Conference at
Kansas City

North Dakota has an exclusive state
fund fo r insuring workmen’s compensa­

^

-* 3 s

— /!

Pouring O i l on
Economic W aters
*1?

When giant waves beat mercilessly
on ships at sea, it is the custom to
pour oil on the troubled waters to
break their violence.

Life insurance

has been the “ oil” which has done
much to break the violence of the
economic storm during the past year.
Central Life is glad to have done its
share.

It pledges anew its aid in con­

tinuing to meet the emergencies cre­
Assets of
$35,000,000.00
Insurance in
Force Nearly
$200,000,000.00

ated by death, disability and old age.

Central
Life
A s s u r a n c e S o ciety
M UTUAL

T. C. D E N N Y , President
DES M O I N E S


Northwestern Banker March 1931
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

IOW A

Bankers Association, and o f the state
bankers associations o f Arkansas, Iowa,
Kansas, Missouri, Nebraska and Okla­
homa will be held at Kansas City March
19th and 20th, it is announced. Fred
B. Brady, vice president Commerce Trust
Company, Kansas City, is to be general
chairman.
Four sessions will be held. The first ses­
sion the morning o f March 19th, will con­
sider the topic “ Loan Administration.”
The general theme o f the afternoon session
that day will be “ Profit Producing Poli­
cies.” The third session, in the evening,
will take up “ Investment Policies.” The
closing session, the morning o f March 20th,
will discuss “ Bank Administration and
Management.”
Operating details o f sound bank man­
agement wfill be presented by successful
bankers who have practical knowledge
gained from seasoned first-hand experience
in bank operation, Frank W . Simmonds,
secretary o f the Bank Management Com­
mission announces. M ajor emphasis will
be placed on the practical side o f bank
management especially as applied to
country banks.
A t the session devoted to loan adminis­
tration fundamental loan principles will
be presented and discussed, comprisirfg
diversification o f loans, safety, length of
maturity, instalment loans, security back
o f loans, liquidity to correspond with
character o f deposits, rate o f return, an­
alysis o f customers’ requirements, etc.
At the session on profit producing p oli­
cies discussion will include analysis of
general operating costs to determine and
eliminate non-essentials; installation of
expense control ; analysis o f accounts to
determine their profit-producing status;
service charges to put small accounts on a
paying basis; per item charges to take
care o f excessive activity costs; payment
o f interest with relation to earning power
o f bank invested funds and profits against
lean years; cooperation through city and
regional clearing house associations ; credit
bureaus and the elimination o f duplicate
borrowers and other banking menaces.
The third session will consider invest­
ment policies in relation to the type o f de­
posits a bank carries and the type o f paper
making up a bank’s portfolio. Subjects
will be the factor o f liquidity in loans and
discounts, and the value of commercial
paper, bankers’ acceptances and call loans
in building up adequate secondary reserves
against deposit withdrawals. Essentials
o f sound bank investment will be treated in
the light o f types o f desirable securities
for bank investment and diversification as
to quality, maturities, incomes and market­
ability. The necessity for following and
analyzing bond price trends to enable a
judicious shifting o f holdings at opportune
times and comparison o f bond yields and
short-term money rates under different
conditions will also be taken up.

77

This department of THE NORTHWESTERN BANKER is to
assist subscribers in obtaining goods or service hard to find.
It is free to subscribers. To non-subscribers the charge is
five cents per word. Use it. ASK US, as we can tell you
where to buy anything you need in your bank or for your
bank. TELL US, as your “ want” will be published under
the above heading free of charge. In answering classified
advertisements which have key numbers please enclose a
two-cent stamp. This is used to forward your letter.
Position Wanted— Cashier or Assistant
Cashier in progressive country bank.
Eight years experience. Age 35. Mar­
ried. Protestant. Can furnish best of

references.
Address
Northwestern Banker.

No. 3160,
3-T.F.

care

Position Wanted— In a good Iowa bank.
Twelve years general banking experience
covering every angle o f Iowa banking,
Insurance and Real Estate. Ten years
as cashier o f a $50,000 bank. A ge 36.
Protestant. Married. Address No. 3158,
care Northwestern Banker.— 1-TF.
Position Wanted— Assistant Cashier.
Nearly six years experience with same
bank as Bookkeeper and Assistant Cash­
ier. Well acquainted with country bank­
ing. Single. A ge 27, Norwegian Luth­
eran. Salary $125.00. Address No. 3157,
care Northwestern Banker.— 1-TF.

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Federal Reserve Bank of St. Louis

For Sale— Burroughs automatic return
carriage poster in excellent condition.
Also other equipment of closed bank.
This is your opportunity for good equip­
ment cheap. Tell us what you want.
Address No. 3159, care Northwestern
Banker. 1-T.F.
Wanted— Position as cashier in good
country bank. Twelve years experience
with all phases o f banking, including
farm loans and insurance. Age 32. Mar­
ried. Protestant. Best references. Address
No. 3152, care Northwestern Banker.—
11-TF.
Bond Salesman, over eight year’s ex­
perience, at present employed, desires
position with Bank or Bond House in East­
ern Iowa.
Has established clientele
throughout Iowa. Can analyze securities
and City,
fully
Sioux
la. competent to manage or start
bondCity,department
o f bank. Reasonable
Sioux
la.
salary to start, with increased opportunity
fo r advancement. Excellent references.
Address No. 3156, care Northwestern
Banker.— 12-TF.

Wanted— Fixed Trust Wholesale Man.
The sponsors and distributors o f two suc­
cessful fixed trusts with a widespread dis­
tribution are seeking a wholesale man to
contact investment dealers and banks in
Missouri, Iowa, Kansas, and Nebraska.
Your ability to sell and to produce in a
highly competitive field is more important
than your financial background. Prefer
man who knows dealers in this territory.
Salary and expenses paid. This is a real
opportunity to become associated with a
fast growing trust organization. Write
giving a complete picture of your back­
ground to No. 3161, care Northwestern
Banker.— 3-tf.

A Brief Interview
Mr. Prospect: Well, I think I ’ll take a
chance that I won’t die in the next year
or so. I ’m healthy and I ’ll let the insur­
ance go awhile yet.
A gen t: So you’re going to take a

chance that you’ll make enough money
to leave your family in good financial
condition in the next few days?
Mr. P . : Yes,
A .: Are you a gambler?
Mr. P. Well I sit in at a game now
and then. I like to take a sporting chance.
A . : And when you lose you pay up
promptly ?
Mr. P . : Certainly.
A . : You never ask anyone else to settle
for you?
Mr. P . : Of course not, I ’d be a poor
sport to do that,
A . : That’s exactly what you are, a
poor sport. Let me explain.
Mr. P . : Yes, I do think you owe me
an explanation.
A . : Every day you’re betting that
you will live long enough to make money
enough so your family will be well taken
care of.
Mr. P . : Yes, I suppose so.
A .: Well, have you ever thought of
what will happen if you lose? You won’t
have to pay that debt, but somebody will.
You’ll be the one who took the chance
and lost, but you won’t pay up. Y ou’re not
even a good gambler. You’re gambling
on the safety o f yonr family and if you
lose, they will have to pajr. They will have
to struggle and work, perhaps fail, all be­
cause you risked their rights to comfort
and happiness. Don’t you think it is al­
most criminal carelessness to go another
day without protecting them?
Mr. P. You win. Where do I sign?—
Pacific Mutual News.

Forest Fires
H. L. Sayre, chief fire warden o f the
conservation department, in his annual
report on forest fires in Michigan, lays
half o f the 4,593 blazes recorded in 1930
to smokers. Carelessness in use o f smok­
ing materials by tourists and hunters is
apparently increasing as the percentage
credited to this cause in 1925 was only five.
A closer check on origins has been kept
o f late years, however, fires o f unknown
origin in 1930 being only 3.79 per cent of
the total while in 1925 they amounted to
33.62 per cent.
It is those who have tried most fre­
quently who are convinced that marriage
is a failure.
Northwestern Banker March 1931

78
Increase Surplus
The annual meeting o f the stockholders
o f the Citizens State Bank o f Castlewood,
South Dakota, was held recently. This
was the fourth annual meeting o f the in­
stitution since it opened fo r business a
little less than four years ago.

South Dakota
Bank N ew s
Officers South D akota Bankers
A ssociation
P resid en t...................
- M iller

A. B. Cahalan

V ice P resid en t-...................J. W . B ryant
M itchell

A. B. C A H A L AN
President

S ecreta ry..................... G eorge A. S tarrin g
H uron
T rea su rer............................ Don W . D eV ey
W estp ort

Elected Director
Dr. P. D. Peabody was appointed a
member o f the board of directors of the
Farmers and Merchants National Bank of
Webster, South Dakota, to till the vacancy
caused by the death o f David Williams of
Duluth. Mr. Williams, although he left
Webster twenty years ago, was still pres­
ident of the bank, which he organized in
1888. At that time it was known as the
Farmers and Merchants State Bank,
having become a National bank later. He
also retained his interests in the Williams
Lumber Company, which he and his
brother, John, also deceased, organized
during their residence in Webster.

Gayville Bank Re-opens
The Security State Bank o f Gayville,
South Dakota, which closed about six
weeks ago, opened for business last month
under a reorganization which was com­
pleted at a stockholders’ meeting.
Five farmers o f the community were
elected to the board o f directors as fo l­
low s: G. B. Wright, Peter J. Dyken,
Peder Olson, Peter Mettet, and Harry A.
Nelson.
The directors elected Mr. Wright pres­
ident and Peter J. Dyken, vice president;
T. B. Wetteland, cashier, and L. C. Olson,
assistant cashier. The reorganized bank
is capitalized at $25,000.
TI. F. Bottcher o f Yankton assisted the
stockholders in carrying out the reor­
ganization plans.

Annual Meeting
The annual meeting o f the stockholders
and directors of the Community Bank,
Hartford, South Dakota, was held re­
cently and the business for the year 1930
reviewed and pronounced “ very satis­
factory.”
A 10 per cent dividend fo r the year
was paid to stockholders and several
thousand dollars placed into surplus and
undivided profits.
The following officers and directors
were elected fo r the year 1931: IT. L.
Lewis, president; John L. W ood, vice
president and cashier ; Charles J. Mahl
and G. E. Borcherding, assistant cashiers,
Northwestern
Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

GE OR GE H . S T A R R IN G
Secretary

and R. E. Crooks, bookkeeper. IT. L.
Lewis, John L. W ood, A. W . Pearson,
H. C. Schmidt, E. A. Wendt, C. A. Greeg
and L. J. Hannon are the directors. The
Community Bank which was started in
1925 has deposits of nearly $300,000 and
besides building up1 a good surplus has
paid consistent dividends every year and
carries a cash reserve of about 50 per
cent which is nearly three times the legal
requirement, thus giving the Hartford
territory one of the strongest banks in
the northwest.

The annual report to the stockholders
showed a very good year.
The surplus
fund Avas further increased $2,500, making
it $10,000, or four times the original
amount paid in. In addition the fourth
consecutive dividend amounting to eight
per cent Avas paid to the stockholders.
The annual statement shoAved total de­
posits amounting to $188,294.60, against
Avhich the bank held a total reserve con­
sisting o f United States and other bonds
and cash amounting to $129,774.94. The
total resources o f the bank amount to

$233,408.19.
The officers and directors Avere re­
elected, namely, Dr. J. B. Vaughn, presi­
dent; Arndt E. Dahl, rice president; C. N.
Halvorson, cashier ; Minnie Roberts, assis­
tant cashier. Other directors are N. M.
Kranz and J. G. Jensen. The outlook
for the coming year A\ras declared to be
very favorable.

Assistant Cashier

Holds Annual Meeting

Frank J. Cinkle was elected assistant
cashier o f the Citizens National Bank &
Trust Company at the annual meeting o f
the board o f directors held in Sioux Falls,
South Dakota. Mr. Cinkle has been con­
nected with the bank since its organization,
five years ago.

The annual meeting o f the stockholders
of the Redfield, South Dakota, National
Bank Avas held recently and the reports o f
the past year’s business Avas very satis­
factory. Everything points to a steady
growth.
The election o f officers resulted in the
election o f the same board o f directors as
last year, but a slight change in the list
o f officers. Claude Henry became a vice
president and R. J. Crain became cashier.
The neAv officers are Z. A. Crain, presi­
dent; W . F. Bruell, C. M. Henry and B. M.
Slaughter, vice presidents; R. J. Crain,
cashier, and C. C. Crain and Gladys
Myers, assistant cashiers.
John Fargo, Avho has held a position
as vice president fo r many years relin­
quishes that position but retains his posi­
tion on the board o f directors.

