The diamond drill. (Crystal Falls, Iron County, Mich.) 1887-1996, 1912-12-14
The Small Banker

The reform OF the banking, and
monetary system concerns no one more
than the small banker. II doesn {
matter whether or not his bank wants
to join co operative reserve agency.
The indIrect result Of better banking
methods will be as great to non mem
ber banks as 70 member banks.
Banks that are not members Of the
agency will have connections with
banks that are They will be bene
ticiaries of the new system They will
conduct their business according to the
new requirements and subscribe TO the
new standards They will bring them
selves within the sphere OF co opera
tion. and demand and receive the ad-
vantages Of II when il Is valuable or
necessary.
Once cooperation becomes the rule
Of the bank system no bank can remain
beyond Is influence. The small bank
will suffer no Impairment of its present
functions. It will nave everything Il
now has II can do everything It now
does IL will gain in strength and Ia
cilities II will be relieved of tear ot
disaster II will have place where IL
can go and be- certain OF accommoda-
tion. IL can serve its customers and
its community better II will have
better clearing house facilities. IL
will be independent but not isolated
The small bank is now hampered in
many ways 1t is at the mercy OF its
reserve agents and city correspondents.
IL gets rediscounts or loans only as a
matter OF favor and it must repay ia
vors with favors II must let Wall
Street have it's surplus funds II must
defend on Wall Street to release these
funds when needed. Il has 70 pay
transportation charges on currency
shipments lt must pay exchange on
checks anG. drafts II must settle bal
ancec against il in cash and ship the
money. II must maintain cash reserves
often in excess of its actual needs. Ii
must be prepared for a panic IL has
no market for the securities II custom
arily accepts as collateral
IL its interest rates were lowered
somew hat by the stabilizng effect of a
fixed rediscount rate, it would have
more money to lend and the assurance
Of protection. II would have outside
capital at its disposal. 1t would never
have TO rejsct good loan because it
was loaned up The commercial
business of the community II serves
would never be halted because Of fear.
lack Of confidence or Limitation of its
facilities.
The small banker will Gave TO be
better banker. He will have TO dstin-
guish between commercial and invest
ment business tetwren the money he
accepts as a deposit payable on demand
and the money he accepts as savings
deposit payable at his option. on 80 or
60 days notice. The former he will
lend only on collateral susceptible OF
instant or speedy conversion into cash
The latter ne will lend for investment
purposes, for the capitalization Of new
enterprises.
The confusion Of these two forms ot
deposits is now common. If not custo
mary, and is the cause of imitation and
trouble Initiation results when invest
mcnt loans exceed current savings In
lation Is impossible when the bank Is
imply the Intermediary IN an cx-
change Of goods against goods In the |
former case currency or demand obi.
cations are issued against obligations
which are not collectihle on demand.
IN the latter the currency issued will
be returned quickly for cancellation or
the obligation quickly discharged by |
the completion ~ the process ot ex
change in which il originated
The small banker will have 10 distiu-
guish between these items He will I
want TO be always in position TO turn /
ms commercial paper into cash 20 be
able 10 apply 20 the Reserve Association I
for reliscount
Added 10 this will be- the small bank.
er's ability to accept drafts for custo.
mers- Acceptances will be superior TO
notes \ banks acceptance
will give a market for paper that \
would I've refused IL signed only by an
unknown meruaant.
AT the present time banks frequently \
have on hand large amounts OF enrplus
cash partly because their OILY certainly
available reserves are their cash hold \