Year: 1876

Senator DONOVAN has introduced o
bill in reference to banking, which
would seem to be good one. 1t pro-
vides that every banking corporation
in the State shall publish twice in each
year,a statement showing the amount
of bona fide capital paid in for the
purposes of the bank, and also once a
year statement showing where all
the assets of the bank are invested,
and the liabilities of the bank. The
demand for such law is based upon
the fact that bank is a public institu-
tion soliciting the confidence of the
community, ,as the depository of mon
ey aud other valuables. The object of
demanding these semi-annual state
ments is intended to give the public
an opportunity to deal with them In
telligently. The propriety of such q
law at first glance seems to be obvious
to every intelligent man, and we are
ready to say mo well managed, honest,
solvent bank will raise any opposition
to such a law. But there is an excep-
tion to such law. Banks, like all other
business institutions, are often forced
into competion with each other, and
when opportunity offers, they are
disposed to make a run on each
other. Hence it becomes necessary in
this, as in all other games, not
to show their hand, especially when
trumps are scarce. If an honest, fair
statement Of the affairs of bank were
made twice each year there is hardly
a bank in existence that could at all
times show sufficient amount of
funds on hand to protect itself in case
of run on it, and competing banks
might avail themselves of the oppor-
unity and cause a run on their neigh
bor at a weak moment. Banks prop
erly managed do not keep all their
funds locked up in the vault. Yet
there are many depositors who de-
mand the highest interest on their
money that believe the bank sh ould
always keep it ready on demand. 1t
is this ignorance on the part of depos-
itOrs that makes it necessary on the
part of bankers to keep their own Sc
crets. In view of these facts, we be-
lieve law compelling the semi-annu-
al publication of all the affairs of a
bank would do more harm than good.
Neither do we believe that the ap-
pointment of Bank Commissioner to
supervise the banks of the whole
State would add anything to security
of creditors (Which is the ultimate OBJ


ject ofany law on this subject). For in


stance, suppose citizen of Los Ange-
les should receive the appointment of
Bank Commissioner for the State. In
this city and county he could act with
some degree of intelligence. He
knows the bankers has some knowl-
edge of their business is acquainted
with the parties who have borrowed
money; can properly estimate the
value of all the mortgages and other
securities; and after looking through
the business of the bank his report
would be of some value to creditors.
Butsuppose this Commissioner should
go to San Francisco to examine the
affairs Of the banks of that city, what
estimate would be placed upon his re-
port? 1t is folly to create such an Of
flee, for it will result in nothing but
drawing money from the taxpayers
to meet his salary. If the Legislature
will authorize the Supervisors of each
county-in which there are banks-to
select committee of business men


we'll acquainted In the county, to look
through the affairs Of the banks and
make report to the public, 1T will give
the creditors better guarantee than
any other report that could be made.
The committee being chosen from the
community, they would be response
BILE to their own people for the report
they would make, and their standing
and future reputation would be at
stake. But after making all the laws
we can to secure creditors, we still
have to depend, in great measure,
upon the honor of the bankers. We
have seen these things tried before


We lived in city once where there
were three banks, and for a wonder
the bankers were all on the best Of
terms. The law of that State permit.
ted the banks to issue a certain
amount of paper for circulation, .bu,
compelled them to keep always or
hand specie to the amount of one


third the paper issued. There were
Commissioners appointed in those
days to make semi-annual examina


tion of the banks, and If the required
amount of specie was not on hand, tn,
bank was reported and closed. Ou


three bankers, all told, only had q!
much spscie on hand as one bank wa!
required to keep. And when the