The Hardin tribune-herald. [volume] (Hardin, Mont.) 1925-1973, 1940-06-20
FIRST PRIZE
WINNING ESSAY.
BANKERS
ASSOCIATION 1910
SSA CONTEST

ing Questions Answered."
l. What determines the inter-
est rate a bank pays on time
deposits, and why does this rate
change from time to time?
2. From what source does a
bank derive its income?
3. What are some of the
principal items of expense a
bank has to pay, including the
different types of taxes which
it must pay?
4. What is meant by an "Ac-
tivity Charge" on a checking
account?
5. What are some of the adj
vantageS of having a checking
account in a bank?
6. What are the benefits af-
forded a bank depositor by the
! federal Deposit Insurance Cor
poration, and what does it cost
a bank to be a member of this
corporation?
The following essay, awarded
first prize $4,000 and a trip
with all expenses paid to the
Montana Bankers Association
convention at Many Glaciers
hotel June 1913 was written
by Arthur Crosmer, Roundup
high school, sophomore class,
Roundup, Montana.
Some Perplexing Banking
Questions Answered"
"a bank is a private enter
prise. Like any other business
concern a bank must operate
at a profit in order to continue
serving the public successfully.
Without banks we could not
carry on the large industrial af-
! fairs of this twentieth century.
It is not big business alone,
however, that is served by. the
banks. They are equally con-
cerned with f%urthering the fl
nancial interests of the small
depoSitors, who after all, con-
stitute the greater part of the
public. Since the commodity in
which the bank deals is money,
the deposits of its customers are
of the greatest Importance.
There are two general types
of bank deposits. time and de-
mand. The purpose of time de-
posts is to put away money for
use some time in the future and
to permit it to draw interest.
The rate of interest on time de-
posts depends upon the rate
which the banks can secure on
safe loans and other invest
ments. Twenty years ago banks
paid as much as six per cent
on time deposits because they
could invest money safely for
as much as ten per cent. This
rate has decreased considerably
so that now the average rate
of interest on safe loans is six
per cent, and some investments
pay as low as one-half of one
per cent. This makes it necess-
airy for banks to reduce the rate
OF interest which they pay on
time deposits to from one to
three per cent. Some banks
limit the amount of savings on
which they will pay interest to
a single depositor in order that
they may be able to pay a high
er rate to the small depoSitor.
This regulation operates to the
advantage of young people and
others whose savings are nee
essarily small.
"A banks chief source of in
come is interest on loans and
investments. Much of the mon
ey which the bank has on de-
| post is loaned out for a GER
tain time at a certain rate of
interest. The banker must take
every precaution to make only
safe loans, however, and he
must have at least ten per cent
of the banks deposits either in
cash or deposited in other
banks. Other sources of a banks
income are commissions for
handling insurance, real estate,
and stocks and bonds; safety
deposit box rentals, rentals for
office space, exchange, float
charges, service and activity
charges, and the like.
There are many expenses
connected with the operation
of a bank. Salaries of officers
and employees are the greatest
single item. Directors fees, al
though of minor Importance,
must be considered. An EXAM
ination must be made of the
banks financial condition at
regular intervals, and the bank
must pay for this service. Other
items of expense are insurance
(burglary, fire and liability,
legal fees, advertising, travel
ing expense, printing, postage,
stationery, depreciation on Of
flee equipment and furniture,
dues to banking associations,
subscriptions to magazines and
papers, telephone and telegraph
fees, and light, heat, and water
charges. The bank does not
usually keep all of its own Sc
curities but stores part of them
with other banks, and this Is
another expense.
I'm considering the expenses
1 -