Full text of Statements and Speeches of George Roosa James : The Relation of the Country Banker to the Federal Reserve Bank : An Address before the Kentucky Bankers Association at Louisville, Kentucky

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V

THE EEL

MR.

X-4662

CHAIRMAN, LADIES AND GENTLEMEN:
As a member of the Federal Heserve Board,

nothing has

me as much concern as does "The R e l a t i o n of the Country Banker
a l Reserve B a n k " ,
have a v a i l e d

^iven

to the Feder-

and my one regret is that so few of the country hankers

themselves of the p r i v i l e g e and opportunity of becoming members.

I say this because of my regard for and my unbounded f a i t h in
Reserve System.

the Federal

I f e e l that a l l of you agree w i t h me in the b e l i e f

that

it

is the g r e a t e s t and strongest banking system i n the world and that i t s usefulness,

soundness and success have been demonstrated both in times of war

and i n times of p e a c e .
In considering i t s f u n c t i o n s ,

I always

System not from the viewpoint of a banker a l t o g e t h e r ,
standpoint, of the p u b l i c .
entirely

try to look at

the

but more from the

F o r , while the System deals with the p u b l i c almost

through i t s member b a n k s ,

the question of how the p u b l i c would be

b e n e f i t e d was of paramount i n t e r e s t and v i t a l

importance i n i t s

creation

and i t s continued existence depends e n t i r e l y on whether or not the p u b l i c is_
benefited.
opinion o f ,

I,

therefore,

the System as

regard the p u b l i c ' s
the one great

I do not share
that

interest i n ,

and the p u b l i c ' s

consideration.

the opinion one frequently hears

to the

effect

the Federal Reserve System is an independent o r g a n i z a t i o n and that

it

-2i s owned by the member banks.
interest

X-46S2
I f e e l that

the p u b l i c has quite as much

i n the Federal reserve banks as have the member banks them-

selves.

This p u b l i c i n t e r e s t

o f the p e o p l e ,

by the p e o p l e ,

serve System is a v i t a l

centers i n our Government.
for the p e o p l e " ,

" T h a t Government

and of which the Federal Re-

part.

As a c i t i z e n ,

the country b a n k e r , whether h i s bank is

not a member of the Federal Reserve System, has an i n t e r e s t
growing out of h i s

to be

is

i n the System

citizenship.

True,
said

or

the reserve deposits

of the member banks may w e l l be

the foundation of the Federal Reserve System, and i t is also

that the c a p i t a l otock of

true

the reserve banks was supplied by the member banks.

But we must not overlook the f a c t that the A c t of Corgress, under which the
System was e s t a b l i s h e d , p r o v i d e d at the outset
s c r i p t i o n s by banks and the p u b l i c
banks,

therefor,

insufficient

to p r o v i d e

then and in that event

the total sub-

to the stock of s a i d Federal

or any one or more of them, b e ,

Committee,

that "Should

i n the judgment of

the

reserve

Organization

the amount o f c a p i t a l stock r e p a i r e d

the s a i d O r g a n i z a t i o n

Committee s h a l l

to the U n i t e d S t a t e s such an amount of s a i d stock as s a i d Committee

allot

shall

determine."
Then,

too,

l e t us for a moment consider "The D i v i s i o n

Earnings of the reserve b a n k s " .

of

The Act says -

" A f t e r a l l necessary expenses of a Federal reserve bank
have been p a i d or p r o v i d e d f o r , the stockholders s h a l l be
e n t i t l e d to receivo a n annual d i v i d e n d of s i x per centum on
the p a i d - i n c a p i t a l stock, which dividend s h a l l be cumulative*
A f t e r the a f o r e s a i d d i v i d e n d claims have been f u l l y met, the
not earnings s h a l l be p a i d to the U n i t e d States as a franchise
tax except that the whole of such net e a r n i n g s , i n c l u d i n g
those for the year ending December t h i r t y - f i r s t , nineteen hundred and e i g h t e e n , s h a l l be p a i d into a surplus fund u n t i l i t

