Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1900-11-26
1O Safeguard Banks
Comptroller Dawes' Annual Report,
Just Made fublic, Makes I'm
portant Suggestions.
Would Restrict officers Powers t
Make Loans to Themselves
and Others.
Interests of Dspositors Best Sub
served by Change in Methods
Of Management.

r 90 Z
{ Washington, Nov. 26. Comptroller
Dawes in his annual report. made pub
lie today makes some Important sug-
gestions for safeguarding national
banks against the unwise management |
OF officers and thus protecting the de-
3positor. He goes to the heart of the
difficulty by advocating greater restric-
8tions upon the powers Of bank officers
and directors to make loans to them
selves.
Having found that sixty-two recent
bank failures. or II per cent Of the total
failures Of national banks, We're attrib-
5ntable to excessive loans to officers and
directors, the comptroller started an in
vestigation. The result was almost
startling. June 20. 1900, out Of a total
of 2S,7O9 directors Of national banks IN
the United States no fewer than 1854
were directly or indirectly Indebted to
the banks under their management Fol-
lowing is q synopsis OF the comptroller's
report:
The most important recommendation
made by the comptroller, and that
which is the chief feature of the report,
lis one for additional restrictions upon
loans to directors and executive officers
of banks. The comptroller states that
the large percentage Of bank failures at
to excessive loans TO directors
| and officers, which amounted to sixty
two failures, or IL per cent OF the total
failures Of national banks, led him to a
| careful investigation as to all directors
lloans now outstanding in the national
banks Of the country.
This investigation showed that on
June 2. 1900, the date of the comptrol-
Hers call for statement of condition
from the national banks that of 22s, 7Os
directors of national banks in the cotin-
| try 1884 were directly or indirectly in
ldebted to national banks under their
management
The aggregate sum owed by these 49,
4 5S4 borrowing directors and 2,279 officers
and employees who We're not directors
lwas s202. .2sI, I,4.1. As the capital stock of
1.-THE national banks of the country on
I5June 90 was 1851 .536, ,4e1, 1t follows that
4 the direct and indirect liability of direc-
i tors and officers amounted to 32.55 per
l.cert, or about one-third the capital.
Il The1 direct and indirect liabilities of
i lldrectors and officers to banks under
their manag ement amounted to 80 per
i cent OF the total loans and discounts Of
\ the national system.
The comptroiler then says:
i While these tables do not necessarily
4 Indicate that national banking officers
4 and directors as whole abuse their
i privileges, and many Of these directors
i lloana are among the safest owned by the
Iie1-o
I, the tables show clearly the great impor-
i, tance of a properly framed law placing
& additional restrictions and safeguards
Il around these loans. in which the exper-
Iience OF the banking system teaches, is
q involved the greatest danger of the i'm
81 proper and lax use of banking funds.
"In formulating provisions of law re-
q stricting loans to executive officers anC
t tldirectors. it is important not to make
t|them SO unrea sonable as to drive from
II auch service the active responsible ane
!. lihonest business men of the country. Th
a problem is to devise such restriction!
i for the safety Of the depsoitors as will
: discourage improper loaning to director
/ while not injuring the depositors by die
I couraging to too great an extent the as
Z sumption OF the duties OF bank director
!, 4 ship by the active and responsible mem
: berg OF the business community
. Primarily, the law should have II
view the safety Of the depositors, and
i should be recognized that their safet;
i \ is aa much endangered by the passag
Z OF a Law which would drive good direc
= ltors from the service as by the existenc
!. of law which does not sufficiently re
I strict the opportunity of dishonest di
!. \ rectorS To abuse the powers Of their po
!, sition.
= 1T seems plain to the comptrolle
that any law upon this subject shoul
make distinction in the nature Of tn
Z restrictions upon directors who are nc
! officers which will not involve as nluc
2 OF delay In the making Of loans I
them as in the making OF loans to tn
) executive officers Of a gank, since tn
2 latter have the greater opportunity an
= tllatitude for improper methods in the US
. OF trust funds
The failure Of the present law to pre-
s vide the power to apply a penalty fc
3 the making Of excessive loans some
2 times embarrasses the comptroller !
= endeavoring to check tendencies towar
. recklessness In loaning, which point
:. the ultimate ruin OF banking institu
ton.
g The present need is for an amend
s ment to this provision which, while con-
lpelling, under penalty, the safe an
proper distribution OF loans of large
n banks. will enable them to loan MOI
d nearly the same per cent OF thier tot;
le assets, which the present provision a
ID lows to small banks. In this way the o
lr ficers Of larger banks can supply tt
l. proper needs Of the larger communitl,
to without disregarding the law. and IL
N comptroller can hold them under pc
aonal penalty to strict Observance of I!
amended law, which, when disregarde
would indicate improper distribution
re loans, something which infractions
mi the present provisions in the case
I'd many banks do not necessarily ind
A. cate. IS
"a THE question Of those laws which a
id / feet the right OF one national hank
Is consider as cash resource . deposit
another national bank. called its rsser'
agent, is one Of great Importance al
~ / involves the most Fundamental primo
Of pies of safe banking. rhe extent
stIwhlch the reserve az one hank can safe
ID be represented by what 40 practically
to another bank. head Of by ca
g 10 vaults. y = props abject for 60