New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-01-21
Lax Bookkeeping Method
CenSured in Explaining
$10O,0O0,0W Loan.
BANKS TO RESCUE
WITH PAY AS YOU CO.
Credit Reserve Plan Advocated
-Hine Believes in $50,000,-
600 Margin for Debt.

20, ana FRANCIS L.. lilne, president OF
the First National Bank, were wit
nesses yesterday before the Brown leg
islative committee, which is inyestigat-
| ing city finances. The two bankers
| discussed the sl00,000,000 loan OBJ
tanned by the city from the various
banks in August,~I9iI, TO liquidate for
eign obligatiohs. They also offered
somo opinions on the methods Of city
! financing.
Referring to the sl00,O0O,OO0 loan
and the negotiations for it with the
city officials, Mr.. Dawson said:
I'VE felt that the city was not being
financed in a way to uphold its credit
In 1907 We had lent aid to the city, and
the administration had agreed to con-
ditions. but had not lived up to them.
One Of my firms suggestions had TO do
with the city bookkeeping, which was
afterward improved somewhat, but not
as far as we had expected"
what did you consider vicious in
the way the city was being financed ?"
asked Senator Brown, chairman.
Tho fnancicrs did not like the way
bonds were outfowing." said the wit
ness. There was great deal OF
money being spent. The city owed
100000 900, and had no way to meet
the debt unless the bankers came for
ward We felt that floating debt of
that sort was too large. The principle
was wrong. In time Of financial strin-
gency such debt was likely to cause
embarrassments."
Mr.. DAWSON said the bankers felt
the time had come when the city should
the pay-as-you-go policy was made,
which met with the hearty approval OF
Controller Prendergsst and other city
officials.
Senator Brown asked the banker If
In his judgment the borrowing By the
city in anticipation OF tax levies, in
volving large amount Of short time
paper and in view Of the vicissitudes
Of III market. was sane method OF
financing the city Mr.. Dawson replied
that the principle was not sound.
We suggested that the city should
establish line Of credit with the
banks" said the witness. at should
feel assured OF being taken care of in
time Of stress. think ! can advocate
that policy. as our firm could not
handle the business"
Names slOO,OOO,0O0 as Margin.
what margin should the city have
under the debt limit in order to be IN
a safe financial condition? asked SEN
ator Brown.
II don't know AS could name
figure" replied Mr.. Dawson. but | do
know that the margin should be much
greater than it now Is, or has been
the custom TO maintain"
"Do you think Sl0000O,0OO is suffi-
cient margin ," asked the chairman.
81 should think that was very ample
was the reply.
The margin under the city's debt
limit on January ! was about $4,000
900. II has increased gradually since
then TO about s40.000,000.
What effect would it have on the
city's credit in the banks if a great
emergency or catastrophe should
arise ," asked Senator Brown.
If il was an emergency" said Mr..
Dawson. "everybody's CT dit would be
affected but, like all emergencies, it
would pass and credit would be re
established. II would create a very
serious situation, however
The witness favored legislation 20
change the dates for tax collections
from May and November TO January
and July, so as 10 avoid the s4.000,O0O
interest on revenue bonds which the
city is compelled TO issue twice . year
in anticipation Of tax levies.
"tf we could be assured OF the char
acter Of the various city administrs-
tons" said the witness, 81 would not
feel so keen about legislation, but as
we can have no such assurance think
the legislation is necessary.
Mr. Hire explained in more detail
the negotiations IN regard 70 the $780,
100000 loan. lie declared that the
business credit Of the state and ma
tion would have been involved unless
the loan had been fioated.
did you consider the rate of inter
est reasonable, in view Of the condition
of the real estate market at that time
asked Senator Brown.
I'VE considered IL exceedingly res
sonable,' said Mr.. Hine
First Aid to City.
"You considered YOU were acting in
the interests OF the city and doing
something you otherwise would not
have cared TO do. Was that it?' asked
the chairman.
"Oh, well. it was below the current
rate Of interest" said Mr.. Hine. The
city should arrange its financial af-
fairs in such a way that il would not
have TO appeal TO the banks twice IN
seven years to save it from default"
Mr.. iIine said he thought the min
imum margin under the debt limit
should be $4,000 900 Incidentally, ne
said that J. p Morgan & Co. should
have the credit Of suggesting the plan
for the city financing.
you wouldn't treat the city the
same was as private customer, would
you ?" asked Senator Brown
1--WE treat the city much more lib
orally" replied the witness.
Does the city receive the same rate
of interest on deposits as private Gus
toner's" asked the chairman.
"The city receives the maximum rate
of interest at the First National Bank"
said its president. Il cannot speak for
the Others
MIR. Uine declared the banks had.