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-3-

X-4662

s h a l l amount
to one hundred por centum of the s u b s c r i b e d
c a p i t a l stock of such bank, and t h e r e a f t e r ten per centum
of such net earnings s h a l l be p a i d into the s u r p l u s .
"The net earnings derived by the U n i t e d States from
Federal reserve banks s h a l l , . i n the d i s c r e t i o n of the Secr e t a r y , be used to supplement the g o l d reserve held against
outstanding U n i t e d States n o t e s , or s h a l l be a p p l i e d to the
reduction of the outstanding bonded indebtedness o f the
U n i t e d States under r e g u l a t i o n s to be p r e s c r i b e d by the Secretary of the Treasury.
Should a Federal reserve bank be
d i s s o l v e d or go into l i q u i d a t i o n , any surplus r e m a i n i n g ,
a f t e r the payment of a l l d e b t s , d i v i d e n d requirements as
h e r e i n b e f o r e p r o v i d e d , and the par value of the s t o c k , s h a l l
be p a i d to and become the property of the United States and
s h a l l bo s i m i l a r l y a p p l i e d " .
The a p p l i c a t i o n ,

under these p r o v i s i o n s

earnings of the System in the p a s t ,

results

of the l a w ,

of

the

i n the c a p i t a l account of

the

Reserve System being one-third under the ownership of the member banks
two-thirds
United

( r e p r e s e n t i n g the s u r p l u s ) b e l o n g i n g

and

to the Treasury of the

States.
H e i t h e r must we forget the f a c t

squarely behind
important p a r t

that

the Government stands

the notes of the reserve banks, w h i c h notes p l a y such an
in p r o v i d i n g a currency for the n a t i o n .

Even though by any

combination of circumstances a l l of the gold held by the System should be
taken away and out of

the country,

still

these notes backed by the

integrity

of our Government would be worth one hundred cents on the d o l l a r .
It

is p e r f e c t l y clear

to my mind that the reserve banks were

not creatcd to make money e i t h e r for themselves or for the member banks beyond the s i x p e r cent i n t e r e s t on the money invested i n the c a p i t a l
It

is equally clear that the System was designed to be an aid

industry and c o m m e r c e o r ,
before,

in other words,

the p u b l i c ,

stock.

to a g r i c u l t u r e ,

a l t h o u g h , as I

it functions through i t s member banks.
The law does permit

the Federal reserve banks

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to perform

said

-4certain services

X-4362

for the member banks w i t h o u t

o f the r e s e r v e "banks b e c a u s e i t was b e l i e v e d
c o u l d r e d u c e the
that

costs

the s e r v i c e s

of performing

i n cost

The

the c o l l e c t i o n

of c h e c k s ,

transfer

System i s

of funds,

increased

dictate.

of

or d i m i n i s h e d o n l y a s

l a r g e s t member banks

on e x a c t l y

the expense of the p u b l i c ,

s h o u l d he i n a p o s i t i o n

to i n q u i r e

o f these s e r v i c e s ,

and

for

The

of what

economies
in

the

Company.
out

(2)

The f a c t

is

that

the

facilities

conditions.
think it

is

feel

given

that t h i s g r e a t A m e r i c a n p u b l i c

( 1 ) whether
if not,

sum u p

just
the

the l a s t a n a l y s i s

or not i t

is getting

the

why n o t ?
taken u p i n

the study of

to the F e d e r a l R e s e r v e

to g e t a n y t h i n g l i k e a s a t i s f a c t o r y answer
that when I

the

the s o - c a l l e d f r e e s e r v i c e which

q u e s t i o n "why so many banks do not b e l o n g
I am s t i l l u n a b l e

They

the s m a l l e s t and f o r

is i n

of

the member banks

information because I

to i t s members
and I

of

to s t a t e

A good p a r t of my time h a s b e e n

problem.

anticipated.

o f the Ford Motor

the saire terms and

that you s h o u l d know that

F e d e r a l R e s e r v e System r e n d e r s

but

performed

and handling

banks.

the r e q u i r e m e n t s

i t may Joe important

I am g i v i n g y o u t h i s

benefit

you

the F e d e r a l r e s e r v e b a n k s a r i s e

o f the F e d e r a l R e s e r v e System a r e a v a i l a b l e

at

can t e l l

charged member banks when the member banks b o r r o w .

