The commoner. (Lincoln, Neb.) 1901-1923, February 01, 1916, Page 14, Image 14
--""t1a,v-,'?BTT3W''JiOTPri,! The Commoner VOL. 16, NO. 2 u II If Ik i Ltfw..ii v - 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 VJIMM lM J5"