The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1899-02-15
PART. II.

the first Board of Bank Commissioners
in it's report Of January, 1880, to the
Legislature been adopted the Peoples
| Home Savings Bank, Fresno. Loan and
Savings Bank and Union Savings Bank
of San Jose would never have come into
existence and hundreds of deluded and
defrauded depositors would have been
saved from ruin and misery.
An important part of that report
reads as follows:
SHOULD SAVINGS BANKS DO A COM
MERCIAL BUSINESS?
The experience of the past eighteen
months has demonstrated to US the i'm
propriety of savings banks being permit
ted also to- do a commercial business.
In no quarter have we met so many en-
barrassing questions as in matters con-
nected with the savings banks which were
so doing. The present laws provide that
savings banks having paid up capital,
or reserve and capital combined, of three
hundred thousand dollars $500 000) may
make loans ON personal security buy and
sell exchange, ETC.; in other words, ful1ll
the functions Of bank of discount with
the limitation created by the bank COM
missioners' act, requiring so per cent of
their loans to be thereafter on real es-
|. tate).
The first reports sent to US Gin July,
1879 and our earlier examinations re-
Vealed to us the fact that many of the
savings banks were ignorant of or indifer-
| ent to the. restrictions placed by law upon
their actions. ...::
After .enumerating six savings banks
which mad "come to GRIEF: from doing
this dual business the Commissioners
continue: 800. ~
/ The Capital Savings Bank .(Sacramen-
| to), which went into liquidation few
/ days ago January p lis another and the
last instance of the utter incompatibi,lity
hntr :r-ld q
classes of banking and IS the seventh
example of the: practical want Of success
| of such unhealthy unions" When we
| first: examined the last named bank in
/ November, 1878, we had to write off,
over two hundred thousand dollars (near--
| ly it's whole reserve fund.- on account OF
! losses which, we believe, were principally
| incurred in It's commercial business. Does
not this record of eighteen months prove
| that the functions of q savings and OF a
| commercial bank are so distinct and UNI
| congeniai that. they ought never to be
| united in one corporation? The matter
| is so Self-eVident that 1t seems almost
| superfiuous to discuss it, but we shall add
ourselves and quote some addltlonal rea-
| sons in support Of our view. No one can
dispute the fact that the qualifications
required to make successful savings
! bank manager are entirely different from
| those which should belong to the manager
of a commercial bank and are seldom, II
ever, united in one person. Among writ
| ers on banks and banking laws the opln-
and banks of discount should not even
be allowed to locate in the same building,
| when they are both managed by the same
officers.
| For the foregoing reasons we have no
hesitation: in recommending that no saw
ings bank not now engaged In the prac-
tice:of SO doing should be allowed mere
/ after to make loans on personal security
| or to transact any business winch IS
| properly the province of bank OF ais
count, and that those institutions which
are so doing, in accordance with the laws
at present in force should be required, on
/ or before the 1st Of January, 1882 to elect
which business they will pursue, and to
! discontinue the other. -.
/ In their report of the following year
| 1SSD the Commissioners repeat this
and other suggestions to the LegiS-
| lature in these words:
/ Repeal the law allowing savings banks
! with paid up capital, or paid up capital
and. reserve combined of $500 900, to make
| loans without adequate security on real
is TO prevent any savings bank hereafter
organized, or which is not at present so
doing, making loans on personal security,
| which is properly the province of COM
/ merciaI banks.)
Require all banks hereafter to have an
appraisement in writing, signed by at
| least one competent person. Of each piece
! of real estate mortgaged to them, and
said valuation to be kept on file.
| Prohibit any diminutton or division of
| the reserve fund of any savings bank lex
| eept to offset losses or depreciation in the
value of assets, until the paid up capital
| and reserve together or the reserve fund
alone, If the bank is on the mutual plan,
| shall exceed 10 per cent of the liability to
| depositors, and then only to the extent of
such excess
These suggestions fell upon deaf ears
The dominant party just then was too
busy trying to legislate the Commits
sioners out of office fhe effort failing
by only one vote in the Assembly, and
was more interested in providing places
for three of the new Governors politi-
cal friends than safeguards for hum
dreds of bank depositorsi 1t is this
sort of thing which has impaired the
value of the Bank Commission from the
! beginning.
The first amendment to the bank
commission act was made after it had
been in operation nine years and then
| began the decadence of the commission.
By this amendment the salary of the
| Commissioners was raised from $4,000
! to $1,000 per year each, which was
proper enough if a little Joker" had
not been inserted which reads: mo
person while holding any other Office
or engaged in business of any kind re-
quiring his personal attention between
! the hours of 8 a. m. and p. m. shall
serve as Bank Commissioner" To be
! eligible for this office since then one
must be a failure or do-nothing.
These qualifications CD seem to have
! been mostly confined to residents of
country towns, as San Francisco hasn't
furnished a member of the board for
some years. If executive ability instead
of executive friendship had been the
test of it's members the commission
would have done better service.
The Bank Commission has at present
the supervision of 233 active banking
| institutions and twenty banks in liqui-
dation, with some $300,00000O of re-
sources.
Three men cannot examine all these
banks thoroughly once a year in ad-
dition to supervising the affairs of
twenty liquidating banks. My plan for
better work at small additional expense
is to add two members to the present
board, reducing the salaries of the
Commissioners to $4,000 per year each
| Gas originality. Let the secretary S
salary remain at $4,000 per year, but
| limit the total amount of travelling ex-
penses, office rent, stationery, printing,
ETC., to $440O per annum as at present,
this to include the printing of the an
nual reports heretofore done by the
State printing office at enormous ex-
! pense to the State.
l learn from official sources that the