And, perhaps

and r i g h t

banks

through mass p r o d u c t i o n a p p l y w i t h equal f o r c e

The major e a r n i n g s

are

expense

o n l y a small p e r c e n t a g e

F e d e r a l R e s e r v e System as t h e y do i n the p l a n t s

the i n t e r e s t

and I

than was o r i g i n a l l y

cost when p e r f o r m e d by i n d i v i d u a l

that are p o s s i b l e

of

the r e s e r v e

these s e r v i c e s ,

that i s f a r g r e a t e r

c u r r e n c y by the F e d e r a l R e s e r v e
those f u n c t i o n s

that

the

now r e n d e r e d by the F e d e r a l r e s e r v e banks a r e

at a saving
cost o f

charge ana a t

the r e p l i e s

the

System",
to

I have seen or

this
heard

-5I

r e a c h the c o n c l u s i o n

l i e u of

that an a l i b i

to me that a good many b a n k e r s ,

many b u s i n e s s men a n d i n d i v i d u a l s ,
through a p a i r

d i s t o r t e d and

can I g i v e ! "

just

success
the

they would

of
and

in

a great

of looking at

every-

s i g n on one l e n s

vision

and

i s b o t h narrow and

"How much can X g e t a n d how

sec that

they make!

If

make

little

they would

broad v i e w o f

this

those who have a c h i e v e d

o p e r a t e d on t h e one and o n l y p r i n c i p l e

the

of service

which

opposite.
No matter what o n e ' s

he must havo

like

the attempt so many p e o p l e

the s p e c t a c l e s a n d g e t a c l e a r ,

wonderful universe

is

on the p r i n c i p l e

for

Their

O h , what a t e r r i b l e mistake

take o f f

greatest

the h a b i t

on the o t h e r .

t h i s perhaps a c c o u n t s

to go through l i f e

have

o f s p e c t a c l e s w i t h the d o l l a r

the p e r s o n a l p r o n o u n " I "

only

or an e x c u s e has been o f f e r e d

reasons.
I t appears

thing

X-4662

for his

the customers.

a v o c a t i o n may b e ,

f i r s t and most important
Hot "how much can I g e t "

"how much can I do"

to e x t e n d my s e r v i c e

to be

consideration

successful
the

interest

but "how much can I
to the g r e a t e s t

give"

number

of

people.
One o f

the p o p u l a r answers

non-member banks do not

join

ceive
get

the i n q u i r y as

on reserve d e p o s i t s ,

t h e i r r e s e r v e s w i t h somo c i t y correspondent

interest

to why

the F e d e r a l R e s e r v e System has b e e n

the System does not p a y i n t e r e s t
keeping

to

on t h e i r b a l a n c e s ;

in consequence,

no r e t u r n on t h e i r r e s e r v e b a l a n c e s ,

whereas,

that

by

bank they do rei n the one

i n the o t h e r ,

case

they make a

they

X-4S62
profit.

Thi

s

ctatomont always brings to my

two negroes who were p a s s i n g a graveyard.
-d

tho other c o u l d n ' t .

min

d

the story of

One of them oould road

The educated f o l i o , was e n t e r t a i n i n g

companion by reading the epitaphs on the t o m b s t o n e .
eamo to one which

f o l i o , said - . . U n p h ,
1

cept

„Ho

3 a l d

M g

tho

ls

toy>

n o t

doad>

t h a t

w h i t e

t u t

sleepoth

^

a l a H

Finally,

„_

f o

his

.

they

^
i i n g

M i o d y

hissef."
W

good friend D r .

greatest agricultural
to a banker who springs

tolemont

Tait S u t l e r once s a i d that

the

ever invented was a load p e n c i l ,

so

that sort o f an answer as h i s r e a s o n for not

j o i n i n g the Federal Heserve System,

I o f f e r the suggestion that he

get h i m s e l f a supply

^

plements but

o f

l e a d

p e n c i l s

t(j

u s e

im_

as

to sharpen and u s e i n a n a l y z i n g h i s own a f f a i r s .
1 could go into d e t a i l s i n e x p l a i n i n g to you j u s t

