Woodville Republican. (Woodville, Miss.) 185?-current, 1902-05-24
" STATE BANK SUPERVISION" )"
Subject Of an Able Paper Before the
mississippi Bankers' Association.


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 manifestations
of this right in the national and state rail.
road commissions. ALI great public COR
porations, exercising stupendous and quasi
public functions, become, in time, SO
blended with and essential to the CONNER
cial life and exchanges OF the country that
they seem almost governmental agencies
and instrumentalities. But however great
the corporation, however far-reaching and
powerful its service and functions, 1t Is
still only creature, an artificial being
created either by state or national legtsla'
owes its every light, every power, even life
itself, to the law. 1t possesses nothing ex-
eept what Is delegated to 1t. Therefore,
the creator, the law, has reserved the right
to control, If need be, the creature, the
corporation, and it is difficult to attempt
to answer the proposition against the au-
thority. Especially has the right Of super
vision and control been asserted with re-
spect to the great corporate bodies public
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
tion 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 aud reflective body that
not supervision alone, but even official ex-
animation, with coercive or disciplinary
authority, shall be exercised by the state.
After conceding this right to the state,
the chief matters Of interest to us are el1-
braced In and may be emphasized by three
questions:
"First-why have state supervision of
banks at allY
''second-If had to what limit should su-
perYision eXtendl
"Third-Does government supervision
and examination inspire greater public con-
fldence and insure safer banking3
''In answer to the first query, we may
reply that If supervision by the state over
corporations of any character is ever right,
then, In a greater degree than with any
other class, 1t Is right and proper to su-
peryise banking institutions as there are
no commercial corporations In the land
which, In the exercise Of their powers, du-
ties and 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.
The banks OF the world have become agen-
cies 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 Ike the United
States, where they arc nominally separate
and 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.
ly determined by the banks themselves than
by all other agencies combined.
I'm the first place, then, the question OF
proper and sound banking is a question Of
sound and proper government, and surely
the government itself should have some
voice In the exercise Of functions which 1t
has created and authorized, and which,
when set In motion, Vitally reacts on itself.
''In the second place, there is no CONNER
clal corporation which more vitality touches
and affects serious and almost sacred pri-
vate interests than does the bank. The
hrst step taken by bank, after organiza:
tion, Is to invite deposits. All classes Of
citizens, from the strong and alert man Of
business to the weak and defenseless widow
and orphan, are invited and expected to IN
trust their money, sometimes their all, to
the possession and custody of the bank. 1t
is the eommunity's treasurer, a dispenser
OF credit and a guarantor to depOsitOrs,
it Is the channel through which the means
of all classes of society must flow. 1t is
the guardian of surplus capital and one of
velOpment So high a vocation should de-
mand sterling integrity and accuracy In the
conduct Of business.
'The bank becomes, in n greater degree
than any other corporation, a hduclary,
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;
1t bids for a mans surplus earnings; while
the bank holds out no great profitable or
speculative returns to the dep0sitor, yet,
as has been stated, invites a deposit, NOT
Of stated sum, but Of his whole account
his all. Part of n mans earnings may be
lost in the failure of an insurance company,
while recklessness in the conduct Of the
affairs of n bank may easily tear down the
walls of industry, dissipate the earnings
Of years and destroy the reputation Of Il
life; so interviewer are ITS relations with
community, and the nature Of its dealings
are such, that safeguards and restraints
may be demanded and should be Invited by
the banks themselves.
1--WE grant that the history Of banking In
for the past ten or fifteen years
does not give rise to a demand for closer
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
contend that no penalty should be imposed
because the death penalty has not prevent
ed murder.
more than so per cent of all the money
owned by the people, and 1t is out of this
money that more than 50 per cent Of the
banks profits are earned. This being true,
and II being impossible to be otherwise ac
curately determined, the only recourse
public could possibly have against
judgment, excessive credit recll-
less banking and Improperly managed kank-
Ing corporations Is, not only state supervi-
sion, but official examination as well.
better argument in favor Of the proposition
could not be made than the assertion that
forty-eight states and territories have laws
requiring supervision Of banks in some form,
tions. and only two or three have no bank.
Ing laws at all. strong argument in
favor of state supervision and examination
Is tnal the states not requiring official eX.
animation have an average OF twenty-six
state against fifty-three national banks;
while those requiring official examinations
have an average of 1870 state to 100 national
banks. The fact that for about forty
years the national banking system has
to prosper and the number Of
banks increase under the most rigid gov.
arnment supervision and examination Is n
forcibe argument in favor Of the policy,
even though such banks are granted some
extra privileges Many claim that the bus.
ness done with banks is purely voluntary,
ind that they have the right to insist on
he same privacy in the conduct Of their
lffairs as the individual, without the In
reference Of state supervision, and they
further assert that state bank examiners
would be a menace to success, for the rea.
son that the business secrets of n bank
would no longer be its own, but that of
he examiners as well, and they would be
1t liberty to dlyulge them indiscriminately,
md to do so might possibly cause the loss
# good business ifhey forget that the
,ank has undertaken aud does exercise func-
Ions that may affect the welfare of q com.
nunitv beyond the power Of calculation
md that properly managed and prosperous
Institutions should have nothing to fear
rom the most rigid scrutiny, which should
De protection to them against Improperly
managed competitive corporations. Bank |
are supposed to be men Of sound |
business principles aud Of good discretion, |
md would not be permitted, II 50 disposed, |
o divulge the internal business of hanks ex.
,ept In q legal way and In the discharge |
4 an official duty. We hazard nothing by |
he assertion that today there are many |
,anks conducted In gross disregard Of sound |