Financial manager

“ In the country it is considered that an average balance of £50 upon a small account pays expenses. However, the bank-manager, who is as human as the gentleman who sells one a dog, seldom neglects to make a small charge upon these accounts when he considers that their owners will stand 10s. ”

“ One of those principles is what the President and the Secretary spoke about today, which was how do the American people feel confident in a financial system where they become -- through extraordinary assistance -- a lender to a bank in order to stay healthy in this financial system. ”

“ To them the Government turns when funds are needed for internal improvements or when the exchequer faces a deficit. The promoters of street railways, steam railways, steam railroads, and other permanent improvements take counsel with the managers of these chartered banks before they issue their securities. The banks as a rule do not invest their funds in the stocks or bonds of new enterprises, yet their managers are the men most familiar with the world's money markets and their approval, therefore, of any financial undertaking is highly esteemed. ”

“ This class of business, of course, is absolutely safe; so the customer, if he cannot come to terms with the manager, is able to take his account to the cheapest market, always remembering that it is never wise to bank with a second-rate firm, whatever advantages may be offered. ”

“ Through these agencies the banks are constantly placing as relatively permanent investments securities which they have bought or have aided "to float" or which they handle only as commission agents. In any case the real investment banker is bringing to his task special training and a high sense of his professional obligations, and is employing the services of statisticians, financial experts, and of practical engineers to determine exactly the fundamental conditions of each investment. ”

“ A combination course in engineering and business management is needed also to prepare men for places in banks as investment managers. The banks must advance funds to industrial concerns, and such loans cannot be made wisely save upon the advice of one who is thoroughly acquainted with plant management, equipment, and mechanical operations as well as costs of production and market possibilities. In addition, such a man must be well acquainted with systems of accounting and methods of preparing financial statements. ”

“ They say that the active manager of industry, the business man or entrepreneur, in the first place is always more or less in debt; in the second place, is always buying labor, or materials, or goods, with the intention of selling a product at a later date at an advance in price. He habitually measures his gains in terms of money, and not in terms of the commodities he can buy with the money. In times when prices are falling, he finds it harder to meet his debts, and to dispose of his goods in hand at a money advance over what they cost him. ”

“ With the third method a permanent increase is secured in the capital funds available for use in the business. Financial policy, governed by the needs of the business and its markets, will always dictate the method to be used for extinguishing or contracting a debt. ”

“ 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. ”

“ The primary object of a manufacturing business is to produce, and if that objective is always kept, finance becomes a wholly secondary matter that has largely to do with bookkeeping. My own financial operations have been very simple. I started with the policy of buying and selling for cash, keeping a large fund of cash always on hand, taking full advantage of all discounts, and collecting interest on bank balances. I regard a bank principally as a place in which it is safe and convenient to keep money. The minutes we spend on a competitor's business we lose on our own. ”

“ The manager is a hired man, sworn to do his utmost to protect the credit of the bank, trained for many years in its service, familiar with its history and its policy, anxious to guard his own reputation and character against criticism. Under these circumstances it would be remarkable if he did not fix the amount of his bank's reserve nearer the ideal figure—if an ideal banking reserve is possible—than could possibly be done by a body of lawmakers or of any other men outside the bank. ”

“ The manager, who is a humble servant of the company, and who, moreover is anxious to pass the rest of his days in that honourable capacity, looks at his customer, thinking hard the while, and then, trusting his man lacks business experience, suggests 5 per cent. per annum on the overdraft and 1⁄8 per cent. on the turn-over. The turn-over of an account consists of the cheques, bills, etc., debited during the quarter or half-year, and the customer, therefore, is asked to pay a commission of 2s. ”

“ As merchants begin by laying in stocks of goods of the kinds they purpose to deal in and offering them for sale, so bankers begin by bringing together money and credits of their own in order to attract to themselves in the way of buying and selling the money and credits of other people. In order to deal successfully in credits the banker must have credit, that is, he must have the reputation of having property of his own, and of being an honest and careful manager of his own affairs and of the affairs of others so far as they are intrusted to him. ”

“ The financial organization is the medium by which the various parts of the industrial and commercial organism are held in harmony. It is by the financial organization that capital is collected and distributed, that the friction of exchanges is reduced to a minimum, and that time is economized, through credit, between production and consumption. The financial system furnishes three indicators—prices, the rate of discount, and the foreign exchanges—through which we may read the operation of economic forces now that their magnitude makes it impossible to inspect them directly. ”

“ As a rule he and the accountant go through the books together; and as there is no recognized scale by which the charges are regulated it follows that they consider the man as well as the nature of his account. The business of the manager is to make his branch pay; therefore, if you do not criticize your commission rate, you may rest assured that he will succeed brilliantly at your expense. Should he think that the customer lacks experience, and is not acquainted with the fact that [43] competition between bank and bank for creditor accounts is active, then he charges him 1⁄8 per cent. ”