" h y t h i s suggestion is o f f e r e d but a y time i s

too l i m i t e d and I

only say i n this connection that the c i t y banks who aot as
pondents for country hanks have quite a way of r e q u i r i n g

will

corres-

"commen-

surate b a l a n c e s " and thoro a r e mighty few o f them but what make a
p r o f i t out of

tho country banks account.
Every now and then wo havo the suggestion

offered

that the reserve banks should g i v e immediate oredit for items de-

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X-4662

p o s i t e d with them "by their members on the theory that
cost the System anything

to do s o " ,

is very g r e a t l y mistaken.

" i t would not

hut any one who holds this

view

Experience has shown that member banks

borrow from the reserve banks almost e n t i r e l y for the purpose
replenishing

t h e i r required reserve balances and the moment

balances at the reserve banks are i n excess
the excess i s

immediately used to r e t i r e
I f you w i l l

notice

the

of the legal

as " T o t a l B i l l s Discounted"

requirements

the "Report of Condition of

that the item l i s t e d in the assets

very closely approximates

the d i r e c t borrowings

infrequent p e a k p e r i o d s ,

offset

the

To g i v e "immediate

the amount of

of msmber banks,

To replace

except

c r e d i t " would cut the

market would cause i n f l a t i o n

for

earning

Calculated on the

it would mean approximately f i f t y per

these " d i r e c t borrowings"

Items".

"float"*

assets of the reserve banks very m a t e r i a l l y .
l a s t report a v a i l a b l e ,

the

newspapers

the item l i s t e d in the l i a b i l i t i e s as " D e f e r r e d A v a i l a b i l i t y
In other words,

their

borrowings.

Federal Reserve Banks" p u b l i s h e d weekly in the leading
of the country, you w i l l f i n d

of

cent.

by purchase:, i n the open

that I should regard as both unthink-

a b l e and unpardonable and i t would a l s o work a tremendous hardship on the commercial banks of the country by u n n a t u r a l l y f o r c i n g
reduction i n r a t e s .

Possibly

(ss8?|

a

the e f f e c t upon the country banks would be

p ?

le

- 8X-4S62
n o t i c c a b l e at the start

than would be the e f f e c t upon the larger

city

"banks, but you may be c e r t a i n i t would reach even the smallest and most remote banks through competition

in one form or

I t is extremely d i f f i c u l t ,
curately

another.

i f not impossible,

the e f f e c t " g i v i n g immediate c r e d i t "

to get ac-

at the reserve banks would have

on general i n t e r e s t rates but my guess is that it would cause a reduction
of more than one per cent.

S o , from the standpoint of the commercial banks

only and without regard to or for

the Reserve System,

be p a i d f o r g e t t i n g t h i s immediate c r e d i t .

see what p r i c e would

Say a bank w i t h $ 2 0 0 , 0 0 0 . 0 0

deposits and loans amounting say to $ 1 5 0 , 0 0 0 . 0 0 ,

- such a bank might reason-

ably bo expected to have something l e s s than $ 5 , 0 0 0 . 0 0
of c o l l e c t i o n ,

to

this,

of items in process

which a t four per cent - the present rediscount r a t e - would

mean that "immediate c r e d i t "
offset

of

r e s u l t e d in a s a v i n g of $ 2 0 0 . 0 0 .

consider the meaning to that bank of

in i n t e r e s t rates

to i t s customers.

would make a net l o s s of $ 1 , 3 0 0 . 0 0

But as an

the f o r c e d

reduction

If the reduction was one per cent
to the b a n k .

This is among those

it

things

that should be considered and f i g u r e d on with a very sharp p e n c i l .
Another reason f r e q u e n t l y o f f e r e d by country bankers in the
South for not j o i n i n g the Federal Resorve System i s that they a r e
the r i g h t

to charge exchange when, r e m i t t i n g f o r their checks.

