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rADULT EDUCATION IN BANKING ADDRESS BY JOSEPH A. BRODERICK COMMENCEMENT EXERCISES - 200 CHAPTERS AMERICAN INSTITUTE OF BANKING BROADCAST - WASHINGTON, D. C. Wednesday, September 9, 1936 - 10:30 P. ADULT EDUCATION IN BANKING I am glad to have this opportunity of speaking to my fellow members of the American Institute of Banking, an organization of which 1 have had the privilege of membership for over twenty-eight years. Started by a mere handful of bank clerks who believed in the banking profession, its future and its opportunities for service, the Institute has grown to a membership of over 55,000. It provides sys- tematic, intelligent and comprehensive courses of studies of the functions, mechanics and fundamental principles of banking and economics. It ha3 widened the scope of its work to embrace every branch of banking activities and is the most powerful and effective school of constructive banking thought in the country today. To the group of founders, to the willing workers who carried on m the early days with limited means, to the excellent educational directors the Institute has been fortunate in having to arrange and direct our studies and activities, and to good old "Uncle George" Allen, our guide and director in the early days, we owe a lasting debt of gratitude. Their reward and satisfaction must come in a realiza- tion that their contribution has been one of real value to the bank- ing profession and to the country; that our progress has been due largely to their unselfish service, to their courage, patience and Persistence, often under discouraging circumstances, and to their vision and belief that the soundness of our banks and the future of our profession depended upon the proper and systematic training of 24938 bank men, in order to fit them for their responsibilities in the operation of our banking institutions. Our students have been drawn from all classes: young men with Public and high school education and men with college degrees; all determined to take full advantage of every course of study which would help them to understand fully their profession and better fit them to Perform their duties and assume responsibilities. The great lesson the Institute taught its students was to focus their attention on fundamentals, to think straight and face the facts courageously. In my forty years in the banking profession each year has been intere ^ an sting one. I have been, and still am, a student of banking, d it is as a student of the American Institute of Banking that I am expressing rny personal views this evening. The Changing Era The Institute has lived during a rapidly changing era and has i'ough its courses recognized the importance and necessity of constant C0 *prehensive studies, to enable its members to understand the changes. Let us briefly refer to the period of, say, the last thirty years, ^ e members of the Institute have seen That the genius and progressive spirit of the American people ha ^e kept this country in the forefront in new industries and inven- tions; -3- A rise in the sense of social responsibility in every walk of life; Changes in every line of business activity, brought about through scientific modernization and management, inventions, labor-saving machinery and other devices, and by improvement in business, technical education and research methods; A marked increase in the utilization of electrical machinery and of water and electric power, vitally affecting every industrial and human endeavor; The amazing growth in the automobile industry, influencing the iife and habits of a large percentage of our people; the development °f mass Production; the consolidation of smaller units into huge cor- porate enterprises; the spread and effect of the large nation-wide c ha.in store corporations; The effect on agriculture of labor-saving devices and improved harvesting methods and the development of irrigation projects; Improvements in the field of transportation and communication; f aster and more comfortable train service; bus and motor truck lines, facilitating movement of passengers and freight; aeroplanes and dirigibles i n national and international trade; wire and wireless telephone 'Und tel egraph services, embracing land and sea throughout the world; mail service, speeding business by rapid letter delivery. Our members have witnessed the rise also of the motion and sound Picture industry, bringing amusement and stage to every hamlet; -4- The introduction and development of the radio, which has brought the current news of the world into every home and which has become a Powerful force in education, advertising and amusement. Our members are seeing at present a new industry in the making •f i-i e air conditioning of commercial establishments, homes, offices and drains, which will bring better working conditions and comfort to the nation. This has been an age of tremendous progress, even though accompanied by the destructive forces of the Groat War, the effects of which are still being felt in ovory section of the world. In banking, during this period our members saw many basic changes, the oarly days each bank was individual in operation and sufficient ^to itself. Ostein. in ab Every fall saw a currency.shortage due to the inelastic The crisis of 1907 resulted in a thorough study of the bank- S system. The Aldrich Commission recommendations were not accept- lo to the people, but from the further study, the Federal Reserve Astern was evolved and its operation begun in 1914 shortly after the °utbreak of the World War. Our members saw the temporary use of the Aldrich-Vreeland cura c y ; great business activity, due to war orders; large foreign loans; th e gradual expansion of Federal Reserve bank facilities; our entry x *to the World War and the consequent heavy governmental borrowings and war-time taxes. After the war they were especially concerned by the effects of the war and post-war speculation; the resulting high money rates; the deflation in commodities and securities; the inventory and trade crisis in the early twenties, which resulted eventually in a change in the method of commercial borrowings by corporations; and heavy gold imports. During the period 1924-1929 they saw the development of the speculative craze, which culminated in the stock market crash in the fall 1929; thereafter the crisis gradually widened; in 1931 four important countries left the gold standard; fear and loss of confidence gradually spread throughout this country and despite the bank and governmental efforts to assist banking institutions to cany on, conditions steadily grow worse. In the early months of 1935 bank holidays v <ere declared in many States and the crisis finally compelled the declaration of a nation-wide holiday in March, 1955. Subsequent developments, you are familiar with. They have been the subject of continuous study and discussion. I