THE CHICAGO ЪА^К.Е'К
Founded in 1898
Number !7
CHICAGO, OCTOBER 24, 1908
Volume xxv

The Imminence of the Postal Savings Bank
$200 to a farmer who has his land clear, and nothing whatever to the unfortunate individual who owns no land. He furthermore told me that the interest rate runs from 8 per cent to 25 per cent, with the majority of the loans running at the higher figure, and very few at the cheap(?) rate named. I traveled from Saskatoon to Regina, a distance of 160 miles through a beautiful and fertile country with towns at appropriate distances all along, but so far as I could see in passing through the towns there were but one or two banks in the entire distance. An American bank, or more probably two of them as we would have in this country, situated in each of those towns, would make that country to blossom as a rose. As it is, Canada suffers, her business men are cramped for funds, and her farmers denied the assistance to which they are reasonably entitled in the holding and marketing of their crops. I cite all this in the way of comparison that we may better appreciate that which we have here. Here, each community finds nearly, or quite enough funds locally to provide the needs of the home people, with the result that each separate village is well taken care of, and in many a hamlet in my state, money is as plentiful in proportion, and rates fully as low as prevail in the city of New York.
It is one of the axioms of finance that plentiful and cheap money is the greatest supporting agency known in the maintenance of prices and the development of industry, and this the American banking system affords in marvelous measure.
Into this system, with all its delicate adjustments of credit, the government proposes to invade. Departing from those democratic principles of non-interference in private industry, which is a corner stone in our constitutional structure, it is proposed that the United States government shall become an active bidder for deposits, and, having these funds, it must in time of very necessity make use of them through the agency of loans.
The bill now considered provides for the payment of quarterly interest at the rate of 2 per cent per annum. Considering the very great and unquestioned credit of the government with the power to levy taxes as a first lien against all property, this is a very liberal rate. Our banks pay from 3 per cent to 4 per cent—perhaps it would strike an average to say that banks pay 3 per cent for six months money and 4 per cent for year money. This estimate is high enough, since many banks pay but 2 per cent on deposits, and it will thus be seen that a bid of 2 per cent on three months money, paid by the United States government is pretty strong alongside of 3 per cent on six months paid by the banks. And yet the postmaster-general naively says:
“These postal savings banks will not compete in any way with our present banks.”
He thinks he is stating a fact, doubtless, but as well might a highwayman, emptying a repeating Colt at you say: “I am shootin these
An address delivered before the Wyoming Bankers Association by E. R. Gurney, Vice-President of the First National of Fremont, Nebraska :: ::
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their clientage. They are a part and parcel of the community, taking part in its upbuilding, and ofttimes sharing in its adversity. I impute to the banker no noble motives—I ask for him no personal consideration, and were he the only one affected by the proposed invasion of the government into the field of local finance this paper would not be presented to-day. The facts are, however, that the bank in America has had thrust upon it functions which are of the utmost importance to the business development of the nation. As the well in the desert is a reservoir into which the scattered waters may seep, and collectively minister to the wants of mankind, so does the American bank operate to gather up the idle and waste funds from the many nooks of a community and to afford the use of these gathered funds to the development of industry, of commerce, and of home building. Knowing something of the work of these banks, I might wish for a moment that I were not a banker, that no restraint of modesty might prevent a free expression as to the tremendous influence exerted by our twenty thousand banking institutions—but I must content myself with the assertion that probably no other one material force in the world to-day has been so potential in the upbuilding of a country as the independent banking system of America. A recent visit to the Canadian Northwest strengthened these convictions. There I- found a marvelously fertile country, yet one that is admittedly suffering for the lack of capital in its development. Nearly all the people there complain that this is the case (and it may be mentioned in passing that the postal advocates boast that the Dominion government has over $50,000,000 of the people's deposits tied up) but since the Canadian regulations do not allow any bank to start with less than $500,000 capital, the only banks in Canada are the great banks of the Eastern cities, each one with many branches, and each branch officered by a man who stands in the same relative position in the community as does the agent of a line elevator, or of a railway in this country. He is looking only for promotion to a larger town and he is no more interested in the local community than are the stockholders, all of whom live a thousand miles away. He curries favor with the management, by subserving their interests, rather than to minister to the needs of his local people. Competition is an unknown quantity, as all the banks are managed on the same principle, and any dissatisfied person can go to the other bank and receive exactly the same treatment he has been having at the first one. The manager of one of these branches in the Northwest informed me that they would loan only
The postal savings bank, that scheme which has been the dream of well meaning people with philanthropic tendencies for these many years, is about to become a reality.
This new departure in American finance, brought out by theorists in the belief that they were conferring a blessing upon the race, and quietly supported by the great body of the American people, who are inclined to applaud enthusiastically anything done by government, is about to be engrafted upon our financial system. Never asked for by the thriftless whom it is designed to teach thrift, nor by the Slavic or Latin races who are pictured as sending so much money home, all of which desire to support the helpless in foreign lands is to be eliminated under the new regime—never requested as a personal desire by one single individual of our nearly ninety millions, it is about to be enacted into law.
The bill, S. F. 6484, was read twice and reported favorably by the entire committee in the recent session of the senate of the sixtieth Congress. There is no question of its passage in the coming session of the senate, whenever it reaches roll call. The house, with a strong republican majority, in view of the platform declaration of the party, can do little else than to vote it through, for the majority of congressmen, like the majority of people everywhere have never given this matter a critical examination, and simply jump at the conclusion that it is a good thing. And the president will sign the bill. He has already endorsed it, though it is to be believed that the press of duties, crowded into the life of our strenuous president, whom we love and admire, has been such as to give him not to exceed fifteen minutes’ attention to the subject in all his career. In fact there is very little opposition to the proposed plan. The average citizen looks complacently upon the proposition as it is a new fangled idea, sounds progressive and has no appearance, upon the outside at least, of hurting anybody except a few bankers who are already rolling in wealth and able to be hurt.
In order to understand the situation and to comprehend its effects fully, it is necessary that we give some consideration to the position and functions of the American bank. The world holds no parallel to these individualized and localized banks of which our country now claims about twenty thousand. These institutions are in every community, being at least ten times as numerous as are similar institutions in any other country on earth, and the claims of postal advocates that banking facilities are meager in any section of this country are unfounded, to say the least. Moreover, fully 90 per cent of these institutions bid for savings deposits, and it is a well known fact that there are very few of our banking institutions that refuse to open accounts when offered, even with the smallest amounts. In nearly every instance, these banks are owned by local stockholders, managed by a board of directors who represent the industries of the particular neighborhood in which the institution finds its place, and responsive to the needs of