The sun. [volume] (New York [N.Y.]) 1833-1916, 1907-12-18
BANK REFORMS IN THIS STATE
HEPBURN COMMISSION URGES
DRASTIC LEGISLATION.
AIsO More E'Over for state SuDerlnt cndrnt 4.
Limitations On Chains Of lBauks. M
secret Loans. ami cheek on syndicate
Dcals Views aDlTer Rs ~ HecscrVc.

49, 49, 49,
public to-day the report Of the commission
headed by A. Is Hepburn, appointed by
the Governor TO suggest amendments 10
the State laws governing financial institu-
tons with a view u remedying defeOts UNI
covered by the recent financial panic, All
the members agree on every recommended
ton made except rs to the reserve trust
companiOs should hold.
The commissioners are A.. y. Hepburn
Stephen Baker and Andrew Mills, who sign
the majority report unreservedly; 4. y.
Frissell, who believes "a 10 per cent. cash
reserve for trust companies ia too low
aud Edward W. sheldon and Edwin y.
Marston. who Disagree altogether with the
majority report ON the question Of trust
company reserve.
The main report points out the weak
nesses Of the State financial institutions.
as shown in the financial panic, and believes
the recommendations made. II adopted 10y
the Legislature. would strengthen all weak
spots. Suggestions arr made which will
prevent the establishment of n chain Of
hanks by the hypothecation Of the stock Of
the first bank controlled by such speculative
syndicates. and increased capital is de-
handed for branch banks.
II is made q misdem"anor to permit loans
not approved by boards of directors in
regular mseting. which lack oi directors
supervision was responsible for many Of the
financial failures in the recent panic.
A most important recommendation gives
complete mower 10 the State SupeTinten-
dent of Binks frd eliminates the Attor-
noy-General. This is accomplished by
ID ing away with court receivers and
givinc the State superintendent Of Banks
the same powers as has the Federal
ComutrOller of the Currency 70 take
possession at once and close weak financial
institutions and to put his own men IN
charge to wind mp their affairs. This. II In
estimated. can be lone az q cost Of H.
uer cent, where as the cost Of the present
receivers ranges from - to 30 per cent.
and frequently cuts mp more than half Of
the remaining assets % a lefunCt Iust,tu-
ton. hen the salary Of the SupeTintendent
of Blnk' ~ TO he raised from 81 900 to Sij .uoC
u wear. UrOn this point the report = ".
Un.ess the superintendent is clothed with
adequate direct power 10 enfOrca the law
by closing Il delinquent institution the ell
cheney Of the Law il obviously lrs-rnrd. | nder
existing law he may ]CritciSe obirctiOnabl"
practices when they come TO his knowledge
ard report continued dcliuuuencies TO the
Attorney. Gencral. His criticism il hence
IN large measure academic and may he given
scaut consideration by drliuqueuts.
The authority To close offending iustitu-
tiOns and appoint receivers therefor should
be vested In the superintPndent for This
rcasan and others TO he discussed presently.
Were he clothed with the power TO direct
the discontinuance of unsafe practices" no
institution would dare continue the same 4
after having been admonished by him.
Touching the organization Of financial
institutions by speculative promoters the
re-. ort says:
Respecting the organization Of banks
aud trust companies existing laws seem
to cover the requirements fairly, except as
to the veto power of the Banking Depart
ment. The establishment of "A bank or trust
company or of a branch of any existing
bank or trust company or the purchase Of
she control Of one banking institution bv
anOt her should he subject to the approval
OF the superintendent.
II should be within his province TO prevent
the organization of suCh institutions by in
proper men or their establishment In localities
where business conditions do not reasonably
assure their success. The law should he
equally restrictive and explicit as to the
organization of banks aud the establishments
OF bank and trust company hTuTh hes. lE"
duties. powers and responsibilities OF the
superintendent should he clearly defined
Trust companies In the city Of New lork
are NOT allowed 10 organize with a less capital
than sJOO. OOO. We think that banks Should
not hereafter he permitted to have branches
unless they pOs-eSs a Cas,ital OF sIOu Opo.
and We think that both banks and trust com
panies should be required to furnish an adj
dittional SIOO,O 900 Capiral for each branch
opened
Where a group of promoters unite to buy
the control of a number Ot separately or.
Ganized institutions and utilize the resources
these institutions by exchanging
loans and deposits a dangerous element
IL likewise introduced aud the law should
provide means TO prevent or eliminate such
conditions. and the superintendent should
be given ample power 70 investigate aud pre-
vent such practices. Moreover. he should
have the same power 10 SCrut iniI" the en-
largement of the capital stock nnl lis a,tua!
payment In cash ~ obtains IN tn" cass OF
the original capital.
Discussing loans and Investments the
re- OTt says:
IL should he made cOmmlSOry thai all
leans, discounts and purchases al commercial
Taper shall be read to the directors ur sub.
nitted in written form "a the meeting ucyi
succeeding the making Of a." -aulc. and IL
territorial ConCealmrnt of the making uf such
loans, discounts ar purchases should he mnde
; m.sdemeanOr Failure 10 submit the max
iag OF such loans. discount, or purchases at
Wv W NAlbNtA w 81 half W lAltIN' q
OF cOncealment. All loans or other trans
actions Of u like character should be fully
reported 10 the directors.
4 deposit OF funds of any mOnrNcd cor
poration with any other similar institution
through which credit il given 10 or advantage
received by the officers or directors Of the
depOsitinR institution. dirrctly or indirectly.
should be a misdemeanOr upon the part of
officers Of the bank responsible Tor the max |
ing OF receiving Of such deposits. This prac-
tice IL very common among bank pTOmOt era.
The law limiting loans il too liberal. and we
recommend that the amount which any in
~rtitutiOn may loan upon collateral To any one
interest be reduced from ~ per cent. to Is
per cent.
With a view 10 the prevention Of the
establishment Of banks by promoters
through the use of bank stock AZ collateral
the report says.
We think that no hank or trust company
should be permitted 10 loan upon the capita
stock OF any mOneye1 corporation an amount
In the aggregate exceeding 10 per cent. of
the capital Of the corporation whose stock
H. offered AS collateral. nor should any bank
or trust company make any loan upon the