Banker

“ The banker who undertakes to make loans to or purchase securities from a railroad for sale to his other customers ought to have as full knowledge of its affairs as does its legal adviser. But the banker should not be, in any sense, his own client. He should not, in the capacity of banker, pass judgment upon the wisdom of his own plans or acts as railroad man. ”

“ All the Bills of Exchange Act of 1882 says is—“A banker includes a body of persons whether incorporated or not, who carry on the business of banking”—a definition which has never had the slightest use in preventing scandals that have arisen in connexion with such concerns as the Charing Cross or Farrow's Bank. ”

“ We now have to discuss the position of those persons who can only offer their banker the deeds of house property, land, and those other securities for which the market is a purely local, and, therefore, uncertain one. A banker, whose deposits are mostly payable at call and short notice, naturally prefers to advance against those securities that are quoted on a Stock Exchange, and does not care to lock up a large proportion of his resources in house property, etc., of which he cannot readily dispose in an emergency. ”

“ Every good banker finds out, that many of his customers wish always to leave a balance in his hands; that while some of them are constantly drawing cheques on him for cash, others of them are as constantly depositing with him in cash; and that consequently he can properly and safely use a large part of the money he has purchased with his credit to purchase other credits with. ”

“ We are studying in order the forms of commercial Credits, and we have now come to that one which is central in the operations of Banking, and accordingly this is the place for us to understand clearly what a Bank is, who a Banker is, and what are the motives actuating at once the Banker and his Customers. A Bank is an institution for the Creation, Management, and Extinction of Credits. Money of any kind plays a very subordinate part in the general operations of banks, which live and move and have their being in the sphere of pure Credits. Bankers are buyers and sellers of credits. ”

“ Whenever makers of securities or investors require all or any of these three services, the investment banker is needed, and payment of compensation to him is proper. Where there is no such need, the banker is clearly superfluous. And in respect to the original issue of many of our state and municipal bonds, and of some corporate securities, no such need exists. ”

“ Now when you say a banker is ready for a run, you mean, as I now understand it, that he has all his deposits on hand in cash, or has all his deposits invested in something that he can turn into cash: good notes that have been taken in the course of business, that is, in the production and transportation of consumable commodities, the necessaries of life. Of course, anybody must understand that if a bank bought a lot of farms or a lot of farm mortgages (and it might be worse off if it bought city mortgages with our deposits) , he could not convert them or turn them into money on demand. ”

“ The banker is a merchant in money and credit, and precisely as you can say that a man is a hardware merchant, cotton goods merchant, grain and flour merchant, so you can say that the banker is a money and credit merchant. He deals in these two things.
Let me illustrate this in a simple way. If Mr. Farmer should come to me to borrow a thousand dollars for three months, and I should make him the loan, as we say, I, as a banker, would buy his note, due in three months. That is just what happens every time a bank makes a loan; it simply buys the note. ”

“ And all the rest of the knowledge requisite for a banker can easily be obtained by any one who has the sort of mind which takes to it. No doubt there is a vast routine of work to be learned, and the manager of a large bank must have a great facility in transacting business rapidly. ”

“ So the banker 347gets something for nothing, and the borrower pays for that which he never receives.”
Banks are run on the deposits, rather than on any capital the banker himself may have. The patrons of the bank furnish the capital, and also the security. The banker lends other people’s money to other people; on this he draws interest; he conducts his business on your money and his credit, which you furnish him. ”

“ The calling is hereditary; the credit of the bank descends from father to son; this inherited wealth soon brings inherited refinement. Banking is a watchful, but not a laborious trade. A banker, even in large business, can feel pretty sure that all his transactions are sound, and yet have much spare mind. A certain part of his time, and a considerable part of his thoughts, he can readily devote to other pursuits. And a London banker can also have the most intellectual society in the world if he chooses it. ”

“ When credit operations have become sufficiently extensive the banker appears as a man who makes dealing in credit his profession. He steps in between the people who have capital but lack the ability or inclination to employ it profitably, and the people who have the ability and inclination to conduct business enterprises but lack the desirable amount of capital. The banker is a specialist in this profession, and by his special knowledge can do more than any one else could to collect the surplus capital and place it where it can be used to the best advantage. ”

“ The modern banker is a dealer in credit, while in ancient times the so-called banker was a mere custodian of other people's money and a buyer and seller of foreign moneys. The bill of exchange appears to have been the first credit instrument handled by the early bankers. ”

“ Undoubtedly such a permanent official should be a trained banker. There is a cardinal difference between banking and other kinds of commerce; you can afford to run much less risk in banking than in commerce, and you must take much greater precautions. ”

“ If, therefore, an English banker retains a sum of Bank of England notes or coin in due proportion to his liabilities, he has a sufficient amount of the legal tender of this country, and he need not think of anything more. ”

“ An officer of a bank there asserts that banking in the north coast countries is not to any great extent a matter of handling currency or money funds. The intermediary system of brokers, merchants, and other middlemen between the producer and his market, to which we are accustomed, is lacking, and the banker must take the place of all of them. ”

“ And besides, a banker, dealing with the money of others, and money payable on demand, must be always, as it were, looking behind him and seeing that he has reserve enough in store if payment should be asked for, which a merchant dealing mostly with his own capital need not think of. ”