One

denied
so-called

banker asked in my presence on one occasion "What r i g h t has the Federal Reserve System to deny my bank the r i g h t

to charge exchange?"

To t h i s I very

promptly answered by a s k i n g him the question - "What r i g h t have you to deduct
anything when p a y i n g a customer's check that i s presented either over the
counter or through a Federal

reserve bank?"

j cop?

"

9

"

X-4662

It is time that i n the o l d days p r i o r to the
of the Federal Reserve System i t was necessary f o r b a n k s ,
pay t h e i r customers'
tant p o i n t ,

establishment

in order to

checks when the payee of the check l i v e d at a dis-

either to ship the currency or e l s e m a i n t a i n b a l a n c e s

correspondent banks against which they could draw and,

of course,

with
in

either case this costs money and the banks were e n t i t l e d to c o l l e c t
the s e r v i c e .

But w i t h the coming of

s i t u a t i o n changed.

for

the Federal Reserve System t h i s

The cost of shipping currency is absorbed by the

reserve bank and it i s not only l e s s expensive but it i s safer and more
convenient f o r a bank to pay the checks of i t s customer

'

when they are

p r e s e n t e d through a reserve bank than when p r e s e n t e d by the customer at
the t e l l e r ' s

window.
Anyhow,

the Supreme Court of

the question and has e s t a b l i s h e d
requirement
collection

the " r i g h t " ,

the United States has
once and f o r a l l ,

of

settled
the

that member banks s h a l l remit at par f o r a l l checks sent for
through the reserve
Furthermore,

banks.
this r i g h t and p r i n c i p l e h a s been

by n i n e t y per cent of a l l banks in the U n i t e d S t a t e s ,
bank i n the F i r s t ,

recognized

and today every

Second and T h i r d Federal Reserve D i s t r i c t s i s a mem-

ber bank or i s on the p a r l i s t s of the reserve b a n k s .
I understand there are only 16 out of the 4 5 3 banks i n
State of Kentucky not on the " p a r r e m i t t i n g l i s t "
people of your State

and I congratulate

the

accordingly.

I t seems quite p o s s i b l e

that some country banks have been

kept out of the Federal Reserve System because they did not want to
disrupt

the

their r e l a t i o n s h i p w i t h their c i t y correspondents.

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The chances

"
are

10

"

X-4662

that the r e l a t i o n s h i p has been and i s mest p l e a s a n t and i n the main

satisfying,

but,

as I see i t ,

j o i n i n g the F e d e r a l Reserve System does not

mean that this r e l a t i o n s h i p should be b r o k e n , not by any means,
would make a change in

the n a t u r e of

although

it

the r e l a t i o n s h i p and a ehange which

in

my opinion can and should be o f advantage to both p a r t i e s .

Undoubtedly,

the c i t y correspondent bank can and w i l l f i n d a way f o r r e n d e r i n g a
that w i l l f u l l y j u s t i f y

the country bank in c a r r y i n g a b a l a n c e .

a minute advocate cutting out the c i t y correspondent,

service

I do not

for

but I do u r g e the country

banker to moke a v a i l a b l e for h i s community every f a c i l i t y the Government provides as an a i d

to the b u s i n e s s of
Another t h i n g ,

country b a n k e r s ,
taking p l a c e

in the b u s i n e s s methods and c o n d i t i o n s cf t h i s e n t i r e

to t h i r t y y e a r s .

in methods o f transportation
Think of the p a s s i n g of

buggy and the steamboats.
and good r o a d s ,
of

Hecall for

in the past

the ox c a r t ,

the

service.

country?

twenty-

the horse and

the moment the coming of

the i n c r e a s e d u s e of the telephone and the

the rural p o s t a l

stores „ „ 4

I wonder i f the bankers, p a r t i c u l a r l y

r e a l i z e what a great change has taken p l a c e and i s now

Think o f the evolution
five

the country.

automobiles,

inauguration

Then t h i n k of the development of chain

the growth of large department stores in c i t i e s and what

these

are doing to the cross-roads storekeeper and the small town merchant.
2orft
to c i t i e s ,

overlook the s h i f t i n g of the p o p u l a t i o n from farms

and keep your eye on the cooperative movement and i t s e f f e c t on

the marketing of a g r i c u l t u r a l
A l l of

products.

