Los Angeles herald. [volume] (Los Angeles [Calif.]) 1890-1893, 1891-11-15
A LESSON IN BANKING.

any eHect, IL sn0uld be made on proper
occasion and upon principle. The many
bank failures over the country the last
few months have uniformly shown one
general state of facts. The trouble has
been on account of few large trans
actions. If there were no real dishon-
esty or neglect of duty in the manage.
ment, there was, in most cases at least
the bad practice OF losning largely to 6
comparatively few favored borrowers
These borrowers, as rule, were large
operators in business, and were playing
for high stakes. At least it can always
be said of such that they are not the
safest men with whom to deal; and vel
they pay good interest, they are in the
way of helping on large enterprises
they want large amounts and they are
often the very best customers the lender
can have. Nobody will dispute the gen.
eral statement that the small borrowers
stand a poor chance to raise money
alongside of this other class who have a
strangely captivating way with bank
directors.
Now, the old tendencies and the tradi-
tions of banking are all to the effect
that it is the safest business in the
world. and should therefore pay
small rates to the lender. Latterly the
policy has changed greatly, and today,
whatever may be said of its safety, the
business of banking has been based upon
large interest and its corresponding
dividends. Large loans at good rates
have been favored and even sought by
bank managers as rule, because they
are profitable. until it has come about
that these bank failures generally show
favoritism if not mutual pulls"
This tendency is not only wrong, but
in the long run will always work disas-
ter. The bank should be not only the
most conservative of all institutions, but
it should be eager to spread itself over
the largest groundwork of popular inter
est and support. 1t should seek Gus
toners everywhere for loans as we'll as
deposits, and not despise the day of
email things. Like the insurance COM
pany it can only be really strong by
scattering its risks, by spreading wide
its operations to include all classes of
resources and risks. How perfectly the
great banks OF the world have always
done this, and how surely every depart
ure from this policy has brought dis
trust and danger. No banking house
ever failed so long az it trusted the COM
mon people who want money for COM
mon needs. No one ever saved itself
from losses when it has under
taken to aid great speculat-
i've movement, for instance, like
the South American investments which
recently wrought such ruin in the
money centers OF the world or even
when it has been committed to the
policy Of taking any unusual risks in the
hope of unusual dividends; for if failure
has not actually come from direct losses
the people have way of standing aloof
from any institution which despises or
ignores them. In other words, bank
must be real depository and agent for
the people, do judiciously distributed
business, content with reasonable inter-
est and legitimate dividends.
Too many banks, with their magnifi-
cence of finish and furniture, have go
few dealings with the common people
that they are regarded as far removed
from public concern as the rich bankers
private residence is. The average bor-
rover, who has sore though small
needs, whether he be the struggling
farmer, small trader or manufacturer, is
driven to the street broker. There is
nothing truer than that the middling
classes are the strength and the hope of
any country; but it is only small pro-
portion of modern banks and bankers
whose policy is based upon the helping
and receiving help from these.
Now, for an object lesson. The Bank
of France last year did loan and dis
count business of two billions, or a
little more than all the national |
banks of this country combined.
The number of bills discounted
was 5,673,0S8. OF these two millions
were for sums under $40, and twenty
five thousand of them were for amounts
ess than So. The tendency has been TO
/ multiplicity of transactions with per-
sons who borrow but small amounts,
md the advantages to the bank have
been even greater than to its customers.
The report says that in addition to the
Increasing of deposits and the stimulat-
ng of trade, the general faith of the
people in the soundness and the good
'ffices OF the bank is being greatly in
creased. The whole nation is interested
n it, and brings its deposits and gets
lelp-from the thrifty merchant or
of Lyons down to the
,oor fisherman of Brittany. Is not this
N object lesson OF surprising interest
o the bankers of this country? What
splendid reform would be inaugurated
they would look after the little bust
less of the deserving people of each /.
community, which is one OF the greatest
ources of good business returns, and
ot turn these over to the Shylocks with
hon no business man can deal and
we.
Can a bank be really strong, and a
cal benefit as well, that has not the
esources and the faith of whole COM
nunity to stand upon? The Bank of
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