The Vinita daily chieftain. [volume] (Vinita, Indian Territory [Okla.]) 1902-1913, 1911-01-11
ISSUES HISTORY
OF STATE BANKS
State Banks And Trust Companies
Since the Passage of the Ma
tional Bank Act.

Washington, Jan. 11.-A very COM
prehensive history of state banks and
trust companies since the creation of
the national banks in 1864 has been
issued by the National Monetary Com
mission. 1t has been prepared by Prof.
George E. Barnett, of John Hopkins
university.
The various provisions of the laws of
the different states regarding loans,
reserves, capital, stockholders liabil-
ity, supervision, and other features of
banking are exhaustively discussed.
State banks have been steadily sup
planting national and private institu-
tions having small capital, but Pro-
fessor Barnetts statistics seem to show
that there is little difference in the
percentage of failures among state
banks or national institutions, although
the rate of insolvency in trust COM
panies seems to be somewhat higher.
Professor Barnett points out that as
trust companies have gradually given
up fidelity insurance and the guaran-
teeing of land title, and have assumed
a general banking business, the legal
restrictions imposed upon them by the
various state have become similar to
the restrictions imposed upon state
banks. The present tendency of legis-
latures is to disregard names and leg
islate for the kind of business actually
done. For instance, states New
Hampshire, Michigan, Connecticut,
Massachusetts, Rhode Island, Cali
fornia, and Texas) have provided that
savings deposits in trust companies
shall be invested in the same way as
funds held by mutual savings banks
and that the assets of savings depart
ments be segregated for the benefit
of savings depositors.
In states (Alabama, Ohio, Oregon
; Missouri, and Nevada) "the state con
stitution provides that stockholders
shall be chargeable only for unpaid
subscriptions In IL other states
(Arizona, Arkansas, Louisiana, Missis
sippi, New Hampshire, New Jersey
Rhode Island, Tennessee, Virginia
Connecticut and Delaware) there are
no general laws imposing additional
liability on stockholders. TN all the
remaining states and territories where
state banks are incorporated an ad
ditional liability is imposed on stock
holders" and in all but two the addi
tional liability imposed is equal to the
amount of stock held. However, "ths
imposition of the statutory liability OF
the stockholders of state banks an(
trust companies has not proved o
great service as a protection to banl
creditors against loss" because, % i
is usually liability to individual
creditors and not to the bank, (2) i
is usually a secondary liability, anC
(3) transfers of stock to evade the liza
bility are difficult to prevent.
As Professor Barnett points out, will
out system of small separate banks
each bank having a limited numbel
of customers for loans, it is well to re
strict the amount loaned to single
borrower. The states have general!
followed the national bank law ant
have limited the amount that stat'
bank or trust company can loan to /;
single borrower to 10 per cent of th'
capital and surplus of the bank. Ger
tain secured loans are usually except
ed from this provision. The state
California, Nebraska and Oklahoma
forbid loans to officers, and other state
restrict such loans.
Most state banks, unlike nationa
banks, are allowed to loan on real es
tate security, although there are pro
visions 'in some of the state laws de
fining the character of the loans whicl
may be made on real estate" Sucl
loans constitute a much greater per
centage of the capital of banks il
small cities than in larger ones. TIL