Hutchinson gazette. [volume] (Hutchinson, Kan.) 1895-1902, 1898-06-30

The following is an extract from an
article by R. A. Dague in the June
New Time:
Let me illustrate how savings banks
are started, and how they work not in
California only, but elsewhere. John
Smith decides to start bank. The
people begin depositing with him, aud
he agrees II they will entrust him with
their money for several months he will
allow them small interest when they
withdraw IL from the bank. Usually
he allows them no interest II the mon
cy is not left a specified time; he thus
gets the free use Of large amounts Of
cash. After the deposits have accum-
ulated to sufficiently large amount
the bank begins to make loans. Farm
er "a" comes in and borrows for year
or longer at say per cent interest per
annum, and gives mortgage on his
farm or other good security. He very
soon puts the money into circulation
by paying Il out to his employees, to
the merchant and to other parties.
Within few weeks o third or half
of that same 500 goes back to the
bank in the way of deposits. Farmer
'B" comes in, borrows 500 or more,
and gives mortgage on his farm at 8
per cent interest, and he too, soon puts
It In circulation. Farmer &c" and Mr..
I'D" and scores of others come in In
due time, borrow and give mortgages.
Each borrower gets some of the same
identical money the banker loaned to
"a" and "B" and &C" and 3D." and all
previous borrowers, all Of whom are
paying interest on it, and thus the
loaning and depositing, reloaning and
redepositing goes on and on Every
time loan is made some Of the dollars
given TO the borrower are the same the
banker has loaned one, two, three, four
or more times before, and to secure
which he holds, perhaps dozen differ
emit mortgages on that many different
men. Such dollars are earning the
bank per cent from ga" the same
from "B, " the same from &c" and 80 on,
thus bringing the bank not less than
per cent interest ON the entire amount
Of money loaned, 16 per cent on part
loaned and "a, so and even so per cent
on other portions of the money let out.
The oftencr the money is handled the
bigger are the profits, of course. Now,
the beauty of this system from the
badkers' standpoint consists in the fact
that he gauges his loans so as to tally
with the amounts Of his deposits, 80
that the money he loans out does not
belong to him, but to the depositor al
ways OF course, the banks pay some
of the earning to the depositor, but
thorough sitting of the system to the
bottom shows that they get they free
use of large sums of money designated
as ordinary deposits and that on
STERN deposits" they allow the deposit
tor very small part of the interest
they get out Of the borrowing class for
the same identical cash. 1t Is proper
to remark here that the deposits in the |
bank usually exceed the sum loaned
out--that 10, the bank does notloan
quite up to the full amount deposited.
OF course the bank incurs an indebted
ness to the depositors equal to the
amount deposited. The depositing
and redepoDiting doubles up in nearly
the same ratio as the loaning and re-
The present debts Of the
banks to the depositors is so large that
its cancellation is very predetermined
indeed, for how can the banks enforce
the collection Of debts exceeding four
times all tile. money in circulation, and i
how can the depositors expect the