Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1916-03-09
O|sPR0VE PAIRING CHECKS
Country Bankers Support Old
System of Collections.
Interest In subject Has Grown since
Passage Of Act, which Attempts to
Make Country Accounts Pay for
collection.

In a recent letter TO the Philadelphia
Public Ledger. Mcl.ane Titon, Jr., of Pell
city, Ala, secretary and treasurer OF
the Alabama Bankers association. con-
siders the collection of checks at par, or
PAIRING Of checks" as the phrase goes.
subject whose interest to bankers has
grown steadily ever since the passage of
the federal reserve act. Country bankers
in particular are interested and for the
most part they are dissatisfied. appar-
emily, with attempts to make country ac-
counts bear the cost OF collection on
business done with financial centers by
check.
The complaint OF country banks as 20
par collections refers to checks drawn
on themselves by their own customers
and received by them from other banks
for remittance in par exchange.
1t has been suggested that the fault
may rest with the local customer in fall
ing to buy exchange with which to set
tie his outside obligations. This point is
not we'll made. though it has been stead-
ly urged by large banks in collection
centers. especially those who charge ex
change on outside collections to their own
The value Of a bank account would he
almost destroyed in the country IL coun-
try business men were required to call
at their bank to buy exchange. If you
realized the number Of checks the aver
age small bank handles each day, you
would realize that the entire time Of an
extra man or more would ne required IN
sell the required number Of such bank
| checks.
| Another suggestion is that the city
merchant could stop the matter by de-
| clning to take country checks at par
He is not likely TO do it. because the net
| cost to him is small in the first place
he would lose a good customer in the
second. and for a third reason it is
reasonable to believe that the price
charge carries this load
BANKS GLAD TO GET CHECKS.
Relatively only few cities maintain a
clearing house rule" whereby members
Of the clearing house are compelled &c
charge for collections. have no figures
at my disposal. but such cities would
not equal 10 per cent. of the banking
towns OF the United States. In Alabama
for instance, 7 know of none who dc
/
par checks on all points for collection
without charge when received for deposit
from customers
The matter. in it's final analysis, rests
upon the simple principle OF balance o
trade 7 charge other banks for checks
received from them. They charge me
If Birmingham handles more checks OF
pell City than Pell City does on Rirming
ham. our exchange shows a profit Biz
mingham shows a loss.
It is a well-known fact that each Stat
has certain larger cities that handle thu
bulk of collections on country banks. Fo
instance. Birmingham performs this serv
ice for north and central Alabama, anr
banks there make these collections OF
all the small banking points in th
territory. II. therefore, follows that ex
change is against Birmingham and /,
favor OF each of these small towns, s.
birmingham pays the country banks.
So the proposal OF the federal reserv
board. acting under very vague sec
ton Of tho act to par checks betweel
members" simply relives Birmingham o
> his item of expense and denies to coun
try banks the item Of profit. The sam
observation holds good against all collec
ton centers. I contend and other coun
try bankers with me. that:
First. Banks of the largest cities ar
already making sufficient profit with
out their net gain being augmented a
the expense of the country.
! Second. The denial of this source o
revenue to country banks will have YER
unhappy consequences. 1t may be safe
~ stated that exchange earnings furnis
on an average OF al least 30 per cent
Of the country banks net profit,
Third. That the country banks ne
profit is too small TO stand this loss o
income. In the sixth federal re
serve district. Atlanta. my information i
that the average net profit Of bank
with capital less than $1,000 was les
than 6ia per cent. Banks with thi
capital or less comprise two-thirds OF tn
entire number of banks. both state an
national in all districts and | ventur
to say in none of them could dccen
dividends ne paid without profits fror
exchange.
THE QUESTION OF PROFIT.
Fourth If collections are unprofita bis
why do these large city banks accel
them" They fight for the bushes.
They advertise for it extensively. fo
ask why" The answer is because the
, gain other advantages in two ways: y
, deposits from banks outside their ow
state; by facilities gained in getting thel
own outside items handled cheaply.
Fifth. These large collection banks ei
JOY further source of profit by gainn
balances from country banks in thei
own sections The more checks a BIZ
mnsham bank handles on us the large
our daily balance with them is. We kee
il SO to make better terms on collection
: between us
SIXTH. Why do We keep balances, "a
in Birmingham? There is another rea
; son other than stated in No above
It is our secondary reserve, No ban
can get along with minimum reserve !
its vaults. This talk OF release Of re
serves is deluson so far as countr
banks are concerned The reduction !
reserve requirements helped only tn
large banks. In the country We genera
~ have to keep full legal reserve in on
own vaults, with more cash Instant
available from nearby bank higce
than ourselves. to meet large and III
, expected demands. To illustrate. m
. own bank here this very morning. hcfor
, 10 O'Clock, paid out in cash a sum /
excess Of its reserve, and there are fe'
, OF the little chaps that do not so throuS
, a like experience for payrolls or CON
, modify drafts every week of their exist
+ ence, OF come very near donG so.
q You ask II this is not difficult ques