Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-04-11

S0PAS0 USiOll6kAB CA0S0
where but placed at their disposal
temporarily by of the countrys
tnterlocked banking system, have
made similar complaints, all due to
O want of understanding Of. funda-
mental banking principles-to q mis-
taken idea that banking institutions
car be organized to create credit and
that credit AN be made to take the
place Of capital to almost any desired
extent. The whole conception is err
roneous and every attempt to put it
into effect results in trouble.
Difference Between Fixed Capital and
Liquid Capital.
There is difference between the
credit to which a man Is entitled on
the strength of owning a farm or q
block Of buildings and that to which
he IL e0titled on the strength Of own
ing grain or another commodity ready
for market. and whenever these two
classes Of credit are confused trouble
is likely to ensue. Credit Of the first
class is a slow credit; the property
may be good, but possibly cannot be
converted into money at any definite
time. The second class of credit
usually can be promptly converted
and therefore is the only kind suitable
as security Of advances by a bank
"N>A NSSP ~ "a POo4SA01A W
pay depositors on demand. 1t must
be always remembered that the first
duty of a banker is to pay his deposit
tors when they a. their money. The
borrower ought to understand that the
bankers first duty is to the depositor:
The banker is a middleman, between
the depositor and borrower. The lat
ter a a right to the funds for the
length of time agreed upon when he
executes his note. and for not a day
longer if the depositor then wants
them. The banking business is based
upon this principle. Deposits are oh
tanned upon this understanding. De-
posts are the basis Of modern bank
ing; without deposits the whole bank
ing service would disappear. and If
depositors could not count on getting
their money when they wanted it de-
posts would not be forthcoming. It
is of interest to the borrowing public,
therefore. that there be a clear un-
derstanding upon this point.
The North Dakota Bond Issue.
After the foregoing extracts from
Mr.. Langer's book it should not be
necessary to say much in explanation
: Of why North Dakota bonds have not
found a ready market. An issue OF
$~6,200,000 was advertised, bids to be
opened on December Is, 1920. 1t is
reported hat there were no bids
The amount is not SO large that the
} look to Wall Street or the Money
J Power in the sense in which that term
is commonly used. There are hun.
dreds of 0nd houses over the country
J able to handle an issue like that, If Il
is Of a kind that appeals to the aver
age investor. To suppose hat there
was a general conspiracy to defeat
this sale is ridiculous.
A representative Of the State gov
eminent came to New York City to
} sell the bonds. He was courteosuly
received, given information and advice
about possible buyers, in good faith;
He spent some days in this city, wen,
! to Boston and probably other Eastern
! cities. So far as We r advised no.
body here made any proposition tc
him based upon an abandonment Of
any part of the Nonpartisan League
! program. The fact is that the partie.
concerned seem to enormously exag
gerate the interest Of the outside pub
! lie in that program State ownership
and operation of industries have beef
tried before and few people believe
that North Dakota is going to revers<
all past experience. AS a rule it i
safe to say that the people who do no
believe in the practicability of stat
operations in industry would rathe
see the North Dakota undertakings 6,
through to a full trial than have then
break down at this stage. The peopl'
of North Dakota certainly have
right to make the proposed expert
ments if they want to, but the right o
an investor to make his own choic
between North Dakota bonds an
South Dakota bonds. or some othe
investments, is likewise above ques
ton. The government of South Da
kota has a rural credits department
on land mortgages, and is selling it
state bonds for that purpose withou
any trouble.
The fundamental reason why tn
North Dakota bonds are not beini
readily sold, it that bankers are afrai
they cannot sell them. Investmen
bankers buy bonds in the capacity Q
merchants, to sell arain. They tr
to buy issues that they think will b
not think the news coming out o
North Dakota about the adminisera
ton of the State government, the ii
nancial policies of the State, the in
crease of taxation and the genera
~ state of politics in the State, as re
ported by Mr.. William LANCER an
others. is calculated to make a goo
market for the bonds.
Nobody doubts the s~olvency of tn
State of North Dakota, or the in
tegrity of the great pody IT it's citizen:
These bonds are said to have bee
passed upon by the Supreme Court Q
the State, and presumably are valic
but there is evidence that the affair
of the State are not being well man