BANK CREDITS 
 
 BY D. B. DEWEY. 
 
LIBRARY 
 
 OF THE 
 
 Jniversity of California. 
 
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[^FIVBKJITT] 
 ADDRESS 
 
 DELIVBRKD BY 
 
 D. B. DEWBY, 
 
 BBPORB THE 
 
 BANKERS' ASSOCIATION OF THE STATE OF 
 
 ILLINOIS, AT SPRINGFIELD, ILL., 
 
 OCTOBER 15, 1896, 
 
 AND 
 
 REPEATED BY REQUEST OF THE BANKERS' 
 
 CLUB OF CHICAGO, AT A MEETING 
 
 HELD OCTOBER 17, 1896. 
 
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 ae-sf/ 
 
BANK CREDITS. 
 
 How to successfully make credits is a problem 
 every bank officer in active work grows old 
 trying to satisfactorily solve. There are no 
 infallible methods of determining who shall be 
 entitled to credit, but there are general prin- 
 ciples which must govern the making of credits, 
 and the relations between the banker and cus- 
 tomer, in order to secure solidity and perpetuity 
 of prosperity. 
 
 He who is wisest in the application of these 
 principles to individual cases, he who best under- 
 stands the law of business, and most clearly 
 interprets this law, will be safest from disaster. 
 It is true that in integrity,, truth, honor and 
 honesty there can be no variations, but the 
 attempt in actual transactions to establish an 
 inflexible rule to goyern all conditions in credit 
 making, is to create an obstacle that will be 
 sure at some period to plunge the banker into 
 despair. 
 
The ability to quickly and diplomatically 
 adapt ourselves to conditions as they develop, to 
 read men as an open book, and mold them by 
 superior will and tact, is within the power of 
 some men, and when possessed is a priceless gift. 
 Tact will triumph over genius and is the key 
 that opens the door to success. Tact has been 
 said to be *' the child of necessity. '' 
 
 A hesitating man never shines in an emer- 
 gency ; indecision is a fatal disease in all busi- 
 ness, especially in banking. Life-s pathway is 
 strewn with victims caught in adversity's storm 
 because they paused at important periods to 
 dally with temptation and to question a policy 
 experience has proven to be the only safe one. 
 Brilliant achievements are always the reward of 
 prompt action ; moments are often crucial periods 
 in destiny. This rule applies, however, only to 
 principles ; action without prudent investigation 
 is equally or more* dangerous. The safe banker 
 never decides until all doubts are removed, 
 knowing that peril lurks in every banker's 
 pathway. 
 
 The thoughtful man knows that prosperity 
 and adversity are and always have been opposing 
 forces, each has its time to reign. He also 
 
knows that the former invests us with the 
 opportunity to provide against the ravages of the 
 latter. When a banker finds a customer who 
 does not recognize this law, it should be notice to 
 him to beware. 
 
 Sunshine will be succeeded by cloud.s, clouds 
 by storm. In fair weather a wise man provides 
 against the foul^ to save himself from the perils 
 of exposure. 
 
 CREDIT-ITS BASIS. USES AND ABUSES. 
 
 Credit is based on confidence — confidence in 
 the integrity, character and ability of the bor- 
 rower ; confidence in the stability of government, 
 in the possibilities of developing the resources of 
 the country and the probability of success. 
 Confidence is the life of business. Daniel 
 Webster says, ^' Credit is to money what money 
 is to goods.^' Again he says, '* Credit has done 
 more a thousand times to enrich nations than 
 all the mines of all the world.'' Demosthenes says, 
 ** There are two kinds of property, money and 
 credit ; the greatest property is credit.'' 
 
 It is true that credit on a solid ba- nuch 
 
 morr iin])()rtant factor in conmicicx- than money, 
 for in the great interchanges in hnsinrss, ni< • 
 
in comparison with credit is an insignificant 
 quantity. 
 
 Mill says, ^^ Wealth is anything which has 
 purchasing power.'' Credit is as much wealth 
 as money and far more reaching in its relations 
 and powerful in its functions. Macleod says, 
 '' Credit is a circulating medium, exactly as 
 money is.'' The credit of a solid, prosperous 
 industry becomes a part of its working capital, 
 but safety to a bank requires that the borrowings 
 from the bank be represented by quick assets, 
 which may be made available in an emergency, or 
 in the frequent ^'clean-ups" which should occur 
 to prove the liquidating qualities of the assets. 
 
 Bank credit, wisely used, under prudent re- 
 strictions, becomes a blessing to the world ; let 
 it be abused and dire calamities follow. The 
 banker who does not by wise discrimination 
 become the sagaciously used instrument by which 
 credit is guarded against its enemies, is a foe to 
 business and generally wrecks his own fortune 
 or the trust he represents. 
 
 Too liberal credit and the tendency of borrow- 
 ers to use it in an imw^arranted manner, has always 
 been a destructive obstacle in the way of sub- 
 stantial progress. It has ruined many honest 
 
men by leading them into obligations they could 
 not meet, when if they had been wisely guided 
 by their bankers, they would have won victories 
 rather than have suffered defeats. While money 
 was easily obtained, they unduly extended their 
 business. Periods of depression will come when 
 rapid liquidation is a necessity. Monetary 
 affairs become agitated, capital seeks refuge by 
 withdrawal, and negotiations become practically 
 an impossibility. 
 
 Unrestricted liberty to borrow is a curse to 
 both borrower and lender, for it is sure to be 
 followed by inflation and over-production — over- 
 production by a crisis whose disastrous influence 
 is only measured by the extent of the abuse 
 which prevailed when the disaster was gen- 
 erating. 
 
 Over-confidence always inaugurates unwar- 
 ranted hazards, resulting in the financial death 
 of the over-trader or over-producer, whose epi- 
 taph might properly read, *' Killed by imprudent 
 credit.'^ 
 
 The tendency to speculate is the bane of busi- 
 ness, and the enemy of banking. A merchant, 
 manufacturer or other seeker after unsecured 
 credit, who speculates, should be discriminated 
 
against by a money lender. I believe if 
 more rigid restrictions were made in the begin- 
 ning, and more unrelenting exactions enforced 
 in settlements with insolvent debtors, credit 
 would not be so cheap, and, further, that fewer 
 failures would occur. 
 
 VALUE-HOW DETERMINED. 
 
 Legitimate credit is founded on value, value 
 of money, and value of commodities interchange- 
 able into money. A promise to pay has value, 
 and becomes the equal of money when confi- 
 dence in the promise is established. A pauper's 
 written promise to pay one hundred thousand 
 dollars would not receive the second glance, but 
 a similar promise of a Rothschild would be 
 eagerly sought after, and be convertible in any 
 money center of the world — proving conclusively 
 that a mere promise to pay without actual pro- 
 perty of current value behind it, is worthless. 
 
 Money is by no means the only capital on 
 which credit is based. Capital covers all 
 economic elements of value, such as skill, in- 
 tegrity, character and labor. The foundryman 
 buys pig-iron on credit; he adds brains, skill, 
 labor and reputation for probity, and sells the 
 
product. He makes a profit not only on the raw 
 material originally purchased, but on the labor 
 of making and selling. The quality of his 
 product not only depends upon the skill in 
 making, but on the judgment and integrity in 
 buying the material. A deserved reputation for 
 a high grade product, for which there is a de- 
 mand, insures success in business. 
 
 It is generally true in the economics of life 
 that whatever contributes to the alleviation of 
 human want is valuable, and he who has it under 
 unrestricted control, with confidence in his in- 
 tegrity and fairness, has credit. It may then be 
 said that the sum of man's want is the measure 
 of all value. Whatever commodity therefore 
 meets universal want is the nearest to quick 
 realization, because it can at any moment be 
 changed into money. Hence it is that Board of 
 Trade collaterals, duly inspected, properly regis- 
 tered and in the custody of independent and 
 responsible warehousemen, are acceptable to 
 prudent bankers. 
 
