The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-11-20
THE UTILITY OF BANKS.

THE UTILITY OF BANKS.
Some people do not approve of
| banks. They seem to think banks have
no reason to exist and that the coun-
| try would be better off without them.
This idea, fortunately, is held only
by those who have few dealings with
banks and who know little about their
workings. Intelligent persons of
means realize the benefits that banks
do. In fact, modern business would
be impossible without them.
For instance, a man in community
where there is no bank wishes to pur-
chase a $4,000 farm, but he has only
$4,000 with which to do it. He wants
to borrow the other $1,000 and give a
mortgage on the farm for it. One
neighbor has $3.50, another has $500,
another 500, and others various
amounts that they are not using. In
order to get his comparatively small
loan, the borrower would have to go
to each of these men and convince
them that his investment was a good
one Then he would have to give each
one a separate mortgage if they con-
scented to make him the loans. But
the chances are that few of them
Indefinitely, even if he thought the in
vestment safe and though he wished
to accommodate his neighbor. Conse-
quently it would be impossible for the
first man to purchase the farm.
But a small bank is started in the
community. The owners put up
capital of $4,000 Or more as mar
gin on which to do business. The
bank opens to receive deposits, prom
Using to keep money in safety for who
ever so desires and return it when
ever wanted, making no charge for
the service. A dozen men in the COM
munity bring in their spare cash and
deposit it until the aggregate is $4,000.
Then the bank makes the loan of
$1,000 to the man who wants to buy
the farm, yet at the same time it
stands ready to cash checks for each
of its depositors. 1t is presumed, of
course, that only part of the deposit
tors will want their money at time,
yet the bank assumes all the respon-
sibility in the matter
Then, again, one of the depositors
ships a carload of wheat to Kansas
City. AS soon as he gets his bill of
lading from the local railroad agent
he can take it to the bank and his pay
for the wheat is Immediately placed
to his credit and he can begin to
check on 1t. The bank sends the bill
of 1ading to its correspondent bank in
Kansas City along with a draft on the
consignee. The purchaser of the
wheat pays the Kansas City bank for
it when he gets his bill of lading, and
the Kansas City bank places, the
amount to the credit of the country
bank.
Another depositor wishes to send |
$500 to pay a debt in the east. The |
chances are that the eastern creditor |
has authorized the bank to accept the |
money and receipt for it, but if not |
the debtor has to send the money or |
it's equivalent to the creditor. 1t |
would be risky for him to send the |
currency, even if he had it, besides |
taking it out of the community. In
stead he goes into the bank, gives the |
bank his check for the amount, re- |
ceives a draft on New York for it. |
mails it in a letter for a two-cent |
stamp, and in due time receives his |
receipt.
In multitude of ways a bank helps |
the business of a community 1t is |
true that some bankers may be grasp |
banker is as accommodating as the |
interests of his depositors allow him |
to be-. If it were not for banks our
business of today would |
be greatly restricted. In fact, it would |
be impossible to carry on business as
1t is.
The present situation Is unparallel-
ed in the history of banking, yet it is
comparatively no hardships
When Wall street took the action it
did in refusing to ship out currency
that 1t owed to outside banks, other
cities were afraid some of their big
would draw out funds and
ship them to New York, attracted by
the high premium on currency offered |
there.
They also wished to prevent deposit
tors from withdrawing their money
from the business community simply
to hoard it and to prevent small banks
from draining the larger ones
So they placed limit on the
amount of currency they would pay
each depositor but gave out clearing
house certificates for all each deposit