The Washington times., 1911-03-19

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It will pass into history as one of the
boldeA wrecking schemes that have
characterized bank looting in recent
years. Robin and those who robbed the
bank have set mark that will prob
ably not be reached very soon. The
whole matter but emphasizes the neces-
sity of the bankers of New York city
and Of every other city Of even mod
crate size getting together and con-
ducting their own examinations in the
interest Of honest banking and the safe
keeping of the funds of depositors.
It is only through the drastic lessons
of experience that protective measures
are undertaken-so long as matters run
along smoothly and with no unpleasant
disclosures-no demands for financial
assistance or aid, everyone sleeps
sweetly and has faith-and believes that
bank examiners have been faithful,
awake, and cautious, and that their
efforts have eliminated every bit of un-
questionable paper in every bank.
Then the crash comes, and wise and
conservative bankers find that one of
their local institutions has been up to
all kinds of tricks-say, as in the case
of the Carnegie Trust Company, loan
ing $500, 900 on the stock of defunct
fertilizer corporation; another 100000 to
the same company, and another of like
size drawn by the political syndicate
that guaranteed" its own notes.
Dummy loans to political grafters;
other loans to unrated borrowers. In
amounts that ought to call for COL
lateral loans, marketable for cash in
excess of the demands to be satisfied,
inside OF an hour or two.
And Andrew Carnegie, with intent to
protect his own name, sent over a cou-
ple of millions Of United States Steel
bonds in exchange for syndicate special
ties. The Carnegie bords were then
sold and used to take up fertilizer notes
and single name paper.
Just why bank examiners cannot To-
cate worthless collateral OF the char
acter deposited with the Carnegie Trust
Company is explainable only by the as
serticn that no examiner can tell just
what collateral is good or bad. -
The assertion has been made that no
State or national bank examiner can
proceed against dishonest banking Of
fetal until a crime has been committed.
The horse has been stolen and the bank
wrecked by that time.
But the Chicago way, the st. Louis
way, the st. Paul, Minneapolis and San
Francisco way would have called
halt on the plunderers before the plum
der had been garnered.
The examination by the clearing
house association examiners is safe
way, and the exigencies Of self-protec-
ton enforced it on Chicago and other
cities. The seven millions needed to
care for the depositors in the Walsh
banks in Chicago would have been seven
times seven millions, and then more
millions, had not the banks of that city
provided the wherewithal to prevent
panic by caring for the owners OF the
seven millions.
The clearing house association Of
every city should have some official
who knows a great deal more than the
average bank examiner. and whose
duty 1t would be TO tell his tale to
every bank director of an institution
wherein anything wrong IS dlScoVereu
that the caustic may be applied.
A public hearing will be held in
few DAYS on the proposed measure for
banking and currency reform, as pro-
posed by former Senator Aldrtch. sam
uel j. Henry, assistant cashier of the
Commercial National Bank of this city,
has prepared q summary OF the pro-
posed measure The digest follows:
The Reserve Association of America
to be chartered by Congress and made
the fiscal agent of the Federal Govern
ment; the capital to be Soo,GO,0O.
Washington is designated as headQuar-
terS.
The shareholders are to consist solely
of the national banks of the Inlted
States that may desire to subscribe.
The country to be divided into fifteen
districts, with a branch of the asSoct-
alton in each district. After payment
Of taxes and expenses the stockholders
may receive as high as per cent per
annum on their investment, in addition
to other benefits.
Four per cent is the minimum divi-
dend, and is cumulative. The subscrio-
ing banks to be formed into local as
sociations and these locals grouped INTO
fifteen divisions. Locals to elect their
own directors. There is to be oranch
office for every local division and the
board for this branch to be elected by
the locals in the district. 1t Is there
fore plain that the first two units-the
local associations and the branches
cover the United States.
The third unit and the most important
is the board of directors of the reserve
association itself. 1t is provided that
there be forty-six directors, consisting
of. first, six eXoffiCio members the
governor of the reserve association, who
Is also to be chairman OF the board,
two deputy governors, the Secretary of
the Currency, the Secretary of Com
mercc and Labor, and Comptroller of
the Currency. Second, fifteen directors
to be elected. one by the board of each
branch Third, twelve directors to be
elected by representatives Of the banks
in each district. Fourth, the board
as thus constituted to select twelve d.
rectors representative of industrial,
commercial, agricultural. and other in
terests of the country; these not to be
bank officials, but may be bank direc-
tors, and no member Of National or
State Legislature is eligible to board
OF local, branch, or association. The
governor of the reserve association
to be named by the President of the
United States from names submitted by
the board of directors, his term of Of
fee to be seven years. Each branch
shall have a manager and deputy man
ager, appointed by the governor of the
association, with approval of executive
committee, standing committee of the
board.
Any national bank in a local associa-
ton may apply to the latter for guar
anty of commercial paper it may de-
sire rediscounted at branch. For this
which is to go to the members of the
local. In event of loss it shall be
borne by the banks composing such
local.
Total guarantees must never exceed
tctal caDital and surplus of banks in
the local association making the guar
anty.