 The economic law under which quantity de- 
 termines value, is higher than any statute that 
 can be enacted, hence all legislation must be 
 subservient to this law. 
 
It is true that the law of supply and demand 
 finally fixes the value of all commodities. De- 
 mand makes commerce possible. Supply is the 
 child of demand. Without demand there can 
 be no value; profit implies a buyer and a seller. 
 It has been said, '^ The value of a thing is what 
 it can be sold for." Certain it is that nothing 
 has a commercial value unless somebody wants it. 
 
 The shrewd merchant of integrity makes a 
 desirable bank customer and subject of credit, 
 because he studies carefully the wants of the 
 community where he is located, and the territory 
 tributary thereto, and buys to meet the desires 
 of the people as nearly as possible. Intuitively, 
 he finds himself recognizing the fact that educa- 
 tion ripens civilization, that civilization creates 
 desires unknown to the uncultured, and that the 
 higher the order of civilization the more aesthetic 
 the wants, and the keener the demand for the 
 products of modern skill. Hence he intelligently 
 adapts his purchases to the special conditions 
 which surround him. 
 
 Credit enables the merchant to buy goods and 
 the manufacturer to purchase raw materials to 
 make them into a merchantable commodity, so 
 they will sell at a profit; therefore credit, as well 
 
as money, gives life to labor, which invests all 
 the products of the earth with value. Labor is 
 vital to the prosperity of an individual or nation. 
 A nation of industry^ and economy becomes a 
 nation of wealth, for wealth is their legitimate 
 fruit. Beecher says " Industry is the parent of 
 thrift.'' Carlyle says, *' Labor is a celestial es- 
 sence breathed into man by Almighty God." 
 
 The influence of honest labor, intelligently 
 directed, never ceases ; it accumulates force as 
 interest accumulates power. Labor perfonned 
 by the buried millions is molding destiny in the 
 present hour. What has been done in the past 
 is an inspiration to us to make improvement 
 and advancement in the present, and to aid us 
 we have the advantage of accumulated intelli- 
 gence and skill developed through the past ages. 
 What we owe the past, with increased obligations, 
 the future will owe us, if we make an honest 
 use of the energies and abilities given us. The 
 wise man profits by the experience of the past. 
 The man who does not permit the past to become 
 a teacher for the present, need have no hope of 
 the future. 
 
MONEY-ITS RELATION TO CREDIT. 
 
 Money, or credit, its equivalent, wisely used, 
 becomes a power in civilization, for it creates 
 opportunities for labor, develops the resources of 
 the country, and lights the way to progress and 
 independence. 
 
 It has been said, '^ Money is simply a com- 
 modity employed for bartering, as the ship for 
 carrying, or the plow for farming ; it is wealth 
 only in the identical sense that the cart is, for its 
 action is similar to the cart's — it fetches to the 
 owner what he is in want of." 
 
 Money enters into credit as a medium of ex- 
 change, and measures the value of all com- 
 modities. Money that fluctuates soon goes into 
 disgrace, while in its flight to dishonor it par- 
 alyzes credit and crucifies progress. Debased 
 money becomes a pernicious influence in busi- 
 ness, is born in ignorance or infamy, is a blighting 
 curse, an emissary of Satan, bearing weapons of 
 destruction to all industrial interests — is a viper 
 that will sting prosperity and independence to 
 death. 
 
 An inexorable and irrevocable law governs the 
 nation as well as the individual. A nation can 
 
no more be dishonest and be respected than an 
 individual. 
 
 It has been said, ** Financial probity is the 
 backbone of a nation.'' A nation that sacrifices 
 its honor by repudiation of its honest obligations, 
 in whole or in part, will pass into history under 
 a stigma that centuries of honorable record can- 
 not remove. The greatest monetary disasters 
 known in history were inaugurated by the at- 
 tempt to create value in money where none 
 existed. 
 
 Money, not based on something of intrinsic 
 value of recognized standard to redeem it, should 
 be prohibited from circulation as you would pro- 
 hibit counterfeiting. Let the foundation on 
 which money rests be honest, the standard true, 
 and all operations growing out of same will be 
 satisfactory. 
 
 Evidences of indebtedness, passing as money, 
 must be based on unquestioned security, con- 
 vertible into an established metal standard which 
 the whole world recognizes as such, in order to 
 give stability to currency and safety to business. 
 No substitute can be safely offered for money not 
 worth just what it purports to be. A govern- 
 ment has no moral right to impose upon its 
 
subjects by stamping anything as a dollar worth 
 only half, or worth any less sum than it stands 
 for. It has no right to discriminate against the 
 product of one State, which happens to be corn, 
 wheat or potatoes, in favor of the product of 
 another State, which happens to be metal — 
 because the owners of the latter are clamoring 
 for unlimited purchase at a fictitious price. It 
 has no right to tax the whole people for the 
 benefit of a single industry, at the expense of 
 all other industries. 
 
 It is an absurdity to say that a government has 
 the power to fix the value of money ; it may 
 arbitrarily compel its acceptance in payment of 
 debts within the jurisdiction of the power issuing 
 it, but beyond that jurisdiction it is worth only 
 its actual value, and reflects credit or discredit 
 just in proportion as it is measured by the 
 standard recognized as such by all nations. 
 
 When money, without reference to its true 
 value, is plentiful, prosperity ma}- apparently 
 abound, and demagogues may applaud its super- 
 ficial evidences, but as a matter of fact the finan- 
 cial atmosphere will be charged with peril, and 
 the prudent, observing the signal of danger, will 
 hoard gold in order to have something of certain 
 
purchasing power when the crash comes. Col- 
 laterals may be abundant, but money, like a 
 frightened deer, has sought safety in hiding, 
 thus impoverishing the ability of banks to meet 
 the necessities of business. Yet the public, over- 
 looking the true cause of restricted lines, unkindly 
 criticises the banks, charging illiberality and un- 
 fair treatment, while the fact is the depositors are 
 in fault, not the banks. 
 
 Unsound money inflates values, incites extrava- 
 gance, promotes wild schemes, is a curse because 
 it produces false conditions, destroys stability in 
 business and ends in disaster. The greatest 
 sufferer is the laborer whose fortune as a rule 
 consists chiefly of his daily earnings. 
 
 Debased money impoverishes and ruins the 
 wage earner ; '' An honest dollar for an honest 
 day's work,'' should be his war-cry. His skill, 
 integrity and energy are made available only 
 when supplemented by the opportunity for work 
 which capital alone can give. The interests of 
 capital and labor are identical ; each has rights 
 which must be respected and protected upon an 
 equitable basis, or there can be no permanent 
 success. You destroy one and xou ruin the 
 other — you protect one and you save the other ; 
 
 13 
 
any intelligent man, who honestly desires to 
 promote the interests of either, will frankly 
 say so. 
 
 Sonnd ^' money is a form of capital which 
 stimulates and facilitates all the processes of 
 business,'^ and largely divests credit of its peril. 
 Restore confidence, and new life will be given to 
 all industries, and the onward march to tri- 
 umphant success will be assured. 
 
 Scarcity of money in circulation does not prove 
 diminution in the quantity in existence, but the 
 loss of confidence to use it, and that does the 
 mischief in credit and damage to business. It 
 is then that the quality of money is determined, 
 proving the statement often made that '' inferior 
 money always drives out superior." 
 
