The Washington herald., 1910-07-03
WOULD PUT CHECK
UPON WEAK BANKS
Comptroller Takes Action in
Two Directions,
PLACES BAN ON PROMOTERS
Application for Charter Must Come
Through BOna-hde Resident and
Holder of StoeI&-RuIes that Insti-
tution with Impaired Capital May
Forfeit Its Charter.

The Comptroller of the Currency in
the future viii take quite drastic action
10 curb the multiplication OF national
banks In various parts Of the country.
where the need for them is more or less
problematic and where they are organ
lied principally 20 benefit the promoters.
The national bank law leaves the comp
troller small room for discretion or ac-
ton IN the premises, but such authority
as he does possess under the statutes
he proposes TO exercise in behalf Of sound
finance.
When application is made at the Office
Of the comptroller for the establishment
of national bank. if the papers are IN
proper form and it is shown that the
preliminaries to the organization Of the
bank have been duly performed, there IS
little left for him 10 do but 10 issue the
charter The law does not give him
authority 10 question the needs of the
community or to bother much about the
likelihood of the bank being a financial
success.
Adopts Two Courses OF Action.
But the comptroller has hit upon two
courses OF action which ne thinks viii
have a restraining influence upon the
great multiplication of such banks
In the first instance he has issued an
order directed at the promoters of ma
tional bank shall be a bona-fde resident
the correspondent of the proposed ma
tional bank shall be a bona fide resident
Of the town or city where the bank is
10 be established. and that he shall per-
sonally own a certain number of pald-up
shares in the concern 70 be established
1t appears that in various parts OF the
country a class of professional bank
promoters has grown up. They go from
place 10 place, get local capitalists in
terested, and resort 10 more or less devil
Gus ways TO secure the charters for
banks. making a profitable commission
out Of the stock they succeed in selling
before and after the institution IS char
tered. The ruling of the comptroller Is
to stop this method Of organiza-
ing banks.
Would Iiquidate Weak Banks.
The other course Of action looks to the
liquidation OF certain banks which may
violate the loan regulations Of the bank
ing act. or otherwise strain their credit
and run along on the verge Of Suspension.
According to a statement Of the comp
troIler, some banks impair their capital
In various ways and place themselves be-
yond the line of safety contemplated in
the banking act 1t is q fact that the
examiners in the performance Of their
duties discover these conditions and
report them 10 Washington. Under the
act the comptroller has no authority 10
close such a bank. IN the majority OF
cases the trouble comes about by over
leans.
II has been customary In such cases
10 make a demand upon the directors
that the situation be corrected. and
through the use of moral suasion and
patience to bring the bank back again 70
a solvent and safe condition. Many times
about the only way 10 remedy matters
is TO call an assessment upon the capital
stock, course which makes more or
less friction among the stockholders and
generally results in a depreciation Of the
securities Of the bank
May Forfeit Charter.
The bank act provides that in cases
where overloans have been made 10 the
point Of impairing the solvency Of the
bank that the comptroller may apply 10
the -U44IltDi VI AliL AANeAHHA1 Ata a I've =
fixture of the charter The comptroller
argues that in cases where the directors
decline 10 go into voluntary liquidation
this course viii act as a means Of
forcing them TO do so, and thus save the
integrity Of the stock.
The comptroller has sent out instruc-
tons TO the bank examiners of the coun-
try how TO act in these cases, and where
it is found that the bad condition of
banks cannot be speedily improved they
will be closed Mr. Murray is Of the
opinion that the forfeiture of a few
charters by national banks here and
there over the country viii have salu-
tary influence upon the practice of di-
rectOrs in making overloans TO priv
ileged patrons and others who may have
q pecuniary interest in the bank, or in
cases where the directors may have out
side peeuniary interests which call for
large amounts of money.