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Show OUR PUBLIC FORUM ' IV. F. A. Vanderlip ' On The Business of Banking The farmers of this nation to come Into their own ' must study buatneaa. We must, as a class, understand R ! the fundamental principles that underlie evry industry, JM I 'l3 fuuc'iolla t0 society and its relation to agriculture, for L j A ' " ' there can be no intelligent co-operation without under-Vs-:-. standing. Mr. V. A Vmidei-lip president of the National !k City Bank of New York, when asked, "What Is a bank?" X v said in part: iTX --jf "The first and most familiar fuuction of a bank is P vint " that of gathering up the idle money of a community, small sums and large, and thus forming a pool or reser- - voir upon which responsible persons may draw as they have temporary use for money, t is evident that this makes large sums In the aggregate available for the employment of labor and the development of the community. But much more is accomplished than the use of the money actually deposited In the banks, for. by the use of drafts, checks and bank notes the efficiency of money Is multiplied several times over. A very large business, for example one of the great beef packers, may use very little actual money; on one side of its bank account will be entered the checks and drafts It is daily receiving from everywhere in payment for meats, while on the other side will be entered the checks It draws in payment for -cattle, etc., its only use of money being for small payments, to labor and otherwise. If there were but one bank in a community and everybody paid all hills by drawing checks on that bank, and everyone receiving a check immediately imme-diately deposited it in the bank, the amount of money in the bank evidently would not change at all and the entire business of the community would be settled on the books of the bank. And the situation is but slightly changed when there are several banks, for they daily exchange among themselves all the checks they receive on each other, which practically otfset themselves, although the small balances are paid in cash. This is called 'clearing' and in every large city there Is a 'Clearing House' where representatives of the banks meet daily to settle their accounts with each other. A bank Is constantly receiving from its customers, particularly those that are shipping products to other localities, drafts and cheek's drawn on banks in other cities, which it usually sends for deposit to a few correspondent banks in the central cities with which it maintains permanent accounts. In this way these scattered credits are consolidated and the bank draws upon these accounts in supplying customers with the means of making payments away from home. As each local community sellB and buys about the same amount abroad in the course of a year, these payments largely offset each other. It is evident that the banks are very intimately related to the trade end industry of a country. The banker Is a dealer In credit much more than a dealer in money, and of course his own credit must be above question. He exchanges his credit for the credits acquired by the customers, and lend? credit for their accommodation, but he must conduct the business with such Judgment that lie can always meet his own obligations with cash on demand. This is the essential thing about bank credit, that it shall always be thi same as cash." |
