White Bluffs spokesman. [volume] (White Bluffs, Wash.) 1907-1938, 1931-05-14

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R. C. STEPHENSON Vislon ol oahks.
In the first
place, the assets of bank, outside It's
government bonds, consist mainly of
loans to business men and of invest
ments in securities created by corpo-
rate enterprises. The deposits Of a
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 its
customers and also pay them interest
on such deposits as bear interest. If
there were no such thing as unsound
business men or enterprises there
would be no such thing as unsound
assets in bank.
1t is of course the unquestioned duty
Of the banker to choose only sound
loans and investments, but the diff
Guilty 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 expected earnings and there
fore hampered in meeting their obliga-
tions. Unfortunately some invest
ments and loans created by persons
outside the banks which found their
way into the banks in relatively few
instances have reflected the unwise
business policies and conditions that
became more than usually prevalent
in our business activities and contribu-
ted to the difficulty of banking. The
vast bulk of bank assets, however,
are 100 per cent sound above all ques-
ton.
lizard Boiled" VS.. easy" Banker
In another aspect the people of the
community have part to play in main
tanning the soundness of their banks,
and that is through the medium Of
patronage The existence of bank is
dependent on public patronage. II
only those banks were patronized in
which the most careful policies were
practiced and the most conscientious
and able men in charge, it would go
far toward maintaining the standards
of banking. II business men in COM
munity when refused loans by their
banks for good and sufficient reasons
because conditions are not favorable,
thereupon withdraw their business to
banks where less careful methods pre-
vail, they clearly contribute to the Gre
alton of less sound banking situation.
Also if, in the heat of competition,
a banker offers higher interest rates
or more free service to attract custom
ers than the earnings of conservative
banking justify, and is encouraged by
the patronage Of the public as against
more conservative bank, obviously
the public is again playing part in
bringing about less sound banking
situation. 1t is an unfortunate fact
that the banker who Is strict, hard
boiled" If you please is liable to be
less popular than the "easy" banker,
and by that same token the public it.
self has voice in influencing the char
acter of banking. Also it is the public
in the end which pays the main part
of the penalty IL unfortunate results
follow.
Still again the public can exert an
influence in shaping the character of
banking by supporting the purposes of
bankers to maintain intelligent, indie
pendent, honest banking supervision
by the public banking departments
through insisting that this function of
government shall be kept as free from
political influence as the Judiciary it.
self and shall be manned only by men
OF the highest ability and character.
In still another way can the people
themselves contribute to maintaining
the ability of their banks to meet their
obligations, and this Is by granting
them the fullest possible confidence.
AS | said the deposits are not kept az
cash but are invested in loans and Sc
curities. 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 bank was an
unduly suspicious and apprehensive
state of mind in Its 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 demanding them i'm
mediately, forcing a bank to sacrifice
Its assets and otherwise disrupt Up
financial operations,