Gainesville daily sun. (Gainesville, Fla.) 190?-1938, 1906-06-01
SIZE OF BANK LOANS.

Now that the Senate has passed the
railroad rate bin IL will have time 10
pay TO other pending measures Among
rhesp is the bill which has passed the
! House OF Representative providing
that a national bank may loan TO one
individual or firm or company no
| larger a sum than one.tenth 81 tie
capital stock and one.tenth OF its an
| impaired suFpius, but in no case the
loan TO BE- greater than 20 per cent OF
the capital stock. This bill is a vast
Improvement upon the present law
which provides that national bank
may not loan TO any one borrower
more than Ont-tenth Of it's capital
stock
In these days OF large business trans
actions, that limitation ia hardship
TO the bankt, says The Wall Street
Journal In fact, it has been law
which could not be enforced and il is
necessary that it should be changed 90
~ 10 conform 10 the new conditions OF
hI.lntH
Why the House OF Representatives
should have amended the bill 80 rs to
make II impossible for national bank
20 loan TO the foil limit OF one.tenth
Of l,s capital stock and unimpared
Surplus does not appear clear. II
changed the bill 20 as TO discriminate
against the banks Of email capital
stock and Of large surplus, although
these banks are among the strongest
and most conservative in the country.
Inis discrimination impaires the value
Of the measure, DOtwithstandl It's
improvement over the present law.
For instance, a bank like the Chemical
National, Of this city, which has sur.
plus OF over $3.50, 600 and q capital OF
only $4,000, instead u being able to
loan TO the full amount OF one-tentr
Of It's surplns, would be- limited 10 ~
per cent ~ its capital stock, 80 that
under the measure, IA IL now s'ands,
It could loan 10 one borrower only
500 600, while il there were not this
q IEcrlmination, IL might make loan
OF nearly $4,000 TO one Dor
rover The evident intention is 10
compel r bank like the Chemical Ma
tonal TO increase lie capital stock
There seems, however, to be- no i'm
prraliNe reason why il should be COM
PEELED TO do this. The surplus il IS
much the capital oi n bank a. ia II
capital stock. 4 bank does not escape
any taxation by Keeping its capital
stock email, because the taxation ia
upon the book value OF the stock II
has been urged that the banks should
be compelled to Increase their capital
stock IN oIder tOgve 10 the deposltors
the added safeguard OF the doub e
liability Eut the depositos are last
NJ strongly protected by big surplus as
they are 10y large capital STOCK
The argument that To permit the
banks to make larger loans to single
borrowers viii operate against the
small borrowers and IN favor of the
big corporations, il absurd Unduubt.
ehly Ia increase the facilities the ma.
tionAl banks II this respect will euAtte
them to accommodate more readily
the requirements OF the large Dor.
rowrrs, hu, t will not IN any way
work 10 the disadvantage ~ the small
borrowers Their small loans will ~.
crlvr ~ mach consideration "a ever
The Sruatr should pAa the blll Which
has come from the House Of Keprrs"r-
iAuves. amended. however. 80 "a to
give the banks permission To loan to
single hofrows to an amount equal TO
10 Per cent to their combined capital
aud surplus regardless OF the ere Of
their cAp''Al stock
Our gallon ~ alcohol Will rrndu ice
twice Ne much light AZ gallon "