The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1906-06-24
X YHEN the bank clerks discussed

JhEN tAe Udnh C4ol No uAoIueSou
wv the question Of national bank
loans on real estate security
before the state bankers at the Tonka
Bay hotel Wednesday, they touched
upon something that comes pretty close
to the hearts Of the real estate men.
Inasmuch as the affirmative, which
held that the national banking act
should be amended to permit such
loans, was awarded the decision, ex-
Minneapolis men are interesting.
The chief argument Of the negative
side was that real estate was not liquid
enough security for banks and that
there were already enough institutions
loaning money on such security.
s,-fy Affrmative's Argument.
The affrmatiye's argument went to
prove that real estate was good Sc
curity, for the banker could be init
asy acqaanssd With ths real estate to
could learn little about the commercial
paper which he must use as loan Sc
purity, real estate being prohibited,
further than he had loaned money on it
before and the notes had been paid.
J. G. Maclean. leader for the affirm
alive, clerk in the Security bank,
argued thus:
Neaa essa.s naSAHE pasSeo i,om an
stu te, with a permanent and increasing
value, there la no sound reason why
national banks should be restricted IN
loaning on same. By not allowing them
to loan on real estate, we are standing
in their wayJ we are placing a damper
on them as to supplying the wants of
the community; we keep back their
progress and they are not able to meet
I IL "A 49, :. L L
permitted to loan on real estate. :,
{. Must Serve Community.
cit must be admitted that a bank
should always serve the community in
which 1t is located, when it can do so
conservatively. A national bank can
not do SO under present restrictions.
For instance, q farmer is in need Of
money, and on going to the bank is
asked for security. He then offers the
only security he has, namely, mort
security; the law does not permit me. ,
The farmer then goes to the nearest
state bank and obtains his loan. He,
therefore, feels under obligations to
this banker who has helped him, and,
on this account, when he wishes to buy
money to deposit, he goes to the banker
who made him the loan. Thus, the
national banker has not only lost the
chance Of investing funds at fair
rate Of interest, but he has also lost
the i or 2 per cent commission which
Is customary on loans Of this nature,
and he has also lost the farmer as a
customer.
IT, Must Go 1t Blind. z.. ~
1.-THE national banker, having a
surplus Of money to invest, is ON this
account obliged to seek elsewhere to
make investments. He therefore re.
quests the commercial paper broker in
the nearest large city to send him some
paper. He, Of course, is sent some
which he accepts, because he has prob
ably had some Of the kind before and
It was promptly paid at maturity. He
does not know in detail himself about
the firm who has signed the notes. but
has been told by other bankers that i
is rated high. He has, therefore, made
a loan to a firm about which he per
sonally knows nothing. %
Possibly this firm may fail, as ii
often the case, and the banker has los
amount Of money could be loaned ovel
and over again on real estate security
without the loss Of a single dollar Of
principal or interest, because a banke.
invariably knows the value Of land ii
his community and on this .accoun
he is able to make loan conserva
lively: Thus we argue, 1t is necessary
i positor's and stockholders stand
point, that national banks, in order t,
escape losses, should be permitted t,
loan on real estate. AS for security
there IS none better than q loan Sc
Cured by first mortgage on uninoum
bered real estate. -
Some More Argument.
Lyman E. Wakefield Of the, North
affirmative with the following reason
ut has been suggested by me-
prominent in financial affairs that on
Of the worst evils in the banking bus
ness. as it Is conducted today, lies /
present day commercial methods. W
all know that the broker secures pei
: disposed Of by him a. bis profit, henc
: the greater the volume Of paper place
= by him, the greater the income. Tn
= more he can sell to the country banke
the better. he lilies it, and for the RET
sons previously outlined, the countr
banker must, have this class Of pape
I do not call your attention to this I
i paper, but because t want You to 81
s that the country banker assumes "a
|. greater risks in placing his bank
l. funds in this way than he possib]
e could, II he were allowed by law to ca
% ry q reasonable amount Of paper s.
II cured by real estate mortgage.
e Over Work Credit.
y tBecause of the : ease with whic
4 brokers are able to dispose Of this p
A. per, large business concerns are induce
n to borrow In some instances large an
unnecessary amounts, which In prepa
a. ing for large season g output, the
/ invest In enlargement Of plant and
4 creasing. their facilities and 60 pla,
themselves in such shape that were the
requested to meet payment Of the
paper as 1t matured, and ware Qnab
to secure renewals, 1t would be impo
siblo for them to do 80.
And we can infer from this on
n that should the time come to curts
loans Of this character, and which q
now considered by our big hnanciers
at liquid assets, we should be quite like
O. to find that the liquid had frozen u
~ Case In Point.
~ stThe following incident shows plai
IS, ly danger Of the present commerce
- paper habit. One Of the largest al
f. most successful makers Of mechanic
ne tools in the country was asked concer
le ing business, and the manager reptile
n that they were never more busy, b
Tx making no profit. Their plant W
be enormous and managed with tho utmn
lll and nonot1J1 lea<ned IN long