The Birmingham age-herald., 1915-05-13
HARDING POINTS OUT TO STATE BANKS
 ADVANTAGES OF NEW FEDERAL SYSTEM

for it to be taxed with the cost of trans- fer of funds from the buyer to the seller, than for it to pay freight upon the goods purchased The banker in the smaller towns naturally looks with favor upon this method of settlement. as he eSacts his ex- change charge from the bank from which he receives the check. and his bank has enjoyed an increased deposit during the time the check has been outstanding. Many abuses have crept in, however, and 1t frequently happens, particularly where the drawer knows that his check Will be
 outstanding four or five days. that he VIII
 forward it before he actually has funds
 in bank to meet it. relying upon his ability
 to make the account good by the time the
 check is returned for payment.
 Frequently Saves Interest Charge
 'tThe merchant in the small town. there
 fore, prefers to continue this method of
 settlement. as it frequently saves him an
 interest charge Ii often happens also
 that in ases where the bank in the larger
 city makes a charge against it's depositor
 more than ample to cover actual cost or collecting country check. that 1t seeks to retain all or a part of this as net profit, and is frequently enabled to do so by taking advantage of competitive condi- tions in an intermediate town where 1t has a reciprocal account, so that the ex- pense is in many cases borne by bank in some local center which is willing to take business at a loss to prevent a com
 pettor from getting 1t. The ideal ar rangement which the bank in the small town, or the real country bank. likes to | make, and one which 1t is frequently able to make, is to charge it's correspondent bank located in financial center of its own state. exchange at the rate of 20 cents per hundred on all checks received for | t1x< lima ale 1.j fl Q through the same correspondent all cheeks payable outside of it's own town without any expense whatever.
 l 'I believe however, that arrangements of this kind are becoming harder tc make, and that the greater part of ex. change charges now being made in this country are borne by the sellers of goods
 It may be that their profits are .sufficien
 to admit of their bearing this expense, ant l I have always been impressed with thu 1 logic of contention made by countr, merchant when l was bank clerk in Tus caloosa more than 30 years ago. It seem that on one occasion he sent his owl check on the local bank to a New Or leans merchant in payment of some sugar instead of following what was then tn l prevailing custom of going to the banl l and buying it's draft on New Orleans
 Il This check was deposited in a New Or leans bank, who sent it for collection t
 the rival bank in Tuscaloosa, so that tn
 bank on which the check was drawn mad
 no profit out of the transaction
 q '"rhe cashier asked this merchant wha
 he meant by sending his local check a far away as New Orleans, and suggeste that he come in as usual and buy ban draft The merchant replied that when ever the New Orleans merchants wonl pay the freight on their goods shppe , to him that he would be willing to pay tn , freight on their money.
 Sellers of goods all over the countr have for several years past been payin freight on the money paid them for the 2 goods. and the volume of local checks tha are transmitted in the mails every da
 now reaches enormous proportions-cel : taly $2O0. .0O0000 would not be a high est mate When the federal reserve act WE l being debated in Congress, represents : tives of those who have been paying e, l change charges on checks send them : payment of goods sold, exerted their il : fluence in favor of free check collection : and shortly afterward representatives l more than 10000 country banks went e Washington and appeared before the con t mittee having the bill in charge and el e tered a vigorous protest against being d e prived of what they regarded as legit :. mate profit. The result was that tn n paragraph was included in section 16