Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-03


diversification in Robt. v. Fleming.
making loans and
investments, favors a generous second
airy reserve and urges due attention 70
nquidity of assets.
las to the question of liquidity." Mr..
Fleming writes, ''let me stress the de-
STABILITY of every bank building a
proper secondary reserve, whether the
bank be member of the Federal Re-
serve system, or a non-member State
institution, it would be well, in my j1dg-
ment, to build an adequate secondary
reserve Of
"1. Government bonds: In this con-
nection desire to call attention to the
provisions of section $500 Of the Revised
Statutes, defining loaning limits IN
der this section authority is given to
make loans in excess OF the usual limit
of 10 per cent of capital and surplus, to
an amount not exceeding an additional
Is cent of capital and surplus, where
such additional Is per cent is secured
by a like amount of bonds or notes OF
the United States issued after April a.
1917. This makes it possible for a ma
tional bank to loan a single borrower an
aggregate amount not exceeding rs per
cent of its capital and surplus, where Is
per cent is secured by these Govern
ment obligations.
&. paper CA1SAbAC All AC-
discount: would suggest that the State
banks who are non-members study the
rules of eligibility laid down by the Fed
eral Reserve banks. so that in times of
stress the paper which they may offer
to the member banks as collateral could,
in turn, be rehypothecated.
80. we'll selected list of figh-grade
bonds of short maturity-in preference
to securities of longer terms, SO that
there will be maturing annually a GER
tain proportion of this part Of the
banks secondary reserve.
Periodical Analyses Urged.
'I think experience has taught u.s."
the banker continues, "the desirability
of looking carefully into the diversified
ton of our investments, both as to
loans and securities, for many banks
have found themselves topheayy in
their portfolios with collateral loans,
It would seem good policy for banks
to make periodical analyses of their
loans and investments to ascertain
whether or not they hold too much of
one class Of paper. A close study Of
general conditions Of ones own COM
nunity as well as of those throughout
the country Is very desirable, and will
put the banker in a position TO recog-
nize the clouds that may be gathering.
The banker should not be swayed by an
abundance Of collateral IL the integrity
OF the borrower is not Of the highest"
Mr.. Fleming suggests that officers be
given wide latitude in making loans but
recommends that large loans be passed
en- by committee likewise that a
periodical review be made of loans pre-
viously made by the committee, with
careful check-up during the life Of the
loan by well developed credit depart
ment.
"Scrutinize every loan,'' Mr.. Fleming
adds. IF 1t Is an unsecured one, be
certain that 1t Is not for capital pur-
poses, which makes the repayment Of
the loan contingent upon the successful
outcome Of the business for which the
money Is borrowed"
"As the relationship of bank to its
customers must be one of mutual
benefit, feel that we should all insist
on adequate compromising balances. I
also suggest that great care be exercised
not to place too great proportion OF
capital funds In land and buildings. ]
do not mean that we should be mig
gardly in properly housing ourselves, as
there should always be adequate space
for the enlargement of business in
order to give the best service to the
customers Of the institution, but have
observed that many institutions have
become non-liQuid from placing too
great proportion Of their capital funds
In bricks, mortar and land"
Today's Trading on Exchange.
Trading on the Washington Stock Ex-
change today was modest, to say the
least. The opening sale was 81 900
Washington Gas 6, series A, at 103, fol-
lowed by smaller bond Of the same
issue at 1922
Washington Railway g. Electric As
came out at 895s, and a 81 900 sale in
Potomac Electric Consolidated IS took
place at 1922. This completed the
bond trading. and the first stock sale
was in Potomac Electric Power per
cent preferred at 11l17, followed by an
other sale in the same stock at liz.
Two bank stocks appeared on the
board. Ten shares of Federal-Amer-
lean National sold at 27212, the same
price as recorded in a sale yesterday
A single share of Lincoln National stock
changed hands at 400.
President Watson announced that in
accordance with the action taken by the
board Of governors last Spring the Sat-
urday sessions of the Exchange would
be resumed tomorrow.
Reference to the list shows that q
host Of dividends on local issues were
paid on October / so that the quota
tons are no longer ex-dividend. Amer
lean Telephone, American Security &
Trust, Merchants Bank g. Trust Union
Trust and Federal Storage preferred are
the only stocks now being quoted ex-
dividend on the local Exchange.
Financial District Notes.
Enrollments in Washington Chapter.
American Institute OF Banking, have
reached 329 and it is now believed the
number may reach last years high mark.
Washington bankers were enthusiastic
today over the speech delivered by
President Hoover at the Cleveland
bankers convention.
The Cleveland delegation Is due back
In Washington late today, as the busi-
ness Of the convention has been
concluded
The more active stock market is CIV
ing the new high-speeds tickers In the
local brokerage houses their first real
test. They are handling present quota
tons without any difhculty.