 We all know that gold is hoarded and drops 
 out of circulation w^hen confidence flees and 
 panics threaten. Gold is something everybody 
 wants, because of the universal faith in its value. 
 The most prudent investors in all countries de- 
 mand that the securities they invest in shall be 
 made payable in gold, not for the purpose of 
 discriminating against any other form of money, 
 but because gold holds commercial supremacy 
 everywhere ; is as current in the most remote and 
 
 14 
 
humble village in the world as in the most im- 
 portant money center. This is not true of any- 
 other form of money. 
 
 Is it not a fact that purchases and sales of 
 commodities, whether for cash or credit, in spite 
 of legislation, are made on a gold basis? A 
 merchant of one country selling to a merchant 
 of another country, making silver a standard, 
 will surely require his bills to be paid in gold, or 
 sell the goods at such a profit as to provide 
 against the fluctuating value of an>- other fonn 
 of money. 
 
 CREDIT-FOUNDATION-NECESSITY. 
 
 Under the most advantageous conditions of 
 money and credit, exhaustive duties and supreme 
 anxieties are the inevitable inheritance of a 
 bank officer, where fidelity, patience and a true 
 conception of the magnitude and sacredness of 
 his trust qualify him for his position. The 
 banker, wise in his own conceit, who super- 
 ciliously assumes superiority and infallibility, 
 demonstrates his ignorance and weakness. Ener- 
 getic ignorance is often more dangerous than 
 criminal intent ; the latter may be controlled 
 and intelligently feared — the former, never. 
 
Credit is the foundation of banking, and the 
 banker in making his credits has always been, and 
 ever will be, the legitimate prey of inflationists, 
 swindlers and thieves in general, who use every 
 kind of ingenuity and cunning skill to secure 
 his confidence and get his money — so that peril 
 shadows his pathway at every step. An ex- 
 perienced banker will tell you at times the pres- 
 sure is terrific, and the responsibilities almost 
 overwhelming. 
 
 Mutual confidence is the foundation of all suc- 
 cessful enterprises. It is well understood that 
 no bank can pay its debts on demand, but that 
 time is required to make available the most 
 solvent securities. If a bank were obliged to 
 keep itself in position to pay it creditors on de- 
 mand, there would be no profit in banking. 
 
 Walker says, ^^ If a man borrows a thousand 
 ducats and ties them up in a bag, he will not 
 find any little ducats at the end of the year, but 
 if he purchases a flock of sheep, he will, with 
 proper attention, have lambs enough at the end 
 of the year to pay a handsome interest on the 
 loan and have a splendid profit for himself.'' 
 
 Credit is a necessity in banking. Risk will be 
 in proportion to gain ; nothing offers profit that 
 
 16 
 
does not present a corresponding risk. A credit 
 which a merchant may make with propriety, a 
 banker cannot seriously consider. While the 
 same general principles must control, the per- 
 centage of profit in one case warrants the risk, 
 and in the other case it does not. For an nnwar- 
 ranted hazard there can be no satisfactory- com- 
 pensation. 
 
 It is the legitimate desire of ever>' banker 
 to increase the bnsiness of his bank ; how to do 
 this safely is the problem of his life, in the 
 solution of which he will inevitably make mis- 
 takes, and largely increase his stock of regrets. 
 To lament will be nnavailing; charging to 
 ^'Experience Account*' does not make satisfactory 
 explanations or dividends. Stockholders quickly 
 forget a bank officer\s triumphs, but luvrr liis 
 mistakes. 
 
 TOO MUCH MONEY DANGEROUS. 
 
 It is true that at certain periods money will 
 accumulate rapidly. An ambitious bank officer, 
 desiring to make attractive dividends, is liable to 
 be led into the inauguration of a system dan- 
 gerous in its character and sometimes fatal in its 
 consequences. Over-anxiety to lend money is 
 
perilous ; it divests judgment of its prudence and 
 scrutinizing power, makes the banker over- 
 credulous and liable to inflate securities with 
 fictitious value. The universal experience of 
 bankers will justify the statement that the 
 greatest mistakes are made, and the most disas- 
 trous losses incurred through loans taken on 
 when there is a plethora of money. Under the 
 influence of a stringency, greater care and closer 
 scrutiny are exercised ; borrowers seek the 
 banker, not the banker the borrowers. It is 
 then a banker can get the cream and let the 
 skim-milk go to the lender where usury is not 
 considered. 
 
 WHOM SHALL I TRUST? 
 
 A banker has a great variety of borrowers to 
 deal with. He should, as far as possible, make 
 it his duty to know each man's peculiarities and 
 business methods. In some he will find frankness 
 personified ; they will open their hearts and give 
 their confidence, so that their banker is placed 
 in possession of all the facts connected with their 
 business. Others apparently will be equally 
 frank, but, as a matter of fact, will conceal vital 
 points, so that a correct judgment of their affairs 
 
 18 
 
is an impossibility. Others will inflate their 
 statements, and by rosy pictures, mislead ; the 
 latter may be honest in their intentions, but they 
 lack discriminating judgment, and often deceive 
 themselves. Others will willfully misrepresent 
 their condition with such plausibility and cun- 
 ning as to deceive the wisest, so that the ques- 
 tion that comes home to every banker, "Whom 
 shall I trust ?'^ is forever pertinent. It will also 
 ever remain a perplexing proposition to know to 
 what extent credit can be given with safety, 
 what methods shall be used to determine the 
 solvency of a borrower and the value of the col- 
 laterals. In making credit it has been my habit 
 to ask myself: 
 
 1st. Is the applicant for credit honest? Is he 
 truthful ? Can his statements be relied upon ? 
 
 2nd. What do his assets consist of? Are they 
 staple and in healthy demand a reasonable part 
 of every year ? There are certain classes of goods 
 or products that are short-lived in their use ; they 
 may sell quickh' to-day and in the near future be 
 unsalable at any price. Any commodity de- 
 pendent upon current conditions may have a 
 brief period of life, and after that become prac- 
 tically worthless. 
 
 10 
 
Again, what are the borrower's estimates of 
 value? Are his assets quick or are they slow? 
 What would they be worth in liquidation under 
 pressure? Has he sufficient capital, with what 
 the bank will lend him, to successfully conduct 
 his business ? 
 
 3rd. If the proposed borrower is doing a 
 general business, is it so distributed as not to be 
 dependent upon one locality, where a failure of 
 crops, disaster by fire or any other calamity would 
 cause embarrassment ? 
 
 4th. Has he a practical knowledge of his 
 business, and does it warrant success? Is he 
 making money? A losing business should 
 always be avoided by the lender of money, 
 even if the assets are sufficient when the loan 
 is made. To continue to produce at a loss 
 makes ultimate bankruptcy certain. The date 
 of bankruptcy depends only on the size of the 
 bank account or the amount of available assets 
 in the beginning. The same line of business 
 may at one time be profitable and at another 
 time unprofitable, so that the closest touch w^ith 
 and clearest conception of prevailing conditions 
 of trade become vitally important to the banker. 
 
 5th. Does the borrower confine himself to his 
 20 
 
legitimate business and keep out of speculation ? 
 If his business involves credit to other people, is 
 he prudent in his methods of making such credit, 
 and wise in his judgment of character? Is he 
 dependent upon sources outside of his regular 
 business for his success or failure, or so identified 
 with other interests as to be imperilled? The 
 collapse of a large concern often carries many 
 others with it. Hence the importance of know- 
 ing all the business relations of the borrower. 
 
