IV BANKS It is not surprising that many persons hesitate in the making of a deposit in a savings bank, on account of the many defalcations continually taking place throughout the country. Undoubtedly there are thousands of persons who look with suspicion upon the majority of bank treasurers, as well as cashiers, especially in what are known as country banks. Unquestionably it behoves the depositor to select his bank with the same care that he would select an investment. It is not the desire of the writer to undermine faith in banking institutions; as a rule, they are the safest places in which the majority may intrust their money. A less percentage of risk, in the long run, is probably incurred in a savings bank deposit than in any other investment paying an equal interest return. Everything else being equal, it is wise to deposit in a bank in which the officer who is the leading spirit and responsible, to a great extent, for its funds, is a man not absolutely dependent upon the salary which he draws from such management, UNLESS THE SALARY IS A GOOD ONE. The handling of large amounts of money belonging to other people is, and must always be, a temptation to many, but that temptation is greatly lessened when such funds are handled by persons who have practically all they need, and who do not feel the want of many things which the possession of some of the bank's funds would enable them to enjoy. The writer would make no deposit in any banking institution which did not also pay other officials and clerks a sufficient compensation to give them a decent and respectable living, without the necessity for stealing, and it is due to just this short-sighted, narrow-minded policy of underpaying which has resulted in so many disasters. It does not stand to reason that every man will resist the temptation of handling funds in the hundreds of thousands, and at the same time live upon a salary which frequently forces him to economize, in order to maintain a social standard at the level with the respectable position which a bank official is supposed to occupy. The handling of large sums of money is a vast responsibility, and small salaries cannot employ sufficiently capable persons to undertake it. The fault of this largely rests with the directors who are striving to handle the banks at a minimum of expense in order to keep up dividends as high, or higher, than their neighbours. It takes courage to reduce dividends in savings banks, but the long run shows that those who have had the courage to make a reduction, although, perhaps, temporarily losing deposits, have proved to be worthy of the confidence of the people, and to have built up large resources and institutions of undoubted strength. xxvii The presidents and directors of banks are themselves, in another way, often indirectly responsible, and very much so, for their officials and clerks becoming defaulters. The possession of the control of a million or more of dollars belonging to a bank is a source of power to those who can control its investment. The officials so controlling it must be good clients to any banking house through whom they choose to invest the bulk of this money, and it is a self-evident fact that they will obtain opportunities for judicious investment of their own funds through an earnest desire on the part of the banking house to place such opportunities before them. The lesser officials of the bank, therefore, become aware that some of their superiors are very profitably making outside investments. They see small and, in some cases, considerable fortunes made in this way. This book does not question the honesty of such fortunes, but the temptation on the part of the underpaid lesser officials of the bank to do the same thing leads to the downfall of many of them. Let the directors look to many such points as are suggested above and there will be fewer thieving officials in their employ. There is no doubt that many of the defalcations can be attributed indirectly to the laxity of directors of the banks in which they occur, if the careful examining into the history of a great many actual happenings is any proof. William B. Ridgely expressed much the same idea when he said: "The ruin of a bank is practically always the result of fraud, or the use of its funds in unlawful amount by its officers and directors. The money is sometimes lost in legitimate enterprises, through bad judgment and mismanagement, but far the most frequent cause for actual stealing or defalcation in banks is speculation. It is speculation which is the curse of the day, which tempts so many men beyond their endurance."... "No man who assumes the responsibility of the custody of funds belonging to others should take the risk of subjecting himself to this temptation, nor allow others with whom he divides such a trust to do so." The writer ventures the statement that most bank troubles, such as the above, occur on a declining market. It is human nature to speculate for a rise in prices, and, as a result, many, who are speculating with the funds of others, are successful when prices advance. But let a long period of declining prices set in, and then the daily papers will begin to exhibit startling headlines of exposures and suicides. The average State savings bank report gives much information of value to such as care to investigate the banks of any particular State. These books may usually be obtained from the Bank Commissioners at the several State Capitols. The reader will find other matter pertinent to this subject under "Savings Banks." PROSPERITY AND THE FUTURE THESE are times1 of great prosperity. The swing of the pendulum has been steady and far out from the perpendicular. How much farther it will go, and how long stay at rest, before beginning its inevitable return swing is not for man to safely prophesy. 1896 was the low ebb of the last period of depression, and since then the march of increasing riches and good times has had but little interruption. But the end will come; the downward movement will follow this era of inflation as certainly as the winter's cold grips the Arctic Circle in its clasp of ice and snow. Benner, the prophet of panics, claims that one is due in 1911. However that may be, all good financiers should put their houses in order and prepare for one in the not very distant future. Benner may have set the date too early, or he may have erred in the other direction. Let us take brief stock of our riches: we may be so laden with wealth, and the money powers may have things so well in hand that there never will be as continued a period of low prices and hard times as preceded 1896. TEN YEARS' GROWTH The Journal of Commerce publishes the following table of statistics showing the growth of the United States in the past ten years, compiled from the latest available sources: The Minneapolis Journal of August 31, 1905, gave the following figures; from which it is worthy to note that we are no longer a one crop country." These cover the three States of Minnesota, North Dakota and South Dakota, only. $282,923,911 "Increase in value of all principal field crops for 1905, compared with 1904 $29,588,143 "Increase in value of all principal field crops for 1905, compared with 1903 $44,901,921 "In addition to the value of the annual production of field crops given above, it is safe to say that the value of the annual production of the dairy farms, the truck farms, the marketable increase in cattle, sheep, hogs and horses, will bring the farm production of the current year for the three States of Minnesota and North and South Dakota up to $340,000,000, or about one hundred million dollars more than the combined value of the entire output of the United States in gold, silver, copper and iron ore." As the South is calling upon the North for much money to aid her in the upbuilding of her almost countless enterprises, it is germane to the subject to reprint the following statistics furnished by the Manufacturers' Record of Baltimore: Pig iron made, tons 1880 1890 1905 $21,000,000 $60,000,000 $225,000,000 667,000 1,712,000 225,000 546,000 9,205,949 2,163,000 $313,696,000 $390,000,000 $680,000,000 397,000 2,600,000 3,300,000 1904 and 1894. 2 Sault Ste. Marie. |