Seventeen Talks on the Banking Question / Between Uncle Sam and Mr. Farmer, Mr. Banker, Mr. Lawyer, Mr. Laboringman, Mr. Merchant, Mr. Manufacturer

by Charles N. Fowler

Mr. Lawyer: Well, let me see now, how you would insure that result, that is that bank failures would cease. The banks fail very often, possibly generally, because the officers of the banks have used the bank's assets in their own schemes, or those in which they are interested. But bank failures are very often due to fish paper, such as you described a few moments ago. How would you detect, check and stop that sort of thing? That is, how would you prevent too much paper from some one merchant, or manufacturer, getting into the banks?

Mr. Banker: Don't you see, Mr. Lawyer, that if your examination covered all the banks in a commercial zone, your examiners would always know, or could very easily find out, just how much paper any business house had in the banks of that particular zone, couldn't they? Don't you see that if they observed that a large amount of paper of some business house had been placed in the banks of that zone, that is, loans made, or paper sold, they would at once be placed upon their guard and inquiry, and would proceed to find out just how much paper that particular business house ought to have, or was entitled to have out, considering its capital, and the general character of its business? Don't you see that these bank examiners could insist on knowing all about the financial condition of any business house in their particular zone, just as well as the banks themselves could and do insist upon knowing? If a business house should refuse the bank examiner the fullest possible information about its affairs, its days would be numbered as a borrower at the banks of that zone, would they not?

Mr. Lawyer: That is just the point. A business that is over expanding its credit by borrowing, or by selling its paper, will probably be working some other zone, or several of them at the same time.

Mr. Banker: You might naturally think so until you reflected upon the situation for a moment. Don't you see that if you had, as I have just said, thirty or forty such commercial zones, all organized, and all united into one system, as perfectly as if they were one single institution, that they could within twenty-four hours know to almost a dollar how much any business house in the whole United States had outstanding so far at least as the banks were concerned in all of them—simply by telephoning or telegraphing to each other?

You must see that every one of these commercial zones would soon become the most comprehensive and the most perfect credit bureau in the entire world, and that taking them altogether, they could and would, by the most exhaustive methods, not even now fully appreciated, be able to check the whole commercial situation in the United States in an incomprehensibly short space of time. Nothing is so essential today as to know the facts about the situation because of the enormous increase of trade, and consequent expansion of credit.

Mr. Lawyer: It does seem to me, after all, now that you have finished the details of your plan, that you have in it a perfect check upon the whole business of the banking world. Humanly speaking, I see no loophole nor escape whatever.

Mr. Laboringman: That looks to me like an all-round scheme. It will certainly work like the colored man's fish trap, it will catch 'em, both "agoin' and acomin'," and would give this country the only practical scheme I've ever heard of for insuring bank deposits; for it does not seem possible to me for a bank to get into a position where it ought to fail. Now, gentlemen, if there is one reform in this whole business that ought to be accomplished it is such an administration of these banks, as will practically prevent failures. Don't you think so yourselves? This question is always coming home to the working people, because a bank failure is a tragedy in their lives.

Mr. Manufacturer: Yes, Mr. Laboringman, I certainly do agree with you, and I believe that this plan of having all the banks of the entire country examined by bankers just as they are now being examined by the clearing houses instead of politicians, and finding out, as such clearing house examiners will, not only the condition of the banks, but the financial condition of every business house as well, will accomplish what you want. The laboring people are entitled to better protection than what has yet been given them. This goes to the very root of things.

Mr. Merchant: Gentlemen, I have been listening with the greatest possible interest to the story of the growth of the American Clearing House and the most marvelous thing about this matter to me is that this vast system which has not yet been correlated is the product of experience, and that there is not a single practice of this huge machine from the Atlantic to the Pacific as it is carried on, or operated, that is based upon a single statute. Think of the Clearing House Associations in those twenty cities, actually examining, not only their own members, but every other bank that clears its checks through one of their members. Why, gentlemen, today these bank examiners could cut off my credit at my bank without my knowing it by simply saying to the banks that my credit was too much extended, and that I ought to cut it down, and get into a safer position.