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Ki ll COPY - LiiiHAKY t For Release afternoon papers, Saturday, April 22, 1 9 2 2 . ^ ^ C ADDRESS 0 ? THE COMPTROLLER OF THE CURRENCY, HONORAto C ^ R ^ I ^ S ; BEFORE THE FLORIDA BANKERS ASSOCIATION, GAINESVILLE, ^ t f j m SATURDAY, April 22, 1922, Mr, Qhairman and Gentlemen: • It is a great pleasure f o r m e to bring to the people of the South a real message of assurance." We are indeed around the curve and are moving steadily, strongly, surely and stralghtly forward on the road t* mors prosPorous conditions. The business oUtlo.ck of the whole country is brighter more encouraging than it has been for .the past t*o years. TO are n i of business and industrial froth, and in a position to go forjara on sound and substantial l i n e s . <Ve are ready to start, to be ©fl, to Aping. Business, industry, agriculture and commerce need only lag of American pluck, Courage and initiative to insure the reestablishment prosperity. The banks -7h*ch come under my supervision, in the maip, are in coTH U t i o n and prepared to finance every productive ^ e r p r i s e , but should have nothing for speculative adventure. There has been ^ n a e r t u l i m p r o v e m e n t i n banking and U m W circles; money is easy and cheap and as in the past, the banks again <vUl be the bulwark of prosperity and the sheet-anchor «f national progress. I t has been a very common observation, in this country i ^ L ^ e f i n that the American banking system, serving as the last line of re.serves i n the vorid 1 s economic scheme, carried the final supremenburdeneffinancing the world War. If our banking system had not been equal to that strain the burden would not have been carried, and the result might have been very Afferent. ft J think «e can a l l agree as to « h i . much of t h e f a c t o c o n c e r n i n g the : service of our.banking system, but there are some statement that I believe are vorthy of being seme-vhat developed and ol being better understood by the public. Quite aside from the ^ our banking syatem, n o . that the F e d e m l Heserve organization has been super imposed upon the aid national bank structure, I think we mus* recognise ™ very much i s o^ing to the popularisation in this country of banks. By thie X mean that the American habit of depositing in the bank and oI W k i n g P»:r aient through i t , constitutes the most effective possible mobilisation ex xn K s t r . sa-sssKw: heavy expenaea, -vae an element of i n e f f i c i e n c y . " X » * in some communities, I think i n a great many c o n e u n i t i e s * e have me.re 0 i» than -rould be justified by considerations of the higheet effxciency But the:other hand the multiplication of banks has the people to uee the banks; to acquire the b a n k i n g h a b i t , to meaning of credit, and the p o s s i b i l i t i e s . 1 i t . . ' ^ i ™ * ' ^ J m tion. I an strongly of the opinion that in the long run this s e r v w - 2 - been so important as to justify tho great number of banks that we have in this country. It i s only within comparatively few years that banks have gone Systematically into the business of advertising for business* Many of them have carried on extended campaigns of publicity, designed to educate the people in the advantages of using the facilities of the bank. This is * policy which, unless it is carried to excesses, as is of course possible in cases where competition between banks is unjustifiably active, is to be regarded as entirely good practice. Every time a bank induces a young fcan or a young woman, just beginning to earn h i s or her own money, to become a depositor, and therefore a regular contributor to the community's fund of liquid credit, it is doing a service both for that new depositor and for the community at large. On the one side, it is teaching to the aew depositor the habit of saving and thrift. On the other, it i s placing that person's savings where they can be effectively utilizee as support for the going enterprises of the community. Moreover, the person who becomes a regular bank depositor does not commonly have to wait V0 r y long before he discovers that as a depositor he is creating for hii&self a credit standing which sooner or later he is likely to want to use in some business activity of his own. It is true, beyond any uncertainty, that to establish and maintain a bank account is one of the best beginnings that a young man or woman can make in business education. The country banker, intimately acquainted with his constituency, and having an ©special influence with them, is particularly well placed to be of service in all such educational efforts. A great part of popular extravagance is due to the failure to inr<luce more people to become bank depositors. ^e all know — nobody indeed knows so well as bankers — that people are much more apt to spend thoughtlessly the money they are carrying in their pockets, than the tooney they have to their credit in the bank. fhere is no need to argue cn this point; it is one of the most obvious bits of business experience, within the observation of every business man, The aggregate of money that people are every day carrying quite needlessly, and at heavy risk, in their pockets, vould be a cash