Bank Failures Should Decline. . . Corporation Commission Attorney Says Industrialization of State Should Aid Situation
Raleigh, Aug. 27—Failure of banks, frequent in North Carolina during the past five years, should decline in the future of the growing industrialization of the state and because the power of regulating the establishment of state banks given the Corporation Commission by the 1921 General Assembly, in the opinion of I. M. Bailey, attorney for the commission.
Many of the 57 state banks which failed in the state during the past five years probably would not be allowed to open under the present regulations of the Corporation Commission, says Mr. Bailey. They were banks opening before the General Assembly passed measures giving the commission the power to regulate their establishment. Before regulatory power was accorded the commission, points out Mr. Bailey, banks were allowed to open almost promiscuously in towns where there were no demands for further banking facilities. After struggling along for a year or so, the attorney declares, the then closed their doors with losses to depositors.
This loss in bank deposits in North Carolina during the past five years, as shown a recent issue of the University of North Carolina News Letter, points out Mr. Bailey, was moe than $12 million, an amount arrived at on the presumption of an average lost of 75 per cent of the total liabilities of the defunct banks.
The Corporation Commission has no control over receiverships and liquidation of banks, except their examinations, says Mr. Bailey. It has no figures available upon which to base an exact, or even an appropriate, estimate of the losses maintained in Nroth Carolina during the past five years through the failure of banks, eh says, adding tht the figures compiled by the News Letter are therefore estimates.
In the opinion of Mr. Bailey, the State Corporation should have more control of the affairs of defunct banks, rather than allow liquidation through the present receivership channels. He advocates the passing of a law providing for this, believes that through this method 15 or 20 per cent of the assets of defunct banks, in the future, can be waved to unfortunate depositors.
As an example of the manner in which the system he proposes works, Mr. Bailey cites the control of national banks by the Comptroller of Currency. Under this system a national bank, whenever it goes under, until all assets are liquidated, has its affairs controller by men whose business is the liquidation of banks. The costs of this method, he declares, is approximately five per cent of the assets, representing a distinct saving over the state’s present system.
For under the usual receivership processed as practiced in North Carolina, says Mr. Bailey, the cost frequently amounts to as much as 25 per cent of the assets, and the assets themselves often remain tied up in the receivership for years.
Were the Corporation Commission to control the affairs of the defunct banks until the assets were liquidated (line obscured) of thousands of dollars might annually be saved to the depositors.
Mr. Bailey expects to interest the next General Assembly in the reform which he advocates.
From the front page of the Goldsboro News, Aug. 29, 1926
newspapers.digitalnc.org/lccn/sn93064755/1926-08-29/ed-1/seq-1/
