Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1912-12-10
Banking Business Is Open
Rich and Poor Alike Trust Banker as They Do No
Other Person7Servce Once Charged For Now Free.

their patrons grew III of the compe-
tition among banks to secure deposits.
1t may be a good thing to sell your
goods to the highest bidder, but Lhei
is a vast difference between selling
goods and entrustlng your money for
safe keeping, to be returned on de-
mand. In the latter case, the high
est bidder Is not necessarily the safest
guardian.
II two men apply to a merchant for
the position of cashier. and n wanted
$40 a week for his services; the ,ther
offered 500 a week for the oppor-
tunity, the merchant would be likely
to view the latter with suspicion. A
banker who offers a higher rate of
interest for deposits than he a pay
out of his returns from safe invest
ments will fail to make honey Ind
the bank that is not making money Is
not a safe bank for the depos tor.
His money is likely to go with the
banks losing venture.
About $50 banks in this State are
paying Q per cent. interest on State
deposits. The national bank act re-
quires that the bank should keep a
is per cent. reserve; that is, SIS out of
every 500 cannot be used. A 2 per
cent. rate, therefore, on the
disable fund 2.35 per cent. 1t costs
one of the banks in this State, whose
operating expenses is perhaps a fair
average, 1.04 per cent. to handle its
business. With a 2 per cent. rate,
therefore, the banks deposits cost 1t
0 90 nov amt a xaar Tho nJQFl0 ore
rate of gross income per dollar of
the bank in question Is All per cent.
a year, which leaves a profit Of 1.32
per cent. This is a very small profit.
smaller than that of any other sue
cessful business, and especially small
when one considers the amount of
service which a bank renders free of
charge and the mount of hazard
and risk it takes in the way of bad
loans and investments. This profit,
too, is somewhat reduced after aver
aging the higher rate on the inactive
accounts upon which the banks in
this city pay 3 per cent, making a
gross profit of that amount.
Bank Earnings Small.
The bank to which refernce is
made in this article earned upon its
transactions not 5 per. cent. to 15 per
cent, but lilo of l per cent. during
a year. If there is any man who
wants the bank to pay higher rates
of interest on deposits and earn less
than one-tenth of 1 per cent. on its
transactions, he certainly isn't a
member of the labor union that be-
lieves in high wages.
Banks cannot exist without profit.
They are not safe banks unless they
make a profit. The tendency to force
banks to pay higher rates of interest
can only have one result. 1t will
compel these institutions in the very
near future to charge for the service
which they now render for nothing.
Last veal one of the banks in this
city paid 500, 600 in interest to its de-
positors-1S per cent. on its capital
stock, more than m most years it has
paid in dividends for its stockholders.
Is there any other business institu-
ton in the country hat thus shares
its profits with its customers and
gives them a share nearly as large as
1t distributes to the stockholders or
members of it's own firm?
Take another view of bank earn
ing. The total transactions of the
bank in question amount in a year
to $16S, 900, 900. This amount repre-
sents what a merchant would prob
ably term his sales. Unless a mer-
chant was earning from s to 10 per