reserve of great value to national business, if deposited in the banks, so that it could be utilized. And, jttst as the habit of wasteful and useless spending is encouraged among people who carry their ready money in their pockets, &o the habit of useful expenditure, of substantial and profitable investment, is encouraged among those who keep their surplus funds in bank. In a time when there is 30 much need to induce people to build their own homes, it would be most illuminating and helpful if we could get statistics show1ing how much the habit maintaining a bank account contributes to the probability of acquiring one 1 9 own home. In this connection, I think every bank would increase its service to the public if it would Aake itself a -.hort of an investment educational Center for its community of patrons. There are millions of people who do £ lot happen to have thought much about the business of permanent investment, who would be glad, if it were called to their attention, if its advantages '"ere impressed upon them, to become participants in permanent investments, Of one kind or another. The patriotic zeal of the war period was responsible for enlisting a new army of investors, who "became purchasers of liberty Bonds and in doing so learned their lesson in the establishment and utilization of sound individual credit* Many of these indeed have not been able to digest all tha> they undertook,but on the whole the results have been mainly gOGd. So I would urge every banker to make special effort to inculcate the habit of saving, of utilizing bank f a c i l i t i e s , of keeping money in the bank father than in the pocket book, and of making small investments whenever the accumulation is large enough to justify them* X think the bank which encourages the depcsitor with a comfortable and reasonably permanent balance to become an investor in sound securities, will in the long run benefit, even though at the moment it seems merely to be giving up some part of its available cash for current business. I do not suggest that bankers should become investment brokers, but merely that they should encourage and guide their clientele to this kind of investment in sound, reliable enterprises, and should uae their influence to prevent flotation of fly-by-night schemes* ^ a t e v e r tends to increase the stability, the aggregate wealth, the average of individual wealth, in the community, will be a good thing for the banks* If you will look into the experience of those sections where tt ost people are bank depositors and general investors, you will find that there the banks are soundest, most useful in financing industry and enterprise, and least threatened by the unfortunate consequences of temporary business depression. If I may be permitted an illustration of some personal experiences, I may say frankly that I speak with some especial conviction on this point, because I happen to have been for a good many years a banker in a small c i t y in vhich it was the constant policy and effort of the banks and business men to keep the control of business and enterprise in the hands of the home people. In ray home town of Marion, Ohio, with about 3 0 , 0 0 0 people, and not one amonfe them who according to the standards of these times would be regarded as really wealthy, we have buwlt a rather remarkable number of industrial enterprises, owned in the main, and controlled, by our own People. That has been possible because so many people contributed to the fund of capital and credit, through using the banks and through making investments in the securities of local enterprises. As a result our to^wi a nd its industries are comparatively independent of outside financial relations, while the town boasts that i t contains a larger percentage of families living in their own homes, than can be shown in any other city of its size in the country — a record of which we are frankly very proud. I believe that similar results can be brought abotft in most communities, and that the bankers can make a most important contribution toward enlisting the public for such accomplishments. There is no greater need cf our time than to teach habits of thrift among all the people. Thus alone will we ultimately be able to make good the great destruction of capital that has taken place in this world in the last decade. It is a great duty and a great opportunity for the bankers; particularly, the small bankers, *ho are close to their people and in position greatly to influence thenu The whcle mode of living and manner of handling tho family business U often to be influenced for the better, by an attitude of interest, sympathy and - 4 - helpfulness of the banks * I would not be understood as w?.nting bankers to be toe complaisant in enabling people to borrow. They m i l serve better by showing people how to handle their affairs so that borrowing will not be necessary* ^here are a great many bankers who do not measure up at this point — who encourage and even assist people in entering upon doubtful ventures, I have in mind °ne state which lately has suffered severely because its people engaged in a veritable orgy of speculation; - speculation in which tney were aided, abetted, finances to an utterly unjustifiable extent by their backers* It ^ s the case of a community, and of the individuals comprising i t , "teir.