Los Angeles herald., 1891-08-16
IDEAS FOR BANKERS.
A Paper BY Major George H.
BOnebrake.
Several Valuable Suggestions
on Matters of Finance.
Three Propositions Which Would In
ure to the Benefit Of Bankers.
How Los Angeles Banks Could Increase
Their Revenue and Usefulness-Com-
mercial Papers Should
Be Discounted.


Be Discounted.
THE following paper was written by
Major George H. Bonebrake and read at
the August dinner of the Clearing House
association j
Comfy BETWEEN BANKERS.
presume that those present will read
lily agree with me that the interests of
bankers are identical, that is, to make
money with safety, and assist their pat
rons. nd
Competition differs from animosity.
In building up one institution it is not
necessary to tear down another. Liber
ality in banking is good for the bank and
good for the community, but recklessness
in making investments, and placing large
loans On wildcat securities, is bad for
| the banks and also for the community.
Bankers are power for good to a
community, city or county. No bank
is so strong that it cannot be affected by
the same causes that affect the weaker
ones. Thus it is absolutely necessary
that banks should stand together, and
in times OF danger all the strength and
| power Of the stronger ones should be ex-
tended to the weaker ones, and only
those which are rotten and worthless
should be abandoned, and only then
when clearly proved to be in that condi
ton. With confidence in ourselves and
each other not only would it be impossi
BILE for bank to fail in Los Angeles, but
our banks could use at least 25 per cent
more of their funds, producing an i'm
mense revenue to our banking institu-
tions and also increasing the volume of
our loans, benefting our customers.
As it stands now the average reserve
kept by the Los Angeles banks exceeds
by forty-fve per cent. all their liabili-
ties. If our banks had an understand
ing with each other, through the clear
ing house, that they would stand to-
gether through whatever trouble might
come or arise, the reserve which the
banks should carry need not exceed
twenty-five per cent. OF their deposits.
Banks are not charitable institutions
and are not organized for health, or on
wind. Stockholders do not put their
money into banking institutions for
sweet charity's sake. The purpose is
to make money, and for this end it is
the duty of the banker to exert every
energy to build up the city and county
in which he resides.
Do we do this in the city of Los An
geles?
First. Is there that necessary har-
mony which comes from close social
and business relations, which ought to
be the case in this city, and which
would enable each bank to do larger
and safer business.
Second. Do bankers use all reasona-
BILE means in their power to make money
out of the business which they transact?
Might we not in legitimate manner
and in accordance with good banking
rules, such as are adopted the world
over, make money, or at least compen-
safe ourselves by charging our custom
ers for exchange? Do we not do millions
of dollars worth of business, furnish sta
tionery, etc., without revenue?
This is not good business sense; but
how will we accomplish the end sought
and so bind ourselves that. no one will
sell exchange without reasonable COM
pensation?
1t is certainly easily done without
coming into competition with each other
by reason of such course.
The basis of buying and selling ex-
change is par. Would it not be better
and more satisfactory to make the basis
of selling such exchange one-tenth of
one per cent. premium, charging not
less than Is cents for every draft and
making no exceptions between a good
and poor customer?
The plan is.feasible if we only adopt
it. think that on basis of this kind
all banks doing commercial business
could be induced to come into the clear
ing house, if an outside agreement could
not be made.
1t would be useless for me to take up
your time in speaking further OF such
course. As it is profitable elsewhere, it
would be more 80 here, owing to our
isolated position and the high rate on
expressage.
Third. Banks were originally organ
lied for the sole purpose OF discounting
commercial bills drawn against actual
values.
Even in my recollection of banks, ac-
commodation paper was looked upon
with suspicion. and when taken at all
| was discounted, but contrary to the
rules of every bank in the world, except
those on the Pacific coast, accommoda-
tion paper seems to have the preference
here, and then is not discounted, but
taken bearing interest, and most times
this is payable at maturity of the note.
| There is perhaps not a bank in the
United States, except on this coast, that
does not discount its paper, yet it is only
necessary for the banks of Los Angeles
to figure up the amounts they are losing
by taking interest on notes, instead of
discounting them, to induce them to
change this method OF doing business.
Almost al our country banks are con-
trolled by those who held similar places
in eastern institutions, and it is only
necessary for the clearing house to take
the proper course, to bring about the de-
sired results, as outside banks are we'll
acquainted with this method of doing
business, and would gladly follow our
| example.
There are other advantages besides
the increase of revenue, and l present
the matter this evening and recommend
that we pursue such course. / will
not take up your time by further dis
cussion of these three subjects, because
know they only need to be presented
to you 70 receive your favorable consid-
Grafton, and If the bankers present, who
ia the past have done so much toward