New-York tribune., 1907-11-15
THE BANKING cOMuISSION.

Governor Hughes by his appointment of
thoroughly qualified commission of inquiry ana
advice has cleared the way for intelligent leg
iSlation regarding state banking ut the coming
session. The commission consists OF two Ma
tional bank presidents, a state bank president,
two trust company presidents and savings
bank president, and consequently represents
all shades of opinion. The conclusions which
il will reach will not be open to the objection
of presenting simply the national bank view
or the trust company view. Because of public
confidence in the members of the commission
and of the diverse interests they stand for their
conclusions will reflect the general sense of the
banking community as TO the restrictions which
are essential to safety and stability
4 reform Of the state banking laws will be
cne of the most important problems before the
Legislature this winter. Within u few years
the trust companies have come TO do large
share of this city'S banking because they have
not been subject to the restrictions which the
federal government has imposed upon the ma
tional banks. They could make larger profits
than the national banks because they could take
greater risks, and hence could offer greater in
ducementS To dcpoSitors than their rivals. This
freedom worked well during prosperous times
lut when the recent trouble came just be
cause they could assume greater risks, could
loan Il larger proportion of their deposltS-anu
to some extent Oh securities that the national
banks were barred 10y law from accepting
they were less ready TO meet the emergency
and needed more support than their rivals. The
financial disturbance proved that the state
was less successful than the nation in safe
guarding the interests Of depOSltors ana Of
the business community in general 1t Is clear
that the present reserve required Of trust com
panies is inadequate. The difficulty in fixing
upon a proper one is in separating the demand
from the time accounts. For the former II
seems reasonable to require the p per cent
reserve which the national banks are COM
Ielled by law 10 rraintan; for the latter
smaller reserve is ~0. icient The present state
law is just a gueS, It the amount of the re
serve fairly TO be required of trust com
pauy in consideration of the composite nature
of its business. No such guesswork will do
for the future, nor is it TO be looked for from
a commission of the character of that appointed
hy Governor Hughes.
What is needed is a law which will leave the
time business of the trust companies profit
able as at present and which will make the
demand business safe and as ready for
emergencies banking conducted under the
national act now IS. II is reasonable TO expect
that experienced bankers anxious to preserve
the good features of the trust companies and
at the same time to eliminate their weaknesses,
Will be able TO suggest plan Tor segreSauh2
the time accounts for the purpose Of estimating
the necessary reserves upon the remaining
business That is the main problem so far as
the trust companies are concerned. Frequent
publicity of state banking conditions, such as
prevails in national banks. would serve the
business community. This it is possible for the
law to require. Association of the trust com
panies in the Clearing House is desirable, but
that is a voluntary matter. However, rea-
sonable solution of the reserve problem would
probably make the way to union easy.