The Charlotte journal. [volume] (Charlotte, N.C.) 1835-1851, 1841-06-03

I
than 90 days to mature. To make safe
loans requires general and accurate
knowledge of the character and business OF
all the customers Of the bank. Ii the capt.
tai is large, more difficulty is experienced
in obtaining the information necessary to
loan all the funds Of the bank, and, ccnsc.
quently the risk Of discounting notes that
will not be paid at maturity, is increased.
A board Of directors, with honest inten-
tons, are sometimes induced to make
loans where their information is not us ac-
curate as they would desire, or when they
know the security is not the best, because
they feel it their duty to obtain interest, If
possible, on all the money placed in their
charge. Directors, generally, desire TO
make large dividends to stockholders, aud
hence they use great efloits to increase the
earnings OF an institution.
The plan above proposed, declares that
all the earnings of the Institution, after
paying SIX per cent. on its capital of five
millions, shall be expended III equalizing
the exchanges.
This provision will prevent the directors
from taking any risk, or discounting doubt
full paper, to increase the surplus in the
Bank.
Question.-Why do YOU wish to prohi-
bit the directors and officers of an iustitu-
ton from becoming borrowers This is
not done IN any other bank.
\ director is an agent and should re-
ceiyc a salary as other agents do.
A bank is lender of money. The in.
terest Of the lender should prevail. This
is for the safety of the public as well as
the stakeholder. The interest of the lem
der is to get the largest security for the
least lo-n, and the interest of the borrower
is to get the largest loan for the least Sc
curly. This is the reason that directors
are limited in some charters to small
loan, and always required TO be stockhold-
ers.
A director is the agent of the stockhold-
ers, he is placed there to loan out their mo-
ney, therefore his interest should be the
same as his employers.
If an agent borrows the money left with
him to lend, his interest becomes adverse to
his employers, and still the owners have
no voice in the matter. No lender would
employ such an agent-because the agent
would only give such security as his own
interest should dictate. From this cause
has resulted more bank failures than from
any other.
One fact Il notorious, men who wish 10
borrow, or afford accommodation to their
friends, are the most anxious TO become dI.
rectors, and too many instances are ON re-
cord, where a borrower has by manage
ment secured the votes of majority Of the
stockholders, and placed in the bank a
board Of directors to suit his own views ;
sometimes majority Of the stock has been
purchased for the same purpose, and SO
well do the public understand the INJURY
likely to result from the operation Of such
an influence, that banks thus situated De.
come al once dIScredsied and l'S hills are
taken with much hesitation.
+ If this influence is felt when openly ex-
ecuted, it should be guarded against in
the charter, by a plain declaration that no
director or officer shall be directly or indi.
recily debtor to the bank. By this
means dangerous Influence will he ex.
cluded from the Institution.
II may not be improper to say, tina, the
safest course to pursue in Legislation and
business, IS to make honesty the best
policy"
Ii YOU make II the interest Of individuals
10 act honestly, there is no danger to be
apprehended. For, surely, L interest and
character both prompt a man 70 Do rgli,
tie must be mailman who would DO
wrong. But, Itself the wayering balance
shake, It's rarely right adjusted"
For these reasons | would allow 90 eff
Ger or director Of bank to become a
debtor or borrower Of the institution d.
rectly or indirectly, and would limit the
dividends, for the same reason, on the CAPT.
tai paid in. lfthese two rules are enforced
by a penal provision in the charter, there
will be no lnducement to make bad loans,
or force a circulation beyond the natural
demands Of the business of the country.
Full and accurate information will con.
vince you that the cause Of the mismanarc-
lnent and failure Of all banks have resulted
from the want Of these two provisions in
bank charters.
There is one important feature in tbs
plan to which public attention should be
particularly called, and that is the sum
Of twenty millions Of security. You viii
observe that this sum is not to be issued
by the Government until the free millions
'zhal be absolutely lost. That is to say,
Until the whole amount Of the entire capt
tai has been surrendered TO pay losses IN
CURED BY the institution. l. il probable,
under the above provisions, relative to
loans and issues, that such result can
ever occur Is it not shorn Of any in
ducemeut to make bad loans and excessive
issues
This plan then leaves no risk upon the
Government, while the provision relating
% the twenty millions will add very much
to The stability and credit Of the lnstitu-
ton.