The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1899-02-17
BANK COMMISSION REFORMS.

Governor each OF whom was to De Tree from CON
nectorl as officer or enploye, with the banking oesl
ness and whose compensation and expenses, heiu
within fixed limits. were to be paid by the banks IN
return for annual licenses by pro rata assessment on
DEPOSITS enli-annual reports be made to the
COMMISSIONERS who in their turn were to submit an
mail REPORTS to the Governor and each OF whom was
invested with the right of visitation and examination
The subsidiary powers supposed to insure the 1ree
exercise of this principal authority were conferred
upon the Commissioners, who IN the event OF Wo-
lation of law by corporations or persons, II pre-
irnary cautions proved unavailing could invoke the
aid OF the Attorney General and OF the courts to sus-
pend and close any banking business thus Illegally
and unsafely conducted.
Under the original act the Bank Commission was
organized and its operations continued for nine years
when certain amendments were adopted by the
Legislature supposed to embody the results OF prac-
teal experience and the essential points OF which
were TO broaden the class of incorporated banks
within the control of the statute, SO as to avold
technical eyasions OF its terms, and to supply cum
bersonle method Of liquidation under the SUPERVISION
of the commission In 1895 other amendments were
made embracing more detailed requirements and
increased complications, and raising the salary OF
each Commissioner from $4,000 TO $4,000 per annurn.
There have been honest men and some VINO were
competent on this commission, but its failure to sub
- NNA~-A--O
edge and notably in those cases of dishonest man
aqement and diversion OF banking capital and funds
which have wrought intoerabe injury to depos1torS
and stockholders Perhaps the most serious evil that
the commission was irpoent to arrest was the inter
mixture of commercial banking, which lncludes
leans upon personal credits with the ordinary func
tons of savings banks The accumulation OF the
net profits of industry into these institutions and the
earning of moderate interest by safe investments Whe
adequately restricted and protected, is one OF the
most beneficial inventions of modern times Pro-
noting thrift and economy in the individual 1t also
benefits the public at large by supplying capital Tor
legitimate enterprise But the grating upon the abb
solute security of loans upon real property or IN
questionable collaterals of the special features OF
commercial banks, and as in this State in many
instances dscarding even their conservatism, has
given recklessness and fraud free scope that has
brought thousands of citizens to poverty and dis
tress The history of the Capital Savings Bank the
Peoples Home Savings Bank and the Fresno Loan
and Savings Bank, emphasized by the tafure OF
the Union Savings Bank of San JOSE are sad Illus
ratons OF the suffering and the loss produced by TINS
unnatural combination. i
Mr.. Evan T. Coleman president of the first Bank
Commission whose competency and whose integ-
ritv have never been questioned has suggested in |
The Call amendments the present law that demand
prompt consideration by the Legislature. He pro-
poses that the number OF Commissioners be increased
TO FIVE without which the proper examination OF
all the banks in the State impractlcable, and that
the salary OF each be reduced to the original sum OF
$4,000 per annum The increased expense Will be
almost covered by the reduction OF unnecessary out
laws such as the printing of reports that
are simply uninteigible because mainly composed OF
bewiIdering 1abyrinths of figures Instead OF col
ectng the cost of the commission deposits alone,
he suggests that be levied pro rata upon the entire
resources of the banks. Eight cents Whereabouts
on the thousand dollars would the amount
necessary and the difference in yearly expense would
be only $4,000 The absurd provision of the existing
law that no gentleman having business OF his own
should be appointed Commissioner, which invites
the selection of politicians or business
failures is eliminated in the new amendments.
But the most important changes have yet to. be
noted The first sure sign of embarrassment in
bank is the transfer of its securities usually concealed
Until it is too late to depostors and stock
holders The public will agree with Mr.. Coleman
that all assignments of mortgages or deeds of trust
by savings banks should be recorded and certified
copies furnished the Bank Commission and that their
validity should depend upon compliance with these
conditions A still greater safeguard would be the
requirement of notice to the Commissioners from all
banks OF transfers ypothecations OF securities held
by them. This would include colaterals the record
ing OF which IS not authorized by law and would
:impart no notice Such information supplied to the
Bank Commission would insure the stoppage of in
solvent or unsafe institutions before their
FILTERED away 1t is also indispensable that the prac
tice OF lending money on overdrafts and personal
notes. INDUCED in by some OF the savings banks, be
permanently stopped.
These amendments should be substantially adopted
by the Legislature during the present session, for
within the ensuing two years they would prevent
repetition of the disastrous record of the Union
Savings Bank of San Jose. At the next session the
entire scheme of the Bank Commission should be re-
cast 1t should be completely withdrawn from the
influence of party Able and experienced men, versed
in the banking business but from the time of their
appointment free from all interest in existing banks
should be kept in office and not subjected to political
raids or to the vcisstudes of gubernaoral patronage
Instead of being a quasi independent adjunct the
commission should be so reorganized as to become