Kankakee Valley Post, Volume 3, Number 4, DeMotte, Jasper County, 8 June 1933 — DISPELS MYSTERY OF BANK BUSINESS [ARTICLE]

DISPELS MYSTERY OF BANK BUSINESS

Country Banker Gives Simplified Picture of How a Bank Works to Help Other People’s Business A COUNTRY banker recently prepared the following simplified statement for his neighbors on just how a bank goes about helping them: "It is the most important part of a bank’s business to lend money. Of all the money deposited in a bank, the law requires that a certain percentage be kept on hand as a reserve to meet the demands of depositors. It is the business of its officers to lend the balance conservatively and safely. “The loans of a properly managed bank are invariably made to those it believes are able to repay, and always on condition that they be repaid at a stipulated time. “The promise of an individual to repay a loan to a bank on a certain date is as sacredly inviolable as the prom ise of a bank to repay its depositors on demand, or, in the case of a certificate of deposit, on the date it falls due. When it comes to be known of an individual that he ‘always pays.’ his credit is established and his bank is always glad to extend him needed accommodations. “A well managed bank never capitalizes industries. That is, it does not place its loans in fixed form, but puts them where they are to be used for temporary requirements, and they will be taken up at the time specified. How a Bank Lends “It is not the function of a bank to become a partner in industries, nor could it be legitimately done with the money of depositors. Its loans must be kept in ‘liquid’ form,--that is, repay able in cash at stated intervals. “A bank must use the greatest dis crimination in making loans. A stranger cannot expect accommodations. It is customary for the borrower to make a statement of his financial affairs, which is kept in the bank’s records. It is a punishable offense to make a false statement for the pur pose of borrowing funds. “Naturally, in their dealing with the regular depositors of the bank, its officers become well acquainted with their characters and their resources and are thus in a position to determine how large a line of credit each one is entitled to. That is one of the great advantages of being a bank depositor. “The man who knows how to get into debt wisely, that is, who borrows money with which to make more money through legitimate enterprise, is the borrower whom the bank is looking for. By the frank interchange of opinion and a free discussion of various projects, the borrower is often guided and helped by his banker. “In order to procure a line of credit at a bank three things are important: “1. A statement of assets showing a basis of credit in the way of invested capital, or collateral of sufficient value to cover amount of loan, or “2. An endorser whose credit is es tablished at the bank; and “3. Average deposits of a sufficient amount to justify the extension of the desired accommodation.”