these things have a d i r e c t b e a r i n g and must be taken

" 11 "

X-4662

into account when you are f i g u r i n g on whether or not i t pays to belong
to the Federal Reserve System,

.and i t would be w e l l to take n o t i c e

them whether you consider j o i n i n g the System or not for
factors

in your f u t u r e ,

- you may be certain of

After a l l ,

as I see i t ,

in both the b u s i n e s s and social
cut of n a t u r e ' s

law of

the o r g a n i z a t i o n

survive.

vital

that.

the changes that are taking p l a c e

l i f e of the n a t i o n are only the working

the survival of the f i t t e s t .

l i c not only demands but it i s e n t i t l e d
or

they are

of

that p r o v i d e s

The American pub-

to the best and the

the best

individual

service is the one who w i l l

And t h i s a p p l i e s to banking j u s t as well as it docs to any

other l i n e of

business.
You who read the newspapers know what r e c e n t l y happened

to a chain of nonmember banks with more than a hundred members in the A t l a n t a
District,
That o u t f i t ,

headed by the Barkers Trust Company, was not

a f f i l i a t e d w i t h the Federal Reserve System.
against

the System;

ance of c h e c k s " ,

On the contrary,

they were l e a d e r s in the f i g h t against " p a r

of a decrease in the deposits of some o f

light,

but

is true,

the banks in the c h a i n ,
The banks

and the damage measured in d o l l a r s was

think, my f r i e n d s ,

bank.

reserves developed because

reserves were not a v a i l a b l e and the crash followed,.
it

clear-

and d e c l i n e d to keep t h e i r reserves in a reserve

When the s t r a i n came'and the need o f t h e i r

were small,

they were

those

involved
relatively

of the tragedies that followed in

thoso

hundred and moro communities whoso hard-earned savings were wiped o u t .
I t seems to me most deplorable that such a large proportion
of our people should be denied the f i n a n c i a l protection and b e n e f i t s
ated f o r

them by the Government,

simply because a large group of

cre-

so-called

"bankers arc a s l e e p on the j o b .
Already the A t l a n t a C o n s t i t u t i o n ,
papers of the South,

is d i s c u s s i n g

commercial banking i n s t i t u t i o n s
supervision.

one o f the great news-

the urgency of f o r c i n g by law a l l

into a National

System under

Federal

C e r t a i n l y the d i s c u s s i o n s of branch banking and the

to pass in the l a s t

two sessions of Congress

the so-called McFadden

designed to check the growth of branch banking in t h i s country,
cause the o f f i c e r s of

Bill,

should

independent u n i t banks to wake up and endeavor to

give the communities that are dependent upon them f o r b a n k i n g
every advantage

failure

in b a n k i n g service that i s now

facilities

available.

Every State bank w i t h r e q u i s i t e c a p i t a l i z a t i o n
management is not only e n t i t l e d to membership

in the Federal Reserve Sys-

tem but h a s been and i s constantly b e i n g i n v i t e d to j o i n
have told you what I thought of the reasons
I wonder what w i l l happen
the s i t u a t i o n and to a s k

and proper

the System.

I have heard for not

I

joining.

when the d e p o s i t i n g customers begin to

study

questions?

I do not f o r one moment mean to say that being a member of
the Federal Reserve System guarantees d e p o s i t s ,

nor does i t insure

the

p u b l i c and the depositors a g a i n s t dishonest or incompetent b a n k i n g ,
I do say that WHEN
its business

a

bank is a member of the Federal Reserve System and

i s conducted w i t h i n the l i m i t a t i o n s and r e s t r i c t i o n s

down by the law and the r u l e s and r e g u l a t i o n s of the Federal
Board,

but

laid

Reserve

THAT BAMX CANNOT F A I L ,
There have been a great many bank f a i l u r e s

States during the p a s t few y e a r s .

