The Sauk Centre herald. (Sauk Centre, Stearns County, Minn.) 1886-current, 1927-03-31
DRASTIC BANKING
LAW CHANGES URGE
Gossiping and Incompetent
Management Cause of
Failures
STATE SURVEY MADE
Increased Capital for New
Institutions Is Recon-
mended

mended
The joint house and senate bank
inquiry committee recommended
ways in which the state legislature,
the state banking department,
bank officials and depositors can
improve the banking conditions in
Minnesota, when it reported to the
Legislature Monday the results of
two-month study and survey.
The committee being unwilling
to accept the theory that large
numbers of recent bank closings
have been altogether blamable to
northwest economic depression, in
its report stated that it went be-
hlni the scenes and found that
failures are due to composite caus-
es, among which are too many
banks, gossping of depositors,
Incompetent bank arrangements,
impotency of directorships, an in
adequate staff in the office of the
state superintendent of banks by
which more detailed examinations
can be made, and a laxity of state
laws which permit banks to reach
shaky conditions.
The committee submitted the
following recommendations as
methods by which better condi-
tions may be attained:
By the Legislature-Enact-
ing laws providing for in
creased capital for new
banks; requiring THAT a sur
plus of so per cent of the
capital be maintained; limit
ing deposits to 20 times cap
ital and surplus; requiring di-
directors to own more stock;
considering a family as one
person where loan limitation
is involved; reduce loan limit;
restrict loans on real estate
security to property within
50-mile radius of country
banks; unsecured loans of
$500 and more can be grant
only upon receiving borrow
ers' sworn financial state
ments; making it a gross mis-
demeanor to over-loan; re-
quiring that security for
loans be first liens; making it
gross misdemeanor to
spread false and malicious
statements about a banks
solvency.
By the State Banking De-
partment - Increased force
of examiners so as to obtain
more detailed examinations;
at least two examiners at
large to check the work of the
regular examiners; men in
charge of closed banks should
be experienced and broad
minded, preferably familiar
with local conditions; forma-
ton of depositors' committees
of closed banks should he en-
couraged; com m S S on
er should be given authority
to order stockholders iabil-
ity subject to appeal to
appeal TO courts, and to COM
promise upon bad or doubtful
debts; increase fees for bank
examinations; use care in
passing upon applications for
new characters, and pass up
on changes Of bank manage
ments.
By the Depositors-Stop
all rumors about banks in
solvency and ascertain facts
from the bank officers them
- ole DO
tect banks from false and
slanderous gossip; cooperate
with bank officers when bank
is in difficulty to prevent
closing; when bank is clos
ed depositors should form
committee to cooperate with
officers in conserving assets;
confidence is banks great
est asset, and everything
should be done to cultivate
it, the silent withdrawals of
deposits from many other
wise sound banks having been
responsible for their closing.
By the Bank Officials
Directors should perform the
uuOlcS VI IdlClI pOOlbtoil etiiN
be held strictly accountable;
free borrowing of money by
banks officers should not
be tolerated; persons in di-
rect charge of bank should
devote full time to it's affairs
and not be occupied by side
line occupations and business
es; real estate mortgages
should not be disposed of un-
der a guarantee by the bank
officials in charge.
The committee report upheld
the findings of its subcommittee
which inquired into the efficiency
of the Nebraska bank guarantee
law as a possible remedy in Min
nesota. The subcommittee decid-
ed that any system of guarantee
ing depositors' funds at this time
is inapplicable in Minnesota, and
might be a dangerous experiment.
Continued on Page Ten)