[Volume XXV11
THE CHICAGO BANKER
14
Editorial Comment
America even more firmly wedded to the central bank idea,” it may be surmised that Senator Lorimer was the passenger quoted. He is a trusted lieutenant of Senator Aldrich in the senate, and there is no more approachable man in the congress, hence the inference is that Senator Aldrich has not been misquoted. Senator Aldrich and his commission will strongly recommend the establishment in the United States of a central bank.
It still is said to be the plan of the Rhode Island statesman to imitate La Follette, Cummins, and other popular speakers and himself to go upon the platform with a message to the people. Owing to the fact that he always has been the reputed leader of trust operations in Washington, his position at first will appear to be rather awkward. It is said by those who know, that his consuming ambition is to be the father of an entirely new banking and currency system for the United States, and to go down in history as the people’s friend and not as the corporations’ tool. His great ability and high personal character will insure attention from all respectable people. Everyone interested in the central bank plan, whether for it or against it, will continue to hope that the senator will not change his mind, but that he will go upon the platform and explain to the people of the western states his new banking measure, and at the same time give them true light on his recently passed tariff bill.
Overloans
Washington, October 25.—Definite information was secured to-day which makes it certain that the first steps have been taken for the purpose of compelling the banks of the country to comply with the provisions of the national banking act respecting loans to individuals or corporations in excess of the amount permitted in the national banking act as amended in 1906. The beginning of the campaign has been made by sending to each bank a letter in which an official statement is called for as to the intent of the bank officers respecting the future policy of the bank as to overloans. Attention is called in every case to the facts regarding the bank’s position, as this has been made clear by recent reports. Then emphasis is laid upon the fact that the bank is in violation of the law and request is made that it shall comply with the law at the earliest possible moment.
From indications already received it is believed that the large majority of the banks will give formal assurance of their intent to rectify their methods. In case they do not do so, however, national bank examiners have been instructed to take up the matter with the directors at the next examination and ascertain the reasons for the failure, notifying the comptroller at once con-, cerning the situation.
Though the banks may in most cases notify the comptroller of an intent to comply at once with the law, nothing is better realized here than that by no means all of the banks can do this. The stress will come when the banks fail to comply and are forced to accept the penalty of an application for forfeiture of their charters. This
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alble period or else make arrangements to shift to some other banking system. So far as is known, and contrary to newspaper interpretation of the situation, the offenders are not ‘Wall Street banks,” but the small country banks in farming districts. Their capital is small and it is believed that actual forfeiture proceedings will be begun for effect upon others. Now is the time to put your house in order.
Truly We Are in Luck
Chicago again is in luck, for the very same day we are to have a hot, presidential compaign opener from Senator Cummins, also the keynote, initial effort of Senator Aldrich as “the peoples’ friend.” This double bill promises to put FEtna and Vesuvius in the pyrotechnic graveyard along with all lesser events.
“You are cordially invited to a dinner of the Marquette Club November 6th, at which Senator Albert Baird Cummins of Iowa (‘insurgent’ leader) will be the principal speaker.”
“You are cordially invited to a dinner of the Commercial Club November 6th, at which the principal speaker will be Senator Nelson W. Aldrich.”
Senator Aldrich sends word that he will be here and the irrepressible Fowler has challenged him to a joint debate. Aldrich most likely will disregard the New Jersey orator and continue as planned, a calm and measured campaign as the people’s friend.
Now that Mr. Aldrich has Returned
The whole country will be pleased to learn that Senator Aldrich has been safely returned to us from his arduous labors abroad in the service of the congressional monetary commission. A three-months’ residence in the capitals of Europe at the expense of the American government, has not softened the honorable senator’s mode of speech in the least. He still uses the first person singular in all references to the opinions and future acts of the commission. “I devoted my whole time,” said the senator, and “I am not yet prepared to say what we shall recommend,” and thus on to the end. On the same vessel by which Senator Aldrich came Senator William Lorimer of Illinois also was a passenger. When the newspaper correspondents say that “it was learned from fellow-passengers that Senator Aldrich returns to
Forfeiting a Bank’s Charter
Our best bankers seriously doubt the power of the comptroller to cancel a bank’s charter as a punishment for technical overloaning. The evil and danger of overloaning are not questioned and Mr. Murray’s zeal is to be commended even by those seriously doubting his powers to forfeit bank charters. Bank men haven’t been so interested in the comptroller for a long time. The rapid ballooning of the British bank rate is a side issue by comparison. The question most sharply raised to-day is whether the comptroller can succeed in applying the severe penalties of the national bank act to the banks. The opinion in some quarters that he cannot is based upon the fact that at no time in the past has the comptroller ever succeeded in checking the overloan practice or ever secured the forfeiture of a bank charter. Only on one occasion in the history of the national system has the forfeiture of a charter been actually applied for, and that was a purely technical case, where the conditions surrounding the bank were such as to render it necessary to make application for the forfeiture in order to enforce the legal liability of directors for some of the bank’s losses. The point which was at stake in the case referred to has since been put aside or overruled by the court, and consequently there has been no repetition of the effort to get a forfeiture of charter. Thus the records and the precedents are favorable to those who doubt the power of actual forfeiture.
Mr. Murray could cause any kind of a bank run simply by applying for the forfeiture of a charter “because the bank is overloaned.” That would work worse than a forfeiture, but will Mr. Murray go so far ? On the other hand will a bank continue in the face of this power, to overloan after being warned ? All comptrollers have attempted to hold the overloans practice within bounds, but have never succeeded. In one instance, Comptroller Ridgely became so seriously offended by the constant and persistent refusal of the banks to obey the terms of the act that he notified several of the worst offenders that he would instruct the solicitor of the treasury to begin proceedings for the forfeiture of charter unless the instructions of the bureau were complied with. This had the desired effect for the time, but it was not long before the banks were back again in their old position.
In looking over the present situation it is noted that probably a large majority of the offending banks are so placed that they can bring themselves within the requirements of the law without serious inconvenience. Either they are very little above the line or else they are not involved with the borrowers in any serious way, so that they can within a short space of time rectify conditions if they wish. But there are a certain number of banks that cannot do any such thing, and these present the problem that must be dealt with. There seems little doubt that these banks will have to put their affairs in order within a reason-