The Grenada sentinel. [volume] (Grenada, Miss.) 1868-1955, 1902-05-24
=. STATE BANK SUPERVISION"
Subject of an Able Paper Before the
Mississippi Bankers Association.

McComb City, Mr.. j. T. Thomas.
cashier of the Bank Of Grenada, read
the following paper on State Bank
Supervision"
''The principle Of state supervision and,
In a great degree, control OF business cor
porations. is not a novel one in the United
States, and the right to exercise 1t is No
longer open to discussion. We see one OF
the chief and most striking manifestation
Of this right in the national and state rail-
road commissions. All great public cor
porations, exercising stupendous and quasi
public functions, become, in time, SO
blended with and essential to the CONNER
cial life ard exchanges of the country that
and instruhVItalities. But however great
the corporation, however far-reaching and
powerful its service and functions, it Is
still only a creature, an artificial being
created either by state or national legisia
ton. Brought into existence by law, II
owes Its every right. every power, even life
Itself 20 the law; 1t possesses nothing ex-
the creator, the law, has reserved the right
to control, IL need be. the creature, The
corporation, and it Is difficult. to attempt
20 answer the proposition against the au'
thority. Especially has the right of super
vision and control been asserted with re-
spect 10 the great corporate bodies pubic
Interest, or interests. more properly speak
Ing, of the whole public. Therefore,, we
see RAILROAD companaies, telegraph and ex-
press companies, fire and life insurance
companies. banking and trust companies
and like organizations subject TO the opera
ton OF the principle.
II have been asked, however, to discuss
only the right OF supervision Of banks by
the state, and | am also expected to con
vince this serious and reflective body that
not supervision alone, but even official ex-
animation, with c~oercive or disciplinary
authority. shall be exercised by the state.
Alter conccding this right TO the state,
the chief matters Of interest 10 US are etu-
braced In and may be emphasized by three
questions:
"First-Why have state supervision of
banks at all!
"Seeond-If had to whit limit should su-
peryisiou extendi
"Third-Docs government supervision
and examination inspire greater public con-
hdence and insure safer bankingf
In answer to the first query, we may
reply that II supervision by the state over
corporations of any character is ever right,
then, In Il greater degree than with any
other class. 1t is right and proper TO SUI
perNlse banking Institutions; as there are
no commercial corporations In the land
which, In the exercise Of their powers, du-
Ties aud privileges, more vitality affect great
public and private interests than do the
banks. The finances Of the world are man
aged through and dominated by the banks.
Inc banks OF the world have become agen-
eies OF governments, not only in countries
like. Great Britain, where the Bank Of Eng.
land Is the direct arm of the government,
but also in free republics like the United
states, where they are nominally separate
ana apart. Eighty per cent of the larger
public and private transactions are nego-
tiated through banks or with bankable pa
per. Therefore, in this day, the first and
prime consideration OF SOUND government Is
the question Of sound finance, and the mat
Ter OF sound finance Is a matter more large.
" determined by the banks themselves than
by all other agencies combined.
In the first place, then, the question OF
proper and sound banking is a question OF
sounc and proper government, and surely
the government itself should have some
VOICE In the exercise Of functions which it
has created and authorized, and which,
when set in motion, vitality reacts on itself.
IN the second place. there is no CONNER
cial corporation which more vitality touches
ana affects serious and almost sacred pri-
vate Interests than does the bank. The
hrst step taken by a bank, after organiza-
ton. Is to invite deposits. All classes Of
citizens, fiom the strong and alert man Of
business to the weak ard defcnseless widow
ana orphan, are invited and expected 10 in
trust their money. sometimes their all, to
the possession and custody Of the bank. Ii
Is the .community's treasurer, a dispenser
or credit and a guarantor. TO depositors,
1t is the channel through which the means
OF all classes Of society must flow. 1t l.
the guardian Of surplus capital and one OF
the most important factors in industrial de-
velopnleht:. So high Il vocation should de-
mand sterling integrity and accuracy in the
conduct of business.
THE bank becomes. In a greater degree
than any other corporation, n fduclary.
a trustee. Even the life insurance com.
pany. which more nearly approaches the
measure of a banks trusteeship than any
other corporation, does not equal it,. The
Insurance company offers a business in.
ducement and a counter benefit and profit;
II bids for a mans surplus earnings: while
the bank holds out no great profitable or
speculative returns to the depositor. yet.
as has been stated. invites a deposit, not
of a stated sum, but of his whole account.
his all. Part OF a mans earnings may be
while recklessness in the conduct Of the
affairs of a bank may easily tear down the
walls of industry. dissipate the earnings
OF years and destroy the reputation of u
NE; SO interviewer are its relations with a
community, and the nature of its dealings
arc such, that safeguards and restraints
may he demanded and should be invited by
We grant that the history OF banking In
mississippi for the past ten or fifteen years
does not give rise. to a demand for closer
investigation and inspection of the conduct
Of its banks, and further. that supervision
Will not absolutely prevent failure. as we
have sufficient evidence furnished by other
states and from the supervision OF national
banks. This. however. is no more an ar
funIent against supervision than It is to
contend that no penalty should he imposed
because the death penalty has not prevent
1.-THE banks Of the land hold on deposIt
more than SO per cent Of all the money
owned by the people, and it is out of this
..-- NANN NAnh " PCT NfnL VI TIE
banks profits are earned. This being true.
and II being impossible 10 be otherwise ac
curately determined. the only recourse a
conidins public could possibly have against
mistaken Judgment, excessive credit. reck.
less banking and improperly managed bank.
Ing CORPORATIONS Is, not only state superyl.
sion. hut official examination as well. A
better argument in favor OF the proposition
could not he made than the assertion that
forty eight states and territories have laws
requiring supervision Of banks In some form.
while thirty-three require official examina.
tiOus. and only two or three have no bank
Ing laws at all. A strong argument in
favor OF state supervision and examination
- lnht the states not requiring official ex
animation have an average Of twentv-six
state against h%fty-three national banks:
while those requiring official examinations
have an average Of i2n state TO los national
banks. The fact that for about forty
years the national banking system has
continued 70 prosper and the number OF
hanks Increase under the most rigid GOV.
eminent supervision and examination 1. n
forcible argument In favor Of the policy.
even though snch hanks are granted some
extra privileges. Many claim that the bns.
ineFs done with banks Is purely voluntary
and that they have the right to insist on
the same privacy in the conduct OF their
a1airs as the individual. without the in.
terference OF state supervision. and they