Macon beacon. [volume] (Macon, Miss.) 1859-1995, 1914-03-27
Real Causes of Bank Failures

oIlVils All ObJS
lesson Of the wisdom Of the nation
banking restriction or prohibition.
such bank securities. 1t was for su,
periods OF farming depression and disa
ter, Of declining values OF land as exp
rienced under boil weevil condition
that the prohibition on bank land LOAF
was enacted. - Vicksburg Herald.
We take issue with the Heral
when it states that the recent ban
failures in Mississippi have bee
due to inability to realize o
real estate loans. In any ayr.
cultural state the best evidenc
of wealth is the ownership of farr
lands and that class of securit
cannot be Disseminated agains
rs q basis for credit. We main
tain that there is no better securi
ty in Mississippi today than gooc
real estate, where titles have beer
properly looked into, proper ap
praisements made, and a margin
of 80 to 60 per cent maintained
This is certainly evidenced by The
fact that so many foreign loal
companies are operating in Miss
issippi, and have been, success
fully, for years. Aside from this
trust funds are mostly loaned OF
real estate and the courts approx
surety bonds of individuals am
consider ownership of real cstat
as a basis for such security.
1t is true, National banks a,
not permitted to take mortgag
on real estate, but as a matter &
fact a great majority of the II;
banks in agricultural St
do not take real estate as :
curiy-not always directly, but il
directly, taking the mortgages i
The name of individuals.
The real causes of bank failure
n Mississippi has been the piola.
ion of existing hUS and the fail
IRE of directors to do their dutr
Excellent laws governing bank,
AVE been on Mississippi's stutu,
looks for a number of years, but
o way was provided to have thcs,
Avs enforced. For instance, tn,
lrectors of a bank are required tc
xamlne their respective banks
losely four times each year and
make an oath that their particu
ar bank was in a safe and solvent
onditiOn, that the assets were col
.otable and its capital stock in NO
Vay impaired.
Now, if the directors did thci,
ull duty in making these cxami
'atlons and had proper regard Gor
heir oaths a few banks would Ii
but there would be no loss
o depositors, as the capital stock
you'd be a sufficient margin to
AXE care of all loses incurred in y
way. The trouble, how
yer, is that the directors do NOT
% to the trouble to make the in.
'estlgation for themselves. They
imply accept the report of an ac.
i've officer of the institution and
make no effort to find out about
ne security that they pass on. 1t
s not expected that the average
ilrector can 60 througha bank and
make an examination as carefully
IS a trained accountant, but they
AN determine the solvency of the
borrowers and the value of the col.
ateral that is put up for loans.
And if, when they found a bad
oan they would require it taken
tut of the assets of the bank losses
'ould not accumulate to such an
'xtent that the banks capital
would be wiped out.
Another splendid law that has
'een on our statute books for years
ND which has been f~lagrantly VIC.
.ted, is the law restricting a loan
o 20 per cent of a banks capital
took to any one firm or individual.
n no instance in the past twenty
ears has a bank failed in Mississ.
ppi, that has not violated this
articular law. 1t is general re.
orted that the First Natchez
which was the largest bank
nat has ever failed in Mississippi,
3rried three loans which