The Leon reporter. (Leon, Iowa) 1887-1930, 1914-06-04
REGULATE PRIVATE BANKS.

These are squally times IN ousl-
ness II is during the storm that the
weakness of unseaworthy craft is dis
closed. hence we find business enter
prises that were spread out too thln
making assignm nts and banks that
have loaned unwisely go under. Inc
wonder is. however, that so very Jew
banks fail to- withstand the test ana
the exclamation can be found IN the
care with which most banks are eX-
amined by directors and by govern
ment examiners State supervision
of the banking business is proving
its worth.
The failure at Radcliffe, however,
shows up the one glaring weakness
in our banking system. Any man
can put up sign calling himself
banker and people will loan their
money to him without collateral. he
NAV call himself the Farmers Bank,
as at Radcliffe, or the Peoples or the
Citizens Bank, so as to disguise the
fact that money handed over his
counter is in fact loaned to him, the
individual. If the individual is per-
sonally strong financially and proves
to be wise in his investments the de-
positors in his private bank never
Nsuffer but it is all left to the individ-
ual. No board of directors scrutinize
what has been done with the money.
M state examiner looks into the
banks affairs to see that not more
than 10 per cent of the capital has
been loaned to one person for prl-
yate bank is not required to observe
the rules and regulations of safe
banking as prescribed by law. prl-
yate bank is not state bank nor a
national bank, it is just an individual
or a partnership which takes the
money people bring in to it and does
what it peases with the funds. II
borrows from it's depositors without
giving collateral and pays its deposl-
tors on demand if it can.
A state or national bank borroWs
from its depositors, too, for all mon
ey deposited in a bank is IN erect
loaned to the bank as no bank pre-
tends to lock these particular funds
M for delivery when called for, but
the difference is that state or ma
tional bank has an invested capital
which must be kept invested in the
bank as security with which to mar
gin the money borrowed from depos-
itors and then it has several stock
holders who are personally liable as
endorsers for an equal amount IN ad-
dition. This gives a depOsitor IN
state or a national bank the banks
capital and surplus as margin or Sc
curity in excess of the amount OF the
deposit and it gives him all the stock
holders as personal endorsers as we'll.
The banks promise to pay out his de-
DOsit on demand is thus secured,
whereas in a private bank the money
is turned over to the private banker
and his promise to pay it out upon
demand is just as good as his own
ability to pay and that is his business
about which no examiner or board OF
directors ever inquired.
People who deposit money in pri-
yate banks loan their money to prl-
vate bankers without collateral al
though they may believe that there
is bank back of their loan. In
most cases the loan is safe because
the private banker is sound, but
there is no way of knowing the I'M
aafe from the sound and herein our
1anking laws fall short For the
dame reason that lawyers are not
dermitted to use the professional
title of attorney at law without
abermission from the state, bankers
3houid not be permitted to call them
1elves banks unless they had full
filled all the requirements OF state
law and have become state banks.
There should be no such thing per-
1nitted in Iowa as borrowing money
under the disguise. of the name
.tbank.'' Private bankers, who are
sound, should be glad to get state
charter which is a certificate of good
character and all others should be
excluded from the cloak of confidence
which the name bank folds about
a trustee of other peoples money
Marshalltown Times-Republican