New-York tribune., 1907-12-18
Cuthuiatlon in the vaults of these companies
d very considerable amount of cash
BOARDING OF CURRENCY RESULTS

present passing, coupled with the very inadequate
TINS country, has resulted in the boarding of cur
d lSics poth py banks and individuals a very
hola. napie extent In the past period Of money
noaalng has been followed by d period of money
TO- maH eSpGee @
proposeo reserve Ample time however, should be
Sare should be taken to prevent evasion of the
ID" ID as TO due-from- bank reserves, such find
instrate: a. trust company deposits 100000 with
amoyny 3oankl ar;kS in turn deposits the same
posts the same amount with A. This would
avoid an offset of deposits and leave each insti-
tuition in possession of its original amount of
funds and enable each to count such deposit
reserve under the present law.
A careful review of loans and investments is
made by the committee. with recommendations
looking to the prevention of improper practices
with regard thereto The report says:
with DEPOSIT D% 6 of funds of any moneysd
credit is given to or dVanlase redeyed by wDfe ne
officers or directors of the depositing institution,
upon the part of the officers of the bank responsible
This de practic is e ye OF suGh r
moiers Bank A deposits With Bank ::B' Say, say
by b TO loan the officers they may
m hae fS, 1890 @ t 6r 1900 at current M & rates of
its funds in furthering their schemes. In this
of chain Of banks OF course, no reputable bank
Tea Code pc a to g aeb ana oa the the
And in this connection we think the law limiting
loans is too liberal. and We recommend that the
amount which any institution on may lean & upon n col
cent To 20 per cent.
brought prominently to the attention of the public
and should be considered at some length. We refer
up0n P nncrwrns %Sn haRk Tor trust company ana
A method of a certain class of promoters. we'll
embarrassed financial institutions, is to buy stock
collateral. borrow money with which to buy stock
of anos5 s56 baRkgg an 1 BY s this
stockholder in the matter pf extending credit In
other directions. it is possible for adrot and un-
of very considerable amount of stock in a num-
paratively small amount of capital. The object of
such procedure is to obtain standing with such
utilize their credit and obtain funds to carry on
their various enterprises.
AN oFT-REPEATED ADVENTURE.
This is such an old and oft-repeated adventure
ding such loans by law. Banks and trust
Dpoh e oc bss S eam used ans
% extension Of Of the prohibition SO as to include the
tend TO protect the community against such ad-
The capital stock of all the banks and trust COM
panies doing business in the State of New York
Iet Value thereon is several times arseT W It would
be clearly an invidious and unjust discrimination
such stock as collateral for loans.
pane sa S that to no os 6ank no or m Trust Sf
stock of any moneyed corporation an amount in
of the corporation whose stock is offered as SoI-
lateral; nor should any moneyed corporation which
business for period of least six months prior
Such a law would make it difficult if not i'm
possible for group of men TO buy the control of
chase to collateral loan with which to buy the
new It would also prevent or discourage the or
ganzation of banking institutions by people who
have little or no means OF their own.
or under writing operations the report says:
Experience has shown that uniiquidated claims
and the securities OF properties in process of de-
by underwriting agreements. are unsafe and un-
The securities OF such undertakings have no
market Their real value can only be tested by
pletion. Underwriting agreements are frequently
n or sg I @ ct
bank or trust company TO carry their obligation In
and the securities sold. and thus realize profit
without having incurred any responsibility other
1t has been suggested that banks and trust COM
panies be prohibited by law from joining syndi, s
underwriting agreements. 1t would be well to for.
syndicates of the ordinary promotion class. but
positive prohibition against all syndicates and un-
enterprises Thus, when the federal government
was compelled to borrow money after the crisis Of
underwriting thereof by the banks and trust com
sns Hew Of I cx Of New shs Yor ee
larry cared for There can be no objection to such
may be members Of such syndicate.
OFFER SECURITIES IN GREAT VOLUME
The great railway systems of the country have
recently offered their securities to the public in
time notes Ss presenty sem maturing they must do so
again. Some banking house. as syndicate man
themselves in position to complete the purchase
by syndicate or underwriting agreement-that
the purchase for stated amounts. The syndicate
r. they can but fane this the underwriters
must take the securities and pay for the same up
There are no better investments available than
those offered by to f a5a feGs S
such securities in the manner deScr1ped. b lie lie
criticism lies against the quality rather thah inc
nature of the transaction
We think it wise to amend Section 25 of the
no bank or trust company shall make.
loan advance to an amount in vsea Of Tos @ s
OF the bank or trust company making such loan
the repayment of Wnidn rs cnpporaons or other
parties ,nst,,ut,oo from, ,oan,ns
more than 20 per cent of its capital. surplus and
profits in the aggregate upon any Raeent ds
ciosiires show that frequently the entire advance
of funds desired in the undertaking was made by
We think the above limitation would have , pre-.
which recently brought trouble to severai lnstl'u
tons IN a,so s,ii tbink it we'll to enact that:
mo bank or trust company shall M make any ioan N
or Ters nTeev See or contngenty for the
repayment of such loan or advance IN "foie OF IN
The foregoing is intended to restrict a loan upon
syndicate or other obligations where the bank or
trust company making the loan is at the same urne
a. particpant underwater
This is as far as think it wise TO go III recon-
mending positive enactments
of New York and OF the cities OF the state OF New
YORK should be excepted from the above
The correction Of the evil involved In TINS class
Of transactions can in our opinion, be best accom-
ni,sbed by responsible, authoritative and efficient
ssmpervision: and render supervision effective.
sreci6c mower 10 direct dscontinuance or uii-
safe practices should be given
QUESTION OF RECEIvERSHIPS-
Thu COMMITTEES recommends greater powers for
- c.o.a s,,,erInfendent Of Banks In the mat