New-York tribune., 1910-01-31
NO "BAD BANKS NOW.
National City Circular Praises
Controllers Worb,.

large part OF the February circular of
the National City Bank is devoted to a
description of the striking success of the
policy pursued by the present Controller
OF the Currency in the oversight and reg
ulation of the national banks. The clrcu-
lar says, in part:
There is practically not a national bank
III al the United States at the present time
whose condition is regarded as unsatis-
factory This is the important decIa ration
which was made by the Controller of the
Sprrency IN q recent informal address to
group or Treasury officials and bankers.
u Is ali the more important in view of the
TACT tnat 1t was also declared that q year
ago Jhere were several hundred banks,
CUT or the seven thousand associations DO
ing business under national charters, which
were regarded, and had for many years
been considered by the officials OF. the
Controllers office, as either unsound or
poorly managed. It formerly was the
practce of the Controllers office to segre-
gate banks of this class from those which
required no special or unusual supervision
EHorts made from time 10 time 70 better
me condition OF these unsatisfactory in
stltuuonS were successful in particular in
stances, but on the whole the list OF the
so-called bad banks was never materl-
ally reduced in number until the iuaugura-
ton of series of adminstratiye reforms
a little more than a year ago. AS the re-
suit OF the successful working out OF the
various reform measures, which have been
a feature OF the administra ton of the Con-
tioller's office since September, 1908. q COM
plete rehabilitation of the .unsound and
poorly managed banks has been effected
By persistent pressure from the Control
lers office. and with the cooperation Of
bank officers and directors, the status OF
these banks has been so improved that
there is not now any bank on the bad
list. This is a noteworthy achievement,
and a most reTnar arka bile one to have been
obtained in 50 short time. II has i'm
rneasurably benefited the general banking
situation, and will add much TO the pres
tige OF the national system II has demon
strated very clearly the tenedt of govern
ment supervision, zealously and intelligent
ly directed
The Controller has recently taken action,
the circular says. on the matter of loans
having real estate security. Some OF the
national bank examiners report ali loans
which even in the remotest way have re-
iation to realty, as, for instance, a loan
on railway bonds, back Of which there is
involved the element of real estate Sc
curity, and such reports have in the past
usually been followed by letters of criti-
cisn1. This practice Controller Murray has
modified. After examination of judicial de-
cisons he has instructed the examiners
TO include in their reports as Objectionable
on account of real estate security only the
, following transactions:
directly TO the bank.
. Those where the mortgage is taken 10
third party for the sole benefit of the
bank.
s. Those where the loan is made TO a
party Financially irresponsible, and the only
security relied upon by the bank Is its
equitable right to real estate held by
third party Tor its benefit
The Controller holds that in the latter
instance the loan would evidently be made
upon concealed real estate security FOR the
pUrpose of evading the law. There is,
however, no presumption or intent TO
evade the law, and unless circumstances
show that an evasion was intended bank
exa miners have been instructed not to re-
port the transactions.
The above is not intended in any manner
20 open the way to the making of loans
by national banks upon real estate secuT-
ity, but the instruction has teeu given 10
relieve national banks of criticism hereto
fore en1anating from the Controllers office
based upon the VARYING conceptions of na-
tional bank examiners as 70 what ConSti-
tutes real estate security.