Full text of Commercial and Financial Chronicle : September 25, 1909 : Bankers' Convention Section, Vol. 89, No. 2309

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ANKERS' CONVENTION
SECTION
OF THE

COMMERCIAL & FINANCIAL CHRONICLE.
Copyrighted in the year 1909 by William B. Dana Company,

Vol. 89.

NEW YORK, SEPTEMBER 25, 1909.

THE CHRONICLE,
THE COMMERCIAL AND FINANciAL CHRONICLE

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INDEX TO ADVERTISEMENTS.

A complete index to the advertisements appearing
in the present issue of the Bankers' Convention
Section will be found on pages 121 and 122.
(As this year's Convention was held in Chicago, we present herewith
of banking in that city from the earliest days.1

a review

HISTORICAL REVIEW OF BANKING IN
CHICAGO.
By FREDERICK W. GOOKIN.
Less than eighty years ago Chicago, now the second city in the United States and the fourth in rank
among the cities of the world, was a frontier military post with scarce a handful of inhabitants. With
the story of this phenomenal growth everyone is
familiar. Yet it is difficult to realize how rapid the
development has been, especially in recent years.
Perhaps in no other way is it shown more clearly
than in the rise of the city's financial institutions
to the commanding position they now occupy.
• The history of banking in Chicago is, a record of
which, on the whole, the city has reason to feel
proud. Through all the vicissitudes caused by
financial experiments, foolish speculation 'aid ex-




in the office of the Librarian of Congress, Washington, D. C.

No. 2,309

travagant overtrading for which the fertile Middle
West has afforded an inviting field, the dominant
influence of exceptionally strong and capable men
among the Chicago bankers has made for sound
practices and has been a steadying force not easily
overestimated. For this service the names of
George Smith, Chauncey B. Blair, Solomon A.
Smith and George Sturges—to specify a few only
from among those who have passed away—deserve
a permanent place upon the city's roll of honor.
The first bank in Chicago was the Branch of the
Illinois State Bank, which opened its doors about
the middle of December, 1835, and immediately
started off with a flourishing business. This enterprise was launched in a time of wild speculative
excitement that extended over the entire country.
Chicago was in the midst of her first real estate
boom. A deluge of newcomers had more than
doubled her population within a year, and the
stream of those attracted by tales of golden opportunity showed no signs of abating. In a literal
sense the term "golden" is a misnomer, for gold was
extremely scarce in Illinois in that day. The circulating medium consisted of little else than notes
issued by banks in all parts of the Union, but chiefly
by those located in the adjacent States. What assets might be back of these issues no one knew with
any certainty.
The issuing of notes to circulate as money was
then looked upon as the principal function of a
bank. The deposit function was regarded as of
less importance and to a certain extent as only
incidental. Large paid-in capital, though desirable,
was not considered indispensable; mobility of credit
was expected to serve the same purpose. It would
be a mistake to stigmatize this conception as fundamentally unsound. In its essence it involves no departure from the principles upon which the most
efficient modern banking systems are based. The
difficulty of its practical application was the absence
of any Machinery for making credits mobile, and
for effectively restricting them within safe limits.
To our disgrace, it may be said in passing, no such
machinery has yet been introduced into the United
States; in this we lag far behind the rest of the
Civilized world. In the days of "wild cat"'banking
•this' machinery had not been perfected. The crude
notion -that bank notes were money and that their

110

BANKERS' CONVENTION.

issue added to the wealth of the community was charter to the Chicago Marine and Fire Insurance
widely entertained. And while the necessity for Company, which, though expressly forbidden to
keeping banking assets liquid was vaguely recog- do a banking business or to issue any bills in the
nized, it was far from easy to meet the requirement. semblance of bank notes, was by a strange inconThe only way was through the maintenance of a sistency authorized "to receive moneys on deposit
sufficient coin reserve, and limiting loans to short and to loan the same." Taking advantage of this
term advances to borrowers known to keep their authorization the company began in May, 1837, to
obligations well within their ability to pay promptly do a general bailking business, and to issue for
at maturity.
use as a circulating medium, demand certificates of
Through the year 1836 the speculative fever kept deposit that were in the semblance of bank notes
up, and though there were premonitions of the save as to the wording.
Though these certificates never attained any wide
crash that occurred in the spring of 1837, the people
of Illinois, vainly imagining themselves too far circulation, they showed the way to George Smith.
away to be affected by happenings in the Eastern In 1839 he obtained from the Territorial LegislaStates, projected a vast scheme of internal improve- ture of Wisconsin a charter for the Wisconsin Maments, including the building of the Illinois and rine and Fire Insurance Company, and being joined
Michigan Canal, and a network of railroad.; by Alexander Mitchell, a young banker from Aberthroughout the State. Then to divorce the State deen, they organized the company and opened a
completely from financial dependence upon the East banking office in Milwaukee, with Mitchell in
and to provide an abundant supply of local "money," charge. To give currency to the certificates of
early in 1837 the capital of the Shawneetown Bank deposit issued by this company they were redeemed
was increased by $1,400,000, and that of the Illinois in Chicago at the office of Strachan & Scott, and
State Bank by $2,100,000. All of this additional after that firm removed to New York in 1840, at the
capital was subscribed by the State and paid for office of their successors, George Smith & Co.
with its bonds. Against these' the banks issued Smith was a man of uncommon ability, keen, farnotes and expanded their loans, though there was sighted and of inflexible integrity. During the
at the time no market for the bonds. The inevitable twenty years he remained in Chicago he was easily
consequences of such financial folly were not long the foremost banker in the city and his influence
delayed. In July, 1837, the Legislature convened was always exerted in favor of sound methods.
in special session and passed an act legalizing sus- Illegal they were called by his rivals, because he
pension of specie payments. This enabled the State circulated paper not authorized by Illinois law.
Bank to run along for a few years, and, as the fiscal And many attempts were made to break him by
agent of the State, to make some show of business. gathering up large amounts of the certificates issued
In 1840 the Chicago Branch was removed to Lock- by the Milwaukee institution, and the notes of banks
port, though for a time an agency was maintained he afterward established in Georgia, and presenting
in the city. The bank was finally closed in 1843, them for redemption. He was, however, never
when the State forced the return of its bonds in caught unprepared, and the result of these raids
exchange for the stock held by it—an act of great was only to strengthen his credit. Hostility to him
was confined to his competitors; the citizens in geninjustice to the other stockholders.
the currency in use in Chicago and eral were only too glad to have a circulating medium
Bad as was
elsewhere in Illinois prior to 1837, it was much on which they could depend. In later years as
worse for several years thereafter. As might have his business expanded he established redemption
been expected the first effect of the legalized sus- agencies in St. Louis, Cincinnati and Detroit and
pension of specie payments was to drive all specie also, for a short time, in Galena.
Between 1837 and 1840 there was little increase
out of circulation. Resort was necessarily had to
another. Canal scrip, in in the population of Chicago. Then, although the
makeshifts of one sort or
appearance not unlike bank notes of small denomi- early '40s were years of "hard times," the growth
nation and payable at the Chicago Branch of the became steady and rapid. By 1844 it is estimated
State Bank, was largely used; while tradesmen's that the number of inhabitants was at least 12,000.
tickets of credit were made to do duty for small The directory for that year shows that besides
change. Besides these, State Auditor's scrip, George Smith & Co., the firms of Murray & Brand
county scrip and St. Louis scrip were circulated to and Newberry & Burch were engaged in banking,
some extent, and a little later the city was flooded and Richard K.'Swift was established as a "broker."
with notes of Michigan banks organized under the Five years later the city had increased to more than
25,000 people. The directory for 1849-50 shows
vicious land loan banking law of that State.
While matters were in this chaotic condition, that George Smith & Co. had removed from La
George Smith, a young Scotchman, who had first Salle street to Clark street, where, between South
visited Chicago in 1834 and engaged in real estate Water and Randolph streets, the financial center of
operations with such success that he had returned to the city was located during the next decade. At
his native land to form a company for future ven- this time I. H. Burch, Alexander Brand & Co.,
tures in this field, came back and brought with Curtis & Tinkham, D. C. Eddy and R. K. Swift
him Messrs. Strachan and Scott, who opened a pri- were the only other bankers. The next year the
vate banking office some time during 1837. fn the firm of Tucker, Bronson & Co. was added to the
preceding winter the Legislature had granted a number.



BANKERS' CONVENTION.
In 1851 the need for a new banking law in Illinois
had become so great that another experiment in
that line was adopted by the Legislature. This
law, which was amended in February, 1853, was in
its main provisions copied after that of New York.
It was defective in many respects; notably in permitting the establishment of banks with little paidup capital. A feature that, a few years later, caused
the downfall of many of the banks organized under
the law, was the requirement that all circulating
notes be secured by bonds of the United States, or
any of the States, upon which 6 per cent, interest was
regularly paid. This was inserted in the expectation that a bond-secured note issue would afford
relief from currency conditions, which, in spite of
such issues as those of George Smith and a few
others, had grown to be almost intolerable. Unfortunately for this expectation there was no way
of keeping out of the field notes issued by banks
in other States. And the Illinois banks unwisely
adopted the practice of redeeming their notes in
notes of other banks, and not in specie except at
a charge of 1 per cent. It is no wonder that they
failed to drive out Smith's currency, which was redeemed at par at is place of issue, and at 1 per cent.
discount in Chicago, St. Louis, Cincinnati and Detroit.
The first bank organized in Chicago under the
new law was the Marine Bank. Jonathan Y. Scammon was the president and Edward I. Tinkham
was the cashier. Its certificate was filed January
13, 1852. A month later the Merchants' and Mechanics' Bank of Chicago was formed, with Levi D.
Boone as president and 'Stephen Bronson, Jr., as
cashier. In May the Southwestern Plank Road
Company, which had been one of the honest issuers
of illegal currency, was incorporated as the Commercial Bank. The same month witnessed the
opening of the Union Bank of Forrest Brothers &
Co. In June Bradley and Curtiss organized their
business as the City Bank. In July George Smith
obtained a charter for the Bank of America, and
I. H. Burch & Co. announced that they would incorporate as the Chicago Bank. Early in August
Dr. A. W. Davisson and T. McCalla opened a banking office at 50 Clark street, and in October their
business was incorporated as the Bank of Commerce. In this month also Seth Paine and Ira B.
Eddy opened the so-called Bank of Chicago, the
"Christian Bank" of Seth Paine & Co., an institution so unique that only lack of available space prevents the inclusion in this article of an account of
its extremely interesting though short-lived career.
Shortly before Christmas the Farmers' Bank was
established by Chase Brothers & Co.
The thriving young city was now liberally supplied with banking facilities, and competition became exceedingly keen. In the words of the Chicago Democrat, "banks were becoming as thick as
groceries in our town." To keep their note issues
afloat was the great desideratum. Alas for the
expectations of the proprietors of the new institutions, the currency issued 1?y George Smith—who
had grown very rich and powerful—continued to
dominate the field. He had prepared for the



111

changed conditions by purchasing a controlling interest in the Bank of America at Washington, D. C.,
and had established two banks of issue in Georgia—
the Atlanta Bank of Atlanta and the Internal Bank
of Griffin. The notes of all three were regularly
redeemed at his banking house in Chicago. At this
juncture the newly formed Merchants' and Mechanics' Bank began to emit certificates of deposit
in the form of bank notes. A loud outcry was followed by an active crusade of the "regulars," under
the leadership of Mr. Scammon, against the "irregulars." In December, 1852, the Grand Jury
found true bills against a number of the latter, including George Smith and his cashier, E. W. Willard. These indictments amounted to little and
apparently were not prosecuted further, as the irregular practices ceased when Mr. Scammon and
his associates succeeded in having a stringent
statute enacted prohibiting them under severe penalties. It was, however, a barren victory except as
it forced the irregulars to legalize their note issues,
which continued to circulate as before.
Steady growth marked the period between 1852
and 1857. By the latter year the population of
Chicago had increased to 93,000 and the city had
come to be recognized as the metropolis of the
\Vest. Its banking history during these years was
uneventful. A large number of small private banking houses sprang up, but only a few new banks
were established and they were comparatively unimportant. Eighteen hundred and fifty-four was a
year of short crops and of "hard times" throughout the West. In March, 1855, the Farmers' Bank,
the Phoenix Bank, the City Bank and the Union
Bank were "closed by protest," and forced into
liquidation. These were Chicago's first bank failures. None of these banks were large; all four paid
their notes in full. Many of the incorporated banks
at this period did not receive deposits, but existed
solely for the profit in issuing circulating notes.
The returns made to the Auditor of Public Accounts show that on the first Monday in October,
1856, of the 42 State banks then in business in Illinois, only 17 held deposits, the total amounting to
$1,212,882.87, of which $210,483.33 was due to
banks. The following table shows the condition of
the three State banks in Chicago on that date:
RESOURCES.

Banks.

Stocks dep. Notes of
to secure
other
circular n. banks.

Deposited
with other ; Specie.
banks.

Current
expenses

Totals

Bank of Am _,
350,000 00
57,000 00'
nil
nil
nil
,$57,000 00
Chicago 13anle 50,611 30 35,200 00 11,795 95 14,800 00 7,182,461. 19,589 71
1
Marine Bank_ 143,083 99 10,000 00176,825 24, 69,000 00
nil
98,909 23
LIABILITIES.

Banks.

1
,Cafi paid
Notes
in and in- Interest
Individual Bank
in
vested ac- dividends
deposits. deposits.
to law. on stocks. circulatn.
cord

Totals.

Bank of Am_ 350,000 00
nil
57,000 00
nil
nil
657,000 00
Chicago Bank 50,611 30 18,978 41 50,000 00
n11
nil
119,589 71
nil
Marine Bank_ 150,000 00
89,705 00 28,900 30 130,303 931398,909 23

Neither of the three, it will be observed, show
any loans or discounts.
The panic of 1857 found most of the Chicago
banks in excellent shape to weather the storm.
Nowhere in the country were the effects of the
crisis felt, on the whole, less than in Chicago. The
reason is not far to seek. In large part the loans

112

BANKERS' CONVENTION.

of the banks were made against staple food products, always salable for cash, and liquidation, therefore, was accomplished without undue strain. And
having comparatively small amounts of notes in
circulation, the Chicago banks were not greatly distressed either by unusual pressure for redemption,
or by the necessity for furnishing additional securities to make good the shrinkage in value of those
deposited with the State Auditor.
Nevertheless the disturbance for a time was severe. Its effect upon the miscellaneous currency
in circulation was shown in the premium on Eastern
exchange, which rose to 15 per cent, when the
panic was at its height. The storm burst
in New York when the Ohio Life & Trust
Company of Cincinnati suspended on August
4. It did not reach Chicago until some weeks
later. On 'September 28, E. I. Tinkham &
Co.'s bank failed. The next clay a run upon
R. K. Swift, Brother, & Johnston, then the largest
banking house in the city, was precipitated.' Their
failure was announced the next morning. Deposits
amounting to $1,200,000 had been drawn down to
-$798,742.73, as appears from a statement issued by
them on October 3. Before the excitement died
away, the Bank of Commerce and the Merchants!
and Mechanics' Bank succumbed. Both paid their
circulating notes in full, as did E. I. Tinkham &
Co.'s Bank, also. What losses were suffered by depositors does not appear. Besides these failures
many of the small private bankers were either
forced to close or found it unprofitable to continue.
Of the forty or more who were in business in the
city in 1857, nineteen are not in the list printed in
the directory for the ensuing year.
Between this time and the outbreak of the Civil
War the Chicago banks and bankers enjoyed another period of comparative ease. It was a period
of retrenchment ,and recovery and political unrest,
and the general conditions were such as to discourage the formation of additional institutions.
Though in 1859 and 1860 a considerable number of
small private banking houses were opened, few of
them continued for very long.
In 1856, George Smith having acquired a more
than ample fortune, decided to return to his native
land as soon as he could close up his affairs. The
need for a strong bank to take the place occupied
by George Smith & Co. caused a group of prominent citizens to join together and establish the Merchants' Savings, Loan and Trust Company, which
opened for business on June 10, 1857. This bank
--is now the oldest in the city. During the fifty-two
years since it was founded it has always borne an
unblemished reputation and is to-day one of the
foremost of Chicago's financial institutions. In
1882 its name was changed to "The Merchants'
• Loan and Trust Company."
When in the autumn of 1860 the outbreak of the
rebellion became imminent, the Illinois banks had
more than $12,300,000 of circulation outstanding,
and of the bonds deposited to secure these notes
68 per cent. were those of the Southern States.




The rapid depression of these securities caused
widespread distrust. Suspensions came in quick
succession. Merchants carefully scanned the pages
of Thompson's Bank Note Reporter before they
dared accept any currency tendered them. By November,. 1862, only 62 of the State banks were in
existence, and two years later only 23 were left.
Fortunately for Chicago, her banks at this critical
time were not to any large extent banks of issue.
A few went down in the general crash, among them
the Chicago Bank, of which I. H. Burch was the
President. Several of the strongest banking houses
in the city at this juncture were private institutions.
In the latter part of 1860 Solomon Sturges, who
had removed to Chicago from Zanesville, Ohio,
four years before, and who had earned a high reputation for prudence and financial sagacity, perceived that it was an opportune time for the establishment of a banking house that would start free
from the disabilities that hampered many of the
existing banks, and be conducted upon conservative
lines. Associating with him his two oldest sons as
partners he formed the firm of Solomon Sturges &
Sons. The building at Nos. 15 and 17 Wells
street, which had been occupied by George Smith
& Co. in their later years in Chicago, was rented,
and in a .short time the largest banking business in
the city was built up. It was not, however, long
continued. Impairment of his health caused Mr.
Sturges to retire from the firm in 1862; and after
the establishment in Chicago of many banks organized under the National Bank Act the business
gradually fell off, and in 1866 it was closed up and
the. partners retired. The same reasons that led to
the formation of this firm, also caused the Bank of
Montreal to open its Chicago Branch in 1860, in
charge of E. W. Willard, who for some years had
been the cashier for George Smith & Co.
After, the general suspension of specie payments
on December 28, 1861, and until the National Banking system came into existence, the condition of the
currency in circulation in Illinois can only be described as chaotic. The city became the dumping
ground for State bank notes, many of which were
of doubtful value, yet which continued in use and
which the banks were willing to handle in default
of anything else, so long as they could pay them
out. So abundant were these issues that the legal
tender notes were largely driven out by them. Then
in 1863 came the National Bank Act. Chicago was
quick to take advantage of it. Five National banks
were organized that year. Of these the First National is now the third largest bank in the United
States; two others, the Fifth (afterward the National Bank of America), and the Northwestern,
were among the staunchest institutions in the city
until they were merged with the Corn Exchange
National Bank in 1900. In May, 1864, the bankers
in Chicago determined not to wait for the 10 per
cent, tax on State bank notes to accomplish its purpose, but to stop their local use at once. To this
end they pledged themselves to receive and pay out
"only legal tender notes, National bank notes, and

BANKERS' CONVENTION.
the notes of such other banks as redeem at par in.
Chicago." This proved effective, and, in the words
of the Chicago Tribune's Annual Review, "rag
money went down and made no sign." The subscribers to this agreement were twenty-five in number: five National banks, three State banks, sixteen
private bankers, and the Branch of the Bank of
Montreal.
Banking in Chicago now entered upon what may
be called its second stage. The history of the first
stage is largely a record of financial experiments
upon which Illinois, like many of the other States,
had lightly entered, only •to discover that natural
law is superior to statutory enactments. It is, however, worthy of note that during the twenty-nine
years of this early period, bank failures in Chicago
were few in number, and the losses sustained by
depositors were not severe. Beyond a few isolated
reports, statements of notes in circulation and lists
of bonds on deposit as security therefor, little statistical information concerning the first stage is
available. The amount of a bank's indebtedness to
depositors was not at that time regarded as an index of its financial strength. Though the banking
law of 1851-1853 called for the publication of quarterly statements of assets and liabilities, only those
for October 6, 1856, appear in the biennial reports
of the Auditor of Public Accounts. And the special charters to banking institutions which the Illinois legislature began to issue freely after the breakdown of the State banking system in 1860, and
continued to grant in steadily increasing numbers
until the adoption of the Constitution of 1870 put
an end to all "Private Acts," made no provision
for any public showing whatever.
At the end of September, 1864, a local flurry
occurred, during which the failure of the small private banking houses of C. C. Parks & Co., and J. G.
Conrad, was followed by that of the Western
Marine & Fire Insurance Company, thus reducing
the State banks in Chicago to two engaged in commercial banking—the Merchants' Savings Loan &
Trust Co., and the Marine Company (the Marine
Bank reorganized)—and two exclusively savings
banks, the State Savings Institution and the Merchants' Farmers' and Mechanics' Bank. The
Union Trust Company was in existence as the
Union Insurance & Trust Company, and the Hibernian Banking Association was established as the
Merchants' Association of Chicago, but neither was
then doing a regular banking business. During the
next seven years the population of the city increased
from 169,000 to more than 300,000, and the Chicago
banks had a period of unbroken prosperity and
smooth sailing. Their growth during these years
is fairly shown by the following table:
Date.
Oct. 2 '65
" 1 '66
" 7 '67
" 5 '68
" 9 '69
".8 '70
" 2 '71

No. of
Surplus Loans ci: Individual Bank
Total
banks. Capital. ,r: profits. Discounts. Deposits. Deposits. Deposits.
13
13
13
14
14
15
19

$
$
$
$
$
$
5,110,000 480,022 6,185,581 8,072.8632,418.097 10,440,960
5,150,000 • 713,243 8,374,007 8,520,228 2,924,981 11,445,209
5,200,000 1,215,394 9,238,348 9,448,628 3,999,995 13,448,623
5,550,000 1,859,147 13,065,332 13,713,867 5,246,583 18,960,450
5,800,000 2,139,24E 14,020,374 10,813,929 4,739,840 15,553,769
6,300,000 2,435,472 16,541,903 14,114,384 5,290,624 19,405,008
7,900,0003,053,368 21,444 53317,967,8489,712.09827,679,946




113

To make a really comprehensive presentation,
similar statistics of nearly forty State and private
banking houses should be included in this table.
Unfortunately they do not exist. The requirement
of the National Bank Act that statements of conditions should be published at least five times a
year was hailed with delight by the press of Chisago. Editorials were written urging that private
bankers and State institutions should also be compelled to publish statements as frequently, and lamenting the absence of any statute making such
publication necessary. Not until the present State
banking law was adopted in 1887 was any heed
given to these expressions, many times repeated in
the twenty-four years' interval, and then no exactions were laid upon private bankers who still pursue their calling with as much secrecy as they see
fit, although the acceptance of deposit accounts
ought in any civilized community to involve periodical publication of the banker's balance sheet.
In the '60s many of the men who have made
Chicago's banking record notable came to the fore.
The city was fortunate in the trying days that were
close at hand, to have her financial institutions in
the hands of such capable and far-sighted bankers
as Chauncey B. Blair, William F. Coolbaugh, Solomon A. Smith, Samuel M. Nickerson, George
Sturges, Henry F. Eames, John DeKoven, Lyman
J. Gage, Isaac G. Lombard, and Orson Smith. Of
these Mr. Coolbaugh was at the time perhaps the
most widely known, and the Union National Bank,
of which he was the President, was for several
years after its establishment considerably the largest
of the Chicago banks. In 1865 the Clearing House
was founded. George Sturges was the prime
mover in organizing it, and to hasten the project
for which the need had become very great, he permitted the exchanges to be made in the office of the
Northwestern National Bank until a suitable room
could be secured and fitted up.
The great fire of October 9, 1871, put the mettle
of the Chicago bankers to a severe test. Every
banking office in the city was destroyed, with the
sole exception of that of the Prairie State Loan &
Trust Company, located at 95 West Randolph
street, outside of the fire zone. Lazarus Silverman
sustained a loss of about $50,000 from the destruction of his money vault, and the Merchants' Savings, Loan & Trust Co. lost its book vault and most
of its books. The other banks escaped without loss
of cash or books. Before the ruins had cooled
sufficiently to get at the vaults the bankers held a
conference. Many were in.doubt about what would
happen should they attempt to resume business. It
was suggested by some that the wise course would
be to pay to depositors only 15 per cent, or at
most 25 per cent. in cash until a clearer view
of the future could be obtained. While this
was under discussion, with a possibility that
the counsel of the timid ones would prevail,
Chauncey B. Blair quietly remarked without rising
from his chair: "Gentlemen, I always like
to agree with my brother bankers, and in

114

BANKERS' CONVENTION.

ordinary matters would yield to the majority,
but when it comes to paying my debts or the debts
of my bank I have only this to say: I have always
paid in full and always shall if I can. Perhaps I shall
not be able to pay even 25 per cent. The vault is
still closed. It may contain only ashes, but I shall
do the best I can to meet all the demands of my
depositors." This courageous expression was
promptly seconded by George Sturges of the Northwestern National Bank. Mr. Coolbaugh and some
others urged that the banks ought to stand together, but as Messrs. Blair and Sturges held firmly
to the position they had taken, the meeting was
adjourned without action. The next day the Comptroller of the Currency arrived in the city and told
the bankers who consulted him that partial resumption was out of the question. When it was found
the vaults were intact the decision to pay in full
was unanimous. This decision was a great relief
to depositors and the country correspondents of the
banks who had been anxiously awaiting it. And
instead of the runs that had been feared, money
came pouring in, and deposits were soon larger
than ever,
The rebuilding of the stricken city was made
easier as the conflagration occurred in a period of
widespread speculative activity and overtrading.
Marvellous progress in physical rehabilitation was
made in the two years following the fire, but before
there was time for complete recovery from its
effects, the panic of 1873 threw everything into
confusion. As the news of one failure after another
came in quick succession, and sharp withdrawals of
deposits were accompanied by urgent requests from
country banks for loans to tide them over the crisis,
word was received that the banks in New York,
Boston and Philadelphia had suspended cash payment and had resorted to the use of Clearing House
loan certificates. A meeting to consider what
course should be pursued by the Chicago banks
at
this juncture was hastily convened. The session
was protracted far into the night. Many
advocated
following the lead of the banks in the
Eastern cities,
believing it the only way to avert a general crash,
Against this view, George Sturges,
President of the
Northwestern National Bank; Chauncey B. Blair,
President of the Merchants' National Bank, and
Solomon A. Smith, President of the Merchants'
Savings, Loan & Trust Co., vigorously
protested.
Firmly believing in the wisdom of a bold policy
and
resting upon the technically strong position
of the
city as the country's chief depot of food
supplies,
they even went so far as to assert that whatever
the
others might decide upon, the banks
under their
charge would contiue to meet all obligations
upon
.demand. A vote was taken. Lyman
J. Gage for
the First National Bank voted "No,"
and it was
soon evident that those opposed to
the issue of
Clearing House certificates were in the majority.
Though some anxious days followed they
were
tempered by an admirable spirit of mutual helpfulness and no failures of any consequence occurred,
The real strain came during the ensuing period of




business depression that lasted until after the resumption of specie payments in 1879. Within that
period there were twenty-one bank failures in Chicago, most of which were the result of the crisis
or of the shrinkage in values which followed it.
This enumeration includes several institutions that
went into voluntary liquidation. Few of those
placed in the hands of receivers owed large amounts
to depositors at the time of collapse. Exceptions
were the Third National Bank, which paid its depositors in full with interest; and the Cook County
National Bank, the State Savings Institution, and
the Merchants,' Farmers' and Mechanics' Bank
(commonly known as the Bee-Hive Bank), which
closed in consequence of dishonest management.
The Cook County National failure was one of the
worst in the history of the city. It was founded
by the notorious David D. Spencer, who in 1873
sold a controlling interest to Benjamin F. Allen, a
"Napoleon of Finance," who came to Chicago from
Des Moines, Iowa, where he had had a successful
career. In the wider field his vaulting ambition
soon overleaped itself. The bank's funds went into
projects from which they could not be released, and
in January, 1875, its doors were closed. Ultimately
the creditors received something less than 15
per cent. While Allen was playing with the funds
of the Cook County National, Spencer was borrowing the funds of the State Savings Institution,
which he used to acquire nearly all of its stock,
and the President of the "Bee-Hive Bank" was
crippling it by similar borrowing.
The failure of these savings banks in 1877 had
far-reaching results. The State Savings Institution, originally incorporated as the Illinois Savings
Institution, had achieved a reputation for impregnablc financial strength and its deposits amounted
to between four and five million dollars. Confidence in savings banks received a shock from which
it was many years in recovering. While the excitement was at its height a run upon the Fidelity
Trust & Safety Deposit Company caused the downfall of that bank also. Later in the year came the
failures of the Third National and the Central National banks, but as these were not altogether unexpected, they only served, so to speak, to clear
the atmosphere.
Nineteen years were to elapse before there was
another bank failure of large consequence in Chicago. Between 1873 and 1877 the total deposits in
the National banks in the city declined from
$28,000,000 to $26,000,000, and the number of
banks was reduced from 19 to 15. By the end of
1888 the number of National banks had increased
to 21, and the deposits had reached a total of
$93,000,000, and State and private banks held probably $40,000,000. During this period the Illinois
Trust and Savings Bank, which was organized in
June, 1873, upon the old charter of the Bank of
Sterling, and had successfully withstood the "sayings bank panic" of 1878, paying down its deposits
from about $1,500,000 to $240,000, rose to prominence among the city's financial institutions. The

BANKERS' CONVENTION.

