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The Commoner
VOL. 16, NO. 2
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The Comptroller's Recommendations
TTho following is a summary of the report of
Comptroller Williams to the congress, us made
public January 10, 1910.
The report of tho comptroller of the currency
for 1915 shows an expansion and growth in tho
business of national banks during tho first year
since the inauguration of tho Federal Reserve
system which has broken all previous records.
From October 31, 1914, to November 10, 1915,
deposits in tho national banks increased 2,081
million dollars. Tho increase in deposits for
this ono year amounts to about as much as the
total deposits of all national banks as late as
1805.
Tho total resources of national banks No
vember 10, 1915, amounted to 13,236 million
dollars, against 3,423 million September 28,
1895, an increase of nearly 10 billion dollars, the
resources now being nearly four times what they
woro In 1895.
Tho reserves hold by all national banks in
1895 woro reported at 571 million dollars,, in
1905 at 988 million, and on November 10, 1915,
at 2,108 million dollars.
Tho reserves held by national banks Novem
ber 10, 1915, exceeded by 587 million the great
est reserves over hold at any time prior to the
passage of the Federal Reserve act.
From October 31, 1914, to November 10,
1915, the available cash resources of all nation
al banks, including specie, bank notes, balances
with reserve agents, exchanges for clearing
house, etc., increased 802 million dollars, while
the liabilities of the banks for the period named,
on account of bills payable, rediscounts and bor
rowed bonds, wero reduced more than 100 mil
lion dollars.
Tho liability of national banks on account of
circulation was reduced from 1,018 million on
October 31, 1914, to 713 million November 10,
1915, a reduction of 305 million principally due
to tho retirement of tho emergency currency.
On February 14, 1914, the national banks in
tho 12 federal reserve cities hold on deposit for
other banks thr ughout the country a total of
1,572 million dollars. On November 10, 1915,
this balance had increased to 1,989 million dol
lars, an increase of 417 million dollars, notwith
standing the fact that member banks had at the
samo time accumulated to their credit in the 12
Federal Reserve banks an aggregate of 359 mil
lion dollars.
On November 10, 1915, tho national banks
of New York city held for the credit of other
banks and trust companies throughout the coun
try a total of 1,067 million dollars.
Tho total amount of money which tho na
tional banks of Now York city were lending to
other banks and trust companies throughout tho
country on the same date was 69 million dol
lars, so that the national banks of New York
city held for tho credit of other banks and trust
companies nearly 1,000 million dollars more
than the New York banks were lending to their
correspondent banks on that date.
Tho national banks in the 12 Federal Reserve
cities on November 10, wero lending to other
banks throughout the country 163 million dol
lars, while the banks and trust companies
throughout tho country had to their credit with
tho national banks of the 12 Federal Reserve
cities 1,898 million dollars, or 1,826 million dol
lars more than these banks wero lending to their
correspondent banks on the same date.
Tho national banks in the 55 reserve and cen
tral reserve cities held on November 10 1915
for tho credit q other banks throughout this
country 2470 .million dollars, which was 2.2M
million dollars morerthan the total -loans whicli
tho national banks in tho reserve cities andcen
cral reserve cities were snaking to their-correspondent
banks throughout tho United States
Tho comptroller discusses at length the sub
ject of usury in the national banks of the coun
.try, and submits affidavits from some fifteen or
twenty -national banks, giving a list of the usuri
ous loans niade-by these different banks fo dif
ferent periods, the. names of the banks, howover
and of the borrowers are omitted, although the
tables give the amount of tho loans, the time
and the rate of interest charged in each instance!
The rates run in some cases up to more than
1,000 per cent. Reference is made to three na
tional banks which have admitted under oath
that the average rates which they charge on all
loans are 25, 30 and 40 per cent per annum re
spectively. The comptroller recommends an amendment
to tho National Bank act which will enable the
department of justice to bring suit against usur
ers upon information furnished by the comptrol
ler's ofllce. Under tho present law suits for
usury have to bo brought by the borrower, who
is usually afraid to bring suit against tho bank
which has made him the loans.
The comptroller emphasizes the fact that "the
Federal Reserve act was framed to benefit not
only tho banks but also the customers of the
banks; that one of tho great objects of the law
was to decentralize the money of the country;
to effect a more equitable distribution of capital
and to do away with tho old system by which the
resources of our banks have been so greatly con
centrated in a few cities or sections, there to be
loaned out largely on speculative ventures, while
in other regions money needed so urgently for
tho legitimate purposes of industry and of de
velopment has been scarce and oftentimes ob
tainable only, if at all, at rates injurious if not
prohibitory." He points out that, "in less than
12 months after the inauguration of the Federal
Reserve system, every national bank in the
United States and every member bank has par
ticipated in the beneficent results which have
been achieved; that every member bank now has
the opportunity of borrowing money to an extent,
not previously permissible, and at interest rates
lower than ever have been known in the history
of tho banks," and he criticizes the unwilling
ness of certain banks to extend to their custom
ers the benefits of the lower rates which the in
auguration of the Federal Reserve system
brought about.
The comptroller repeats the recommendations
which were made in last year's report for amend
ments to the National Bank act, and recommends
12 additional amendments, as follows:
1. To prohibit officers of banks from borrow
ing from their own banks.
2. To prevent loans to directors except with
the formal approval of the board.
3. To require officers and employees to give
surety bonds.
4. To limit the direct and indirect loans which
may be made to one individual, firm or corpora
tion. -
5. To prevent or limit overdrafts.
6. To require certificates of deposit to be
signed by two officers.
