The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1928-10-04
BANKS ADVISED
WHERE To
INVEST
BY HARRY GUSACK
Financial Editor


Closer scrutiny of investments by
banks in smaller communities where
bankers have little opportunity to
study available investments was
urged by Comptroller Of the Cur
rency J. w. Mcintosh yesterday In
an address before the American
Bankers Association in annual con-
vention at Philadelphia.
Mr.. Mcintosh said that these
banks should consult more freely
with their city correspondents who
have the opportunity to know the
preferred securities, and who, ne
declared, are anxious to extend the
use of their information to smaller
institutions.
IT is through no fault Of the
smaller bankers that they have
bought securities which prove later
to unliquid assets, though offering
q high yield, according to Mr.. Nc
1ntosh. He believed they were cog
infant of the duty they owe to their
community in the matter of credit
and were, therefore, too occupied
with the local problems to have
made the proper examination of in
YeStmGnJS OIISrGQ Ln6u1s
The result, then, he added, was
that while the directors Of bank
were discussing a $500 loan for local
use, a '.high-preSsure bond salesman
sells the cashier $4,000" in securi-
ties that can not be moved when
the bank needs to convert them into
cash. The offer of high yield, he
said, too many times had caused the
L. =
greater income.
Urged Safety
He urged bankers to consider
safety and liquidity in their invest
ments, rather than high yield. Most
country banks" he said have SUI
fered loss through unwise loans and
many have been brought to hquida-
ton for this reason. In the eager
ness to secure yield, the safety OF
principal is forgotten or neglected
and the results have been DISASTROUS.
The same kind of thing has begun,
this time with securities as the asset.
which is causing the trouble.
Far too many bankers when they
buy bonds are buying yield and are
paying little attention toN safety or
1iquidity, and a few losses of the
principal of securities which default
n the course of year will not only
wipe out the extra interest, but are
likely to turn net income into a
loss. This has occurred In a number
OF cases which have come to my at
tention.''
In urging the extension of security
selling by banks, Mr.. Mcintosh said:
THE country banks of moderate
size which has built up a sub
stantiaI security business can OBJ
tain wholesale prices from the dis
tributing syndicates. The smaller
bank can frequently make arrange
ments to sell off Of the list Of its
correspondent city bank or some
high grade investment house sub
ject of course to confirmation. The
profit, naturally, is smaller, but the
country bank by so doing ties up
none of its funds and assumes none
OF the risk. Here is field OF
operation which yields a profit to a
bank, provided, and this provision
is most important, it sticks to
sound lines.
Community Service
Country banks owe real service
and duty to their community in
seeing that the funds Of the COM
munity go into safe investments.
The same houses whose statesmen
are forcing the banks into buying
poor securities are selling the same
securities to the people in the COM
munity which the bank serves. The
outcome is often the loss of per-
sonaI fortunes on the part of the
individual and loss of finance to
the community from which the bank
must inevitably suffer, as well as
the loss to the bank of the profit
which it might have made by sell
ing good securities itself to Its
clients"