115

Merchants' Loan .8z Trust Company, as it was try banks, from which
a heavy demand came with
now called, also forged steadily ahead; and the great suddenness,
and it did not slacken until after
other State banks made substantial progress. The the panic of the
following summer.
great impetus to State banking, however, came with
Again the Chicago bankers had to face the questhe adoption of the present banking law which went tion of issuing
Clearing House Certificates, and
into force December 6, 1888. In its main features again they decided in
the negative. Although their
it follows the National Bank Act so far as may technical position was
not quite so strong as it had
be; but, while providing for publicity of accounts, been in 1873, a much
smaller percentage of their
State supervision, double liability of stockholders loans resting upon the
direct pledge of grain and
and other safeguards, it permits a much wider range provisions in store, it was
still strong enough to
of business. In Chicago this law has had very make an independent stand
possible. No doubt the
marked effects; it has largely put an end to private maintenance of this attitude put
an additional strain
banking, and because of the greater opportunity for upon the banks in the Eastern
cities. But it is
profit which accrues to institutions that may be at equally certain that it redounded
to the financial
one and the same time commercial banks, savings prestige of the city and caused
many Western banks
banks, and trust companies, the tendency has been to transfer their principal reserve
accounts to Chifor new banks to organize under it instead of the cago banks instead of carrying them in
New York.
National Bank Act. At the time of the latest pub- No failures occurred as a result of this
policy. The
lished statements—National banks as of Sept. 1, collapse of the two banks which closed
during 1893,
and State banks as of Sept. 2, 1909—the individual the Columbia National and the Chemical
National,
deposits held by the State banks were more than like that of the Park National,
which suspended
$9,000,000 in excess of the aggregate held by the in July, 1890, was due to
inherent weakness and bad
National banks, and the total deposits were larger banking.
by about $5,000,000. Indeed the competition for
The years of business depression, widespread
certain classes of business has resulted in the liquidation, and unsettled financial
conditions that
formation of State bank adjuncts to National banks, followed the panic of 1893 ushered in what
may be
as in the case of the First Trust and Savings Bank, called the third stage of banking in Chicago,
of
which is owned by the stockholders of the First which the distinguishing features have been the
National Bank upon a plan under which each share building up of great institutions by consolidati
ons,
in the latter carries an inseparable proportionate in- and the notable increase in the volume of business
terest in the stock of the former. The recent transacted. The extent of changes in the Chicago
merger of the Continental National Bank and the banks between 1895 and the present year can most
American Trust and 'Savings Bank upon a similar readily be comprehended by giving the data in
plan, is another step in the same direction, and tabular form.
points to what may perhaps become a general
Capita2
Capital
movement.
Banks.
Change.
Decreased. Increased.
From 1863 until about 1877 the discount rate of Central Trust & Say. Bank Failed
1896 $200,000
Dime Sayings Bank
100.000
National
the Chicago banks was always uniformly 10 per cent. Globe Bank of Illinois_
Dec. " 1,000,000
Savings Bank
200,000
1897
Atlas National Bank
Voluntary liquidation,
Then as idle funds accumulated at certain seasons Prairie State Nat'l Bank.1 Consolidated as the Prai- ' 700,000
200,000
State Say. &
rie State Bank, Aug.
50,000
concessions began to be made and soon became the Prairieof Commerce Tr. CoJ Consolidated with Union "
Bank
National Bank, Nov.
rule. Thereafter the rates became responsive to Hide Az Leather National Consolidated with Union " 500,000
Bank
National Bank, Dec. "
300,000
the law of supply and demand, sometimes falling Home National Bank
Voluntary liquid'n, Jan. 1898 1,003.000
American Exch. Nat'l B'kl Consolidated as America
1,000,000
National Bank of Americal
National Bank, Feb. " 1,000,000 1,000,000
very low as in the summer of 1882. Meanwhile the International Bank
Consolidated with Continental National, Feb.
maximum contract rate had been fixed at 8 per cent. Commercial Loan & Trust Consolidated with Royal " 500,000
Co
Trust Co.,
500.000
Oct. "
by act of the General Assembly. Chicago was now Globe National Bank
Consolidated with Continental National, Nov. " 1,000,000
rapidly changing from a provincial into a metro- West Side Bank
Consolidated with Metropolitan Nat'l, Feb.
50,000
politan city. By the autumn of 1892 the popula- Lincoln National Bank..__ Consolidated with Bank-1899
ers' Nat'l Bank, July 1900
200,000
America National Bank..1
1,000,000
tion was not far from 1,250,000, and the deposits Northwestern Nat'l [tankl Consolidated with Corn
Exchange Nat'l, Sep. 1900 1,000,000 1,000,000
Consolidated with First
held by the banks had reached a total of $206,- Union National Bank
National Bank, Sep. " 2.000,000 2,000,000
with Corn
000,000, of which $63,000,000 was due to country Merchants' National Bank_ ConsolidatedNat'l, Mch.1902 1,000,000 1,000,000
Exchange
with First
banks. These figures are taken from the official Metropolitan Nat'l Bank ConsolidatedBank, May " 2,000,000 3,000,000
National
National Bank of North Consolidated with ContiAmerica
reports made on September 24 and October 26 of
nental National, Oct. 1904 2.000,000
Federal Trust & Savings Consolidated with AmeriBank
can
that year, when a sharp withdrawal had been in Chicago National Bank... Failed;Tr.&Say.Bk., May '05 2,000,000 1,000,000
1,000,000
funds to pay deHome Sayings Bank
positors advanced by
100.000
progress for several weeks. Warned by the severe Equitable Trust Co
other Chic. b'ks, Dec."
Bank of America
Feb. 1906
200,000
stringency of the preceding autumn, when the nor- Milwaukee Ave. State 13'k _ Failed
Aug. '
250,000
Manufacturers' Bank
National charter as Monmal tendency in the United States had been accenturoe Nat'l Bank, Aug. "
200.000
200,000
Federal National Bank. _ Voluntary liquid'n, Oct. 1907
500,000
Consolidated with Amer.
ated by the disturbed condition abroad, consequent Mutual Bank
Tr. & Say. B'k, Jan. 1909
250,000
Consolidated with Drexupon the Baring failure, many of the larger bor- Oakland National
el State Bank, Jan. "
100,000
Trust Co
with Cenrowers in Chicago had made such provision for Royal Side State Say. B'k Consolidated Co., Feb. " 500,000
North
tral Trust
50,000
5,00%000
their needs as to be virtually out of the market, and Continental National B'k Consolid'ted upon plan of
American Trust & Savings
Joint stk. ownership;
Bank
both cos. contin'd Sep."
few of the bankers expected even the usual au- Commercial National.... Consolidation, Sept."
4,000,000
Bankers' National
13ankers'Nat.liquidated
2,000,000
tumnal pressure though they had prepared to meet
the financial storm that for some time had been imWhile these changes were taking place more than
pending. In this they did not count upon the coun- thirty new banks were organized, some of them




d•

BANKERS' 'CONVENTION.

116: •

incorporations of private banking houses under the
State law, and there were numerous increases of
capital by existing institutions. The net result is
an increase in the capital of the Chicago banks
from $33,177,000 in October, 1895, to $62,925,000
in. September, 1909, while the surplus and undivided
profits have increased from $20,985,569 to $54,.
770,480 in the same period.
in the preceding table, the
Of the failures named
most notable were those of the National Bank of
Illinois, and the Chicago National Bank and its.
allied institutions, the Home Savings Bank and the
Equitable Trust Company—all the result• of injudicious banking and the tying up of assets that
should have been kepi liquid but were Used to
promote ambitious railway schemes. In the case of
the Chicago.National the effects would have been
widely felt and perhaps have resulted in other failures of a serious character, but for the action of the
other Chicago banks, which, for the protection of
the community, took over the burden and advanced
funds for the immediate liquidation of depositors'
claims.
The wide variation in the number .of the Chicago
banks in different years has materially affected the
proportion of the checks paid by 'them that have
passed through the Clearing House. For this reason the clearings do not accurately represent the
volume of business transacted by the banks; yet.
the figures have perhaps sufficient value .to make it
worth while to include them in this review.
'
1865. _ _ _
1866 _
1867 _.__
1808 _ _
1869 _ _
1870
1871
1872 ____
1873
1874
1875 ___
1876 _
1877
1878
1879 ---

CHICAGO BANK CLEARINGS.

$319,606,228
453,798,648
580,727,331
723,293,444
734,661,949
810,676,036
868,936,754
993,060,503
1,047,027,828
1,101,347.918
1.212,817,207
1,110,093,624
1,044,678,475
967,184,093
1,257,756,124

1880 __
1881 _ _
1882 ._
1883 __
1884 -1885 __
1886 __
1887 _1888 _1889 -1890 _ _
1891 _
1892 _
1893 _ _
1894 _-

$1,725,684,894
2,249,329.924
2,393,437,874
2,517,371,581
2,259.680,391
2,318,579,003
2,604,762,912
2,969,216,210
3,163,774,462
3,379,925,18$
4,093,145,904
4,456,885,230
5,135,771,187
4,676,960,968
4,315,440,476

,

$4,614,979;203
1895
1896 ...._ 4,413,054,108
1897 ___ 4,575,693,340
1898.- 5,517,335,476
1899 -- 6,612,313,611
6,799,535,598
1900
1901 ___ 7,756,372,455
1902 ___. 8,394,872,351
1903 _- 8,755,553,649
1904 ___ 8,989,983,764
10,141,765,732
1905
11,047,311,894
1906
1907 ___ 12,087,647.870
11,853,814,945
1908

Nine months.
.

Perhaps the best index to the development of the
city as a financial center during this third stage is
found in the increase in the deposits of the banks.
DEPOSIT LIABILITIES OF THE CHICAGO BANKS.

Date.
Oct. 2
Sept. 25
Mk" 30
Oct. 3
" 2
Sept. 28
Oct. 6
" 5
Sept. 21
7
" 5
" 30
" 15
" 9
" 6
Nov. 9
" 12
Aug. 22
Sept. 23
June 23

1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
190!

No. of NATION'L
Banks. BANKS.
23
24
27
25
24
25
24
22
19
18
16
14
13
14
15
16
16
17
16
16

Date.

$
108,521,702 Oct. 8
118,649,456 Nov. 14
138,349,602 Oct. 26
112,945,586 Nov. 8
134,614,115 Dec. 14
122,907,968 Sept. 21
1
109,760,418
148,311,620 Oct. 26
170,637,91 Sept. 21
210,861,587 ' 8
239,030,337 Oct. 1
265,167,889 " 15
278,260.372 " 13
272,416,717 " 15
296,570,660 Sept. 7
314,103,708 Nov. 10
323,295,421 " 13
330,613,222 " 19
369,490,393 Sept. 24
402,292,754 June 24

1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909

No. of STATE
Banks. BANKS. Total Both.
15
13
21
20
19
20
22
22
19
17
16
16
22
25
33
36
43
43
44
43

$
$
45,474,658 153,996,360
55,361,717 174,011,173
68,189,233 206,538,835
67,345,958 180,291,544
74,949,854 209,563,969
77,936,305 200,844,273
76,005,763 185,766,181
90,657,361 244,968,981
104,966,118 275,604,018
133,502,431 344,364,018
154,873,657 393,909,994
178,542,433 443,710,322
208,049,802 486,316,174
234,226,045 506,642,762
274,459,144 571,029,804
338,605.866 052,709,574
355,170,368 878,465,789
343,420,719 074,033,941
360,727,116 730,217,509
403,589,119 805,881,873

Aside from the magnitude of the totals, the most
significant thing shown in this table is the steady
gain of. the'State banks upon the National banks in
number and in aggregate volume of business. Not
less significant is the notable increase in savings
deposits and bank deposits as shown in the follow-




ing table: The dates are the same as in the preceding table.
Individual Deposits
(Including (1. S.)
Year.
National
Banks..

State
Banks.

Total
Both.

'Bank Deposits.
•
'
.
Total
Slate'
_Vallonat
Both.
, Banks.
Banks.

•

*
$.4
46,958,0
1890___ 61,563,6 .30,496,0
1891._ 67,171,8 35,748,1 102,919,9 51,477,6
1892,.. 79,690,2 45,086,9 124,777,1 58,659,4
1893._ 69,482,6 45,645,2 11&,127,8 43,462,9
1894... 75,548,3 48,869,8 124,418,6 59,Q65,2
1895_ 69,480,7 49,167,2 118,647,9 53.427.2
1896_ 66,143,9 46,558,4 112,702,3 46,616,5
1897- 72,964,6 62,481,3 135,445,9 75,346,9
1898_ 85,462,8 62,658,9 148,121,7 85,175.1
1899_ 103,477,4 78,910,4 182,387,8 107,384,1
1900___ 105,528,8 82,205,4 187,734,2 133,507,5
1901_ 124,727,1 86,905,0 211,632,1 140,440,7
1902_ 134,542,9 95,428,0 229,970,9 143,723,4
1903___ 129,099,5 101,577,9 230,677,4 143,317,2
1904._ 137,391,8 123,710,3 261,102,1 159,178,8
1905_._ 150,696,1 161,278,7 311,974,8 163,407,5
1906__- 153,993,1 165,856,3 319,849,4 169,302,3
1907___ 149,168,5 152,893,4 302,061,9 181,444,7
1908_ 156,331,3 172,035,0 328,366,3 213,159,1
1909._ 172,907,8 193,974,7 366,882,5 229,384,9

Savings
Deposits
State
Banks
Only.

_

12,487,5
*3,090,0
2
4,143,1 -5&:6- "0",7 14,610,5
4,278,3 62,937,7 18,823,9
5,609,5 49,072,4 15,446,9
7,337,4 66,402,6 48,742,6
6,756,1 60,183,3 21,480,4
6,093,1 52,709,6 23,354,1
10,618,6 85,965,5 23,557,5
11,332,0 96,507,1 30,975,1
12,191,2 119,575,3 42,400,7
18.556,4 152,063,9 54,101,5
24,413,5 164,854,2 67,223,8
27,042,4 170,765,8 85,639.3
27,450,7 170,767,9 105,197,4
30,591,7 189,770,5 120,157,1
32,419,4 195,826,9 145,916,1
38,144,9 207,447,2 151,169,1
32,509,4 213,954,1 158,017,9
43,293,4 256,452,5 145,398,5
48,312,7 277,697,6 161,291,0

Note.—In all the above-the last two figures have been omitted.
* Approximate. Total deposits reported by State banks was 545,474,658.
of which 812,497,501 was savings deposits.

From this it appears that the rapid increase in
the swirgs deposits, held only by the State banks,
makes up a considerable proportion of the gain
shown by these banks. It also appears that between
1892 and 1907 there was an increase of $151,000,000
in the bank deposits, and that while in the former
year . the National banks held about $58,000,000
bank deposits as against $79,000,000 individual deposits, in 1907 they held $181,000,000 bank deposits
as against $149,000,000 individual deposits. Separate statistics for trust companies cannot be given
for the reason that all of these companies in Chicago are eng9ged in general banking, with the
exception of the Farwell Trust Company, which
makes a specialty of dealing in investment securities, and the Pearsons-Taft Land Credit Company,
which makes real estate loans and issues collateral
trust bonds against them. Although these companies are organized tinder the Illinois banking law,
because of the character of their business their figures are not included in the statistical tables given
in this review.
As bank balances are the first to be drawn down
in time of stress, it will be apparent that the technical position of the Chicago banks was somewhat
less favorable in the panic of 1907 than in previous
crises. Moreover, the increase in manufacturing
and merchandizing- in the city had been so great
as to make the grain and provision trade of somewhat less relative importance than in the earlier
stages of her development, while the devolution of
that trade more,and more into the hands of a few
large houses had steadily reduced the proportion of
loans secured by warehouse receipts for the commodities named. In spite, therefore, of the much
greater strength and larger resources of the Chicago banks in 1907 than in 1873 and 1893, an independent stand would have been much more difficult,
and while it is possible that they might have stood
out and declined to resort to the use of Clearing
House Certificates, they wisely decided to fall into
line with the banks in New York and other cities.
The crisis passed without any local failures, and
to-day the Chicago banks have entered upon a new
period of prosperity with every prospect that their

BANKERS' CONVENTION:'.

117

government funds ink" should hold the re-:
deposited reserves of natidnal• banks of the cen-'
tral reserve cities; that it'should- accept .no deposits from the public at large, but .shotild dis
THE CONVENTION AND THE CENTRAL cotint for it,:such discounts being, however, limBANK PLAN,
ited to real Cornitierciar bills of high .grade, runSo far .as concerned' the interest of the outside ning not more than ninety days: Two boards, in
world. in its deliberations, the discussion of the Mr. - Reynolds' view, should exercise cbntrol over
proposal for a central bank of issue, introduced such a bank one, .a.* "general • governmental
at the opening of the proceedings in President supervising or overseeing. boafd;" Should be apGeo. W. Reynolds' annual address, was the pointed 'j'ointly by the President of the United
salient incident of this year's Bankers' Conven- States, the Secretary of the Treasury, and the
tion. Mr. Reynolds'. speech on this subject was Comptroller of Currency, and 'confirmed by the
aptly timed to attract public discussion. .A week Senate; the other shOad be"elected by the Sharebefore, Mr. E. B. Vreeland, chairman of the holders,. and the officers *of the bank should be
House of Representatives' Banking and Currency named for long terms, or for life, by the superCommittee, had taken ground for a. central .bank vising board after conference with the second
of issue, in .a speech to a PennsylVania bankers' board.
That discussion of the central bank expedient,
convention. Mr. Vreeland's..argument
not.
go very far; it, rested in the main on the defects as a solution of the currency problem generally;
of our present bond-secured banknote circulation. should have been stimulated into immediate acThis system, Mr. Vreeland set forth, introduces tivity by these several speeches, was to have been
and perpetuates a wholly unscientific basis of expected. According to our information, the
regulation for expansion and contraction ,of such subject became at once the chief theme of discuscurrency. Each separate bank "figures upon its sion or controversy at the Bankers' Convention itown profits as to whether the volume of its note self, and, in perhaps. a less degree, it may be said'
issue shall increase or decrease," the inevitable' to have occupied attention in public discussion
outcome being that the volume of circulating me- generally. It appears that in the convention, a'
dium, at any given tithe, "depends more upon 'the very considerable. difference of nopinion developed,
'
price of government bonds than upon the needs and, So far .as we have observed, opinion outside
of business." Mr. Vreeland's conclusion was, of the convention has by no means been unanithat a central bank with monopoly of circulation, mous. Neivspaper comment on the Matter has
with a limited dividend rate, and with some for the most part, SQ far as we have observed,'
measure of government control, is the ideal solu- been more than usually reserved and disposed to
tion. On the very day of Mr. Reynolds' speech of await the fuller discussion of the matter before
September 14 to the bankers at Chicago, President taking sides positively on the question of a cenTaft, addressing the Boston Chamber of Com- tral bank of issue. And this in the main appears
merce, took occasion, after noticing the defects to us to be the attitude of the average citizen. Cerof our present bank circulation system, to refer tain objection to the central bank expedient he can
to the •central bank plan, declaring that "it is foresee; at the same time, he is ready to recognize
quite apparent * * * that the trend of the minds of certain theoretical merits of the proposition.
the Monetary Commission is-toward some sort of
It is usually the conclusion, under just these.
arrangement for a central bank of issue, which conditions,. that a "campaign of education" is in
shall control the reserve and exercise a power to order, and we presume that some such public canmeet and control the casual stringency which vassing of the merits of the question may be
from time to time will come in the circulating me- looked for under the auspices of the Monetary
dium of the country and of the world."
Commission, and perhaps under those of the
The speech of Mr. Reynolds, therefore, was at Bankers' Convention Committee itself. But it is
once ensured a hearing; all the more so from the already manifest that discussion of the subject
fact that his analysis of the plan, his sugges- on this basis, in order to bring about any useful
tions of the necessary details, provisions and results, must address itself chiefly to the objecrestraints, and his comments on the probable tions alleged against the central bank expedient.
working of such a system from the practical
That such a solution of the currency dilemma'
banker's point of view, gave a clearer compre- was impracticable politically, has long been behension of the problems involved than has been lieved by some of the most thoughtful men who
embodied in any other recent review of the sub- have studied the question. The New York
ject. The more important provisos suggested by Chamber. of Commerce Committee on Reform of
Mr. Reynolds were that the capital of such a bank the Currency, reporting in October, 1906, placed
should be at least $100,000,000, its shares to be the central .bank of issue first on its list of. alowned either by other banks or by the public at ternative expedients. But the _committee's re-.
'
large; that its note issues should be secured in port frankly recognized that the proposition'
part by• a metallic reserve and in part by high-' might not be feasible; and its chairman,, Mr. John
grade endorsed commercial notes of a short ma- Claflin, in submitting the, report, expressed his
turity; that it should be the sole depository of own judgment that the public mind was not pre,'
growth
the last decade will' be far exceeded in
the next.