-g aade the victim of too easy credit, ^e donTt want it made too e<?.c; tc borrow, but we do niied to hate investment made easy, attraoti/e and safQt> t^Q p a r j 0 i 0 f depression has been the inevitable reartion f rem an a r a in which there was too much liberality in credit. ^o have suffered ^ore from excessss of credit than from want of it in short, frjm borrowing too muoh. How different results would have been, if banters throughout the land had shown people how to get on without, borrowing fcr the gratification of their whims or the changes of more speculation, if that policy had been followed banks "*ould not have become over-exteiided ^ d the people as well as the banks would be comfortably solvent. There is presented right now a situation not at all alarming, in ^hich bankers have the opportunity to render a real public service along thes© lines. You have a l l noted recently the evidence that on the speculative side business is rapidly coming back. Speculation always discounts the future, and somstimes more than discounts i t . The tendency speculation to absorb liquid capital into more or less fixed investments, is always to be guarded against* The general business situation will not in the long run be greatly benefited by merely marking up quotations of securities, and absorbing the cash and credit of the community into them a t the new and higher prices* If people, in the hope of easy profits, inVQ s t their ready capital in speculative directions, they must understand that when productive business is ready for increased activity, it will be c °nfronted with a dearth of ready capital, proportioned to the speculative a ° t i v i t y that has gone before. Consequently, to the extent that bankers and investors, can restrain the tendency to absorb available capital in speculative investments, the community -ill be the better equipped for rehabilitating general business that will follow a little later. I am not among those who regard the operations of the great centralized markets with concern. Rather, I recognize tnem as very useful and Necessary utilities. I simply feel that even the most useful instruments ar e liable at t.vaes 'to be overworked, and I certainly do not feol chat at thi s time a series of two'-million-share-days on the stock exchange, representing a feverish speculative activity, -^ould be to the public advantage, business is doming" back, and it is of ths supremest imparlance that money a nd credit shall be available to sustain its renewed activity. Bankers, * feel very sure, will serve their customers -veil if they rill exert their influence for moderation and against speculative excesses. The recent reduction of interest rates has been too generally regarded as an .invitation to the speculative public to assume that easy profi-cs are in sight. The P ^ S 3 n t is a most appropriate time for banksrs to admonish their clients Against over-confidence in speculative investments* The world n-^eds a - 5 - restoration of opportunity to produce and consume things needed for human progress, and bankers should keep in mind that the first call for liquid capital must "be made in behalf of the farmer, the manufacturer, the exporter, and in general, the industrial and commercial community* It is equally important that banks lie kept from over-extending themselves by too liberal accommodations to speculative clients* The United States continues the one first-class country that is maintaining its money system on a sound gold basis. To do this is the greatest immediate service we can do to the corcmercial world and to our ovm business. It is of the greatest importance that out currency and banking policies shall insure the maintenance of the high standard of American money in every financial center. If for a time, in order to accomplish t h i s , the speculative interest rate shall be comendiat higher here than in some foreign markets, the ultimate results •vill be by no means unfortunate for our country. Better to maihtain our position as ±« the country with the soundest money system, than to encourage any speculative movement which might threaten another era of inflation, and a consequent postponement of the day ^hen the gold standard can once more be established and exchange restored to its normal 9 basis. No section of the community is so well equipped to impress these considerations uptn the public at large, a s the bankers. Therefore, I would particularly appeal to the bankers, to eatart their influence in the direction of a wise, cautious, considerate policy of business rehabilitation which in a time like this is absolutely necessary. •ufc country has wonderful recuperative possibilities. Its varied and bountiful resources only need the touch and enthusiasm of American genftus to make them yield their riches to bless and prosper u s . I have abiding faith in the triumph of American enterprise and business, ^ith out people divinely impressed with the faith that work and frugality are essantial for human progress, the happiness of our people, and the prosperity and greatness of our country is assured for all time*
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