In his first annual report to Congress Mr. Trenholm submitted a number of suggestions for amendments to the banking laws. He took the position that as the interests of the Government in connection with the issue and redemption of the circulation of the banks were fully protected and the noteholders were absolutely secured, official supervision of the banks was reduced to the necessity of protecting the interests of depositors and creditors other than noteholders. He stated that as the security of the depositor was dependent upon the proportion of the bank's assets to its liabilities and the solidity of such assets, both of which were in turn dependent upon the management of the bank, official supervision of the management of every national bank by the Comptroller of the Currency had become a very important and necessary feature of the national system. For this reason he was of the opinion that the laws governing supervision, and the character of the business that may be done by the banks, should be frequently revised, in order that the interests of both may be benefited by the light of experience.
That such revision of the laws was not made from time to time is not the fault of the Comptrollers, nor of the best minds among the bankers. Numerous amendments of the laws had been suggested by both, the adoption of some of which have no doubt greatly improved the system, but the known ambiguities and inadequacies of many of the most important provisions of the law remained unchanged since the original enactment, until in some sections of the country it had become almost impossible for banks in the national system to meet, within the limitations of law, the legitimate business demands of their customers in competition with the best class of State institutions operating in the same locality.
The national banking laws were all right in the main, but they did not keep pace with the evolutions of business and banking. Greater latitude to the banks was needed in some respects; increased restrictions in others. Had the necessary changes been made in the law, as recommended from time to time by Comptrollers, the national system would have been steadily improved, both in the interests of the banks and the better security of their depositors.
Mr. Trenholm, like all of his predecessors, readily recognized the defects in the banking statutes and endeavored to have them corrected. In his first annual report he submitted a number of specific recommendations for amendments to the law, the most important of which were the following:
That the limitations with respect to the dealings of the banks in real estate and real estate mortgages be more clearly and definitely expressed, and a penalty provided for violation of the law.
That not less than five directors of a bank, exclusive of the vice-president and cashier, be required, when such officers were members of the board.
That the shareholders of the bank be exempted from further liability when the surplus of the association should exceed twenty per cent. of the paid-in capital stock of the bank.
That the banks be required to keep on hand, or at some nearby center, a larger proportion of reserve than was then required by existing law.
That the banks be permitted to exceed the limit placed upon loans when security of undoubted value was held for a loan, which security was not in any way dependent for its ready convertibility upon the borrover.
That the compensation of bank examiners be based upon the aggregate liabilities of the bank, instead of upon capital stock, and that the appointment of supervising examiners be authorized, to be paid out of the Treasury of the United States.
That the assistant cashier of a bank be authorized, in the absence or inability of the cashier, to sign all certificates then required to be signed by the cashier.
That provision be made for the protection of the rights of shareholders desiring to withdraw from national banks extending their corporate existence.
In his report for 1887, Mr. Trenholm recommended a revision of the entire National Bank Act, and embodied his views in the form of a prepared bill, containing 242 sections, codifying existing laws, with such modifications and additional provisions as he deemed essential.
In his third and last annual report, Mr. Trenholm called attention to the gradual and continuous contraction in national bank circulation that had taken place during the preceding ten years. He stated that the influences principally responsible for such contraction were the refunding operations of the Treasury Department in United States bonds, the growing scarcity and high price of the bonds, the resumption of specie payments in January, 1879, made possible only by the co-operative relations between the Treasury Department and the national banks, the displacement of national bank notes by other forms of money, the silver coinage law of 1878, providing for the coinage of two millions of silver dollars a month, and the silver certificates authorized by the Act of August 4, 1886, which were absorbed by the public because they constituted the only supply of notes of small denominations.
While all these influences, Mr. Trenholm declared, had the effect of increasing the total volume of money in circulation $660,000,000- between January, 1879, and October, 1888, the date of his report, the national bank circulation during the same period showed a shrinkage of nearly $83,500,000.