118

BANKERS' CONVENTION.

pared for the expedient, and that it was politically
out of the .question.
There are many who believe that the public
mind is better prepared to accept the central
bank proposition now than it was in 1906; that
the panic of 1907, the "currency famine," the
recourse to irregular and extra-legal forms of
money, and the blockade of depositors' bank accounts because of inability to maintain cash reserves, have predisposed the average thoughtful
citizen to favor an institution which, if ideally
managed in the crisis, ought surely to have
averted the worst of these difficulties. We are
unable to say whether this is true or not of the
general public; it is true, we presume, to a considerable extent of the banking community,
though even of this we shall know more when
opinion has been more thoroughly canvassed.
We suppose that the objections generally held
against the central bank plan may be classified
as political, sectional, practical, or sentimental.
It was clearly enough the political objection
which Mr. Claflin recognized in 1906, and to which
Mr. Taft referred last week, in his reference to
the necessity of keeping the monetary system
and the central bank "free from manipulation .for
political purposes." Political interference, as generally pictured, would be of one or the other of
two somewhat different sorts—one, the use of
the bank's facilities and power to favor an administration party; the other, use of its offices as
reward for political activities. The first of these
conditions has never appeared to us a serious possibility; the notion itself is a survival of Andrew
Jackson's days, when something of the sort, if it
did not actually exist with the old United States
Bank, was at any rate believed to exist. The
second suggested avenue of political interference
cannot be pronounced an absolute impossibility
to-day, when the existing executive departments
of the government are themselves not free from it.
We imagine that much of the subsequent discussion
will converge on this aspect of the question.
For ourselves, we cannot regard the discussions
of this month as anything more than preliminary
and tentative. Even Mr. Reynolds' very able and
enlightening review did not settle such questions
as would hinge, for instance, on the concentration of reserves and of public deposits. Government deposits in the national banks, which in
times of excessive surplus revenue have risen as
high as $200,000,000, are the product of taxes
drawn from communities throughout the whole
United States; it is from those markets that circulating medium was absorbed through excessive
public revenue. Therefore the demand, that such
moneys be re-deposited in banks of the localities
whence they were withdrawn, is by no means the
outcome of selfish desire of the banks of such localities to get a share in the public funds;
it voices the dislike to artificial depletion of
a community's own supply of currency. How
this dilemma would present itself if such deposits
were to be coverged in a central bank at New




York or Washington, is a question to consider; or,
if the alternative of numerous branch banks were
to be considered, the question of competition with
existing institutions would arise. The mere
question, where the central bank itself should be
located, is a matter of some importance. The
question of the bank's relation to the general
money market—how far, for example, it should
on occasion, like the Bank of England, raise as
well as lower the bank rate and restrict the market's supply of credit—is a matter to be pondered.
There are problems, by no means yet even tentatively worked out, in the matter of actual control, by government or by outsiders.
We mention these considerations, not as fatal
to this plan or to any plan, but as showing the
need of much more light upon the problem, and
of very careful deliberation on the whole matter
of currency reform. We presume the question
will be thus debated. It is highly improbable
that a bill for a central bank, or for any final solution of the currency question, will occupy the
coming session of Congress. The Monetary
Commission itself has not yet concluded its
labors or formally agreed on any plan, and we
have reason to doubt that the central bank will
be either advocated, or exhaustively discussed, in
the President's next message to Congress or in
the Secretary of the Treasury's report.
SOME FEATURES OF THE CONVENTION'S WORK.
With the growth of the American Bankers' Association in membership and influence, and with the
extension of the scope of its activities into the
various different branches of the banking field, the
function of the Annual Convention is confined, and
wisely and properly so, to registering its judgment
on the work done and in giving expression to its
opinion on important current questions. It is gratifying to note that the action of the 1909 Convention
on the questions which came before it was conservative and that the Convention took a firm and
determined stand against several of the most prominent popular fallacies of the day.
It was, of course, a foregone conclusion what the
course of the Convention would be on the scheme
for a guaranty of bank deposits. Last year the Association collectively, and all its sub-divisions separately, almost unanimously condemned the proposition. It was improbable that the Association would
stultify itself by taking any different action on the
present occasion and it would have argued that the
bankers were lacking in a knowledge of the fundamental principles underlying sound banking to
imagine that they could ever be got to give even
quasi endorsement to such an untenable and indefensible suggestion as the guaranty proposal.
Notwithstanding, however, that it was known
beforehand what stand would be taken on this question, no one would have thought that absolute
unanimity of opinion could be depended on in opposition to a proposal which has been commanding a

BANKERS' CONVENTION.
wide degree of support from politicians and legislators in some of the smaller Western States. Since
last year's Convention recorded its judgment so emphatically in disapproval of the notion, a number of
these Western States have enacted laws providing
for various guaranty schemes. The banking fraternity, however, as represented by the members in
convention assembled, have, it would appear, remained unaffected by the craze which has been gaining headway in some of the remoter sections of the
country. At all events, a resolution condemning the
mutual guaranty of deposits either by the State or
Nation was adopted without a dissenting vote, showing remarkable unanimity of opinion,
Not less emphatic was the position of the Convention with reference to the Proposal for postal
savings banks, on which subject also past action
indicated what present action would be. Here likewise the Convention, without a dissenting vote,
adopted a resolution declaring it the sense of the
Association "that we should condemn in unqualified
terms the proposition for the establishment of postal
saving banks or any other system by which the Government enters directly into banking relations with
the people." Another resolution declared "that the
American Bankers' Association is opposed to any
financial legislation based upon the argument that
it was a party pledge and should be redeemed."
This it will be seen has reference to President Taft's
recent remarks that the Republican platform in the
Presidential election of last year had declared in
favor of postal savings banks and he believed that
the party should redeem its pledges.
A third resolution adopted with equal unanimity
reads as follows: "Resolved, that we believe the
proposed plan to invest postal savings bank deposits to the extent of $600,000,000 or $700,000,000
in United States bonds simply to maintain such
bonds at par is unsafe and unwise legislation and if
enacted would ultimately lead to lack of confidence
in our National credit."
There was a fourth resolution which formed part
of the series, but which was not adopted, making
the action of the Convention with reference to the
other resolutions stand out in still bolder relief,
The resolution which the Convention failed to accept dealt with a substitute proposal for the scheme
of postal savings banks. On this the Convention
declined to take a definite stand and we think that
the fact that it did not is further evidence of the
prudence and deliberation with which the Bankers'
Association generally acts. The resolution iji question recommended as a substitute for postal savings
banks the maintenance of separate savings bank departments by National banks, the assets to be segregated and accounts separately kept for the protection of the depositors in that proposed department,
It is known that some of the National banks are
already receiving savings deposits, but whether
Congress should confer express authority upon the
National banks to solicit such deposits and establish
savings departments is manifestly a large question
upon which action should be deliberate and taken
only with the utmost caution. This fact was recog


119

nized by many of the members in attendance
and
hence the resolution met with vigorous opposit
ion.
The final outcome was that the whole matter
was
referred to the Currency Commission of the
Association, evidently a wise disposition of the
question.
If a mercantile bank—a bank of loan and
discount—whether organized under National law
or
under State laws is to have the right
to receive
deposits at all, it certainly is proper that
such deposits should be separated from the ordina
ry cornmercial deposits. The two classes of deposit
s stand
on a totally different footing. That aspect
of the
matter received considerable attention at the
hands
of the Savings Bank Section, and this gives
prominence to the fact that discussions in the
'Savings
Bank Section, which has a separate day for its
meeting at the annual gatherings, are not limited to
subjects in which savings institutions alone
have an
interest. H. M. Zimmerman, the Michigan
Commissioner of Banking, specifically discussed
the subject of the Segregation and Safeguarding
of
Savings Deposits. Our readers need not
be told
that many banks of loan and discount and also
many
trust companies have savings departments.
The
subject, hence, is one that appeals to both
these
classes of institutions.
It hardly seems necessary to argue that saving
s
deposits, where held by general banks, should
be
invested with especial care, should be sharply
differentiated from other deposits and should in other
ways have preferred treatment and conside
ration.
Mr. Zimmerman in his address well said
that sayings deposits have always been regarded as
trust
funds when left with the ordinary "mutual" saving
s
banks, which is the only type of savings institu
tion
known here in the East. He argues with much
force that these deposits should also be so regard
ed,
both legally and morally, when placed with
other
institutions. The nature of such deposits is certainly not changed, he says, no matter what
may be
the character of the corporation or association
into
whose hands they are placed. The investment
of
such funds in ordinary commercial business
risks
would not be countenanced by the courts
if in the
hands of administrators or guardians.
Neither
should it be countenanced when these funds
are in
the hands of corporations which are not
required by
the laws of the State in which they operat
e to invest
them in the most stable securities to be had.
Many States already insist on this distinction
and
Mr. Zimmerman argues that all should.
In other
words, he urges the adoption of a general law
by the
Nation as well as by the States that any institu
tion
chartered by either which holds itself out
to the
public to receive savings deposits should be
required
to segregate them and invest them in a definit
e and
prescribed manner. It is his opinion that
with the
adoption of such a requirement many, if
not all, of
the alleged reasons for the insurance of
deposits and
the establishment of postal savings
depositories
would disappear. The suggestion is in
any event
an excellent one.
It is to be noted, too, that the Committee
on Sayings Bank Laws of the Savings Bank
Section has

120

BANKERS' CONVENTION.

been giving careful and detailed consideration to the and a few of the Western and Southern States,
subject during the past year. It will be seen from • mutual savings banks (without stock) are provided
the report of that Committee, published on a subse- for.
Another paper read before the Savings Bank 'Secquent page, that at a meeting of the Committee last
February in conference with a number of prominent tion is of interest far beyond the confines of the
bankers it was unanimously conceded that savings savings bank circles. We refer to the paper of
deposits, wherever held, should be segregated and Robert M. Rother on "Partial Payments Compared
safeguarded. The opinion is expressed, too, in the with Sinking Funds." Mr. Rother argues that sinkreport that at the spring meeting of the Executive ing funds are a doubtful assurance to the lender and
Committee of the Savings Bank Section in 1910 the an expensive undertaking to the borrower. To have
Law Committee will be prepared to submit the draft any value at all the provisions for a sinking fund
of a skeleton banking law for the safeguarding of must be conscientiously carried out, and the accusavings deposits. In Michigan, as pointed out by mulated funds must be advantageously invested.
Mr. Zimmerman, savings depositors have been the The first is not always done and that the investment
special objects of care and solicitude on the part of of the fund is subject to all sorts of contingencies is
the lawmakers. The statute in that State provides self evident. Mr. Rother contends that however
that separate books of account shall be kept, that all sound in theory a sinking fund may be, its adminisinvestments in the savings departments shall be kept tration cannot be placed beyond the pale of human
entirely separate and apart from the other business weakness; it always was and always will be an unof the bank. It appears from the report of the known quantity—a speculation. The partial paySavings Bank Law Committee that the general situ- ment plan, he declares, is free from these unceration as to savings bank laws in the different States tainties. The specific amounts to be paid each year
is this: Eighteen States have no savings bank laws; on account of principal and interest are determined
eight States allow stock banks to be organized with in advance, and the liability of the issuing corporadepartments for commercial and savings business; tion is reduced with every payment. There is no
other States permit organizations of stock savings guessing; it is fixed figures and facts from first to
banks; in New England, some of the Middle States, last.




INDEX TO ADVERTISEMENTS.
PAGE.
Albany, N. Y.

FIRST NATIONAL BANK

78

Atlanta, Ga.
ATLANTA NATIONAL BANK
FOURTH NATIONAL BANK
Baltimore,

Md.

BALTIMORE TRUST SZ GUARANTEE
CO,
BROWN (ALEX.) & SONS
CONTINENTAL TRUST CO.
FIDELITY TRUST CO.
FIRST NATIONAL BANK
NATIONAL UNION BANK OF MD
READ (WM. A.) & Co
SAFE DEPOSIT & TRUST CO

Berlin,

63
63

56
2
44
57
56
3
56

Germany.

BANCO ALEMAN TRANSATLANTICO
DEUTSCHE BANK

94
94

Birmingham, Ala.

BIRMINGHAM TRUST & SAVINGS.
FIRST NATIONAL BANK

63
63

Boston, Mass.
BLAKE BROS. & CO
BRIGHT, SEARS & CO
BURR (GEO. H.).& Co
ELIOT NATIONAL BANK
ESTABROOK SZ CO.
FEDERAL TRUST CO
FISK (HARVEY) 8z SONS..
HATHAWAY (CHAS.) & CO
HEAD (CHAS.) & CO
HORNBLOWER & WEEKS
MASON (WM. A.) & Co
MERRILL, OLDHAM & CO.
NATIONAL UNION BANK
NEW ENGLAND TRUST CO
OLD COLONY TRUST CO
PINGREE, MCKINNEY & CO
READ (WM. A.) & Co
ROLLINS (E. H.) & SONS
STONE & WEBSTER
TROWBRIDGE & NIVER CO
TUCKER, ANTHONY & CO
WEBSTER & ATLAS NATIONAL BANK

14
82
37
215
157
82
4
27
82
10
29
83
83
8I
8o
83
23
217
41
83
82

Brooklyn, N. Y.
FLATBUSH TRUST CO
FRANKLIN TRUST CO
LONG ISLAND LOAN & TRUST CO
PEOPLE'S TRUST CO

104
107
104
104

Buffalo, N. Y.
FIDELITY TRUST CO
MARINE NATIONAL BANK
STEELE (JOHN T.)

79
79
79

PAGE.
BYLLESBY (H. M.) &CO
220
CENTRAL TRUST CO
39
CHICAGO BEACH HOTEL
218
CHICAGO SAVINGS BANK & TRUST
36
CHICAGO TITLE & TRUST CO
28
COLONIAL TRUST & SAVINGS BANK 36
CONSOLIDATED CASUALTY CO
219
CONTINENTAL NATIONAL BANK
22
CORN EXCHANGE NATIONAL BANK
Inside Back Cover

CUTTER, MAY & CO
37
DEVITT, TREMBLE & CO
40
EVERZ & CO
27
FARWELL TRUST CO.
33
FIRST NATIONAL BANK
35,
FISK (HARVEY) & SONS
4
FORT DEARBORN NATIONAL BANK.. 32
HAMILTON NAT. BANK
30
HARRIS TRUST & SAVINGS BANK.. 26
HARRIS, WINTHROP & CO
216
HATHAWAY (CHAS.) & CO
27
HOLTZ (H. T.) & Co
38
HORNBLOWER & WEEKS
10
ILLINOIS SURETY CO
4
2
ILLINOIS TRUST & SAVINGS BANK
32
KuHN (J. S. & W. S.)
55
LIVE STOCK EXCHANGE NAT. BANK 29
LOBDELL
L.) & CO
37
MASON (W. A.) & Co
29
McCoy & Co
43
McGEE & Co
216
MERRILL, COX & CO
23
MONROE NAT. BANK
30
NATIONAL BANK OF THE REPUBLIC 31
NORTHERN TRUST CO
25
PEABODY, HOUGHTELING & CO
37
PORTER, FISHBACK & CO
34
PLYMPTON, GARDINER SZ CO
5
READ (WM. A.) & Co
ROLLINS (E. H.) & SONS
23
RUSSELL, BREWSTER & CO
44
SHOEMAKER, BATES & CO
21
SHORT, STANTON & CO
45
SLAUGHTER (A. 0.) 8z Co
24
SONNTAG (J. H.) & Co
44
SPEER (H. C.) & SONS, Co
216
SWARTWOUT & APPENZELLER
Io6
TROWBRIDGE SZ NIVER CO
41
WESTERN TRUST & SAVINGS BANK 24
WOLLENBERGER & CO
45

(E.

Cincinnati, Ohio.
FIFTH-THIRD NATIONAL BANK
KLEYBOLTE (ALBERT) & CO
KLEYBOLTE (RuDoLPH) 8z Co., INC
MERCHANTS' NATIONAL BANK
SHORT, STANTON & CO

Camden, N. J.
CAMDEN SAFE DEPOSIT & TRUST

45

102

AMERICAN
TRUST & SAVINGS
BANK
22
ASSETS REALIZATION CO
218
AUDIT CO. OF NEW YORK
76
BABCOCK, RUSHTON & CO
24
BECKER (A. G.) & Co
23
BURNIIAM (JOHN) & CO
30
BURR (GEO. H.) & Co
37

FIRST NATIONAL BANK
OTIS & HOUGH

FIRST NATIONAL BANK
INTERNATIONAL TRUST CO
OTIS & HOUGH
ROLLINS (E. H.) & Soxs

Detroit,• Mich.
HORNBLOWER & WEEKS
NOBLE (H. W.) & Co
PEOPLE'S STATE BANK
UNION TRUST CO

Columbus,

10
64
64
73

Fitchburg, Mass.

BRIGHT, SEARS & CO

82

Fort Worth, Texas.
FORT WORTH NATIONAL BANK...

CHILD, HULSWIT & CO
MICHIGAN TRUST CO
OLD NATIONAL BANK

45
73
73

Hartford, Conn.

HARTFORD NATIONAL BANK
Havana,

Cuba.

NATIONAL BANK OF CUBA

95

Hongkong, China.

HONGKONG SZ SHANGHAI BANKING
CORPORATION
93
Houston, Texas.

FIRST NATIONAL BANK

Indianapolis, Ind.
ELLIOTT (Jos T.) & SONS

Jersey City, N.

3.

COMMERCIAL TRUST CO
FIRST NATIONAL BANK
UNITED STATES TRUST CO

102

17
67

Knoxville, Tenn.
HOLSTON NATIONAL BANK

6o

London, Eng:zn:.

BANCO ALEMAN 1RANSA7LAN1ICO.
BANK OF BRITISH NORTH AMERICA
BANK OF MONTREAL
.
BONBRIGHT WM. P.) & Co
CANADIAN BANK OF COMMERCE
DEUTSCHE BANK
DOMINION SECURITIES CORP
FARMERS' LOAN & TRUST CO
INTERNATIONAL BANKING CORP
JARVIS (AEMILIUS) & CO
LONDON CITV & MIDLAND BANK
NATIONAL DISCOUNT CO
STANDARD BANK OF S. AFRICA, LTD.
YOKOHAMA SPECIE BANK, LTD

1)4
86
84
15
85
94
91
I08
8
91
94
96
92
92

Lcs Angeles, Cal.

15

Lowell,
73

65

Kansas City, Mo.

AMERICAN NATIONAL BANK
UNION NATIONAL BANK

Ohio.

62

Grand Rapids, Mich.

Louisville,

OTIS & HOUGH

73
23

73

Too

Colorado Springs, Col.
BONBRIGHT (WM. P.) & Co

68
68

ADAMS (JAMES H.) & CO
NATIONAL BANK OF CALIFORNIA
STILSON (FIELDING J.) & CO

Cleveland, Ohio.

Chicago, Ill.




65
65
72
65

PAGE.

Denver, Col.

76
74
74

Ky.
60
69

Mass.

BRIGHT, SEARS & CO

82

Milwaukee, Wis.
Dallas, Texas.

CITY

NATIONAL BANK

62

'FIRST NATIONAL BANK
SCHLEY (CHAS.) & CO

69
69

INDEX TO ADVERTISEMENTS.—Continued.

122

PAGE.

Minneapolis, Minn.
FIRST NATIONAL BANK
MINNEAPOLIS TRUST CO
NORTHWESTERN NATIONAL BANK.
SECURITY NATIONAL BANK
EUGENE M.) & CO
STEVENS (

72
70
71
70
70

Mobile, Ala.
CENTRAL TRUST CO
PEOPLE'S BANK

61
61

Montreal, Canada.
BANK OF BRITISH NORTH AMERICA
BANK OF MONTREAL
DOMINION SECURITIES CORP
)
CHAS. & CO
HEAD (
INVESTMENT TRUST COMPANY
MERCHANTS BANK OF CANADA...
MOLSONS BANK (THE)
ROYAL BANK OF CANADA

86
84
91
82

go
87
86
88

Nashville, Tenn.
61
6r
60

PAGE.
•
LYBRAND, ROSS BROS. & MONT52
GOMERY
93
MAITLAND, COPPELL & CO
16
MANHATTAN TRUST CO
MARKET & FULTON NAT. BAN .. 18
9
MERCANTILE TRUST CO
87
MERCHANTS' BANK OF CANADA...
MERCHANTS' EXCHANGE NATIONAL
19
BANK
MORGAN (J. P.) & Co

Air
..,L ULLER,

Outside Back Cover

SC HALL & CO
NASSAU BANK
NATIONAL BANK OF CUBA
NATIONAL RESERVE BANK
NEW YORK COUNTY NAT. BANK.
NEW YORK LIFE INSURANCE &
TRUST CO
NOBLE (H. W.) & Co
OLIPHANT (JAS. H.) & Co
PHOENIX NATIONAL BANK
PLY M PTON, GARDINER & CO
READ(WM. A.) & Co
REDMOND & CO
ROYAL BANK OF CANADA
RUSSELL BREWSTER & Co...
SCHAFER BROS.
SEABOARD NATIONAL BANK
SHOEMAKER BATES & Co
SMITH (EDWARD B.) & Co
SPEYER & CO
STANDARD BANK OF S. AFRICA, LTD
STANDARD TRUST CO
STEPHENS (T. W.) & Co
SWARTWOUT & APPENZELLER
TROWBRIDGE & NIVER CO
TUCKER ANTHONY & CO
UNION TRUST CO
UNITED STATES MTGE. & TRUST CO
UNITED STATES TRUST CO
WADE & CO
WASHINGTON TRUST CO
WEBB & CO
WINSLOW, LANIER & CO
.
YOKOHAMA SPECIE BANK, LTD...

100
97
95
20
97

REDMOND & CO
SHOEMAKER BATES & CO
SMITH (EDWARD B.) & CO
TRUST CO. OF NORTH AM ERICA..
UNION NATIONAL BANK
WEST END TRUST CO
WURTS, DULLES & CO

PAGE.
12
21
54
50
51
8
4
52

Pittsburgh, Pa.
GEORGE B.) & CO
HILL (
J.
KUHN ( S. & W. S.)
SECOND NATIONAL BANK
UNION TRUST CO

55
55
55
7

Pittsfield, Mass.
SWARTWOUT & APPENZELLER

106

Plainfield, N. J.
Ioo PLAINFIELD TRUST CO

102

II
64

20
5

Portland, Ore.
UNITED STATES NATIONAL BANK. 77

12
88

Providence, R. I.
.
MERCHANTS' NATIONAL BANK... IOI
101
MILLER (ALBERT P., JR.)
RHODE ISLAND HOSPITAL TRUST CO 101

98
19
21
Quebec, Canada.
54
6 UNION BANK OF CANADA
89
Newark, N. J.
92
214
16
Richmond, Va.
FIDELITY TRUST CO
106
59
FIRST NATIONAL BANK
New Orleans, La.
1136
59
SCOTT & STRINGFELLOW
62
41
CANAL-LOUISIANA BANK & Ti...
83
Rochester, N. Y.
13
New York City.
64
& HIBBARD
15 BONBRIG HT
218
ASSETS REALIZATION CO
103
76
St. Louis, Mo.
AUDIT CO. OF NEW YORK
98
37
24
GEO. H.) & Co
103 BURR(
BABCOCK, RUSHTON & CO
67
(WILLIAM R.) Co
107
64 CompToN
' TRUST CO
BANKERS
67
EDWARDS (A G.) & SONS
86
27
BANK OF BRITISH NORTH AMERICA
)
CHAS. & CO
HATH WAY (
2
9
4
8
MECHANICS AMERICAN NATIONAL
BANK OF MONTREAL
67
104
BANK
Norfolk, Va.
BICKMORE (A. H.) & Co
MISSISSIPPI VALLEY TRUST CO..
14 CITIZENS BANK
& CO
BLAKE BROS.
58
Inside Front Cover
15
58
NATIONAL BANK OF COMMERCE...
BONBRIGHT (Wit. P.) & Co
NATIONAL BANK OF COMMERCE.. 66
L BANK
2 NORFOLK NATIONA
8
5
BROWN BROTHERS & CO
St. Paul, Minn.
37
Omaha, Neb.
GEO. H.) & Co
BURR (
72
85
FIRST NATIONAL BANK
BANK OF COMMERCE
CANADIAN
68
OMAHA NATIONAL BANK
EUGENE M.) & CO... 70
STEVENS (
215
CHASE NATIONAL BANK
Ottawa, Ont.
18
San Francisco, Cal.
COAL & IRON NATIONAL BANK
86
BANK OF OTTAWA
76
8
9
JAS. H.) & CO
ADAMS (
COLER (W. N.) & Co
100
BANK OF BRITISH NORTH AMERICA 86
Paterson, N. J
JAS. B.) & Co
COLGATE(
85
CANADIAN BANK OF COMMERCE
91 PATERSON NATIONAL BANK
GEO. D.) & Co
102
COOK (
75
FIRST FEDERAL TRUST CO
67
SONS
EDWARDS (A. G.) &
75
FIRST NATIONAL BANK
Philadelphia, Pa.
20
23
ROLLINS (E. H.) & SONS
EQUITABLE TRUST CO
218
74
1438 ASSETS REALIZATION CO
SUTRO BROS. & CO
FARMERS' LOAN & TRUST CO
76
CO. OF NEW YORK
18 AUDIT
FIDELITY TRUST CO
Seattle, Wash.
THOS. A.) & CO
53
BIDDLE (
19 BODINE, SONS & CO
52
. 77
FIFTH AVENUE TRUST CO
L BA NK OF COM MERCE
NATIONA
37
4 BURR (GEO. H.) & CO
FISK (HARVEY) & SONS
Toronto, Canada.
46
139 CASSATT & CO
FOURTH NATIONAL BANK
52
89
107 CLARK (E. W.) & Co
BANK OF TORONTO
FRANKLIN TRUST CO
49
COMMERCIAL TRUST CO
E
85
216 CORN EXCHANGE NATIONAL BANK 51 CANADIAN BANK OF COMMERC
HARRIS, WINTHROP & CO
9
8
DOMINION BANK
100 CRAMP, MITCHELL & SRODER
54
HATCH (W. T.) & Co
91
DOMINION SECURITIES CORP
40
27 DEVITT, TREMBLE & CO
82
)
HATHAWAY (CHAS.) & CO
HEAD (CHAS. & CO
& CO
53
)
82 ERVIN
91
JARVIS (AEMILIUS & CO
)
CHAS. & CO
HEAD (
)
FISK (HARVEY & SONS
4
91
MACKENZIE (W.A.) & CO
99 FOURTH STREET NATIONAL BA NK.
HODENPYL, WALLBRIDGE & CO
48
BA NK
90
215 METROPOLITAN
FRANKLIN NATIONAL BANK
HONGKONG & SHANGHAI BANKING
HAM MOND
90
215 OSLER &
GIRARD NATIONAL BANK
93
CORPORATION
Front Cover
Utica, N. Y.
10 GIRARD TRUST Co..Inside
HORNBLOWER & WEEKS
HARRISON (C. C. JR.) & Co
51
78
CITIZENS' TRUST CO
8 JONES (E. B.) & Co
INTERNATIONAL BAN KING CORP..
46
78
UTICA TRUST & DEPOSIT CO
99 KU H N (J. S. & W. S.)
55
(A. M.) & CO
KIDDER
69 LYBRAND, ROSS BROS. & MONTWashington, D. C.
KIMBALL (R. .) & CO
52
GOMERY
72
KLEYBOLTE (RUDOLPH) CO., INC.
58
50 PLANT (A. G.) & Co
MARKET STREET NATIONAL BANK
L BANK
59
KNAUTH, NACHOD & KUII NE
53 RIGGs NATIONA
9° MELLOR & PETRY
L BANK
NATIONA
59
14 MERCHANTS' NATIONAL BANK... 50 SECOND
KNICKERBOCKER TRUST CO
64
99 NOBLE (H W.) & Co
Winnipeg, Canada.
LADD & WOOD
PENNSYLVANIA CO. FOR INSUR99
LAMARCH & COADY
89
105 UNION BANK OF CANADA
ON LIVES
ANCES
17 PHILADELPHIA NATIONAL BANK.. 47
LIBERTY NATIONAL BANK
Yokohama, Japan.
8 PHILADELPHIA TRUST, SAFE DE9
LINCOLN NATIONAL BANK
POSIT & INSURANCE CO
46 YoKonANIA SPECIE BANK, LTD... 92
97
LINCOLN TRUST CO

AMERICAN NATIONAL BANK
FIRST NATIONAL BANK
FOURTH NATIONAL BANK




BANKING

SECTION

AMERICAN BANKERS' ASSOCIATION
Thirty-Fifth Annual Convention, Held at Chicago, Sept. 14, 15, 16 and 17, 1909
INDEX TO CONVENTION PROCEEDINGS
Comptroller's Problems, Lawrence 0. Murray
National Wealth and Farm, James J. Hill Limitations of Bank Supervision, J. B. Forgan
Industrialism and Americanism, John C. Kilgo
Annual Report of the Secretary Annual Report of the Treasurer Report of Protective Committee Financial Statements Report of General Counsel Report of Executive Council

Page
Page
Page
Page
Page
Page
Page
Page
Page
Page

223
126
130
136
140
242
243
144
245
145

Legislation During 1909
Report of Bill of Lading Committee Report of Committee on Express Companies
Report of Institute of Banking Report of Federal Legislative Committee Report of Standing Law Committee Detailed Report of Proceedings Addresses of Welcome President Geo. M. Reynolds' Address
Report of Currency Commission -

Page
Page
Page
Page
Page
Page
- Page
Page
- Page
- Page

147
151
152
154
155
155
158
158
16o
167

Some Problems of the Com,troller' 0
s .
ffice.
BY HON. LAWRENCE 0. MURRAY,

Comptroller

of the Currency.

