George W. Hensel, Jr., warns of the chain gang that threatens small towns, in an interview with

I WAS sitting in George Hensel’s big parlor talking with him about the new bank building just on the other side of the road. Hensel is the president of that bank and he was telling me about it and about other country banks and bankers he had known. This was in Quarryville, Lancaster County, Pennsylvania, a village of a thousand souls in the center of one of the richest farming sections in the world. Go south from that bank a dozen miles and you will almost run into the Susquehanna as she flows into Maryland. Hensel’s bank stands at a fork in the road. One prong leads due south. The other leads off to York County and beyond to Gettysburg. Over these roads swarmed the armies of Lee as they pressed their desperate invasion of Pennsylvania. This was Lee’s gateway to the North. Now they call it the Gateway to the South. And George Hensel, big, generous-hearted son of Pennsylvania, has a picture of Lee upon his wall. “For,” he tells you, “this is where the South begins.” Along this road now move two ceaseless streams—men of the North going south and men of the South motoring north. Hensel’s home is truly the

House by the side of the road
Where the race of men goes by

And so Hensel has had carved on one of the stone posts that guard his porch those words:

Where the race of men goes by.

But in Quarryville they will tell you the race doesn’t go by—all the men seem to stop at Hensel’s house.

I had been talking about banks and money to some of the big bankers of New York who direct the flow of hundreds of millions. Some of them had told me the day of the little bank and the little banker is over. They could see very near the time when the country banker would disappear and his bank would become just a branch of the big city institution. Down in Washington a committee of congressmen is studying the subject and powerful interests are trying to get a law passed permitting national banks to buy up these little country banks and turn them into branches.

I thought I would like to hear what a country banker thought of all this. And so I went to see my friend George W. Hensel, Jr., president of the Quarryville National Bank. I picked him because I know he is one of the wisest of men, a genial, kindly, observant, tolerant man. For all that he is a hardware merchant and a bank president in a village of a thousand people he is one of the best-known men in Pennsylvania, noted for his wide acquaintance, his countless friendships, his varied interests and the achievement of having carved out an extraordinary career in a little farming village.

“EVERY now and then,” he said, “we go in for abolishing things L in this country. Right now it looks as if we had gone to work on the country banker. The big bankers want to buy up all the little country banks and turn them into branches of the big banks. It’s amazing how this thing is spreading. Back in 1900 there were sixty branch banks all over the country. Now there are three thousand. Look at this man Giannini. Here is a young Italian starts out in California twenty years ago with nothing. Now his bank, the Bank of Italy, has 299 branches all over the state. In 170 towns in that state the country banker has disappeared. Instead they have branch banks run from San Francisco and Los Angeles.

“A lot of states prohibit this, twenty-nine of them forbid it one way or another. So what do they do? The promoters form a holding company. Then the holding company buys up the stock of the country banks. They don’t call them branches. They seem to be independent. But the stock is owned by a central holding company in some big city and to all intents and purposes they are branch banks. Only they are called chain banks. Out in Minnesota, for instance, they have thirty-five chains owning over 400 banks. One man in Minnesota owns the stock of sixty-four banks in that state, Michigan, North Dakota and Montana.

“At the last meeting of the American Investment Bankers’ Association in Quebec it was said that at least half of the country banks were lined up to be taken over into chains if Congress would just pass a law to permit large-scale branch banking by national banks.”

“Well,” I interrupted, “these big city bankers say that you little fellows in the country don’t know how to run banks. They tell me that in the last eight years five thousand banks have failed and that seventy per cent of them were little banks.”

“That’s true,” said Brother Hensel. “Did you ever see an empty mill dam? Well, it may be empty because the water that flowed into it has stopped running. The streams that supplied it have ceased to flow. The country around has dried up. It’s not the mill dam that failed. It’s the country that failed. A bank is built on a community. In the last eight years a lot of farming communities in this country have failed. You know a bank can fail and wreck a community. But it is also possible for a community to fail and wreck a bank. Most of those little banks failed because the communities they were built on failed. Any kind of banks would have failed there.

OF COURSE, a lot of them should never have been brought into existence. There are foolish bankers just as there are foolish merchants. But don’t forget the country banker has no monopoly on failing. Only a few months ago a banker who owned a chain of twelve banks died. The next morning all of the twelve banks failed to open. You see that failure didn’t hit just one town. It hit twelve towns. When the Bankers Trust Company of Atlanta failed recently, eighty-three small banks in its chain in eighty-three towns of Georgia and Florida failed. When the Merchants Bank in Canada closed its doors the people of four hundred towns woke up next morning to find their local branches closed. When one of our little country unit banks fails it is just a small explosion in one town. When one of these chains blows up it’s like a pack of firecrackers going off in scores of towns.”

“But these big bankers say you don’t make any money,” I put in. “They tell me that it takes a lot of brains to run a modern bank and the necessary brains are not available in the small banks. In one large agricultural state, they say the banks in that state are operated at a profit of around one and one-half per cent and many are run at a loss.”

