IS MY BANKER MY FRIEND?
[To THE EDITOR OF THE " SPECTATOR."] SIR,—I am rather mystified by the ways of bankers with theie of their customers who have small private accounts, and I should be glad if your readers could throw any light upon the subject. I am in the position of a great many men who live upon a fixed salary plus dividends from a small amount of money saved and invested. I am paying for the best education I can afford for may children, and every one in my position knows that it is exceedingly difficult to distribute one's expendi- ture evenly over a year. In these times dividends come at highly irregular intervals, and there are occasions in the year when one has to pay out heavily, followed by periods of recuperation in which one overtakes an excess of expenditure.
In practice this means that I have occasionally—lately almost regularly—an overdraft at the bank. Although my banker calls what he lends me an " overdraft," the word, as it seems to me, is strictly misapplied. Before he allowed me to " over- draw " he required that some of my securities should be trans- ferred to the bank and be held in the bank's name. He valued these securities considerably under their market value. Surely then, when he advances me money at 1 per cent. over Bank Rate—that is to say, at present at 8 per cent.—he has got a soft bargain. He is absolutely secure.
I call to mind that in happier days when I lent money on mortgage I had to pay lawyers' fees, &c., for the arrangement of the mortgage, and my security for the money I lent was certainly not so good as bankers require from their private customers every day. How happy I should have been to lend on bankers' terms! Yet my banker writes to me as though my attempts to educate my children with the help of an overdraft, in respect to which he is more than secure, were a kind of financial crime which must be atoned for as soon as possible.
I can well understand that it is the duty of bankers, in order that inflation may be reduced, to go very easy in granting credits where the security is the prospects of an industrial company and the known character of those who manage that company. But surely my case is wholly different. Are bankers really so prosperous that they can afford to adopt such a con- temptuous or censorious attitude towards the interest which private customers pay them for fully secured loans? If they are I am fully and quickly answered. But in that case I can only say that I was ignorant of the exceeding prosperity of
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