Every public officer, clothed by law with extended powers in which bank examinations were made, and
offered sugand wide discretion, has many difficult problems to meet. gestions for improvement. Such a percentage
of criticism
Perhaps the hardest one of all to settle, to the satisfaction showed something radically and fundamenta
lly wrong.
of a critical public, is the general problem of the internal Some of the remedies suggested were excellent;
some were
administration of his own office. This, to a public officer impossible. But one important fact was
established beyond
is the fundamental problem. No matter how high his any question—there was room for
great improvement in
ideals may be, no matter how devoted he may be to the the work.
settlement, in a fair and equitable way, of every particular
The careful reading of the letters of criticism put the
question, whether legal or commercial, that comes before Comptroller's office in possesion of specific
and reliable inhim, if the machinery of his office is below the necessary formation as to just how the work was
being done. About
standard of efficiency, his administration is doomed to forty of the examiners were then called
to Washington for
failure.
a conference. At this conference they were told, in lan•
Bank supervision and bank examinations exist for but guage as plain as could be used, that
some of them did
one reason—to offer greater security to the creditors of excellent work, that some of them gave
fair service, that
the banks. If examining and supervising are to be done at some of them were incompetent and
their work both a
all, they ought to be as well done as possible under existing farce and a fraud.
laws. If poorly done, the State or the Federal Government,
This conference developed clearly the need of closer
as the case may be, affords only a false and misleading co-operation between the bank examiners
themselves, as
security to the depositors. The public official, whether well as between the bank examiners and
the Comptroller's
Federal or State, charged with the duty of enforcing bank- office. Examiners had gone on for years,
working in the
ing laws, who is a party to a form of administration that same district, conferring with nobody,
each following his
beguiles the depositor into a sense of security which has own methods of examination, often
.faulty and crude, and
no basis in fact, perpetrates a fraud upon the public.
knowing nothing of a borrower's standing and little of the
value of securities, except what they learned in the banks
CO-OPERATION WITH BANKERS.
in districts to which they were assigned. An examiner
There has always been a great deal of criticism of the cannot
make a reliable estimate of the value of the assets
National bank examiners, and perhaps there always will which
he finds, unless he has a broader basis of informabe. Some of it is just; much of it is very unjust. When tion
than he will be able to get by going around and examI became Comptroller, I determined to find out exactly how ining only
certain banks, and none other. The service was
the bank examiners did their work, and there seemed no therefore
reorganized on a new basis. The country was
better way than to ask the bankers themselves. A letter divided into
eleven districts; some one of the very best
was sent to the president of each National bank, asking examiners
in the service was named as chairman of each
how the examiners were doing their work; whether or not district,
and the examiners assigned to each district were
it was being well done; and whether the examiners took required
to attend a joint meeting in their district at least
time enough to go into the details of the bank as the law twice a
year.
contemplates, and asking them, in a general way, to point
These district meetings of examiners are now not only
out every defect in bank examinations.
clearing houses for the exchange of information on credits,
About 2,000 bank officers severely criticised the manner
but the examiners attending discuss many matters of




124

BANKERS' CONVENTION.

mutual interest, such as better methods for doing their
work; the adoption of new forms and blanks; good and
bad banking practices; good and bad bankers. They return
to their work better equipped for effective service.
At these meetings, each examiner brings to the chairman
of his district a report on every bank which he considers
in an unsatisfactory condition, and discusses in the meeting
the condition of the bank, and why he regards it as unsatisfactory. From all these reports of the. individual examiners, the chairman makes up a final report for the
Comptroller, and sends a copy of his report to each of the
other chairmen for their information and for the information of the 'examiners in the other districts.
The meetings already held have been most successful.
The information submitted in the reports by the chairmen
form the basis Upon which a credit bureau is now being
built up in the Comptroller's office. A copy of the report
of each chairman has been sent to each of the other chairmen, and as the reports are available for the examiners
assigned to the different districts, it is now possible for
any examiner who is interested in any particular line of
credit, or in any securities, to write to the chairman of the
district to which he is assigned, and find out what the
other ten chairmen know about the particular subject of
his inquiry.

••

a man in the service who is not giving his best energy, his
best thought, and his undivided attention to his work.
OATH AND BOND 01' BANK EXAMINER.

As the National bank act does not specifically require it,
no oath of office has ever been required of the bank examiners. ,Neither does the law require that the bank examiner
shall give a bond for the faithful performance of his duty.
But it seemed to me that, as a matter of good administration, the men who actually handle twice a year nearly a
billion dollars in cash, and pass on the valuation of nearly
'ten billion dollars of assets held by the National banks,
should not only take an oath of office, but should give a
bond to the Comptroller of the Currency, in a substantial
sum, for faithful performance of their duty. So every
examiner now in the service has taken an. oath' of office
required of all government officials, and everyone hereafter
appointed will do the same. Every examiner has given a
bond to the Comptroller, in the sum of $20,000, for the
faithful performance of his duty, so there are to-day outstanding and in force bonds given by the National banic
examiners in the penal sum of two millions of dollars. •
BANK PROMOTERS.

Every Comptroller of the Currency takes a natural pridt.
in seeing the banks grow in number, in strength, and in
popularity. 1 believe in the expansion of the system, but
EXAMINERS TO BANKS.
RELATIONS OF BANK
believe that that expansion should be along normal, safe
to which I gave attention was
One of the first things
and conservative lines. I do not believe in the organization
the' relation of the bank examiners to the banks. I can
of a bank in a community where there is no good reason
think of nothing more indefensible or fatal to any sound
for its existence. I do not believe in the organization of
system of bank examination than to have men examining
banks in communities where the business that would natubanks who are themselves stockholders in or borrowers
rally come to the bank is insufficient to warrant success;
from these banks. An investigation of this matter showed
nor do I believe in the organization of any bank in a comthat some of the bank examiners were stockholders, many
munity where the Board of Directors will not be composed
of them were borrowers; some of them were officers in
of men of business ability equal to the best to be found in
corporations which borrowed money from the banks which
that community.
they were themselves examining; others were officers or
If we are to have a great system of banks, sound, well
directors of National banks, and some were officers or
managed and prosperous, the greatest attention and serudirectors of State banks.
tiny must be exercised before the government issues a
No one can defend such a situation as that. A National charter. In the National system we want banks organized
bank examiner ought never to borrow a dollar from any
in places where the demand is spontaneous and originates
National bank, nor own a share of stock in' one. A bank
with the people living in the place who feel an actual need
examiner who does his full duty is engaged in business
of banking facilities. I do not believe in the organization
sufficiently important and responsible to require his best of banks by promoters who go about the country, calling
and undivided attention to the work at all times.
public meetings, and by methods of advertising characterEvery National bank examiner, therefore, who was either istic of the circus, endeavor to arouse enthusiasm for the
a borrower or a stockholder in any National bank, or organization of a bank.
engaged in any other business than that of examining
some cases the promoter is satisfied to organize a
In .
banks, was required to dispose of all the stock held in
bank for a fee of five to ten dollars on each share of stock,
National banks; to resign as an officer or director of busiwhile in others he is contented with a commission of from
ness corporations; to at once pay any loans which he might 3 to 6 per cent. on the capital stock and surplus fund. In
have in National banks; to agree in writing that hereafter, other cases he expresses a willingness to organize a bank
while a National bank examiner, he would not borrow, with the understanding that he is to be elected to office,
either directly or indirectly, from any National bank; that receive a salary, and be given the privilege of having a
he would not acquire stock in any National bank, either company in which he is interested loan the funds of the
directly or indirectly; that he would not accept public
bank on a commission basis. There is still another type
office of any kind or nature whatsoever, and that he would of promoter who makes a business of organizing banks for
not become an officer of any corporation.
the sole purpose of having his company supply furniture
Comptroller's office has been
and fixtures. And in some cases promoters have charged
For forty-five years the
receiving letters from banks which had been criticised, the bank more for organization expenses than its net
stating that the examiner's report on which the letter of earnings would amount to in five years, even if it should
not lose a dollar in bad debts.
criticism was based was unfair, and the reason given
The Comptroller's office knows every bank promoter now
was that the examiner making the criticism was a stockhim.
holder in or borrower from a rival bank. Since the recent operating and has a special report on file concerning
been received, and none It has full information as te; the methods used, not only
order was issued, no such letter has
as a general rule, but in each particular bank. It has a
ever will be as long as that order stands.
ts and the handFor the first time, therefore, since the National bank act fairly good file of the alluring advertisemen
bills which they have spread broadcast in the places where
there is not an
went into effect, forty-six years ago,
banks have been promoted.
examiner in the service to-day who owes a National bank
As soon as an application comes to the office for the
a dollar;'there is not an examiner in the service who owns
any of the ear-marks
of stock in any one of the seven thousand National establishment of a bank, if it bears
a share
an of the application of a promoter, although his name may
banks; there is not an examiner in the service who is
written to every man signofficer or director of any corporation which borrows a dollar not appear upon it, a letter is
ing the application, raising these questions: First, did the
from any National bank; there is not an examiner engaged
of the bank originate with the
in any business except examining banks, and there is not idea of the 'organization




:BANKING SECTION.
people of the community themselves, and is it the outgrowth of a necessity for banking facilities, or is it the
plan of a bank promoter; and, secondly, if the bank is
established, will the business which will naturally flow to
it be of such volume and character as to reasonably insure
success?
The answers to these latters, in a .great many instances,
are that the organization of a bank was entirely the idea
of outsiders who came there for the purpose of organizing,
and that they signed the application with very little consideration as to the probable outcome of the. venture. In
these eases, the promoters are asked to make a deposit of
a sufficient amount of money to cover the expenses of a
competent examiner from my office to •go to the community
and make an honest and thorough investigation of the
whole situation; and if his report is to the effect that
there • is no necessity for its reorganization, no field for
the bank, no reasonable chance for its success, the application is promptly disapproved.
CLEARING HOUSE EXAMINERS.

I believe in co-operation _between the Comptroller and
the Superintendent of Banks of the different States; in
co-operation between National and State examiners, at
least in the examination of allied institutions; in co-operation of the National examiners and the clearing house
-examiners, and where there are no clearing house examiners, in co-operation of the National examiners and the
'clearing houses.
At present the ideal examination can best be made by
.clearing house examiners, owing to the manner in which
they are paid and the unlimited time at their command,
and I would like to see at least one examiner so equipped
in each of the large cities of the country. It has been suggested to me that the Comptroller ought to look with
disfavor on the clearing house examiner, because the necessity for such an examiner seems to reflect on the work and
the efficiency of the National bank examiner. I take
exactly the opposite view. I am heartily in favor of clearing house examiners, and I have instructed the National
bank examiners, in the cities where there are clearing house
examiners, to co-operate with them fully; and the cooperation goes to the extent that the clearing house
examiners and the National bank examiners go into the
banks at the same time and make a joint examination.

125

During the last year instructions have been issued to the
National bank examiners advising them that the joint examinations must be made if possible, ,and putting all the
inconvenience of it upon them. They are told to arrange
in advance positively for certain dates upon which the joint
examination can be made; and, if necessary, to delay the
examination of the National bank until such time as it
may be convenient for the State officer to examine the
allied State institution. So that now we have, for the
first time, an effective co-operation between the National
and the State examiners, in all the allied banks. The
examination of these allied institutions at the same time
will accomplish nothing unless the examiners have a conference after the examinations have been made, and fully
discuss with each other what they find in the banks. That
kind of co-operation is correcting bad conditions where any
are found to exist.
NATIONAL BANS EXAMINERS AT LARGE.

There are conditions existing to-day, and continually
arising in banks in various parts, of the United States,
with which the regular examiner of the district is wholly
unable to cope, either because. of insufficient time or because he has not that positive and forceful character and
determination necessary to handle that particular situation. It therefore seemed wise to appoint some National
bank examiners at large, whose duty it would be to make
examinations of banks found to be in an unsatisfactory
condition. Five of the best examiners in the service, men
of tact, good judgment and of wide experience, have already been appointed, and they have examined and by
direction of the Comptroller have forced the directors to
put into satisfactory condition, during the last nine months,
many banks which have been severely criticised for years.
The bank examiners at large have another and equally
important duty to perform, and they are performing it
well. As these National bank examiners at large are going
all over the United States and examining banks in different
districts, they are requested to report whether or not the
regular examiners for the district are doing their work
carefully, accurately and conscientiously, and in the painstaking way required by the Department. They are, therefore, not only examining and improving the conditions
found in many banks, but they are reporting what they
find out about the work of the other examiners.

CLEARING HOUSES AND NATIONAL BANK EXAMINERS.

DIRECTORAL CONTROL.

But the great majority of clearing houses have no examiner, and cannot afford to have one, by reason of their
limited membership. In all such cases, however, the clearing houses may, if they desire, utilize the results of the
work of the National bank examiner. If any clearing house
association in the United States, no matter how large or
how small, requests me to have the National bank examiner for the district in which it is located co-operate with
the clearing house in the interest of better and more conservative banking, I will direct the bank examiner to do
so. He should report only really dangerous conditions
and tendencies. The only condition required is that the
request be signed by all the banks composing the clearing
house, or at least that the co-operation be requested by
a committee properly authorized to make such a request.

come now to the question of directoral control, and I
approach it with no inclination to controversy.
The director of a bank who poses before the people as
the trusted custodian of their funds, and who is using
his trusteeship for the purpose solely of personal gain,
who is recklessly speculating with the people's money by
borrowing unwarranted sums upon insufficient security, is
the greatest menace to the safety of the banking system
to-day. The elimination of this type of director from the
control of banking institutions and the fostering of a
keener sense of responsibility among a certain class of
bank directors of the duties of their high office is being
attempted by me through all the means at my command.
No matter how effective a law the Comptroller may have
at his. disposal; no matter how efficient the bank examinations may be, in the last analysis the internal management
of the bank makes for either success or failure. The three
forces, good examination, strict enforcement of the law,
and directoral control, are absolutely essential; but the
most important of all is the directoral control. As every
Comptroller takes an oath of office to see that the National
banking law is enforced, it seems not only my official duty,
but that I am bound morally, to make an effort to bring
home to the management of every bank, where it is either
careless or inefficient, a due sense of its legal and moral
responsibility to its depositors. When the government
gives to a body of men a charter which authorizes them to
receive other people's money, and at the same time the law
fixes upon a government official the duty of supervising

CO-OPERATION BETWEEN THE NATIONAL AND STATE EXAMINERS.

In every State, with possibly the exception of Massachusetts, there are very closely allied institutions, one
under the National system and one under the State.
It has been the policy of the Comptroller's office for several years to make an effort to' arrange with the State
superintendents to have the State institutions examined at
the same time that examinations are made of the allied
National banks, but the effort has been in the main a
failure. When the State examiner was ready to examine
the State institution, the National bank examiner would
no be ready to examine the National bank, or. vice versa.




I

126

BANKERS' CONVENTION.

these corporations, he is doing no more than the law requires of him when he inquires of the directors how they
are performing the duties which they take an oath to
perform.
The reasons for my determination to make an effort to
stimulate directoral control were two: First, a National
Commission is now making a study of the entire banking
situation in this country. And as in the present banking
law the duties of directors are not specifically set out, it
seemed well to ascertain definitely just how the seven
thousand banking corporations chartered by the government are internally managed by the board of directors;
so that, if, in the new law, it seems wise for Congress to
specify in detail what the duties of directors shall be, it
will have the statistics as to just how the banks are managed at the present time. And, secondly, I desired to find
out just how the banks are managed, so that, with no
additional legislation at all, bad conditions may be remedied by good, effective administration. And I have found
such a remedy. I now know exactly how every bank in
the country is managed, and the few badly managed ones
will be examined hereafter four times a year, and in the
presence of the directors. And in the banks where the
management is either careless or not up to a fair standard,
the directors will be asked to adopt such rules for the
internal management of the banks as will remedy for all
time all ground for just criticism, either from the Comptroller or from anybody else.
And I can say to you now that I firmly believe that
before the end of this year every single bank will comply
with this reasonable request. The result will be that
within a few months there will be on file in the Comptroller's office a letter from the boards of directors of every
bank whose internal management is subject to any criticism, agreeing to meet all reasonable requests of the Comptroller's office; and further agreeing that the internal
management of the bank, hi the future, will be vigorous,
effective, constant and watchful.
I assumed the active control of the Comptroller's office
just a year ago, and during the year an investigation has
been made as to the management and condition of every
one of the seven thousand National banks. I have gone
over the reports of the examiners of every bank, as well
as the answers made by the directors to the questions put

to them, and I can say to you this morning that for honesty of purpose, for painstaking devotion to the heavy
duties and responsibilities placed upon them, for keen business ability and devotion to the interests of the nearly six
million depositors, for the wise handling of the assets of
the banks, in round numbers nearly ten billions of dollars,
the officers and directors of these seven thousand National
banks as a whole have no superiors in any corporation
in the world. And it is in hearty co-operation and accord
with these officers that I desire to work, to correct every
condition which we may find that is not up to a reasonable
standard.
I have been asked repeatedly what my position is on the
question of guaranty of bank deposits.
Gentlemen, I believe in just one kind of guaranty of
deposits. I believe in the guaranty which comes from the
Comptroller of the Currency doing his duty under the law,
from the bank examiners doing their duty and from the
executive officers and directors of the bank doing their
full duty and in accordance with the oaths of office which
they take. That is the only kind of guaranty of deposits
in which I believe. That kind is practicable, and it does
not cost the banks an extra dollar, nor permit depositors
to lose a dollar.
CONCLUSION.
I have briefly touched on some of the problems that confront the Comptroller's office. In the near future other
problems will come up, and an earnest effort will be made
to meet them in a fair and business-like way, and if improvement can be made in the management of the Comptroller's office, I want to be among the first to suggest the
improvement, and the first to make it. I am not one of
the public officers who believe that the way the government has been doing things for fifty or one hundred years
necessarily is the best way. I am looking for a way to
make betterments every day, and the moment they can
be made, with safety and security, they are made.
I have but one request to make this morning, and that
is that in the solution of the problems coming before me
you give me, when you feel I am right, your kindly consideration, your encouragement and your support; and
when you feel I am wrong, your fair criticism, for fair
criticism is as helpful as honest approval.

National Wealth and the Farm.
BY IION. JAMES J. HILL, Chairman of the Board, Great Northern Railroad.
The well-being of a country, its political institutions,
the direction of its industrial progress and ultimately of
popular genius itself depend intimately upon the amount,
distribution and employment of its capital in the shape of
cash and credit. This is the motive power of the national
engine. It always has been so. "Commercialism" has been
common and must be common to every time and every
race above the barbaric level. Men are always seeking to
better their condition. The increase of wealth is an outward and visible sign of an increase in intelligence and
power. The use made of that wealth will determine largely
the quality of the next national era and the ideals that
move the new generation. The bankers of a country, for
centuries past, but more completely now than ever before,
rank high among the custodians of the nation's future.
This gives to the deliberations of a body such as yours a
profound and far-reaching significance.
.. I may, therefore, be excused for departing from precedent
if I devote this opportunity to a brief review of one of
the larger national needs of the United States, since the
wealth and industry of the whole country are represented
here, rather than to some topic directly connected with the
conduct of the banking business. It will be, I hope, more
profitable to leave these matters to the experts among your




own number and to consider instead the rapidly changing
balance of our industries which leads to disturbance and
possible disaster to the nation. If there be any dislocation
of the process of wealth-building in sight, the bankers of
the United States have more interest in a clear perception
of the fact and an effort to forestall misfortune than any
other class.
The public is now to some extent awake to the relative
value of the different occupations as sources of wealth.
The farm is our main reliance. Every other activity depends upon that. The farms of this country are now
adding annually over eight billion dollars to the total of
our assets; a total which, unlike that of manufacturing
and other industries, represents not value conferred by
human labor upon some material already existing, but
value actually created out of elemental things. This is the
annual miracle of the earth; quite as wonderful as if a
new planet should appear in space each twelvemonth. It is
the mother of every other form of human industry. Our
tillable area may be made to support millions of people
greatly multiplied after the last bit of mineral has been
extracted from the earth, and man's ingenuity in fashioning tools and fabrics has passed its limit. There is no
comparison, in volume, in value and in relation to human

BANKING SECTION.
enterprise and the very continuance of human life between the cultivation of the soil and any other occupation.
So far the majority of people will agree. What they
fail to realize practically is the declining status of agriculture in this country. They are misled by the statistics
of farm values and products, mounting annually by great
leaps, into thinking that this absolute increase implies
a relative advance of this industry as compared with
others. Exactly the opposite is the case. I refer not
merely to the quality and results of our tillage, concerning which something may be said a little later on, but to
the setting of the human tide away from the cultivated
field and toward the factory gate or the city slum. This
is something whose consequences for evil are as certain
as if the aggregate deposits in all the banks of this country were decreasing by a fixed percentage every ten years,
while their loans were increasing by another percentage
just as stable. You would know what catastrophe that
assured by and by. It means the same thing, in kind
and consequences, when the agricultural population, the
producers and depositors in the great national treasury
of wealth, is declining year by year, while the city population, which thrives only by drawing drafts upon the land
and cannot live a year after these cease to be honored,
rises at its expense. Yet not only is such a crisis approaching, but it is being hastened by legislative stimulation
in favor of other industries while overlooking this.
In 1790 only about 3.4 per cent. of the American people
lived in towns. At the time of the Civil War the percentage had risen to 16. In 1900 more than 31 per cent.
of our population was urban. The change is portentious;
and there is no doubt that the coming census will show
it to have proceeded in the last ten years with accelerated
speed. In spite of the warnings of economists, the amelioration of farm life, the opening of new and attractive
employment on the land through the spread of irrigation
and the growth of the fruit industry, the encouragement
of public men and the wider dissemination of agricultural
education, the percentage of our population who work on
the farm constantly declines. If that proceeds too far, it
is as if dry-rot had eaten through the timbers supporting
some great structure. We should consider now the change
accomplished and that impending.
In the earlier history of the country, it is well known
that the great majority of its people followed the cultivation of the soil. The census of 1870 was the first to group
the population of ten years old and upwards in great divisions according to occupation. The drift away from the
land became pronounced in 1880. Since then the process
has been continuous and the results cumulative. The percentage engaged in agricultural pursuits of the whole number of persons ten years old and upwards engaged in gainful occupations in this country is as follows by decades:
1870
1880

47.36
44.3

1890
1900

37.7
35.7

From all the States, East and West alike, comes the
complaint that the children will not stay on the farm,
and that other labor cannot be enticed there except by high
wages for a few weeks in summer. It is quite probable
that the new census will show this farm population reduced
to 30 per cent. of the whole. We may certainly say that
it does not exceed one-third. And, unless this tendency
is counteracted, no one can now predict to what inconsiderable fraction it may one day be reduced. Totals of farm
products expressed in dollars and those expressed in bushels or pounds tell quite different stories. We maintain
the showing because new and fertile land is still being
opened, while at the same time older lands are abandoned
or deteriorate. The possibility of this disappears with the
appropriation of most of our available unoccupied land.
The further fact is that we are now and have been for
more than a generation, in spite of our boasted rtrogress,
in the grip of a revolution that has preceded declining
wealth and falling institutions wherever it appeared since
history began.