“ The later introduction of Banks brought along with it the custom, now continually widening in commercial countries among all classes of the people, of keeping one's funds with some banker, and making payments by written orders or cheques upon him. When the person making the payment and the person receiving it keep their money with the same banker, there is no need of any money at all passing in the premises, the sum being merely transferred in the banker's books from the credit of the payer to the credit of the receiver. ”

“ The bill brokers lend most of their money, and deposit the remnant either with the Bank of England or some London banker. That London banker lends what he chooses of it, the rest he leaves at the Bank of England. You always come back to the Bank of England at last. But those who keep immense sums with a banker gain a convenience at the expense of a danger. They are liable to lose them if the bank fail. As all other bankers keep their banking reserve at the Bank of England, they are liable to fail if it fails. ”

“ A. There are certain places where the private banks have kept on, but the tendency is for the private banker to disappear. We take small sums and have numerous branches. One great distinction is that the private bank is always in the hands of a family. A man who originally starts a private bank may be a good banker, financier, and business man, but it does not always follow that his son, who in all likelihood will inherit the business, will be capable of running it. Our joint-stock banks do not go from father to son, but are always under efficient management. ”

“ By way of encouragement to you men, before you begin to discuss the subject of reserves, I want to gamble the prophecy that if you will work out some method or plan that will make it possible for the banker to pay all his deposits on demand, and at the same time will enable him to continue to use practically all of them in profitable employment, I will guarantee you now the support of every banker for your plan, when you've completed it. ”

“ A banker's profession being that of a money-lender, his issue of notes is a simple extension of his ordinary occupation. He lends the amount to farmers, manufacturers, or dealers, who employ it in their several businesses. So employed, it yields, like any other capital, wages of labor, and profits of stock. ”

“ He has such confidence in the integrity and solvency of the banker, finds it so practically convenient to have dealings with him, and comes to have certain minor privileges at the bank in other relations over non-depositors, that he quite prefers a credit on the banker to the possession of the money itself. ”

“ Such bills are not always distinguishable from the bills a banker in New York may draw on a banker in London in the operation of lending money for him, but in nature they are essentially different. Whether or not any collateral is put up, the whole purpose of the drawing of finance-bills is to provide an easy way of raising money without the banker here having to go to some other bank to do it. ”

“ The investment banker is naturally on the lookout for good bargains in bonds and stocks. Like other merchants, he wants to buy his merchandise cheap. But when he becomes director of a corporation, he occupies a position which prevents the transaction by which he acquires its corporate securities from being properly called a bargain. ”

“ Seeing that the banks themselves discount trade-bills for their customers, the necessity of a middleman or bill-broker between the person who discounts a bill and the banker who supplies the capital is not very apparent, but the broker’s “turn,” when he re-discounts with the banks, is extremely small ”

“ If a banker has funds deposited with his correspondent upon which he can draw, well and good: if he has no balance with the agent, he must either provide the wherewithal to meet the bills which he has drawn, or, alternatively, he can instruct the agent to draw on him in reimbursement. ”

“ The original function of the investment banker was that of dealer in bonds, stocks and notes; buying mainly at wholesale from corporations,7 municipalities, states and governments which need money, and selling to those seeking investments. The banker performs, in this respect, the function of a merchant; and the function is a very useful one. Large business enterprises are conducted generally by corporations. ”

“ Thus he goes through the lot, commenting on the financial means and willingness to pay of each signer. When he has concluded the doctor gathers up the notes, replaces them in his wallet, chats for a moment about the weather and crop conditions, gives the banker a fine cigar, thanks him heartily for his courtesy, and turns to leave.
Country bankers make the most, if not all of their money by discounting the notes of their neighborhood farmers. They know the financial record of everybody within reaching distance. ”

“ Just as soon as there is any fear anywhere in this great country about a bank of any consequence, or about the business generally in the country, every banker from Dan to Beersheba begins to grab currency in whatever form he can get it, because he knows the amount is fixed and limited. ”

“ There is a building called the Clearing-house, to which every City banker sends, each afternoon, all the cheques on other bankers which he has received during the day, and they are there exchanged for the cheques on him which have come into the hands of other bankers, the balances only being paid in money ”

“ Before the investment banker underwrites the issue, or makes his purchase from the corporation—before the bonds are offered to the public—there is always a painstaking and minute investigation of the new security from many different viewpoints, made by and in behalf of the banker. ”

“ As the customer’s loan or advance is well secured, and as the banker will only advance to the extent of 90 per cent. of the market-price on the condition aforesaid, he is only willing to pay Bank rate upon the sum he borrows. ”

“ We need not discuss here whether or not this policy be essential to modern banking; but it is quite evident that the small man of business has lost a good friend in the old-fashioned country banker, whose place has not been taken by that person of peculiar views and training—the bank-manager or clerk-in-charge, whose urbanity must be more than painful to those would-be borrowers without security who ask for bread and are politely offered—a stone. ”

“ Modern banks are banks of ‘deposit and discount,’ for though all loans made by banks are not in the form of discounts, the word is used in this connection to embrace all its loans. The advantage to society from banking operations consists in centralizing credits. The banker collects the money and wealth which would otherwise lie idle, and brings it into use. Through his agency, wealth which would lie idle and unproductive becomes useful and productive. ”