“Well, there’s no doubt about that,” was Hensel’s answer. “There are poor business men in the banking business as in every other business. But I am afraid these great gentlemen are overlooking something. You can’t always judge the utility of a country bank by the profits it makes. You know that in times of depression even the smartest city bankers don’t make very large profits. Now a lot of these agricultural communities have not been sharing in all the prosperity we have been having these last eight years. And so their banks have not been doing so well. But many of them have been standing there against great odds rendering fine service to their people.

“If banks are established for the benefit of bankers, then the only thing to gauge them by is the per cent profit they can make. But I have never thought that banks were set up for the benefit of the bankers. They are established for the benefit of the people. If a banker can make a profit out of his bank while it is serving its people, all well and good. But the first thing is to serve the community. The bank is primarily the depository of the money of the people of the village. The money belongs to them.

The banker’s duty is to see that it is safely kept and is there for them when they want it. Meanwhile he must see that the money is used for the benefit of the people of the village. A banker visiting a village in the far west of Canada said he went into a branch bank which had $400,000 in deposits. Of this money $300,000 had been sent east to the parent bank. The village was getting the use of only $100,000 of its own money. That bank may make money. But what good is it to that village? You know there are two kinds of bank failures. There’s the kind where the bank just busts and gets its name in the papers. Then there’s the kind where it keeps on running but stops serving its people, just gets to be a machine for collecting interest. That’s sometimes the worst kind of a failure.

“Suppose our bank here was just a branch of a bank in Philadelphia. We’d have a branch manager. He’d be a stranger sent out from Philadelphia. That’s all right. We welcome strangers here in Quarryville. But he wouldn’t know our village. What 1 is more, he wouldn’t have much real interest in us. He would probably be a young man with ambition to make good here—that is, show a good record of profits—so as to get a promotion as rapidly as possible to some bigger town and then shake the dust of Quarryville from his feet. Then we would have a new manager for a little while.

“And how would we make loans? Well, if Emery Null came into the bank to borrow ten dollars, the manager would get out the book of rules, turn to page 46, rule 167 and that would tell him the loan couldn’t be made. We don’t have to turn to any book of rules here. We know Emery Null. And by the way, Emery used to come into our bank at intervals and borrow ten dollars. He always got me to endorse his note. He was the only man I endorsed for. One day he presented himself for his loan when I was away. He went to the cashier and said: ” ‘I wish to borrow ten dollars but my endorser is away. Can I get the loan?’ “‘Well, Emery,’ said the cashier, ‘I’m sure you’re all right. But could you furnish some collateral?’ “Emery fished into his pants’ pocket and pulled out a ten-dollar gold piece. ‘How is that for collateral?’ he inquired.

” ‘That’s excellent collateral all right,’ the cashier assured him. ‘But why do you want to borrow ten dollars when you have ten dollars?’ “‘Well,’ said Emery, drawing himself up to his full height, ‘from time to time I deem it wise to come here and reestablish my credit.’ NOW we have a lot of customers like Emery. You can’t put into a book of rules the human elements a country banker must deal with. We have three thousand depositors and ten directors. And we seldom have an application for a loan in which at least one or more of our directors doesn’t know the applicant thoroughly. Character is one of the biggest kinds of collateral used in this bank. When we don’t know a man the first question we ask is what kind of a wife he has. Often we have to turn down a loan because the applicant’s wife isn’t good collateral. You can usually get a loan on a good wife in this bank.

“Then there are all the countless little facts about the man himself which we know. Years ago when my father ran this bank a man came in and asked for a loan of one thousand dollars. Any branch manager in the land would have turned him down. He had no collateral. But he had a good father and mother back of him, a sober, industrious young manhood, a good wife and a few kids. He was a bright, keen, ambitious young fellow. My father knew all about him and the business he wanted to buy. He made the loan. 1 mention it merely because this man died last week, the most prosperous citizen of this section. He spent his life here, built up a fine business, gave work to many people, was a useful citizen. If that loan had not been made he might have gone away from Quarryville to seek his fortune some place else. That’s the basis on which we make our loans. We don’t pretend to be great bankers here. I am a hardware merchant. Our directors are just business men and farmers. Yet we have built up our bank until our surplus is four times our capital and we have had only three losses of three hundred dollars here in our own territory.

“It doesn’t seem right when a man in Quarryville wants to borrow money in Quarryville—money that belongs to the people in Quarryville—that he should have to get permission of a Philadelphia or New York official who knows nothing about our town, its people or its farms, who has never been any nearer to a wheat field than he gets in a bowl of breakfast food and never met a hog face to face in his life.

“This bank has prospered amazingly. And yet many of our loans are the kind no branch bank would countenance. We lend all kinds of small sums—five dollars, ten dollars, fifty dollars. We have notes for as little as three dollars. We lend a man one day thirty-five dollars to move. The next day we lend forty dollars to another one whose wife is expecting a baby. We lend sixty dollars to a farmer who wants to buy a tractor, five dollars to a man whose children have the mumps, seventy-five dollars another day to help a young fellow get married and one hundred dollars the next day to some troubled farmer to bury a wife. Our little bank stands there a friend—a kind friend and a strong one, I hope—to which our people turn in all the serious moments of their lives.”