127

The effect of a constant decrease in the number of
those engaged in producing any foodstuff, while the number
of consumers steadily grows, is already evident in our markets. We exported last year 68,000,000 bushels of wheat,
which was about 30,000,000 bushels more than we had to
spare. We drew down our supplies to that extent, and
the market responded with the highest prices known for
many years. Last May wheat that had been shipped from
Kansas City to Chicago and sold there was resold and
shipped back to Kansas City at an advanced price. In
the same month wheat was taken out of storage in New
York City, shipped by steamer to Galveston and sent by
rail to supply the immediate needs of mills in the wheat
belt. This season there will be an unusual wheat crop,
probably 700,000,000 bushels or upwards. At six and a
half bushels per capita for home consumption and seed,
this leaves us a surplus of 115,000,000 bushels. We shall
probably export 125,000,000 bushels, under the pressure
of foreign demand, leaving us nearly as badly off as we
were last year.
With our annual increase of over 1.5 per cent. in population from natural causes and immigration that has not
been less than three-quarters of a million any year since
1902, there will be from two to two and a half million
more mouths to feed every year. Having in view this increase in population, the declining average yield per acre
of cultivated land in the United States after it has been
farmed for a few years, the rise of per capita consumption,
with a higher cost of living and the movement of the
working population away from the land, the time is now
approaching when we shall not only cease to be a wheat
selling nation, but will find it necessary to import a portion of what we consume.
Last year the value of our total exports classified as
foodstuffs, either crude or partly or wholly manufactured,
and food animals, amounted to $438,000,000. We imported
of the same classifications nearly $329,000,000. The idea
that we feed the world is being corrected, and unless we
can increase the agricultural population and their product, the question of a source of food supply at home will
soon supersede the question of a market for our own prod..
nets abroad. Our foreign trade in the past has rested
mainly on our exports of products drawn from the earth
directly, or only once removed. Our manufactures for export are to a large extent natural products subjected to a
few simple processes. How are we to meet the immense
trade balance against us, how prevent financial storms of
frequent occurrence and destructive force, how feed the
coming millions, if the farmer, who pays most of the bills,
has retired to the city or the country town in order that
his children may the better enjoy their automobiles and
enter into the delights of the social game?
Since the percentage of those at work on the soil declined by about one-fourth in the last thirty years, we
have to consider not only the increase of food demand over
its domestic supply but also that disturbance of the balance between one form of industry and another upon which
prosperity and stability depend. This industrial interdependence appears to be one of those universal laws
that prescribe harmony and proportion as essential to
health. Just as the soil itself must have a change of crops,
as every member of the body must have its appropriate
exercise, as a hygienic food ration must include a proper
amount of each of the chief chemical constituents to produce physical and mental vigor, so human occupations
must be distributed with reference to one another if the
big machine is to work without loss of efficiency or collapse. Up to this time other industries than agricultural
would have flourished and grown amazingly in the United
States without any artificial stimulus, because the large
percentage of the total population engaged in agriculture
furnished an adequate market. This condition is changing
rapidly.
If, in a population of 100,000,000 people, which we shall
have shortly, 45 per cent. are engaged in agriculture, then
45,000,000 people are calling upon the labor of 55,000,000

128

BANKERS' CONVENTION.

for clothing, professional service, commercial help, tools
and furniture and all the smaller comforts and luxuries.
If, instead, the agricultural percentage is reduced to 30,
only 30,000,000 people instead of 45,000,000 people make
such demands, while 70,000,000 instead of 55,000,000 compete in supplying them. A stationary or declining product,
a soil becoming annually less productive, a revolt against
the life of the farm and a consequent rise in wages amounting, since 1895, to 55.6 per cent. for ordinary day labor on
the farm without board and 61.3 per cent. with board,
compel such a rise of all prices as bears ruinously upon
town and country alike. Our real concern is not so much
to save the home market from the inroads of the foreigner
as to keep it from destruction by an enlarged city life
and a neglected country life, a crowded artisan population
clamoring for food and a foreign demand for the product
of their wages limited to fields where the competition of
all the world must he met and. overcome.
This problem besets Great Britain to-day. We must not
seek voluntarily that calamity which has been forced upon
her by physical conditions. The time of her greatness
was the era of prosperous agriculture, with other industries proportioned to it duly. Long after that balance was
disturbed, she maintained herself because the growth of
her colonies was equivalent to added farms in England.
At the same time she improved her domestic agricultural
methods and doubled her product. Thus she protected and
preserved herself until the growing tyranny of her trade
unions made much of her production too costly for the
markets of the world. Their limitations on output, their
embargo upon exceptional skill and industry, their opposition to enterprise and their practical control of legislation
have at the same time raised prices and lost markets.
From such a dilemma Great Britain has turned to the
socialistic hallucination; and even some of her truest
friends doubt whether she has vitality and recuperative
power enough to save•her from permanent decline.
There are few more interesting chapters in history than
those detailing the relation between industrial development, the food supply and the growth and decline of
political institutions and national greatness. Civilization
is mostly the story of the triumph of the human stomach
in its struggle for food equal to the work of physical and
mental evolution. Events and epochs that puzzled the
historians of the past are explained by a study of common human experience. An economic cycle runs through
all the affairs of men from the earliest times. There is a
period of foundation-laying, in which agriculture is the
accepted resource of the State, and national strength is
built upon it. Then the demand for an enlarged life
stimulates the manufacturing and the commercial interests,
and there ensues a period of great prosperity, which sees
the rise of great fortunes, the relative decline of the food
supply, the introduction of luxury, the growth of indolence
and a universal increase in prices. Never yet has this
enhanced cost of living, when due to agricultural decline
and inability to supply national needs, failed to end in
national disaster. Professor Ferrero, in his story of "The
Greatness and Decline of Rome," after describing the agricultural depression of Italy, the ruin of her peasantry and
the distress of all classes that followed, attributes it "simply to the increased cost of living." This, rather than
imperial ambition or race decay, is the key by which history unlocks the secrets of the past.
Once the valley of the Euphrates was earth's garden
spot. Its greatness passed with the deterioration of its
soil. When Greece was at the summit of her power, her
ambition was to capture the grain trade by holding sway
over the Black Sea and the Bosphorus. Even in good
seasons Attica is said to have been obliged to import about
_12,000,000 bushels of wheat. Every one of the great nations
of antiquity guided its foreign relations and directed its
invasions and conquests with a view to obtaining an adequate food supply. That was the value of Egypt to thern
Roman Empire. That determined her policies in the East.
Spain in her greatness scoured the world for the food




which her own soil had ceased to yield. With the decline
of agriculture every one of these nations lost its leadership and either disappeared or remains a mere name.
The consumers of bread throughout the world increase
by probably from four to five millions every year. In
our own country we shall require from 13,000,000 to
15,000,000 bushels more annually for seed and home consumption. The domestic supply cannot be maintained by
present methods. Not only is the cultivation of the soil
being neglected, but it is also notoriously ineffective. Our
wheat product per acre from the older lands falls steadily.
Our national average is less than half that of England or
Germany, both of which have soil inferior to our own.
Only.. by bringing rich new land under cultivation have
we prevented the fall from becoming abrupt. Good farms
in the Mohawk Valley in New York State forty years ago
were worth from $100 to $150 per acre; now many are
sold at from $25 to $30. This is not because wheat has
become cheap, for it is dear not entirely because of Western competition, but because there is neither good cultivation nor enough cultivators. The younger generation
throngs the cities, and the land, rented by its owners
to tenants careless of everything but immediate profit, is
abused and robbed of its fertility. In New York State
20,000 farms are for sale. The southern central portion
shows a progressive loss of population. Professor Tarr, of
Cornell University, in an article published during the present year, says: "I have driven much over the country
roads of this section, and have been astonished at the evidence of general decline in the farming industry, especially
in the hilly sections. Abandoned houses in all stages of
decay abound, and in some cases the forest is encroaching
on the pasture." Schuyler County had 3,815 less population in 1895 than in 1860, Tioga County 2,000 less and
Yates 992 less. If anybody imagines that this process of
exhaustion and abandonment or transfer to other uses is
peculiar to the East, let him look at Iowa, whose average
wheat crop in the five years 1883-87 was 29,682,560 bushels,
and in the five years 1904-08 was 9,976,488 bushels. In
1908 it was 8,068,000.
All this has come about notwithstanding economic
changes favorable to the occupant of the farm. In the
introduction to the census of 1870, relating to the agricultural interest, we read this: "It is sufficient barely to
allude to such notorious facts as corn selling in New England at 90 cents and being burned for fuel in Iowa;
wheat selling at $1.35 in New York and for 45 cents in
Minnesota; beef bringing $7 a hundred on the hoof in the East, while cattle are being slaughtered for their hides in
Texas." Such inequalities are unknown to-day. The per.
fection of our transportation system has made a market
accessible to every farmer, and carries his produce at the
lowest rates in the world. His life has become more comfortable and desirable. But the increased cost of living
bears most hardly upon him, while it entices his children
to the centers where they think that the larger income
now found necessary may be won more easily. And while
the enhanced price of grain may induce him to enlarge his
wheat acreage, it does not lead him to more careful tillage.
The situation, then, sums itself up thus: We have almost
reached a point where, owing to increased population without increased production per acre, our home food supply
will be insufficient for our own needs; within ten years,
possibly less, we are likely to become a wheat-importing
nation; the percentage of the population engaged in agriculture and the wheat product per acre are both falling:
at the same time the cost of living is raised everywhere by
this relative scarcity of bread, by artificial increase in the
price of all manufactured articles, and by a habit of extravagance which has enlarged the view of both rich and
poor of what are to be considered the necessaries of life.
These plain facts should disturb and arouse not only the
economic student but the men who are most intimately
related to the wealth of the nation and most concerned
that it shall not suffer loss or decrease.
You deal with wealth in its most condensed and univer-

BANKING SECTION.
sal form. That wealth is the slow accretion of many
centuries. It changes its form and occupation with wonderful facility; but so slight at all times is the margin
between the world's production and its consumption, that
its savings have been acquired almost as slowly and painfully as the miser's hoard. Practically only a few months
lie between a universal cessation of production and the
destruction of the human race by starvation. The marvelous diversity of modern industry and its products
blinds us to the bare simplicity of the situation. Those
who, like you, are main factors in supplying to industry
the means to carry it on, who open up the main and
lateral channels through which the fertilizing stream of
capital may be turned upon the otherwise barren field of
labor, should be always mindful of the first great source
and storehouse of national wealth, and the most sensitive
whenever it is depleted or endangered.
What we must come to—and the signs of the times
indicate that we cannot make head in that direction too
rapidly—is the smaller farm, with a more intensive agriculture. We support, in round numbers, ninety millions
of people on three million square miles of land. We
should be able to support 150 per square mile as easily as
30; and then we should have but a fraction of the density
of population of Denmark with 167 inhabitants per square
mile, Holland with 448, or our own State of Rhode
Island with 407 in 1900. But the education of a whole
people in right methods of tillage is a stupendous task.
It took England nearly fifty years to do this, with powerful agencies at command and with a control over her.
farmers through leasehold conditions that no one in this
country possesses. She has raised her average wheat yield
from 12 and 15 to upwards of 30 bushels per acre. If it
should take us fifty years, we would by that time probably have doubled our population also, and barely kept
pace with our necessities. But we have not yet accomplished the mere preliminaries of such a process.
Not only have we not begun, except in a few cases so
rare that they furnish striking illustrations for magazine articles and experiment station bulletins, to mend our
farm methods, but the machinery by which the great
body of farmers may be reached—as they must be reached
if any change worth considering is to be brought about—
has not yet been determined upon. While we do considerable for the boys and girls who attend them through our
more than threescore agricultural colleges, but little impression is made upon the bulk of all the people engaged
iii farming. Here are some extracts from a letter written
recently by an intelligent farmer for publication: "I don't
think one-half of 1 per cent. of the farmers of the State
are in touch with the State Agricultural College and Experiment Station. It is practically unknown to the mass
.of the farmers." That is true everywhere. There were
more than ten million people at work on the farms of this
country in 1900; and it needs a big school and a big
teaching force to take them all in.
That is what we have to do. There are between six
and seven million farms in the United States to-day.
Their annual product of over $8,000,000,000 could be
doubled without adding anything to the labor or money
now expended. The average wheat yield of the country is
now about 14 bushels per acre in good years. The same
land might produce 30 bushels if properly cultivated. The
average cotton yield is about four tenths of a bale per
;
acre, and possibly four times that amount could be raised
as easily. The same holds true of the whole list of farm
products. The farmer has been discouraged by seeing
every other industry preferred to his. A false policy of
stimulating these by legislative favors has naturally
tended to tempt the intelligent, energetic and ambitious
into other occupations.
While much praise is due to what is now being done,
and well done, by the agricultural experiment stations
and colleges, by the Department of Agriculture and by
farmers' institutes and other agencies, the job is too big
for them. When we set out to educate the children in




129

the public schools, we do not establish one or two large
ones in each •State and expect them to go there. The
farmer is almost as numerous, as much in need of instruction, and is unable to leave home in search of it or to
absorb it through literary channels, as the child. The
education must be taken to him. If all the graduates of
all the agricultural colleges were sent out as missionaries
to the farm, there would not be enough of them to do the
work. But it is the sort of work in which every State
should engage without delay.
What has to be taught is not abstruse. While highgrade farming can furnish employment for the best intelligence, instruction in a few simple subjects will enable the
ordinary farmer to double his product. He needs to be
taught how to prepare a field properly for the seed; how
to select and where to get the seed that will yield the
best return; how to cultivate each crop; how to combine
stock-raising with tillage, and how to rotate his crops
and preses ve unimpaired the richness of his soil. On his
r
own farm, with the material and the object lesson before
him, under instruction that comes with public authority
and sanction, he will be a pupil apt to learn. It is on a
par with the importance of the public school. We have
not yet made a beginning; but every other interest and
every other item of proposed legislation might well wait
until we do.
The returns of Great Britain's Board of Agriculture
show that there are less than 15,000,000 acres under the
plow to-day as against 18,500,000 acres thirty-five years
ago. An investigation of the decline in the agricultural
population in France has disclosed two main causes. One
is this same rise of prices, which sends the young to the
cities because they believe that they can reach independence sooner there than on the farm, where they must
labor for years before they can put enough capital together to engage in business for themselves. The other
is the temptation to indolence, extravagance and inefficiency offered by the pension system. With support
given by the State to civil as well as military servants,
and promised to old age unaccompanied by any other
claim, men seek the comparative ease and excitement of
the town in early years, believing that in age and infirmity some one else will pay for their self-indulgence.
But every nation will still learn and progress by bearing
manfully the consequences of its own mistakes. They will
stand or fall hereafter as heretofore according to their
care of the one great resource—the soil; the one indispensable occupation—agriculture; and the maintenance of
a proper economic relation and balance between it and all
others.
It is not illogical, and I hope it will not prove unhelpful, to make this presentation of our industrial case
to
the associated bankers of the country and to
invite
their co-operation. The strength of capital and
the
mightier force of credit hold up your hands. "Credit,"
said Daniel Webster, "has done more, a thousand times,
to
enrich nations than all the mines of the world." The
banks are creators, distributors and conservators of credit.
This power, mightier than armies, is within certain limits.
under their control. They can, subject to the large and
general business conditions that govern us all, use thb
force to encourage or to discourage. You can do as much
by the influence and advice to which your calling so often
lends weight. I can best express the possibility and
value of this by quoting from the last address of President Chapman, of the Minnesota Bankers' Association:
"The banker as an individual hardly recognizes the important place he holds in the community. He is the confidant of the widow, the orphan, the business man, the
farmer and the professional man. To men engaged in
no
other occupation do the people look for guidance
and
advice in business ventures more than the banker. . . .
It is to you, gentlemen, largely, that the father of
the
young man living in the country comes for advice as
to
what school or college the boy is to attend or what
profession he should follow; and it is your duty to be
so

130

BANKERS' CONVENTION.

advised and posted regarding conditions in the cities that
you can intelligently advise that father whether it is to
the boy's interest to leave a farming community where
the chances are that in five or ten years he can own a
farm and be worth $10,000 to $50,000 in intelligently
farming the land, or whether he should go to the great
cities and become the future motorman and street car
conductor." Thus I am able to reinforce by the words of
one of your own order my opinion that you can do much,
both by direct influence and by promoting such an educational campaign as I have outlined, to restore the prestige
of the farm and to raise it to that pre-eminence in profit
as well as in attractiveness which is its own due and the
nation's hope.
The eminent historian to whom I have already referred,
scanning the history of more than twenty-five hundred
years with the eye of the philosopher, determined to

extract from this vast store of facts, according to the
modern •scientific method, some fixed principle in the affairs
of men, announces this as his conclusion: "The only durable conquests, even in ages of barbarism, are conquests
made by the plow." If this was true of the rude ages
when men lived for the sword, and the tiller of the earth
was either a slave or a still more wretched peasant, it is
far truer to-day when civilization has built her imposing
fabric upon the expected bounty of the earth. We must
maintain, protect and extend these conquests by which
the race has won its way. It is not, as in the old mythology, Atlas whom we see groaning beneath the weight
of the world upon his shoulders, but the homelier and
bumbler figure of the cultivator of the soil. It is for
each of us, in every capacity, public and private, to do
what in us lies to enlighten, reinvigorate and sustain this
common benefactor of our kind.

si
The Efficacy and the Limitations of Bank Suftervi on by Examination and the Resfionszhle Source of Bank Management.
BY JAMES B. FORGAN, President The First National Bank of Chicago.
Bankers and their customers alike are deeply interested.
in this subject. For some years past this interest has
manifested itself in a growing demand that bank supervision should be as thorough and bank examinations as
efficient as it is possible to make them. In response to
this demand there has been a steady development of
method and a widening of scope in government examinations—both National and State. The clearing house associations of some of our larger cities have organized
examination bureaus, and private audits by chartered
accountants have become of much more general and more
frequent use. These developments have greatly enhanced
the efficacy of bank supervision and improved the efficiency
of bank examinations.
So marked have been these developments and improvements that there seems now some danger that the limita•
tions of bank supervision by examination will be overlooked
and that too much reliance will be placed in the efficacy
of external supervision. The public must not be deluded
into the belief that official examinations will relieve them
of the fundamental duty of exercising their own discrimination in the selection of a bank. The entire credit system
on which the business of the country is built up having
its very basis in the exercise of such discrimination, any
delusion which proposes to relieve the public of it would,
morally and economically, be most injurious, tending to
carelessness and general demoralization in business affairs
as well as to a lowering of the standard of business
sagacity and social efficiency.
There is a growing tendency on the part of the public
to blame government or other authorities charged with the
supervision of banks by examinations for failures when
they occur. This tendency of public opinion I regard as
unfortunate, untenable and unjust. In considering these
questions let me call your attention to three kinds of bank
supervision:
First—By the Government in the interest of the public.
Second—By the Clearing House Committee in the interest of associated banks.
Third-7
-By the directors in the interest of their stockholders and depositors.
As State supervision is modeled after that of the National Government and serves the same purpose we may
confine our consideration of government supervision to that
authorized by the National Bank Act and conducted by the
Comptroller of the Currency.
The authority of the Comptroller of the Currency is, of
course, statutory, which places limitations on his jurisdic-




tion and restricts it to such powers as are conferred upon
him by the National Bank Act. The powers thus conferred
upon him, briefly stated, are as follows:
In connection with bank organizations he is empowered
1. To require a copy of the articles of association,
2.

To approve each bank's name and its organization certificate,
3. To authorize banks to begin business,
4. To certify payment of stock,
5. To compel oaths of directors;

And during bank Operation
1. To approve or disapprove increase or decrease of capital
stock,
2. To require reports from banks and to fine them for
refusal,
3. To designate or approve additional reserve cities and
additional central reserve cities,
4. To appoint a receiver
a. When a bank has refused to redeem its circulating
notes, or
b. When it shall be dissolved and its franchises declared
forfeited, or
c. When a creditor obtains a judgment against it which
remains unsatisfied thirty days, or
d. When he shall be satisfied of its insolvency, or
e. When its legal reserve is short and it fails to make it
good within thirty days, or
I. When its capital is impaired and it fails to pay it up
after three months' notice,
5. To appoint examiners who shall examine into all the
affairs of the bank, examine officers and agents and
make their reports to him.

The Act gives him inquisitorial power as to amount of
assets, but only inferentially as to character of assets. He
is required to "examine into all the affairs of the bank"
and is given discretionary power to decide when an impairment of capital takes place and to take summary
action thereon. In order to do so he must, of course,
investigate and pass upon the value of the assets. It is
not, generally speaking, his function to exercise his judgment as to current credits so long as they are within legal
limits as to amount. The exercise of such judgment would
neither be desirable nor practicable. That responsibility
rests on the bank's officers and directors. The Comptroller
seems to be unnecessarily hampered by legal restriction in
determining when losses have occurred. Under the terms
of the•Act no obligation due a bank can be considered bad
until interest is past due six months, and not then if it is
secured or in process of collection. Such a narrow definition of a bad debt can only embarrass him and his examiners in arriving at a correct conclusion as to the
impairment of a bank's capital. Under his power to

BANKING SECTION.
appoint a receiver he is given the power to decide when
a bank is insolvent. He is again hampered here by the
Federal Courts' definition of insolvency, which is "inability
to pay. current debts as they mature," and he could be
enjoined in the District Court for any abusive exercise of
his discretion.
Notwithstanding these limitations and restrictions, I
believe it may truthfully be said that under no other
banking system in the world are such executive authority
and plenary powers conferred on any one man as are
vested in the Comptroller of the Currency. Nor do the
laws of other countries place such restrictions and limitations on banking operations as are placed .on those of our
National banks.
Considerable attention has recently been directed to the
possibility of improving the Government's supervision of
National banks by the passage of further restrictive laws
and by extending the Comptroller's powers so that he may
enforce them by fining or otherwise punishing those who
break them. If all the suggestions that have been made
along this line were enacted into law the Comptroller's
offce would become so overburdened with executive duties
that no man with any proper sense of the responsibility
involved would accept the position. The more general and
undefined the powers of the Comptroller are, the more useful to our banking system will the administration of his
office be made. To charge him with specific duties, which
are impractical because impossible of fulfillment, will only
weaken the administration of his office and detract from
its usefulness. Any attempt to regulate individual bank
management by specific legal enactments and to hold the
Comptroller responsible for their enforcement would prove
futile, for as has been well said by Senator Aldrich in
this connection, "we cannot legislate good judgment and
honest purpose into the minds and hearts of men." Realizing this, our legislators should be careful that bank
management is not hampered with such petty legal restrictions as only retard the natural and legitimate development of the business, stunt the growth of individual banks
and impair their ability to compete for international
business with the older and greater banks of other countries.
Under our system of free, individual and purely local
banking, rising industries of all kinds in any given locality
must provide themselves with banking facilities by organizing and usually controlling their own local banks. The
natural tendency of this is to place the management of
new banks directly under the control of their principal
local borrowers, hence, our banking laws have had to be
strongly restrictive and prohibitive. This is a weakness
inherent in our system of numerous small independent
banks.
It is evident, however, that restrictive measures which
may be necessary to regulate a country bank with very
limited resources, when applied to large city banks with
resources aggregating many millions, would prove exceedingly irksome, tending only to retard their progress, curtail their legitimate enterprise and impair their usefulness
to the community.
Some evils which it is sought to correct by further restrictive legislation are, as I have already intimated,
inherent in our system. For instance, there is found in
some of our. small banks a large line of trade paper entirely out of proper proportion to their resources and frequently discounted for the president or a director or for
corporations in which they are interested. It has been
proposed to place legal limitations on the aggregate
amount of such paper which a bank can discount for any
one customer. It is, of course, the abuse and not the
legitimate use of banking facilities which it is sought to
prevent by this legislation. By thus attempting, however,
to prevent such abuses which only occur in a few cases,
the legitimate and helpful use of banking facilities may be
seriously curtailed. If the credits as originally granted
by the bank's customer have been carefully and judiciously
made and the paper has all been taken by him in good
faith for merchandise sold and delivered, and if these




131

facts have been properly checked up by the banker, as
they should be, a safer, sounder or more legitimate line
of discounted paper cannot be conceived. The only limitations necessary to be placed on it, other than the bank'Ep
capacity to handle it, are such as every sensible banker
will place for himself, viz.: a limit on the amount of the
obligations of each individual maker, in proportion to his
standing and credit, as these may easily be ascertained on
inquiry.
In the great majority of cases it is the prosperous industries in a community that require banking facilities, and
their successful owners that take steps to provide them.
As a rule, the officers appointed are honest and trustworthy, comprehending their fiduciary relationship to their
depositors as well as to their stockholders and having due
regard to the well-recognized principles and methods of
banking as well as proper respect for the banking laws
under which the bank is organized. Hence, fortunately,
success is the usual result and failure the rare exception,
as is shown by the small percentage of failures that take
place. Abuses calling for governmental interference creep
in when the men in control of a bank, through recklessness
or mismanagement, are unsuccessful in their other enterprises. Under their baleful influence, the executive officers
appointed and controlled by them, gradually forgetting
their responsibility as trustees, ignoring correct principles
of banking and defying the law, become demoralized and
permit the use of the bank's facilities for improper purposes. By granting constant renewals of what were
originally trade notes, instead of enforcing their payment,
they permit their controlling borrowers to carry along
their delinquent debtors. Gradually accommodation notes
are permitted to go through as representing actual transactions, until the parties in control of the bank, besides
having borrowed on their direct obligations all the law
permits, have become liable as endorsers on a wholly un•
warranted line of discounted paper, which is not what it
professes to be, but is composed of renewals of bad credits,
accommodations, kites or otherwise worthless paper, together with all the other abominations to which mismanagement and bad banking fall heir. Such a condition of
affairs is a most difficult one for the Comptroller or his
examiners to handle. The longer it lasts the worse it
becomes, and it is difficult from a legal standpoint to allege
a cause for action. The only thing that can be done is to
promptly take exception to such business in its incipient
stages, keep on objecting to it and finally take action when
it becomes so bad that an impairment of capital or insolvency takes place.
This evil, however, diminishes as industries grow and
increase, and banks grow with them. Villages become
towns, and towns cities, and banks develop with them,
increasing their resources, diversifying their business, distributing their credit risks and gradually becoming independent of any single controlling interest or influence.
Just as in other lines of business, the weak and poorly
managed drop out of the race and the strong and wellmanaged survive. With our business rush and rapid
growth, together with the necessity there has been of employing men to manage our banks who have had no
previous knowledge or experience in the business, the wonder is that failures have been so few. The results afford
no basis for serious complaint against the Comptroller's
department, as it has been administered, and disclose but
little necessity for new laws to regulate it or bank examinations as they are conducted under it. Both are
developing as the system develops and are steadily improving in efficiency.
Many of the suggested changes in the administrative
features of the National Bank Act are such as, under the
general powers conferred upon them, the Comptroller, his
deputy and examiners can best work out for themselves.
Some of them, however, are quite necessary and desirable.
It would, for instance, be ideal to have a corps of trained
examiners, adequately paid by salary and under civil
service rules, both as to their appointment and the tenure

BANKERS

132

CONVENTION.

of their office. Also to make the position of Comptroller
of the Currency such as to inspire the ambition of leading
and successful bankers to fill it. But these suggestions,
however desirable, do not seem practical or available at
the present time. They must await the further development of our system and in the meantime we should take
such practical steps as may make them possible in the
future. Good, capable and faithful service are not always
nor mainly dependent upon adequate remuneration. This
is conspicuously the case in the public service. The fact
affords no excuse, however, for perpetrating and perpetuating a palpable injustice. The pay of the Comptroller is
now and has long been totally inadequate. As a matter
of simple justice as well as of sound public policy his
salary should at least equal that of the presidents of large
city banks. Instead of being regarded as a position from
which bank presidents may be graduated the Comptrollership should be considered a post-graduate. honor. and a distinction of the highest order to be conferred on men who
have previously filled a president's position and demonstrated their ability by the success they .have achieved.
These ideals can hardly be realized, however, so long as
the acceptance of the honor by one holding such a position
would mean the reduction of his income by from one-half
to two-thirds, besides having to give up a permanent
position for one of limited term of service.
The pay of the Comptroller's deputies and examiners
should also be such as to command the services of experienced and competent men. The policy adopted by the
present Comptroller of appointing as examiners men Of
previous banking experience, giving preference to those
who have been connected with sound, progressive and wellmanaged institutions and refusing to consider applications
from officers or employees of badly Managed banks, cannot be too highly commended. However, as he will have
to compete for the services of such men with practically
all the good banks in the country, their remuneration
should be made such as will enable him to do so successfully.
It is most desirable, almost essential, that bank examiners should have had a bank training. Without it, unless
they are men of very exceptional natural ability and adaptability, they are liable to be impractical in their work and
erroneous in their judgment, applying theories to problems
which will not solve them and failing to exercise that
sound judgment which, as a rule, is only acquired through
practical experience in the business. On the other hand,
the experience of a bank examiner is of incalculable value
in the evolution of a bank training, provided he has previously been long enough in the banking business to have
asquired something of what may be called the banking
sense—a sort of intuition by which a banker reaches conclusions and makes decisions that are generally his best.
Policies controlling successful bank management must be
in accord with the laws of political economy and with
sound financial 'theories. Such laws and theories will not,
however, solve the problems connected with individual
applications for loans, no two of which are ever alike.
The theoretical banker, who knows it all and can give you
a definite rule for all he does, is not generally the successful one. Accompanying theoretical knowledge there must
be sound judgment and applied common sense. Bankers
have human nature to deal with in all its varying propensities. They must, as Burns advises,
"Keek thro' ev'ry other man,
Wi' sharpen'd, sly inspection."
Not coming into daily contact with the borrowing public
and having constantly to pass judgment on transactions
after they have been completed, bank examiners have little
opportunity for the development of this banking sense,
and unless they have by previous experience acquired it
they are very liable to get into a too critical frame of
mind and to become over-technical and .theoretical in forming their judgments. Having been a bank examiner myself
I speak from experience. The value of a bank's resources




cannot be measured by the rules .of mathematics, accountantcy, political economy or finance, and yet bank examiners,
as well as bankers, should be familiar with all of these
sciences.
A year ago when playing golf on the old links at St.
Andrews, Scotland, I saw a party of players coming
towards me with quite a gallery following them, showing
that they were recognized as experts at the game. Turning
to the old man who was carrying my club, I asked him
who the players were, which he told me. Recognizing
among their names that of a well-known authority on the
game, I remarked that I supposed he was a very good
player. "Weel," said the caddy, "he used to be among
the best, but two years ago he wrote a book on the science
of golf and he has not been much of a player since." I
have sometimes wondered since if there was not sonic
practical sense in the old man's observation. The gentleman's close attention to the technique of the game may
poL-sibly have affected his natural ability to play it; while
thinking of how to place his feet he may have neglected
to keep his eye on the ball.
Borrowing from their own banks by officers and directors
is another matter which it is thought should be regulated
by further prohibitive or restrictive legislation. That there
has been serious abuse of banking privileges along this
line is only too true, but, as I have already pointed out,
it is due to an evil lying at the very foundation of the
development of our banking system, the arbitrary prohibition of which now would be almost revolutionary. The
trouble lies in one man being permitted to act on both
sides of a transaction, i. e., both as borrower and lender.
Officially, he passes judgment on his personal credit, and it
is not human nature that he should degrade himself in his
own estimation. Bank directors who know their responsibilities and care to assume them will not permit such
practices.
It may be necessary under our system to do as some
of our State legislatures have already done, prohibit loans
to salaried officers, except with the full consent of the
Board of Directors, regularly recorded in their minutes.
It is a mistake, however, to pass laws which are too easily
circumvented. It only induces evasion which is always
demoralizing. As a rule, salaried officers of banks should
have little occasion to borrow, and it is open to question
if when they do they should not do so at their own banks,
always on satisfactory security and with the knowledge
and approval of their directors; never in my opinion otherwise. It is certainly better so than that they should be
compelled to go to some officer of another bank, or to some
personal friend and customer, with whom reciprocal arrangements for mutual accommodation could be so easily
established.
However this may be, it is certain that to absolutely
prohibit loans to directors, or to place legal restrictions
on loans to them, or to corporations in which they are
interested, that , do not apply to other customers. would
completely upset our present banking system, destroy the
integrity of its directorate and seriously impair its usefulness. The best directors banks can have, and those they
now do have, are the men connected with the leading commercial and manufacturing industries, whose close touch
with business affairs makes them the best judges of credits
in their various communities. If by being directors they
are debarred from the legitimate banking facilities to which
they are entitled, they will cease to be directors, and the
inevitable result will be that dummies will take their
places, possibly to do their bidding. The demoralizing
effect of such a condition of affairs, affecting practically
every bank in the system, can easier be imagined than
described. It. does not follow from this that the present
practice of showing directors' liabilities in reports to the
Comptroller should be discontinued, or that examiners
should not take special cognizance of them to see that the
bank is not being illegitimately or unreasonably used for
the special benefit of those controlling it. This is always
a legitimate and most necessary subject of investigation.