 6th. If a nlanufacturer, has he sufficient bills 
 and accounts receivable, or other quick assets, to 
 pay his liabilities ? Experience has proven con- 
 clusively to every money lender that machinery 
 and plants make poor assets to pay debts with ; 
 especially is this true if the owner meets with 
 misfortune. Methods pursued by manufacturers 
 in charging off or failing to charge off each year 
 an equitable percentage for depreciation in ma- 
 chinery^ and plant, is a true index to their pni- 
 dence or lack of it. Location of plant is also 
 a vital question. What is the power used? If 
 water, is it in regular supply, or a fluctuating 
 quantity, demanding a large expenditure of 
 money to keep it in operation? Is there an 
 abundance of raw materials used in manufac- 
 
turing the products, tributary and accessible, or 
 is the supply limited ? Location and the condi- 
 tions referred to might determine the permanency 
 of an industry and solve the safety of a credit. 
 
 7th. Is the customer borrowing money to 
 increase his lending facilities? A banker or 
 broker who becomes a borrower of money to 
 lend again, should always be willing, and be re- 
 quired to pledge as collateral for his borrowings, 
 with satisfactory margin, the securities which he 
 buys or lends upon. This rule sTiould be abso- 
 lute, without reference to the financial strength 
 or high credit of the borrower, for it is a safe- 
 guard against undue expansion. The ability to 
 borrow money at a low rate to lend at a higher 
 rate creates a temptation pregnant with danger, 
 hence safety to both borrower and lender de- 
 mands that the most conservative judgment and 
 prudent methods should obtain. 
 
 8th. What kind of an account does the cus- 
 tomer keep? An important feature in deter- 
 mining the amount of credit to be extended, 
 other conditions being right, is the bank balance 
 which a customer carries, or shall be required to 
 carry. The percentage demanded varies largely 
 with banks, so that no universal rule has been 
 
adopted. Certain it is that a healthy balance 
 shonld be carried ; it is wiser for the customer, 
 as well as equitable to the bank. An average 
 balance, not less than a sum equal to the reserve, 
 which a bank must by law carry against a cus- 
 tomer's deposit, should work no hardship to bank 
 or customer, and its results would be more satis- 
 factory to both. The customer should never lose 
 sight of the fact that whether a shareholder or 
 not, he is vitally interested in the character and 
 prosperity of his bank, and that when he makes 
 unreasonable demands upon his banker, he com- 
 mits a wrong upon himself. The selection of a 
 conservative and wisely managed bank reflects 
 credit upon the judgment and standing of the 
 customer. 
 
 9th. Is the applicant for credit an officer of 
 a correspondent bank ? I do not approve of the 
 habit indulged by some bank officers — i. e., ask- 
 ing their correspondents in money centers for 
 loans, offering as collateral security the stock of 
 their bank and basing their claims for considera- 
 tion upon the value of their bank's account. The 
 policy is bad for several reasons, but principally 
 because they demand a privilege which ( except as 
 to kind of collateral ) legitimately belongs to their 
 
 23 
 
bank only, and may be needed to protect their 
 bank in special cases where borrowing may be 
 good policy, or emergencies where it may be a 
 necessity. To secure these personal loans, bank 
 officers often make unwarranted concessions, thus 
 belittling the profit which is the natural inherit- 
 ance of their bank, and then they deprive their 
 bank of the independent position which commands 
 the highest respect of conservative men whose 
 influence is of value because it establishes con- 
 fidence and brings good business. 
 
 One prominent bank officer said to me that he 
 never accepts a borrowing account without asking 
 who the legal counsel of the borrower is. I think 
 the suggestion a good one. Certain it is that a 
 wise, discreet, honorable lawyer is of priceless 
 value to business interests — he who holds com- 
 mercial honor and public weal above personal 
 gain. There are pirates in the legal as well as 
 quacks in the medical and frauds in the banking 
 profession. Wherever you find either you are sure 
 to find a malignant foe to the true interests of 
 humanity. This statement only emphasizes the 
 value of an able, conscientious follower of either 
 calling. 
 
 Again, if the proposed borrower is a corpora- 
 
 24 
 
tion, the banker should be sure that the men in 
 active management have large personal interests 
 at stake — with only a salary at risk the bank- 
 ruptcy of the industry is npt so alanning to the 
 officers. I believe a rule requiring directors of a 
 corporation to personally guarantee its borrow- 
 ings from its bank to be an important element of 
 safety. Directors can always protect themselves 
 by protecting the bank. No motive has greater 
 power than that which prompts self-protection. 
 
 There are many other questions which may be 
 legitimately asked, but if able to answer the fore- 
 going satisfactorily, a reasonably safe foinidation 
 for credit is established. 
 
 METHODS AND SOURCES OF INFORMATION. 
 
 There is a variety of sources for getting at the 
 facts as to a customer's standing, all of which a 
 prudent banker will use, but in his final judg- 
 ment he must rely upon his confidence in the 
 integrity, fidelity and business ability of the 
 customer. Personal contact with the borrower, 
 familiarity with his habits, methods and charac- 
 teristics, are invaluable aids in determining whom 
 to trust. Only education, long experience and 
 patient thought can bring the wisdom necessar>' 
 
for a solid foundation on which to determine 
 credit, and even then errors of judg-ment will 
 creep in. 
 
 It will be helpful, in avoiding complications, 
 for a banker never to lose sight of the fact that one 
 careless action, one single mistake, where trans- 
 actions are large, or relatively large, will swallow 
 up a whole year's profits, accumulated by his 
 previous prudence, faithful study and skilled 
 discrimination; hence prudent and critical in- 
 vestigation should be made, and careful con- 
 sideration given, before decision is reached. 
 When this is done and wisest judgment used, 
 self-reproach is unwarranted. 
 
 A successful banker believes in men. Inspire 
 a man with the belief that another trusts him 
 implicitly, and his manhood will be exalted, 
 his trustworthiness will be largely increased and 
 intensified. The power to make men believe 
 that you trust them, and thus forcibly appeal to 
 their higher nature, is a quality nowhere more 
 valuable than in a banker. Such a banker will 
 also be fair to his customers ; he will never 
 sacrifice where he can save. He should be a 
 genuine man who despises pretense. His educa- 
 tion unavoidablv g-ives him an intense hatred 
 
for sluuns. Ik will strive to make himself 
 a recoo;nize(l standard of honor and fairness, for 
 his important trusteeship makes him a vital part 
 of the civilization under which he lives. He 
 will also ever remcinhn that misfortunes are 
 liable to overtake any customer, and if wise, he 
 will judiciously distribute his risks, keep him- 
 self in touch with his customers, show an active, 
 kindly interest in their success ; have them 
 implicitly believe that the bank is not only a 
 safe depository for their money, but its officers for 
 their business secrets, and so treat his customers 
 in his intercourse with them that they will not 
 leave him because his competitor offers what may 
 seem more attractive inducements ; and so that in 
 financial trouble he will be the first one consulted 
 and his bank protected. This result can only be 
 secured throuo^h uniform courtesy, fair treatment 
 and fidelity to all confidences bestowed. 
 
 DIRECTORS-THEIR DUTIES. 
 
 A common error with hank ofil the 
 
 lu-^U'ct to make axailahk- the inthu-nce and 
 knowledge of tlu directors of the bank. Kvery 
 director, in acce])tin<^ his position, assumes a 
 rc'sp«>n.si])ilily fur which he .^hoiiKl Ik- held .strict- 
 er 
 
ly accountable. Should trouble come to the 
 bank, the plea of ignorance of the bank's affairs 
 should in no way mitigate the charge of in- 
 fidelity to his trust. A bank officer should give 
 his full confidence to the directors, who are co- 
 trustees with him, and in just reciprocity they 
 should give him their unqualified confidence 
 and co-operation, and to the bank their best 
 efforts in protecting the business in hand, and 
 in the getting of new business. The reputation, 
 character, safety and prosperity of the bank 
 should be as vitally important to them as their 
 own, because in accepting the trusteeship, they 
 have assumed a sacred duty, and their reputa- 
 tion becomes at once involved. 
 
 COMMERCIAL AGENCIES. 
 
