Five Mile Beach weekly journal., 1909-11-05
COMPTROLLER TO
STOP OVERLOANS
Murray Asking National Banks
20 Reduce Outstanding Cred
its 10 Legal Limit


WASHINGTON, Oct. 2o.-lt need
not surprise some of the national banks
that have been accustomed to ignore
the law regarding over-loans to find
themselves defending an application
for revocation of their charters before
long.
Comptroller Murray is in earnest in
his determination to put a stop, not
only to this common phase of violation
of the national banking laws, but also
to go after several other forms of lille
gality on the part of the national
banks, seriatim, and see just how near
to complete observance of the law he
can bring them. 1t is a grand round
up that he has undertaken and n
that is expected to produce results.
For years it has been the complaint
of the Comptrollers OF the Currency
that the national banks have practi-
cally defied the department with re-
gard to certain features of the law.
The prohibition of loans above certain
amounts has always been practically
disregarded by certain bankers, and
despite the utmost efforts of the Comp
troller nothing effective has been done
in the way of checking the banks.
The law provides that no national
bank shall lend to any person or cor
p~oration more than 10 per cent Of its
capital and 10 per cent. of its unim-
paired surplus. In no case shall any
loan exceed 80 per cent. of the capital.
The great majority of national bank
failures i n recent years have disclosed
a complete disregard of this prohibition
on the part of the bank officers.
Ever since Mr.. Murray became
Comptroller he has been hammering
away at the banks on this evil. He
has obtained some results, having cut
down the percentage of banks that
were violating the law from about 80
to about 10. But the banks composing
this Is per cent. have been resisting
his efforts stoutly.
The banking law does not confer
any power upon the Comptroller to
deal with such a situation except the
drastic one of going into the Federal
Courts and applying for the revocation
of the charter of the offending bank.
That is a measure which Comptrollers
OF Inv cut feucy Laveaiways hcaitatod
to employ, for it is obvious that over
loans are not necessarily impairments
OF the solvency of the bank.
AS a result of this situation every
Comptroller for years has steadily
recommended to Congress such an
amendment of the banking law as
would enable the Com ptroller to deal
adequately with offenders of this class
without having to seek TO shut up the
bank.
The knowledge of this difficulty in
the way of the Comptroller has always
seemed to inspire certain bankers to
continue to defy the C~omptroller's Or
ders and appeals, in the confident GER
tainty that the Comptroller would not
take the extreme step of asking for re-
vocation of charter.
Comptroller Murray has now deter
mined that he will not hesitate any
longer in the case of banks that con-
tinue to resist his instructions to get
within the law regarding their loans.
He has been sending out a series of let
tiers to the offending banks in the last
few days, warning them for the last
time that unless the overloans are re-
duced promptly they must be prepared
for drastic measures.
In cases where the solvency of the
bank is not in question, and the loans
are clearly good, the extreme limit of
reduction might be made conterminous
with the life of the loan. But that
would be the extreme consideration
given by the Comptroller, and that
only in exceptional circumstances.
The next step will be application for
revocation of charter. Banks which
want to avoid that will be wise in TAX
ing care of their overloans.
That is only the starter of the Comp
troller's crusade for compliance with
the banking law. 1t is not only in
the matter of overloans that the nation
al banks disregard the law and the
Comptroller. Especially among the
country banks of the West is there a
tendency to make loans on real estate,
despite the prohibition of the law as to
that.
The Comptroller is going after the
banks that make such loans with the
same stick he is using with regard to
overloans. There are several other
forms of violation of the banking law
which have also attracted the attention