The San Francisco call., 1908-04-30
BANKERS LEND
$5,OOO,OO0 TO
OWN PROJECTS
Senator Frank Leayitt Makes
Serious Charge Against
UnreveaIed House
He Advocates Laws to Prevent
Commercial and Savings In- :
stitutions Doubling Up
Present Laws Are Inadequate to
Control Private Dealers in
Financial Securities

SPECIAL DIsP4rcH 10 THE GAIL


. SACRAMENTO, April zo.-Sena-
TOR Leavitt of Alameda, chairman of
the committee appointed at the last
session Of the legislature to inyesti-
gate the condition of the banks of the
state and recommend improvements
in the banking laws; created a sensa-
ton today at the session of the COM
nnittee in this city when he declared
that he knew Of back whose direc-
tors had borrowed more than half a
million of its funds and had invested
more than S5,ooo,0eo of its assets in
corporations in which they are inter
ested. He refused TO name the fnan-
eiaI institution TO which he referred.
Almost the first announcement when
the committee was called. to order was
the charges Of Leavltt as follows: Il
know Of bank whose directors have
borrowed ss7O.4T4.0s. I know that the
directors have loaned TO corporations in
which they are interested s2ss.4s4.73;
they have loaned on the securities and
bonds Of their corporation s4ssiooo; they
have purchased bonds in the sum of
sI.esS.2ss. In all there is total of
t5.TIs,2O7.SI that is invested by the di-
rectors IN various enterprises in which
the directors are concerned. That total
amounts TO five times the capital stock
of the bank and represents hve-sixths
OF its entire deposits.
LAWS ARE INADEQUATE :..
Leavitt said further that the existing
laws Of the state. governing banks. are
so inadequate that the Institution he
referred TO could not be proceeded
against, as it was violating none of the
state enactments. He said the state
bank commission was helpless to rem
edy the evil.
A greater portion. Of the session was
devoted TO a discussion Of the laws gov
erning commercial banks. Savings
banks and national banks came in for
their share Of attention, however. It is
the consensus OF opinion among the
members OF the COMMITTEES that the
various banking institutions. savings,
commercial, national and trust com
psnies must be segregated and laws
made for each The present laws gov
erning savings banks are not found
fault with TO any great extent. The
law prescribes what particular kind of
securities q savings bank must haye
but il does not place any limitations on
commercial banks or trust companies.
AS a result, what are known as dual
banks are made possible A CONNER
ciaI bank and a savings bank combine
and form a dual bank. The savings
bank then invests through the CONNER
cial bank and. there being no law linn
: ftfng the character Of investments. the
last named institution shall make. the
commercial bank can make inveSments
OF any kind whatever. When this is
done. the depositor. who supposedly. has
his money In a savings bank. In re-
atty has II in commercial bank and
Is not protected by the gilt edged se-
curIties of the former.
TO STOP DUAL BANKING
The commission favors the passage Of
laws that VIII prevent dual cornbina-
tsons. Means Of preventing directors
from borrowing huge amounts of
money from the institutions they are
interested in were talked over at
length. the following section. which IT
has been suggested be placed in the
: