The sun. [volume] (New York [N.Y.]) 1833-1916, 1897-11-22

Sheriff OF the county to swear In nfty special
deputies to preserve the peace. A mob Of do
positors. Il In said. paraded the streets OF the
town OF English. where one OF the branches Of
the collapsed bank was situated. and its
officers had TO nee for their lives. The
County Treasurer had $4,000 Of tho county's
money on deposit In the bank. and four we'd
prospective brideFrooms could not draw out the
funds they had put aside for their expenses.
In their indignation tho victims Of the failure
held q meeting. and snbscribod money for the
arrest and prosecution Of the banks officers,
who, for several days. wisely concealed them
selves. t the latest dates they had returned. and
the county was subsiding into quiet. Friends
of the bank promise that its creditors shall re-
coive q dividend OF rs per cent, and some talk
OF payment in full. but at the time OF tho fail
ure the cash on hand was only o12. 900.
The incident, occurring % It does Just now.
when 90 much 10 said about tho desirahility
of creating moro little banks. to supply tho
needs Of rural communities, IL highly instruc-
tive. 1t is true that the insolvent Indiana banks
were not corporations, either under the laws Of
the State or under the National Bank act, and
therefore no Inference can DO drawn from their
collapse. respecting tho failure OF either State or
national legislation to prevent Il. None the
less. their fate. coupled with that which has
overtaken hundreds OF other country banks in
recent times. shows tho risks that attend bank.
ing on q small scale. both TO the anker and his
depositors. Here in this city even, within two
years. half q dozen or more OF so-called banks
managed by Italians have closed their doors,
leaving those who have conaded their money to
them to mourn the loss OF the whole or the
greater part Of It As in Indiana 90 in New
York, O large capital IL regulate in banking,
both for safety and for profit.
The business OF banking Ia. le~gitinntely,
nothing moro nor less than dealing in money
and credits. The trne banker accepts deposits of
money on the undertaking TO repay them on do
mand, lends money to borrowers, ana buys and
sells notes and drafts. Everything beyond this
10 not banking. but o moro or less remote ad.
3unct to 1t. Thus. many OF our New York bank
ers deal in stocks and bonds. finance railroad,
mining and industrial corporations, and Job
Government municipal and other corporation
loans. for all OF which operations their banking
machinery affords facilities. For many years,
too. the Incorporated banks OF this country have
been permitted. without being Government
agents, as the great banks Of European nations
are. to usurp the Government preroRative OF
issuing paper currency. but this is no moro
banking than the selling OF drugs by a grocer
makes them groceries. Many Of us can remem-
ber the time when not only Rrocers but dry
DSSoo aiS hhku u u6uleEB, anu oven BAlC0u
keepers, issued what were called "shinpiasters,"
which. for q while, did duty az currency. but
nobody supposed that the operation was bank
ing. Even now. our great New York banks own
and rent Office buildings. but they do not claim
Q monopoly OF the business because they are
banks. Like the issuing of circulating notes, It
10 profitable and convenient, but 1t il none tho
less o stretch Of the banks corporate powers.
The profits OF legitimate banking. like those of
. merchant, are confined to tho difference be-
tween the prices paid for tho articles dealt in,
and those received for them. A bank usually
allows either no interest at all upon deposits, or
else interest at q lower rate than that which IL
charges for loans. If 1t buys commercial paper
1t sells 1t again for more than IL gives for 1t, and
for drafts ON its correspondence, 1t receives q
commission. In these days Of fierce competition,
the profits Of banking, confined within its strict
limits, are very small. unless the business 10
very extensive. Where the differences between
buying and selling are calculated in fractions Of
j per cent. even . turnover Of 81. GOO. 600 Yields
an uncomfortable sum. Hence. the addition to
banking. in most cases. Of other business for
which 1t affords facilities: and hence, too. the
urgency with which small banks contend for
the privilege Of issuing currency without 30.
curity. and in unlimited amounts. By the exer.
else Of this privilege they would obtain capital
which costs them little or nothing and could
use it to corresponding advantage.
In rural districts. legitimate banking cannot
under the most favorable conditions, be carried
on 80 as to yield . profit that makes 1t worth
while TO embark capital In 1t. It's transactions
are limited by tho want of . community OF
frugal habits and which has little trade and nc
manufacturing. Hence. in such d~istricts, the
so-called banker joins with his banking business
that Of speculating in agricultural produce, OF
making loans on land and Of lending the money
deposited with him to operators in other locali
ties whose credit 10 doubtful and who, In con.
sequence, pay high rates of interest Just as the
little italian bankers In this city act as agents
for steamship companies. deal In exchange
drawn by other banks. and. too often. speculate
on the Stock Exchange or the Produce Exchange
with the money intrusted to them. When such
banks fail 1t Is not through their banking oper
ations but from outside causes.
The National Bank act wisely requires that q
bank organized under 1t shall have q capital o.
not less than $50. 600. An outcry has recently
been made against this restriction, and mer
who ought to know hotter have demanded thai
the limit be reduced to SIS 900, in order. as they
say. to permit national banks to DO established
In places where q larger capital than $500 0
cannot be used prohtably. They do not consider
that the rent, salaries. and other expenses Of
bank with $50. 900 capital will be fully as larg,
es those Tor one with $4,000. while Its ~earningi
will DO very much smaller. Surprising thu
92o.OO bank to have, besides Its capital. $50.
600 In deposits. which Is moro than the syerag,
proportion of deposits In agricultural soc
lions. and supposing 1t to lend its Who'll,
capital and three-fourths of its deposits
or q total OF $62. 500, its gross earn
ings at 8 per cent. per annum. provided 1
allows no interest to Its depositors, will b
$4,000. out of which 1t must pay for rent, say
$500. salaries 81. 800. and taxes. stationery. an,
incidentals $500 more. leaving but 81, 800 70
dividends. even IL no losses by bad debts are In
Cured. This. in q place whore 8 per cont. ID tn
ruling rate Of interest. IL altogether too meagr,
areturn to tempt investment in such an enter
prise; and II. to increase 1t. the Institution EN-
barks In spoculations In grain. cotton. pork, an,
similar articles, 1t runs . risk Of ruin like tina
which has just overtaken the banks OF Crawfor
county. Indiana 1t might make q little NOR
hU In z.A s---I