New-York tribune., 1922-08-06
wants Banking information

0uesttou~What can vo,. fan ,, .n.
ers for tha C.,ni,sys CS9,mp,snys who are underwrit-
,s.s rns iaster is said 20 be a commercial hanls
vaar. Ssry ereditabie past OF some three
inSs h.nL ease distinguish between saw
ard ~ ~oahk national bank. trust company
& sha commercial bank Has q "eom,nnr
az nahk ever failed. and is IL generally
az safe as any of the otheras fs II raai}S
ereaper for business man "a horra,ys
Ittcn' rt' a commercial than national banS >
We oeen told that 1t costs him more than
correctly informed? Have any hlocks :
@ osnk stock been put on the rnarset re-
gasaS, gssry because of policy OF the Federal
.rssTVe Bank TO boycott banks which have
sweoShhoIaers w with more than l. 600 shares
, mas the cause law. or was I misin-
The n,,.c,. ouia you personally approve
ration stock?-C. II. II. P'-
Answer.-The Colonial Finance Cor
poration is too new a venture to Justify
our recommending it as safe
investment regardless of what it's rec
ord may have been. Your letter indi-
Gates some misapprehension as to the
character of financial institutions. A
savings bank, as its name implies, is
designed to receive and safeguard the
savings of individuals, the bank nav
ing a small interest return, USUALLY 3
or per cent annually, on deposits and
making it's profits from the sliphtlv
higher return it can obtain through
use OF the accumulated funds. Ouer-
ations of these banks are strictly regu
lated under laws framed to give the
maximum safety. National banks. state
Banks and trust companies now do an
almost ldentica! business. The first,
havlng Federal charters, have a few
privileges which state institutions do
not ENJOY, but the scope of their oper-
aIiohS is usually more closely restrict
cd. Both national and state institu
tions are subject to periodic examine
tons and must conform to the bank
ing laws under which they are char
tered. The third classification that of
commercial bank, is not generic. Ma
tlonal banks or trust companies, doing
pr1nclpally commercial banking
business, are frequently so designated.
presumably what you refer to is the
rather numerous and varied class of
finance corporations created to aid
trade and industry through acceptinp
and dealing in bills. through operating
as a private bank. through transactinS
commercial paper business, or other
wise. These are subjected to varying
degrees of regulation, according to
'helr KIND ana are, generally speaking,
not nearly so safe" as the other
classes of institutions you mention.
They have been known to fail Nor
mally, there should be little, if any, dis
terence between the rate national
bank charges a business man and what
hnance corporation, if operated on
sound lines, charges. So many ele-
ments enter into the determination of
rate for particular loan-as the bor-
rower's credit standing, the security he
has to offer, etc.-that variations are in
evitable. but the average asked by ma
tlonal banks of their customers TODAY
Is well below 6 per cent, according to
our understanding. There have been
no blocks of bank stock put on the
market for the reasons you mention. so
tar as We know. Such sale would not
be forced by any policy of the Federal
Reserve Bank nor by any provision of
the law In conclusion, Your misin
formation is, in certain respects, SO
startlingly at variance with the facts
that we feel warranted in warning YOU
against its source.