 It is wisdom for a banker in forming judgment 
 of a credit to avail himself of the reports of the 
 reputable commercial agencies, who have un- 
 equalled facilities for getting information, and 
 who make it their business to learn the histories 
 of men, what their records have been as to 
 integrity, promptness and success. 
 
 A valuable aid in making credits would be a 
 central Bureau of Information, accessible to all 
 
bankers who desire to make it so. To be able 
 to use paper at will is a practice pregnant with 
 danger. If borrowers knew that all their paj^er 
 given was reported to the Central sonrce referred 
 to, it might make a very material difference in 
 their operations, and result in greater safety to 
 lenders. 
 
 WHAT TO AVOID. 
 
 Bankers should learn to avoid a great weak- 
 ness, common and dangerous, which is the lack 
 of courage to charge off a loss when tempted to 
 risk more money, hoping to thereby ultimately 
 save the bank hannless. The most serious 
 disasters have come to a bank when, under the 
 appalling influence of a large loss, additional 
 money has been contributed with the hope of 
 final escape. Where a strong competition exists, 
 an over-anxiety to keep customers will also exist 
 and will prove a menace to safety. Bitter 
 ri\alry is thereby created and judgment is di- 
 vested of its prudence and sagacity. Under its 
 influence indiumient^ tlinf are unwarranted are 
 often oflfcird. A di ckoning will surely 
 
 come. riu 11 iIk pnukiit stand and the reckless 
 fall. 
 
As a rule, the wealth of men is overesti- . 
 mated ; profits are magnified and losses be- 
 littled. The wise credit man largely discounts 
 the public estimates of the wealth of business 
 men. Industries that have had a high credit 
 and have been unhesitatingly trusted, will sud- 
 denly fail and the expose becomes an awful 
 shock to confidence ; the lender will find that 
 through the lack of proper investigation he has 
 unconsciously contributed to the borrower's ruin, 
 who in turn by his failure has ruined other 
 customers of the bank. 
 
 An insight into a conservative, sagacious 
 banker's credit case might make revelations to 
 some people posing as models of honor and 
 possessors of wealth that would astonish them. 
 Rest assured they are not always attractive 
 pictures, and in some cases they might be quite 
 as astonishing to the community, as will be the 
 secrets of life, when the veil is lifted on Judg- 
 ment day. 
 
 ANALYSIS OF ACCOUNTS. 
 
 I think any successful banker will say that a 
 careful analysis of a customer's account gives to 
 him an index uniformly reliable in its correct- 
 
ness. Men mifainiliar with bank records little 
 dream of the graphic histories they disclose. 
 One customer will always have a solid cash 
 balance, his account needs no watching, his 
 banker thinks of him only with pleasure. An- 
 other will pinch his account and make his bank 
 a convenience only. Some balances will be 
 made up of checks on other banks, in or out of 
 the city, taken legitimately perhaps in the 
 routine of business, but nevertheless the receiv- 
 ing bank actually never has any money in hand 
 from these accounts ; each day^s drawings will 
 absorb the previous day's deposits. And so it 
 will go on indefinitely. 
 
 There are customers who consider their 
 accounts so valuable to their bank that in 
 addition to depositing their country checks 
 (which may take from one to ten days upon 
 which to get returns) they will want these 
 checks collected without charge, which results 
 in the city bank paying for the privilege of 
 doing such customers' business, and is wTong in 
 principle. As a matter of fact, there should \ye 
 some profit on every transaction a bank makes, 
 especially on exchange and collection. Through 
 competition unwarranted concessions are made 
 
 n 
 
so that important elements of profit are elimin- 
 ated from banking. The acceptance b}^ the city 
 merchant of the country merchant's check on 
 his local bank is bad practice and ought to be 
 discouraged by metropolitan bankers. It is true 
 that some country merchants calculate the days 
 it will take for their check or checks to reach 
 their local banker and make provision only in 
 time to cover, thus depriving the country banker 
 of the interest to which he is legitimately 
 entitled, while it works both an injury upon and 
 an inconvenience to the city banker. 
 
 Another customer may subject his bank to 
 great annoyance by persistently over-drawing 
 his account. If he is charged with interest, he 
 will vigorously protest, forgetting that interest 
 is the life of the bank, that interest never sleeps 
 and has no respect for holidays or Sundays, but 
 keeps ticking away as the pulse keeps beating. 
 
 Another customer, and the one to be most 
 dreaded, is the habitual ^' kiter " or ^^ shinner. '' 
 This customer will find another man of like 
 tastes and needs with whom he will swop checks, 
 sometimes for like amounts, but usually he 
 imagines more shrewdly for unlike amounts, 
 flattering himself that he has fooled his banker, — 
 
sad delusion! The Clearinj^ House lifts the veil 
 and this customer stands out in his true lij^^ht. 
 When suspicions are aroused by such evidences, 
 the banker will send out this customer's check, 
 deposited after Clearings, to be certified ; usually 
 it will come back with the familiar stamp ** No 
 Funds. '^ If the depositor can raise the money 
 or some other obliging man^s cheeky provision 
 will be made during the next day and so on until 
 he has exhausted the patience of his banker, and 
 has been forced to withdraw his account, — when 
 he will seek some other bank to impose upon in 
 like manner. 
 
 Another customer will run a large balance for 
 a time for the purpose of establishing credit, 
 proposing to himself in the beginning when 
 confidence is won to make his bank a victim. 
 In due time he will have unexpected demands 
 and want temporar>' accommodation ; when his 
 banker demands security he will become incensed 
 and threaten to change his account He will 
 probably be surprised to find that that is just 
 what his banker wants him to do, for he has 
 already become satisfied of the ulterior purpose 
 of this customer and his kind. 
 
LOANS-CHARACTER AND DESIRABILITY. 
 
 It is true that the ablest bankers disagree as 
 to the kind and character of business most desir- 
 able. One banker will say, ^* Give me loans on 
 collaterals only; I want quoted and quick-selling 
 securities with such margins as will make them 
 available in emergencies.'' In order to do this, 
 a lower rate of interest must be accepted, and 
 the habitual lender on collateral is entirely 
 willing to make the necessary concession for the 
 absence of anxiety and the peace of mind which 
 follow. 
 
 Another banker will say, ^' Judiciously selected 
 commercial accounts are most attractive." To 
 the lender on collaterals these unsecured credits 
 would be a source of anxiety, if not torment. 
 While a fair proportion of each kind of loans may 
 be desirable, I believe, on the whole, experience 
 teaches that the grandest successes have been 
 attained by commercial bankers who were wise 
 enough to properly select the paper made by 
 solvent merchants and manufacturers, who are 
 willing and can afford to pay a higher rate than 
 cash collateral borrowers. 
 
 Commercial credits are based on the integrity 
 
 34 
 
of the borrower, the prosixiuy oi liis business, 
 the merchandise or products, the bills receivable 
 and accounts receivable shown by his books, and 
 in his possession, representing tangible value 
 held in trust for his creditors, and fully justifying 
 the bank credit asked for. 
 
 A banker cannot confine himself to million- 
 aires; the small merchant and manufacturer 
 must be accommodated with banking facilities, 
 as well as the merchant prince; and these 
 borrowers are just as safe for the amounts loaned 
 — perhaps safer than those possessing larger 
 means with larger wants. 
 
 It may be accepted as true that the bank which 
 has the largest number of small borrowers who 
 are prosperous is in the best possible position 
 to earn dividends. Better rates of interest are 
 obtained on small amounts, larger profits on 
 exchange, better average balances in projxjr- 
 tion to the amount loaned, and the liability to 
 large losses, even in the aggregate, is much 
 lessened. 
 
