Marietta daily leader. (Marietta, Ohio) 1895-1906, 1897-09-13

Local Disaster Such as Occurs when
Local Banks Fail.
Instead of individual aud local banks,
such as exist in this country, Scotland
and Canada have great central banks
with branch banks in small cities and
villages. Discussing the advantages Of
these banks before the recent bankers
convention at Detroit, Mr.. William c..
Cornwell said:
IF the people who now have no
banking facilities. and consequently
hoard what little money they have, had
in their vicinity Il branch of reliable
bank. they would prefer to place their
savings in this branch rather than take
the risk of losing it by keeping it them
selves. The very smaln proportion of
coin which the Scotch banks carry en-
nbles them to afford to pay interest on
deposits. as their notes cost them moth
ing. and what they loan is their notes.
The payment of a small rate of interest
on deposits encourages people with
small sums of money to deposit them,
while if no interest was paid the money
would probably be boarded.
I'm towns and counties where money
is not used much the branches collect
in the spare funds, and almost without
expense it is transferred through the
head offices to other branches where
money is inactive demand. This money
from all parts is placed in one reser-
voir and distributed. doing the most
good at the lowest cost. Rates to bor-
rowers are equalized by this distribu-
ton, and in the far-off. sparsely-settled
regions rates are practically no higher
than at the large centers. We know
how different this is in the United
States-money at one ard two per cent.
per annum in New York. ten nd twelve
per cent. west and south and unobtain-
able at any price at many points.
"One of the great economies in he es-
tablshment of branch banks is the
lessening of the capital invested in the
business. The average percentage of
capital to deposits in Scotland is 1879
FER cent, while in this country it is 34.2
per cent. Whatever reduces expenses of
bank management means reduced rates
to the borrower-benefit to the public
If there were only one bank in the coun-
try this might not be so. but competi-
tion between banks forces them to the
lowest rates that decent returns on
their capital will allow Consequently
if cost to the bank is reduced cost to the
public is also reduced. A tax on banks
is tax on the people. Legislators. sup
posed to represent the people. should re-
member this when it occurs to them
that it would be good thing to increase
the burdens of the banks.
Money is not always in demand at
a!lplaces at the same time. but is needed
in different parts of the country at diff
ferent times, and for this reason. under
the branch system. the head bank is
enabled to meet demands upon it with
a comparatively small amount of
money, which would be entirely in
sufficient if being handled by numerous
independent banks. For the head
banks risks are distributed, and If one
part of the country has disaster this is
offset by the banking profits in another
part not affected. Each locality would
be assured that no local disaster would
affect the banks. Now. when local
banks begin to break. the locality sub
mits and suffers until long afterward.
when timid capital again establishes it.
self.
In panics there would be a combi-
nation of interests which would make
such an experience as ours
in 1898, when the solvent banks of the
west were moved down by hundreds
because of lack of support from each
other and from the centers. The very
existence of the large, strong banks
which would grow out of the system
would tend to dissipate storms.
Perhaps the argument in favor of
branch banks may be summed up when
we say the system reaches the highest
perfection in three important particu-
lars-stability, economy, usefulness;
stability, the greatest financial strength,
holding up all our institutions in active
periods and in storm and attracting to
this country the capital of the world;
economy both of capital and manage
ment, meaning the lowest cost to the
business world and consequently the
highest development of our resources;
usefulness, developing, and with most
perfect machinery, the resources of
every part of the country and bringing
into greatest activity the capacities of
brain and muscle of all our people"
Uncle Sans White Elephant.