have briefly recalled these events during the life of our Institute in order to emphasise how great and how rapid have been the changes within our immediate knowledge and experience, and therefore hov/ important it is for the banking fraternity to continue the work inaugurated by the Institute - work that is primarily educational in aiding us better to understand the forces with which we are surrounded in thy world today and how to meet them intelligently and constructively. -6- Education Knowledge is logical truth, or the agreement of the mind with an °b,ject. We all are in search for truth. We desire knowledge. There are many definitions of the word "Education", but one that T came across in my early days appeals to me very strongly, namely: "Education is a prolongation of the curiosities of youth." y ou know that a child is an eternal question-box. Wa Even before a child lks, its quest for knowledge is shown by its desire to take toys a Part to see what they are made of. When a child first learns to talk, the first question is - "How does this work, Daddy?" question is: ear "Why is this done this way?" Later on, the For several years in the ly life of the child, the fond parent is required to refer to the eri cyclopaedia frequently to answer the many and varied questions. The child learns to play fairly - how to take defeat gamely and 1 to win graciously. He plays hard but hits clean and without malice. The child and the student learn early the principles of good sportsmans hip. These traits of youth should not be forgotten in manhood. The G Vernal quest for knowledge, truth and fair-play should continue through life. Man not only wishes to know, but wishes to know why. His search the reason, the cause or the principle establishes man's desire to know scientifically. We learn by observing and experimenting. study facts and what others have done and are doing under similar We -7circumstances. That is research. The value of education can only be measured by the intelligent use to which it is put. Book learning or ability to memorize is in itself only of passing value. to Education is intended to enable you acquire basic facts, encourage industry in study and develop initi- ative and imagination. Through intelligent and systematic direction your attention is focused on fundamentals. Education is acquired only through long, painstaking and consistent effort and work. The object of education is to have a broad basic understanding, which will enable you to analyze thoroughly, to weigh opinions, arguments and views before accepting them. Knowledge is power, but the ability to think straight, fairly and clearly is a priceless possession. Do your own thinking. There is an old saying that there is no substitute for knowledge seasoned by experience. Keep in mind, however, that you will lose the *'eal benefit of your studies if you permit your thought to be swayed m ®rely by the utterances of those who are great in reputation or gifted ^ oratory. You must rely always on your own individual analysis. Study both sides of every important question; often apparent differences of opinion, when examined and studied, are really differences in Phraseology. Do not dismiss ideas, plans or suggestions without study and analysis simply because the proposer may be actuated primarby selfish or personal motives. Such motives are quite natural a^d usual, and persons actuated by them may, and often do, have -8me ritorious ideas. Your quest is for truth. Keep your mind on this goal. To be successful, a banker must sincerely believe in his work profession. To discuss banking intelligently, he must understand ey ery branch of banking activities, its practices, policies, prin- Cl Ples, his duty to depositors, to his community, to other banks, and to stockholders, and the high standard of ethical conduct so necessary foi> good banking. The wise bank man, to be prepared adequately, will take full advantage of the Institute courses and support Institute ac Uvities. It is the real school for training bankers. So many basic changes have taken place in the business world and lri 81 bank law and practice in recent years that there is a growing neces- ty for intensive and intelligent study on the part of all bankers and young alike - of their new opportunities and responsibilities. It is a basic truth that no human being knows everything, and no human being can know everything. This should be a source of encour- a gement to the young student, and a source of constant admonition to th e banker who feels that, in his years of service, he has learned so ^ch that there is nothing further for him to learn. to When a man comes such state of mind he is in a sad position - to himself and to his immunity. Comments and Suggestions Law can neither insure good management nor is it a substitute for Successful operation will always depend upon competent experienced management, fair dealing, the proper sense of trusteeship, credit sense and skill. Competition in the banking business should be in f 'he quality of service, not in the degree of laxity. Sharp practices are not conducive to lasting and mutually satisfactory relationships. A bank has a right to undertake fair risks with the expectation of fair profits, but undue speculative risks actuated primarily by an excessive profit incentive are never justified where the depositors' funds are involved. ness is to Over a period income must exceed outgo, if a busi- succeed. A bank is no exception to this rule. However, the n ced or desire for higher earnings has never justified inferior invest- ments. Research Every informed student will agree, I am sure, that banking must adjust its operations and ideas to changing conditions. Through excel- ent research departments, industry is constantly studying economic c °nditions, the changing styles and requirements, new methods and machinery, cost trends and markets, and every other factor affecting likely to affect its business - all for the purpose of meeting a demand or creating a demand for its products and also to determine in ^hat direction its business is headed. Should not bankers be equally terested in all the factors affecting the trends in their business? inkers are more fully alive today than ever before to the importance of acquiring knowledge and applying it practically through intelligent and enlightened leadership. -10At the suggestion of the Reserve City Bankers Association which Is sponsoring this type of study, a Commission for the Study of the inking Structure was appointed by the New York State Bankers Association in 1954 and the experiences during the depression were made the basis of a factual study by that Commission. The results of this study aroused such widespread interest that thirty other State organnations are contemplating similar studies. The belief exists that a scientific analysis of banking problems b y bankers in the individual States, acting under