The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1909-08-15

- ideas and generous spirit, but
go is afflicted with an imperfect
YYX ! sense of consequences and a
9 X% constitutional inability to think
straight His ideas for example,
concerning the rehabilitation of
the California safe deposit and trust company are
admirable in purpose and in their essence sound,
but his plan of execution is merely absurd, not
TO call it blind rush on disaster Undoubtedly
the insOlvent bank ought to be put on its feet
again, and there is ample precedent in San Fran
cisco for a successful operation of the same sort
brilliantly executed by courageous and far seeing
men.
A VALUABLE PROPERTY
In spite of its insolvent condition the California
safe deposit and trust company is a splendid
property, that only needs wise management and
a reasonable backing of capital to make it pros
porous. Any bank with 10000 depositors is
great property so long as it is a going concern.
But you can't make it so on a shoestrng, plus
Colonel Kowalsky's moral support
HOW SHARON DID IT
William Sharon appreciated that fact and showed
his faith IN a. very striking way when he took
hold of the Bank of California after Ralston had
left 1t a wreck. He assessed the stock holders
heavily and they paid dollar for dollar to the
depositors besides taking care of a large over
issue of stock that Ralston had put out The opera
ton cost Sharon and his associates nearer 100000
than the 100000 which Bartnett thinks would
be sufficient to restore the safe deposit company
TO sovency, but we who see the results know
that no money was ever more wisely invested than
that which Sharon provided to restore the Bank
OF California.
THE DEPOSITORS AN ASSET
The same thing can be done with the safe deposit
company, burt on the plan recommended by
Bartnett. No property is better or more profitable
than sound bank and none is more dangerous
than bank under suspicion There are, let us
say, 10000 depositors with the safe deposit COM
pany That is the ground which to build, and
It would be great pity to let it disappear by wind
ing up the concern. If the bank is set on its feet
these depositors will see their interest in continu-
ing their support, but they must have reason to
believe that the business is sound. With that
understanding they will be virtually compulsory
depositors. 1t is magnificent foundation on which
40 build great property.
A MILESTONE OF DEBT
How does Bartnett propose to use this oppor-
tunity? He undertakes on behalf of certain CAPT
talists, not yet named to put up 100000. That
money, with 100000 now in the hands of the
receiver, would be used to pay the depostors Is
per cent of their claims. The next step would.
be to give the depositors certificates of debt for
so per cent of their claims, payable in deferred
sums The final 25 per cent of the debt would be dis
charged by an issue of stock in trust company
which proposes to take over those somewhat uncer-
tain enterprises in the manufacture of glass brick
and lumber, which the chief causes of the banks
downfall. 1t is an ingenious plan and it is not
the first time that book keeper has sought to
disguise a liability as an asset, but it would not
work in this case A bank starting with inadequate
working capital and debt of nearly $5,OOOOOO
hanging round It's neck like milestone would be
headed straight for the rocks.
SHORT ON CAPITAL
The working capital under Bartnetts plan
would be supplied with 100000, for which it
is proposed to assess the stock holders, but part
OF this money would be required to pay the Is
per cent first instament to depositors. The bal
ance, considerable though it might be, would be
wholly inadequate to finance bank starting with
an enormous load of debt. SO much the receiver
has pointed out with pitiless logic. Nevertheless
It is not a situation that should appal the stock
holders. They undoubtedly have a great op-
portunty if they will harden their hearts as
Sharon did in like case and provide the one thing
needful, The wisdom of this policy should be
obvious to any who will reflect the value
OF the good will of going bank. Compare, for
instance, the market value of stock in the Bank
of California or any other first class institution