The record-union., 1891-07-29
ILLEGITIMATE BANKING.

There is nothing of greater importance
to the people of a country than that its
banking business shall be done upon
legitimate principles. The whole subject,
however, is involved in mesh of diff
culties chiefly because of the sensitive
ness Of depositors in certain institutions.
The press may be thoroughly persuaded
of the illegitimate character of banking
transactions as relate to specific institu-
ton, and yet be restrained out of con-
siderations of public policy from expos
ing the illigitimacy of the methods en-
ployed. The public in this regard is like
patient under treatment, whose system
is such that the remedies for his cure
cannot be applied without creating new
ailments.
The recent disclosures concerning the
relations of the Pacific Bank of San
Francisco to the Peoples Home Savings
Bank is a case in point. 1t transpires
that the Peoples Home Savings Bank
was sort of side show to commercial
bank; that the Pacific Bank was the
Treasurer of the Peoples Home Savings
Bank. The statement needs scarcely to
be enlarged to show that the relation was
neither In accordance with banking
principles nor good financial ethics.
Here was bank claiming to be an incor-
poration, claiming to have a paid up
capital, which was no doubt true, and yet
it could not trust itself to be it's own
Treasurer. The depositors placed their
money there to be used for the purpose
ofgaining interest, but as the corporation
known as the Peoples Home Savings
Bank was not even the custodian of its
own funds, it deposited them with the
Treasurer, the Pacific Bank, and thus
the latter institution had it's banking
capital augmented by use of another
banks deposits. When the time of fear
came, and exposures were made concern
ing questionable securities, the bank i'm
mediately sought to bolster up its SOL
vency by saying that the Pacific Bank
was behind it. The bank to avoid in the
very nature of things is one that has
another bank behind it. A bank to need
another behind it is not bank in its own
right. The only bank with which sensi-
Die people deal is one standing alone, and
Independently receiving deposits, max.
ing proper and safe loans for the de.
positors, and having nothing but strict
and prudential business methods behind
it. 1t needs no other backing, and when,
ever it forms relation with another
bank which will justify it in loanine
money on undeveloped irrigation
schemes in Arizona or electric railway
bonds in San Diego, and apologies fol
these illegitimate ventures upon tn,
ground that a certain other bank is be
hind it, and that it can therefore afford t.
depart from well established bushes.
methods, it repudiates its own existenc,
as bank in its own right, and disclose.
relation with another bank which
justifies the Characterization of ''snide'
institution.
The Peoples Home Savings Bank anC
the Pacific Bank may both be very sol
vent institutions, but the relations they
have sustained TO each other as confessed
by the interviews with the President O
the Pacific Bank, places the saving
Bank in the attitude of being q sort o
little end to the larger end of bankin,
corporation. If the Pacific Bank wanted
the money of the Savings Bank deposit
ors for banking capital, 1t would hav
been infinitely to its credit to have simpl,
said SO, and offered to pay interest to de
positors in the Pacific Bank. The i'm
portance of the whole subject justifies tn
plainest expressions on the part of thos
who guide public opinion in the premises