 Among the most desirable loans for a bank to 
 make is where one merchant or manufacturer 
 sells goods to another merchant or manufacturer, 
 or a producer of materials to a consumer of the 
 
 » 
 
same, taking paper therefor, each being in good 
 credit, with the responsibilities entirely inde- 
 pendent. Here actual value has passed, and the 
 endorsement by the payee, and its use with his 
 banker, make of it at once productive capital, 
 which facilitates and vitalizes commerce. Some- 
 times goods may legitimately be purchased by 
 each customer of the other. Where this is done, 
 it is well to know that in the interchange paper 
 is given for only differences in settlement, instead 
 of, as is often the case, having the paper repre- 
 sent the whole purchase each way. 
 
 WAREHOUSE RECEIPTS. 
 
 A class of borrowers will present themselves 
 for loans, offering as collateral security their own 
 warehouse receipts, for property they propose to 
 hold in trust for the account of the lender. I 
 have made it a rule during my banking experi- 
 ence never to loan on warehouse receipts issued 
 by the borrower, unless I was willing to loan 
 him the amount asked for independent of such 
 receipts. The enforcement of the rule in one 
 notable case saved the bank of which I was 
 president over $100,000.00; other banks loaning 
 
the same customer on his own warehouse receipts 
 lost more than the sum named. I believe the 
 principle of loaning on warehouse receipts (so- 
 called) issued by the borrower on property under 
 his control to be radically wrong^. It encourajjes 
 a system which develops inflation, contributes to 
 the power and opportimity of dishonest motives, 
 and saps the foundation of the true principle 
 of lending on collaterals. 
 
 CHRONIC BORROWERS. 
 
 Again, all banks recognize a class known ai> 
 ** chronic borrowers/' or so-called ** luggers,'' who 
 are to be avoided by money lenders as vigorously 
 as a city would avoid a pestilence; tliey may be 
 estimated to be wealthy men or corporations, but 
 as a matter of fact their methods and true con- 
 dition make them unworthy of bank credit at 
 all. They may not be actually insolvent, but 
 they are treading on dangerous ground and 
 should be shunned by the prudent banker as he 
 would shun an impostor. 
 
 WRITTEN STATEMENTS IMPORTANT. 
 
 The system adopted by many banks requiring 
 a customer, desiring to borrow money, to make 
 
 S7 
 
over his own signature a written statement 
 showing his financial condition, is a wise one. 
 A banker who views such statement in the 
 light of what the borrower would realize if 
 retiring from business, under adverse circum- 
 stances, will not over-estimate the present or 
 future value of the assets shown. 
 
 The creation, by the several States, of a 
 uniform law and severe penalty for making a 
 false statement to obtain credit, and the vigorous 
 enforcement of the penalty, would show salutary 
 results. Concerted action on the part of creditors 
 in securing the punishment of fraudulent debtors, 
 would give great force and effectiveness to such 
 a law. The man who willfully lies to get credit 
 is as much a thief and more dangerous than 
 the man who steals a pocket-book. The former 
 may be aided by respectability and a good past 
 record ; the latter, people are on the lookout for, 
 and opportunities are limited. Prosecute and 
 punish the maker of false statements as a 
 criminal, and the credit atmosphere will be 
 purified, and the liability to unworthily bestow 
 confidence greatly lessened. 
 
 The ability to analyze a trial balance or state- 
 ment may be, in part, a gift, but experience is the 
 
only safe guide. The cultured eye intuitively 
 takes in the quick assets, unconsciously the mind 
 deducts the liabilities and strikes a balance 
 without any actual computation being made. 
 While this statement is true, it does not lessen 
 the importance of prudent investigation and a 
 critical examination before a decision is reached. 
 It is also true that solvent borrowers delight 
 in searching scnitiny. The refusal to disclose 
 actual financial condition to a creditor, who has a 
 right to know, is acknowledged weakness, or piti- 
 able stupidity. Together the banker and borrower 
 can digest a statement made and determine its 
 strength or weakness, which can only be a satis- 
 faction and source of great help to the proposed 
 borrower entitled to credit. 
 
 INFORMATION WANTED. 
 
 A banker will want to know how inventories 
 are taken ; whether the product is put in at 
 original cost, or its market value. He will also 
 want to know the liquidating character of the 
 assets ; whether all worthless and doubtful debts 
 have been charged off ; what the responsibility 
 of the customer is outside of his business invest- 
 
ment ; also whether the customer ever signs 
 security bonds to accommodate friends holding 
 positions of trust, where possibilities are always 
 dangerous. With the existence of good Surety 
 Companies, prepared to furnish bonds as a business 
 transaction, no reasonable excuse exists for 
 appealing to friends to help in this direction. 
 It embarrasses a friend having intimate social 
 relations to refuse, yet a prudent man, especially 
 a borrower of money, feels that he must do so, 
 for there are contingencies beyond a friend's 
 honesty to be considered. 
 
 ACCOMMODATION PAPER. 
 
 The banker will want to know further whether 
 the customer ever makes accommodation paper 
 or accommodation endorsements. It is wise to 
 avoid accommodation paper or accommodation 
 endorsements, for they are undesirable from the 
 fact that the maker or endorser gets no value, 
 and if obliged to pay, he will become bitter in 
 his denunciation of the lender — while, when the 
 debt was contracted, he voluntarily perpetrated 
 the folly now so fruitful of regret, never expect- 
 ing to be called upon to pay. 
 
Acconniiuilaiiuu paper is the ** plague spot of 
 commerce/^ and the stimulator of panics, becaiLse 
 capable of nnlimited extension. It finally lands 
 both borrower and lender in the whirlpool of 
 disaster. I do not mean single name paper, 
 where the maker gets value, but where he loans 
 his credit without value. Fortunately, accom- 
 modation paper has ear marks that the skilled 
 eye usually detects, which to a certain extent 
 become a safeguard to the lender. 
 
 CHANGE IN CIRCUMSTANCES. 
 
 The liability to change, in circumstances and 
 conditions of customers, requires etenial vigilance 
 on the part of the banker; hence he must always 
 be on the alert. A man whose record has been 
 good as to integrity and success may, if disposed, 
 through the various avenues at his command, 
 work disaster and ruin. It is often true that a 
 man, blinded by the perils developed in adver- 
 sity, does not hesitate to use methods that create 
 for him undying regret, and that frightfully 
 wound confidence in humanity, thus crippling 
 the ability of others to borrow for legitimate 
 needs. Hy adroit manipulation he conceals his 
 
true situation, and under pressure he determines 
 to get money even at the expense of his honor. 
 He is liable to succeed in doing so for a time ; 
 he will unblushingly make false statements as 
 to his responsibility, as to the volume of his 
 business and the character of paper made br- 
 others which he offers for discount. He will 
 solemnly declare that he is using only business 
 paper, where value has passed to the maker, 
 while as a matter of fact it is purely accommo- 
 dation or fictitious paper, representing no value 
 whatever. He who maliciously deceives will 
 inevitably learn that it is an awful fate to become 
 the slave of an evil memory. 
 
 Character is never known until it has been 
 tested by some ordeal that shakes the very 
 foundation of life. Beecher says, ^^\dversity is 
 the mint in which God stamps upon us his 
 image and superscription. '^ Deep down in the 
 hearts of true men lie the germs of heroism ; 
 emergencies develop them. In other hearts evil 
 lurks and temptation shows its power. We are 
 surprised to find that the man we believed to be the 
 soul of honor and integrity has proven himself to 
 be an arrant coward and swindler. Such cases 
 will come into the experience of almost every 
 
 42 
 
banker, and the most war>' will be deceived 
 and entrapped. 
 