7. To prevent erasures on the books of a bank.
8., 'To limit the interest to be paid on deposits.
9. To authorize national banks to establish
branches in tho United States.
10. To permit branch banks in Alaska and the
insular possessions.
11. To authorize a minimum charge of 25
cents for small loans.
12. To authorize the comptroller to bring pro
ceedings against directors for losses sustained
by banks through violation of the National Bank
act.
The comptroller refers to several cases where
national bank directdrs during the year were re
quired personally to make good to their respec-
tivo banks losses sustained through ultra vires
investments in stocks, including one bank whose
directors were required to relieve the bank of
Snnn1001" unlawfully held at approximately
$500,000 more than their depreciated market
value.
The comptroller also recommends that all
members of boards of directors of national banks
be required to serve in turn on the executive
committee of the bank.
A list is also furnished of bank officers con
victed of criminal violations of. the law through
-the year ending October 31, 1915, and who have
- been, sentenced to the penitentiary for periods
varying from two to seven years. The list in
cludes 3 bank presidents, 13 cashiers, 6 assistant
cashiers and 21 tellers, bookkeepers and others.
A full record is given of the issuance of the
emergency currency during the crisis arisinc
fromthe European war. The revenue collected
bythft .government as-jnterest on this currency
amounted to $2,977,000.
The comptroller also presents a summarv
showing the condition as of June, 1915, of ail
national banks, state and savings banks, trust
companies, and private banks throughout the
United States.
The total number , of banks shown in this
statement were 7,605 national banks and 19 -457,
state banks, trust companies, savings banks,
, Reports are also submitted for 3,003 state in
stitutions .which failed to send reports, and
whose statements were estimated in making up
the totals, making a grand total of all banks of
30,065 with a paid in capital of 2,222 million
dollars, of which 1,068 million was for national
banks, 1,094 for state banks, etc., and 59 mil
lion for the non-reporting banks. The aggre
gate deposits, exclusive of Federal Reserve
banks were 19,660 million, including 6,613 for
national banks, 12,635 million for the reporting
state institutions, and 412 millions for -non-reporting
state banks.
The statement shows that the investments in
bonds and other securities held by the reporting
banks aggregated 5,881 million dollars, of which
811 million dollars were United States bonds,
1,494 million in state, county and municipal
bonds, 1,704 million in railroad bonds, 63 mil
lion in bonds of other public service corpora
tions., and 1,208 million other bond's stocks,
warrants, etc.
The cash held in all national banks, state
banks and trust companies, and in the Federal
Reserve banks was reported at 1,769 million dol
lars, an increase in cash holdings of all banks
during the year of 131 million dollars.
The total money in the United States in June,
1915, was reported at 3,989 million dollars, of
whicli the money held by all reporting banks
was placed at 1,760 million. The amount of
money in the pockets of the people, that is to
say, not held in the treasury and not held in the
banks, is placed at 1,808 million dollars.
In regard to the amendments to the National
Bank act recommended by him, the comptroller
says, "Attention is asked to the fact that none
of these changes, if adopted, would hamper le
gitimate banking enterprise or development.
They are intended to be constructive and pre
servative." The comptroller compliments the national
banks of tho country and says:
"It is a real pleasure to say that the intimate
connection of this office with the internal affairs
and management of the national banks of the
country gives cheering assurance that the large
majority of our bankers are not only honest and
anxious to obey the laws, but1 are intelligently
patriotic and intent on building up .their -respective
communities and the country The
value of their service in this respect is beyond
computation. An important purpose of the
changes of the law herein proposed is to encour
age and strengthen bankers of this kind by re
lieving them of the odium brought on the bank
ing business and of the unfair competition forced
by the limited minority who disregard the laws
and tho public interests."
The report concludes as follows:
"Study of the situation as it is brings the con
viction that in our country we have tended to fix
our attention on thethings that look big and
loom large, while often overlooking the things
that seem small, but really are the biggest and
most important, of all. The real foundation for
the prosperity and stability of the country is the
prosperity, stability and productive power of the
farmer. Statistics show that the condition of
the agricultural interests in many sections is un
satisfactory in important respects. The propor
tion of farm owners does not increase in propor
tion to the number of farmers.
"As the tenant class increases production per
acre is less favorable. Tho migratory tendency
among persons engaged in farming has been in
creasing. Most of these migrations mean unrest
and failure; and many of the failures result
from oppressions or exactions or from lack of
proper assistance when needed. Usury unchecked
means depopulation,- hopelessness, thriftlessness,
and resulting loss "of producing capacity per
man and. per acre.
"It is hoped that we wilMvork out presently a
well-guarded .and well-directed plan of rural
credits lor the stimulation, and protection of our
great laming, industry. Until that" time qpmes,
the smaller banks in the smaller communities
will have a great opportunity whicli they should
i n?!,ped t0 use a tremendous duty which they
should be encouraged to perform. The record
villjhow.that co-operation with the - farmer,
b carryilie;-himthrough-hiseasons of- waiting and
aiding him an themdoption-o new methods .and
m getting from his-land the-bestpossible profits,
is perhaps the safest of all banking business.
When the smaller banks work together to
aid and develop thrift and hope and intelligent
and successfu work on the farms about them,
and to nourish and uphold their local enter
prises, we will have a prosperity which no event
can shake and increasing shares of distributed
real, act ve wealth of which no shock can de
privo us." - r
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