Los Angeles herald., 1908-03-11
LEGISLATIVE JOINT COMMITTEE
IN SESSION
FINANclERs ADVOCATE DRASTIC
PROVISIONS
Oklahoma Plan Is Under Discussion
as a Side Issue-commissioner
sherer Makes Strong
Charges

tional bank of Los Angeles in his talk
to the joint legislative committee IN
vestigating banking methods at Its ses-
sion at the chamber of commerce yes
terday afternoon.
Mr.. Elliott stood pat on the segre-
CATION of the different kinds of bank
ing. He believed that trust company
should be required by law to connne
itself to a strictly trust business ana
not engage in commercial or savings
bank business. Likewise he thought
a savings bank should be confined to
its sphere and the commercial bank to
it's natural functions. And in saying
this everyone knew he was identified
with two trust companies in Los An
geles.
He advised the committee that the
law should provide for real examina-
tions of the most vigilant kind and
character.
"And when you find that banker Is
showing a tendency toward an unsafe
business inform his directors and see
that they remove him from office. If
they do not, put the stockholders in
possession of the facts and let them
act. If these bankers practice unsafe
business fine them and IL they repeat
the offenses send them to the peni-
tentiary."
Mr.. Elliott thought it best to instantly
close banks that were becoming unsafe.
Senator Wolfe asked him If he thought
it would have been well in the last few
months to do this. Mr.. Elliott replied
that it might have been the worst time
to do 1t, but as q rule the time to in
tercept big failures was when they
were in their incipiency.
"In San Francisco I am told that the
30 he 90 20 nd
Trust company was known among
bankers long before the failure" He
said Herman Silver, a former bank
commissioner, had told him he had
tried to have the commissioners act on
this bank long before the failure. If
they had acted in time this calamity
might have been averted.
'I should like to see the record of
this" said Chairman Leavitt.
Confined to Spheres
Mr.. Elliott in the course of a long
talk urged care in the enactment of
legislation regulating banks, Each
class should be confined to its sphere
and the reserves and investment priv
ileges so surrounded with restrictions
that there would be little chance for
dishonesty or bad management to go
very far.
The session yesterday bristled with
strong assertions by those present. At
the morning session Joseph F. Sartori,
president of the Security Savings bank,
was the principal speaker for the saw
ings bank interests.
The Security, he said, was not ex-
clusively a. savings bank. Out of
twenty millions of deposits probably a
million and a half were commercial
deposits. The cash on hand was about
$2,600,00 of which $S00,000 was in the
bank here and the remainder on deposit
in banks in San Francisco and eastern
cities. One of the reasons for this was
the tax on cash balances. The COM
mittee directed incisive inquiry as to
what per cent of q savings bank cash
should be deposited in other banks.
Mr.. Sartori agreed that this item should
be restricted, saying that or per
cent was about the right restriction on
the gross deposits. Savings banks, he
said, could not very we'll get along
without a cash reserve of from 12 to Is
per cent. When 1t was suggested that
Massassachusetts savings banks got
along with a per cent reserve he said
it was absurd"
Fictitious Certificates
Bank Commissioner Sherer asked him
If it is true that savings banks in Los
Angeles had issued certificates of de-
posit when the money was not actually
deposited and that the certificates had
been cashed at other banks. Mr.. Sar-
tori said he had not heard Of such a
thing.
"Well, there are banaks that have
done it," said Mr.. Sherer.
"Will you furnish the committee with
list of such banks?" asked Mr.. Wolfe.
st would at an executive session., %
said Mr.. Sherer.
Mr.. Sherer also said that loans to Of
ficers had been made by savings banks.
This Mr.. Sartori said should be for
hidden.
Mr.. Sherer further said that there
were banks that had charged up large
items to furniture. Banks in Los An
geles had as high as $4,000 charged to
furniture that had only $4,000 or $12,-
OC0 actually invested. Banks with $125,-
900 capital had 100000 in furniture,
mostly in little savings banks scattered
throughout the country
The investments of the funds of a
savings bank in corporation stock, Mr..
Sartori thought, should not be per-
mitted, but i.e did not think loans on
such stocks should be prohibited.
Chairman Leavitt asked how he
would preve-t the loaning of funds by
an unsafe banker on the stock of an
unsafe corporation.
Mr.. Sartori thought no loan on stock
should exceed Gu per cent of it's actual
value.
Oklahoma Law
Senator Wolfe asked Mr.. Sartori
about the Oklahoma banking law. He
answered he had never considered 1t
because he did not believe any legis-
lative body in California would ever
consider it. He did not believe good
bankers should pay for the mistakes
of bad ones, as he understood the
Oklahoma laaw practically provided.
The committee corrected him in this,
explaining that the law mentioned pro-
vides for fund to which the state
contributes half and when this fund is
depleted the banks are assessed for the
difference, but when there is an excess
in the fund the excess Is distributed
back to the banks. Mr.. Sartori said
he was not familiar with the law. He
was not prepared to answer Chair
man Leavitt's question that, with the
Oklahoma law in force in California,
eastern money would pile up quickly.
TRUST Companies Heard
The afternoon session was devoted
to trust companies and j. B. Burke,
vice president of the Southern Trust
company, was the principal talker. He
said there is not sufficient business or
a purely trust character in Los Angeles
to maintain one company. The saw
1s.,l IL Ixra xvQ (