Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-03-21
FINANCIAI-LOCAL AND OTHERWISE.
ny I. A. FLEMING.

legal department of the Journal of the
American Bankers Association for an
| opinion as to the authority of the con-
| troller of the currency in enforcing
his order against overdrafts issued
January %, 1915.
In reply the legal department has
| this to say:
| The controllers circular may be
regarded from two points of view:
! % As a compulsory order; CD re-
| quest for cooperation.
| Viewed in the light of an order or
| instruction to national banks that the
practice of granting overdrafts shall
cease entirely and calling for the adop-
| ton of resolution to such end, do
not understand that the law vests in
| the controller of the currency any
| power or authority to compel a ma
| tional bank to adopt such resolu-
| ton.
The controller is charged with the
| execution of all laws passed by Con-
| gress relating to national banks. and
| In case of violation of any of the pro-
visions of the act the law provides for
forfeiture of the franchise. But
! such violation must first be defended
In proper court in the United States
! In suit brought for that purpose by
| the controller of the currency, in his
own name. before the association shall
he declared dissolved
There is no express provision In
the national bank act which is vio-
lated by the granting of overdrafts.
| makes it unlawful to certify check
unless the drawer has on deposit, at
the time of certiffcation, an amount
equal to the amount drawn for
An overdraft allowed by a bank.
being in law a loan and of precisely
the same character as the obligation
of note given. payable on demand
(Hennesy Brothers vs.. Memphis Ma
tional Bank, 129, Fed. $50, it will
hardly be questioned that. under the
general power of making loans con-
ferred by the national bank act. the
bank will have the power to grant a
loan In the form of an overdraft; and
even were it otherwise. and the law
bank to make a law by way of over
draft, there Is no power vested in the
controller of the currency to compel
board OF directors of national bank
ject"
Continuing. the opinion cites that
the only consequences which would
follow an ignoring of the circular or a
seem to be that the controller might,
with the cooperation Of the Secre-
tary or the Treasury, deprive a nom
complying bank of the privilege of re-
celvlng government deposits or acting
as financial agent of the government
1t would be in the power of the
treasury Department to include in
sucn regulations Gas govern govern
rect that national bank, to be eligible
as a designated depository of public
money or as financial agent must
ADOPT q resolution prohibiting officers
or employees from paying overdrafts in
all cases This would seem to be the
extent to which failure to comply with
the controllers request might possibly
work to the detriment Of a national
bank
The Other Side of the Question.
But. secondly, viewing the con-
troller's circular not SO much in the
light Of mn instruction or order as
request for cooperation of the national
banks in prohibiting overdrafts, it
would seem. from this standpoint,
worthy of consideration. The practice
OF granting accommodations in the
form Of overdrafts has long been re-
garded by many bankers as objection
abe. and numerous efforts have been
made by individual banks all over the
country to abolish this practice. Near
~ a century ago the Supreme Court
OF the United States in Minor agt. Me-
chanics Bank. l Peters. 46. stigmatized
the usage and practice Of allowing
overdrafts as a usage and practice to
mtsapply the funds Of the bank in ia
vor of privileged persons, and many
bankers have circularized among their
customers extracts from the language
OF the court in this case for the pur-
pose of dtscouraging the making of
overdrafts.
Since the rendition of that decision.
ove-drafts in certain cases has Lecon.e
customary and is recognized by the
courts as legitimate transaction
founded on banking GU stom. But while
not at the present day unlawful. it is
regarded by very many bankers as OBJ
1ectionable and one which should be
discountenanced as far as possible.
should be made between a practice OF
allowing certain favored customers to
overdraw their accounts and those tso-
lated cases referred to in the letters
above s,on where responsible customer
exceptional cause, fails to have a sufi-
cfent balance to his or her credit when
q check is presented. In all such cases
It !. n you'd - seem proper and iegitimate
customer by paying the check. Indeed,
the controllers circular does not, in
Its opening sentences. refer to isolated
cases OF mistaken overdrafts. but
commodations in the form of over
drafts. To prevent this the controller
not only requests the cooperation of
the national banks, but is enJeavorinR
through the state banking departments to
secure the cooperation Of state banks
in attaining the end desired. AS a re-
quest for such cooperation, 1t would seem
that the controllers circular might proper
ly receive attention. At the same time.
the remedy he proposes, namely, the
adoption Of resolution which would pro-
hibit the payment of overdrafts entirely.
would seem to overshoot the mark"
Financial Notes.
New York Central Railroad Company
has declared the regular dividend for
the quarter. 4 per cent. payable May
1, to shareholders of record April /.
The city Of Milwaukee has sold $780,
900 ~ per cent twenty-year serial
syndicate at 1920.
Gold was imported from Canada last
week to the amount of $3,100,000.
Betting at Lloyds' is even that the
war will be over by June 80. and two
to one that 1t will end by September l.
Louisville and Nashville earned 81
per cent on Its stock for the first half
$50 per cent for the corresponding
period Of the previous year. The COM
pany has Just issued a complete report
Of its operations for the half year, an
innovation, and one that would be ap-
preciated by shareholders in other cor
porations. The loss in gross earnings
a saving Of s2.s2o,7s3 was accomplished
by reduction in operating expenses
Taxes increased 3159,235.
The Welsbach Company. after paying
regular dividends on both common and