The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-06-06
FEDERAL SUPERVISION or IN.
SIRANCE COMPANIES.
The Pc ssibility OF Relations AnalOg Gus TO
In 90 with the National Hanks.

To THE Enron OF The SuN-Sir: Your
leading editorial in this mornings issue on
the relation which exists or should exist,
between the Federal Government and life
insurance companies Ia both Interesting and
| timely 1t seems to me. however. that you
give voice to popular misapprehenslon as
to the similarity between the supervision
OF national banks by the Federal Government
and the proposed regulation Of insurance
companies by the same authority. 1 take
the liberty Of quoting from paper on the
subject of state Supervision OF Insurance
Companies" which recently had the pleas
ure Of reading to class at the Wharton
School OF Finance and Commerce Of the Uni
versity OF Pennsylvania:
Why. they ask, II the banking business Is super
v!sed by the Federal authorities. should not the
Insurance business be treated In similar manner!
The answer Is simple. The banking business Is
not supervised By the Federal Government except
when the bank attempts to exercise function Of
the central Government viz sto emf; bills OF credit"
In other words. there may be bank Incorporated
under the laws OF any Of the States. which trans
acts an enormous business. which practically has
agents In every state OF the Union. and whose
operations partake Of Interstate nature as thor
oughly any can. The Government does not
attempt In any way to exercise supervision over It.
but let bank no matter how small Its capital. no
matter how restricted Its operations, once issue
bank notes. aud 1t becomes at once an object OF
visitation by the central Government. which In
sists upon regulation Of the affairs OF such OH
Institution In order that the early scandals of repu-
dated bank notes be not repeated. The national
Government does not say 10 a banking institu ton:
because you are large and operate In every State
OF the Union we VIII supervise you" but II applies
the sole ties, Are you exercising function OF
the central Government II SO. We will see that
you conduct your business along proper lines
that the credit OF the United States will stand be-
hind every dollar note that Is issued TO the world
With the names of your president aud cashier
upon H."
The examination Of a national bank re-
uuires no scientific or technical knowledge
upon the part OF examiners other than a
proficiency In RcCountancy and the exercise
OF common sense. The examination of an
insurance company. on the other hand, re-
Quires a thorough knowledge of the insur-
ance business. OF accountuucy and Of actuarial
matters. Is 1t likely that the proposed Fed
eral Bureau will be able to command exam-
ners 30 equipped, especially II the head Of that
bureau is TO be paid only $1,000 year. as
proposed In the original bill of MIR. Morrcll
OF Pennsylvania?
/ do not intend to discuss the thorough
ness or the efficiency OF the supervision of
national banks. Suffice it TO say that in the
report OF the Comptroller OF the Currency
issued Dec. 5. 1904. he states that during the
last year twenty-six national banks were
issuance of that report have likewise
learned of the peculiar financial methods
OF the president OF the First National Bank
OF Milwaukee, No matter how perfect any
supervision H. 1t will never be able TO prevent
rascality upon the part Of the managers OF
large financial corporations II they really de-
sire to he dishonest. The best that can be
done Is the institution of a series OF checks
which would prevent the actual stealing of
the funds. and then to perfect the system of
supervision 80 that errors in management
and the use OF the funds for the personal
profit or ACKNOWLEDGMENT Of the officers shall
be prevented, This can best be accom-
plished. in my opinion, not by placing our
huge insurance corporations under the con-
troll Of Que bureau in Washington. but rather
by insisting that the State governments shall
take their Insurance departments out OF poll
tics. If this be done, and the findings OF
honest and efficient examiners be given due
publicity. we would. in my opinion. be able
to avert many of the disRraceful conditions
now existing in certain quarters.
New ioRK. June 5. $. II. WOLFE.
II Mr.. Wolfe will look again he will find
no evidence o. the Misrepresentation re-
ferred to. The suggested analogy was not
between Federal supervision of national
banks as at present exercised, and Federal
supervision OF insurance companies as
proposed under the conditions he intelli-
gently discusses 1t was a suggestion,
without advocacy, Of the idea of a new
system Of national insurance companies,
related to the Federal Government some
what az national banks are related