What is the absolute, final and unquestionable test of a good banker, a real top notcher in his business? It is the volume of deposits which he attracts. That is the ultimate test of his ability and integrity—the confidence he inspires in his institution as measured by the volume of money entrusted to it! That volume of deposits must be obtained, retained and increased in the face of the hottest kind of hot competition. It is the absolute ability and integrity meter of a successful banker. There is no other. Are these strutting, preening, vociferating and vociferous Federal Reserve bankers measured—or measurable—by that standard? Do they battle for their deposits and by those deposits and the volume of them win their spurs? They do not. Their mass of deposits—the largest on earth—are dumped into their banks by law, conscripted into their coffers. They are not won in competition. Federal Reserve bankers don't prove their ability by competition—they smugly admit it. At this writing over $1,800,000,000 of deposits are in their coffers, conscripted there as were soldiers in the World War by law!
And not only that, but that vast mass of deposits—the hugest on earth—is handed to them free of interest charge. All other banks in large American cities not only compete with each other for the deposits of country banks, but pay interest on them at a minimum of 2 per cent per annum. Federal Reserve bankers pay no interest—not even to the Government. If a National Bank wants Government deposits it must put up the unquestioned security to get them and then must pay interest on them, but Federal Reserve bankers do neither! Not much competition for Federal Reserve bankers there, is there? Peg that proposition and look at the next one.
Here it is. The loans of a bank are the life of a bank. From the interest upon them comes practically the sole earnings of a bank and upon their repayment depends the solvency of a bank. The credit department of a bank is its solar plexus. Loans must be successfully made to men engaged in every variety of industry, some secured, some unsecured and in amounts varying from a few hundreds of dollars to hundreds of thousands of dollars. In May, 1922, the loans and discounts of the National City Bank of New York amounted to $506,840,494—larger by over $200,000,000 than all the "earning assets" of the Federal Reserve Bank of New York. But there is a greater difference than even in these figures and here it is. The bulk of the loans of the Federal Reserve System are made to its member banks and require very slight, if any, credit ability. The bulk of the people in the U.S.A. are loaning money to banks—when they make their deposits—without interest and unsecured, while the Federal Reserve System is engaged largely in making loans to banks at rates up to 87 per cent and mostly secured at that! In other words, what the bulk of the people of the U.S.A. do who are bank depositors is to loan banks money for nothing or at a very low rate of interest and unsecured, while the Federal Reserve System loans the banks money often at altitudinous rates and often secured at that! Or to put it another way, Federal Reserve bureaucracy draws fabulous profits for doing practically for the banks what the people of the U.S.A. are daily doing for nothing!
Sum up some of these differences between National and State Banks and Federal Reserve parasitism.
National and State bankers put up their own capital and risk their own money. Federal Reserve bankers commandeer their capital and risk not a penny of their own.
National bankers make practically over a large term of years about 12 per cent net profits and Federal Reserve bankers make the most fabulous profits ever registered on bank ledgers—during the three years last past an average of 116 per cent.
National and State bankers earn their deposits in the hottest kind of competition. Federal Reserve bankers conscript their deposits—without a scintilla of effort.
National and State bankers pay interest to the Government for Government deposits and give security besides. Federal Reserve bankers pay no interest and give no security for Government deposits.
National and State bankers pay interest upon deposits of other banks. Federal Reserve bankers do not pay any interest.
The capital of National Banks is commandeered into the capital of Federal Reserve Banks at a petty six per cent and their reserve deposits are conscripted at no per cent and then they are graciously permitted to borrow their own money at altitudinous rates!