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Show Healthful Bank Purging (FrMil Barion's Weekly) It is evident that the (happily!) late "banking crisis'' bids fair to accomplish a swooping- change in our banking methods which might otherwise have required years to achieve. For one thing, something like a unified control of the system in the Federal Reserve network is inevitable. Next to the scarcity of "bankers," the multiplication of small "state" banks has been one of the main roots of our bunking misdeeds. The time has gone for "free trade" in banking at retail ; it must hereafter be impossible for Tom, Dick or Harry to open a "bank" wherever and whenever he pleases. Branch banking must take the place of that sort of thing. Furthermore, we are witnessing a "housecleaning" and a separation of sheep and goats, the effect of which will be to purge our banking structure of its accumulated "weakness" "weak-ness" with a rapidity and completeness that would have been possible in no other circumstances. That is a tremendous tre-mendous gain. The introduction of the "conservator," the provision for issue by banks of preferred stock without double liability, and the enabling of reorganization without receiverships are all most desirable innovations, and Will greatly facilitate facili-tate salvage of resources to the largest possible extent. Somebody in Washington has been foresighted and forehanded; fore-handed; these things were no last-minute happy thoughts. Afgain, it is clear that we are going to make sharp distinction dis-tinction hereafter between commercial banking, as such, and what is called "investment banking." The security "affiliate" of a commercial bank must go; it never was a natural alliance. Commercial banks hold the country's "working capital," capi-tal," and their main function is to keep it "working" not let it drift into "fixed capital" either by direct investment or its employment in loans which cannot in fact be called in when they are wanted, or if they can be "liquidated" at all, can be liquidated only at a considerable loss. It is for .savings banks and "investment bankers" to invest capital, not for commercial banks. All "crises" are periods of intensive education and of real progress. "Sweet are the uses of adversity," and this particular adversity carries full 'freight of "uses" and' liberal lib-eral earnest of progress. -But we must finally learn, mark, and inwardly digest a few elementary truths. One is that safety of bank deposits is the first law of banking, to which all else is subordinate. Another is that no one has any inherent right to borrow at will somebody else's money from the "banker" to whom that other's money has been intrusted. A third is that that banker must he held to the strictest responsibility for the safety of the funds intrusted to him, and in order that he may discharge that responsibility he must have complete power over disposition' of those funds, without interference , from "anyone. "Credit" always' has been, is and always will be personal. ' ' |