This section is from the "Practical Banking" book, by Albert S. Bolles.
A banker will be often subjected to importunity by persons who will desire a deviation from the usual modes of banking. They will propose a relaxation of good rules, and allege therefor some pressing emergency; but if the relaxation involves any insecurity, any violation of law or of official duty, the banker should never submit, even when the result may promise unusual lucrativeness to his bank. While a banker adheres with regularity to known forms of business and settled principles, Providence is a guarantee for his success; but when he deviates from these Providence is almost equally a guarantee of disaster, both personal and official.
Banking is a business, and should be reciprocally beneficial to the borrower and the lender. When a borrower's business cannot yield the requisite reciprocity of benefit, he will often attempt to mend the defect by pertinacity of application, and by persuasions addressed to the directors of a bank personally, as well as to the banker; and by servility and sycophancy. Such conduct is a strong symptom of some latent defect in the applicant's pecuniary position, and the appliances should strengthen a banker in his refusal of loans rather than facilitate their application. Loans thus obtained rarely result favorably to the lender.
No man is safe when engaged in a speculation, especially when the price of the article that he purchases is above the usual cost of its production. The speculator's intellect soon loses its control over him and he will be controlled by his feelings, and they are unnaturally excited. He becomes a monomaniac in the particular concern with which he is engaged. He will increase his purchases beyond all moderation, and at prices which he himself, when he commenced his purchases, would have deemed ruinous. Many banks are destroyed by such speculators. A bank will loan to them till its safety seems to require that the speculation must be up-held against a falling market; and the effort is made till the continued decline in prices ruins both speculators and sustaining bank.
When a debtor arrives at a certain magnitude of indebtedness he becomes the master of his creditor, who is somewhat in the position of Jonah when swallowed by the whale. The debtor can say to a bank thus circumstanced that to stop discounting for him will ruin him, and that his ruin will involve a loss of the existing debt. No prudent banker will be placed in such a position, but should any banker lapse into so sad an error, he will rarely mend his position by yielding to the proposed necessity for further loans. He had better brave the existing evil than yield to an argument which, if already too potent to be disregarded, will acquire additional strength by every further discount, and render his inevitable fall more disastrous to his stockholders and more disreputable to himself.
With respect to his contingent expenses, the more a banker car reduce their amount, the more easily will he make reasonable dividends of profit among his stockholders, without an undue expansion of loans and consequent anxiety to himself. The income of a bank is only an aggregate of petty accumulations. Every unnecessary expenditure of one hundred dollars by the bank will nullify the interest on four ninety-day loans of fifteen hundred dollars each— loans often withheld from meritorious claimants. The economy of which we speak is not any unjust abridgement of properly remunerative salaries to faithful officers and servants, who should, however, labor diligently and perseveringly in their vocations, as men labor in other employments, so that the bank may economize in the number of its agents, instead of economizing in the magnitude of their salaries. A hundred dollars, or a thousand, when contrasted with the capital of a bank, may seem a small matter, and probably bank expenditures are often incurred under such a contrast; but the true contrast lies between the expenditure and the net percentage of a bank's gains. A bank whose net income will not exceed the legal rate of interest possesses no fund from which to squander. And banks often expend an unduly large part of their capital in architecture to ornament the city of their location, or to rival some neighboring institution, whose extravagance ought to be shunned, not followed. No person has yet shown why banks should be built like palaces, while the owners of the banks are to a good extent poor, and live humbly. The custom is perhaps founded on the delusion of deeming a great capital identical with great wealth. When several men, for any purposes of gain, unite their several small capitals, they may well need a larger building and more agents than each man would require were he unassociated; but that the association can afford an organization increased in splendor as much as in magnitude, is a fallacy somewhat analogous to the blunder of the Irishman, who, hearing that his friend intended to walk forty miles during a day, said that he would walk with him, and then they could walk eighty miles.