The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-06-25
SAYS HIS FORCE IS SMALL.
NECESSARY TO RELY TO SOME Ex-
TENT ON REPORTS 7TOF
BANKS 20
BLAME ON THE JURIEs
That Notice Is Not Taken of Fla
grant Violations of the
Laws. = e<

ment which Gov. ClOugh, requested him
to make in reply to the structures of
the Hennepin county grand jury on the
policy of the administration in regard
to the insolvent banks of Minneapolis
Mr. Kenyon, in brief, submits that with
the small force of assistants at his COM
mand it is necessary for him to rely,
to some extent, upon the word of the
officials of the banks, especially as the
banking laws provide severe penalties
for the making of false reports, penal
ties, which Mr.. Kenyon pointedly re-
marks, the bank inspection department
has had occasion to ask previous grand
juries in that and other counties to en-
force, but in vain.
The report, in substance is as fol-
lows:
Relating to the statements of the grand
jury Of Hennepin county as to banks and
trust companies, in a letter to the gov
ernor permit me to say that the reports
of this office have been made as required
by law.
In regard to the Washington bank re-
ports made to this department, stated by the
jury as having been false, this department
law (sec. 2, chapter 145, Laws 1885 provides
that every officer, agent or clerk of any
bank who wilfully and knowingly
subscribes or makes any false statements of
Facts or makes false reports shall
be deemed guilty of a felony (Sec. 1920
Stat. of Mimi, 1S94-the old law prescribes the
same penalty) Unless there is something
that indicates false reports the examiners do
not attempt to verify reports made under the
statute, relying on the requirements of a
Verihed statement, and the severe penalty for
false statements AS we get five reports a
year from each bank, the reconciliation of
Such statements with the bank would take
all the examiners time. The examination
OF the Washington bank made tby this de-
partment on Jan. II, 1886, WAS ali exhaustive
one and was followed by a further examina-
ton as to special matter on April A. and
this, in connection with the first examination,
showed the bank to be certainly in a condi-
ton very far from insolvency.
The loans bore no indication that they were
OF a speculative character.rO r.
The directors in charge were at the time,
so far as known, men of unblemshed char
acter and of wide acquaintance with the bust
ness interests of Minneapolis.
This department was certainly justified in
placing confidence in such men, especially in
Mr. Haukan. who was city treasurer and as
such had large deposit in the bank the pro-
lection of which, to him, was of more i'm
portance than to any other customer of the
bank.
1t is hardy consistent with common sense
to think that he would permit himself city
treasurer to be robbed by himself under the
gulse of the Washington bank.
As might be expected, there. were some
loans that were. of such a character as to
be Objectionable and the directors were asked
to have them taken care of. which was done
subsequently to a large extent, and duly re-
ported uDen. .h Et.H 81 H-fsf rs 80
There certainly was NO item of any mag
nituGe omitted in the report that would have
shown any material difference in the condition
of the bank. - . ..-..
AS to the irish American bank, examina-
tons were made in January and October, 1885,
and after the October examination two meet
lQPS of the directors held and If
decided to assess the stockholders $4,000 for
the impairment of capital, leaving the rQues-
ton of further assessment to be settled after
this was disposed OF. The question of the
payment of the assessment by the stockholders
controlled to make the assessment at the time
at that sum, although some of the directors
were of the opinion that the assessment COW
cred the entire impairment.
The loans appeared to be business paper
and no indications of speculation appeared.
From the known standing of the men on
this board and the great interest the manag-
ing director had in the soivency Of the bank.
I think I was justified in taking their estimate
of the assets: certainly, could have no per
sonal knowledge of any of the paper. and was
DESTROYS of arriving at Just conclusion and
the best action to be taken under the CT
cumstances.
thorough. as evidenced by the following:
Examiner Lonegren discovered, two drafts
for collection amounting to $3.50, which had
been carried from April to 8, 1895, without
the knowledge of the officers or directors OF
the bank. He Immediately called the atten-
ton of ]. H. Bishop. managing director. to
the matter. and the latter asked j. E. Gould
either to eXDiain it or to resign.
In regard to the Penny Press matter
connec ed with the IrishAmer:can bank,
an examination made in June. 1898 DIS
SIG. q. On April II, 1895, the amount
was shown TO have increased in various
ways to $21029.35. in spite of the protest Of
this office to any such Increase. On April "a
asked shat the call this
office in regard to loan of Penny Pre- !;
Judge Rea. one Of The directors of the bank,
called and stated that the loans to the Penny
Press were to be placed on a different basis.
and that the bank would not advance further
money for carrying on that business On
May II this office wrote further, in reference
to such loans. A specjal eXaIninat ION was
made June and the loans were found
to have increased to the amount of $50. 000
when they stopned leaning and adjust
ment was made by which $4,000 of this loan
was secured by mortgage for the term of
three years.
The Bankers Exchange bank US author
lied on May 10. 1886 No examination was
made Of this bank further than to count the
money on hand the -0nen:ng day, when the
entire amount CT capital was, found in the
bank in cash.
The Northern Trust company was exam
ined in July 1895, and reported in great de-
tail.
AS to loans of officers there were found
10 the amount of 10 GAG 80 of which So TT. So
based order of the court permit
ting an advance to an estate of which W.
n. Carroll was in charge, and for which he
acknowledged receipt
The persons receiving these loans were J.
E. Thwing.- George Thw:ng J. H. Pau'son
Mary E. Maxwell and Walter n. Carroll
none of whom were managers.
The loans en- real estate were the larger
part of the assets. and l had no way of de-
termning their value.
The statement that the funds we're loaned
in violation of sound business principles
would just as well apply to almost all loans
made on rea estate in the city Of Mnneapo-
lis: if we were to judge by the values of
today.
That the banks and trust companies herein
referred to had insufficient capital is an
swered by the fact that they had the capital
required by law. 8
the department to be dereliet or inactive
and that it avs impossible with the limited
assistance at it's command to have given
ceived o.1'G
AS to financial institutions that are in
difficultles and banks especially. the law
certainly does not contemplate closing them
at once unless they are insolvent. as it
provides for renewing impaired capital and
this law was invoked in the case of the Irish
American bank, and the Washington bank
loans. IHtF II
That the information as to values of loans
was found incorrect is no. fault Of the exam
liner, as the source of such Information is
limited and that the best sources at the COM
mand of the department, were consulted, that
is the officers of the banks who are put in
charge and paid salaries for the very purpose
Of making loans on proper security.
That the department made mistakes as to
accepting values is simply to admit that there
is no extraordinary knowledge or source of
knowledge at its command, and that in COM
mon with all persons in these times of uni
versal depression and falling values it has
to depend on the values of the day, which may
be greatly decreased or ultimately destroyed
by the continued stringency of the period.
he Jury admit thai M