The herald., 1898-10-23
Small Banks in Large Cities

The day of the independent small bank To-
Gated in the large city is passing. The
proposed Boston consolidation shows this
clearly. Not less significant is the gradual
absorption of some of the smaller banking
enterprises in New York by interests closely
identified with the more prominent institu-
tions. Only last week two very large banks
identified themselves in u measure with the
future of lesser known and weaker institu-
tions by putting members of their own
boards on those of the small banks The lat
ter do not become direct branches Of the larg-
er banks, but the measure of their influence
is vastly strengthened by such connections,
and the outlook for a more prosperous ca
reer is enlarged in proportion. The ques-
ton of the independent small bank, located
in the greater centers of population, is be-
coming daily more serious one. Why this
Is true needs no explanation here. As the
department store is slowly working the ruin
of the minor merchant, so the large banks,
owing to superior facilities, immensely
greater resources and ability to regulate the
character of their loans, are able to absorb
the highest grade Of offerings, not only at
price that affords them better profit, but
also in amounts sufficient to leave but little
gilt-edged business for the small institution.
The primary problem that confronts the
small bank is how to build up desirable
business. 1t is not large enough as a gen.
eral thing to attract the larger customer; it
is forced, therefore, to turn over its re-
sources in the shape of small loans, and this
process inevitably means large losses. The
consequence is that between maintaining
its organization, paying other expenses, and
charging off losses, the small bank that pre-
serves really profitable existence and offers
a safe investment, is the exception, rather
than the rule. The shares of the institu-
tions that the Boston savings banks COM
mittee propose to liquidate are not worth as
much now as they were twenty years ago,
and it is fact that the dividends they have
returned to their stockholders for some time
have been taken from previously accumu-
lated surplus, and have not been earned.
To continue such banks means that other in
stitutions are menaced by their existence.
In Boston, where the current deposits are
only about four times the amount Of bank
ing capital invested, the best remedy appears
to be in the direction indicated. In New
York, with capital one-thirteenth the
amount of the deposits-we are speaking
now only of the national banks-there does
not seem TO be superfuity Of capital, but
at the same time it cannot be said that the
weaker banks here have a much better op-
portunity, or that they contain within them.
selves the possibility of larger growth than
those in Boston-providing always that they
are operated independently. But once
identified with interests that have made the
larger banks successful, they enter field
where their own usefulness is vastly in
creased, and their opportunities expanded
in proportion. They cease to be sources Of
apprehension in times of panic, and while
their operation may not be as economical as
. Is the case in the larger bank, the, chancd of
loss, owing to the installation of specially
trained officers and the cooperation of ac-
tive directors, is greatly minimized For
these reasons and many others which might
be cited, the entrance of larger interests
into the control of small banks is to be en-.
couraged. 1t protects the larger bank by
strengthening the weaker.-New York
Einancier.