The article was the advice of Hugh McCulloch, the Comptroller of the Currency in 1863 and later the Secretary of the Treasury. McCulloch wrote these comments to the national banks under his watch, imploring them to uphold prudent lending standards.
Let no loans be made that are not secured beyond a reasonable contingency.
Do nothing to foster and encourage speculation.
Give facilities only to legitimate and prudent transactions.
Insist upon the payment of all paper at maturity, no matter whether you need the money or not.
Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or company, although sometimes proper and necessary, are generally injudicious, and frequently unsafe.
If you have reason to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you. The risk in such cases is greater than the profits.
In business, know no man’s politics. Manage your bank as a business institution, and let no political partiality or prejudice influence your judgment or action in the conduct of its affairs.
The capital of a bank should be a reality, not a fiction.
It should be a chief aim, therefore, of the managers of the banks, to make their respective institutions strong; not only to keep their capital from being impaired, but gradually to create a surplus that will be a protection to their capital and to their creditors in the trying times that sooner or later happen to all banking institutions.
Splendid “financiering” is not legitimate banking, and splendid financiers, in banking, are generally either humbugs or rascals.
Hugh McCulloch
Comptroller of the Currency
1863
Let no loans be made that are not secured beyond a reasonable contingency.
Do nothing to foster and encourage speculation.
Give facilities only to legitimate and prudent transactions.
Insist upon the payment of all paper at maturity, no matter whether you need the money or not.
Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or company, although sometimes proper and necessary, are generally injudicious, and frequently unsafe.
If you have reason to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you. The risk in such cases is greater than the profits.
In business, know no man’s politics. Manage your bank as a business institution, and let no political partiality or prejudice influence your judgment or action in the conduct of its affairs.
The capital of a bank should be a reality, not a fiction.
It should be a chief aim, therefore, of the managers of the banks, to make their respective institutions strong; not only to keep their capital from being impaired, but gradually to create a surplus that will be a protection to their capital and to their creditors in the trying times that sooner or later happen to all banking institutions.
Splendid “financiering” is not legitimate banking, and splendid financiers, in banking, are generally either humbugs or rascals.
Hugh McCulloch
Comptroller of the Currency
1863
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