The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1898-07-28
Exchange on County Checks

Under an agreement between all the banks
of the city, a change will be made on
and after the 5th proXimo for collection OF
out of town items payable at points (otner
than San Francisco) in California, Arizona,
New Mexico, Oregon and Nevada. This rule
will apply to all such items received, wheth-
er for deposit or collection. The minimum
rate will be cents for each item of 500 or
less, and one-twentieth of one per cent for
each item in excess of 500.
A local banker who was asked 10 give the
reasons for this departure, replied substan-
tally as follows:
"In the rapid business expansion OF sew
eral years ago banks were established be-
yond the actual requirements Of this sec
ton. AS a result, there has been undue
competition at many points. This has led
some banks to Ibid for business" by offer
ing extra inducements, such as furnishing
exchange free, receiving for deposit a par
private checks and drafts which required
time and expense to collect, etc. Others
were obliged to follow suit. and for years
the banks of Southern California have been
transacting for their customers, free of ex-
pense, immense volume of business,
which elsewhere contributes largely toward
the payment of running expenses.
"Take exchange, as an example,: The To-
cal bank has to keep with each of its CORE
spondents in San Francisco, New York, Chi
cago and other money centers, large sum
of money, to provide for payment Of its
drafts. 1t also pays for the expensive sta
tionery required for such drafts and their
proper record, and the salaries Of reliable
and competent men to write drafts and keep
and adjust the various accounts with cor
respondents. There is no department of the
banks business calling for higher rate of
Integrity and skill. but because Of the con-
ditlons Just referred to, the results have
been furnished to customers without cost
the income of the banks being derived al
most exclusively from the interest on their
bills receivable. 1t has long been recognized
that it was unfair that borrowers should
thus indirectly pay for exchange furnished
to customers who were not borrowers, but
every attempt to correct this erroneous way
Of doing business proved unsuccessful
when the new revenue act was passed.
however, and it became known that banks
would be compelled to bear the additional
expense of internal revenue stamps upon
their drafts. and to pay taxes upon capital
and surplus. which in this city alone will
aggregate about $4,000 per annum, IT was
recognized that something must bel done
to meet these new expenses. without in
creasing rates Of interest. Rates Of exchange
were therefore very generally established
usually at the extremely low rate Of cents
per 800 for local business. and as rule the
change was accepted by customers as a nat
ural and entirely proper one. Some have
however, sought to evade the payment OF
such charges by sending their checks on
local banks, in lieu of bank drafts, in paw
ment of bills due. Los Angeles merchants
have been receiving an unusual quantity of
such checks, and. In accordance with the
prevailing custom, Nave deposited them
with their banks at par The Los Angeles
banks. In turn, have charged these checks
10 the accounts of their country correspon-
dents and forwarded them. The country
banks object to this for several reasons:
They can never know whether they have
available balances or not, as checks of which
they know nothing may be already charged
TO their accounts and be in transit; such an
evasion of the rules for exchange charges
not only defeats pro tanto the purpose of
the rules but works an unfair discrimina-
ton against those customers who have in
good faith complied with the exchange
rules; "kiting' of checks-a most objection
able and dangerous practice-is directly en-
couraged.
"For these and other reasons number
OF country banks have requested that checks
on themselves should be charged against
their accounts only after deducting current
rates Of exchange. 1t has, therefore. been
thought best to make uniform rule COW
ering the whole matter. and putting all the
banks upon the same footing.
"About ten days have been allowed to
enable merchants and their customers to
adapt themselves to the new order Of things.
and 1t is believed that there will be little or
no friction-in fact. am sure there will be
no objection on the part Of those who do
business along strictly legitimate lines"
Local Real Estate
Transfers for the week ended JULY 2sth
were 1872 In number and amounted to &324 log, |
- against ?n amounting to $131 zee the nre-
seding week and 1876 amounting to $14l, l76
The corresponding week Of last month.
Mortgages flled for the week ended July !