PEOPLE come to Hensel for all sorts of advice. They want their wills drawn and they want him to act as executor. He had thirty wills in his safe the day I was there, wills he had drawn and in half of which he was named executor. Occasionally people leave their children in his care. He always has a flock of four or five orphans whose small estates he is administering. He is a kind of human trust company. He is the leader in the life and fun of the village. Saturday night in Hensel’s hardware store is fiddlin’ night. Half a dozen old gentlemen fiddlers will be there with their fiddles playing the old tunes and one or two can do a dance. Every spring Hensel mobilizes all the old fiddlers of that section at Parkers-burg for a big fiddlin’ field day, with five thousand people devouring the music. Henry Ford came through Quarryville and made a little visit. “I can get together forty-six fiddlers,” he told Hensel. “And how many can you muster?” When Hensel answered “176,” Henry murmured: , “Well, Hensel, you are richer in fiddlers than I am.”

Hensel is hibernating governor of the Slumbering Groundhog Lodge, a kind of burlesque, skylarking satire of a fraternal organization which he organized and which has been written about in every paper in the country. He is president of the Martinville Horse Detective Association and of the Consolidated Horse Detective Associations for tracing stolen horses. He has built bird-feeding stations all over Lancaster County, takes a big batch of children to the circus every year and with his kindly, gentle wife visits practically every old person in his territory twice every year. And he has for years written a weekly feature for the Philadelphia Inquirer called “Down Lancaster Way.”

Of course, all country bankers are not like Hensel. But Hensel thinks the country bank plays an important part in providing the village with its leaders.

THAT bank over there has done something else for us besides take care of our money. It has not only developed the community, it has developed men. Every village needs its leaders. But you will never have the leaders unless you have something to lead. Man after man has been brought into our directorate from his small business or his farm. The honor and responsibility has deepened the ties that bound him here, stimulated his sense of responsibility and inspired him to move out toward the front. I want to preserve these little independent banks not only to preserve the independence of the bankers but to save the independence of the towns. I don’t want our villages to become just branches of big towns.

“Keep on the way you are going and Main Street will become just a string of branch managers—the grocery-store manager from New York, the clothing-store manager from Baltimore, the hat-store manager from Newark, the shoe-store manager from Boston, the drug-store manager from Pittsburgh, the branch-bank manager from God knows where and nobody from your town but the fellow who sweeps the floor and carries the bundles. When that time comes what kind of opportunity will there be in your town for your sons? The only opportunity you will be able to offer your boys will be a railroad ticket on the main line for New York, where they can go and learn to be branch managers for stores in other men’s towns. What we spend will go out of the town by way of the store and what we save will go out by way of the banks. The chains will get us coming and going. They’ll still let you manage the farms and do the plowing. You can raise the corn and wheat and tobacco, fatten the cattle and dig the potatoes; send them to town, get your money for them and as the money arrives in town the “chain gang” along Main Street will be there to relieve you of it and send it right back to the big town from which it came.

“Remember what Shylock said: ‘You take my life when you take that by which I live.’ Maybe a banker ought not quote Shylock. But you may set this down as settled: that you take the life of the small town when you take the business by which it lives. And that business, whatever it may be, must have blood coursing through its veins. That blood is the money and credit of the town, and the heart in the middle of the town’s body that keeps that blood moving in a wholesome stream is the town bank. Take that heart away or interfere with its functions and don’t be surprised to see your village die of heart disease.”

  1. Tom says: August 28, 20118:24 am

    This bad dream came true. I suppose that it’s up for debate whether the advantages outweight the disadvantages. I only know that when our small town bank was bought out the ease of service was gone. No longer do you walk in fill out a sheet of paper get your car loan and chat with the staff. The staff don’t have time for that. If you cash a check with someone you’ve know for 20yrs. they still have get a DL no. to follow policy. The Mgr. can no longer make decision on his own. Still pushing the idea of being “Your Hometown Bank” when it only means a bank located here that is one of many of a single corporation.

  2. Toronto says: August 28, 20113:50 pm

    The “Bank of Italy” mentioned renamed itself “Bank of America” iin about 1930.

  3. Sean says: August 28, 20116:32 pm

    Google maps can’t seem to find any non-branch banks in Quarryville. What I think would have been the setting for the article is now a Wells Fargo, though the building, at least, is still there. Tellingly, though. Hensel’s house is not.

    My father is the President of a small bank in Western PA and, though anything but an S&L these days can’t survive without at least a half dozen or so branches, this is the creed by which he lives. Though the idea of ‘community’ has expanded to something more akin to ‘county’ or ‘greater metropolitan area’, the idea of a bank which lives and dies by its community and can make intelligent decisions based on first-hand knowledge of its customers and local economy is still alive, though shrinking daily. Every new regulation hits the small banker hardest. When BOA screws up and the FDIC requires more paperwork, it is the little guys without a staff of tens of thousands who pay the price.

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