62 UNIVERSITY OF COLORADO STUDIES 



3. Banks and trust companies must report on call at least every 

 three months. Formerly they reported twice a year on specified dates. 



4. State superintendent of banks must examine banks and trust com- 

 panies twice a year instead of annually as heretofore. 



5. Directors or three of them must make two examinations of the 

 institution, one in April and the other in October of each year. Report 

 of the examination must be filed with the state banking department. In 

 this examination the directors are to ascertain especially the character of 

 the loans and the security therefor. 



6. Not over 10 per cent, of the capital and surplus may be loaned to 

 any one person, firm or corporation, if unsecured, and not over 40 per 

 cent, if secured.^ 



The greatest cause of bank failures is excessive loans to an individual, 

 firm, or corporation in which the officers of the bank or trust company 

 are interested. The provision of law limiting the amount that may be 

 loaned to a single firm is most difficult to enforce. President Hamilton 

 of the American Bankers' Association says the old law Hmiting the 

 amount of loans by national banks to an individual, firm or corpora- 

 tion was constantly violated.^ This law provided that 10 per cent, 

 of the unimpaired capital might be so loaned. Under the new law 

 passed at the last session of Congress the limit is 10 per cent, of the 

 unimpaired capital and surplus. The only way of enforcing this act is 

 by suit to forfeit the bank's charter. This remedy has always proved 

 too violent ; the examiners and the controller have not had the courage 

 to enforce it, and it has remained a dead letter. 



After all, it should be remembered that thoroughly effective bank 

 supervision is well nigh impossible. No matter how acute the examiner, 

 he may be deceived. No outside examination of a bank can supply 

 honesty and good judgment for the officers. We should enact such 

 legislation as will keep the business of banking upon a high plane and 

 make it a calHng that will attract only men of honor and integrity. In 

 this way the banker can render his greatest sersdce to society and in an 

 increasing degree set in motion one of the strongest forces making for 

 industrial progress. 



""Report of Supt. of Banks, New York," Bankers^ Magazine, Vol. LXXII, pp. 105-106, 1906. 

 ' Bankers' Magazine, New York, Vol. LXXII, p. 95, 1906. 



