The Seattle Star Newspaper, July 1, 1920, Page 8

J. W. SPANGLER President Seattle National Bank Vice President and Secretary Clearing House Association of Seattle There are very few of the residents of the Northwest who have at one time or another, passed through, or inspected, some one the irrigation projects existing in this district. It is a marvelous tht to see the green fields of the wonderfully productive farms in the valleys, upon which it has been possible to direct a flow of rater from. mountain reservoirs, when one drops down from the ounding rolling highlands of a semi-arid district. The water lat is needed to make these desert districts blossom is secured by storing of the waters from numerous mountain brooks and riv- most of which are fed by the melting snows of the higher eleva- ons of the mountain district, in vast reservoirs, from which the Water can be carried off and directed through large canals which in rn are intersected by numerous smaller canals through which the ter is directed on the landpitself that is in process of cultivation. The banks of any community function primarily along the same as such an irrigation system. The stockholders of these banks fumulate reserve® in cash and invest these savings in the capital ek of the bank. With this as the original bulwark—so to speak —to protect the stored savings of the community, these savings are ithered into this reservoir and held until the individual owners re- mire them in their own business operations. From the nature of - community’s activities, there is always a large number of per- z having savings awaiting use or investment, and while this sroup is ever changing, yet, upon the average, a considerable per- centage of these savings of a community are on hand in these bank- gp reservoirs. This reserve power is an essential factor in the usiness life of any community, because the banker, as custodian of hese funds, is permitted to distribute through loans a part of this urplus from time to time to various business activities, even as the FURSDAY, JULY 1, 1926. A COMMUNITY’S BANKS--- ITS RESERVOIRS OF BUSINESS POWER | this surplus of the community into your particular activity as you are to secure it, provided there is every assurance of it being re- turned to him at a definite time. A depositor with a moderate account may sometimes think that an application for a small loan ata large bank is not welcome for consideration by the bank’s executives. The fact is, however, that careful consideration will gladly be given to any application fora loan, and credit will be extended, provided the proportions of a per- son's or firm’s assets are proper. Be frank and honest and cqgmplete in your statements ‘to your banker. If you seek to borrow from the bank, make a complete ex- hibit of your financial condition. Tell him what you have, what you owe, when it is due. Why? Why so intimate? For this rea- son: The banker is not seeking an opportunity to refuse a loan; he is seeking to make a loan which, if made, will not prohibit his sleep- ing nights. He wants the money back. Most of the money he so employs is entrusted to him by others. He must get the money back at the time it is agreed upon. Do you notice the frequency with which criminal proceedings follow banks that fail, and that such proceedings are comparatively few in other lines? It is a rare thing for a bank to fail and not have a criminal prosecution follow. If the banker in making the loan seems to be somewhat inquisitive, do not attribute it to the fact that he is cold, but because he de- sires to be on the safe side. Do not wait until it is necessary to borrow money before you cul- tivate the banker. Anticipate your future borrowing needs. Visit with the banker and indicate how you are progressing. Arouse in him his sympathy in your efforts, because he will bear cultivation. It is customary for all borrowers at a bank, irrespective of their wealth, to furnish a copy of their finaricial statements. A proper bank loan is based upon the net worth of an individual or firm as shown by this financial statement of assets and liabilities. resents certain foreign interests in this country. Because he had transacted some of the company’s business with the bank, its offi- cers had come to know and like him. On this day he came to report that one of the three men who owned the company had died, and the two survivors had offered the opportunity of purchasing the dead partner’s share. It was necessary for him to make a trip to Europe in order to have himself approved by the principals over there. He broached the subject in some embarrassment. “Tt will cost me a thousand or fifteen hundred dollars to make this trip,” he said, “and the truth is I do not have that much money. I don’t want to borrow it from the men who have been my employ- ers because I am afraid they might be prejudiced by that fact. If the people on the other side approve me, I shall begin at once to draw a very much larger salary and can repay the loan. If, for any reason, they should disapprove, I will still ond my present position with some additional compensation, and can pay off the loan in in- stallments. 1 know it isn’t a business proposition, but it’s my only chance. Will you lend me the money?” It was, of course, an unusual case, and the official to whom he had presented it carried the request to the president. ; “Look him up,” the ieee answered, “and if you are satisfied that the facts are as he states them, we will let him have the money.” His record was clean as a whistle; the two men with whom he had been associated were eager tohave him take advantage of the,< opportunity. And so a few days later he set off for Europe wi! a letter of credit in his pocket. In a month he was back again with the approval of the European principals. Then came his second problem; he was very frank about it. “T know that the price at which I am buying this stock is consid- erably below its real value,” he said, “and I have the figures .to prove it. But I have no collateral to offer for the loan except the But in turn, the success of the various banks of the com- munity is dependent absolutely upon the prosperity and de- velopment of the individuals and firms doing business in that community. In