18	THE CHICAGO BANKER	[Volume XXV
Banking Business in Des Moines
making a total of $5,000; $3,000 of this the bank loaned to the firm, for which these men were working, thereby making it possible for this firm to continue in business and furnish profitable employment to these same depositors, and the balance of $2,000 the bank kept on hand with which to meet the current demands of these fifty depositors. From the above I believe it is made clear that in addition to the depositor receiving interest upon his deposits, the banks also put into operation capital that would otherwise be idle.
Another advantage of the banks is the commercial business that is transacted through them. The method of paying bills by checks is now universally employed, and this besides being more convenient, also affords the man who pays an absolute receipt for the money paid, as the check will have to be endorsed by the person receiving it, and later returned to the person who issued it. During this last year in Des Moines alone, there was more than one hundred and seventy-five millions of dollars paid by check.
Another great advantage which the banks afford is the system now in use to transmit money from one place to another, commonly called exchange. Because of this system it is unnecessary for the general public to send the actual money from one place to another, but instead drafts are used which simply is a transfer of credits.
The most important business of a bank is the loaning of money. This part of the business is generally conducted by the president, vice-president, or cashier, assisted by the advice of a committee of the board of directors, known as the loan, or finance committee. When a bank loans its funds, it must be sure that the person, or firm, to whom this money is loaned, will be able to pay the obligation when it becomes due. The solvency of a bank does not depend so much upon the amount of assets, as the nature and gilt-edgedness of its assets. The cause of the flurry last fall was perhaps from a fear in the public mind that the Eastern banks had among their assets securities that were not gilt-edge. The banks, however, all over this country with but a very few exceptions demonstrated that the assets were good and soon turned them into money. One of the first questions asked by a banker concerning a prospective borrower, is as to his honesty. Integrity is a necessary and valuable asset in any line of business. Then the habits of the borrower are looked into. The banker must know whether or not the borrower is thrifty, prudent, and industrious. Gilbert says “that bankers perform the functions of public conservators of the commercial virtues, by speaking well of the man who regards his obligations enough to look after it at the time he should. From motives of private interest the banker encourages the industrious, the prudent, the punctual, and the honest; while they discountenance the spendthrift and the gambler, the liar, and the knave. They hold out inducements to uprightness, which are not disregarded by even the most abandoned. There is many a man who would be deterred from dishonesty by the frown of a banker, though he might care but little for .the admonition of a bishop. Thus it will be seen that the banks have a moral influence.
Every child should be taught the value of money, and the advantages of banking connections. If a child is given the opportunity to save and come in contact w׳ith the banker, that influence will much more than offset the influence of all the spendthrifts with whom such child may come in contact. It is much easier to make a child believe that it is manly
By A. O. Hauge, Cashier Iowa Trust and Savings Bank, Des Moines
cial system. To very many our banking system seems the best in the world, while others denounce bond security for our circulation as vicious, rigid, and unresponsive in times when elasticity is most desired. The theory of basing a more elastic currency on the general assets of the banks, imposing on such currency a graduated tax so as to force its redemption, is fast gaining favor among the best financiers of the land. Some are advocating federal and state insurance of bank deposits, such as is now in vogue in Oklahoma.
The stronghold of our financial system is its actual gold, and our laws making gold the standard. The total gold in the world is about six billion dollars, and of this the United States has more than one-fifth, or about one and one-half billion dollars. Stability is a virtue in finance and the gold as a standard makes our system stable.
The laws governing the different kinds of financial institutions enumerated above do not differ very materially. The national banks are not allowed to loan any funds on real estate security while other banks have this privilege. Private banks have very largely, heretofore, escaped any supervision by the states, but of later years the different states have passed laws bringing private banks under state supervision. We have no such supervision in Iowa as yet.
The amount of capital invested in banks in the United States is more than seven hundred and fifty millions of dollars, while France is a close second with $700,000,000, Russia is third with about $500,000,000, while the United Kingdom is fourth with a little more than $350,000,000, or not quite one-half as much as the United States.
