The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1893-06-24
TIE FINANCIAL SITUATION.

The Pacific Bank did not open its doors
| on Friday. 1t had long been in trouble.
The increased monetary stringency
brought matters Thursday to crisis. Ap-
plication had been made 10 the Clearing
house for relief, which would have been
granted if the securities offered could be
converted into cash within a reasonable
time. From the statements made the bank
had been engaged in too many outside
speculations. 1t is claimed that the de-
positors will all be paid in full. California
banks have no note-holders to protect.
The depositors are the only creditors. To
them all the stockholders are responsible
for all that is due. each IN proportion TO the
amount of his stock. In this respect the
California banks differ from the national
banks. as the stockholders in the latter are
responsible 10 the depositors only to
double the amount of stock held by them.
Connected with the Pacific Bank is the
Peoples Home Savings Bank on Market
street, the continuance of which depends
in a large sense on the stockholders. The
institution has made no statement of its
condition, nor has it yet had an opportunity
to do so. The only fact that it seems to
be necessary TO impress on the public mind
as to banking generally is that no bank
keeps all the money it receives on hand
1t has to lend it so as to pay interest to its
depositors. salaries 70 it's clerks and rent
for its premises. If it were to lock I'D all
the funds intrusted to it in its vaults all
that would be gained by the operation
would be the doubtful pleasure of looking
upon unused piles of gold. If all the de-
positors in a savings bank want their
money at the same time ii is manifest they
cannot get it. There must be time to col
lect before all can be paid off. The saw
ings banks under the law have the right
to suspend for a certain period in order to
make necessary collections.
The Gepositors in Los Angeles savings
banks who in the late furry withdrew
their money simply lost the half years inter-
est which will accrue on the 1st of July
next. What we have to deal with here for
the moment is the distrust ergendered by
the failure Of some banks. But that is no
reason why everybody should proceed at
once to take leave Of his or her senses. as
the case may be. 1t is instructive at this
time to recall the fact that the banks Of
San Francisco have remained mistaken
during all the financial commissions that
have taken place during the last forty
years. In a large sense it has been the
Gibraltar of finance. Our banking system
is legalized conservatism.
Our banks issue no notes. The deposit
tor makes his own paper money in the
shape OF checks, which is cancelled over
night. The stockholders of banks incur
an unlimited responsibility to the deposi-
tors. They are liable for their proportion
as already stated Of all the debts of the con-
Germ. They are likewise held for any
frauds that may be committed by their
employees or agents. More than that. there
is no release in insolvency for the bank
rupt banker. 1t would perhaps be i'm
possible to devise a sounder system
of banking. Thirty years exhibit
the good fruits that it has
borne. The savings banks are organized
upon equally correct principles. We have
heretofore been able to take just pride in
the fact that no matter how severe the
monetary stringeney might be in the
country at large our city remained un-
moved in its financial stronghold. There
have been in times past what might be
called sporadic failures here and there,
but in every instance they were due either
to individual rascality or Individual in
capacity. The whole system could not be
wrecked unless by widespread conspir-
acy impossible of formation.