Sunday, March 4, 2012

Early banking...............

P. W. Huntington

My grandfather was a young country bank president when the stock market crashed in 1929 and the Great Depression soon followed.  By the force of his personality, and some very prudent and prescient lending practices, he safely steered his Chester, Illinois bank through the crises. Because of this background, and because borrowing money plays a fairly significant role in our real estate investing model, the thoughts of bankers have long fascinated me.  The most recent Columbus Business First magazine has an interesting article about Pelatiah Huntington, the founder, in 1866, of what would become Huntington National Bank.   A few excerpts:

"Clair Fultz, himself a former CEO of the bank, wrote that Huntington refrained from "temporal enthusiasms."

    "McCullough warned a group of Columbus bankers that, among other things, 'the capital of a bank should be a reality and not a fiction,' and 'splendid financiering is not legitimate banking.  And splendid financiers in banking are generally either humbugs or rascals.'
     In his book Fultz writes Huntington took the words to heart and adopted as his creed: 'Credit is a subtle thing,' stressing that lending money should be scrutinized and approached very carefully."

"For the rest of his career, Huntington would ensure his bank's capital reserves were strong and the institution remained in a liquid position.  He once turned down a $500,000 deposit from the Hocking Valley Railroad to administer it payroll, a common practice at the time, commenting that the amount was 'more money than we should ever owe anybody.'"

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