The star of the north. [volume] (Bloomsburg, Pa.) 1849-1866, 1857-01-21
STAR OF THE NORTH.
Wednesday, Jan. II, 1857
THE MYSTERIES OF BANKING.

THE MYSTERIES OF BANKING.
IN order that some of the honest people of
Columbia may see in what manner tb 3anks
are managed, whose paper you handle every
day, we propose 10 treat them 10 the state
ment of the management Of the Lancaster
Bank, which was supposed by most people
to be very sound institution. II is the re.
por: Of the. Committee appointed recently TO
inquire into..he causes Of the Banks failure:
Report to the Stockholders Of the Lancas-
ter Bank.
The undersigned committee OF Stockhold-
era Of said Bank appointed to investigate its
condition and make report
I. Whether said Bank 10 solvent or insol.
vent:
2. II found ..insolvent, 10 report tho cause
or causes of such insolvency, and The mar
nsr in which il was produced:
g. The time or times when the losses were
Incurred that have rendered it insolvent:
4. Tho names of the Directors and officers
under whose administration the solsency
Of the Bank occurred
respectfully beg leave TO submit to this meet
Ing, Tha, having mads the Investigation di-
rected by the resolutica under which they
were appointed, and after careful examina-
lion of the assets and liabilities OF the Bank,
have come 10 the conclusion that ,he stale-
men, submitted to tho Stockholders at a for
mer meeting was fair and impartial exhi.
btion of the Bank-thus leaving no doubt oi
Its insolvency 10 an amount sufficient to ab.
sorb the eutire capital stock and portion o
the deposits.
The insolvency of the Bank can be readily
traced to a combination Of causes, each con-
tribuling to waste It's resources and enc roach
upon It's assets. Instead of accommodating
,he business community in the locality OF the
Bank, where the Directors had the means o.
knowing the responsibility of the drawers and
sndorsers OF the psper offered for discount, il
loaned an amount exceeding ,hree-fourlhs oil
i,s capital 10 few individuals (its President
and Cashier among the number,) for the Pur-
pose of building the Sunbury and Philadel-
phia Misunderstanding extensive iron es-
Establishments, and developing The Shamokin
Coal felds-projects, which, every man OF
even ordinary discretion must have foreseen,
would lock up the funds of the Bank, thus
loaned 10 those parties, for long space oi
time and, If those speculations should prove
disastrous, must inevitably lose 10 the Bank
the money loaned for such purposes.
In consequence of the entire capital of the
Bank being locked up: either on the protest
list, invested in factory stock, and in loans to
ils President, David Lonsenecker, and his
eo.opera,ors in the Shamokn Coal specua.
tions, resort was had to various 'ilegIimale
methods of banking, in order to carry it's cir.
eula,ion, but which in rapid succession only
tended still more TO cripple its condition.
Among the expediens resoried 10 by the
Bank 10 carry its circulation. without the ba-
sls OF it's capital, was the furnishing Of ito
bills 10 wildcat Savings Institutions, private
banking Establishments, and even private in
dividuais, in large amounts, charging inter-
est q, the rate of three per cent. per annum,
With the understanding, on the part of this
class Of borrowers, that they should keep
|. those bills aAoa., so as not to incommode
the Bank. By this means one single indi.
vidua! has become indebted 10 the Bank in
Q very large amount, which Indebtedness is
put down among the doubtful and uad as
se,s. But independent of the insolvency of
the parties to whom the bills of the bank
were thus furnished in large amounts for
circulation, this method of keeping up cir
culation was the cause of additional losses.
These bills of the bank found their way to
Philadelphia, the commercial mart Of Penn
sylvania, where il was required they should
be redeemed in gold or silver; and In order
70 do this the notes and bills of exchan ge
which had been discounted al the counters
Of the Bank, at legal rates, were sent 10
Philadelphia, and there sold at discount,
rating from II TO 8 per cent per month
More than 500, 900 of the insolvency of the
Bank can be traced to The payment of extra
interest to meet the demands of its circula-
ton. y
Among other causes Of iis Insolvency may
be mentioned the transfer 10 the Bank of
$4,000 worth of the factory stock 81 par by
David Longenecker, the President, on the
2s.h of January, 1852. when in fact the stock
was not selling al more than Si4 TO Sl6 per
share, the par value being $50 por share.
Also, in the exchange by the Bank OF S1a,.
900, James Loan, al par, being loan secu-
red by first mortgage on Conestoga Steam
Mill, No. Q, for 225 shares Lancaster Bank
Stock at $50 per share. This exchange wac
directed by Inc Board Of Directors In May,
1855, the stock to be transferred TO The Bank
before the first of November 1856; but the