 A banker will find men of liigh social posi- 
 tion [and great wealth of good intentions], 
 but witliout practical exiDcrience in business 
 or bankable assets, who will have accounts 
 with his bank, and they will be sure to want 
 to borrow money. They may have rich wives, 
 who do not endorse their husband's notes, yet 
 give them luxuriant surroundings and influ- 
 ential connections that indicate wealth. They 
 are very liable lo have elegant bearing, and fine 
 persuasive powers, which make the refusal of 
 credit a painful operation to a bank officer, but 
 it must be done, or he will tie up money in a 
 permanent investment which may cost him his 
 position. 
 
 FORETHOUGHT NEEDED. 
 
 Wise forethought is a virtue whose value 
 cannot be over-estimated. A banker must for- 
 ever bear in mind that monetary conditions 
 rapidly change, that confidence will be suddenly 
 depleted, that deposits will melt away like dew 
 before the morning sun, and various other con- 
 tingencies arise, so that absolute contracts a*s to 
 
 43 
 
future transactions in banking are not consistent 
 with prudence. 
 
 In the panic of 1884, I heard a prominent 
 banker, where a line of credit had been pre- 
 viously agreed upon, and the customer protested 
 at being denied that line, say^ — ^^ All trades are 
 off in a panic.'' I know the customer then 
 thought the restriction unwarranted and unjust, 
 but not long ago I heard him say, "The banker 
 was justified in his position and acted wisely.'' 
 
 It is true that when deposits, under the influ- 
 ence of fear or depressed monetary conditions, 
 are being depleted and resources limited, the 
 prudent banker must make every borrowing cus- 
 tomer bear at least his proportion of the shrink- 
 age. By so doing he aids the customer in get- 
 ting himself in condition to be safe in the pend- 
 ing emergenc}^, and at the same time, is protect- 
 ing the bank against disaster to itself, thereby 
 promoting the interests of every depositor and 
 public confidence as well. 
 
 We this year have some striking illustrations 
 of the practicability of this principle before us. 
 (I trust now behind us.) Not since the demo- 
 niac yell, born in the hot-bed of lunacy, known 
 as the Chicago Convention of 1896, has any 
 
metropolitan banker I'unnd a bed of rases on 
 whicli to sleep and dream of the Klysian bower, 
 where silver cranks are unknown. Anxitiirs 
 have made days crucibles of sorrow, and nights 
 hideous with the possibilities of the morrow. 
 Solvent industries have been imperilled. Some 
 men have proven themselves craven-hearted 
 cowards by sacrificing their credit and assets, 
 when, had they given their bankers their confi- 
 dence, they might have lived and protected 
 themselves and the connnunity from a shock not 
 easy to recover from. When it is too late, they 
 realize their imbecility and cowardice. The 
 sacrifice has been made, however, and they can 
 never recover the position they heretofore held 
 in the esteem and confidence of the public. 
 
 During such crucial periods every conscien- 
 tious banker will keenly feel the responsibility of 
 passing upon a man's credit, which may deter- 
 mine his destiny. It is a grief to be compelled 
 to refuse credit to one whose past achievements 
 have given him high standing. He may be a 
 warm personal friend. The banker may have 
 been startled by the discover)' that this friend is 
 slowly going down the current, and knows that 
 he is sure to finally rush over the rapids to dis- 
 aster and ruin. 
 
 45 
 
A man thus struggling never realizes his true 
 condition and the inevitable result. If cour- 
 ageous and honorable he will, with tenacity and 
 valor, fiercely battle to sustain his reputation, 
 shield his pride and protect his assets against the 
 depreciation caused by forced or acknowledged 
 insolvency. He believes himself to be entitled 
 to the credit he asks for, feeling sure, if the 
 credit were granted his difficulties would be over- 
 come. He recognizes, however, that the refusal 
 of his banker to grant further credit means de- 
 feat, for he has nowhere else to go. Heretofore 
 this man ma}' have been eagerly sought after b\- 
 money lenders, and perhaps given such liberal 
 credit as to produce the very danger which now 
 threatens him. Money was so easy to obtain he 
 extended his business, and thereby sharpened 
 the weapons which are now cutting his throat. 
 
 There is a sympathetic touch among bankers 
 and money lenders which conveys the news of 
 over-borrowing; an almost imperceptible voice 
 that whispers the tidings, and the borrower who 
 was heretofore freely solicited, now meets refusal 
 on every hand — not harsh, but kind — the lender 
 desiring to wound the pride of the borrower, 
 whom he respects, as little as possible. 
 
Tlii> iiKiu, now thivalcned with ruin, hy the 
 relentless conditions prevailing, may have l)cen 
 a striking character in the community; benevo- 
 lent in his charity, beloved for his manly quali- 
 ties, patriotic in his citizenship, generous in his 
 friendships, and supremely loyal to his cofivic- 
 tions. His resources, to outsiders, may have 
 seemed practically inexhaustible, and his trium- 
 phant march irresistible. He is a proud spirited 
 man, conscious of his own integrity. It is pos- 
 sible that conditions over which he had little or 
 no control may have been created that sapped 
 the foundation of his prosperity, and sent him 
 toward financial ruin with resistless rapidity. 
 Every moment he is treading over a yawning 
 gulf in which may soon be buried his fond hopes, 
 and his fatally wounded pride be left to writhe 
 in agony. 
 
 Of necessity business is cold in its realities; 
 cannot be otherwise; a banker must divest all 
 his transactions of favoritism, personal friend- 
 ship and all prejudices created by them, or his 
 tnist is in danger. When a banker's sympatliies 
 control him in estimating and deciding a credit, 
 his judgment is weakened, if not destroyed. 
 
 The aforesaid applicant for credit, who must 
 
now be denied, may have shared with this bank 
 officer social festivities and home joys; their 
 families may have been intimate, and tender 
 associations formed. The appeal for aid in his 
 distress comes with seductive power, but fidelity 
 to his trust compels the banker to refuse the 
 credit asked for. It may be his first refusal to 
 this proud spirited man and his beloved friend, 
 hence fear that his judgment may be at fault 
 haunts him. Experience has taught the banker 
 that the existing conditions can only terminate 
 in financial death, — he must refuse. When the 
 unfortunate debtor becomes conscious of his fate, 
 his soul is the victim of despair ; he charges 
 his banker friend with cold-hearted cruelty, — 
 when it is simply loyalty to a sacred trust and 
 obedience to duty. Gladly would this friend 
 help him if he could do so with safety to the in- 
 terests he represents, but he knows help would 
 only prolong the struggle and result in an out- 
 rage upon his bank. 
 
 I am not now referring to the banker whose 
 so-called conservatism is only commercial im- 
 becility and cowardice, who in unwarranted alarm 
 runs when the first shot is fired, and injudiciously 
 refuses credit, which, wisely extended, would save 
 
 48 
 
the debtor and spare the shock to the business 
 world. Such a banker is an enemy to business 
 interests, and unworthy of the position he holds. 
 Commercial disturbances will occur, peril will 
 abound ; under the influence of a panic, chaos 
 rules, a financial volcano will appear and bury 
 hopes in the grave of despair. Prudence does not 
 imply timidity; courage does not imply rashness; 
 refusal does not imply wisdom. A banker mitst 
 be wnse enough to supply, so far as his ability will 
 l^ennit, the legitimate needs of worthy customers; 
 sagacious enough to discriminate against a hope- 
 less case in favor of one whom timely aid will save 
 from failure ; courageous enough to refuse all 
 appeals for help, when help would only prejudice 
 his bank, and be unavailing in saving the 
 customer. 
 
 The bank officer is only a trustee, liis trust is 
 sacred; loyalty to his trust should make him for- 
 get his prejudices and his friendships when 
 weighing the rights and interests of his bank. 
 To know just how far to go with safety is the 
 wisdom ever)' honest banker seeks. 
 
 BANKER'S ATTITUDE IMPORTANT. 
 