A small percentage of

in the U n i t e d

them - and a

small percentage only - have been members of the Federal Reserve
but NOT ONE SINGLE ONE OF THEM f a i l e d that had l i v e d up to the

System,

letter

and sp i r i t of the law and the r u l e s and r e g u l a t i o n s of the Federal

"

13

"

X-4662

Reserve Board.
Another

thing;

a very careful a n a l y s i s of

the earnings of

the something l i k e . t h i r t y thousand "banks in the U n i t e d States
that

shows

the member hanks who l i v e up to the l e t t e r and the s p i r i t o f

the

law and the r u l e s and r e g u l a t i o n s r e l a t i n g to the Federal Reserve
make more money on the c a p i t a l
age that are not members o f

System

invested than do those banks on the aver-

the System.

As a r e s u l t of my study of t h i s great problem,

I am w i l l i n g

to say that it i s my judgment that i f and when a commercial bank f i n d s
out that it cannot make money f o r i t s stockholders as a member in good
standing o f the Federal Reserve System,
do in the i n t e r e s t of i t s d e p o s i t o r s ,
is

then the best t h i n g that bank can

i t s stockholders and i t s

to l i q u i d a t e and get out of the way f o r c e r t a i n l y

community

there are too many

banks in this day and time f o r the b u s i n e s s now a v a i l a b l e .
Let mo,

in c o n c l u s i o n ,

urge you to look upon the law and

the r u l e s and r e g u l a t i o n s of the Federal Reserve Board not as
measures,
banking,

intended to harass and h a n d i c a p ,
for,

after a l l ,

restrictive

but as a standard of

good

that i s exactly what they a r e .

I t may seem to the nonmember country banker that the requirements of

the reserve b a n k s ,

are d i f f i c u l t
It

to meet,

relative

to the paper that is to be

but let me assure you that

is l i k e it was when I began to r e a l i z e

car.

and then,

too,

i s not the

I f e a r e d that I never would be a b l e to operate a
cars,

then s a i d to myself surely i f other people can learn I can too,

fears vanished,

in

I j u s t h a t e d to give up my

One day I r e a l i z e d how many people there were d r i v i n g

w i t h the determination

case.

that i f I was to keep peace

my family I would have to buy an automobile,
horses,

•

discounted,

and

to run an automobile or d i e in the attempt, my

and I soon found that after a l l

i t was a very easy and

- 14 -

simple matter,
the p u b l i c

X-4562

and I was in t h i s way enabled to again take my p l a c e on

highways.
D o n ' t be a f r a i d to a s k your borrowing customers f o r

statement or to i n s i s t
against

the l o a n .

banking.

that they carry a b a l a n c e w i t h you as a reserve

Surely you carry reserves a g a i n s t your

to your d e p o s i t o r s ,

a

not because it

is the law but because

Good for you as w e l l as the d e p o s i t o r .

obligations
it i s

good

I t i s e q u a l l y good f o r

you and f o r your borrowing customer to r e q u i r e him to keep a r e s e r v e .
Don't

s t i c k to the a n t i q u a t e d methods of g e t t i n g your

accommodations for seasonal needs j u s t because

it seems to be the easy way.

I learned as a boy at Sunday School that the easy route was not the road
to

salvation.
The f u t u r e of the country banker w i l l rest upon h i 3

to meet changed conditions by a d o p t i n g the new methods.
going to be an easy one by any means.

ability

H i s road i s not

Most l i k e l y it i s and w i l l be

of r u t s , but r i g h t here let me remind you that the only
a rut and a grave i s that one i s longer and the other

full

difference.between

deeper.

Study your p o s i t i o n and do not be ashamed to acknowledge mistakes or to learn from the experiences of o t h e r s .

As Mr. Hubbard once

s a i d , " W h i l e we are green we are growing and when we think we are r i p e we
are b e g i n n i n g to get

rotten".

My l a s t and p o s s i b l y most important suggestion is that you
keep in mind the slogan of your own great Commonwealth - " U n i t e d we stand;
d i v i d e d we f a l l " .
Federal Reserve

And then,

i f you have not already dono so, j o i n

System.
I

thank you.

the