The statement of Mr. Justice Holmes of the Supreme Court of the United States, in the Oklahoma Bank case, is significant:
“We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the State in taking the whole business of banking under its control. On the contrary we are of opinion that it may go on from regulation to prohibition except upon such conditions as it may prescribe.”
OFFICIAL PRECEDENTS
Nor would the requirement that banks shall make no loan in which a director has a private interest impose undue hardships or restrictions upon bank directors. It might make a bank director dispose of some of his investments and refrain from making others; but it often happens that the holding of one office precludes a man from holding another, or compels him to dispose of certain financial interests.
A judge is disqualified from sitting in any case in which he has even the smallest financial interest; and most judges, in order to be free to act in any matters arising in their court, proceed, upon taking office, to dispose of all investments which could conceivably bias their judgment in any matter that might come before them. An Interstate Commerce Commissioner is prohibited from owning any bonds or stocks in any corporation subject to the jurisdiction of the Commission. It is a serious criminal offence for any executive officer of the federal government to transact government business with any corporation in the pecuniary profits of which he is directly or indirectly interested.
And the directors of our great banking institutions, as the ultimate judges of bank credit, exercise today a function no less important to the country’s welfare than that of the judges of our courts, the interstate commerce commissioners, and departmental heads.
SCOPE OF THE PROHIBITION
In the proposals for legislation on this subject, four important questions are presented:
1. Shall the principle of prohibiting interlocking directorates in potentially competing corporations be applied to state banking institutions, as well as the national banks?
2. Shall it be applied to all kinds of corporations or only to banking institutions?