Elects Directors
A t the annual stockholders and directors
meeting o f the Buffalo Gap, South Dakota,
State Bank, the following directors and
officers were elected:
W . H. Schneider, president; W . A.
Sewright, vice president; N. B. Streeter,
cashier.
Mrs. Dorothy Thompson was
elected assistant cashier, succeeding Mrs.
O. M. Isham, resigned. T. W . Bondurant
and C. G. Streeter were named to complete
the directory board o f five.
At the meeting the regular semiannual
dividend was declared. The December 31
statement o f the bank showed a 47 per cent
cash reserve, exceeding the legal require­
ments by more than two and a half times.
Mr. Streeter states that since that time, the
reserved Avas 50 per cent fo r several days.

Directors for 21 Years
A t the thirty-first annual meeting o f the
Fairview State Bank o f Canton, South
Dakota, it was disclosed that the bank
has had the same board of directors for
21 years.
They are E. 0. Swenson,
Charles Grotli and O. L. Greguson, Fairvieiv, and Louis Anderson and G. J. Moen,
Canton. All were re-elected.

New Organization Fails
Prospects fo r a new organization o f
South Dakota bankers failed to materialize
when nearly twenty-five independent
bankers, meeting in Huron at the call o f
I. J. McGinity o f Lebanon, chose to re­
main a part o f the South Dakota Bankers
Association.
Rather than to involve a split Avith the
present association, the bankers who met
decided to present their views to the South
Dakota Bankers Association through a
committee o f five Avhich Avas to be ap­
pointed by Mr. McGinity.
This committee will make a thorough
study o f the effect o f chain banking
methods upon independent bankers o f the

79
state and include its findings and recom­
mendations in its report to the present
bankers association.
The meeting o f the hankers was
prompted by the spread o f chain banks
throughout the state, according to Mr.
McGinity.
The list o f bankers present fo r the
session included G. C. Blum, Florence;
C. W . Harrington, Wentworth; L. A.
Hanson, Nunda; F. J. Simmons, Mans­
field; Don W . DeVey, W estport; George
B. Cady, Mellette; H. E. Beebe, Ipswich;
L. H. W ood, H artford; H. 0 . Bard,
Miller; J. D. Kaufman, Y ale; W . A.
Hicks, Carpenter; L. M. Larsen, Wessington Springs; T. M. Brisbine, Woonsocket,
and C. E. Barkl, Huron.

reports. For gaining the confidence o f
the investor, the unscrupulous dealer has
substituted more clever mediums which ape
methods o f legitimate security houses who
have long been informing customers of
financial trends through periodical bulle­
tins.
The market letter oilers a ready means
fo r the “ fly-by-night” dealer to make
contact with the prospect, secure his inter­
est and induce him to buy over-rated
stocks. These dealers, whose methods in
many respects resemble the high pressure
tactics o f the tipster operator, the bureau
states, often make recommendations con­
cerning good stocks as well as indifferent
ones. In many cases where the promoter

is unable to make a direct sale he may
influence the buyer to switch from a good
investment to a highly speculative stock.
In some cases investigators found a late
delivery o f stocks which indicated that a
bucketing o f orders was possible.
Inquiries concerning activities o f this
type o f dealer are received daily by the
financial department o f the National Bet­
ter Business Bureau, which has a file of
companies previously investigated.
The quarterly report o f the department,
just issued, shows that investigation of in­
quiries and complaints concerning security
dealers, ranks first among its services, com­
prising approximately one-sixth o f the
total work o f the department.

Re-elected President
The annual stockholders meeting o f the
Bank o f Winner, South Dakota, was held
recently. Robert R. Jones was re-elected
president. T. C. Montgomery, vice presi­
dent ; Albert Scheinost, cashier, and Anne
Hansen, assistant cashier, were also all re­
elected. The board o f directors consisting
o f Robert R. Jones, T. C. Montgomery,
P. 0. Beaulieu, Theodore Smook and H. A.
Niser, were all re-elected.

Officers Re-elected
At the annual meeting o f the board o f
directors o f the Mellette County Bank o f
Wood, South Dakota, all the officers were
re-elected, as follow s: H. A. Kiser, presi­
dent; Robert R. Jones, vice president; H.
J. Snyder, cashier; Dessa K . Gallagher
and Sally Johnson, assistant cashiers. The
bank moved to W ood on January 1, 1930,
and experienced one o f the most success­
ful and profitable years in its history.
W ood is on the terminal o f the C. &
N. W . Ry. in the Rosebud country of
South Dakota and is making a substantial
growth in both business and population.

Im m ediate A c tio n !
A our live stock drafts to the Sioux
City yards will receive immediate action
if sent through the d e p en d a b le sh ortcu t
-— the Live Stock National Bank.
Our strategic location on the main floor
of the Exchange Building, plus 35 years
of experience at the Sioux City stock
yards, enables us to render you speedier,
more efficient collection service.
Use the Live Stock National Bank—

Fighting Unscrupulous Dealers
Unprincipled security dealers have prac­
tically abandoned use o f the tipster sheet
and the purported financial advisory serv­
ice in favor o f the market letter, the Na­
tional Better Business Bureau disclosed in
a report o f recent investigations.
With an increase in market trading, the
bureau warned, inexperienced investors
should not be influenced by market letters
o f “ fly-by-night” dealers patterned after
those o f reputable houses, and should in­
vestigate the record and standing o f all
sources o f financial advice.
Of 150 tipster sheets investigated by
the financial department o f the bureau
two years ago, some o f which were sup­
planted fo r a short time by purported
financial advisory services, the number
now in existence is negligible, the bureau

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

the o n ly bank at the Sioux City stock
yards.

Live Stock National Bank
S I O U X

CITY.

IO W A

^ A ff i li a t e d w i t h

N O R T H W E S T BAN C O R P O R A T I ON
Combined Resources

Over $495,000,000

.Northwestern Banker March 1931

80

Cox Elected President

Nebraska
Bank News
Officers Nebraska Bankers
Association
P resid ent..............................J . G. L ow e
Kearney
Chairman, E xecutive C ouncil. . . .
................................E. N . V an H orne
Lincoln
Treasurer ...............Denman Kountze
J. G. L O W E
President

S ecretary..................... W m . B. Hughes
Omaha

United States Supreme Court Sus­
tains Special Assessments

are to receive 20 per cent o f their losses,
before any other payments are made.

The United States Supreme Court, at
Johnson Receives Gift
Washington, February 25tli, sustained the
Alvin
E. Johnson, vice president o f the
right of the state of Nebraska to levy
Live Stock National Bank, Omaha, was
special assessments on state banks for the
agreeably surprised on the occasion o f his
benefit o f the bank guaranty fund.
birthday anniversary when 45 employes
The decision, made in the suit brought
and officers o f the bank and their families
by the Abie State Bank and about 700
met in Mr. Johnson’s home at 306 South
other state banks, to prevent collection o f
Fifty-second Street.
special assessments for 1928, 1929 and
Mr. Johnson was presented with a golf
1930, will result in $3,000,000 becoming
bag and a set o f clubs, and Mrs. Johnson
available fo r depositors in failed state
with a framed picture.
banks if assessments are paid.
Afterwards the guests used the clubs
In all, the decision may result in the pay­
to play miniature g olf with round pieces
ment of about $7,000,000 of the total net
o f paper serving as holes and hastily con­
deficit in the guaranty fund o f $20,000,000.
J.
G. Lowe, Sr., head o f the Farmers structed hazards placed about the room.
Mr. Johnson has been with the Live
State Bank, at Kearney, Nebr., and presi­
Stock National Bank since its organiza­
dent of the Nebraska Bankers Association,
tion December 9, 1907, having risen from
said:
messenger boy to his present position.
“ My opinion is that there won’t any of
this special assessment be paid. I don’t
think the state banks will pay it, fo r the
reason that I don’t believe the state will
try to make them; the matter will die out,
and be forgotten.”
“ It is a great victory fo r the state and
for the depositors o f failed banks,” said
Attorney General Sorensen, at Lincoln.
“ It was the biggest lawsuit the state of
Nebraska ever had in the United States
Supreme Court.”
Mr. Sorensen was assisted in defending
the special assessments by Charles E. A b­
bott, attorney o f Fremont.
The state banks, in attacking the special
assessments and in general the principle
o f the bank guaranty, were represented
by Frank H. Gaines, o f Omaha; Leonard
Flansburg, of Lincoln, and S. S. Sidner,
o f Fremont.
Mr. Sorensen said that the general level
o f recovery by state bank depositors will
be 30 per cent.
The legislature has provided a “ set-up”
system o f repayment, by which first returns
from the banks are to be paid to those
who have been paid the least from the
guaranty fund.
Every depositor in a failed bank, how­
ever, is to receive at least 15 per cent be­
fore other depositors are paid. All then
Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Merger at York

At a recent meeting of the stockholders
o f The Citizens State Bank o f Cedar
Rapids, Nebraska, J. W. Cox was elected
president o f the bank to fill the vacancy
caused by the recent death o f John S.
King, former president.
Other officers elected are: H. T. Jackson, vice president ; H. M. Ripp, cashier,
and N. F. Lowe, assistant cashier.
The board o f directors now consists o f
J. W . Cox, J. N. Bowers, H. H. Schueth,
John C. Sievers, F. G. Walker, Chas. F.
Orshek, Peter J. Korth, J . A. Kieve,
Henry Yanderloop, Jacob Rutten, E. G.
Snyder, C. I. Casper, F. P. Wright and
H. T. Jackson. The above officers and
directors, with Mrs. Rachel A. King, now
constitute the stockholders.
A ll slow notes, judgments, and a large
part o f the real estate account have been
removed from the bank, thereby placing
the bank in a liquid condition and abso­
lutely sound.

Holds Annual Meeting
The regular annual meeting o f the stock­
holders o f the Farmers National Bank was
held recently in Stanton, Nebraska.
All present directors were elected to
serve fo r the coming year, and they are as
follow s: Charles H. Chace, Frank W.
Scherer, James Doty, Walter R. Chace,
Robert Larson and L. E. Bare.
A t the directors’ meeting after the
stockholders’ meeting, all officers were reelected as follows : Walter R. Chace, pres­
ident; James Doty, vice president; Robert
Larson, cashier, and L. E. Bare and
Walter L. Happel, assistant cashiers.
The regular annual dividend to stock­
holders was declared.

Consolidation o f the City National Bank
o f York, Nebraska, and the Bank o f Com­
merce o f York was announced by officials
o f the City National which has taken over
Cashier Resigns
deposits of the Bank of Commerce and
A t the annual meeting o f the stock­
purchased its equipment.
holders o f the Fullerton, Nebraska, Na­
The Bank o f Commerce was established
tional Bank, a change in the bank per­
last March. It had deposits o f $302,000 at
sonnel was effected. A. G. Arrasmith, who
the time its last statement was issued. The
fo r the past eleven years has been asso­
City National’s deposits at that time were
ciated with the bank, is no longer con­
$375,000.
C.
N. Beaver is president o f the City nected with the institution and his place
as cashier has been taken by Fred E.
National, F. L. Borden, vice president,
Ward.
and J. E. Shrigley, cashier. Officials o f the
The new officers o f the bank, following
Bank o f Commerce fo llo w : W. G. Liggett,
the
meeting, are J. M. Brower, president;
president; E. II. Smith, vice president,
R. C. Brower, vice president ; F. E. Ward,
and Fred Babka, cashier. No changes were
cashier, and Leonard L. Lesiak, assistant
made in the personnel of the City Na­
cashier. The directors o f the bank are
tional.
W . P. Hatten, M. L. Knowles, H. W .
Jessee, Mrs. Letitia Kaveney, F. E. Ward,
Elected a Director
R. C. Brower and J. M. Brower.
A t the annual meeting o f the stock­
holders o f the Genoa, Nebraska,, National
Sale of Banks
Bank, E. L. Burke, Jr., was elected a,
The sale o f banks recently negotiated
director of the bank. Mr. Burke’s father,
by The Charles E. Walters Company o f
the late Edward L. Burke, was connected
Omaha, Nebraska, include the State Bank
with the Genoa National Bank for many
years and was one of the principal stock­ o f Sugar Creek, Missouri, to C. D. Cayot
of Ottawa, Kansas; the Farmers State
holders at the time o f his death.

81
Saving’s Bank o f Fairbank, Iowa, to G. F.
Haas o f Woodbine, Iowa, and the Citizens
State Bank of Polk, Nebraska, to Arnold
Isaacson and M. J. Ferguson o f Aurora,
Nebraska.

