Volume 2 - ElectricCanadian.com

464 HISTORY OF THE BANKthey made advances in dependence upon the good faith ofthe customer alone, some subsequent creditor would frequentlycome along and seize those assets of the customer which werevital to the repayment of the advances. It is, of course,open to the banker to ask for an endorser, or he may, ifpermitted by law, take some form of mortgage or pledge ofhis customer's goods or other property. In the earliestdays of banking in Canada it will be found that an endorser'sname was always taken. Experience, however, taught thebanks that accommodation of that kind was almost invariablyreciprocal. However good the name of the endorsermight appear at the time of making the loan, it was almostinvariably found, when trouble came, that he hi turn hadborrowed from another bank on the name of the friend forwhom he had endorsed. On the other hand a Canadian bankisprohibited from lending on mortgage or on the security ofgoods except as authorized by the Bank Act. Subject tocertain conditions a bank may lend against a bill of lading orwarehouse receipt, but in the case of grain and lumber theseforms of security do not meet the practical requirements oftrade. Nor would the removal of the prohibition againstlending on the security of a chattel mortgage meet the case.Such a mortgage is an equally impracticable form of security,and in addition, it is not comparable in simplicity or economyof expense to the customer with the form of pledge authorizedby section 88 of the Bank Act. 1On many occasions when thecapital of a customer is small, the ability to take this simpleform of security has turned the scale in his favour, and hasenabled a bank to make advances which otherwise it wouldnot have been justified in doing. Probably no classes inII it be argued that a bank takes no greater risk than the wholesaler does inselling to his customers, and that it should be content with the same security, namely,the general credit of its customer, it must be remembered that the wholesaler aims tomake a profit on each traruactwn which often amounts to from 15 to 20 per cent., whilethe bank earns only 6 or 7 per cent 7*r annum gross, the mere interest value of themoney. The wholesaler is therefore in a very much better position to recoup himselffor the losses he sustains.