New-York tribune., 1907-11-15
WAINWRIGHT ON BANKS
SUGGESTS LEGISLATION.
Assemblyman Urges Higher Re
SerUeS for Trust Com panies.

clared Assemblyman ]. Mayhem Wainwright.
chairman OF the Assembly Committee on Banks.
yesterday This action is bound to he of the
utmost service in getting to the root of present
conditions and paving the way to remedial legis-
laton at the coming session when this serious
situation must be taken up and. in my opinion.
great changes made in the banking laws of this
state.
"One of the grave questions which undoubtedly
will arise early in the work of this committee Is
whether some means cannot be devised. either
by legislation or adequate supervision Of our
financial institutions. to assure the use of the
resources of our banking system primarily TO
the commercial and mercantile world / know
that this is a direct reversal of the present con-
dition when the wealth of the banks goes pri-
marily to feed Wall Street speculation, and sec
ondarily 10 meet the legitimate demands or the
business men and manufacturers and farmers
of the country. Yet the reverse seems more IN
keeping with sound economic principles; and to
my notion the perverted condition Is at the roo'
of most of our present trouble
Assemblyman Wainwright as chairman of the
Committee on Banks OF the lower house or the
Legislature to which place he is certain or re-
appointment will be power in banking legls-
lation at the coming session. He fought STUD
bornly in 1906 TO obtain an investigation Of the
banking situation IN this state and a revision
of the banking laws A resolution presented pS
him was passed by the Assembly, but after
many hard fought battles in the Senate was put
to sleep there, in great measure because OF the
opposition Of Senator John Raines and the we'll
known attitude of Governor Higgins, who looked
with disfavor on a course which he thought
certain to create unrest and disturb confidence
in the financial world. Mr.. Wainwright was
largely Instrumental in obtaining the passage
of the present trust company reserve law
though he fought to compel the trust companies
to maintain a much heavier reserve than that
law stipulates He told yesterday much OF the
inside history of that fight.
II have no doubt that the gentlemen ap-
nointed bv Governor Hughes will find many
features of the law requiring legislative atten-
ton" declared Mr.. Wainwright. They are
men of such experience and character that their
views cannot fail TO have most important in
Auence in shaping new legislation in manner
TO inspire complete public confidence The
state thus will have what 1t has not had for
long time-the benefit of disfnterested' high
minded authority this subject.
There is no question that odr banking laws
must be vastly improved by the next Legs
lature With such a law on the statute books
and its enforcement committed TO departments
which will undertake without fear OF favor 10
see II rigidIy observed. It should be possible TO
nut the state banking fabric upon every bit
as strone. basis as the national banks
THE laws relating to trust companies espe-
ciaIIy will require careful overhauling with re1-
erence to trust company reserves. the invest
ment of their deposits and the character OF
ths securities on which they may make loans
" the time the act compelling them 10 keep
reserves was passed II was pretty geheraHy
regarded as more or less of makeshift. and
cd
,,or+s NJ the state and federal statutes In re-
,ord m state and national banks. Any short
oo,,,noa in this law however. must be laid at
+ba door of the banking fraternity and not OF
the legislature that passed IL, as IN its nnai
torr, n represented compromise between the
CONSERVATIVES of the state banks VINO had
urged II. and the trust companies who had
opposed IL
.Tbe naionai banking interests in New York.
which are now insisting that trust companies
doing a banking busiess shall maintain a re-
serve similar 10 that required by the 1ederai
statute of national banks, and which snouIo at
that time have been interested in our ADOPT
ing a proper statute. withheld the great lnnu-
ence they might have exerted. The Clearing
House though asked. took no action upon the
nroposed legislation In this. in many other
inoportant matters, where the legislators should
beva commanded the best views the sub
tAct the Judgment of many of those most In
tarested and best qualified to pass Judgment
was withheld.
The law appears to be inadequate, first. in the
amount of reserve required, which is 10 per cent
of deposits in the large cities and 10 per cent
elsewhere IN the state, as against the 20 per
cent In reserve centres and Is per cent elsewhere
OF the federal statutes; second. IN the proper
ton Of cash which the reserve must contain
and third. in the provision permitting third
Of the reserve TO be represented by a certain
class of municipal bonds. This was insisted on
nv the citv of New York TO create and main
tain a market for New York City bonds. and
also bv the trust companies which desired that
bonds OF this nature. which they already had.
he treated as part of the reserve required
Recently 1t has been demonstrated. as many
of us maintained at that time. that IN so far as
any, mart of the reserve was represented by Sc
curities the law would be ineffective The AS
sembly declined to adopt this provision and II
was only after its insertion as an amendment
in the Senate and the certainty that unless IT
was accepted by the Assembly no law on the
subject could be passed that our house con-
sented to it.
"As TO the size Of the reserve trust com
NAMES said that so large a proportion of their
deposits was represented by inactive accounts
and time deposits that II was unnecessary in
any aspect for them TO keep as large a reserve
ss the hanks all of whose deposits were subject
to Immediate checking. There may be force in
this contention. but on the other hand, It Is
hard 10 see why as 10 their free deposits they
should not be required TO keep reserve as great
IN amount and not inferior in quality to that re-
ouired of the national banks, and why the same
thing should not apply to the state banks. Pos
siblv their time deposits might be treated entire
" separate. represented by separate investments
"As I understand the law, there Is no restric-