Holds Annual Meeting
The stockholders o f the Security State
Bank, Holbrook, Nebraska, held their an­
nual meeting last month.
All notes and assets o f the bank were
carefully checked by all stockholders, and
found in first class condition.
The following stockholders were elected
on the board o f directors fo r the year
1931: P. Phillipson, August Warner, Otto
Warner, Mrs. Emma C. Snyder and S. F.
Curry, all of Holbrook.
The board o f directors then elected the
following officers to serve fo r the year
1931: P. Phillipson, president; August
Warner, vice president ; Otto Warner, vice
president; S. F. Curry, cashier, and Willie
Wilson, assistant cashier and bookkeeper.
Mr. Ban well, having disposed o f his in­
terests, will retire from the active man­
agement o f the bank on March 1, 1931.

Shelton, Nebraska, in 1928 met to con­
sider continuing collections under the re­
ceivership sale o f remaining assets to the

Vote to Reorganize
Approximately 225 depositors o f the
Meisner State Bank which failed in

MIDLAND BANK
L IM IT E D
1

C h a ir m a n :

T H E R IG H T H ON . R. M cK E N N A
M a n a g in g

F R E D E R IC K H Y D E

D ir e c to r :

S ta te m e n t o f C o n d itio n
December

3 1 s t ,

¡ 9 3 0

ASSETS

S 4 -8 6 6 5

C a s h in h a n d a n d D u e f r o m B a n k s . .
M o n e y at C a ll a n d S h o r t N o t ic e
..
In v e s tm e n ts
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B ills D is c o u n t e d
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A d van ces
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B a n k P r e m is e s
. .
..
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I n v e s tm e n ts in A f f il i a t i o n s
..
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=

£1

$ 3 0 3 ,3 7 1 ,6 5 9
1 0 5 ,6 8 2 ,6 6 8
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Bank Reorganizes
The Center State bank o f Center, Ne­
braska, which has been closed since
October 18, 1930, reopened fo r business
last month.
The old stockholders voluntarily paid
in a 100 per cent assessment on their stock
to help in the reorganization o f the bank.
The depositors consented to use 50 per
cent o f their deposits as o f the date o f
the closing, to purchase undesirable assets.
The bank reopens with a new paid up
capital stock o f $15,000; surplus $3,000,
and with cash reserve equal to 90 per cent
o f the outstanding deposits.
The newly elected officers and directors
are: George Gnewuch, president and di­
rector; William von Bentzell, vice pres­
ident and director; William R. McGill,
director; Charles Ellingson, director;
William A. Pageler, director ; G. T. Britt,
cashier.

..
..
..
..
..

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6 9 ,3 3 7 ,9 5 0
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T o g e t h e r w it h its A f f il i a t e d C o m p a n ie s t h e M id la n d B a n k o p e r a t e s
2 5 5 0 b r a n c h e s in G r e a t B rita in a n d N o r t h e r n I r e la n d , a n d h a s o f f i c e s
in t h e A t la n t ic L in e r s A q u i t a n i a , B e r e n g a r i a a n d M a u r e t a n i a .
T h e o f f i c e s o f t h e B a n k in P o u lt r y , L o n d o n , E .C . 2 a n d at
1 9 6 P ic c a d illy , L o n d o n , W . 1 a r e s p e c ia lly e q u i p p e d f o r th e
u s e a n d c o n v e n i e n c e o f A m e r ic a n v is ito r s in L o n d o n .
OVERSEAS

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BRANCH

HEAD

1 2 2 O L D B R O A D S T ., L O N D O N , E .C . 2

O F F IC E

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T iY ,

LONDON.

E .C . 2

I

Election
A t the regular annual meeting o f the
stockholders o f the Stockham State
Bank, Stockham, Nebraska, the following
directors were elected: Walter D. Ely,
Arthur W . Grosshans and Geo. B. Miles,
Jr. Following the stockholder’s meeting,
the directors held a meeting at which
Walter D. Ely was elected president;
Arthur W . Grosshans, vice president;
Geo. B. Miles, Jr., cashier, and Ruth
Griess assistant cashier for the ensuing
year. The new member to the board o f
directors is Arthur W . Grosshans, who re­
places the late J. Clark Wilson whose
death occurred on November 5, 1930.

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Federal Reserve Bank of St. Louis

FOR

PROMPT

C O LLEC T IO N

LIV E STOCK PROCEEDS
♦

LIVE STOCK NATI ONAL BANK
OF SOUTH O MA HA
Union Stock Yards
OMAHA

Northwestern Banker March 1931

82
highest cash bidder, or adoption o f the
Dalton plan o f winding up affairs. By
the latter plan all depositors sign over
their claims to a committee o f three
trustees who are empowered to settle a f­
fairs of the institution.
Clarence G. Bliss, bank receiver, was
present and outlined various plans, ex­
plaining in detail how each worked, and
then asked the depositors to come to their
own decision. A fter considerable discus­
sion it was voted to adopt the Dalton plan
and a committee composed of Max Schiemann, George N. Mortimer and A. F. Bills
was named as trustees.
At the time the Meisner bank failed
three years ago it had deposits o f $625,000.
Depositors have received about 60 per cent
o f their claims.

Sutton Bank Elects
At a meeting o f the Sutton, Nebraska,
State Bank the following board o f di­

rectors was elected : W . F. Hoerger, Dr.
J. M. Welch, William Levander, F. E.
Weston, E. Kirchhefer. A dividend o f
seven per cent was declared to be paid on
the capital stock. A t the semi-annual di­
rectors’ meeting the following officers were
re-elected : W . F. Hoerger, president ;
William Levander, vice president; E.
Kirchhefer, cashier; W . Kirchhefer, as­
sistant cashier.

Buy Bank Interest
L. D. Spalding and W . T. Waldron of
Omaha have purchased an interest in the
Arlington State Bank o f Arlington, Ne­
braska, and will take an active part in the
management. A. 0 . Hawkins and L. E.
Peterson are retiring. Mr. Peterson has
been appointed district manager fo r the
Mutual Life Insurance Company, and Mr.
Hawkins has several propositions in view
but has not definitely decided.
The board of directors now consist of

H. W . Schoettger, F. W . Smith, Peter
Peterson, C. C. Marshall, Dr. R. A. Davies,
L. D. Spalding and W . T. Waldron. Mr.
Spalding and Mr. Waldron are both ex­
perienced bankers and are not strangers
to that community. The other members o f
the board have been with the bank a great
many years.
Henry W . Schoettger was one o f the
original incorporators in the bank in 1890
and will continue actively in the manage­
ment. The Arlington State Bank has
served its community fo r more than forty
years.

Bank Re-opens
The Guide Rock, Nebraska, State Bank,
which closed early in December, opened
again for business last month.
Officers o f the new organization are
Lloyd Hunter, president; Ira A. Pace, vice
president; S. E. Volger, cashier. The
capital stock is $25,000, and the surplus
fund is $5,000.
Directors are L. H. Hunter, I. A. Pace,
C. M. Taylor, Henry Pederson, S. E.
Volger, Martin Meents and W . L. Dyson
o f Bostwick.
L. H. Hunter, former cashier, will work
in connection with the depositors’ com­
mittee. Bernard Wichmann, former as­
sistant cashier, is assisting at the bank for
a time.

“ Bandit-Proof"" Cages

Your Hotel Address
— -jReflects Your Business
T h e universal acceptance of T h e D r a k e as the stop­

ping place for travelers of note lends added prestige
to the mission of the business traveler who gives this
as his Chicago address. Service standards of the
highest order relieve you of detail and provide, with
finer quarters and foods . . . many unusual accom­
modations to expedite your business. On request,
special quarters for large or small conferences are
gladly placed at the disposal of the guest, without
extra charge. Room rates begin at $5 per day.

T H E

H

H

B

n

B

H

D C A liE
HO TEL,


Northwestern
Banker March 1931
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Federal Reserve Bank of St. Louis

I

C H IC A G O

U n d e r B la c k s t o n e M a n a g e m e n t

Cages in the new trust department o f
the Omaha National Bank, opened a few
weeks ago on the second floor o f the bank
building, are described as “ bandit p roof.”
Clerks serving the public are in the outer
cage; the custodian o f the vault in the
inner cage. Bullets cannot penetrate the
glass o f the cages, which is more than an
inch thick. Inside, the walnut cage walls
are lined to the floor with bullet-proof
steel and steel mesh, which is also used for
the ceiling.

Nebraska News
IN A RECENT T A L K in Omaha,
George W . Woods, bank commissioner for
Nebraska, described the condition o f the
state banks as being distinctly stronger
and sounder than it had been fo r months
and even years back.
“ The people o f Nebraska,” he said,
“ would be astounded if they should learn
that stockholders in many instances have
had to pay special assessments amounting
to as much as 300 per cent o f their invest­
ment. This has resulted in vastly sounder
banking. By classifying each bank’s as­
sets and causing the stockholders to take
up the poor and lost loans we can now
proceed with the knowledge that only
Class A and B assets, together with cash,
form the basis fo r future operations.”
The number o f banks in thè state has
been reduced by about five hundred in
recent years.

83

Killed by Airplane Propeller

Promotions
Chester G. Weston and Ray H. Matson
were appointed second vice presidents,
Russell V. Carlson, assistant cashier o f
the Foreman-State National Bank and Ira
W. Hurley was named assistant secretary
o f the Foreman-State Trust and Savings
Bank at the meeting of the directors which
followed the annual meeting o f stockhold­
ers o f the banks. There were no additions
to the directorate o f the banks.

Chicago Banker Dead
William G. Strand, fifty-four years old,
died recently at his residence in Chicago.
Mr. Strand was manager of the foreign
banking department o f the First National
Bank o f Chicago, with which he had been
connected fo r thirty-four years. He was
born in Denmark, but had lived in Chicago
fifty years, and was a member o f the Lake
Shore Athletic Club and the Rolling
Green Country Club.

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Federal Reserve Bank of St. Louis

S A L M O N P. C H ASE ,

S e c r e ta r y o f th e T r e a su r y u n d er L I N C O L N

The Chase National Bank
of thè City of New York
Pine Street corner of N assau

.

? 148,000,000.00

Surplus and Profits

209,791,140.83

Capital

.

.

.

2,073,775,922.95

Deposits (Dec. 31, 1930)

DIRECTORS
Albert H. Wiggin
John McHugh
Charles S. McCain
Winthrop W . Aldrich
Harry M. Addinsell
Frank Altsehul
Vincent Astor
Gordon Auchincloss
Earl D. Babst
Howard Bayne
Amos L. Beaty
Hugh Blair-Smith
Henry S. Bowers
Edward N . Brown
Francis H. Brownell
Kenneth P. Budd
H. Donald Campbell
Henry W . Cannon
Newcomb Carlton
Walter S. Carpenter, Jr.
Malcolm G. Chace
Harold Benjamin Clark
Robert L. Clarkson
Joel S. Coffin
Howard E. Cole
Edward J. Cornish
Harvey C. Couch
Frederic R. Coudert

Paul D. Cravath
Bertram Cutler
Gerhard M. Dahl
Thomas M. Debevoise
Clarence Dillon
Franklin D ’ Olier
Frederick H. Ecker
Halstead G. Freeman
Tom M. Girdler
David M. Goodrich
E. Carleton Granbery
Edward H. R. Green
Augustus H. Griswold
William E. S. Griswold
Henry O. Havemeyer
Charles Hayden
James N. Hill
Arthur G. Hoffman
Ralph C. Holmes
George H. Howard
Daniel C. Jackling
Otto H. Kahn
Lewis Cass Ledyard, Jr.
James T. Lee
L. F. Loree
H. Edmund Machold
John R. Macomber

John C. Martin
Thomas N. McCarter
Chas. G. Meyer
Albert G. Milbank
Jeremiah Milbank
George M. Moffett
George Welwood Murray
Joseph D. Oliver
Henry Ollesheimer
Eugenius H. Outerbridge
Thomas I. Parkinson
Frank L. Polk
Robert C. Pruyn
Samuel F. Pryor
Lyman Rhoades
Andrew W . Robertson
Ferdin’d W . Roebling, Jr.
Reeve Schley
Carl J. Sclimidlapp

T V tV tV

Joe W. Lewis, who was president o f
the Clarke, Lewis & Company, Omaha
brokers, as well as the Midwest Aviation
Company, was fatally injured at Spencer,
Nebraska, Thursday, February 12, when
he was struck by the steel propeller o f his
plane. His tragic death took from mid­
west financial circles a man who had made
many friends by the force o f his per­
sonality.
Mr. Lewis, fo r several years, had made
use o f the airplane in conducting his busi­
ness, to save time in travel. He was a
pilot, and operated his own three-place
bi-plane. The week before his death, he
had completed a nine-day trip covering
three thousand miles, to the south as far
as New Orleans. His fatal trip to Spencer
had been made fo r the purpose o f in­
specting liis company’s hydro-electric
properties there.
The starter o f the plane was out of
order. Mr. Lewis was trying to start the
plane by swinging the propeller, although
he was not accustomed to this practice.
With Jack Newell, superintendent of the
hydro-electric plant, he had been working
at the plane, trying to start it, when the
blade got into action, caught and crushed
his body.
Mr. Lewis was active in Omaha civic
affairs. He was a leader in the aerial
transportation committee o f the Chamber
of Commerce, which has fostered the de­
velopment o f the Omaha airport and has
aided in Nebraska air tours. The Cham­
ber of Commerce adopted resolutions o f
sympathy at his death.
Mr. Lewis is survived by his wife and
three children. A fter funeral services at
which pastors o f several denominations
took part, his body was laid to rest in
Forest Lawn Cemetery, Omaha.

