[Volume XXV
24
THE CHICAGO BANKER
			
The Audit Company of Illinois 1137 First National Bank Building, Chicago Specialists in Auditing and System־־ atiElngf Public Service Corporations C. W. KNISELY, C. P. A. President—Manager REFERENCES; Leading Bond Houses dealing in Gas, Electric and Railway Securities			Marshall & Ilsley Bank Milwaukee, Wis. ESTABLISHED 1847 Capital $500,000 Surplus $250,000 Oldest Bank in the Northwest Conservative Progressive We take pleasure in placing our facilities at your disposal and should be pleased to have you write us if you are contemplating opening either an active or a reserve account in Milwaukee. OFFICERS AND DIRECTORS JAMES K. ILSLEY, President JOHN CAMPBELL, Vice-President HARRY J. PAINE, Asst. Cashier JOHN H. PUELICHER, Cashier G. A. REUSS, Mgr. South Side Branch SAMUEL H. MARSHALL J. H. TWEEDY, Jr. ROBERT N. McMYNN C. C. YAWKEY GUSTAV REUSS
			
stock. Elect a board of directors by territorial districts so that every section of the country would be represented by a director of its own choosing; it is a practical certainty that at least the two leading political parties would also find representation on the board. By reason of its intimate relations to the Treasury, and its great public importance, I think the Government should be represented upon the board by the principal officers of the Treasury Department. The details of the management should be in the hands of officers elected by the directors. I think that the profits of the bank should be divided between the shareholders and the Treasury, on a plan similar to that of the Imperial Bank of Germany. The bank should certainly pay a fair return on its capital but its primary purpose would not be to make money, but to safeguard the general banking and business situation.
This is a rough plan for an organization with a variety of interests that will naturally keep check on each other. You don’t want to give the money lending power to a department of the government; nor do you want to put the money-issuing power wholly in the hands of a private corporation. But "here is a plan for private ownership, widely distributed among bankers, who would be interested in all sections of the country, with first class banking ability in the management and supervision by public officials of the highest responsibility. The position of director would be one of dignity and honor, and, selected by the bankers of the country, there is every reason to believe that the board would be made up of capable and honorable men.
The prominence and importance of the institution would assure the constant scrutiny and criticism of the financial world. This institution in my judgment should do business only with its constituent members and the government. It should certainly not receive deposits or make loans except to or through its constituent banks. It should: devote its resources to supporting and supplementing the services of the local banks: in their communities. The banking business: with the public would be done as it is now, the local banks would be owned and managed as they are now, but back of each local bank would be the resources of this central institution. In this country now it is almost discreditable, a sign of weakness for one bank to borrow money of another.
In this country when a bank makes loan¡
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it expects to carry that paper until it is clue and so much of its resources are definitely tied up. We have practically all our liabilities payable on demand, and have three-quarters of our assets loaned out on time, and when an unusual demand for money comes,,as■it did last fall, there is nothing we can do but wait for our loans to fall due, and then if; there is any general movement on the part of the banks to press collections, they create conditions which render collections . impossible. Abroad the local banks do not expect to carry their loans to maturity, unlesstife,is ׳;convenient for them to do so. If theyjwant to reduce their loans,• or increase; their/ !bans to their patrons or want to increase;their cash, they ]!ass some of their ■ paper Yip to the central bank and realize on it, and the ability to do this gives a fluidity to their assets which ours do not possess. Just now all our thoughts in this country are fixed on relief for emergencies, but if we had a central bank its services would be available, not only in emergencies but whenever and wherever for any reason the demands of a locality for the time being overtaxed the resources of the local institutions. It would take the sharp edges off the money market, it would tend to equalize interest rates, and accommodations over the different seasons of the year and to some extent over the different sections of the country.
But someone may ask how this institution, without deposits, can have the resources to meet the possible demands of a country like the United States. The answer is by its power of note issue.
But someone may ask, what is to prevent the lending power of this bank from being exhausted in good times, by the demands of a country like the United States, where the call for money is almost unlimited? The answer is, first, that this bank, without depositors, would be under none of the obligations to depositors which embarrass the rest of us in the management of our loans; .ad, the bank is not to be run with a view to the largest profits; and finally, the demand for loans can be controlled by the interest rate. The central banks elsewhere meet the tendency to draw on them too freely, not by refusal to lend at all, but by raising the interest rate. There should always be money to loan to good borrowers, at some price, but in order that this may be so there should be a repressing influence somewhere before it is too late. That repressive influence is supplied by the central bank.