BANKING SECTION.

133

be a misdemeanor on the part of the officers and directors
It will, however, be found in nearly every case that the
and could be controlled by the criminal code as other
best loans in the banks are those to its directors, who are
engaged in the legitimate, successful and profitable enter- . frauds are. The injury would, however, be confined to
the deceived shareholders. No harm could come to depositprises of the communities in which they live.
ors from a bank being stronger than its statement disA serious defect in the Bank Act, as the courlys have
closes. In the interest of the bank itself as an institution,
interpreted it, is that false reports made to the Comptroller are not a misdemeanor as are false entries in the as well as in the interest of the stockholders who own it,
books and false statements made with intent to injure or a reasonable contingent fund is desirable and generally
necessary. Such a fund furnishes a reserve strength to
defraud the bank itself. This is all wrong and should be
protect a bank's resources against contingencies of which
promptly corrected. The making of false reports to the
Comptroller should be regarded as the most heinous offence there are plenty. In exceptionally prosperous years when
profits are large provision should be made for possible
of its kind and should be punished accordingly. A false
losses in lean years. Thus a bank's earning powers can
report to him means a fraud on the public whose reprebe steadied and sudden or violent changes in the book
sentative he is. It should be part of the duty of examiners
value of its stock prevented, much to the benefit of the
to check up reports made to the Comptroller. The integrity of the system depends on the reliability of the state- stockholders. For example, the year 1908 was one of
abnormally large banking profits, while so far this year,
ments made from time to time to the Comptroller and
published in the newspapers. , There should be no weak- owing to the low rates prevailing for money, profits have
been abnormally small. Last year, therefore, it was posness in the administration of the Comptroller's office in
sible to make liberal allowance for losses, and in view
regard to the criminal prosecution of bank officers who are
of the panic, just then passed, it was good banking that
guilty of falsification or misrepresentation. Such offences
this should have been very generally done. This year
should be nipped in the bud. When an examiner discovers
anything in the books, the securities, the loans or the there has been no margin of profit on current business out
records that misrepresents actual conditions it should be of which, after paying dividends, the usual necessary provision for losses can be made. At the close of 1908 it
a case for criminal proceedings and the law should be such
might have been impractical to specifically apply the
as to facilitate prompt action.
amount then appropriated, while in view of general busiAt an early stage of .my banking career the inviolability
ness conditions and their effect on the bank's customers
of bank reports was strongly impressed on my mind. A
the directors had good reason to anticipate considerable
bank agent in my native town misappropriated some of the
bank's money. According to the rules of the bank a loss on current loans, and when they had thus cause to
monthly statement had to be rendered to the head office. expect it who will say that it was anything short of their
In this statement the agent and accountant had both to duty to provide for it? It is neither necessary nor advisable
certify that they had counted the cash and that it was that whenever loss is threatened on the accounts of certain
all on hand as stated. The regular accountant being absent, customers still actively doing business a portion of their
a clerk, who was a friend of mine and whose honesty was current loans should be charged off as if loss on them
had already occurred. Such an appropriation should be
unquestioned, was temporarily filling his place and it
made as in the judgment of the directors seems necessary,
became his duty to sign the statement. The agent, claimcharging it to profit and loss account and crediting it to
ing that he had something important to attend to and
contingent account, where it can remain until the anticithat he wished the statement dispatched at once, induced
pated losses materialize, which they generally do. Such
the young man to sign it, without giving him an opportunity to count the cash in his custody, but promised that appropriations should, of course, be regularly shown in the
he would do so next morning. The next day he put him statement of profit and loss account rendered to the Comptroller, and the contingent fund should be kept in the
off again, ard after a few days, when the young man
general ledger open to the investigation of examiners. In
found that the agent had .no intention of fulfilling his
my judgment no sound, conservatively managed bank can
promise, he wrote his brother, who happened to be a clerk
in the inspector's department at the head office in Glasafford to be without such a ,fund. It protects the new
shareholder who invests in the stock at the market price,
gow. He simply stated the facts to his brother and asked
his advice under the circumstances. His brother showed
based on the bank's published statements, against fluctuating values of its resources in consequence of losses having
the letter to the head inspector, who promptly dispatched
two men to the branch to investigate. They found a to be provided for on loans or other assets in existence
at the time he makes the investment, and I think he is
deficiency in the agent's cash and had both him and the
clerk arrested, the former on a charge of embezzlement, entitled to such protection. Further, it has a most beneficial effect on the management to feel that the bank is
the latter for having signed a false bank statement. The
running ahead, instead of lagging behind in the procession.
agent was tried and sentenced to the penitentiary inside
The Comptroller's Department will doubtless agree with
of thirty days, and it was only due to the action of the
leading men of the community, who, knowing the circum- all I have thus far said on this subject, but will ask why
the contingent fund should not be shown in the published
stances, got up a largely signed petition to the court in
the young man's behalf, that fie escaped punishment, but statements as undivided profits are. It will claim that
the public and the shareholders are entitled to know the
the incident ended his banking career and he is now a
actual condition of the bank, which they cannot do if
respectable farmer in this country.
There is a matter on which a difference of opinion has there are hidden profits not shown in the statements. My
answer is that there are or 'should be no hidden profits.
for some years existed between the Comptroller's department and some of the most conservatively managed banks The contingent fund represents an amount which the
in the system. While it may not be considered germane
directors have deemed it necessary to deduct from the
to my subject, I should like, if I do not weary you, to
profits and set aside to provide for anticipated losses in
discuss it now. I refer to the contingent account not current loans in order to maintain their integrity. While,
shown in the published statement. Like many other bank- therefore, the ledger and balance book will show the fund
ing practices, sound when kept within reasonable limits, in a special account, when a statement of the bank is
it is susceptible of abuse and may be made the means
published the amount of it can quite properly be applied
of misrepresenting a bank's true condition. When built
where it belongs. It should be deducted from the current
up beyond reasonable limits and its existence is only known loans, reducing the amount of them as published to the
to the officers, directors and a few favored stockholders, realizable value placed on them by the directors.
great injustice may result. Outside shareholders, ignorant
The main thing looked for by the public from governof the true book value of their stock and of its real mental supervision is reasonable assurance that bank
earning power, might be induced to sell it to inside parties statements, which are mere figures after all, can be relied
at much less than its actual value. This, however, would
on. In view of this and of,the natural desire on the part




134

BANKERS' CONVENTION.

of bank managements to make the best showing possible
in their published statements, and the general tendency
being decidedly along this line, it would be a wholesome
policy on the part of the Comptroller to encourage if not.
to require the maintenance by the banks of a reasonable
contingent fund. It would lead to the keeping of an anchor
to the windward for the benefit of all concerned. It would
certainly be an improvement on the present erroneous
practice, against which no exception seems to be taken.
I refer to the very general practice followed by the banks
of overstating their accumulated profits by including in
them discount on time loans collected in advance. All
note's discounted up to the date of the statement appear
in it at their face value, while their real value is the price
at which they are purchased, that is, they are subject to
the rate of discount received on them from the time the
statement is made to the various dates of their maturities.
How would a banker regard a customer's statement if he
learned that in taking inventory of stock on hand the
customer had added the selling profit to the cost price.
thus "counting his chickens before they are hatched?" And
yet in bank statements this is the common rule to which
correctly made statements are the rare exceptions.
The objects being the maintenance of the integrity of
the assets and the adjustment of profits and losses one
year with another, so that the growth of the surplus may
be solid as well as steady and uninterrupted, the publication of the fluctuating amount of the contingent fund
would only confuse the public, hurt the bank and nullify
all the benefit to be derived from it. Rather than show it
in the published statement it had better remain in profit
and loss account as part of which, if shown, it would
erroneously continue to be reckoned. A short 'statement
by each bank to the effect that proper provision has been
made for all known or anticipated losses and that loans
are shown in the published statement at what is believed
to be their estimated realizable value would be more satisfactory to the public and more easily understood by it.
The National Association of Credit Men, from whom, I
have noticed, there emanates from time to time a good
deal of sound business sense, recently appointed committees of their State organizations to investigate the condition of the State banking laws. After careful investigation
these committees are required to answer to a general
committee of the National Association the following
questions:

to keep abreast with the development of the banking system and its administration is steadily improving in the
value and reliability of its service both to the banks and
the public. As an illustration of this and of the ability
of the ,department officers to develop their own methods
under the general powers they now possess without specific
legal enactments for every move they make, which would
hinder and hamper more than they would help them, let
me draw your attention to some of the department regulations recently inaugurated:
Bank examiners can be neither stockholders or borrowers from
National banks.
Savings banks, trust companies or other State banking institutions allied with National banks are examined simultaneously
with them.
Bank examiners are to be selected from men of previous
banking experience who have been connected with sound, progressive and well-managed institutions.
Banks are classified in the department according to the
character of their management and such as are classified poor
are being examined four times a year in the presence of. their
directors, from whom a letter is required promising that conditions subject to criticism will be attended to and corrected,
while those whose management is classified as very bad are
being handled in a still more vigorous manner.
Examiners are now required to make such careful and complete reports in writing of all evidence discovered by them
tending to show criminal violation of the Federal Statutes that
the Department of Justice may determine from them without
further investigation whether or not there has been a criminal
violation of law.
The National bank examiners through the country have been
divided into eleven districts with a chairman appointed by the
Comptroller for each district. Examiners in each district are
required to meet twice a year to have a general discussion of
methods of examination and to prepare reports of banks in the
district whose condition is unsatisfactory and of any lines of
doubtful credit in them; each examiner to report to the chairman for his own particular section and the chairmen to furnish
the Comptroller with a complete report of the proceedings,
retaining a copy for reference at future meetings. The chairman of each district at his discretiors can report to the chairman
of any other district such information as he may deem advantageous.

These questions, it strikes me, furnish an almost complete synopsis of everything that governmental supervision
can be expected to accomplish, and, with the .
exception of
providing for adequate punishment for the making of false
reports to the Comptroller, our National Bank Act already
covers them all. With adequate pay provided for the
Comptroller, his deputies and examiners and with some
" unessential amendments in minor details the powers now
conferred upon these officials appear to me to be quite
sufficient to•enable them to accomplish all that can possibly
be accomplished through governmental supervision.*
The department in its methods is showing its ability

The efficacy of government supervision by examination
lies primarily in its restraining influence on bank management. The knowledge that the banks are to be examined
holds the officers in check. This followed by the criticisms
of the Comptroller based on the examiners' reports is
efficacious in inducing or compelling bankers to comply
with the law and with proper banking methods and to face
and provide for losses as they occur. This should afford
the public reasonable assurance. Such are the benefits to
be derived from governmental supervision, and the degree
of their accomplishment is the measure of their efficacy.
All external supervision is, however, based on the examination and consideration of transactions after they have occurred. It cannot control the making of loans or investments at the time they are made. It has no control of
initiative management. It cannot, therefore, be held
responsible for errors of judgment or lapses of integrity.
Its business is to discover such and its efficacy depends
upon its ability to do so. It is at best a human device
and in common with all such devices its limitations should
not be ignored or forgotten.
The next branch of our subject is "clearing house supervision in the interest of associated banks." As you are
doubtless all aware this method of local supervision was
first inaugurated in Chicago three years ago. Its main
strength is derived from the fact that it was evolved from
the voluntary action of the banks themselves for their own
benefit individually and for their protection collectively.
Thus "its just powers are derived from the consent of the
governed." Similar bureaus have since been organized in
St. Louis, Minneapolis, St. Paul, San Francisco, Kansas
City, Philadelphia, St. Joseph, Milwaukee and Los, Angeles,

'Since this was written the Comptroller of the Currency has expressed himself as follows:.
"After a year's trial of the Bank Act, I can say to you frankly
that it gives me all the power I want, and even more. If I were
to-day to go again before the National Currency Commission, and
the question were asked me IT.to..;what changes were necessary, I

would answer, that in my opinion the only essential change was one
giving bank examiners in the country districts more compensation.
"Of course, some trivial administrative features of the Act could
be made a little better, but I do not want, and I do not believe any
other Comptroller will ever want, any more actual power than the
present banking law now gives."

1. "Does your State have a State banking department with
a superintendent at its head appointed by the
Governor ?"
2. "Is your State banking law considered by bankers, lawyers and business men generally adequate in its requirements in the way of
a. Maintenance of reserve,
b. Frequent and searching examinations and authoritative
supervision,
e. Prevention of over-extension of credit to heavy borrowers,
d. Penalties for the making of false statements of condition,
e. Economic liquidation in cases of failure?"




BANKING SECTION.
while other cities are showing their interest by investigating our methods and the benefits to be derived from
them.
A short statement of the Chicago method may therefore
be of interest to you. Neither the committee having the
matter in charge nor the examiner are hampered in their
work by any code of rules and regulations adopted by the
associated banks. Both were given an absolutely free
hand. The committee was by resolution instructed to
secure the services of a suitable man of experience to examine the seventeen member and some forty non-member
banks clearing through members. Having secured the
services of such a man, the committee in turn instructed
him to engage the necessary help (he has now five assistants) and proceed in his own way to make thorough
examinations of all the banks. The following extract from
the original letter addressed by the committee to the president of each bank will fully explain the method adopted:
"The examiner will furnish you for the use of your
directors a detailed report on the condition of your bank
at the date of his examination. He will file in the clearing house vault, under his own custody, a copy of such
detailed report. He will also make a separate report to
the Clearing House Committee expressing in general terms
his opinion of the condition of each bank as he finds it and
calling special attention to any unwarranted conditions or
gross irregularities discovered. His detailed reports will
not be examined by the Clearing House Committee except
when it may appear necessary to do so from the general
report of conditions made to it."
And the following from a letter sent out later to the
directors of each bank as the first examinations of them
were completed will show that the method was intended
to benefit directors and that their co-operation in correcting anything open to criticism was desired and expected
by the committee:
"The Clearing House Committee, desiring the co-operation
of bank directors in maintaining a high standard in the
condition of banks in the city, has requested the official
examiner to notify the directors of each bank, individually,
when he has completed and delivered his report to the
president so that every director will have an opportunity
of perusing it. The committee urges upon every director
that he should, as a part of his directorial duty, carefully
examine such reports as promptly as possible after he
receives notice of their existence."
Bank directors have been most enthusiastic in their
commendation of the method. They find that it gives them
an opportunity of judging of their bank's condition as a
whole, which the mere passing upon individual loans at
their meetings does not afford.
Our experience has been that the banks have almost
unanimously adopted every suggestion made by the committee. The method has worked with but little friction,
and while I cannot discuss such details as would show its
efficacy, I can say that the result has been most satisfactory to all concerned and that much good has been accomplished for the Chicago banks individually and collectively.
The organization being entirely voluntary partakes somewhat of the nature of a gentleman's agreement, under
which each bank binds itself to conduct its business under
proper methods. The disciplinary effectiveness of the
method lies in the fact that they are all measured by the
same standard, viz.: that their statements as rendered to
the Clearing House Association shall be satisfactory to the
committee, in view of the examiner's reports upon them,
otherwise they cannot continue to enjoy clearing house
privileges. In no sense, however, does the association or
its committee assume responsibility for the individual
management of the banks or for the quality of all the
loans current in them. This responsibility, as I have said
before, rests, and must always rest, on the officers and
directors of each bank. All the committee undertakes is
to pass judgment, and that only approximately being
based on the examiner's report, on the reasonable integrity
of each bank's assets and the general reliability of its




135

statement. In the fact that the members of the committee are well posted on local credits and financial affairs
lies the superior efficacy of clearing house supervision. But
the committee is not omnipotent; it is only an ordinary
human agency. Like the Comptroller, it has no control of
the initiative management of the banks under its supervision. It fully realizes the heavy responsibility laid upon
it. It is no easy problem to decide when summary action
should be taken in connection with a badly managed bank's
condition, which depends on the condition of its customers,
while both they and it are interdependent on• each other.
Conditions must become very bad and expostulation be
exhausted before any supervisory authority, however constituted, will assume the responsibility of action that will
lead to the closing of a bank's doors. If it were otherwise and such action were taken simply because something
in the bank was unsatisfactory such authority would be
accused of shutting up a solvent institution, not only by
its stockholders, but by its depositors themselves in whose
behalf the action would be taken.
It may, therefore, be said that bank supervision by examination on the part of a clearing house committee,
while probably the best and the most effective external
supervision possible, has its limitations, which should be
recognized by the intelligent public, and it should not be
held to a degree of responsibility which it does not assume.
We will now consider supervision by directors in whom
is vested the primary responsibility for bank management.
Their supervision is in the combined interests of the
stockholders who elect them and of the depositors who
confide in them. They govern and direct as a board, requiring the presence of a 'quorum for the transaction of business. Their official actions and the responsibility they
assume are therefore collective and not individual. They
are not expected to devote their entire time and attention
to the affairs of the bank, and their supervision is necessarily more or less intermittent. They appoint and fix
the remuneration of the officers and for cause can discipline
or discharge them. Thus they, and they alone, control the
initiative of management and on them must rest the final
responsibility for it. The officers appointed by them dispose of their time and their talents to the bank for the
consideration of their salaries and assume the daily details
of management.
Such being the established relations it becomes the primary duty of the directors to hold the officers to a strict
accountability, not only for integrity and honesty in
motive and action, but for efficient and successful service.
It will go without saying that the power of the directors
to discipline or discharge officers should be promptly exercised on the discovery of dishonesty, deception or bad faith,
either in their personal or their official capacity, or for dissolute or improper conduct in their private life. It is
equally essential, however, that the same power should be
exercised in cases of incompetency, bad judgment, recklessness, speculation or whatever there may be in the makeup
of the officers that injuriously affects the management or
deprives it of public confidence and success. In the exercise
of this prerogative, probably more than in any other way,
directors are prone to neglect their duty. It is not an agreeable one, and collectively they are disposed to evade it
even when individually they realize the necessity for it.
It is without doubt the primary responsibility placed upon
them, and its evasion must be held responsible for much of
the disaster resulting from bank failures due either to
incompetent or to dishonest management.
The same ordinary prudence which men exercise in their
own affairs is required of bank directors. The application
of it differs with the varying circumstances of the banks.
Just as men of small or moderate affairs can undertake
the personal management in detail of their own businesses,
while those of large affairs must of necessity employ
others to manage for them and must relieve themselves
of details, so bank directors under similar circumstances
may assume the details of management or appoint others
to do so. Their delegating authority to others does not,

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BANKERS' CONVENTION.

however, relieve them of responsibility for the direction
and supervision of the management or of keeping in touch
with what is done. In banks of moderate size this can be
accomplished by committees. In the largest banks, however, it becomes necessary for the directors to -delegate
even the details of ;their supervisory duties to experts and
to rely on their investigations and reports.for an intelligent
knowledge of what is being done and of their bank's
condition. Systematic organization is necessary, whether
a bank is small or large, and directors must see to it that
one of its results is that they are kept fully posted as
the bank's operations and condition. This can be accomplished quite as effectively in large as in small banks
through the. employment of competent auditors either permanently or when they are wanted. Such auditors in their
investigations should represent the directors and should
report direct to them, uninfluenced by any of the executive
officers. But, however it may be accomplished, it is up to
the directors to keep themselves posted as to their bank's
operations to the extent of enabling them to form a correct
opinion of actual conditions in them and to judge of the
integrity and ability of the management, as it is conducted by the officers, to whom they have delegated
managerial powers. Only thus can they intelligently exercise their control of the management, a responsibility from
which there can be no escape.
The progressive success, or lack of success, in bank management can be fairly well discovered by the periodical
classification of a bank's loans and investments. This
classification should be conscientiously made outhide of the
executive officers. It may be done by a committee or
directors or by a competent auditor, at whose disposql
must be placed the statements of customers and all the
information available in the credit department. The assets
can be divided into five classes and the result will, I think,
disclose to the directors the necessity for a contingent
fund, such as I have advocated. The percentage of each
class to the aggregate total should be shown and the
periodical classifications compared with each other. This
will disclose the progressive condition of the assets,
whether they are growing better or worse, and from the

result the management may be judged. I suggest the
following classification:
1. Good desirable business,
Fair business risks,
Business not desirable as a new proposition, but which
policy makes it necessary to carry along for the
purpose of gradual liquidation,
4. Loans which should be liquidated and on which more or
less loss is probable,
5. Loans so bad that they should be charged off now.

2.
3.

The respective percentage of these five categories forms a
very good criterion of the character of a bank's management. It must be the constant and unremitting aim of its
officers to reduce class three to its smallest possible proportion and to eliminate entirely the fourth and fifth
classes.
Co-operation among all supervisory powers is most desirable. National and State government examiners should
consult and co-operate with each other and, where the
opportunities exist, with the clearing house examiners.
The Comptroller and the State banking commissioners
might, with propriety and with much benefit to both systems, establish confidential relations with each other and
with the different clearing house committees, and all
should keep in close tciuch with the bank directors and
take them into their confidence regarding everything open
to criticism in their banks. They are all engaged in the
work of raising banking standards and improving banking
conditions, and they should avail themselves of every
opportunity for co-operating towards these highly desirable
ends.
External supervision alone, under whatever authority it
may be exercised, it is needless to repeat, cannot establish
safe and sound banking. Honorable and intelligent initiative management must be relied on for the ultimate
success of individual banks. As now administered, however, governmental and clearing house supervision are
doing a great deal.(in my opinion as much as can reasonably be expected of them) along the line of purging and
purifying our system, raising our standards of banking
and giving to the business a character which conduces to
that healthful tone so essential to the commercial, industrial and social life of the nation.