 In hours of financial peril the attitude of a 
 banker may inspire confidence or create fear. 
 
 49 
 
Nervousness is catching, especially where the 
 public is already excited. Intrepid nerve and 
 mental poise are essential qualities in all depart- 
 ments of life, but especially so in a banker, who, 
 in monetary affairs, should be a leader ; on his 
 part a calm, self-contained, dignified manner 
 will ever be reassuring. A wise banker in the 
 community becomes a mainspring, a balance 
 wheel, representing courage, good sense, steady 
 energy, and moral independence, whose influence 
 works like magic in restoring and sustaining 
 confidence. 
 
 SPECULATION SHOULD BE DISCOURAGED. 
 
 It is the unqualified duty of bankers to refuse 
 money to speculators, especially in money strin- 
 gencies, no matter what security they offer. 
 Their purpose is to profit from the dire necessities 
 of the panic-stricken, and build their own fortunes 
 on the ruins of the fortunes of others, towards 
 whose destruction they have contributed. The 
 bank or banker who encourages unwarranted 
 speculation, by lending money to market man- 
 ipulators, commits a crime which should drive 
 him from the recognition of the legitimate 
 members of his profession. For instance, aiding 
 
 50 
 
the officers of a corpoialion in usiu^ iu .suiplu.^ 
 funds to buy the corporation's own stock on 
 margins, for speculative purposes, if at all. The 
 unprincipled speculator cares nothiuj^ for public 
 weal ; men and principles are unhesitatingly 
 sacrificed. I refer now to manipulators of 
 markets who instigate and circulate false reports, 
 who impeach confidence, precipitate panics, who 
 on the slightest provocation predict gold famines, 
 offer premiums on gold options, exaggerate the 
 depleted condition of the Government Treasury 
 and its effect upon business, all to stampede the 
 timid; speculators * who borrow money in large 
 or small blocks, withdraw it from circulation, 
 where it is needed for legitimate business, and 
 lock it up in vaults and create stringencies, 
 thereby demoralizing trade and ruining fortunes, 
 while on the ruins these selfish fiends build up 
 competencies and laugh at the miseries of their 
 victims. These cowardly vultures, to serve their 
 own purposes, will maliciously attack the good 
 credit and good faith of any individual or bank. 
 They possess all the instincts of the highwayman 
 or midnight assassin, without the physical 
 courage to perfonn the latter's work. 
 
 This is in no way intended to reflect upon the 
 
honorable Board of Trade operator or Stock 
 Exchange broker who, relying upon facts, make 
 a convenient market for the products of the 
 country and the solvent securities of the world. 
 
 No banker who speculates is ever a safe cus- 
 todian of trust funds ; his judgment is divested 
 of its efficiency, his attention diverted from and 
 his anxiety unfits him for business. Under the 
 crucifying pressure no man can be effective. 
 Many a banker has commenced speculating with 
 his own money in a small way, never dreaming 
 in the beginning that he would make use of his 
 bank's funds. When private resources became 
 exhausted, resort was made to the bank's money 
 and the death trap was set ; the temptation 
 became irresistible, the banker made a bank- 
 ruptcy of his own existence and an inheritance 
 of withering sorrow. 
 
 A bank and its credit must never be used for 
 personal ends. I believe that an executive 
 officer, in active management, should never bor- 
 row money of his bank, but should keep himself 
 in a clean and independent position, where his 
 judgment is uninfluenced by any interest other 
 than the bank's highest good. History clearly 
 proves that, as a rule, bank failures find their 
 
 52 
 
orijj^n in the attempt of officers to use their 
 bank for private purposes. 
 
 Look out for the bank organized so that its 
 promoters may increase their borrowinj^ facilities ; 
 it is always a menace to safety and public 
 interests, and becomes a putrid ulcer on bnsiiuss 
 life. 
 
 CONCLUSION. 
 
 In conclusion allow me to say that an honest, 
 able banker can become a powerful factor in the 
 equitable adjustment of the relations between 
 capital and labor. The success of his bank 
 depends upon the prosperity of the industrial 
 interests of the country, and as there can be no 
 solidity and perpetuity of prosperity except upon 
 a just recogiiition of the rights of both capital 
 and labor, independent of the moral sentiment 
 that compels fair-minded men to fight injustice 
 and oppression, it becomes the banker's impera- 
 tive duty to stand as an impartial arbitrator 
 between the two, striving to be just to each. 
 
 The capitalist employing labor, who does not 
 concede to wage earners their rights, and fairly 
 treat them, is a pirate on the sea of commerce, 
 whose craft is sure to be wrecked in the fury of 
 
 58 
 
the storm Eternal Justice is brewing for the 
 punishment of him and his kind. 
 
 Gigantic fortunes, made up of unholy gains, 
 that re])resent losses forced by the stronger upon 
 the weaker, the tears and anguish of poverty, 
 are an insult to God, and a curse to the possessor. 
 
 A man whose idolatry for gold has made the 
 eyes of his conscience blind, and frozen every 
 generous impulse of his nature, so that his moral 
 sense lies only in the might that money gives, 
 need not flatter himself that, because judgment 
 for unjust and cruel deeds is delayed, there is np 
 punishment. The attempt of such a man to win 
 the approbation of just men, and to make peace 
 with the Infinite, by making liberal contribu- 
 tions to churches, or endowing schools or chari- 
 ties, is as useless as for the leopard to try to 
 change his spots, or for the slimy serpent to 
 attempt to invest himself with the wings of the 
 eagle. The unthinking public may applaud the 
 parade of his virtues and generosities (so-called?) 
 and sycophants dance attendance upon the ele- 
 gance of his entertainments, but the inexorable 
 settlement day will come when the penalty must 
 be paid. Justice is a law inherent in creation. 
 Its edicts may be slow in execution, but they are 
 as sure and resistless as death. 
 
 54 
 
The foregoing in no way applies to noble, 
 public-spirited citizens, who, through magnificent 
 ability, exhaustless energy and wise economy, 
 have accumulated fortunes that make generosity 
 possible, and whose benefactions bless the world 
 and crown their own lives with immortal 
 memories. 
 
 And further, that the same law which governs 
 morals governs business ; whether we stand or 
 fall depends upon ourselves. If we stand, it 
 must be in the rectitude of our own lives and 
 the prudence of our own management. We may 
 use all the faculties we possess and all the 
 experience we have gained, yet we shall make 
 mistakes. A mistake does not imply a disaster, 
 if the qualities of manhood are so stalwart as to 
 demand another trial, and we are courageous 
 enough to acknowledge past errors, and wise 
 enough to profit by experience. 
 
 The grandest triumphs always crown the 
 severest struggles. The consciousness of being 
 right gives courage, strength and irresistible 
 power. Right always ultimately triumphs, and 
 there is no kingdom so rich, no crown so bright, 
 no inheritance so grand as spotless integrity. 
 The banker who has proven worthy of his trust 
 
 55 
 
has won that self-respect born of purity of life 
 and honesty of purpose. The merited respect of 
 our fellows becomes a matchless diadem when 
 the shadows of old age fall upon us. An honor- 
 able old age is clothed with the memory of the 
 highest success a man ever achieved — hence the 
 twilight hours of a truly successful life become 
 an abiding consciousness of manhood^s meridian 
 grandeur. Nowhere are opportunities for being 
 just, fair and helpful more abundant than in a 
 banker's career. The memory of a good act 
 never dies ; it is a benediction upon the past, a 
 joy in the present and an inspiration for the 
 future, and will cast a sweet halo over the grave 
 of the departed. 
 
PRESS OF 
 
 S. D. CHILDS & CO. 
 
 CHICAGO. 
 
UNIVEESITY OF^CALIFOKNIA 
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