Committees of their ow n choosing, will prove an effective way of improving the character quality of banks' services to their communities. fer Conditions dif- in each State, hence the program to be devised should be the best fitted to meet the respective needs. It is a fine "Know thyself" and know-thy-business movement. This fype of work deserves the cooperation and support of the Institute. Tn iU my mind the success of the movement depends upon making it a con- tinuous and impartial study, with the scope broadened from time to time, its advance and success depend upon the sincerity of those in charge and their realization of the social and public responsibilities of bankers; personalities should be merged, with no thought of personal c ^edit, power or advantage. In a study of the banking structure it will be well to consider th e following points: are the needs of the community such as to re- tire fully equipped bank offices and large staffs where the demand -11is principally for deposit and paying facilities? a is it necessary for U such banking offices to retain loan and investment facilities? and should the Iowa bank office idea be applied? (i.e. establishing offices providing banking facilities for those communities not served b y local full-fledged banks.) The question of a reasonable and prac- ticable system of branch banking should be studied, especially in those States where such a system appears desirable or necessary. th ha In is study the Committee constantly will have to consider, on one nd, the question of public need for banking facilities and, on the other, the soundness and safety of the means to be provided. Changes .in the importance of various banking functions likewise r squire constant study. Practically non-existent. The note issue function of banks has become The deposit function, with a very fine X ine of demarkation between demand and time, or savings, funds, is c learly in need of clarification. The discount function has changed Materially in importance through the changing method of financing business; the process has been a gradual one. ln The principal invest- g function of banks is gradually becoming one of securities rather than of loans. This trend and the means of analyzing securities be- fore purchase are vital ones for our smaller institutions. Public fin nance is another question that needs thorough study on the part of bank men. Taxation measures and methods not only affect the in- dividual banker but the entire monetary and economic condition of the country. * -12Marked improvements in the relation of banks with governmental agencies have been shown during the past few years as a result of the helpful attitude of committees of the American Bankers Association and the Reserve City Bankers Association, which has been extremely valuable to governmental agcncies charged with the performance of certain duties affecting bankers. This experience has shown the neces- sity of further efforts in the same direction. Because of their knowledge of the practical operation and effects of supervisory and regulatory methods, bankers may be extremely helpful in shaping the rules, regulations and even the laws under which banks are to operate. Successful bankers must be students of psychology and know how to Promote better relations with the public. like people. They must know people and They must be frank with the public. Marked advances have been made during the past few years in public education through addresses at meetings and over the radio, and through forums and newsPaper articles. It is highly important that the public know what the real functions of banking are and what services banks are in a position to °ffer. There is room and opportunity for great progress in the de- velopment of this excellent work. I believe in the banking profession and its future; I have confidence that through public spirited cooperation of all interested Parties our banking structure will be properly improved and strengthened; -13also that the present functions and practices will be adjusted to fully meet, as occasion may require, the changing needs of our people. My faith is in the youth of the country and its ability to solve or help solve our problems and questions; not the youth that is measured by age, but the youth in the mind and spirit of our people; the youthful influence that brings vigor and enthusiasm to our thoughts, actions and ideals; the resourceful spirit that has the will to do and accomplish, and refuses to be discouraged by obstacles, misunderstandings, or even depressions, which, on the contrary, spurs them on to greater effort; the spirit that is more interested in worth-while accomplishments in the interest of our country rather than in personal advantages or prerogatives; the youthful mind with the fertile ideas which are seasoned by research and experience; the open mind that refuses to be hemmed-in in the study of important questions, but seeks fundamental and basic facts and the truth; the open mind that has learned the proper spirit of fair play - that preserves independence of thought and refuses to be a blind follower of tradition and personal interest; the mind that does not lose its perspective, but retains its initiative and vision - that is willing to accept responsibility and has the courage to express its views; the mind that is ruled by fact and reason, that believes in cooperative effort, and is not easily swayed by emotion; the mind that is seasoned by hard work and Practical experience - welcomes criticism for its constructive possibilities; the mind that is tolerant, sincere and sympathetic in its -14approach, thorough and fair in analysis and study, steadfast in principle and conviction and uses good old-fashioned common sense in conclusions; the mind with the ability to reason and think, which is not deterred by fear or timidity but has the courage to speak frankly and effectively; the mind that is interested in this country of ours a na its people above everything else, that respects and practices the Golden Rule and believes in the principle of live and let live, rather than that of the survival of the fittest. Fellow members, this reflects the spirit and inspiration which has been the most powerful force for good in our country's development, *nd will continue to light the way for the future, in which opportunities are greater than ever before. Not only have I deep faith in the future of our country and in the unbounded opportunities before us, b nt I am more certain than ever that through our Institute many doors 01 individual opportunity will stand open, but above all through the Perpetuation of its work and adherence to the ideals it has represented W H 1 come immeasurable benefits to the banking fraternity and to the entire nation. Dr. Stonier, I appreciate greatly this opportunity of speaking to m y fellow members.
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