Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1910-03-01

tantially :nc same for nearly two
years, no more loans to these interests
were made except one of $500 in 1907,
which was necessary to prevent at
tachrents which would have precipita-
ted crisis resulting in excessive losses
and interfering with collections that
cnured largely to the benefit of the
bank and its deIjostors.
''On September u. 1906. getting tho
matter fairly in hand. ] sent an official
communication to the bank IN which I
summarized conditions as they then
appeared, as follows:
II. L. Holmes Treas. Waterville
Trust Company. Waterviie. Maine.
Dear Sir:
LAS you and your directors are aware
this department. both recently and
during the latter part of the term Of
my predecessor. has felt called upon to
give considerable attention to certain
extraordinary conditions existing in
connection With the loans of your
Rank. | now wish TO call this matter
formally to yrur attention and through
YOU to that of your board of directors
and to make certain suggestions which
the circumstances seem to demand.
You are capitalized at 100000. and
have a fair, but not large surplus.
The business of your bank has been
prosperous. ard With no unusual losses
promises to continue So Losses With
in reasonable limits are always To DC
expected in banking business. as in all
other enterprises. 1t is. however. the
duty of those who have the affairs OF
the bank Immediately in charge. to
guard against them as far as possible.
and especially to use every erdeaVor TO
see that no combination OF circum-
stances exists which make it possible
that calamity to any one person or
group nf associates, either directly or
through any particular enterprise or
gtoup of enterprises in which they are
interes ted. may involve the entire
group in financial embarrassment and
through that injure or destroy large
block of paper in the bank.
while l trust that nothing of this
sort may happen in the present IN
stance. or any other. l believe the con-
ditior of your loan makes this precise
thing possible, and while trust COM
panies in this State are not circum-
scribed by law to the extent that ma
tional banks and savings banks are.
1.-THE statutes make it the duty OF this
department to see that they are man.
| aged on sound banking principles.
II find that some $685., 84406, or nearly
one-half of your entire lean consists OF
paper bearing the names of seven or
your directors, Messrs. Lawrence, Da-
Wis. Thayer, Abbott Nye, Page and
Gerald; four of whom, 1 think. are
| members. and constitute a majority of
vo,r executive board. All their names
do not appear Oh all of this paper, but
all of the notes making up this aggre-
gate bear the names of some Of them
| at least. and against their total worth.
Won have this total amount or lndeDt-
edness. On a minor portion of It you
have the names of other parties, some
of whom are of very doubtful fnanciai
standing. and those representing the
large, part of this additional security
living outside the State and country.
Your president, if my figures are
correct. is on some s409, 4S6.38 of this,
representing practically the whole OF
his net worth as given to me; and
another member of your executive
hoard. Mr.. Davis, is on some $449,22259,
or very much more than his total net
worth according to his own figures
"Do not understand me to suggest
that the total net worth of these seven
gentlemen is not considerably III eN-
cess of the total amount Of this paper.
But at their own figures the excess
is not such as to make the SITUATION
an alluring ole, and their hgures lor
banking purposes must be cut very
heavily For instance, the statement
of one of the gentlemen whose name
appears most extensively on this pa
per, shows more than one-third or
his property to be in real estate APP
parently put in at full value. While
this class of property is usually rev
garded as very desirable for purposes
of security. you are all well aware
that it would not be accepted from an
outsider at more than two-thirds OF us
market value. even when all DOVER
rights were released.
But perhaps the most serious Tea
ture Of this whole thing is the com
munity of interests of these very large
borrowers. | refer to the tact tndt
the statements of their financial con-
dition shew that they are all. or nearly
all. interested very largely in common
enterprises which have no ready fixed
value ON the market. and heavy
failure of which, as is always possible
in the course of human events. Wouid
seriously affect. not one or two names
on which your bank relies. but sub
stantially all Of them at blow.
ct may be urged that much of this
paper is secured by collateral. That
is true But l apprehend that it rep
reserts to just that extent the wealth
of these borrowers as shown by their
statements, SO that you have the Sc
curtv but once, reckon it either way
you like. 1t is probably also true that
if yon were forced to look to this col
lateral for the only purpose for which
| it could have been received in serious
! ness, namely. to secure money to liaui-
date the debts, you would find it very
| difficult to secure market for much
! of it.
Il have said that trust companies
are not hedged about by the same re-
strictions as savings banks. 1t is
commonly suggested in reply to this.
that there is not the same necessity
for it; that depositors are protected
| by stockholders liability. That is
| h,Yf xx,;1c ,of xSyhon the