Our Indusirialism and Americanism.
BY PRESIDENT JOHN C. KILGO, Of Trinity College, Durham, N. C.
Mr. President and Gentlemen:
I greatly appreciate both the courtesy and the honor you
have bestowed upon me in the invitation to attend your
annual meeting and to address you at this hour. For
reasons which must be obvious to you all I accepted your
invitation with no small degree of hesitancy. In a very
modest way I have had dealings with individual bankers
at various times, but to come before a multitude of them
under present circumstances is a new relation for one of
my vocation.
I confess that I have been much puzzled to know what would
be a proper subject for me to discuss before you. It has
fallen to my lot to speak to many kinds of audiences under
a wide variety of circumstances, but this is the first time
I have engaged to speak to an audience of this kind. For
the best of reasons, I did not deem it wise to select a technical subject of banking, and I have, therefore, chosen as
my theme "Our Industrialism and Americanism."
The people who first came to our shores and stocked this
continent were a. brave, vigorous and strong people. Inspired by religious faith and a love of freedom, they laid
deep and broad the foundation of a new civilization. From
the very start Americans have been a hard-working people,
and among the best of them indolence has always been considered both a personal shame and a public peril. Referring to their characteristic energy, Doctor Charles Wagner




said: "America works, honors work, and knows how to organize work." This is a very high tribute from a very
worthy source; and when read in the light of all the circumstances the story of our industrial evolution is without
parallel in the world's history and is really no less romantic
than the myths of ancient Greece. Our Ulysses has been
a railroad builder, our Hector has been a miner, and our
Helen has been a home-maker.
I do not, sir, agree with the pessimistic views sometimes'
expressed concerning our industrialism. I do not think I
am ignorant of its tendencies, and I am sure I would not
palliate any of its evils, nor would I unduly magnify any
of its virtues. There is much in it that is entirely new.
In many of its methods and its conceptions it has departed
from the ways of former times, creating new problems
which have engendered widespread suspicion and very
great confusion. In the vastness of its conceptions and
the daring of its undertakings it startles the imagination,
and a host of evil prophets have pictured it as a huge
beast devouring the life of our nation. But the captains of
our American industries are not pirates invading our coasts
to thieve and ruin. They are Americans, the descendants
of patriotic citizens who fought in our battle lines and
labored for the welfare of their nation. Bound by honorable family tradition and tri tight to believe in their country.
I see no just reason why our industrial leaders should be

BANKING SECTION.
regarded as less patriotic than that class of American
citizens into whose hands has fallen the guidance of our
political affairs.
For the past twenty-five years industrialism has been
clearly in the ascendancy among us. It has engaged our
.best energies, taken possession of our political thought,
given direction to our educational policies, shaped our social
influences, and strongly influenced our literature and our
religion. Holding as it does such a large place in our American
life, it is inevitably the chief agency through which the cardinal principles of our civilization and the ideals of our social
life must find their largest and their most effective expression. Our faiths must be verified amid the strains and the
conditions of our industrial activities. Our ideas of government, of society and of religion must become embodied in
the laws, the relations and the ethics of industry. We cannot, for example, separate our religious duties and acts from
the relations and the tasks of the shop, the bank and the
factory; and if there be any need for a revival of our religious life, it will not be found in the demand for new
creeds, but in making old creeds do less service about high
altars and more service amid the dust and din of industrial tasks. I shall content myself with pointing out
only two of our national virtues which it seems to me find
peculiar expression in our industrial character.
In it one will find the truest and strongest spirit of
our nationalism. There is nothing sectional, nothing provincial in our industrialism. The diameter of its vision is
the diameter of the whole nation, and the circle of its activities takes in all sections and people of our great coun
try. The industrial world cares little about the old-time
debate between 'Webster and Calhoun, or the latter-day
discussions between Mr. Tillman and Mr. Lodge. It is
vastly more interested in the cotton crop of Texas and the
wheat crop of Dakota than it is in any academic theories
of government. In its geography there is no Mason and
Dixon line, and the battle of Gettysburg is not on the
front page of its history. It invests in railroads that run
from the lakes to the gulf, and from sea to sea; it puts its
capital in Alabama mines and Oregon banks, and sends
its agents into every State of the Union. Its very soul
throbs with nationalism, and nowhere on this continent,
sir, will you hear a finer note of nationalism than you
will hear in the humming wheels of a Carolina cotton mill.
If this American Union of States is to be real and not
merely nominal, if it is to be vital and not incidental, it
must find a deeper and a stronger bond than the articles
of our national constitution, and it must be held together
by a power greater than legislative enactments. People
are bound together not by documents and enactments and
bayonets, but by the ties of a common ancestry, by the
traditions of their race, by the common experiences of their
history, aril by their associations with each other, and
these find a very real form in our industrial activities,
confidences and sympathies.
In its freedom from class distinction and the rule of
caste our American industrialism is the finest triumph of
democracy to be found in any part of the world. Thi3
freedom is strikingly illustrated in two forms. First, the
distinction between capital and labor, which in aristocratic
governments is a real class distinction, does not represent
a real distinction in •our industrialism. While economists
for the sake of their science make such a classification, in
reality the American capitalist is an American worker.
The idle capitalist spending his time in lordly indolence
is not a custom among Americans. The captains of American industries do not regard work with social disdain,
as becoming only to the poor classes. In our industrialism
it is an honor to work, a disgrace to idle. The marks
of labor are badges of respect. And in the great army
of American laborers there will be found none who work
harder, none who more highly esteem labor, none who
devote more wisdom to their tasks than the heads of our
great industrial organizations. Who in America works
harder than Mr. Morgan? Who gave a larger number of
hours and more tireless efforts to his tasks than Mr.




137

Harriman? Every great industrial enterprise in America is a
monument to the working spirit of our capitalists. There
is, therefore, among Americans no just ground for warfare
between capital and labor as though they were alien and
dissimilar forces battling against each other for heartless
conquest. The capitalist and the laborer share the scenes
of toil and know their common interests and regard their
common relations.
The second form in which American industrialism is
the world's best example of freedom from the rule of class
or caste is the ease with which man may pass from one
line of work to another. In old countries the reign of
industrial classes has predestined the field of each man's
work. Ask an Englishman why he is a merchant and he
will answer, "Because my father and because his father before him were merchants." Ask another why he is a
tailor, and the same traditional reason will be given. They
inherit an industrial destiny. But ask an American why
he is a merchant, or a tailor, or a farmer, or a banker,
and he will reply, if he replies at all, "Because I wish
to be." His grandfather was a carpenter, his father a
farmer, he began as a clerk, changed to a traveling agent,
went West and became a banker. It is an abnormal record
in which the man has not passed through many fields of
industry before settling down to one field, while the typical
genius of • our race is a natural conceit which makes every
true American believe that he can do anything. And it is
rarer to find a successful business man who is not engaged in several lines of business than it is to find one
who devotes all his energies to a single industry.
Dr. Eliot thinks that the ideal democracy is a social
order in which each man will have a free chance to do the
thing which he can do the best. Perhaps the same idea. was
more accurately expressed by .Mazzini when he defined a
democracy as a "chance for all through all under the
leadership of the wisest and the best." Both agree that
a sound democracy should furnish each member of society
a ready chance to find the place in which he can render
the most efficient and remunerative service. This ideal
may not yet have been attained, but I believe that it has
been more nearly realized in our industrialism than it
has in any other department of our social order. The
richest heritage of the American youth as he quits college is the full assurance that all the gateways to all the
fields of human endeavor are wide open before him, and
that he may select or change his calling as may seem best
to himself. And it has been this soul of democracy in our
American industrialism that has filled the American youth
with a conquering vigor and kept alive in his mind the
spirit of freedom.
It is popular to discuss the failures of democracy and it
is common enough. to find Americans who express doubts
as to the final results of our effort to maintain a.democratic
government. And the effort is full of difficulties. It demands eternal vigilance. But if our efforts to establish
democracy in the earth, to prove its cause for all mankind.
fail, the blame cannot be justly charged to our industrialism. The tendencies which seem to threaten our .
democracy
do not spring out of our industrial spirit, they do not
belong to our industrial methods. They come out of the
social realm, and should be credited to the weakness and
the insincerity of our social sentiments, standards and customs. They are the creations of men and women who are
the beneficiaries of the wealth produced by industry and
who use it to set up false and undemocratic ideals of society
and to parade the forms of aristocracy in a most harassing way. The chief danger, if there is a danger, is in the
parlor, not in the shop. Americans are democratic enough
in the scenes of work, they become suspicious when they
lay off their working clothes and put on dress suits and
pass into the social world. Then human sympathy seems
to chill. Then the laborer comes in contact with the
spirit which he resents. It is in the snobbishness of the
parlor, the arrogance of the social spirit, that American
democracy reaches its lowest point and seems to have its
least chance: It is unfair, therefore, to charge to in-

138

BANKERS' CONVENTION.

dustrialihm the crimes of social life, the shortcomings
of the educational spirit, or the failure of politics. Judged
by every fair test there are ample reasons to believe that
the democracy of our industrialism is not a failure, but
that it shows signs of health and of vigorous growth. I
feel justified in believing that in it the spirit of democracy is developed to a larger degree and in a sounder form
than in any other department of our national life. It is
more democratic than our politics, than our society, than
our education, and, I regret to say, than our church fellowships. If the soul of democracy is, as Archbishop
Ireland says, "a supreme faith in manhood," then where
will one find a higher, a sincerer, and a more persistent
faith in true manhood than he will find in the history and
the standards of American industrialism? In the fields of
our industry each man is to a larger degree the master of
his own destiny than he is in any other sphere of American
life. There ancestral influences, social badges, and other
incidental circumstances count for less and personal manhood counts for more than it does in other fields of activity. I never fill out a blank for some person who is
applying to a bonding company that I am not deeply impressed with the high estimate the business world puts
upon personal worth as the chief basis of business confidence and esteem. This is democracy in earnest. It is
the one spirit that inspires hope in every heart and furnishes, a high motive for sacrifice and labor. It invests
manhood with a dignity and clothes it with rights that are
acknowledged at the highest seats in every department of
industry.
One of the most splendid achievements of our American
history is the unlimited opportunity it has furnished men
of all classes, conditions and races to improve their industrial and social conditions and to rise to the highest
points of success. In the halls of fame are recorded the
names of those who have done some immortal thing in
letters or art or war or politics, but a roll that also reflects great honor upon our American government, the on
that marks the high point of our social evolution, is that
long roll of Americans who began at the lowest pOint and
by fidelity and labor rose step by step till they reached
the summit of industrial infllence and power. That is the
common story of American men of business success. The
Americans to-day who commanded such large industrial
power throughout the world, whose names give value to
commercial paper in every market, bear witness to the
genuineness of democracy in our industrialism. The little
tot who is selling his papers along the street at a penny a
the citizen of the country and the heir of industrial
copy is .
traditions that make possible to him the day when he will
own the paper and his voice become a national power.
That is not the dream of democratic idealism, it is the
wonderful record of our democratic industrialism.
True Americanism, sir, as I see it, is an infinite faith in
the rights of unadorned manhood. And the supreme place
which Americans who rightly understand the genius of
civilization give to personality; the sincere enthusiasm
with which they hold their faith in the divine rights of
manhood; the hearty homage which they pay to the lordship of individual worth, and the enduring fame which they
accord to the unselfish hero, have been abundantly proved
in our history. But in the long list of examples there
are two which seem, for every reason, to be the foremost
illustrations of the real soul of our democracy.
The first is Abraham Lincoln. A child of our frontier
life, born in a rough cabin, the son of poor, unlettered and
common parents, he was the heir of dismal prospects.
He inherited no ancestral traditions to stir his boyish
heart with exalted ambitions; no community surroundings
to refine his thought and polish his manners; no educational advantages to push back from his youthful vision
the shadows of ignorance, and no wealth to take from his
shoulders the crushing weight of daily toil. He was no
debtor to favorable circumstances; he owed nothing to
inspiring environments. But he had one supreme resource
of success: he was an American. The star of eternal




hope shone in the heavens above his head, and the note
of freedom sounded clear and strong in his ear. No feudal
laws imposed a despotic embargo on his aspiration and no
iron gates closed before him the path to service and to
fame. He took counsel with the highest voices in his soul,
and, like the Wise Men of olden times, followed the brightest star in the skies. The story of his life is common
household knowledge among Americans. I need not repeat
the details of how he mastered circumstances, overcame
conditions and at length made the "Little Giant" of the
Middle West stand in awe of his ascending leadership.
When the hour of direful peril came to this republic;
when the clouds of war began to gather over it, and when
the destiny of the nation hung in the balance, He who
presides over the affairs of human history appointed this
son of the cabin, this man of the forest, this new master
of the West, to direct the ship of the nation through those
furious years of war. No man ever carried to the seat of
government loftier statesmanship; no man on a throne of
power ever showed a more masterly genius, and no man
ever gave to his race a finer example of patriotic wisdom
and service. We cannot duly celebrate his virtues in words.
Even the increasing number of splendid monuments we.
erect to his memory are but slight hints of American
gratitude for his services and poor tributes which we try
to pay to his fame. This American Union is his only
adequate monument, and as long as it shall endure it will
serve to celebrate his conquering genius. Every star on
the American flag, it matters not where it is unfurled and
what winds play along its colors, is a tribute to the patriotism of Abraham Lincoln. If eternal praises are due George
Washington for putting them on our flag, eternal praises
are equally due to Abraham Lincoln for keeping them
there. If George Washington is the father of the Union,
Abraham Lincoln is the father of the mightier re-Union.
But of more enduring worth to our national spirit is
the illustration which such a career gives the whole world
of the genuineness of our democracy and the superiority
of our civilization to make mighty men. Abraham Lincoln
is an American; he could not have been the creation of
any other land, and his record will stand through the years
as a divine rebuke to that type of tyranny which exalts
form above fact and circumstances above character.
The other example, sir, that I have in my mind is in
every point exactly opposite from the one that I have just
cited, and serves to prove by new and opposing tests the
sincerity of our faith in manhood. Robert E. Lee was the
son of a noble parentage with a history reaching far back
into high ranks of English life. A native of Virginia, he
was from the start the beneficiary of cavalier customs and
all the advantages of home culture and school training. In
his public career he is the most tragic figure in our American history. The force of circumstances predestined him
to be on the failing side of the course of events. Viewed
in the light of consequences, he is America's immortal
hero of defeats. Yet he holds a place in our national
esteem which grows more and more as years go by. True
Americans without regard to their political sentiments or
the sections of country in which they live, hold in sacred
regard the memory of this superb man. And Virginia
has selected his statue along with Washington's to be
put in the capitol at Washington as those of her two greatest citizens. She did not select Jefferson or Madison or
Marshall, but she chose her son of defeat. In this Virginia was wise, and no true-souled American will reprove
her judgment. For the career and the fame of Robert E.
Lee when read in the light of all the facts, is without a
parallel in human history.
How will we account for his fame? How can we explain the place he holds in the esteem of Americans? Why
was it that Americans North, South, East and West celebrated his centennial birthday? Why did Mr. Roosevelt
speak in such exalted terms of his genius?
We can readily tell why we honor Benjamin Franklin.
At a critical period in our history he rendered as a minister
at a foreign court a wise service, and in the moments of

BANKING SECTION.
strain his rare wisdom was a guide in national affairs.
But Robert E. Lee was never a minister at a foreign court;
he was never in the councils of State.
Thomas Jefferson as the author of the Declaration of
Independence and the founder of a political party gained a
place of lasting fame in our history. But Lee wrote no
governmental documents and founded no political party.
Fulton and Morse by invention and discovery brought the
nation under everlasting gratitude to them, and their names
hold high place in our history. But Lee invented nothing,
he discovered nothing.
Emerson, Lowell, Whittier and Longfellow gave American literature a larger place in the world, and for their
work we do them increasing honor. But Lee wrote no
poetry, history or philosophy.
Webster and Clay and Calhoun in the legislative halls
of the nation contended for the rights of States and left
us speeches that give us splendid examples of oratory.
But Lee was never a legislator, and he made no speech
that belongs to our literature.
George Washington for seven weary years followed the
hopes of his people through the war and in the end gained
their freedom and gave a new nation to the world.
returned from the field of battle to be greeted with the
shouts of a conquering people, and to be crowned with the
honors of an immortal hero. It is natural to admire victory
and to exalt a victor. But Lee after four years of as heroic
a struggle as ever engaged human courage, came at last to
an overwhelming defeat. When he turned from Appomatox
no shout of victory greeted him, no new government rose
to crown him. Far and wide lay the waste of his proud
section, and from every direction came the wails of desolate
and broken people. He quietly went away from public gaze
to rebuild a college in the mountains of Virginia.
Yet this man has honor; he has increasing admiration:
be has immortal fame. Why? Does it not take victory to
gain fame and honor and admiration? He has reversed the
order of history and conquers without victory, and achieves
without success. By what strange law does he do these
things? There is but one satisfactory answer. He does
them by the might and majesty of his incomparable Dersonality. He is our one American who does not need
triumph to make him great. Men honor him because he
was brave, they praise him because he was clean, they
pay him tribute because he was godlike, they build monuments to him because he was the embodiment of invincible manhood. So he will stand along with Lincoln
to prove by undeniable fact that in America manhood is
the one thing that counts, and that Americans believe
in it whether it is in friend or foe.
Sir, as a college president, to some extent seriously de•




sirous of inculcating in Southern youth who come up
under my direction the true idea of Americanism as I see
it, I have often coveted the right and the ability to build
on my college grounds an American monument. I should
build a great, strong pedestal upon which with their
sheathed swords at their feet, clasping each other's right
hand, I should place the statues of Ulysses S. Grant and
Robert E. Lee, the hero of victory and the hero of defeat.
I should symbolize by their hand-grip the reunion of a land
too strong to be hewn asunder by battle-axe. I should
adopt as the sentiment to he inscribed upon it those famous
words of Grant: "Let us have peace." On one side of the
pedestal with bronze tablet I should celebrate the virtues
of the Federal soldier, on another I should celebrate the virtues
of the Confederate soldier. On another I should pay tribute
to the unparalleled patriotism of American motherhood and
sisterhood; and on the remaining I should pay due honor
to the high example of loyalty so sublimely illustrated by
the old negro daddy and mammy who worked in Southern
corn fields and cared for Southern women and children
during those years of furious strife. . And, sir, out of the
whole conception I would wish the student to read this
glorious truth: Americans believe in the union. of their
country; they believe in and exalt human virtues wherever
expressed, whether in friend of foe, whether in man or
woman, whether in lord or 'slave, whether in white or
black. Whether in the North or the South or the East
or'the West, always and everywhere Americans believe in
manhood and manhood's virtues.
We have a great country, sir, and it behooves us all to
labor for its largest prosperity. I come from that great
section of it that lies on the other side of the Ohio River.
Many of the most tragic chapters in the eventful history of
our nation have been wrought out down there, and not a
few of the men whose names give glory to our past have
been sons of the South. Out of that I bring 'you greetings.
We have come to know that our fields and forests, our
mountains and our rivers, are filled to the brim with undeveloped resources of wealth, and we are busy trying to
bring them forth. Week after week we are adding millions
to the wealth of the nation. A new generation of Southerners have taken charge of our industries, and under their
vigorous leadership the South is coming into a new era of
prosperity. I tell you these things because I am sure that
no other class of Americans is more deeply interested in
the welfare of every section of our country than the American bankers are. What should chiefly concern the South
and the North and the East and the West is how to wisely
use our enormous resources of wealth for the permanent
good of mankind, and to illustrate to the world the faith of
James Madison when he said, "The United States is useful
to prove things that have not yet been proven."

THE FOURTH

NATIONAL

BANK OF THE CITY OF
NEW YORK OFFERS TO DEPOSITORS EVERY FACILITY
WHICH

139

THEIR

BUSINESS AND

BALANCES,
RESPONSI-

BILITY WARRANT.

Committee Reports—Banking Section,
Annual Report of the Secretary, Fred. E. Farnsworth.
New York, September 1, 1909.
To the American Bankers' Association:
This report marks the close of my second year's administration of the affairs of the American Bankers' Association, and it
is with much pride that I submit same covering in a general
way the year's business. This report with all others which will
be presented to this convention, will show the Association in a
most prosperous condition, and the past year the most successful in its history in growth, activity and results, and in distinction and in the satisfaction of a large membership. It is
not necessary at this time to enlarge on the work of the Sections
and Committees, nor to occupy your time by going into details,
for you will have full reports from these adjuncts of our
Association.
EXECUTIVE COUNCIL.

The report of Chairman Watts deals generally with what has
been accomplished by the Council. As to the method of selecting .its members, I believe this change was a wise one. While
it was feared that the new Council might be too large in numbers to dispatch business expeditiously, the May meeting was
a disclaimer of this belief. The business was so arranged and
carried out that there never was a more successful meeting in
any particular even when the Council was small in numbers.
By allowing each State to select their own members on the
Council, additional interest has been created in the Association
and its work. Representative men of the various States are now
chosen and harmony prevails.
SECTIONS.

Sections have been active along the various lines laid
out by them and for which they were established. The Trust
Company Section has compiled for its members some valuable
publications. The Savings Bank Section, through a special
committee, has shown great activity and done very efficient work
in its crusade against Postal Savings Banks, and by a special
effort materially increased our membership. The Clearing
House Section has perhaps done the most effective work in its
history and has in operation features which will rapidly develop
to tile advantage of tile clearing •houses of the country. The
American Institute of Banking Section, which represents the
Institute, has now 11,015 members and fifty-one chapters. Tile
work which is being done by the Institute and its Chapters is of
incalculable benefit to the bank clerks of the country, and
incidentally will extend its influence and power and training to
the banker of the future.
The

CURRENCY COMMISSION.

appointment of the Monetary Commission of Congress
over a year ago caused tile suspension of all banking and currency legislation, hence the operations of the Currency Commission for the time being have ceased. While not a member of the
Currency Commission, yet representing it as secretary, it would
seem wise to me that we should continue this Commission as a
part of our machinery. When the Monetary Commission shall
finally report out a bill, it may then become necessary for our
Currency Commission to act. I have great faith, however, in
the outcome of the work which is being done by this body and
believe that there will come from their deliberations and investigations a new banking and currency bill which will be
satisfactory to the financial and commercial interests of the
nation.
The

STANDING PROTECTIVE COMMITTEE.

The year just closed, as in the past, emphasizes the importance
of the work of the Standing Protective Committee, and without
question there is no other one feature of the American Bankers'
Association which so strongly appeals to the banks of the
country. It became apparent to your Secretary during the past
winter, with the increased work in these offices, that the protective feature was not and could not receive tile close attention
which it should have. It was also obvious in so great a work
as this and of such peculiar nature that it would be much more
effective were we to have a department presided over by a manager experienced in this class of work. My suggestion to our
Standing Protective Committee in this regard appealed to them,
and it was recommended to the Executive Council at our spring
meeting. That these matters might have tile fullest investigation, and a move of this importance receive proper consideration,
a special committee was appointed and authority given to the
executive officers of the Association to establish a Protective
Department. The Special Committee, after its deliberations,
decided in favor of the proposition, and on August 2 the new
department was created, and there was placed at the head of It
Mr. L. W. Gammon, who held a most responsible position in tile
United States Secret Service, and who was very highly recom-




mended for the place. That tills was a wise move is already
apparent, and Mr. Gammon's sixteen years in the Secret Service
will insure much more effective results in tills department in the
future, and without doubt, realize a saving to the Association,
and give more prompt and satisfactory service. Tile Association
has a most excellent Protective Committee who are earnest and
painstaking in their duties, and have been willing to sacrifice
..their time when occasion required. The Association is to be
congratulated in this respect.
COMMITTEES.

The Association now has six active standing committees. At
the Briarcliff meeting of the Executive Council, four of our
committees were either discharged because their duties had been
performed, or their work was merged with that of other standing
committees. Time and space prevent my taking up tile work
which has been accomplished by these committees during the
past year. The work has been extensive and great results have
been achieved which are appreciated by the membership, and
will be of great benefit to the Association in the future. The
standing committees referred to are as follows:
Finance Committee,
Committee on Bills of Lading,
Standing Law Committee,
Federal Legislative Committee,
Committee on Express Companies and Money Orders,
Institute of Banking Committee.
STATE ASSOCIATIONS.

We now have in tile union forty-six State Associations. During the past year there have been organized three Associations,
namely, Nevada, Utah and Vermont. There are three States
without Associations—New Hampshire, Rhode Island and Delaware. I have come to look upon these State bodies as tile
strong bulwark of tile banking interests of the country. We are
working together, and tills has never been more evident than
during the year just closed. As far as possible I have felt it
my duty to attend the State Association conventions, and as a
representative of the American Bankers' Association I have
been very warmly received by the State bodies, and I am sure
that these visits have been advantageous to this Association as
well as tile State Associations. Since our last annual convention I have attended the conventions of Illinois. Alabama, Minnesota and New Jersey; the Tr -state convention of Oregon,
Washington and Idaho; the joint meeting at New Orleans of
the States of Alabama, Texas, Mississippi and Louisiana; the
organization of tile Vermont State Association ; tile Annual
Dinner of the Massachusetts State Association, and Groups No. 6
and No. 8 New York City, and Group No. 1 of Buffalo; the
Annual Banquet of New York Chapter American Institute of
Banking, and the Seventh Annual Convention of tile American
Institute of Banking at Seattle.
As Secretary of the Organization of Secretaries of State
Bankers' Association, of which I was one of the founders, I
have been brought very closely into contact with tile Secretary
of every State Association, and in them I have found tile
firmest friends of our own great organization.
LEGAL DEPARTMENT.

Although tile Legal Department may have been considered
problematical by some, the wisdom of this action was never
questioned by the Secretary, for many of the State Associations
had such departments which were successful.
General Counsel Paton's long experience as editor of the
"Banking Law Journal" and as a student of blinking law, and
as attorney for our various committees, had ably fitted him for
the position. Mr. Paton has been strongly supported by the
Legislative Committees of tile various States and much has been
accomplished in new laws drafted by him and passed by many of
the States. Our membership has to quite an extent also taken
advantage of the privilege of obtaining opinions on questions
of banking law which have been given publicity through the
"Journal."
THE "JOURNAL."

The "Journal" completed its first year on July 1. The
general office has every evidence from our large membership, by
correspondence and otherwise, that the publication meets with
great favor and that it is supplying a long-felt need. We are
now able to communicate with our entire membership monthly
and keep them closely in touch with what is transpiring in
Association affairs.
ASSOCIATION

OFFICERS.

Since my last report of one year ago, all of tile adjuncts of
the Association have been brought together under one roof and
occupy our general suite of officers. With the increase of departments and work, it became necessary to enlarge. tile office

BANKING SECTION.
room and additional space was secured to provide for the
Savings Bank Section, the Protective Department and the
"Journal." All are now comfortably located, convenient for
doing business, thereby saving certain expenses that had to be
met when the Sections were separately located in office buildings
outside. There has been a marked increase in visitors to Association headquarters in New York City, and the wisdom of
furnishing accommodations and conveniences for visiting
bankers and for committee meetings is apparent, as well as
much appreciated.
CORRECTION OF MEMBERSHIP RECORDS.

With so large a membership and constant changes in banking
Institutions from various causes, we would earnestly request our
members to notify the General Offices of all changes that may
occur by mergers, liquidations, failure, etc., or change in
National or State banks, from one system to another.

