Nogales international., 1931-03-07

winch the pub
, lie has a part
NJ T. . ! i1A ''A''>' to play as well
as bankers and government officers
who supervise the banks.
In the first place, the assets of a
bank, outside it's government bonds,
consist mainly of loans to business
men and of investments in securi-
ties created by corporate enter.
prises. The deposits of bank are
not kept in the vaults as idle cash
but are employed in these loans and
investments to earn the money to
pay the expenses of the bank so
that it can render services to it's
customers and also pay them inter-
est on such deposits as bear inter-
est. If there were no such thing as
unsound business men or enter
prises there would be no such thing
as unsound assets in a bank.
1t is of course the unquestioned
duty of the banker to choose only
sound loans and investments, but
the difficulty of such judgment, and
human judgment is never infallible,
is plainly increased in such times
and" under such conditions as we
have been passing through, with
many businesses not making expect.
ed earnings and therefore hampered
in meeting their obligations. Unfor-
tunately some investments and
loans created by persons outside the
banks which found their way into
the banks in relatively few in
stances have reflected the unwise
business policies and conditions
that became more than usually
prevalent in our business activities
and contributed to the difficulty of
banking. The vast bulk of bank
assets, however, are 100 per cent
sound above all question.
lizard Boiled" VS.. Easy Banker
In another aspect the people of the
community have part to play in
maintaining the soundness of their
banks, and that is through the me-
dunn of patronage. The existence
of bank is dependent on public
patronage. If only those banks were
patronized in which the most care
full policies were practiced and the
most conscientious and able men in
charge, it would go far toward main
tanning the standards of banking. If
business men in community wnen
refused loans by their banks for
good and sufficient reasons because
conditions are not favorable, there
upon withdraw their business to
banks where less careful methods
prevail, they clearly contribute to
the creation of less sound banking.
Also if, in the heat of competition,
! banker offers higher interest rates
or more free service to attract Gus
toners than the earnings of con-
servative banking justify, and is en-
couraged by the patronage OF the
public as against a more conserva-
tive bank, obviously the public is
again playing q part in bringing
about a less sound banking situa-
ton. It is an unfortunate fact that
the banker who is strict, hard
boiled" if you please, is liable to De
less popular than the "easy" banker,
and by that same token the public
itself has a voice in influencing the
character of banking.
Still again the public can exert an
influence in shaping the character
Of banking by supporting the pur-
poses of bankers to maintain lntelll'
gent, independent, honest banking
supervision by the public banking
departments through insisting that
this function of government shall
be kept as free from political influ-
snce as the judiciary itself and shall
be manned only by men of the high
est ability and character.
In still another way can the peo'
pie themselves contribute to main.
tanning the ability Of their banks to
meet their obligations, and this is
by granting them the fullest pos
sible confidence. AS l said, the de-
posits are not kept as cash but are
invested in loans and securities.
Even the soUndest assets of this
type require some time to recon
vert at full value into cash deposits.
In many cases Of bank troubles the
only thing wrong with a bank was
an unduly suspicious and apprehen-
sive state of mind in it's customers
created by no act or condition of its
own but by baseless rumors which
sometimes led them to destroy the
value of their own deposits by de-
manding them Immediately, forcing
a bank to sacrifice it's assets and
otherwise disrupt it's operations.