The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1866-05-09
The National Bank Systematic Rich
Ynond Banks.

The National Bank Systematic Rich
mond Banks.
The failure Of the Merchants National
Bank Of Washington city, although II was
only the second that has failed out Of the
ones in existence in the United
States, has occasioned good deal of talk
in that city, and good deal Of unneces-
sary alarm in the South, where the national
banking system is impcrfectly understood,
and Is consequently regarded with some
degree of suspicion. Ithas been said that
no law can make a rogue an honest man ;
and We suppose it is equally true that no
law can make an honest man rogue. So,
also, II is true that no banking system can
he devised under which il will not be pos
sible to cheat either the noteholders, or the
depositors, or the stockholders, or all.
And this triple classification Of the per-
sons to be injured in these cases suggests
the idea that il, as has been charged, the
banks in the South have been brought here
by northern men, and are conducted by
northern men, there is not much danger
that our own people will lose anything by
them, as all directors concede, we believe,
that the notcholders are safe. Borrowers
certainly are in not much danger. As to
those who conduct our banks, it is sufficient
to say that the act Of Congress provides
that "at least three -fourths of the dircc-
"tors shall have resided in the State one
"year next preceding their election as di-
"rectors, and be residents ofthe same during
"their continuance in Office" And rs wal
had been raging for four years before any
of our present banks were established, it
follows that three -fourths Of the directors
of our banks have resided here ut least five
years. The proportion is unqucstionably
greater, but it is sufficient to state the re-
quircments of the law.
We believe that we are safe in saying
that no banking system can do more thah
make the noteholders safe from loss; for
there are so many transactions which
every bank is authorized to make which
might, if good Judgment be not exercised,
ruin it, that it is impossible to devise any
system which could render bank abso-
lutely safe to depositors, stockholders, and
all-unleSS, indeed, it were one which
would make the institution OF no benefit
to the community. Money loaned upon
ln of carnrity =
often lost. All these classes must depend
upon the honesty, good judgment, and
financial abilities of the bank officers.
And as no national bank is allowed to
issue notes amounting to greater value
in the aggregate than ninety per cent. OF
the par value of the Government bonds
deposited with the Comptroller of the
Currency, nor to a greater amount than
the "amount of capital stock actually paid
in" il would seem that the notcholders,
ut least, need have no fears. But in adj
dition to these safeguards, each stock
holder is individually responsible, equally
and ratably, though not one for another,
yet "for all contracts, debts, and engage
ments" of his bank "to the amount Of
"his stock therein at the par value there
"of, in addition to the amount invested
ain each share"; and the name and place
of residence of each stakeholder are re-
gistered with the Comptroller of the
Currency. These are provisions for the
protection of others than the noteholders.
The first failure under the present bank
ing law was that of the National Fenango
Bank, of Franklin, Pennsylvania. The
second, as we have already said, was that
of the Merchants National Bank of Wash
ington city. Both of these failed i'll con-
sequence of the previous failure Of private
banking houses with which they kept ac-
counts. Their failure, then, was the result
of want of good judgment or of honesty
in the officers of the bank. The Merchants
National Bank actually volatedits charter !;
and Of course any other kind of charter
would Just as easily be violated. Section
twenty-nine of the act of June Sd, 1864,
provides that the total liabilities to any
national banking association, of any person
or firm, for moneys borrowed, "shall at no
"time exceed one-tenth of the capital stock
"of such association actually paid in" This
provision Of law restricted the Merchants
Bank, whose capital was but two hundred
thousand dollars, from lending to any per-
son more than twenty thousand dollars
vet it seems that Mr.. BAYNE, of Baltimore,
or his firm, was furnished with not only one
tenth Of the capital of the bank, but with
some half million, it is reported, which is
more than double the entire amount of the
capital. Section fifty-three Of the same
act declares that if the directors shall vio-
late, or knowingly permit any of its officers
or agents to violate, the act referred to, the
charter shall be forfeited, and every such
director shall be held liable, in his personal
and individual capacity, for all damages
which any other person sustains in conse-
quence of such violation. This liability is
in addition to that imposed on them as
shareholders, to an amount of double the
par value of their stock. While, then, the
noteholders cannot lose, the stockholders
are not to be pitied, seeing that they Sc
lected directors who managed those insti-
tutions in so careless manner. Failures
of this sort have always been common in
this country. As TO the cause Of these fail