Charles M. Schwab
Alfred P. Sloan, Jr.
Lloyd W . Smith
Robert C. Stanley
Cornelius Vanderbilt
Thomas F. Vietor
George E. Warren
George P. Whaley
Henry Rogers Winthrop

F o r e i g n a n d T r u s t D e p a r t m e n t F a c i litie s

Northwestern Banker March 1931

84
Foucpiette, president o f the St. Cloud
State Bank, and A. Mac C. Washburn,
general counsel o f the First National
Bank o f Minneapolis.

M in n esota
Bank News

Peyton Named Commissioner

Officers Minnesota Bankers
Association

C. B. BRO M B AC H
President

P resid ent................... C. B. Brom bach
M inneapolis
V ice P resid en t........... J. R. Chappell
W inona
T reasurer.....................W . L. Brooks
Bem idji
S ecreta ry..................... George Susens
M inneapolis

Merger at Austin
The First National Bank o f Austin and
the Austin National Bank, two o f the old­
est and largest depositories in southern
Minnesota, were consolidated recently with
the dedication and occupancy o f the new
First National Bank building. The con­
solidation perpetuates the name o f the
First National and gives Austin a deposi­
tory with resources o f approximately
$4,500,000. The merged bank is capitalized
at $200,000 with surplus o f $100,000. Ini­
tial deposits are approximately $4,200,000.
The merged banks were both affiliated
with the First Bank Stock Corporation
and prior to their affiliation for many
years have been identified with prominent
Austin families. The First National Bank
was known as the Banfield Bank and the
Austin National as the Hormel Bank.
The official staff, as elected by the
joint board, is constituted as follows :
J. C. Hormel, chairman of the board
o f directors; Nathan F. Banfield, Jr., pres­
ident; Park Dougherty, vice president;
Everett C. Banfield, vice president; Rich­
ard S. Banfield, vice president; Henry
J. Drost, cashier; George H. Ewoldt, as­
sistant cashier; George L. Jennings, assis­
tant cashier; Fred H. Edson, assistant
cashier, and Bernard W . Kough, assistant
cashier.
The board o f directors is composed of
sixteen members, including: Everett C.
Banfield, Nathan F. Banfield, R. S. Banfield, R. F. Crane, Park Dougherty, H. J.
Drost, M. F. Dugan, C. F. Fox, C. L. Free­
man, G. A. Guy, Jacob Herzog, Jay C.
Hormel, C. F. Lewis, O. W . O’Berg, J. C.
Schottler and J. H. Skinner.

Banks Hold Elections
A itk in ’s three national banks have
elected officers.
There have been no changes in the
management o f these banks and the busi­
ness reflects the stable and steady condi­
tion o f the community. Deposits aggre­
gate $1,726,000 in round numbers.
The First National Bank elected fo r
board o f directors : Peter Larson, chair­
man ; G. M. Robinson, Albert Zeese, B. R.
Hassman, Norman Falconer, F. E. Freeh,
Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

GEORGE SUSENS
Secretary

John E. Healy. G. M. Robinson was
elected president; Peter Larson and
Albert Zeese, vice presidents; B. R. Hass­
man, cashier; Robert Hasling, assistant
cashier.
The Farmers National Bank elected as
directors: Dr. B. W . Kelly, chairman;
W . T. Mount, Fred Nichols, F. H. Osterliout, Dr. J. J. Ratcliffe. Officers are
W . T. Mount, president; Fred Nichols,
F. H. Osterliout, Dr. J. J. Ratcliffe, vice
presidents; IT. D. McNeil, cashier; Thorn­
ton Getting, assistant cashier.
The National Bank o f Aitkin elected
as directors: C. P. DeLaittre, chairman;
J. B. Galarneault, J. J. McDonald and
J. H. McDonald. Officers are J. B. Galar­
neault, president; J. J. McDonald and
J. H. McDonald, vice presidents; Fred
Johnson, cashier; Otto Elling, assistant
cashier; J. T. Galarneault, attorney and
assistant cashier; Miss Mabel Jacobson,
bookkeeper.

John N. Peyton has been appointed
commissioner o f banks in Minnesota by
Governor Floyd B. Olson to succeed A. J.
Yeigel who recently resigned to become
president o f the University State Bank of
Minneapolis.
Mr. Peyton was born in Duluth and has
lived there all his life, except when away
at school. He is 45 years old, and grad­
uated from Yale in 1908. He started in
the banking business in 1909 with his
father, the late H. M. Peyton, the founder
of the American Exchange National Bank
o f Duluth. In 1912, John N. Peyton or-

Heads Eighth Group
R. M. Cornwell o f Eveleth, was elected
president and Duluth was chosen as the
1932 convention city at the closing ses­
sion o f the Eighth District group, Min­
nesota
Bankers
Association
annual
meeting.
Other officers named are W . F. M c­
Lean o f Duluth, vice president; R. J.
Lewis o f Moose Lake, secretary-treas­
urer; W . L. Spensley o f Hibbing and
Paul Essen o f Two Harbors, members
o f the executive committee, and H. C.
Matzke o f Duluth, member o f the Coun­
cil o f Administration. The 1932 conven­
tion date is February 12.
George Susens o f Minneapolis, secre­
tary o f the State Bankers Association,
spoke regarding a bank officials’ law,
bank reserves, bad checks, a state bank­
ing board to serve in an advisory capacity
to the state commissioner o f banks,
mortgaged property loans and branch
banks, in the principal address o f the
afternoon.
More than 150 bankers attended the
session. Other speakers during the ses­
sions were John E. Peyton o f Duluth,
neAV state commissioner o f banks; D. J.

J O H N N. P E Y T O N

ganized the Citizens State Bank of West
Duluth, which, since 1927, has been known
as the Pioneer National Bank o f Duluth.
He has been president o f that institution
since its organization. He is also vice
president o f the Minnesota National Bank
o f Duluth. He is married and has two
sons.

Heads County Organization
F. M. Williams, president o f the State
Bank o f Byron, Minnesota, was elected
president o f the Olmsted County Bankers
Association at the annual meeting held in
Rochester.
C. J. Leusman, assistant cashier o f the
First National Bank o f that city was
named vice president, and A. C. Burgan,
cashier o f the Union National Bank, was
re-elected secretary.
Twenty-six bankers, including repre­
sentatives o f all banks in the county,
attended the meeting.

85
Statement of Condition
According to the statement o f condition
released on January 12, 1931, o f the Citi­
zens State Bank o f Tyler, Minnesota, de­
posits are listed at $362,229.83 with capital
and surplus o f nearly $23,000. The officers
are Hans Lauritsen, president; F. Utoft,
vice president; C. A. Lauritsen, cashier,
and Vera Kjergaard, assistant cashier.

Election at Elmore
The Farmers State Bank o f Elmore,
Minnesota, held its annual meeting re­
cently and re-elected all the old officers
and directors. The officers a re : Mrs. W .
0 . Dustin, president; G. C. Pirsig, vice
president; G. F. Ivoepke, cashier, and
Mrs. Martha Neilson, assistant cashier.
The directors a re : Mrs. Dustin, G. C. P ir­
sig, G. F. Koepke, Chas. Anderson and
Henry Grimmelmann.

New Bank at Currie
J. N. Peyton, state commissioner o f
banks fo r Minnesota, has announced a
charter has been issued to the Currie
State Bank in Murray county. The in­
stitution has capital o f $20,000 and sur­
plus o f $4,000. Henry Paal, Sr., and
Henry Eiselein, both o f Currie, are presi­
dent and cashier, respectively.

Re-elects Same Officers
The hoard o f the First National Bank
o f Waseca, Minnesota, was organized at
the regular monthly meeting with the
same officers, namely, C. P. Sommerstad,
president; E. 0 . Herter and J. L. Hanson,
vice presidents; J. E. Farrell, cashier;
F. L. Manthey and L. R. Peterson, as­
sistant cashiers.

t

DIRECTORS

20 Y ears of

P. D. A R M O U R
G EO . M . REYN O LD S
Chairman Executive
Committee
Continental Illinois Bank
& Trust Co.

S uccessful G rowth

H ER M A N W A LD ECK
V ic e President
Continental Illinois Bank
& Trust Co.

have justified the policies on
which this Bank was founded,

J O S E P H T. R Y E R S O N
Treasurer
Joseph T. Ryerson & Son

and have made it, today, the

C H A S. W A R D SEA BU RY
Marsh & M cLennan
Insurance

Financial Center of Chicago’s

E. P. W A U D
V ic e President
Griffin W heel Company

Lake Front.

R U S H C. BU T L ER
Butler, Lamb, Foster & Pope

It offers bankers and busi­

RO BERT J. G R A F
First V ic e President
H . M . Byllesby & Co.

ness men a complete bank

C Y R U S M c C O R M IC K
V ic e President
International HarvesterCo.

of distinct individuality, and

D O N A L D B. D O U G L A S
V ic e President
The Quaker Oats Co.

of that fortunate size which

W AYNE
C H A T F IE L D - T A Y L O R
Field, G lore & Co.

assures a continued personal

L EST ER A R M O U R

Bank Officers Are Re-elected
A ll o f the present officers o f the Blackduck, Minnesota, State Bank were re­
elected at the annual meeting o f the
board o f directors, according to I. J.
Hauge, the cashier o f the institution.
H. C. Baer o f Bemidji, president o f the
bank, was present at the meeting.

Re-elects Officers
The annual meeting o f the First Na­
tional Bank was held in Roseau, Minne­
sota, recently. Officers were re-elected
as follows : President, L. IT. Ickler ; vice
presidents, W . W . Smith and A. W aag;
cashier, A. E. Laufenburger ; assistant
cashier, W . S. B ell; directors, L. H.
Ickler, C. J. Ickler, C. L. Thorson, W .
W . Smith and A. Waag.
The bank, according to its last pub­
lished report, is in a healthy condition.
Mr. Laufenburger is optimistic as to the
future o f the institution.

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Federal Reserve Bank of St. Louis

re la tio n sh ip betw een the

JO H N A . H O L A B IR D
Holabird & Root, Architects

custom er and the senior

R O B E R T B. U P H A M
V ic e President
E A R L E H. R EY N O LD S
President

banking officers.

The P E O P L E S T R U S T
and S A V I N G S B A N K
OF

CHICAGO

Peoples Securities Company
( Affiliated)
Michigan

Avenue

at W a s h i n g t o n

Complete Banking, Trustand Investment Service

Street

Resources M ore Than $35,000,000

Northwestern Banker March 1931

86

Becomes Director

Facilities
Based on Wide
Experience
■

In y o u r o w n business y o u
m eet m any em ergencies
that call for the solution of
difficult transit and co lle c­
tion problems.
So do w e.
T h e help w e can give y o u
is the result o f years of
experience w ith just such
problems.
W e serve every type of
b a n k i n g i n s t i t u t i o n in
every section o f the United
States.

. . . T H E . . .

PHILADELPHIA
NATI ONAL BANK
O R G A N IZ E D

1803

P H ILAD ELPH IA, PA.
Capital, Surplus and Profits, $46,000,000

Northwestern Banker March 1931

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Federal Reserve Bank of St. Louis

Wm. H. Griffin was elected as a new
director o f the Rock County Bank at the
annual meeting o f the stockholders held
in Luverne, Minnesota.
The former
directors, Theo. Albrecht, C. D. Millard,
John P. Houg, E. IT. Canfield and Rus­
sell Sherman were all re-elected to their
positions.
The directors met follow ing the stock­
holders’ meeting and re-elected all offi­
cers. They are, Theo. Albrecht, president;
John P. Houg, vice president; C. D. M il­
lard, vice president and cashier, and
Russell A. Sherman, assistant cashier.
Miss Esther Nuffer was promoted to
assistant cashier.
The y ea r’ s business disclosed an in­
crease o f 30 per cent in deposits. G ratify­
ing dividends were paid to the stockhold­
ers during the year. President Albrecht,
o f Minneapolis, expressed satisfaction
with the excellent condition o f the assets
o f the bank.

