Show I THE COr r UN TY AND i lIS BAr BANKS S By ROME C. C STEPHENSON President A Association RILE upon the lIle Individual bankY bankers bank bank- WHILE YI Y ers there rests without qualification tion tiou the the direct responsibility for the prudent h o 0 n nest nest n n- est conduct of their Institutions t i 1 0 on n S nevertheless nevertheless never never- t 11 e 1 0 S s the soundness s of ot banking as a n practical matAS matA'S matter mat mat- AS A'S t ter of ot fact tact is a II t community w problem In Y m which the pu pub public tic lie has a part to play playas as well as bankers and n G government officers of- of who supervise the banks s. s In the first place the assets of ot a n bank outside its government bonds consist mainly of loans to business businessmen I Imen men and of ot investments In securities securities ties created by corporate enter enter- The fhe deposits of a bank hank are not kept in the vaults as Idle cash but are arc employed in to these loans and Investments to earn the money to pay the expenses of ot the tha batik bank so SJ that it can render ser services to its customers and also pay them interest interest inter inter- est st on such deposits dep as bear inter inter- est If there were no such thing as unsound business men inen or enterprises enter enter- enterprises prizes there would be no such thing as unsound assets in iu a bank It is of course the unquestioned duty of ot the banker to choose only sound loans and investments but the difficulty of such judgment and human j judgment is never Infallible is plainly increased in such times and under such conditions as we v have been passing through with many busin businesses lot making expected expect expect- ed earnings and therefore hampered in iu meeting their obligations Unfortunately Unfortunately Unfortunately some some- investments and loans created by persons outside the banks which found their way Into the b banks In a relatively few v instance in stance j have reflected the unwise e business policies and conditions condition that bec became me more than usually prevalent in our business activities and contributed to the difficulty o of banking ing The vast hulk bulk of bath bank k assets however are aie per cent sound above all question Hard Boiled vs Easy hEsy Banker In another aspect the people of th the community have a part to play i in n main maintaining the soundness of ot their banks banIs and nd that is through the medium medium me me- of ot patronage The fhe existence of ot a bank is dependent on public ImbUe patronage If It only those banks were patronized iu hh which the most careful careful care ful ul po policies v vere eie vere practiced and th the most conscientious and able men i in n charge it would go far toward maintaining maintaining main main- tamping the standards of ot banking ing I If business men In a community when wipe refused loans by their banks fo for r good and sufficient reasons because conditions are not favorable thereupon there here thereupon hereupon upon withdraw their business t to o banks where less careful methods oU prevail they clearly contribute t to U the creation of or less sound ban banking Also if ft in the time heat of competition a banker offers higher interest rates rate s or more free service to attract customers cus cus- tomeI's than the earnings of conservative conservative conservative con con- banking justify and is en encouraged en encouraged by the patronage of th the public as against a more moie conservative conservative conservative conserva conserva- tive bank obviously the public i is I again playing a part in bringing I about a less sound banking situa situa- tion It is an unfortunate fact that t the banker bankel who is strict hard haid d boiled if you please is liable to b bless be beless beless less popular than the easy banker and by that same t. t token ken the public c Itself has a voice In Influencing th the tho 0 charac character er of banking Still again the public can cal exert a aa an n influence in shaping the character r of banking by supporting the time purposes purposes pur poses of bankers to maintain intelligent intelli intelligent gen gent Inde independent enden honest banking bankin supervision by the public banking departments through insisting that tha t this function of government shall shat be kept as free fres fre from political influence influence influence ence as the judiciary itself and shall shat 1 be manned only by men of the highest high I est eat ability and character In still another way can the peaple peo pea pie themselves contribute to maintaining main taming the ability of their banks t to meet their obligations and this i iby is isby isby by granting them the fuU fullest st possible possible pos pos- sible Bible confidence As I said the de deposits deposits e. e posits are arc not kept as cash but are invested in loans and securities Even the soun soundest est assets of this type require some time to reconvert recon recon- vent vert at full value into cash deposits In many cases of bank troubles the only thing wrong with a bank wa was wan an unduly suspicious and amid apprehensive sive state of ot mind in its customers created by no act or condition of ot Its own but by baseless rumors which sometimes led them to destroy the of their own deposits by demanding demanding de de- demanding manding thorn them immediately forcing a bank to sacrifice Its assets and otherwise disrupt its operations |