Los Angeles herald., 1906-05-04

and II has to be financed quickly. The
immediate agents I'm the financing Of q
confiagration. Of course. are the ineur-
ance companies, and the methods by
which they proceed to meet an emer-
| gency such as that caused by the San
Francisco losses furnish an interesting
| study.
The loss 10 the insurance companies
through the San Francisco disaster, it
is thought will approach the $500, ,000,
900 mark. In financing an enterprise
demanding so great a sum, the small
investments of the people can In ordi-
nary cases he called upon. Ordinarily
finance Is constructive. For q new en-
terprisa stocks or bonds can he offered
for sale. and the savings Of the people
may be relied upon to come out of
their hiding places to furnish the
sinews. But the present undertaking.
while constructive in the final working
out, is destructive of immediate effect.
Money is needed and at once Com
pact hoardinEs Of capital. in the form
of securities, mortgages, notes or other
collateral, accumulated slowly and by
steady additions through the profitable
years, and representing the surplus
holdings of the insurance companies,
must now be broken UP. The effect is
widespread.
Heavy claims exist against the COM
panies and prompt payment means
prestige for them and future business
of large proportions. Hence S2OO,0OO,OOO
must be paid and paid quickly; there
is no time to walt for an influx Of busi-
ness to swell the bank accounts of the
companies.
Method Of Procedure
The insurance men. realizing the
situation, have been scurrying. The
first thing they did, as they have done
before in such cases. was to get to-
gether. Then in general conference
they looked into the amount of liquid
assets. including their bank balances,
and made a rough estimate Of the loss
sustained Those that found that as
sets Immediately available would not
meet the loss made arrangements for
loans or for the sale of some of the
securities in which their reserves were
invested.
A slump in prices in Wall street was
due to the sale of such securities, and
in fact the market was soft upon first
news of the disaster. Ordinarily there
is no call for heavy liquidation. Com
panies have learned to avoid the direct
effect of heavy losses by reinsuring,
and by not carrying too much insur-
ance in any one district.
While the officials of the companies
have been arranging for the money It
their home offices, adjusters have been
in the field footing up accurately the
losses. There is much detail in this
work, especially in the present case, be-
cause the earthquake losses do not
have to be paid by fire insurance COM
panies. and the situa tion is complicated, |
for It IS hard to draw the line, and |
moreover the exact liability of the |
companies in case of fire damage fol- |
lowing earthquake is by no means |
clear. But even with legal uncertainty |
in some instances the work is being |
rushed and probably by thirty days |
from the date of the conflagration a
large portion Of the losses will have
been settled for with money which the
officials have obtained both in Europe
and America to meet the emergency.
In 1871, when property valued at
about 5000 000 900 was destroyed in Chi
cago, and a year later when the insur
ance companies had to pay nearly |
$50, 900, 900 in Boston. many of the claims |
were settled within few days after |
the property was destroyed.
PubIic's Immediate Needs
The financing of a great fire by the |
insurance companies is not all of the |
financing done. The immediate needs |
of the people must be met. These are |
provided for in part by outside aid, |
but in a large measure by banks, the |
very banks that have gone through the |
fire and that have to wait for their |
vaults to cool before they can get at |
their money and resources.
After a, great fire there is a strong |
demand for ready cash. Credit has |
been in a measure destroyed by the |
fire, and merchants want money with
which to restock their warehouses. |
Hence as soon as vaults have cooled |
and banks are opened in temporary |
quarters there is rush to the tellers' |
windows for money. An officer of one |
of Chicago's great banks tells how he |
fought his way through crowd to get |
at the ruins of his bank building the |
Monday after the great fire, and of an |
experience that followed, showing the |
eagerness of depositiors to get their |
money. He tells what followed his |
leaving the vault, after an investiga-
ton, thus:
'I saw four men waiting for me in |
what had been the cashiers office. |
They were among our largest deposit |
crs and I knew we'll enough what they |
wanted. 1t was a trying ordeal, and |
one calculated to make each of my |
visitors show the real stuff that was in |
him. AS events proved, this did not |
take long.
"A little money Lender grabbed me |
first. With a strange little wink he |
forced me to one side and said in half |
whisper, DO you know how much I !
have in the bank?'
II said, Yes. about $30,000.'
"'Well, I will give you $4,000 If you |
will give me that balance in cash right |
away
"'I won't do that said I; your
money is all right; but you will have to
wait a week for it until we get in shape |
again
WHAT he fairly, gasped. do you
decline $4,000? That is a good deal of
money in a city that has gone to de-
struction.'
1T answered no, that would not. |
and told him in plain English what I
thought of him. 1 said: Il am not
knave enough to take your bribe and
give you an unfair advantage over the
other depositors, and / am not fool
enough to do il. because / know as soon
as you discovered the bank paid it's
claims within n week you would sue
me for the $4,000. Get out of here right
away
"Then a school treasurer came to me
with a straightforward story Of how