Hold Annual Meeting
The board o f directors o f the Citizens
National Bank, o f Faribault, Minnesota,
consisting o f Ed. Fleckenstein, T. J. M c­
Carthy, John Peterson, H. P. Leach, J. E.
O ’Neil, Geo. L. Weinberger, J. J. Rachac,
W alter Nutting and J. E. Losleben, held
its regular meeting recently and organ­
ized fo r the year o f 1931 by electing J. J.
Rachac as chairman o f the board o f
directors and J. E. Losleben as secretary.
The follow ing officers were elected for
the ensuing year : J. J. Rachac, president ;
J. E. O ’Neil, vice president; J. E. Losle­
ben, cashier; R. G. Endres, assistant
cashier; C. C. Reineke, assistant cashier.
There was no change made in the per­
sonnel o f the board o f directors and the
clerical force o f the bank remains the
same as in the past. A ll the old officers
were re-elected.
The Citizens National Bank has the
distinction o f being the oldest bank in
Rice county and one o f the oldest in the
state. It will celebrate its sixtieth an­
niversary on August 16, 1931, as a na­
tional bank.
The bank had a prosperous year in
1930 and declared a dividend in spite o f
the general business depression.

Election of Directors
The stockholders o f the First State
Bank o f Cambridge, Minnesota, held their
annual meeting recently and elected the
following directors: J. A. Stoneburg, C.
W . Patsold, Eric Moody, Ed. Rathjens,
Jack Lewis, Robert B. Gillespie, and T.
C. Blumgren.
At the directors’ meeting following, the
following officers were chosen: J. A.
Stoneburg; president; C. IV. Patsold, vice
president; T. C. Blumgren, cashier, and
P. W . Dahlgren, assistant cashier.

87
Chairman of Board

North Dakota
Hank News
Officers North Dakota Bankers
Association
P resid en t.................................. ..................................... J. E . Davis
B ism arck
V ice P resid en t........................................... Paul T. Kretschm ar
V enturi a
S ecreta ry............................................................. W . C. Maefadden
Fargo

W . 0. M ACFADDEN
Secretary

Merger at Kenmare

In Consolidation

A merger o f the two Kenmare, North
Dakota, National Banks has been effected
to be operated under the title o f the First
National Bank o f Kenmare, with the fo l­
lowing officers in charge:
President, J. N. F o x ; vice president
and cashier, David Clark, J r.; assistant
cashiers, J. H. Sinclair, Jr., and P. W .
Dahl.

The German State Bank o f Zeeland,
North Dakota, was consolidated with the
Zeeland State Bank, which took over the
other institution’s deposit liabilities,
Gilbert Semingson, state bank examiner,
announced recently.

Both the First National and Kenmare
National Banks have been operating fo r
28 years. The merger gives Kenmare a
big, strong bank able to meet the needs
o f a growing community.

E D W IN TRA YN O R has been elected
vice president o f the State Bank o f Stark­
weather, succeeding his father, Mr. Peter
Traynor, who passed away recently.

Joins Bancorporation
The First National Bank, Carson,
North Dakota, has become affiliated with
Northwest Bancorporation, it was an­
nounced in Minneapolis, recently.
Capital o f the First National Bank,
Carson, is $25,000, surplus $5,000 and
deposits $203,000.
W . A. Hart is president, L. Ruben, vice
president, and O. Tollefson is cashier.

Closed Banks Pay
L. R. Baird, receiver o f closed banks,
has announced that a dividend is being
paid to the depositors o f three closed
banks in North Dakota.
C. W . Conroy, district manager at
Devils Lake, is paying a 10 per cent
dividend to the depositors o f the Bordulac State Bank.
A dividend o f 10 per cent is being paid
to the depositors o f the Citizen’ s State
Bank o f Epping. Payment is being made
through the office o f J. P. Reeve, district
manager at Burlington.
Baird also announces that the five per
cent dividend which is being paid to the
depositors o f the Farmers State Bank o f
Churches Ferry brings the total divi­
dends paid by the bank to date to 40 per
cent. C. W . Conroy, manager at Devils
Lake, is making the payments.

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North Dakota News

B EN JAM IN B AG LIE N has accepted
a position as assistant cashier with the
Security State Bank, Dunseith, succeeding
Mr. H. E. Falk, who has resigned.
S. A. BYE has been elected president
o f the State Bank o f Heimdal. Mr. J. M.
Bye has been elected vice president, and
Mr. A lfred H. Bakken, formerly assistant
cashier, has been promoted to cashier.
THE B A N K OF GOGSW ELL has
changed its corporate name and headquar­
ters to Bank o f Sargent County, Forman,
and opened up fo r business January 26,
1931.
THE SE C R E T A R Y OF STATE has
issued certificates increasing the capital
stock o f the First State Bank, Venturia,
from $10,000.00 to $15,000.00, and renew­
ing its term o f corporate existence fo r a
period o f twenty-five years. A certificate
has also been issued to change its corporate
name to read “ First State Bank o f Ven­
turia.”

Bank Unit Elects
O. W. Harrison, cashier o f the Citizens
State Bank at Brandon, Minnesota, was
elected president o f the Douglas County
Bankers Association at the annual meet­
ing. Other officers elected Avere M. A.
Lukken o f Alexandria, vice president, and
A. C. Schneiderhan o f Alexandria, secre­
tary-treasurer.

George P. Tweed has been named chair­
man o f the board o f the First and Ameri­
can National Bank o f Duluth, Minnesota,
after David Williams, former chairman,
submitted his resignation to the director­
ate.
Mr. Williams, who succeeded the late
Albert L. Ordean as president o f the First
National Bank prior to its merger Avith
the American Exchange National Bank,
told directors attention to personal affairs
necessitated his resignation. He remains
as a director o f the institution.
Mr. Tweed, in addition to his bank asso­
ciation, is connected with mining activities
at the Head o f the Lakes.
Stockholders o f the bank elected George
W . Ronald, a vice president, to the board
o f directors. The official staff was un­
changed Avith the exception o f Mr. TAveed’s
ascendency to the chairmanship.
The present officers and directors o f the
bank are as f o II oavs :
George P. Tweed, chairman o f the
board; Isaac S. Moore, president; J.
Daniel Mahoney, vice president; Edward
L. Palmer, vice president and trust officer ;
George W . Ronald, vice president; Willis
A. Putnam, vice president; William W.
Wells, cashier; W . Gordon Hegardt, as­
sistant vice president; Robert W . Hotch­
kiss, assistant vice president; Hubert U.
Moore, assistant vice president and trust
officer; Sylvester T. Strain, assistant
cashier; Henry E. Grieser, assistant cash­
ier; Colin Thomson, assistant cashier;
W illiam K . Alford, assistant cashier; John
L. Evans, auditor; John C. ÜAvan, assist­
ant trust officer.
Directors— A. C. Weiss, Adam G. Thom­
son, Edward C. Congdon, Ward Ames, Jr.,
George P. Tweed, T. F. Cole, Isaac S.
Moore, Oscar Mitchell, W . E. Magner,
Marshal] W . Alworth, A. H. Crassweller,
E. J. Maney, James W . Galvin, Frank A.
Brewer, Carl A. Luster, F. PeaATey Heffelfinger, Julius H. Barnes, W . P. Chinn,
Edward L. Tuohy, Louis W . Hill, Rudolph
M. Weyerhaeuser, J. Daniel Mahoney,
Henry F. Salyards, N. F. Russell, George
H. Spencer, W . B. Castle, Walter R. Mc­
Carthy, George W . Welles, David W il­
liams.

Heads Association
R. E. Bennett o f Crosby Avas elected
president o f the Crow W ing Bankers A s­
sociation formed at a meeting held in
Brainerd, Minnesota.
Other officers named are Julius C. Nel­
son o f Pequot, vice president, and T. S.
Nyhus o f Ironton, secretary-treasurer.
Communities represented in the organ­
ization include Pequot, Crosby, Ironton,
Trommald, Cuyuna, DeerAvood and Brain­
erd.
Northwestern Banker March 1931

88

1 0

WA

SECTION
Officers Iowa Bankers
Association
P resid en t....................C. C. Jacobsen
S iou x C ity
"Vice P re s ....... -W a lt e r T. R obin son
H am pton
T rea su rer............ ........ Jos. W . M eyer
Dubuque
O. C. JAC OB SEN
P resident

S ecreta ry.......................Frank W arner
D es M oines

Group Eleven Meets at
Burlington

Iowa is fortunate in having gone through
this severe deflation with much less trouble
than other states. W e are now in a posi­
tion to profit by the return o f general
prosperity which is expected in the next
few months. W e have a rich state here
ready to respond to hard work, thrift and
good banking.”
Mr. Jacobsen urged the confidence o f
the general public in banking institutions,
in his address, maintaining that they are
safe, constructive and conservative. He
pointed out the things which have been
accomplished through the dual system o f
national and state banks and expressed the
belief that net bank losses are not nearly
so great as individual losses and commun­
ity failures due to land speculation, stock
market and “ get-rich-quick” investments.
Censures Loan Agencies
E CENSURED farm loan agencies for
their hesitancy in renewing existing
farm mortgages. “ In shaping our credit
policies,” he said, “ let us realize that there
is a happy medium between a policy too
liberal, which invites undesirable business
with resultant losses, and on the other
hand a policy too conservative with its
retarding o f legitimate industry and con­
sequent ill will.”
Mr. Warner discussed plans o f the state
association fo r more efficient service. He
outlined policies for the successful resist­
ance of bank robbers and other matters o f
primary importance to business.
A resolution, recommending that govern­
ment extend its business ability to aid in
the rehabilitation o f the farm industry by
refunding farm loans at a lower interest
rate over a term o f years, was adopted.
Another resolution adopted opposed the
cash payment at this time o f all the ad­
justed service certificates to war veterans,
in the belief that such a movement would
be unsound business.

H

Snapped at the B urlington group m eeting: Standing (left to right) W illiam H . Maas, Chicago,
vice president of Northwestern B an ker; R. F. W ilson, Fairfield; H . R . Boles, m anager bond
department, Am erican Commercial and Savings B ank o f D avenport; S. E. Coquillette, vice
president, Merchants National Bank, Cedar R ap id s; D. J. Ross, cashier, Commercial Savings
Bank, W ashington; T. T. W arren, cashier, B ank of W infield, W infield. Seated, left to right,
are Y erne L. Bartling, vice president, Forem an Bank, Chicago ; L. A. Andrew, state superin­
tendent of banking in Io w a ; O. L. Karsten, K ew anee 111.; F. B . Yetter, vice president,
Am erican Commercial & Savings Bank, D avenport; C. A . Diehl, vice president, Iow a-D es
Moines National Bank, Des Moines.

LARGE attendance, due in part
to the perfect weather conditions,
featured the meeting o f Group
Eleven at Burlington February 12th. Earl
C. Huene o f Mt. Pleasant was elected
chairman of the group for the coming
year, succeeding E. E. Skola o f Kalona.
Wesley Swiler o f Burlington was elected
secretary.
Speakers of the business session in­
cluded C. C. Jacobsen o f Sioux City, presi­
dent of the Iowa Bankers Association;
Frank Warner, secretary; and banking
superintendent L. A. Andrew. Renewed
faith in Iowa and general optimism for

A

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the future development o f the state were
expressed by all three speakers.
Mr. Andrew spoke o f the failures in
other states, caused principally by the non­
payment o f notes given by farming inter­
ests which are now in distress, and he
pointed out the advantages of Iowa in this
regard.
Iowa Fortunate
N IO W A we have been fortunate in
being able to go through this severe
drop in prices with only a few failures.
The improved banking methods now in
general practice in this state are respon­
sible fo r our fortunate stand at this time.

I

Above, left to right, W alker D. H anna, of
W alker D. H anna Co., B u rlin g ton ; G. S.
Krouth,
Iow a
banking
departm ent;
R oy
H utchinson, cashier, Clinton National Bank.
Seated, left to right, E arl C. Huene, cashier,
State Trust and Savings Bank,, Mt. Pleasant;
F. E. Skola, vice president, Farm ers Savings
Bank, K a lon a ; and M. E. Tate, vice president
and cashier, Security State Bank, Keokuk.
This picture was taken at the Group Eleven
meeting in B urlington last month.

89
Earnings High

Director Deceased

P roof that a bank in a small town and
near large centers can make money is re­
flected in the statement o f the Farmers
Savings Bank o f Weaver, Iowa, which
has a population o f 200.
The bank earned 30 per cent on its
$20,000 capital the past year. It paid
out $15.00 per share and put the other
15 per cent in a reserve fund fo r de­
preciation.
The deposits are around
$300,000.00 with surplus and undivided
profits o f $30,000.00. The total reserve
for depreciation is now $12,000.00. The
town is on the main highway between
Burlington and Fort Madison, being ten
miles from Burlington and eight miles
from Fort Madison.