order to have an ever widening scope of activity, there must be in every district an accumulation of this reserve power stored in the banks. And so the bank- er’s primary interest is the prosperity of his customers. Thus, instead of indulging in the exploitation of any class of the residents of his district, he is intensely interested, from a purely selfish standpoint! in seeing all classes pros- per. It is through genuine co-operation between all the various classes—including the banker,. merchant, manu- facturer, farmer, miner, lumberman, fisherman and all the workers—that the greatest good for the greatest number can be accomplished. The banker will always be found more’ than willing to co-operate with any and allof the other business groups, because he knows, perhaps better than the members of any other group, that his prosperity is entirely dependent upon their prosperity. waters from the irrigation reservoir are distributed over the lands ‘of the irrigated district. Because it has been found that there is | always this average amount of surplus on hand in any community under normal conditions, there is always available for use in the env business enterprises a portion of this surplus which can used as working capital in the development of the community. In such use, these savings form one of the most important business powers for productive enterprises. In addition to the actual accumulation of these savings of the var- ious individuals, under the present laws, it is possible for banks to add to this supply by the creation of banking credit. A_ parallel instance woul the tapping of an underground powerful stream of water to feed the accumulation of the drainage waters in the irriga- | tion reserves. In this manner the banks actually manufacture et wel in the form of credit, and direct this into business channels to aid in the creating of wealth and prosperity to be shared by all the residents of the community. ‘ __ So it is to be seen that instead of being mere money changers, or : shop brokers, or profiteers and exploiters in the business struc- : , a banker has the opportunity of being a constructive factor in _ the development of business interests by manufacturing and direct- ing ge capital to aid these enterprises. In so far as good judg- ment is followed in these operations, material aid will be given to the upbuilding of any district. Because a banker is the custodian of the funds of other people, he is of necessity compelled to exercise the utmost care in the lend- "ing of such funds. This often leads to the creating of an impression t a banker is very cold and unemotional, but in the majority of eases a banker is just as anxious to aid you by directing a part of Loans are based on the proportion of the borrower's “liquid as- sets.” Assets, to be “liquid,” must be of a readily salable value that can be quickly turned into cash, and consist of such items as accounts and bills receivable due from reliable people, and the value of merchantable goods, as shown in a,recent inventory. Liquid assets do not include machinery, buildings and other items which could not be sold promptly for full value. However, plant and ma- chinery are “supporting assets,” and the adequacy of such equipment is of importance in the consideration of a loan. When a professional or salaried man, not having invested capital in a business or accounts and bills receivable or merchantable goods, applies for a loan, it is customary for securities to be deposited as aeere! for the loan, which have a definite and ready market value. ; Owing to the heavy demands for bank credit, it is customary to confine loans to contmercial account depositors. The size of the average balance carried in the bank is taken into consideration in meeting an application for a loan, as good” business judgment pro- vides for a definite cash reserve in the conduct of a busihess en- terprise. Practically all successful business enterprises find it profitable to use borrowed funds. It should be the aim of every bank depositor to have his business matters in such condition as to entitle him to use the credit facilities of his bank. .. This is told of a young Eastern business man who is a third owner in a very successful business today because, when his opportunity came, his bank was willing to take a chance upon his integrity and character: He was at the time chief clerk in a company which rep- NORTHWEST INDUSTRIAL EDUCATIONAL BUREAU stock itself. Are you willing to make the loan on that basis?” The president answered that if there were no other way to arrange it, the bank would back him. “But,” the president continued, “it seems to me that these men with whom you are associated ought to be willing to show their faith in you, too. Suppose you suggest to them that they loan you the money, and give them your stock as security, allowing you to pay for your stock out of its earnings. That would be a little more reed from our standpoint, and I believe they would be glad: to lo it.’ . When it came time for him to conclude his arrangements he ‘was all smiles. It had not been necessary for him to make the sugges- tion to his associates; they had, of their own volition, made it to him. So, with no capital to start with except his own ability and a bank’s faith“in him, he had his opportunity to get into business for himself. And the bankers who had backed him were almost as hap- py in his success as he himself. For it is one of the pleasant things in the day’s work when a banker, by his advice and the exercise of a little faith, can help a man to increase his own faith in himself. ‘A New York bank president once. remarked: “We bankers are often only commonplace business men. Because, however, we come in contact with all lines of business, and have the opportunity to witness the causes responsible for many men’s successes, and the mistakes that have caused the downfall of many business enter- prises, we are often able to help in solving problems that perplex business men who know far more about the details of their own bus- iness than we could possibly know. There are undoubtedly many thousands of men in this district who owe their business success in a large measure to the aid rendered them by their bankers. ow , SS