The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1905-11-26
Law Only Evaded in First
National Bank.
Bradley Discusses
Causes Leading Up to Failure.
THERE is NO PENALTY.
Excess LOanfng Only Contrary
to the Statute.
Says Failures OF National Banks
Are Comparatively Rare.


There was no violation Of the nation
al banking laws in connection with the
bankruptcy Of the First National bank"
said Receiver J. T. Bradley of the First
National last evening. There may
have been evasions but there were no
violations of the law. Not a dollar was
loaned to Devlin directly before his sick
ness though it apears that. way, The
money that was loaned was on CONNER
cial paper, on paper from the various
corporations of Mr.. DevIins coal COM
panies. This was perfectly legitimate
since there is nothing against the loan
ing of money on commercial paper. The
companies were supposed. to be perfect
" solvent.
cat present there is no penalty for ex-
| cess lOaning IN national banks It is
simply a violation OF the law. I do not
think it would be wen to attach a pen
atty for this offense for the reason that
the experience Of all bankers has prov
en- that there are many cases where It
becomes necessary to loan mora money
to protect loans already made or to hold
a good customer whose business REQUIRE
nnents demands more money than can be
lawfully loaned. The power might be
given the comptroller of the currency
by and with the concurrence of the sec
rotary of the treasury to place a bank
in liquidation which persists in over
loaning to a dangerous extent. I think
I would favor such an amendment to the
law as too many safeguards cannot be
thrown around the billions of dollars
deposited in the banks of the country.
There has been more or less talk
about the connection Of the government
in safeguarding the interests of de-
positors in national banks and certain
criticism of the methods employed.
While it is true that in particular cases
this is well founded in a general sense
it is unfair and unjust to the authorities.
For instance, 1881 national banks since
1862 were organized when this system
went into effect and out OF this num-
Der 43S for various causes have failed, or
only 5IR per cent of the whole number
as against 173a per cent of banks. other
than national which have failed during
the same period. The national banks
which have failed have paid a little
over rs per cent of the amount due their
depositors and creditors while other
banks have only paid IS per cent.
'Of the billions upon billions of dollars
which have been deposited in the ma
tional banks during the forty-three
years of their existet1ce, only about $780,
10000 have been lost, or an average of
! about $69l,O0 a year There is no other
class of business which can show the
same results. In 1894 a committee was
appointed from the United States to
investigate the causes of bank failures
and to- report any additional legislation
necessary for their prevention,
This committee reported that Of all
the money that has been deposited in
national banks from the inception Of
the system until the date of their in
vestigation only one-twentieth Of 1 per
cent had been lost. It is a matter of
history that the principal causes of
bank failures are two; First, the over
loaning of the banks funds to a few
individuals or concerns. And second,
r,H
the officers whom the stockholders have
I placed in charge of the management.
Some times this is the result of had
/ judgment where no criminal violation
of the law results and some times the
result Of criminal violations of the law.
1.-THE history of the banking business
proves that where a bank is capably
managed within the limitations Of the
law. failures are practically unknown.
/ Therefore the problem is to consider
how best to prevent the things which
cause these failures Bank eXamina-
lions be they ever so efficient cannot
prevent incapacity and dishonesty, they
can only discover and report it. 1t
must be clear to every thinking indi-
vidual that a bank defalcation cannot
| be discovered by q bank examiner UNI
/ til after it has happened and when too
| late It is also evident that excessive
| Ioaning of money must have taken
/ place before an examiner can discover
it. And If the general public can only
I
and excess loaning have been discover
! ed and reported through the efforts of
] the comptrOller's Office and have been
| corrected they could then better judge
! of the efficiency Of the examinations.
! The remedy must be within the bank.
Boards of directors are provided by
/ law and charged with the duty of
managing a banks affairs and it de-
wolves upon them to pass upon all
1 loans made and paper discounted and
/ they. should see that none except such
as meet their approval goes into the
| assets Of the bank. And in exercising
! this function it is their duty to prevent
! violations of the law. It would seem
! that if the law would hold bank dfrec-
/ tors more strictly responsible for any
| derenctfon of duty that good results
would follow. Tt has been suggested
| that where a bank can afford 1t an aud
! itor should be employed to make a con-
/ tinuouS audit Of the banks business
and to make weekly reports to the
! board of directors. I believe this sys-
] tenn would work well in larger banks
/ but in smaller banks the board of di-
reetors must attend to this important
| duty themselves"
| The forced bankruptcy of the First
National is directly straceabIe to the ex-
cessive loans which were made upon
companies and corporations in which
Devlin was an interested or majority
/ stockholder. The amount of paper and
/ claims which the bank holds against the
Devlin estate is 81, 81, 302.26.