Homer Cresap, director o f the Farmers
& Merchants Savings Bank, Ottumwa,
Iowa, and connected with the Standard
Oil Company, died recently. He was
stricken with a paralytic stroke and died
in three days. He was 55 years o f age.

42 years and fo r 20 or more years he has
been a director and officer in the Keokuk
Savings Bank and Trust Company. He
also was president o f the inheritance tax
board. He is survived by his wife, and
two children, Raymond J. Cannable and
Mrs. J. S. Wells and two grandchildren.

Keokuk Banker Dies

Excellent Showing

Howard L. Connable, president o f the
Keokuk Savings Bank and Trust Com­
pany since 1921, died in a hospital after
a few days illness with pneumonia.
Connable was born in Keokuk January
14, 1858, and received his education there.
He was in the mercantile business for

According to the statement o f condition
at the close o f business December 31, 1930,
o f the Farmington State Bank o f Farm­
ington, Iowa, the affairs o f that institution
are in an exceedingly liquid condition.
With deposits o f over $175,000, the bank
has available as reserve, $187,000. Capital

President in Florida
J. A. Bradley, president o f the Iowa
Trust & Savings Bank, Centerville, Iowa,
and also the First National Bank o f
Centerville, and president o f the First
National Bank o f Eldon, Iowa, is spend­
ing about six weeks in Florida. He will
visit H. H. Moore at Sarasota, Florida,
who is a former resident o f Centerville.

V ice President Deceased
I.
L. Nedrow, vice president o f the
Farmers & Traders Savings Bank, Douds,
Iowa, died January 27th. He had been
suffering from cancer fo r the past two
years.

V iew po in t is a vital
factor in banking d eci­
sions.

O u r v ie w p o in t

Elected Director
The Security State Bank o f Keokuk,
Iowa, lias elected J. W . Winger, a dry
goods merchant o f Keokuk, to the board
o f directors to succeed John W . Leisy
who died the latter part o f January.

the side of Io w a busi­

Made Assistant Cashier

ness and Io w a progress.

like yours, is always on

F. L. Beal, Farmers Savings Bank,
Carlisle, Iowa, was recently elected as­
sistant cashier. He was formerly at the
First National Bank, DeWitt, Iowa, as
bookeeper.

Banking Hours Change
Effective February 16th, banks at Fairfield, Iowa, changed their banking hours.
The new hours will be from 9 :00 a. m.
to 3 :00 p. m. Heretofore the hours were
9 :00 a. m. to 4 :00 p. m. and took a half
holiday each Thursday afternoon during
the spring and summer months. The prac­
tice o f taking a half holiday on Thursday
afternoon will be discontinued.

Bank Re-decorated

BANKERS TRUST CO.
B A N

K

Cor. 6th and Locust Sts., Des Moines
Capital $1 ,000,000.00

Surplus $ 2 0 0 ,0 0 0 .0 0

The Eldon Savings Bank, Eldon, Iowa,
have re-decorated their bank throughout.
New paper was put on the walls, the fu r­
niture rewaxed, the woodwork varnished,
and the linoleum cleaned.

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Federal Reserve Bank of St. Louis

Northwestern Banker March 1931

90
and surplus are given at over $35,000.
The bank was founded April 16, 1929.
The officers are W . A. Logan, president;
J. I. Amiable, vice president, and G. M.
Barnett, cashier.

Tama Bank Remodels
The Tama State Bank o f Tama, Iowa,
has begun the remodeling o f what was
formerly the First National Bank building
as its future home. The investment will
be about $15,000 and it is expected that
work will be completed in time fo r the
fourth anniversary which will be May 7th.
The Tama State has deposits totaling
$571,409 with capital and surplus of
$50,000.

Ten Per Cent Dividend
A t the recent annual meeting o f the
Perry State Bank o f Perry, Iowa, a divi­
dend of 10 per cent was declared to the

stockholders. This was the second divi­
dend since the organization in November,
1927. All o f the officers and directors
Avere re-elected.
The capital and surplus and undivided
profits are given at $92,870.31 with de­
posits o f $914,379.99. Officers are J. C.
Bryan, president; E. P. Dills, vice presi­
dent, and N. P. Black, cashier.

Vigilantes Capture Robber
Within exceedingly short time after he
had robbed the Farmers Savings Bank at
Steamboat Rock o f $1,000.00, Kenneth
Eldred o f Iowa Falls, Avas captured by
vigilantes.
Shortly after 3 :00 o’clock on February
16th, Eldred entered the Farmers Savings
Bank and forced Cashier E. Christians
and Assistant Cashier J. A. Holmes to
hand over $1,000.00 in coins and currency.
Immediately after he left the bank and

Speed-Accuracy-Satisfaction
FIR ST

TRUST & SAVINGS

BANK

hurried to where his car Avas parked
around the corner from the building,
Christians seized a gun and fired after the
fleeing bandit from a rear window. L. G.
Condon and R oy Hatharvay, both vigi­
lantes, heard the shots, jumped in a car
and started after the youth.
They folloAved, firing at him as he tried
to escape over country roads to the north
and Avest o f Steamboat Rock.
Finally Eldred halted his car and climbed
out. Condon covered him Avith an army
rifle, but as he started to approach, the
youth grabbed fo r his gun. Condon shot.
While he didn’t hit Eldred, the youth put
his hands in the air and surrendered.
He Avas wounded, however, by a bullet
that had pierced his heel. Another had
singed his neck.
In the meantime, Holmes had called
Sheriff W . H. Thompson at Eldora, aaI io
A\rith a posse started out in search o f the
bandit.
Just northwest o f Steamboat
Rock the sheriff encountered the vigilantes
Avith their prisoner, took him into custody
and returned to Eldora where Eldred Avas
placed in jail.
The money he obtained from the bank
was found in the auto in AA-hich he tried
to escape.
Eldred has lived in IoAva Falls most
o f his life.
H e formerly Avas employed
by the Bell Telephone Company, but Avas
laid off a feAv Aveeks ago.

Wendell Eldred, brother of Kenneth,
AA7as also arrested when he Avas found folloAving the bandit’s car. He is being held
fo r investigation.

Capital $600,000.00
Message to Bandits

BURLINGTON, IOWA

The IoAva Bankers Association has just
finished mailing to each o f the banks and
county sheriffs o f Iowa tAvo copies o f a
poster which is a direct message to
burglars and would-be robbers.

The poster which measures 24x36 inches
is headed “ To all bank burglars and rob­
bers and would-be burglars and robbers.”

At your service

PEOPLES
TRUST &

SAVINGS

in Eastern Iowa

BANK

and

W ester n Illinois

P eoplesT rust & S avings Bank
REM EM BER

IT

T H IS

W A Y — ‘ ‘ PEOPLES

TRUST”

OFFICERS
W . W . CO O K . President
J . Q. J E F F E R I E S , Vice Pres.
J . C. L A N G A N , Vice Pres.
W M . M. W IL S O N , Vice Pres.
J . L. B O H N S O N , Cashier
C. S. H A R R IS , Assistant Cashier
F. W . S P A L D IN G , Asst. Cashier
E M I L JO H A N N S E N , Asst. Cashier

Northwestern Banker March 193Í

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Federal Reserve Bank of St. Louis

FolloAving is given four o f the penalties
fo r burglary and banditry. The poster is
effectively illustrated by the photographs
o f thirty-six bandits Avho have either been
sentenced to long terms in the penitentiary
or have paid Avith their lives for the rob­
bery or attempted robbery o f IoAva banks.

This is the result of legal activities
through the state during the past eighteen
months.
The information contained in the poster
includes the folloAving data :

Number given life in Iowa Penitent i a r y .........................................................23
Number giATen life in another State
( Minn.) ...................................................26
Number killing self in Iowa to avoid
capture .................................................... 2
Number dying o f woundsin Io wa............ 1
Number awaiting trialin Iowa............... 1
Number giATen 5 years in another State
(Nebr.) ..........
1

91

“ Facts”
ANKERS throughout Iowa are invited
to call on our Bond Department as a
source of information on securities eli­
gible for investment or reinvestment, just as
freely as if this was their own department.
Facts on a diversified list of securities ac­
ceptable for bank investment and offered by
our Bond Department will be sent upon re ­
quest.
B

G R A N T M cP H E R R IN

L E L A N D W IN D S O R

L YN N FULLER

President

Vice President

Vice President and Cashier

FRANK

R. W A R D E N

Manager of Bond Department

C en tra l


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Federal Reserve Bank of St. Louis

A N

D

T

Ba n

n a t io n a l

R U S T
Of- D E S

C O M D
M O I N E S

A

N

k

T V

Northwestern Banker March 1931

92
Number given indeterminate sentence in
another State (M in n .).........................
Number given 5-20 years in another
State (M in n .) .......................................
Number given 15-20 years in another
State (W ise.) .......................................
Number killed in accident in another
State ( K y . ) ............................................

EDM U N D W . M IL L E R , President

COMMERCIAL
JAM ES M. GR A H AM
V ice President

H . W . W EN T E
Cashier

H. A . M A IN E
V ice President

S. C. KIMM
A ssistant Cashier

A . M. PLA C E
V ice President

R. L. PE N N E
A ssistant Cashier

W . A. LANE
V ice President

C. S. M cK IN ST R Y
Assistant Cashier

NATIONAL BANK

1
1
2
1

T o t a l.....................................................36
It is the intention of the Iowa Bankers
Association to hang one o f these posters
in each bank lobby, or in the waiting rooms
o f railway stations where they are sure to
be seen by any gangster who enters the
town with the idea o f getting the layout
fo r a successful bank holdup.
Altogether the poster constitutes a most
effective piece o f advertising and should
lend its influence in discouraging bandits
from entering the State with the idea of
finding easy victims within its borders.

Bank Makes Fine Showing

'""THE entire facilities
x of the Commercial
National are available to
th ose bankers w h o
demand the best in a
correspondent service.
Prompt action, accuracy
and a satisfactory per­
formance are assured to
all w h o need proper
representation in the
Waterloo territory.
W e invite your busi­
ness and offer you our
sincere cooperation.

Since its founding in 1900 with $10,000.00 capital the Kinross Savings Bank
o f Kinross, Iowa, has paid to its stock­
holders a total o f 333 per cent in dividends,
or a sum o f $33,300.00.
This bank has been most consistent in
its declaration o f dividends, having in
1930 earned a total o f 21 per cent. During
its 30 years o f existence the bank has
never at any time owned any real estate
other than its own building.
Officers are: Forrest M. Herr, presi­
dent; Win. F. Herr, vice president; E. E.
Graham, cashier, and Genevieve Fischer,
assistant cashier.
Directors are Forrest M. Herr, Wm. F.
Herr, E. E. Graham, Genevieve Fischer
and C. M. Herr.

Heads County Bankers
Forty bankers attended the meeting of
the Floyd County Bankers’ Association at
the Hildreth Hotel in Charles City, Iowa,
when the following officers were elected:
Raymond Reis, Marble Rock, president;
E. C. Moody, Nora Springs, vice presi­
dent; Edgar Ball, secretary, and Horace
B. Olds, treasurer, who both live in
Charles City. The association went on
record as favoring a state police. Sheriff
G. E. Cress o f Mason City was the speaker.

Dividend Totals $200,000

W

a t e r l o o

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Federal Reserve Bank of St. Louis

.Io

w a

A 40 per cent dividend, totaling almost
$200,000, is in store fo r depositors in the
First National Bank o f Villisca, Iowa, ac­
cording to announcement by Receiver
W . R. Payne. Authority to make the dis­
tribution has been received from the comp­
troller o f currency at Washington and
checks will be returned for distribution
March 7, it is anticipated.
The bank closed its doors following a

93
run last October. To issue a dividend
within six months after closing is con­
sidered unusual. Stockholders in the in­
stitution have hopes that the bank will
pay its investors 100 per cent.

Heads Clearing House
J.
M. Dinwiddie, president o f the Cedar
Rapids Savings Bank and Trust Company,
was re-elected president o f the Cedar
Rapids Clearing House Association at the
annual dinner meeting last month. This
is the eighth time that Mr. Dinwiddie, first
president of the clearing house which was
organized thirty years ago, has been elected
to the highest office in the association.
L. J. Derflinger, vice president and
cashier o f the Cedar Rapids Savings Bank,
was re-elected secretary, an office he has
held for fourteen years.
Other officers re-elected are C. C.
Kuning, vice president o f the Cedar R ap­
ids National Bank, and F. G. Kanak, cash­
ier o f the United States Bank, who were
named again as vice presidents, offices they
have held since 1927; and C. A. Davin,
who was re-elected manager o f the clear­
ing house credit bureau.
Sixty officers and directors o f clearing
house banks attended the dinner and meet­
ing which was the largest annual gathering
held for several years.

