Los Angeles herald., 1907-12-14
Wonen's Clubs
Friday Morning Club

Banking and Its Relation to the Com
munity" was the subject of timely and
exceedingly interesting address given be-
fore the Friday Morning club yesterday
by II. s. Mckee, president of the Long
Beach bank, an address so devoid of
technicalities and verbiage so simple and
direct, that the nebulous maze in the minds
of the uninitiated sourrounding every
thing connected with banks and banking
vanished as before a strong, west wind.
and the subject became so plain that he
who runs may read.
Eve will begin at the beginning" said
the speaker, and then divided his subject
into three factors-the bank, the depos-
itor and the borrower. The story was
briefly told, from he moment when the
idea of starting a bank finds place in the
busy brain of some fnancier, until. organ
izaton and equipment complete, the doors
are thrown open for business-"and that's
a bank" The workings of savings banks.
trust companies and commercial banks,
the three classes into which for practical
purposes the banking business of the
community is divided, were explicitly out
lined; the relative value of various col
laterals and securities was made plain,
Flcng and short term deposits, promssory
notes, commercial paper drafts and mort
cages touched upon, and clearing house
operations the why" of the issuance of
scrip and the rise of underwriting syn
dicates explained
That the custom of issuing drafts is
courtesy from the bank to it's depositors
and not an obligation was emphasized,
and was also the fact that this entailed
Upon the banks the placing and maintain
ing of large deposits with correspondents
at q distance, the convenience OF Wnlch
was made plain a short time ago when the
financial stringency arose and the
courtesy was discontinued.
A new idea to many of his hearers was
advanced by Mr.. Mckee, when he said he
had heard of banks where the wish to
accommodate depositors was not confined
to the routine of checks and drafts, but
that these institutions honored kilograms
to meet incoming trains on which were,
perhaps, an aged parent or wife ana
small children, and had been known to
execute and pay for shopping commits
sions received by mail.
Mr. Mckee made very plain the value
of the clearing house to the community,
not only as displacing that old-time dig
nitary, the bank messenger, but In times
of financial stress safeguarding the indi-
vidual banks and thus the monetary in
terests of the body polite. Scrip was de-
clared to be as good as national bank
notes.
| Speaking of the present financial con-
QlLlOn MT. hlCAet. Sdlu Out uillclCuSC DS-
tween this and previous ones is that this
time the banks early placed limit on
the amount the depositors could draw
and so secured sane conditions and pre-
vented runs" and consequent foreclos-
ures. The speaker said no bank keeps
on hard more than ore-third of the mon
ey deposited with it, the amount re-
quired by law, and If all the clients
came at once demanding his or her cash.
1o1 fnC
aster. The other two-thirds have been
loaned at interest to manufacturers, mer-
chants, farmers, miners or in other of
| the channels of commerce, and is not
| available on demand. II at this time the
| | nks should insist on the payment of
| these notes many a solvent business man
would go under but instead these institu-
| tions come to the front and bear the
| brunt of it all, and find some temporary
means of tiding over the trouble.
No one can tel, said he, just what are
the causes of these panics, and probably
one hundred different men, If interro-
| gated, would give one hundred different
| answers. There might be some phase
of truth in each reply, the difficulty being
to decide on their relative Importance.
Perhaps the student of economic and in
| dustrial conditions, who has his ear to
| the ground and who knows that history
repeats itself in these crises after every
| ten or fifteen years of prosperity, would
! say they come because they are due,
that they hang like ripe fruit and fall in
the season. Thoughtful business men
knowing this, when the time is near, be-
come conservative, limit their expendi-
lures, retrench their business even along
| legitimate lines, and call in loans. This
uneasiness extends from a few to many;
| the retailer cancels his order because
of a large stock still on his shelves the
wholesaler carcels his, the large man
| ufacturer let's out thousands of employees
who, being out of work, cannot purchase
of the retailer. and SO the depression
grows in ever widening circles, one class
that is ever among the first to suffer be-
ing the large army of railroad employees
who are discharged because as there is
less freight to be handled and less travel,