The star-independent. [volume] (Harrisburg, Pa.) 1904-1917, 1915-01-15
Smith PRAISES
CURRENCY LAW
State Banking Co M
missioner Says Elias
ticity of New Federal
Plan Is Beneficial
TRUST COMP ANIES
ARE INCREASING
Report Shows That Financial Institu-
tions With Pennsylvania Charters
Are Exhibiting No Desire to Join
the Regional Bank System

In his annual report Just sent TO the
Governor, covering the operations of
the Banking Department for 1914,
Banking Commissioner William IL.
Smith deals at length with the sub
Ject of Regional banks, established by
the Federal government under the new
order of financial things. and saws that
no State financial institution appears to
have any desire TO ioiu the system. He
concludes that any advantages offered
hy the new Federal act are more than
offset by the privileges State banks
now enjoy under their State char
tiers. He sets forth that the one State
institution that made application for
membership has withdrawn the applica-
tion. The following are the Banking
Commissioner 5 eepclusions on this sub
Ject:
sit has been the policy of this de-
partment for several years, and all
banks and trust companies have been
advised accordingly. that the surplus
of an Institution should be intact Just
as should its capital When capital is
impaired the law is mandatory as to
the course to be taken to have the i'm
pairment made good. Morally we view
the impairment of a published surplus
10 be as serious as the Impairment of
published capital, and hence no bank
or trust company has the right TO ex-
hibit surplus or to report the same
under oath to this department when
its assets are not sufficient to make
up Such surplus. This advise. we are
pleased to say, has been generally
needed.
1.-The wear just closed mas been of in
tereSt hv reason of the amendment TO
the national laws on banking and the
creation of the Regional reserve banks.
Two thoughts in relation thereto have
been OF paramount interest-the first
being as to whether il would be ad-
vantageous TO. our banks and trust COM
panies 10 'be associated as members of
this system and the other As to their
legal rights. under the laws Of Penn
sylvania, to become members if ad-
yantages' 10 their respective corpora
tions would thereby result.
AS to Legislative Recommendations
In the last annual report of our
department mention was made of the
fact that there might be some reason
to make recommendations TO the Leg
iSlature in this regard. The Regional
banks have opened and have been run
ming along for three months but there
does not appear TO be any desire, so
far as we are advised, by any insti-
tuition chartered by this Commonwealth.
10 Join this system. 1t is our conclu-
sion, after careful observation. that
the officers and directors who may have
tkeu this matter into consideration
have finally decided that any advan-
tageS offered by the new Federal act
are more than offset by the privileges
which the State banks now enjoy by
their State charters. In fact. from
information received, there appears to
have been but one State bank which
made application for membership and
this has recently been withdrawn. There
is nothing, therefore, for the depart
ment to consider or advise upon or to
refer to the Attorney General for a
legal opinion as to the right of bank
or trust company in this State TO ac-
cept membership in this national sys-
TEN.
" Although not members of the Reg
iOnal banks our State institutions can
not be denied the benefits. which il is
believed Will accrue therefrom, the first
of which is conceded by all bankers
TO be an elastic currency in ease of a
general panic. There cannot. as we un-
derstand practical affairs. be any
change in the method of collections.
The reserve system in this State will
continue as heretofore, the act of 1907.
regarding the method of selecting re-
serve repositories, will be adhered 70
and the approval of the Commissioner
OF Banking must be obtained in the
same manner as hitherto, ant. this ap-
pToval, while not arbitrarily exercised.
Is absolute. National banks are con
stantly looking for the accounts of
State banks and trust companies. and
having once received them. these clients
must be accorded the same uniform
good service as is rendered to others.
Upon the safety and adequacy of the
reserve agent the responsibility rests
with the department.
Trust Companies Increasing
Trust companies. which do not pur-
chase commercial paper or loan without
collateral, could not hypothecate their
securities for loans under the national
law with regional banks hut thev can
continue as heretofore with their local
reserve banks and be accommodated.
Hence, so far there is no change in the
cash reserve method in this State.
This report. shows as increase in
the number of trust companies and
larger increase in the number of banks
and the indications are, from the num-
Der of pending applications, that the
number for the ensuing year will be
still further increased
- 1t is made the duty of this depart
ment to recommend in its annual report
such legislation as may be adopted for
the security of depositors, whose
money it is our duty to safeguard.
From our experience restrictions upon
our State financial institutions are diff
fcult to obtain while at each session
of the Legislature further privileges
are granted. AS has been noted, by en-
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