[Volume XXV
THE CHICAGO BANKER
14
Editorial Comment
dealer in credits. But a certain class of bankers want to make a profit in excess of the legitimate gains of conservative banking. They are eager for the speculative profit. Therefore, they adopt methods and enter into the operations proper enough for a private bank, but extremely improper for a public bank. Instead of being satisfied with the gains from the buying and selling of credits, they seek to obtain the larger profits possible in the buying and selling of securities and in the underwriting of new enterprises. For instance, the excuse given for many of the transactions of Mr. Morse in the conduct of the Bank of North America was that he was seeking to earn some additional money for the bank. There was more money to be made by speculations in ice stock and other securities than by the discounting of paper and the making of carefully considered loans.”
The Journal admits that some other New York banks have dipped, at times, into these practices, and cites the envy of the honest banker when he sees the other fellow’s gains. Then it boastfully, and truthfully too, says “the old fogy bankers still are standing and they are in control of the clearing houses and exercise a commanding influence in the community, while at least some of their speculative brethren have come to grief. The speculative bank is a menace to financial stability־. While the speculation may be most attractive and ordinarily successful, yet when the hour of disaster strikes and a grave emergency arises, it is not the speculative banker who comes to the rescue, but it is rather he who is to be helped out. It is then that conservatism, the adherence to principle, has its time of triumph. Then for a while it appears as the paying proposition, while speculative banking conducted for speculative profit shrivels into nothingness, leaving only the memory^ of failure and disgrace.”
Alost of the banking episodes of the day are among the “big banks,” showing for big figures in the deposit column, fond of big loans and speculation. The much maligned country banker is of a different sort. In such matters he only is an onlooker.
V*
Texas Banks Notified
Commissioner of Insurance and Banking Love this ־week addressed a communication to the directors of every bank and trust company in Texas, calling attention to the fact that specific permission is required of the board of directors at a regular meeting as a precedent to making loans to officers or directors of the bank in excess of 10 per cent of the capital stock, it being a violation of the law to make loans to exceed io per cent.
V
Elected Cashier of Merchants
“Wilson Eyer, of Ismay, Mont., has been elected cashier of the Merchants National Bank of Dickinson, N. D.
V*
The First State Bank of Reeder
The First State Bank of Reeder, N. D., will erect a new bank building.
J5he
Chicago *BanKer
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HARRY WILKINSON, Editor and Publisher
LARGER PAID CIRCULATION IN THE MIDDLE WEST THAN ANY THREE OF ITS COMPETITORS COMBINED
As a rule they come without warning or they never could come at all.
N?
An End of One Objector
For years every attempt to pass a bank supervision and inspection law in Indiana met defeat, just as it has met defeat in Io־wa, Ohio, and Illinois and each y^ear the head man of the lobbyists was Seth M. Richcreek. Richcreek was a private banker, one of the best known in Indiana; was rated a rich man and claimed “responsibility” much in excess of his deposit. His claim was that inspection was an inference that bankers were dishonest and that an “examination is an insult.” But after many' y־ears the inspection law was passed and Richcreek’s bank closed its doors. Logical result! Now notice has been sent out to the creditors of Seth M. Richcreek, ex-banker, bankrupt, that the trustee of the estate will, on the morning of November loth, offer for sale at public auction, all the real estate of the bankrupt. The notices are sent out by the referee in the bankruptcy. There are about fifty pieces of real estate, comprising vacant lots in various parts of Indianapolis, and several improved properties. The aggregate value of the properties is about $54,225, some of the lots being valued at only $100. The various fixtures, furnishings, etc., of the bank that -Richcreek has conducted, were sold a number of months ago.
The motive of Richcreek’s opposition was known only to a few. His prompt failure will be a notice to bankers who hereafter fight inspection too valiantly, that they, too, may come under suspicion.
A Blow to Speculative Banking
The West has not been much afflicted with speculative banking, the temptation being more remote and the banking interests not quite so exclusive nor distant from the public as in the East. It wall not be fair to mention the many other reasons, nor would it be truthful to say that there had not been flagrant offenses committed west of Pittsburgh. The famous case of the National Bank of North America is being ventilated in the courts and the Wall Street Journal comments freely and truthfully upon the incentives to and the cure for speculative banking. On this subject, among other things, it says that the “profits of banking are large because the risks of banking, even under conservative administration, are necessarily large, inasmuch is a bank is a
May Crises be Predetermined ?
Much has been printed and shouted from the stump in the late political campaign about the effect of the result upon the prosperity of the country. Much that was said was untrue and a large part of it was uttered purely for political effect. Most bankers kept out of it, believing with the Scotchman who said “No whuskv is bad whusky, some is better than others.” No one should predict a crisis for political reasons. There is a question if any man is shrewd enough to see a coming crisis or panic, and truly they-never are founded upon sentiment nor upon presidential elections. They occur in monarchies quite as frequently. The methods of business and of banking vary in the different countries but the panic is bred; it comes and goes in all countries for very similar causes. Crises are preceded almost universally by a period of inflated prosperity, and followed by a period of liquidation. There is no designation in common language for the period of prosperity. It too often is regarded as the normal condition of things. As a rule, a period of eight to ten years has separated one crisis from another. In England these troubles have not recurred so frequently of late. The Baring difficulty in 1890 might have been as overwhelming as the severe crisis of 1866, but it was met with great vigor and promptness by the action of the governor of the Bank of England. Many of the leading banks joined in underwriting the house of Baring somewhat after the manner in which in the United States certified checks are accepted at the clearing houses. As was truly said at the time, “the great house was saved because it was a great house,” and its downfall would have meant ruin to many. The assistance of the Bank of France, considerately afforded to the Bank of England at the time, calmed the storm, and business rapidly resumed its natural course. In 1906 and 1907 there was a period of great tightness, and the rates charged went to higher points than since 1873, yet this condition of things solely־ arose from the stringency in other countries, especially in the United States. On the continent at the present time the notes are issued by the great state banks. This enables the course of business to be more easily traced, and also keeps the metallic reserve of the country more distinctly in view. It is the amount of notes issued by those great banks which indicates the demands of commerce and industry, and which largely governs the amount of the metallic reserves that the banks hold. The circulation of these notes is based greatly on the discount of commercial bills, which, on the whole, when carefully-selected, form the best commercial basis on which a paper circulation can be founded, as the banking experience of all European countries continues to demonstrate.
It is doubted if the most careful study of all past records added to the keenest judgment of men can determine in advance, even shortly before, the times when a crisis may be expected.