“ Knowing that certain bank-managers are running about the City in search of desirable accounts, just as are bill-brokers for first-class paper, he not unnaturally comes to the conclusion that he can find a cheaper market elsewhere, so, having exhausted the gentler modes of suasion, the client finally and reluctantly threatens to apply elsewhere, or reveals the fact that he has already done so, and with what result, when the manager, if he think him in earnest, quotes his very lowest rate, and asks him not to mention it outside. ”

“ All these various forms of banking are distinct in character and economically the funds of each perform a peculiar function that must be recognized and observed or we shall make a great fundamental error in constructing what we hope will prove a sound financial and banking system. We must provide that the commercial function, the savings function, the trust function shall be kept apart by separating the funds arising from each, and keeping them completely segregated, in order that the country may always know just what its commercial fund is, as distinguished from its investment fund. ”

“ After all, in the ordinary affairs of life one does not accept without question the price of the seller; and if a customer be so unwise as to think that a bank-manager has a higher sense of honour than his kind, then he must be prepared to take the natural consequences. For instance, D and E keep an average balance of £100 in their bankers’ hands, and the turn-over of each account is about £1,500 for the half-year. ”

“ In Chapter II, on the choice of a banker, an attempt was made to show why a customer should select a strong institution whose working resources are plentiful, and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic. The shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors. ”

“ If you take a bill to the bank now, with, say, even my Lord Mayor’s name on it, the manager looks at you as if you were no better than a thief. It is no good being down-hearted, though; if care killed the cat, I still see no reason why care should kill us. We shall find the ‘Protector’ looking up yet, never fear, and the shares at a premium again. Deuce a share is at a premium in the City, I think, at this present minute of speaking. ”

“ Without going into shades of encyclopedic meaning, I would define, for the purpose of this discussion, a financier as a man who has some recognized relation and responsibility toward the larger monetary affairs of the public, either by administering deposits and loaning funds or by being a wholesale or retail distributor of securities.
To all such the confidence of the financial community, which naturally knows them best, and of the investing public is absolutely vital. Without it, they simply cannot live. ”

“ If, on the other hand, his business is unexpectedly large, giving opportunity to make bigger profits and creating the need for more capital, he will find the bank ready to increase his line of credit, provided the manager is satisfied that business conditions and prospects warrant expansion. Under no circumstances, however, must the customer of a bank seek to raise funds elsewhere unless he first gets the consent of his bank. If he sells his notes in the open market, he must do it with the [Pg 429] full knowledge of his bank or run the risk of being placed upon the "black list." ”

“ For instance, suppose a man who possesses a good list of marketable stocks and shares wishes to borrow £5,000 from his banker, and calls upon the branch-manager, who at once expresses the opinion that his directors will have no hesitation in granting his request. ”

“ Thus he can apply far more directly than the manufacturer or railroad manager the economies and efficiencies of Big Business.
Banking—the business of dealing in money and credit—is the most logical of trusts. And in practice it has justified the theory. Where banks have become larger they have become stronger, where co-operation and concentration have gone far, there safety and effectiveness have reached a high pitch.... Banking is the one central business of all—it is the business of businesses. ”

“ A really large tradesman, however, whose securities consist of this variety, will sometimes find a bank-manager anxious to secure his account, because he thinks he may influence others in his favour, and such a man will not pay high rates before he has at least sounded two or three managers of well-known banks and discovered that their terms are not more liberal. ”

“ Investment bankers, like J. P. Morgan & Co., dealers in bonds, stocks and notes, encroached upon the functions of the three other classes of corporations with which their business brought them into contact. They became the directing power in railroads, public service and industrial companies through which our great business operations are conducted—the makers of bonds and stocks. They became the directing power in the life insurance companies, and other corporate reservoirs of the people’s savings—the buyers of bonds and stocks. ”

“ Canadian bank managers are anxious to put out their money where it is most wanted, for there they get the best possible rate of interest and obtain paper of the best quality. No matter where a manager's headquarters may be, he is most deeply concerned in three questions: (1) Where is idle money accumulating? (2) How can he best draw it into his bank? (3) In what parts of the Dominion is money most needed? In localities of both kinds he establishes branches; in the one the branches accumulate deposits often much in excess of their loans, in the others the loans exceed the deposits. ”

“ 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. ”

“ The money account may or may not reflect efficiency in performance. Have we not been grasping at the shadow of money at the expense of the substance, effect? Consider, if you please, the working of a bank, perhaps the corporate institution in whose efficiency the public has the greatest confidence. In a small country bank one man does all the work. Later he requires a clerk or a bookkeeper. As the bank grows there are self-suggesting divisions of labor along such well defined positions as teller, paying or receiving, cashier, vice-president, president, etc. ”

“ The manager, knowing that D is not critical, charges him 1/16 per cent. commission, or 18s. 9d. E, he asserts, is a most unpleasant man, who, when charged upon a previous occasion, threatened to remove his account unless the sum were given back to him; E, therefore, who is aware that competition is one of the factors that determine price, has his business done free.
A large trader or merchant, as a rule, does not allow his banker to have the use of a considerable amount of money free of interest ”