Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1900-11-26

u.
the limit of credit has been thus fixed
an appheation for loan by a director
must ne IN writing, approved by two
other directors. Such loan may be
made by an executive officer, but must
be brought to the attention Of the
board of directors at its next meeting
for purposes of record. penalty is
provided for violation of this section.
The bill also contains the amendment
to section $500. which. in his two for
mer reports the comptroller recon-
mended relative to restrictions upon
the general loans of banks
Section 500 at present reads us fol-
lows:
The total liabilities to any association
of any person, or of any company, cor
poration or firm, for money borrowed,
including in the liabilities OF COM
pany or firm the liabilities of the sew
eral members thereof. shall at no time
exceed one-tcnth part of the amount
of the capital stock Of such association
actually paid in But the discount of
bills Of exchange drawn in good faith
against actually existing values, and
the discount Of commercial or business
negotiating the same. shall not be con-
sidcred as money borrowed.
The failure of the present law to pro-
vide the power to apply Il penalty for
the making Of excessive loans, some
times embarrasSes the comptroller in
lcndeavoring to check tendencies toward
rccklesSncsS in loaning which point to
the ultimate ruin of a banking insti
tuition.
The present need is for an amend
ment to this provision which. while
while compelling. under penalty. the
safe and proper distribution of loans
of larger banks. will enable them to
loan more nearly the same per cent. Of
| their total assets which the present
provision allows to small banks. In
| this way the officers of larger banks
can supply the proper needs of the
larger communities without disregard
| ing the law and the comptroller can
hold them under personal penalty TO
| strict observance of the amended law.
which. when disregarded. would indi-
cate improper distribution Of loans,
something which attractions Of the
present provisions in the case Of many
banks DO not necessarily indicate.
! The greater ratio borne BY banking
resources To banking capital in the
larger communities. AS compared with
a like ratio in smaller communities,
/ is responsible for the defective and un-
| equal working of the present provision.
The average ratio of resources To the
average capital of the "a national banks
| in the city of New York is as l7.5 is TO
| t,
as 142 is to / Of the national banks
in ST. Louis as So is to ]; of the 26s
national banks in other reserve cities
| as is To j. while in the $500 country
banks the ratio is but as 81 is to /.
| The law limiting loans To 10 per cent.
Of the capital when applied To the 3fo0
| banks of the smaller communities OF
| the country. as Il whole, would allow
the loaning Of l.i6 per cent. of their
| total assets to one individual As com
| pared with this. the banks Of the city
Of New York on the average could not
| loan over tifty-seYen one-hundredthS Of
! ] per cent. Of their total assets to any
one Individual: the banks Of Chicago
not over seventy one hundrcdthS
per cent. OF their total assets:
tho banks Of ST. Louis not over Ill per
cent. of their total assets; tho banks 81
other reserve cities not over lilo per cent.
| of their total assets.
! In other words. the proportion Of their
assets which the country banks of the
| United States can loan. III strict cOmpii-
ancc with Section I1uu. 10 one individual |.
| is i6-lco of per cent. greater than in ID
| reserve cities. .cI-leh of per cent. greater
| than in ST. Louis, over twice as great as
| in Chicago. and nearly three times aS
great as in the city of New York.
This provision, as it stands at present.
constitutes an nccntiVc Ia the making of
| loans the larger in proportion to the total
assets of banks in smaller communities,
where. as a rule. large loans which are
safe are the most difficult IL secure. while
| IN the larger business renters of the
country. where commercial conditions
create Il certain dcmaud both from banks
and borrowers for larG" and safe loans.
its effect is tn" reverse to such an extent
as l." BE- injurious.
FIJI" Compt roller states that in his judy
mcnt the present provision when properly
altcrca should allow the banks of larger
communities to have NOR nearly the
lriNilcg" of luituipC = given per cent ot
their total assets tea one individual. which
row belongs. under Il strict compliance
with the present provision. to the banks
Of thc smaller communities. From this
priv ilcgC they are now dcharrcd BY Law.
he SUGGESTS that after thu words. in
Section 300 ''thall Al ~ time exceed one
tenth part Of the amount Of capital stock
Of such association actually paid in. thc
following words:
provided That the restriction os this
section as to the amoInt Of total linbiil-
Ties 10 amy association Of any person, or
Of amy company. corporation or 1irm. Tor
mnucy borrowed shall not apply whore a
loan in excess Of unc-t"nth part ~ ms
capital stock shall he less than pcr cent.
sc tho total assets Of said bank at the
time Of making said loan. Said loan shall
be at All times protected by collateral So
curitY equal to or greater in value than
the excess in the amount of said loan
over onc-tcuth of the capital stock.
\ strict penalty enforceable by the
comptroller should then he provided for
linfractions of the amended section by the
officers of banks to enable the comntroilcr
to successfully enforce general and strict
compliance with its terms.
The suggested amendment Will make
Section 800 Just aut equitable in ita re
lation To all national banks and to all
communities of our country. large and
small. which it is not ut present.
Ii would not lessen the amount which
the smaller banks can now loan in com
plianCc with the section as II stands a
present. At the sam" time ii would not
allow the larger banks to loan any one
individual or corporation more than 10
per cent of the capital, unless such .oan.
i naddition to being secured for the eX-
cess. would not amount to n greater
per cent. of the total assets than is con-
Sistent with the safe distribution of loans
and the resultant protection to deposit
tors.
will ;,