Changes Name
The Morning Sun, Iowa, State Bank
opened recently Avith a new name, the
Iowa State Bank, following a meeting to
effect a slight reorganization. There was
minor change in the personnal at the bank.
W. A. Thompson remains as president,
Samuel Baird is vice president, and M. H.
McDonald, former assistant cashier, is noAV
cashier. Directors o f the bank are Sam­
uel Baird, D. R. Cummings, Glen C.
Nichols, L. R. Pierce, C. W . Butler and
W . A. Thompson.
The combined capital and surplus stock
is $32,500.

O F F IC E R S

G. L. CURTIS.
President
MILO J. GABRIEL.
Vice President
AV. A. ANDERSON
Vice President
O. P. PETTY.
Arice President and Cashier
J. H. NISSEN,
Assistant Cashier
H. G. KRAMER,
Assistant Cashier
H. M. OLNEY,
Assistant Cashier
F. E. CONOVER
Assistant Cashier
F. H. HAMANN
Assistant Cashier

The Best
Recommendations

of City National Bank come from
those who know it best—the
banks, business houses and in­
dividuals who use its services
year in and year out.

Established 1870

Your Business Invited

D IR E C T O R S

AV. A. ANDERSON
Vice President
C. A. ARMSTRONG,
President C. F. Curtis
Company, Inc.
A. P. BRYANT,
Manager of Operations
Clinton Corn Syrup
Refining Co.
O. D. COLLIS
President The Collis Co.
E. J. CURTIS,
Vice President Curtis Bros.
& Co.
G. L. CURTIS,
President
President Curtis Companies,
Inc.
G. AV. DULANY, JR.,
President Eclipse Lumber
Co.
Chairman Climax Engineer­
ing Co.
MILO J. GABRIEL,
Vice President
President Gabriel Lumber
& Fuel Co.
B. M. JACOBSEN,
President Clinton Thrift Co.
J. PETERSON
O. P. PETTY,
Vice President and Cashier
H. W. SEAMAN
J. O. SHAFF,
Farmer and Live Stock
Dealer
W. R. SMITH,
General Manager
Clinton Corn Syrup
Refining Co.
F. H. VAN ALLEN,
President J. D. Van Allen
& Son, Inc.

C lin to n
C o u n ty s
L a rg est
Bank

Declares Dividend
The Farmers Trust and Savings Bank at
Joice, IoAva, o f which 0 . Iv. Storre is presi­
dent and S. R. Torgeson cashier, held its
annual business meeting last month Avith
140 shares represented. The business o f
the past year has been highly satisfactory
and all o f the old board and officers were
re-elected. An 8 per cent dividend, repre­
senting $2,000 had been declared several
Aveeks ago and these checks were distrib­
uted at the meeting.
The financial statement as of December
31, 1930, shows the capital stock to be
$25,000 and the surplus fund $12,500. In­
dividual deposits, savings deposits, and
time certificates o f deposits total more
than $210,782.

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

City National Bank
CLINTO N IOWA
Northwestern Banker March 1931

94

Joins Oskaloosa Bank

Re-elects All Officers

F. A. Menneke o f Los Angeles, Calif.,
has been elected a vice president o f the
Oskaloosa National Bank at a recent meet­
ing and becomes an active member o f the
organization.
Mr. Menneke is an old time Iowa banker
who has operated successful banking in­
stitutions at Miles and Maquoketa, but
more recently has been located at Los
Angeles.
The new bank official says that he has
returned to Iowa because he believes this
state offers opportunities fo r future
growth and development equal to any
other section and expressing an abiding
faith in agricultural advancement-.

Citizens-Security Trust & Savings Bank
o f Cedar Falls, Iowa, re-elected all officers
and directors at its annual meeting held at
the bank.
Officers include J. G. Wyth, president;
V. W. Johnson, vice president and cashier;
H. W . Johnson, vice president; J. B.
Newman, vice president and counsel; W.
E. Brown and L. E. Daubenberger, as­
sistant cashiers.
The directorate is made up o f the above
officers excepting the last two named and
the following additional m en: Dr. W . L.
Hearst, J. H. Byers, LeClair Martin, P.
C. Petersen, W . N. Hostrop, George S.
Mornin and C. J. Wild.

TRUST

CONFERENCE

E . R . Jackson, T rust Officer o f the
C o u n cil
Bluffs
Savings
Bank
and
C h airm an of the T rust C o m m ittee of
the Iow a B ankers A s s o c ia tio n ; and
C . C . Jacobsen, V ic e P resident of the
Security N a tio n a l B a n k , S iou x City
and P resid ent of the Io w a Bankers
A ssociatio n announce the date fo r the
second M id -W in te r T ru st C onference
of the Iow a Bankers A ssociatio n to be
h e ld in Cedar R ap id s on T h u rsd ay,
M arch 26, 1931.

Buys Iowa Interests
C. B. Kloppe, who has been in charge
o f the Iowa territory fo r Lambert-Price
& Company fo r several months, has just
purchased the Iowa interests o f the latter
company.

HE Pioneer National
offers a correspondent
service ripened by seventyfive years of successful bankin g o p e r a t i o n . Yo u are
assured of complete satisfac­
tion for all the guesswork
and uncertainty have been
eliminated from our banking
transactions.

Mr. Kloppe heads the new investment
organization to be known as C. B. Kloppe
& Company, with offices at 335 Insurance
Exchange Building, Des Moines.
The
company already has an extensive dealer
organization throughout the state and
has under way an expansion program to
open further connections in all im­
portant cities and towns o f Iowa.
The company will specialize in invest­
ment trust issues and will act as ex­
clusive Iowa wholesalers fo r the Calvin
Bullock trusts, including Nation W ide
and Uselps. Nation W ide is a semi-fixed
trust comprising seventy-seven basic cor­
porations, and Uselps is a semi-fixed
trust embracing forty-fou r large power
companies which generate over 80 per
cent o f the nation’ s power at the present
time. In announcing his program for
1931 Mr. Kloppe stated that he regards
Iowa as one o f the best investment ter­
ritories o f the country at the present
time.

Officers Re-elected
All officers and directors o f the Farmers
and Merchants Savings Bank o f Burling­
ton, Iowa, were re-elected at the annual
meeting o f the board.

Na t io n a l Ba n
Established, by John H. Leavitt in
W aterloo, Iowa

1656

IR A R O D A M A R , President
J. O. T R U M B A U E R , V . Pres.
C. A . C L A R K , V . Pres.

J. A . YO U N G , V . Pres.
D. J. W A L K E R , V . Pres.

FR ED H. W R A Y , V . Pres, and Cashier

Banker March 1931
Digitized forNorthwestern
FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

k

The usual dividend was declared and
it was reported that the institution showed
a substantial growth in 1930. Indications
show that 1931 has a bright outlook,
officials o f the bank announced.
Officers o f the bank are M. E. Toothacre,
president; II. R. Buettner and August
Witte, vice presidents; H. E. Simon,
cashier; R. A. Haggerty, assistant cashier.
Directors are H. R. Buettner, George
Steingraber, Dr. C. P. Frantz, August
Witte, Oscar Riepe, Henry C. Koestner,
James Kelly, M. E. Toothacre and Frank
Barnes. Mr. Buettner is chairman o f the
board.

95

Name Officers
A t a meeting o f the directors o f the
Henry County Savings Bank o f Mt.
Pleasant, Iowa, the following officers o f
the bank were elected for the new y ea r:
William Kitch, president; John P. Budde,
executive vice president; W m. H. Evans,
cashier; C. Van Brussel, first assistant
cashier; G. A. Hallowell, second assistant
cashier; Edna Michener, third assistant
cashier.
The directors o f the hank are Messrs.
W . B. Seeley, W . F. K opp, William Kitch,
H. E. Elgar and J. P. Budde.

Bank Open for Business
Closed six weeks ago, the First National
Bank o f Cherokee, Iowa, opened fo r busi­
ness, after culmination o f reorganization
plans by old and new interests. The new
bank is capitalized at $50,000 with $25,000
surplus paid in full.
Officers o f the reorganized hank have
not yet been named. The stockholders are
N. T. Burroughs o f Chicago, H. E. Ben­
nett, R. A. Caswell, Wallace Caswell and
J. F. Weart o f Cherokee and A. W . Jones
of Sac City, Iowa.

Hawkeye Merger
Citizens Savings Bank o f Ilawkeye,
Iowa, has announced it had taken over
the business o f Alpha State Bank and
assumed all deposit liabilities.
The Alpha banking business became un­
profitable by reason o f a decrease in
the volume o f business, resulting in the
merger. The Alpha institution was cap­
italized at $25,000, with deposits o f
$50,000.
H. A. Swigard is cashier o f the Hawkeye bank and L. H. Hautli its president.
They will continue in office under the
merger.
Hawkeye Citizens Savings Bank was
organized in 1927, following the suspen­
sion o f First State Bank. It has made
great strides in its three years o f opera­
tion.

The Personalized corre­
spondent service rendered
by the First National
gives you the exact repre­
sentation your business
in the Mason City terri­
tory demands.

O F F IC E R S

V,

Hanford MacNider
Chairman of the Board
W. G. C. Bagley
President
C. A. Parker
Vice President
P. E. Keeler
Vice President
R. P. Smith
Vice President
H. V. Bull
Cashier
W. W. Boyd
Assistant Cashier
H. C. Fisher
Assistant Cashier
R. B. Johnson
Assistant Cashier
R. E. Wiley
Assistant Cashier

Pays Final Dividends
The sixth and final dividend, amounting
to $13,469.71, for the Citizens National
Bank o f Royal, Iowa, is now ready for
payment, according to an announcement
from C. F. Fiman, receiver. A dividend
o f 8.4 per cent will he paid.
With the addition o f the final dividend
a total o f 78.4 per cent has been paid or
a sum amounting to $125,743.84. Amounts
paid in dividends prior to this last divi­
dend were $112,274.13. Payments will be
made by Mr. Fiman at the Citizens Na­
tional Bank building in Spencer.
The Royal bank closed its doors on
November 9, 1926, and F. R. Jones took
over the receivership which he held until
the appointment o f Mr. Fiman, early in
1930.

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

First National B ank
Mason City, Iowa
Affiliated W ith N o r th w est B a n co r p o r ation

C om b in ed R esources $495,000,000

Northwestern Banker March 1931

96
McChesney Re-elected
W. J. McChesney has been re-elected
as president o f the First National Bank
and the Fanners Loan and Trust. Company
o f Iowa City. The new officers o f the bank
were re-elected by the board o f directors.
Other officers o f the First National
Bank Avho were re-elected are as follow s:
Vice president, Charles M. Dutcher;

cashier, Thomas Farrell; assistant cashiers,
J. E. Gatens, and G. R. Griffith.
The other officers o f the Farmers Loan
and Trust Company are as follow s: Vice
president, Marvin H. Dey, and treasurer,
Thomas Farrell.
The board o f directors consists o f
Marvin H. Dey, Thomas Farrell, W . J.
McChesney, Charles M. Dutcher and
Dean Chester A. Phillips.

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correspondent ac­
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the service we ren­
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pleasing satisfaction
throughout the years
to come.

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O F F IC E R S
Leonard R. M anley........................ President
C. C. Jacobsen..................... Vice President
R. Earl B ro w n ................................... Cashier
Delko Bloem ............................. Ass’t Cashier
Albert C. E ck e rt......................... Ass’t Cashier
Daniel B . Severson..................... Ass’t Cashier
Elm er O. Sm eby......................... Ass’t Cashier

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1876

1931

The Consolidated National offers
you the benefit of its fifty dive
years successful banking operation

C o n so lidated National B a n k
DUBUQUE, IOWA
J. K . D e m in g , President
G eo. W . M yers, V ic e President

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Jos. W . M e yer, Cashier

Organize Vigilantes
As a part o f a state-wide movement,
bankers and vigilantes met at Muscatine,
IoAva, recently to form a county organi­
zation. Representatives o f the three banks
and vigilantes attended the meeting where
the purpose and routine o f the organi­
zation was explained by the state leader.
Ammunition and arms, consisting o f
riot guns, pistols, and .38 caliber re­
volvers Avere distributed. Money fo r this
equipment is furnished by the county
supervisors and the banks o f the county.

Pays 2 0 % Dividend
Stockholders o f the Farmers and Mer­
chants State Bank re-elected the board o f
directors and loan committee at the an­
nual business meeting at Lake Mills, IoAva.
The directors met after the regular session
and voted to maintain the same staff o f
officers. The bank has been organized
little more than three years and stock­
holders were Avell pleased Avith progress.
The 20 per cent dividend was recently paid
to stockholders in addition to adding
$2,500 to the surplus fund. A substantial
fund still remains as undivided profits.

