The Washington times., 1928-02-10
BANK INTEREST
GUT URGED
By RICHARD HATTON

rates on bank deposits are discussed
by Charles e. Mitchell, president
of the National City Bank. New
York city. in the current issue OF
the American Bankers Association
Journal Mitchell. after outlining
former postwar conditions marking
up rates and then the subsequent
general decline in yields on securi-
ties In which bank funds are in
vested, says in part:
II see no reason for thinking the
movement has come to an end. On
the other hand. operating expenses
Of the banking business, in which
salaries and taxes are the leading
items. have not been declining and
are not likely to do so. While it is
unpleasant to think Of disturbing
relations with depositors. it is even
more so to think of reducing the
pay Of the bank staff, and otfGr
expenses are largely beyond con
troll. 1t is evident. however. that
normal equilibrium must be main
tanned between income and outgo, If
on a sound basis.
Matter OF Interest.
banking income is chiefly in the
form Of interest. and the largest
item Of banking outgo consists Of
interests on deposits. The banking
business lives mainly upon the
margin between interest received
and interest paid and the relation
between the two is of vital impor-
lance.
Bank deposits on time and at
interest are to depositors virtually
q class of investments OF low
rate, convertible into cash upon
comparatively short notice, the bank
assuming responsibility for their
profitable employment. The banker
prefers to employ these deposits
at short time, but he is influenced
by the rates obtainable. The banks
are directly interested in security
yields, first because 80 per cent
of their funds are invested in Sc
curities, and second, If security
yields decline current rates will
tend to decline also.
Current interest rates on de-
posits should be based on current
bank earnings, not on past profits.
1t is not sound policy to dissipate
such profits by running the bank
upon a scale Of expenditures which
is unwarranted by returns upon
present values.
Must Have Safe Margin.
IT am not Directing to savings
deposits or the practice of invest
inc fIao111 fv1 cnoa.Y-ffiac H.. :, lie
professionally render a public SER
vice of great Importance in re-
ceiying such deposits and invest
ing them in high-class securities.
but ana urging the Importance
OF keeping the business on sound
and liquid basis, not only with due
regard for the interests Of de-
positors. but because the entire
banking situation is involved. A
bank must have a safe margin
upon which to operate--ai margin
sufficient to cover expenses, risks
and something for compensation
and any business which cannot be
had on this basis should be consid-
cred as undesirable to the banker.
with a declining tendency appar-
ent in the interest return, both
upon short and long term employ
nfent-that is, upon current as well
as investment wealth-is there logic
in the maintenance of existing in
terest rates paid by American
bankers on current, time and
savings accounts? In view Of the
competitive banking situation in
various cities and between various
sections, hesitation to be first in
making reductions is likely to delay
action, but il the argument is sound
we may expect the characteristic
courage of our bankers to manifest
itself in clearing house action here
and there, with general movement
following. Because it is right there
is good reason to believe that such
a movement will not offend the
depositing public, which demands
above all else conservative bank
ing"
The regular monthly bulletin of
the District of Columbia Bankers
Association was distributed yester-
day afternoon. The issue contains
number of items of especial in
terest in local banking and financial
quarters, including a list of the
committee chairmen and vice chair
men chosen for the tenth annual
convention and some interesting
figures on the 1928 Christmas
savings clubs.
The New York and Washington
Stock exchanges will be closed on
Monday. February 10, Lincoln's