[Volume XXV
THE CHICAGO BANKER
14
Editorial Comment
One of the important new provisions of the bill provides “that each director shall take and subscribe to an oath such as the auditor shall prescribe, of fealty to the bank, or association, of which he is director, and that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such bank or association, and will not knowingly violate, or willingly permit to be violated any of the provisions of this act; and that he is the owner in good faith and in his own right, of the number of shares of stock required by this act; and that same is not hypothecated, or in any way pledged as security for any loan or debt. Such oath subscribed by the director making it and certified by a proper officer authorized to administer oaths shall be immediately transmitted to the auditor and shall be filed and preserved by him in his office. The directors shall cause to be kept suitable books of records of all transactions of the bank or association, and shall furnish to the auditor lists of the stockholders, and copies of any other records the auditor may require. And there shall be an annual meeting of the stockholders for the election of directors each year on the first Monday in January unless some other date shall be fixed by the by-laws of the association. Any omission to elect directors shall not impair any of the rights and privileges of the association, or of any person in any way interested, but the existing directors shall hold office until their successors are elected and qualified, as in such cases may be by law provided. Vacancies may be filled by a two-thirds vote of the remaining directors.
“Every director of any bank or association organized under the provisions of this act must own in his own right, free of any lien or incumbrance, at least ten shares of the capital stock of such bank or association of which he is a director. Any director who ceases to be the owner of ten shares of the capital stock of such bank or association, or who becomes in any form disqualified, shall therefor vacate his place as such director. *	*	* *
“It shall not be lawful for any bank to loan to its president, or to any of its vice-presidents, or its salaried officers, or employees, or to corporations and firms controlled by them, or in the management of which any of them are actively engaged, until an application for such loan shall have been first approved, both as to security and amount, by the board of directors.”
The act also covers by severe penalties all violations of the law and all impairment of capital. It enlarges the powers of the state auditor, and will make the position of bank director anything but a sinecure.
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New Maryland Officers
The following officers were elected by the Maryland Bankers Association for the ensuing year at their convention last week: President, William B. Copper, cashier of the Second National of Chestertown; secretary, Charles Hann, assistant cashier of the Mechanics’ Bank, of Baltimore, and treasurer, William Marriott, cashier of the Western National.
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step nearer to legitimate insurance of deposits, for safe banking makes for deposit guaranty.
This plan is capable of being made one of the most useful steps in banking reform that have been taken for a long time past. Much depends on the national bank examiners. Most of the troubles arising from time to time in the oversight of the banking system originate from the fact that the bank examiners do not invariably furnish the office with all the information which is or might be in their possession. In some cases their work has been slipshod and purely routine in character. Under those conditions they frequently fail to detect fraudulent or illegal methods in the banks which they examine. Occasionally they do not report them when they have discovered such methods. This is not likely to be the case in a great many instances ; but, if it is true in only a small proportion of them, it is enough to vitiate the system. A few banks of large size which are allowed to persist in irregular practices until they become rotten, not only furnish the nucleus from which may start a panic like that of last fall, but they give the impression to other institutions and their managers that the inspection system is not being lived up to, or that the authorities persistently disregard its requirements. In either case, demoralization spreads rapidly—often without any knowledge on the part of the Comptroller of the Currency.
The difficulties which confront the Comptroller have stood in the way of his predecessors, and will continue unless eradicated by legislation. Political appointees cannot be effective. Civil service is the only plan to bring bank inspection up to a creditable and efficient basis. Then the pay should be in salary, and not in fees which lead to still other abuses. The entire service should be reorganized.
Amendment to Illinois Bank Act
Bankers and all others who may be interested in bank inspection and supervision are reminded that a vote will be taken in Illinois this fall, at the regular election upon “House Bill 522, approved June 3, 1907” an act to amend sections 4, 5, 10 and 11 of the “Act concerning corporations with banking powers.” The amendments were passed by the legislature and approved by the governor. Now they are up for ratification by the direct vote of the people.
New Banking Laws in California
New and improved banking laws in any state make for the safety and dignity of the profession. The proposed new banking laws for California, prepared by a committee appointed by the California Bankers Association,, have been approved by the bank commissioners of that state in all of their important features. A legislative committee was present. The matter will be submitted to the legislature as the draft of a new state banking code. Under the proposed code a bank may be a savings bank, a commercial bank, and a trust company provided the three departments have separate capitals, reserves, separate books, vaults, and segregate their assets. Another important section defines what investments may be made by the different character of banks. A state banking superintendent who shall take the place of the present board of commissioners is a new departure which met with approval. The bank commissioners made some minor suggestions. The proposed code contains about 15,000 words and was three months in compilation. The following committee had the matter in hand: J. M. Henderson, Jr., Sacramento, chairman; L. A. Moulton, Bank of California; Lovell White, San Francisco Savings Union; Elliott McAllister, inland banks; J. Y. Eccleston, Union Savings Bank of Oakland; J. M. Sartori, Los Angeles; F. H. Colburn. The following legislative committee was present at the meeting:	Senators F. W. Leavitt of Ala-
meda, J. B. Curtin of Tuolumne, E. 1. Wolfe of San Francisco; Assemblymen P. A. Stanton of Los Angeles, C. M. Fisher of San Francisco and A. P. Cutten of Eureka. The discussion will be continued on October 12th. This is an important step for California and when adopted will improve interstate banking relations as well as local confidence in the banks of deposit.
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Short Cut to Deposit Guaranty
Politics and economics aside, the new Comptroller of the Currency is finding a neat, short route to guaranty of deposits, to which even the grouchy old clearing house bankers will agree. The short cut is by weeding out incompetent and derelict inspectors, who having failed in civil pursuits, hope to pass the remainder of their years as a lazy, perfunctory bank inspector. Upon the theory that the policeman who never makes an arrest, and, consequently never a mistake, is never “removed for cause” this sort of examiner is such in name only. Comptroller Murray's first step in calling his field officers together for a conference was a stroke of genius. Looks good !
Mr. Murray’s purpose is to have a general discussion upon the present methods of bank examination. The examiners are to be urged to make their work more efficient and less formal, and to proceed without regard to the special sensibility of the banks to which they are accredited.
Every improvement in bank inspection is a