The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-08-29
RULES TWENTY BANKS
AN INTERESTING SYSTEM OF FINAN-
CIAL INSTITUTIONS.
Each One Is Entirely Independent of
the Other, but All Are Governed
by the Same By-LaNs.



ity to run one bank and fewer enjoy that
privilege 1t is commonly considered a
hard place with heavy responsibility, and
men with strong constitutions often break
down under the strain This man runs
Nv enty banks easier than most men run
one, and his institutions have been phenom-
enally successful They have paid high
as 40 per cent cash dividends and have
averaged from to Is per cent, besides
setting apart an equal or greater amount
as surplus.
The man who did this Is ". s. Witham.
In nine years he has built up. mainly in
Georgia what he calls the Witham bank
ing system. This series of twenty country
banks. with only $4,000 capital each, has
in it the prophecy of a new grouping Of
financial institutions analogous to that
which has taken place in the organization
of such great concerns as the American
Cotton Oil Company, the Pacific Tea Com
pany and the Park SS TilfOrd stores.
The precedent has been set for cOmbina-
lions of banks and it has been demonstrate
ed that the principle, properly applied, has
the same advantages as in other lines of
business. But the combination idea must
not be misunderstood. AS applied to banks
by Zimri Dwiggins it is a failure.
That experiment failed because It con-
sisted of string of country banks tied to-
gether and to a city bank, so that disaster
to one affected all of them. The securi-
ties of the city bank We're tainted with real
estate speculation, and like other institu-
tons with the same weakness, it went
down in the storm of 1893, carrying the
whole series down like ninepins.
Williams system of combined country
banks withstood that panic and is pros
porous out of proportion to the capital in
vested 1t is differently organized from the
Dwiggins system, and in that difference is
it's safety.
1t is an axiom among bankers that one
bank must not be effected by the nabili-
ties of another. Each financial tub must
stand on it's own bottom. For this reason
bankers of the United States have given
only q qualified approval to the Canadian
system, in which, all the banks are to a
limited extent, through an insurance tund,
guarantors of the bills of each. Nothing
but the strong necessity of a panic has in
duced them to lock arms to any great eX-
tent. They have been wary or comblna-
ton. because it has peculiar danger Tor
financial institutions. This is the funda-
mental principle that Zimri DWigg1ns Vlo-
lated. -
NOT LIKE DWIGGINS.
Mr. Witham has avoided that rock, and
in his SERIES each bank is separate and dis
tirct from all the others. The only organic
connection OF the series is in the fact that
the Witham syndicate, through corpora
ton organized for the purpose, owns a con-
trolling interest in each of the banks. In
this the Witham system differs radically
from that of Dwiggins. 1t also differs from
the departmental banking systems of Eng
land and France. There a large central
bank, with a big capital, is organized in
city like London with branches in all parts
of the country. That suits the situation
over there, but in England money goes
from the outlying counties to the metrop-
oils or the manufacturing cities to be
loaned. 1t finds more profitable employ
ment than in the agricultural sections
where rent money comes in.
In this country, or at least in the SOUTH
different conditions obtain, ana money goes
from the metropolis to the country districts
in spring and summer to make the cotton
crop, and in the fall to move it.
To meet this demand Mr.; Wltham mas
created a new office in banking which he
calls financial agent. The business of this
functionary is to supply the banks with
money when their capital and deposits are
not sufficient to do the legitimate business
that offers. This office Mr.. Witham Nils,
and he supplies the money, sometimes using
his own resources and his own lndorse1n lent
For this service he Is paid fixed sum
called an allowance, and for the twenty
banks it amounts to $4,000 a year.
In this extra supply of money he gives
each bank a liberal quid pro quo for the
salary it pays him. The extra demand Tor
money comes in the summer in almost
every town in the cotton belt. 1t is es-
pecially heavy when the corn crop of the
previous year has been light and the farm
ers have to buy from the West. Corn,
under such circumstances becomes the
basis of important banking operations, and
the cashing of corn drafts for merchants
is quite profitable in country towns. When
ever from this or other causes one Oh Mr.
Williams banks can put out safely and
profitably q good deal more money tnan IT
takes in locally, it is the duty of the imam
ciaI agent to meet requisition for funds.
The fact that he has twenty banks to
supply and twenty for connections gives
him a strong leverage, especially as the
business of these institutions is out OF an
proportion to their capital. They get
money freely in the SUMMER and their loans
are large at good rates to good parties.
This makes their earnings larger than in
other country banks.
WITHANI'S METHODS.
In reply to my question about his methods
Mr.. William quoted these four bylaws
which, he said, will keep any bank from
breaking:
/. The cashiers must be bonded for more
money than they have access to.
2. Each bank must have a chrome steel
triple time lock- burglar-proof safe and the
cashier must put the time lock at 8
o'clock in the afternoon and take it off at
o'clock in the morning
g. All loans exceeding $50 must be made
by the written consent of the majority of
the board of directors after being passed
on in open session.
On this bylaw Mr.. Witham remarked:
LAS bills receivable are always the key
to a banks condition, l hold, with Solomon,
that in the multitude of counsel there is
wisdom"
4. The cashier is responsible for over
drafts and for loans growing out of deal
ing with strangers. No loan shall be made
to any one without security
On this Mr. Witham remarked:
"A private bylaw unto itself is that
borrow my money from other banks.
Commenting all four of the bylaws he
said: mo city bank could confine itself
TO these rules. We have the only bank in
the county, and country people are not
quite so fast as city folks they can afford
to wait few days for the discount period
to come around.
people say you can't run business at a
distance. They say so because they don't
know"
The beginning of the interesting career of
Mr. Witham was when as a country boy
fourteen years old he went to New York
10 seek his fortune. He found it in a 81
q week job at straw goods house.
He went to a night school, working hard
and walking two miles. and worked hard at
business. At the end of eighteen years
after drawing a 50 600 salary as the largest
straw goods salesman in New York, he
went into business two years for himself
and made money rapidly. When he came
To Georgia in 1889 he brought a capital of
SIS 600 His quick financial instinct told him
that the power of combination with this
sum was greater and Its operations safer
among the small COMMUNITIES OF the South
than in a great city like New York, where
coDpeSted Canital waits on all safe invest