The morning Astorian. [volume] (Astoria, Oregon) 1899-1930, 1904-10-26
NATIONAL BANK FAILURES.

MA A11OA>&A1 DAMN &AIbohEN.
striking feature of Comptroller Ridgley's ad
dress before the Illinois Bankers association is hi
strictly obeyed the national bank act ever failed
not one" This statement is especially true of ma
tional banks during the last 25 30 years. says the
New York Commercial. During that period the ma
tiona banking law has been strengthened and forti
fed at every point where it seemed to be weak, SC
that if its present provisions are faithfully obeyed
the failure of an institution that is chartered under
1t is, except in extreme and rare cases, such as sud
den runs, panics, defacations forgeries prac-
tically impossible.
The national banking system has now been in
operation about AZ years and there was undoubtedly
period in the earlier history of the system when
many national banks, particularly in smaller cities
and villages, were loosely managed. The granting
of loans and discounts in these instances was left
largely, if not entirely to the discretion of the
cashier the president of the bank-or perhaps to
both-and if the applicant for loan chanced to be
stakeholder of the institution or depositor who
usually kept good balance, the loan was often
granted with little investigation as to his actual
financial standing or that of the endorser of his
paper" 1t was quite common practice at that
time for persons or concerns whose loans had already
reached the 10per-cent limit Of the bank s capital
to which amount the national banking law express
y restricts such loans-to offer STRAW paper for
discount and many banks, understanding fully that
the discounting of notes of this kind was asclear
evasion of the law but having faith in the solVency
Of the endorsers, did not hesitate to grant loans
thereon. The result was that many of these inst
tutioRs; through losses incurred in this way, were
forced into bankruptcy.
In recent years there has been a marked change
IN the management Of national banks in this respect
Even the smallest classes of these institutions are
beginning to see the unwisdom of comforting upon
enc or two persons the power to grant loans at their
discretion. The common practice among national
banks now is to appoint committee of directors
Who meet daily or at frequent intervals and pass upon
applications for loans and for renewals of existing
loaHs- The wholesome effect of this policy is shown
by Secretary Shaw's statement in his annual re-
port to congress last December to the effect that i
while SAT national banks were in existence at the
close Of the year ended with October 81, 1903 only
12-or less than onequarter of one per cent of the
total number had been placed during that year in
the hands of receivers. This showing is in marked
contrast with Secretary Shaw statement that Of the
total number of national banks that had been organ
ed up TO October 81 1903, inclusive Of those which
had gone into voluntary liquidation, Sc per cent had
failed These figures clearly indicate that national
banks are now being managed more strictly in ac.
cord with sound business principles and with the pro
visions of the national banking act.
In spite of the improvement in bank manage. |
nent, Comptroller Ridgely's emphatic warning to
directors of national banks, that they should take
more active part in the conduct of these institutions
Is not untimely In the last four years over two
thousand new national banks-the majority of them
located chiefly in the south and the west and having
individually capital of $4,000 or less-have been
organized, and there is danger that some of them,
the expectation of gaining business may be tempt
ed TO follow the example of smaller national banks
IN the east and the north score or more of years
ago and take risks in the matter of loans that the
national banking law, either directly or by mplica-
Fion, forbids To the directors of such institutions
IS nay be thus inclined Comptroller Ridgely's ad.
dress should be of particular interest
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