Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1907-11-21
WHY BANKS KEEP YOUR MONEY.

WHY BANKS KEEP YOUR MONEY.
If business man is close enough to
a bank these days to be supposed to
know anything about banking he has
been asked hundred times "Why does
the bank keep my money when want
ito" and the question is usually sup
ported by an argument something IKE
this THAT is my money. took 1t
there with the understanding that
could have it when wanted it and the
/ bank ought to give it to me-"
Exactly, and if a man has been do
ling business with banks for forty
wears or more he can remember OF
only one or two weeks in all that time
when the banks have refused to do all
| that he now asks of them. But II he
would look over the bankers shoulder
for a moment he would see that the
so-called money which ninety five out
of every 100 depositors put in the bank
was not currency but checks and drafts
drawn upon banks all over the United
States. Yet he has been arguing that
Ia bank ought to pay every depositor
in currency the moment he demands
| it, when only five in a hundred ever
BRING currency to the bank. Fie does
Mt ask for what he deposited. He de-
hands currency. He believes in this
argument because the bank has prom
;sed to do that very thing and mas
spoiled him by doing it so long.
The bank, however, has relied upon
banking experience which shows that
only small per cent of it's deposltors
will ever call for their money at the
same time and the law provides that
bank is safe If it keeps Is per cent OF
It's deposits on hand in money. Most
Banks keep 25 per cent to be doubly
safe and loan out the other three
onrths TO farmers who want to feed
.attle, to merchants who want to buy
goods and to manufacturers who must
,ay cash to their workmen every Sat
urday night and wait three months
for their pay for the goods they have
made.
If banks did not enjoy this privilege
If loaning a portion of their deposits
there would be no banks. banker
must be paid good salary. His clerks
Eo q
lis fine bank building is entitled to it's
entail. His stockholders have invested
Zoo 900 in many instances and have
assumed a liability for another $780,
BOO, under the law, which has the ef-
'ect of putting them on the cashiers
,ond for this amount to insure the de-
positors against the cashiers mistakes
ar his dishonesty. Men who thus as
sumo a $4,000 risk for every $1,000 In
vested in bank stock, are entitled to
good profits on the $1,000 invested, yet
bank stock seldom pays over s per
cent annual dividends. All these items
of expense cost money. In a. 100000
bank carrying half a million of deposits
they will run close to $4,000 per year.
And it takes $4,000 more to pay fair
dividends on the stock. Who is going
to pay it?
If the depositor who believes that
his money is due him on demand,
should call for it every morning and
if all the others should do likewise,
everybody would soon be required to
pay about per cent interest for the
privilege Of putting money in bank;
the depositors would have to pay the
expense of running the bank.
AS It is, however, the bank loans out
three-f ourths Of the depositors' money,
when it can at rates of interest vary
cent on personal security. 1t does we'll
to average per cent on tWo-thirds of
it's deposits and capital, for, in some
seasons of the year, it can not find
borrowers for all it would like to loan
and it can never loan over three
fourths and be real safe, so Z per cent
on two-thirds of It's half million de-
posits, plus its capital, or $4,000, Is
its gross earnings. Its operating ex-
penses and s per cent dividends to
stockholders will eat up $4,000 of this.
Then out of million deposits fully
$250,0O0 will be time deposits, drawing
3 per cent interest, which will eat up
$500 more Of this income, and leave
only $4,000 to be carried to surplus out !,
of which to meet losses when they
come.
Now, every depositor knows all these
things when he puts money in bank
1t is true the banker smiles pleasantly
and promises to pay it back on de-