# Testimony of George H. Earle, Jr. (7 Feb 1891)

from Proceedings of Joint Committee of the Legislature of Pennsylvania, Appointed to Investigate the Cause of the Recent Failures of All Incorporated State and Private Banks. Harrisburg: Edwin K. Meyers, State Printer. 1891; pp. 84-86
George H. Earle, Jr., affirmed.
    Examined by Senator Dunlap :
Q. You are connected with the Guarantee Trust Company.
A. President of the Pennsylvania Warehousing Company, vice president of the Guarantee, and a director in the Equitable Trust Company.
Q. You know the purpose of this investigation.
A. Yes ; I think the failures were due to the fact that the private banks depended on private credit. Wherever you have a money scare they will be hurt the most. When a stringency came the private bankers felt it the great institutions did not feel it so much ; feeling it that way they had no one to help them. The banks and trust companies were ready to see each other out, and for that reason you had a larger number of failures among private banks. In the question of state supervision people who are connected with national banks have had things to say about trust companies. The laws under which trust companies were organized was wise legislation. I never heard of the failure of a trust company ; The trust companies have stood up through all times ; there is good reason for it. You take national banks which discount paper in time of great stringency, they have two names to look to, the trust company has security. Every trust company only permits loans on listed security, so that the officer has no chance to make a mistake. If they want a loan from a trust company other than on a listed security it has to go before the board.
Q. Did you hear Colonel Bosbyshell.
A. No, sir ; you should bear in mind there never has been a failure of a trust company. This committee is not considering the interest of the banks or the trust companies or the institutions. It is considering the general good of the people. You must consider how are the people to get the use of money most readily. In making a law requiring a reserve you consider the prudence. You should therefore consider what is the least prudent reserve, my view of the reserve is not that it is to be kept but it is to be used. I do not think that twenty-five per cent. would be of any use. In Philadelphia there was more than enough money to make things easy here. In the vaults was enough money to supply all wants. If you take a trust company that only loans on collateral and make it carry a large reserve you put a restriction on companies that never had a failure.
Q. Do you apply that to state banks.
A. They do a different business. They loan money. If a man wants an active business account he wants to keep it in a bank. The bank have active accounts. In times of stringency the banks must use their money. I do not believe that any trust company in Philadelphia ran down ten per cent. in any one month of the time, but the banks have active accounts and discount paper which is running on time. In the companies I am in I think ninety per cent of the moneys are loaned on collateral and on call, and while not absolute it is pretty near reserve. Take Reading fours, you could sell 1,000,000 a day, and Pennsylvania railroad, and when you get to a stock like Reading, you could sell $10,000 worth of that without a ripple. I think it would be wise to require trust companies to keep a ten per cent. reserve. In the working of the national bank act, the bank examiners were careful not to call for a statement during the panic.
If a bank is solid I do not think there ought to be any want of liberality in using their reserve. On the subject of private banks I think every private banker ought to be compelled to do his business in his own name ; no fancy name should be allowed. If a man wants to put his money in the hands of an individual I think he should be permitted to do so. A private banker should be compelled to do business in his own name and state that he is a banker. All business men are private bankers they are all quasi-trustees. If you go in and interfere with the private banks you should go into other private business. I want very strongly to say that as to trust companies they receive a thorough examination from the courts, the system seems to have worked well. I have a strong tendency to letting well-enough alone.
Q. You are not in favor of an additional examination.
A. I do not think it is necessary. During the last panic there was a feeling against every one. If we could have called upon some one to examine the trust companies it would possibly have restored confidence. I do not agree with the gentleman who say that the state ought to pay these gentlemen. I think if a business is conducted for my benefit I should pay for it. If it is compulsory they could not help themselves. I do not see that the examiner could be possibly bought. So I would make the state officials entitled to ride on the railroad cars so it would not seem a favor to them.
Q. How should the examiner be appointed.
A. I would be opposed to having any rival order of institutions appoint an examiner for my institutions. I think he should be appointed by the officers of the state.
    Examined by Mr. Flad :
Q. You assume that there shall be a published statement of the results.
A. That I had not thought about. In New York they have had a marked experience in that. In New York some of the banks were liberal, they said if our statements are published and our depositors see we are running on a weak reserve it might cause a lack of confidence : my own judgment is that the public statements should be only made by the head of the department. It might be unwise to publish to the community that on a given day they were under the reserve. If you publish five millions of deposits and only five hundred thousand dollars worth of reserve, I think the bank might be good, yet it would hurt the bank, I don't think public statements are of much use.
Q. This morning the superintendent of the mint gave us some information as to the bond and investment companies that are being formed. Do you know of this.
A. There are some of them that are good and some of them are going to rob the people. They go to good companies and open accounts and then they advertise so and so deposit agency, and do tricks of that kind. One of the companies I am connected with investigated it and came to the conclusion that it was a certain losing scheme. Some of them are real charities and unquestionably useful. I think the state should interfere and bring them under the rules and laws of the state. I should think that the trust companies had plenty of safeguards against everything except fraud and that we cannot prevent, if you will put in the law the right of the trust companies at any time to ask for an examination. I think there should be a supervision of state banks as of national banks and that trust companies should have he right to ask for an examination if they desire. I would not have them published.
Q. Then you would make such publication at the discretion of the head of the departmant.
A. Yes, sir ; in ordinary times they would like to publish the statements. If you made it compulsory at all times it might make trouble. Take the Fidelity with fourteen million dollars worth of deposit.
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