Many people fail to realize the advantages 'of a bank and the relation our banking system bears to the commercial interest of our nation. In the first place a bank is the safest place one has to keep one’s money or valuables, for the reason that a bank, more than any other organization, is prepared to and makes a business of keeping money and valuables safe from the robbers who are always looking for loot. If it should become generally known that individuals were keeping large sums of money about their homes, robbery and thieving would become so frequent that our department of public safety would have to double its police and detective forces. This mission of the banks to keep safely the savings of our people is greatly appreciated and taken advantage of by the people of our states.
At the same time that banks keep and guard the savings of the people they also allow the savers a fair rate of interest upon their savings. The banks in turn reloan a part of these savings to persons or firms upon approved notes and securities at a larger rate of interest than they themselves pay the depositors thereby deriving a profit, and help keep the wheels of industry rolling. As an example of this I might cite a firm in a smaller town in which I once lived, that employed fifty men. The firm had invested in plant and necessary real estate $25,000, but in addition to the $25,-000, so invested, they needed S3.000 in cash as a working capital for pay-rolls, etc. This sum they had to borrow and if they could not borrow this amount it would have been impossible for the firm to have continued in business. The fifty men employed by this firm we will say had saved and deposited in their local bank on interest an average of $100 each,
The business of banking is so old “that the memory of man runneth not to the contrary.” It is claimed by our best authorities that as early as the year 2500 B. C., banks were in existence, and in a crude way served the needs of the people. In a museum at St. Petersburg, is now to be found a bank bill which bears upon its face the name and location of the bank of issue and the }־ear, (1399 B. C.), in which it was issued. In a museum in New York is to be found “a table of banking transactions” that were in use 600 years B. C.
It is claimed upon good authority, that the Jews were the first people to use money as a medium of exchange. One authority contends that the tables upon which the Jews exchanged their money were called Bancoe, (meaning bench), and that this word Bancoe was the origin of the word bank.
Some Early Banks
The Bank of Venice was founded in 1171, and is the first institution of which there is any reliable record. The Bank of Venice flourished for more than six hundred years, when it fell, as did Venice, before Napoleon.
The Bank of England was established during the reign of William and Mary, in 1694. Its first charter was for a period of twelve years, and it was capitalized at $5,800,000. The Bank of England celebrated its 214th anniversary on the 27th day of last July, and is conceded to be the hub of the financial interests of the world. This bank is now capitalized at eighty millions of dollars. It transacts all the financial affairs of the kingdom. First American Bank
The Bank of North America was the first authorized bank organized in America. Its capital stock was $300,000, and it was organized in 1781.	1791 the Bank of the United
States was incorporated to continue for a period of twenty years with a capital stock of $10,000,000. Of this, one-fifth was furnished by the government. It was the idea of Alexander Hamilton, (who was the prime organizer) and his colleagues, that the Bank of the United States should be to our country what the Bank of England is to England. When its charter expired, it was not renewed. In 1816 another Bank of the United States was organized, and at the expiration of its charter the Congress of the United States refused to renew the same. It seems that a central institution with federal patronage, such as the Hon. Geo. E. Roberts advocates, is a political impossibility in our country, and when one stops to consider that if a bank, such as the one organized by Alexander Hamilton, was to be organized at the present time (having a relatively large capital stock) it would have to be capitalized at about $1,000,000,000; and the result of placing this power into the hands of a few men, one does not wonder at the attitude of President Jackson toward this kind of an institution. Blaine in his “Twenty Years in Congress” says that President Jackson realized that such an institution growing with the growth of the nation, would surely tend to corruption, while its unlimited power might be directed to interfere with the independence of Congress.
We have at present national, state, savings and private banks, and trust companies, that are meeting, and have met the needs of the country in a very satisfactory manner. True it is, that in times of stress, our present financial system is not concentrated enough, and the working out of a solution of this phase of our financial system is now awaiting the best brains of our land. One can easily see how opinions differ in regard to our finan-