Monroe Banks Elect
Officers and directors for the îavo banks
o f Monroe, IoAva, the Monroe National
Bank and the State Savings Bank, Avere
re-elected at the annual meetings o f the
two organizations held recently.
C. B. Livingston Avas re-elected pres­
ident o f the Monroe National Bank, Frank
Chipps Avas re-named vice president,
Ulrie Clevenger Avas elected cashier for
another year, and Ray Kingdon Avas
again selected as assistant cashier.
Members o f the board o f directors were
re-elected, and one new member Avas added
to the board, J. D. Long. Others on the
board are Chet Fennema, C. B. Livingston,
Frank Chipps, C. M. Gloyd, O. G. ShaAv
and Ulrie Clevenger.
Officers o f the State Savings Bank were
re-elected as folloAvs: R. W. LiA'ingston as
president, E. W . Henry as vice president,
W . M. Livingston as cashier, and Laurel
Buckley as assistant cashier.
The members o f the board o f directors
were re-elected also as folloAvs : R. W.
Livingston, E. W . Henry, W. M. Liv­
ingston, L. D. Burchinal, D. F. LeAAds and
H. T. Burchinal.

Heads New Bank
A t a meeting o f the directors o f the
Williams Savings Bank, Williams, IoAva,
A. H. Graffunder was elected as president,
P. W . Peterson, vice president ; F. A.
Rummel, cashier, and F. J. Counsell, as­
sistant cashier.
The officers o f the new institution have
been busy making final arrangements for
the opening. The bank has received its
charter, which has been issued fo r a fiftyyear period.

97

Heads Federal Surety Company
Hon. Ray Yenter, Iowa insurance com­
missioner, will resign from that position
soon to become president o f the Federal
Surety Company o f Davenport, according
to a recent announcement by Percy F.
Biglin, vice president and treasurer o f the
company.
Colonel G. W . French of Davenport is
to be elected chairman o f the company’ s
board o f directors. He will succeed Ira
Schiller o f New York City.

Bank o f Keokuk, Iowa, was elected vice
president of the bank succeeding the late
John W . Leisy. The election o f Mr.
Schouten occurred at the regular meeting
o f the bank’s directors.
Mr. Schouten, associated with the bank
for several years, is one o f the younger
business men in the bank’s personnel. He
is president and treasurer o f Schouten’s
Bakery, Inc.

New Bank At Sutherland
Sutherland, Iowa, again has a bank.
The Security State opened for business
recently with a capital o f $25,000 and a
surplus o f $6,250.
Officers o f the corporation are Wm. F.

Thompson, president; John S. Woolston
and Ernest McDowell, vice presidents, and
C. W . Lynn, cashier.
Directors o f the bank are : James
Sweeney, Chas. Green, Chas. Aldred, Jack
Woolston, C. W . Lynn, Wm. Thompson,
Ernest McDowell.
Mrs. Clubber : How do you control your
husband while you are away?
Mrs. Onthego: I leave the baby with
him.
— Pathfinder.
Another alarming disadvantage o f min­
iature g olf is that players who make a
good stroke are tempted to take the course
home and show their friends how it was
done.
-—Punch.

R A Y YE N TE R

The Federal Surety Company has
ceased to operate as a direct underwrit­
ing company and will do a reinsurance
business. Headquarters will remain in
Davenport.
Commissioner Yenter is now' serving
his third term as commissioner which
would have expired in July. A t that
time the position will be filled by E. W.
Clark o f Mason City, the new appointee
o f Governor Dan Turner. Mr. Yenter is
at present chairman o f the executive com­
mittee of the Commissioners’ Convention.

Bank Officers Re-elected
At the annual meeting o f stockholders
o f the Citizens State Bank o f Humeston,
Iowa, the officers were all again elected
as follows : President, Geo. McCulloch ;
vice president, E. S. Williams. Other
directors, C. C. Hutchinson, W . R.
Richard, H olly Garton, H. D. Hines,
D. S. Moore. Cashier, J. A. Courtright;
assistants, Geo. R. Garton, L. J. Guinn.
The bank has done well under this man­
agement the past year, and has paid a
10 per cent dividend and added $5,000 to
the surplus fund.

Becomes Vice President
Hubert Schouten, a member o f the
board o f directors o f the Security State

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Northwestern Banker March 1931

98

Debits Down in 1930

Your Des Moines
Business
The Valley National will give your bank’s
business the same individual and careful atten­
tion that has prevailed through 58 years of
service to Iowa banks. This close relationship
and seasoned experience makes this bank your
logical connection, in Iow a’s logical reserve
center.

Founded 1872

VALLEY
NATIONAL BA N K
D ES M O IN E S
OFFICERS
R. A. C raw ford , President
C harles W . E n y a r t , Vice President
D. S. C h a m b e r l a in , Vice President
C. T. C ole , J r ., Vice President
W. E. B a rr ett , Cashier
C. O. C r aig , Vice President
C. M. C o r n w e ll , Assistant Cashier

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Check payments through Des Moines
banks fo r 1930 totaled $979,692,000, clear­
ing house records revealed.
This is 2.1 per cent under the 1929 debit
volume which showed the unusually large
sum o f $1,019,215, caused largely by the
abnormal check transactions which accom­
panied stock market activity in the fall
o f 1929.
In spite o f this condition, however, four
months o f 1930 showed larger debit vol­
ume than corresponding months o f the
previous year, while two reached almost
record figures.
January started off the year with $87,499,000, Avhich was considerably above the
average month’s business here. February
sagged slightly with $71,544,000, being a
short month with two holidays.
March came back strong with $85,936,000 and then came two bumper months—■
April with $90,198,000 and May with
$90,111,000. June produced $82,392,000
and finished the first six months with a to­
tal considerably ahead o f that o f the cor­
responding period of 1929. The second
half o f 1930 failed to keep step with the
first half, and October was the only month
in the latter half o f the year to reach or
pass the $85,000,000 mark.
As was pointed out before, 1930 was
seriously handicapped in the comparison
by the inflated debit volume o f the last
quarter o f 1929. October, 1929, set a new
high mark when it registered a debit
volume o f $97,739,000, or more than $12,000,000 above October, 1930, which was
a normal month.
Comparative check payments fo r the
two years follow by months:
Month
1930
January ......................... $87,499,000
February ........................ 71,544,000
March
............................. 85,936,000
April
............................... 90,198,000
May ................................. 90,111,000
June ................................. 82,392,000
July ................................. 80,145,000
August ............................ 74,880,000
September ..................... 80,188,000
October
.......................... 85,486,000
November ........................ 71,714,000
December ........................ 79,599,000

1929
$84,266,000
72,389,000
83,051,000
83,051,000
87,772,000
85,914,000
85,966,000
85,110,000
84,506,000
97,739,000
85,708,000
81,005,000

Book on Stock Speculation
The point o f view that stock specula­
tion is “ no longer the prerogative o f the
wealthy” and that “ fundamentally there
is no real necessity o f money being lost in
stock trading” animates the volume “ Suc­
cessful Speculation in Common Stocks,”
which has just been published by W hit­
tlesey House, the trade department o f
the McGraw-Hill Company.

How It Happened
“ I ’ve been under the doctor’s care for
thirty-five years.”
“ My goodness, what has been the matter
with you ?”
“ I got very foolish when I was nineteen
and married a doctor.”
— Cornell Widow.

99

<T )r in k nature’s greatest
health waters

A T A M E R IC A ’S
FINEST RESORT

ImHotd

EXCELSIOR

^E ST LIN G among the beautifully wooded

hills of Northwest Missouri, amid scenes of
natural beauty and splendor, the new Elms
Hotel is acclaimed by visitors as one of the very
finest resort hotels in America. Newly refur­
nished and redecorated and equipped with all

SPRIN GS

MO.

everything to be desired for your comfort and
enjoyment.
Excelsior’s world famous mineral waters, gush­
ing forth from more than twenty bubbling
springs, are unexcelled in their curative value
in all chronic organic disorders.

modern conveniences, The Elms offers you
Here you can tone up your system, regain your

f e t f e n f n ."girai

The Sims is only 28
miles Northeast o f
K ansas C ity a n d
there a re p a v e d
highways leading
in a ll directions

health, and enjoy all the pleasures of resort
life. There is horseback riding, boating, bicycle
riding, swimming, tennis, and two sporty
eighteen-hole golf courses.
A visit to The Elms will pay you big dividends
in renewed health. For reservations or a book
fully illustrating the many beauties of Excelsior
Springs, write, wire, or phone Fred F. Hagel,
President and Managing Director.

O ne of the W orld’s Most Famous Mineral Springs Resorts

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Northwestern Banker March 1931

100

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P e o p le s T r u s t & S a v in g s B a n k , C lin ­
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P h ila d e lp h ia N a tio n a l B a n k .................
P io n e e r N a tio n a l B a n k ................................
P o lk , H a r r y H . & C o ..................................
P r ie s te r , Q u a il & C u n d y ...........................

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C o n so lid a te d N a tio n a l B a n k ................. 96
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L iv e S to c k N a tio n a l B a n k ......................
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F ir s t Io w a S ta te T r u s t & S a v in g s
M a tth e w s , L e w is & C o...............................
B a n k .................................................................. 90 M e rc h a n ts N a tio n a l B a n k ............ ..
F ir s t N a tio n a l B a n k , M ason C ity . . . . 95 M e tc a lf, C o g ill & C o.................................
F ish e r C o m p a n y ............................................ 18
................................32, 38, 44, 50, 54, 62,
F o r e m a n -S ta te N a tio n a l B a n k ............
2 M id la n d B a n k , L td .......................................
P o rte r, F o x & C o........................................... 58 M in n e so ta C o m m e rc ia l M e n ’ s A s s n .. .

TH E N O R T H W EST E R N B A N K E R AND THE TE R R IT O R Y IT COVERS
by

D e P u y P u b l is h in g C o m p a n y

555 Seventh Street, Des Moines
C LIFFO R D D EPU Y
Publisher

R. W . M O O R H E A D
Editor

G ER ALD A. SN ID ER
Associate Publisher

L. D. V A N D ORAN
Associate Editor

F R A N K P. SYM S
Vice President

W M . H. M AAS
Vice President

Chicago Office: W m . H. Maas, 1221 First National Bank Bldg., Phone Central 3591
New York Office: Frank P. Syms, 25 W est 45th Street, Phone Bryant 4867
Milwaukee Office: 110 E. Wisconsin Ave., Phone Daly 6154
Minneapolis Office: Frank S. Lewis, 840 Lumber Exchange, Phone Main 3865

Official Publication of
T H E S O U T H D A K O T A BA N K E R S A S S O C IA T IO N
T H E I O W A FARM M O R T G A G E A SS O C IA T IO N
T H E IO W A IN V E S T M E N T B A N K E R S A S S O C IA T IO N

Northwestern Banker March 1931

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

65

M

F

P u b l is h e d

22

ORGANIZED
1877

MEMBER
FEDERAL RESERVE


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

^Ve c T V

Lo uring

all the years when the

Cedar Rapids National has been
growing in size and strength, and
capacity for service, it has retained
its reputation as a bank where
friendliness is a reality.
spondent service

Its corre­

is today as it

was when Cedar Rapids was a
village, a true reflection

of

its

hospitality.

Glenn M. Averill, Pres.
E. M. Scott, Vice Pres.
C. C. Run ins, V. P.
and Cashier
Van Vechten Shaffer,
Vice Pres.
Geo. F. Miller, V. P.
and Trust Officer
Marvin It. Selden,
Vice Pres.
Assistant Cashiers
Peter Bailey
Bertha M. Wolf
Geo. W. Swab
Maud W. Carpenter
It. D. Brown
O. A. Kearney

C ed ar I^ajjids, Io\0a

STRATEGIC POSITION
That Iowa Uses to Advantage
E N T R A L in the geographical
sense, Iowa more and more
approximates the central position
in the Nations population.
O f its favorable location, Iowa is
fully conscious. It utilizes to advan­
tage the exceptional opportunity
thus afforded for cultivating mar­
kets, for expanding its industries

C

and for diversifying its agriculture.
This Bank, similarly alive to its
strategic position, has served its
customers through ever widening
circles o f contact and influence.
Its connections are nation-wide.
Its channels o f information are
far-reaching and direct. Its central
clearing facilities are outstanding.

C• Correspondents appreciate the promptness with which this hank can
fu lfill their requests, due to its favorable location and to facilities
that it has developed to a high point for rendering that type o f service.
Your business is cordially invited , and w ill be effectively handled.

wmmmmmmm.

IO W A -DES MOINES NATIONAL BANK
& T rust c o m p a n y


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Affiliated with

NORTHWEST

BANCORPORATION