The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-11-22

An exchange says that the Journal in a
recent article on banking made several err
rors in regard to the provisions of the state
banking law. The only essential error was
in the statement that the Indiana law did
not make shareholders of state banks
responsible for double the par value of their
shares, does the national banking law
The Legislature of 1895 amended the law so
that it now conforms with the national
banking law in regard to the obligation of
shareholders in the event of failure. The
other point, that the subscribers for stock
in state banks are required to pay in the
full par value of their shares, is not we'll
taken. 1t may be that the law means that
the par value of the shares shall be paid in.
but in practice not more than half the par
value of the shares in large number of
state banks is actually paid in. The pay
ment of one-half of the par value of the
shares is required in order to get the GER
tificate necessary to organize The pro-
visions in regard to the other half are not
such require any certificate of payment
to be made to any official of the state. AS
a matter of fact, a large part of the second
half of the shares is never actually paid
In some cases notes are given. and in other
cases the shares are paid in with the under
standing that the holders may borrow the
money back. The law should be so amend
ed that the state auditor or some other Off
cial shall know that the par of the
stock is actually paid in, either before or
soon after bank begins business
he tot hor
condition, but if there was absolute GER
tainty in regard to the full payment of the
stock they would be entitled to greater con-
fidence. The trouble, however, in this and
other States is not so much with regularly
organized state banks as with private
banks There are many of these. Some of
them do business upon a conservative basis
and are managed by men of property, but
it is feared, indeed, it is known. that many
of them are in the hands of men who take
that method of obtaining the use of money
of others which is intrusted to them for
safe keeping. In this State there is no law
that applies to the private bank. number
of men may form a partnership as they
would for other business and proceed to re-
ceive loans and do other banking business.
Over their places of business they put a
sign Bank of -'' (naming the town.,
and in some instances calling it a state
bank. The mass of people who have small
sums of money to deposit are often misled
by the regulations of such bankers to be-
lieve that they are doing business under a
law which makes them responsible to those
who intrust money to them. AS matter of
fact there is no such responsibility If the
bankers, or those claiming to be bankers,
are men of property, experience and con-
sentative ideas, the depositors are as safe
as need be, but in many cases, like those
in Crawford county, the men managing the
banks are engaged in speculative enter
prises requiring more money than they
have Thus the men who manage the bank
and who receive the deposits of people use
the money themselves If they are success
full in their speculations all goes well for a
time; but, sooner or later, with all private
banks, and, it may be added, other banks
where the men who manage them are al
lowed to be unlimited borrowers, disaster
or loss will come. Even when sound panic
may affect them and give shock to pub
lie confidence in banks, since many people
do not discriminate between national, a
state and a private bank To these peo-
pie the failure of one is a bank failure, and
therefore, they distrust banks and hoard
their money where it will not go into cir
culaticn and where it may be lost
The frequently recurring troubles with
private banks, with their losses to individ-
uals, involving in financial ruin many of
their customers, is matter which needs to
be considered. There is very general feel
ing among those who favor sound banking
and value the maintenance of confidence in
communities that a law should be devised
| which will make all those who receive the
| money of others as bankers responsible in
| the event of loss.