Paid Membership.
Annual Dues.
September 1, 1875,
$11,606.00
1,600
September 1, 1885,
1,395
10,940.00
September 1, 1895,
1,570
12,975.00
August 31, 1905,
7,677
127,750.00
August 31, 1906,
8,383
137,600.00
August 31, 1007,
9,251
150,795.00
August 31, 1908,
9,803
162,507.00
August 31, 1909,
10,682 Estimated
170,000.00
Interest on Bonds and Corporate Stock... 4,650.00
Interest on Bank Balance (estimated).... 1,280.00
5,930.00
Making the Total Income

MEMBERSHIP BY STATES.

[As of August 31, 19091
New Hampshire
Alabama
133
14
New Jersey
Alaska
40
New Mexico
Arizona
132
New York
Arkansas
California
406
North Carolina.
Colorado
172
North Dakota
Connecticut
151
Ohio 0
Delaware
31
•
Oklahoma
District of Columbia... . 32
Oregon
Florida
Pennsylvania
107
Georgia
Rhode Island
280
Idaho
South Carolina
106
South Dakota
Illinois
738
Tennessee
Indiana
332
Texas
385
Iowa
Utah
366
Kansas
Vermont
140
Kentucky
Virginia
143
Louisiana
Washington
• 84
Maine
West Virginia
151
Maryland
Wisconsin
Massachusetts
235
Wyoming
Michigan
341
Canada
Minnesota
338
Mississippi
Cuba
133
Missouri
Hawaii
361
Montana
Isle of Pines
130
Nebraska
Porto Rico
314
Nevada
Mexico
31
Total

45
244
43
865
127
190
451
234
121
790
51
110
166
117
279
.11

59
176
206
133
306
52
11
6
8
1
1
17
.10,682

MEMBERSHIP OF STATES AND TERRITORIES, . HAVING LESS THAN
100 MEMBERS.

[As of August 31, 1909.1
.\ laska
14
Utah
40
Vermont
A rizona
31
Wyoming
Delaware
Canada
32
District of Columbia
84
Cuba
Maine
Hawaii
31
Nevada
.45
Isle of Pines
New Hampshire
43
Porto Rico
New Mexico
Mexico
51
Rhode Island
Total

41
59
52
11
6
8
1
1
17
567

MEMBERSHIP.

9,803
Aug. 31, 1908
Erased from the rolls, through failure, liquidation, consolidation and withdrawal
760
Sept. 1, 1908, Membership
9,043
Aug. 31, 1909, Members joined during year including
regained
1,639
Aug. 31, 1909, total membership
A net increase for the fiscal Year of
The net loss for the year in failures, consolidations, etc
The net loss for the year in delinquents
Making the actual gain in new banks

10,682
879
192
182
1,253

The delinquent loss is the smallest in the history of the Association in proportion to the membership-less than 2 per cent.
The aggregate capital, surplus and deposits of our membership amounts to almost $14,000,000,000.
The membership and resources of the Association have increased as follows:




$175,930.00

MEMBERSHIP BY YEARS.

ROUTINE WORK.

During the fiscal year Just ended, 450,000 circular letters,
special letters, and codes have been issued from the Secretary's
Office.

141

1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909

Lost by Failures, Merger and
Members. Delinquent, etc
3,915
211
4,500
234
5,504
200
6,354
186
7,065
313
7,563
500
7,677
1,038
8,383
337
9,251
434
9,803
691
10,682
760

Gross
Gain.
741
819
1,313
1,159
1,139
1,120
1,152
1,043
1,302
1,243
1,639

Net
Gain.
530
585
1,113
973
826
620
114
706
868
552
879

The loss shown in 1909 was reduced by regained members to 374.
DIVISION OF BANKS IN ASSOCIATION.

State or Territory.
Nat'l.
Alabama
41
Alaska
2
Arizona
12
Arkansas
25
California
131
Colorado
92
Connecticut
70
Delaware •
18
District of Columbia 11
Florida .....
43
Georgia
64
Idaho
41
Illinois
... 277
Indiana
147
Iowa
138
Kansas
137
Kentucky
64
Louisiana
31
Maine
45
Maryland
72
Massachusetts
124
Michigan
83
Minnesota
148
05
Mississippi
Missouri
78
Montana
43
Nebraska
123
Nevada ...
11
New Hampshire
34
New Jersey
145
New Mexico
26
New York
330
North Carolina
48
North Dakota
77
Ohio
197
Oklahoma
117
Oregon
50
Pennsylvania
483
Rhode Island
17
South Carolina
17
South Dakota
60
Tennessee
44
184
Texas
Utah
18
Vermont
33
69
Virginia
Washington ....... 60
West Virginia...... 59
110
Wisconsin
Wyoming .
27
0
Canada
1
Cuba
3
Hawaii
Isle of Pines (W. I.) 0
0
Porto Rico
Mexico
0
4,305

State.
65
9
16
85
201
52
9
1
2
53
185
55
193
114
84
222
55
93
1
19
4
103
174
89
218
62
183
16

1
19
10
192
58
111
81
108
46
64
2
76
93
38
44
13
1
72
115
57
174
20
11
2
1

Priv. Tr. Co's. Say.Bka.
20
5
2
2
1
0
11
1
18
2
2
1
31
42
9
11
8
43
23
6
8
2
2
6
8
5
2
6
3
10
13
8
1
'1
8
202
50
16
41
29
1
13
52
98
1
3
3
18
1
2
16
1
2
22
1
15
15
22
23
34
13
60
46
6
103
6
3
7
16
0
3
22
18
25
16
7
2
4
3
1
3
1
3
7
1
63
16
1
3
3
182
89
72
16
1
4
60
11
64
5
1
3
2
25
4
0
15
8
2
1
1
3
2

16

1
1

3,788

860

40
8
11
150
21
5
4
29
26
3
14
12
19
10
10
4
0
2
1
0
0
0
961

73
1
3
35
6
11
4

Total.
133
14
40
132
406
172
151
31
32
107
280
106
738
332
385
366
140
143
84
151
235
341
338
133
361
130
314
31
45
244
43
865
127
190
451
234
121
796
51
110
166
117
279
41
59
176
206
133
306
52
11
6
8
1

3
11
8
4
5
11
0
0
0
0
0
0
0
17
768 10.682

BANKERS' CONVENTION.

142
APPRECIATION.

It would not be possible to carry on so vast an organization as
ours successfully and make the progress that has been made if
your Secretary did not have the hearty support of the executive
officers, committees and members, and I desire to express my
sincere thanks for the uniform courtesy and able assistance I
have received from President Reynolds, Vice-President Pierson
and Chairman Watts. These gentlemen have been ever ready to
respond to every call upon them which was in the interest of
the Association, and Treasurer Kauffman has been a live, energetic and enthusiastic official, co-operating with the general
officers at all times in furthering its welfare. I want to emphasize particularly the work of the Executive Council, the VicePresidents of the various States and the Secretaries of the State
Associations. The magnificent showing which has been made
in the increase in membership has,been largely due to the efforts
of these officials, and to them I express my sincere thanks. The
additional work in the Association brought about by new features and departments made it necessary to enlarge to a certain extent the office force. To them and to Assistant Secretary
Fitzwilson is due • much credit for expeditious work and they
have all willingly contributed to the success of the administration by faithful services.
PROSPECTIVE.
It is an established fact that the Association today i more
widely and better known than at any other time in its history;
that through its various ramifications it is securing results. It
Is my firm belief that it will continue to grow in prosperity and
achievements. It will be necessary, however, to be ever active
and alert to devise new plans for increasing its usefulness from
time to time, and to me one of the most important steps in the
near future will be the publication of a bankers' directory to
embody only members of the Association, eliminating all extraneous matter, having the publication in compact and convenient
form; this I believe would be appreciated by our membership.
All of which is respectfully submitted,
FRED. E. FARNSWORTH,
Secretary.

Report of the Treasurer, P. C. Kauffman.
Mr. President and Gentlemen :
You will find my report as Treasurer of the Association
• printed in full in the little pamphlet entitled "Reports," which
has been distributed throughout the ball.
I will not read it in full, but simply call your attention to
some of the principal facts contained therein. The cash balance
on hand September 1, 1908, was $1,023.20. The total receipts
of the Association for the current year were $174,475.73.
Owing to the wonderful activity of the Association and expense
of operation, the total expenses during the year yere $174,291.07, leaving a cash balance September 1, 1909, of $2,107.86.
On August 20, 1909, the Secretary forwarded to the Treasurer
for collection 10,051 drafts on account of the current membership dues, amountinsz to $164,035. These drafts were at once
sent out for collection, but owing to the fact that the Convention tills year is held so early a much smaller percentage than
usual has been collected up to the present date. However, the
Treasurer hopes by the end of the month or certainly by the
middle of October, to have the collections completed.
For investment the Association holds the following stocks and
bonds, which are deposited with the Bankers' Trust Company
of New York, as per instruction of the Executive Council. Interest on these securities is regularly collected by the Trust
Company and forwarded to the Treasurer, and by him credited
to the Association account. The securities are as follows:
$10,000 Government 4% Bonds of 1925.
$30,000 Atchison, Topeka & Santa F6 4% Bonds of 1925.
$50,000 Chicago, Burlington & Quincy, Ill. Div., 4% Bonds.
$30,000 New York City Registered Corporate Stock, 3%%,
due 1940.
The furniture and fixtures belonging to the Association in
the main office of New York by inventory are worth about
$7,500, but they are not carried as an asset, as they were
charged off at the time of the purchase.
It should be remembered that in addition to the balance
shown on the Treasurer's report, the Secretary sent to the
Treasurer for collection September 1, 1909, 10,051 drafts on
account of membership dues, unpaid for the fiscal year ending
August 31, 1910, amounting to $164,035.
While I will not read the Treasurer's report in full I sincerely trust every member of this Association, certainly every
one present at this convention, will analyze this report carefully,
as it is only by a thorough perusal of the reports of the Secretary and Treasurer that you will be enabled to gain a clear
insight into the active workings of this great organization.
I wish to take advantage of this occasion to express my
personal appreciation of the splendid manner in which the
accounts of the Treasurer are kept in the home office of the
Association under the management of Secretary Farnsworth.
Most of you are aware of the fact that all this labor has been
taken off the ,shoulders of the Treasurer, who is simply the disbursing officer. After the appropriations have been made by
the Executive Council, the accounts against each of the various
organizations of the Association and the several committees to




which appropriations have been made are kept by the Secretary in the New York office, and the vouchers as drawn and
countersigned come through to the Treasurer for payment in
due course. The active work of the Association being conducted from the New York office, it is, of course, necessary
that the accounts of the several organizations and committees
be kept there.. At the close of each month an account is stated
by the Secretary as against the Treasurer, five copies of which
are made and forwarded to the Treasurer for reconciliation, one
copy of which, with the reconciliation sheet, is sent to the
President of the Association, one to the Vice-President, one
to the Chairman of the Executive Council, the fourth to the
Secretary at the New York office, and the fifth retained by
the Treasurer in his own office. In this way the accounts are
so thoroughly systematized that it is possible for any one
of the members of the Association to go into the Secretary's
office and in a moment find the exact balance in the hands
of the Treasurer, the amount expended by any committee, and
the purpose for which the expenditure was made. At the close
of each year the tccounts of the Association are carefully examined and audited by the Audit Company of New York, all
the vouchers in the Treasurer's hands being forwarded for
examination. I cannot see how it is possible to in any way
improve upon the method in which the accounts of the Association are kept.
Respectfully submitted,
P. C. KAUFFMAN,
Treasurer.
TREASURER'S FINANCIAL REPORT
FOR FISCAL YEAR ENDING AUGUST 31, 1909.
RECEIPTS.
September 1, 1908:
$1,923.20
Cash balance
Interest on bank balances
1,281.29
Interest on stock and bonds
4,050.00
Account sundry small items
17.00
Extra guests, Denver convention
790.00
Dues 8 regained members of 1907-1908
95.00
Dues 1 old member of 1907-1908
20.00
Dues 378 regained members of 1908-1909
4,900.00
Dues 795 new members of 1908-1909
7,933.75
Dues 8,484 old members of 1908-1909
142,340.00
Dues 132 old members of 1909-1910
2,005.00
Dues 460 new members of 1900-1910
5,630.00
Dues 6 regained members of 1909-1910
70.00
Account Clearing House Section, postage
. 31.86
Account soliciting new members
12.35
Account Trust Company Section, sale of books and envelopes, etc
594.55
Office fund
1,000.00
Journal, profit
2,920.78
Account Standing Protective Committee
49.55
$176,414.33
DISBURSEMENTS.
September 1, 1908:
Petty cash
$80.00
Salaries
22,871.19
Postage, stationery and printing
4,645.00
Rent, General Offices
$4,300.00
Paid for Sections, Legal Department, Journal, and
Protective Department
2,841.66
7,141.6G
Publishing and distributing Annual Proceedings
10,938.08
American Institute of Banking Section
7,604.50
11,389.73
Trust Company Section
Savings Bank Section
9,438.47
Clearing House Section
1,408.52
Legal Department
0,037.40
Committee on Bills of Lading
1,402.82
Committee on Uniform Laws
79.45
Federal Legislative Committee
608.55
Currency Commission
1,604.06
Standing Protective Committee
44,336.07
Committee on Express Companies and Money Orders
4,565.68
Standing Law Committee
1,256.07
Voucher Check Committee
1,551.84
Committee on Revision of the Constitution
192.50
Special Committee on Travelers' Checks
163.48
Cipher Code, balance from 1907-1908
2,388.40
Journal
9,084.47
Office Fund, now balanced
1,000.00
Extra office help
409:60
Telephones and telegrams
419.91
Auditors, for 1907.1908
150.00
Insurance
65.00
Balance Treas. Crane Account collecting dues 1007-1908
152.16
Premium on Officers' Bonds
73.75
Furniture and fixtures, furnishing offices, including Sections and Legal Department
2,850.10
Convention expenses, Denver, including $5,000 to entertaining city
8,481.19
F. G. Moffat, chairman, account extra guests, Denver
convention
770.00

BANKING SECTION.
1,001.41

Traveling expenses
Executive Council, Vice-Presidents and State Secretaries
securing new members
Refund account dues, 1907-1908, overpaid
Refund account dues, 1908-1909, overpaid
Refund account dues, 1909-1910, overpaid
Executive .Council meeting, 1909
Signs, membership
Gold badges for President and 40 members of Executive
Council
Sundry items, otlice supplies, etc.
Balance August 31, 1909

004.55
6.00
150.25
10.00
7,508.29
230.00
261.17
1,309.97
2,107.86

$176,414.32
September 1, 1909:
Cash balance

$2,107.80

Report of Standing Protective Committee.
New York, September 1, 1909.
To the Executive Council of the American Bankers' Association:
GENTLEMEN :—The detailed Financial Report of the Standing
Protective Committee for fiscal year ending August 31, 1009, is
as follows :
RECEIPTS.
Oct. 1, 1908, by Appropriation Executive
$25,000.00
Council
May 5, 1909, by Appropriation Executive
Council
20,000.00
Received from Union State Bank, San
Francisco, Cal
37.50
Received from Salisbury Savings Bank, Salisbury, Mo
12.05
$45,049.55
DISBURSEMENTS.
Pinkerton National Detective Agency, service for contract for one-half fee due
November 1, 1008, 8,998 Members
$13,497.00
at $1.50
Same due May 1, 1909, 10,010 Members
$1.50
15,015.00
at
15,824.07
Account of special cases
----$44,336.07
Credit Balance, August 31, 1909, charged
off per resolution of Executive Council

$713.48

The following data will show you the result of the Committee's work during the year Just ended:
The record of criminals arrested, convicted, sentenced, awaiting trial, bank burglaries, etc.
Arrested prior to September 1, 1908, 25; arrested since September, 1908, 129; convicted, 01; sentences, 277 years and 9
months; indeterminate terms, 21 ; suspended sentences, 9 ;
escaped, 3; released, 18; died or killed, 1; awaiting trial, 42.
During the last year there were 89 attacks against nonmembers on account of successful and unsuccessful burglaries,
as against 18 members. Loss to non-members was $137,809.27,
against $21,578.01 by members, making a difference of
$116,231.26.
Hold-up robberies upon non-members were 8, with a loss of
$2,625, against an attack on 7 members, with a loss of
$15,042.15, making a difference of $12,417.15.
The total of imprisonment for criminals that have been convicted for the fiscal year 1908-09, amount to 277 years and 9
months. This does not include 21 indeterminate terms.
During the year there was only one robbery on a member by a
professional sneak thief, and his arrest was caused, and he is
now held awaiting trial.
The Protective Committee has expended $44,286.52 for the
protection of 10,682 members, which amount is $5,763.98 in
excess of the expenditures by the Committee last year. Consideration should be taken in connection with this increase of
expense of the fact that there has been in increase of 879 in
the membership, and therefore, allowance should be made for
the increased expense on account of the additional disbursement covering the retaining fee of $3.00 per member paid the
Pinkertons ; and further, the Protective Committee while endeavoring to confine its operations against professional criminals
has, when in their Judgment a case warranted it, endeavored to
apprehend and cause the arrest of amateurs whose records
classify them as dangerous criminals, and therefore, part of
this increased expense for the carrying on of tile work of tile
Protective Committee, is due in a large measure to this new
feature. In addition, the Committee has had several important'
cases, which have necessitated a considerable expenditure of
money, among them being an investigation covering a long
period in connection with the note kiting fraud, which has been
so much in evidence, and which was called to our attention by
various members. heretofore tile work of previous Committees
has been confined entirely to professional criminals.
Again we report that it sometimes happens that members are
dissatisfied because the detective agents are not authorized to




143

do special work on cases which do not come within the rules of
your Committee. The Committee regrets this very much, but
believes that you will appreciate the fact that they are cornpelled to have rules to govern their work. They give careful
consideration to every case submitted and decide each case on
its merits.
The number of criminals arrested, convicted, etc., for operations on banks from December, 1894 (at tile time of the first
appointment of the Standing Protective Committee) to September, 1909, is as follows:
Arrested
951
Convicted
813
Escaped
17
Recaptured
5
12
Released
84
Awaiting Trial
42
—
951
Your attention is also called to the burglaries and attempted
burglaries on banks since the inauguration of the protective
feature, viz:
Non-members
.1,062 Lost $1,468,879.47
Members
194
147,065.23
Difference
The expenses
their work since
Fiscal
Year
Paid
ending members
1901
5,392
1002
6,204
1903
6,943
1904
7,563
1905
7,677
1906
8,383
1007
9,251
1008
9,803
1009
10,682

868

"

$1,321,814.23

of the Committee and tile practical results of
1901 are as follows:
Total
Cost per
Total
Special General Total convicmember
expenses arrests arrests arrests tions
$5.56
$29,973.20
59
51
110
99
5.28
32,781.11
78
60
138
125
5.93
41.145.61
59
86
145
122
4.53
34,282.44
78
48
126
82
4.06
31,203.61
51
116
167
85
3.71
31,057.76
70
109
179
115
3.98
36,847.40
48
49
97
75
3.93
38,522.54
57
77
134
74
4.14
44,286.52
85
77
162
107

The rules under which the Protective Committee work are as
follows:
1. "Upon receipt of notification by the Protective Committee,
Hanover Bank Building, New York, N. Y., of an attempted or
successful perpetration of fraud upon a member of tile Association, either by forgery, check-raising, robbery, or safe-breaking,
which appears to be the work of professional criminals, accompanied by a full account of the offense, and, if possible, a description of the operators, the Committee will, if the case come
within tile category of those of which the Association can take
cognizance, at once undertake the apprehension of the criminals
by means of detectives and such other means as they may consider warranted. A case once committed to the Association,
which results in the apprehension of the criminals, cannot be
taken out of its hands, nor the offense condoned or compromised."
2. "The Association cannot take cognizance of petty larcenies
or thefts by employees.
"The Protective Committee can spend no money, undertake no
detective work, employ no lawyers and pay no fees of any kind
in cases of local swindles, or frauds or confidence tricks. The
vigilance, alertness and energy of the officers of the banks must
be relied upon in such cases."
3. "The Association cannot be held responsible for any expense
Incurred for protective work which has not been previously
authorized by the Protective Committee."
4. "The Committee cannot undertake action on any case
unless immediate notice of crime has been given to the Secretary
or such notice sent to the nearest Pinkerton office."
5. "The Committee will not take cognizance of cases where
other than members are defrauded. If customers of members cash
checks for unidentified strangers, and same turn out to be
forged or raised, they must pursue the criminal through the
police, sheriff, or other county authorities or some detective
agency at their own expense."
As a result of the work of the Protective Committee increasing
to such an extent, and in view of the fact that it was impossible
for tile Secretary's Office to give the required attention to this
work, the advisability of the employment of an experienced man
in criminal work to give his undivided time to tile work of your
Committee, was considered (the authority to employ such a
person having been granted) and resulted in the appointment,
on August 2, 1909, of a representative of the Government Secret
Service, who had been for years in its employment. Tile Committee believe this action will achieve beneficial results.
Your Committee have examined, reported and acted on over
20,000 letters and reports in connection with their work during
tile fiscal year 1908-09.
We are pleased to report that there have been fewer crimes
in proportion perpetrated against members than for any previous
year. We refer you to the report of the Pinkerton National
Detective Agency for additional details.
Respectfully submitted,
STANDING PROTECTIVE CONIMITTEE.

BANKERS' CONVENTION.

144

Financial Statements of the Various Committees.
Credit Balances as reported September 1, 1909, charged off as
per Resolution of the Executive Council.
AMERICAN INSTITUTE OF BANKING.
New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.

$7,500.44
1,500.00

CLEARING HOUSE SECTION.
New York, September 1, 1909.

$9,000.00

Front September 1, 1908, to August 31, 1909.

DISBURSEMENTS.
Expense, Bulletin
Executive Council traveling expenses to Seattle

$6,430.25
1,174 25 $7,604.50
$1,395.59

September 1, 1900, Credit Balance
CURRENCY COMMISSION.

New York, September • 1, 1909.
From September 1, 1908, to August 31, 1909.
RECEIPTS.
$7,500.00

Oct. 1, 1908, By Appropriation

RECEIPTS.
$2,500.00

Oct. 1, 1908, By Appropriation
DISBURSEMENTS.
Special Work
Buttons
Stationery and Printing
Stenographer
Traveling Expenses
Postage
Sundries

$75.00
10.00
274.87
24.00
948.90
51.86
23.89

$1,493.0Q
6.00
104.98

Credit Balance September 1, 1909

1,408.52
$1,091.48

Credit Balance, September 1, 1909

DISBURSEMENTS.
Special Committee, 1907-1908
Stenographic
Traveling Expenses

9,438.47
$661.53

Credit Balance, September 1, 1909

RECEIPTS.
Oct. 1, 1908, By Appropriation
64
May 5, 1909, "

$75.70
602.66
3,253.73
55.95
364.64
88.85
40.74

Sundries
Expense, Executive Commtt tee
Committee on Postal Savings Banks
"
" Auditing
" Savings Bank Laws
64
•" Membership
" Vice-Presidents

COMMITTEE ON BILLS OF LADING.
1,604.06

New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.

$5,895.94

TRUST COMPANY SECTION.
New York, Septernber 1, 1909.

RECEIPTS.
Oct. 1, 1908, By Appropriation
May 5, 1909, "

$1,250.00
500.00
$1,750.00

From September 1, 1908, to August 31, 1909.

DISBURSEMENTS.

RECEIPTS.
Oct. 1, 1908, By Appropriation
May 5, 1909,"

$7,500.00
4,000.00

4 Copies Trust Co. Proceedings
24 " Proceedings 1806-1903
95 " Proceedings 1904-1908 (less exchange, 60c.)
57 " Trust Company Laws
Stamped envelopes, returned
Account Meeting of Executive Council, overpaid
Sale of one bookcase

$11,500.00
2.00
72.00
284.40
198.50
15.40
7.25
15.00
$12,094.55

$217.90
18.50
321.60
771.31
17.66
55.85

Stationery and Printing
Telegrams and Express
Traveling Expenses
Professional Service.
4
Postage
Typewriting and Stenographer
Credit Balance September 1, 1909

1,402.82
$347.18

COMMITTEE ON EXPRESS COMPANIES AND MONEY ORDERS.
New York, September 1, 1909.
From September 1, 1908, to August 31, MP.
RECEIPTS.

DISBURSEMENTS.
$4.015.23
Salaries
238.64
Postage
84.00
Postage Account Proceedings
201.10
Printing and Stationery
105.00
Petty Cash
46.97
Sundry Expense
97.50
15 Gold Badges
110.00
Rent
477.15
Expenses Denver Convention
H. I'. McIntosh, account Postage, Telegrams, Express Charges, Telephone, Herrick, and Salary and
350.28
Expense of Stenographer
86.15
Committee on Trust Company Forms
15.00
Trust Company Forms
90.00
Loving Cup to Col. J. R. Branch
218.10
Express on Proceedings and Trust Company Laws
19.22
Insurance
759.36
Proceedings of 1908
2,000 Copies Trust Company Laws and Legal Service
2,379.58
In Preparing Same
1,355.55
1,000 Copies Proceedings 1904-1908
Expense of Executive Committee Meeting at Briar740.90 $11,389.73
cliff, N. Y.
September 1, 1909, Credit Balance

$704.82

Oct. 1, 1908, By Appropriation

$14,000.00

DISBURSEMENTS.
$2,500.00
1,991.37
6.16
18.15
50.00

Professional Services (Legal)
Traveling Expenses
Sundries
Printing and Stationery
Stenographer

4,565.68

$9,434.32
Credit Balance September 1. 1909
Note.—Bills submitted not yet paid will close this credit balance.
STANDING LAW COMMITTEE.
New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.
RECEIPTS.
Oct. 1, 1908, By Appropriation
Oct. 1, 1908, " Special Appropriation

$750.00
2,000.00
$2,750.00

DISBURSEMENTS.
Stationery and Printing
Traveling Expense
Special Professional Services (Legal)
Postage and Express

$134.75
116.45
1,000.00
4.87

1,256.07

SAVINGS BANK SECTION.
New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.
RECEIPTS.
Oct. 1, 1908, By Appropriation
Jan. 26, 1909, "
May 5, 1909, "




COMMITTEE ON UNIFORM LAWS.

RECEIPTS.
$10,100.00

Printing, Stationery and Supplies
Postage
Stenography and Typewriting
Rent
Convention Expenses
Allowance of Secretary
Book of Proceedings

$1,493.93

New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.

$4,500.00
500.00
5,100.00

DISBURSEMENTS.

Credit Balance September 1, 1909

Oct. 1, 1908, By Appropriation

$600.00

DISBURSEMENTS.
$277.45
673.00
832.00
337.50
280.95
1,575.00
980.30

Stenographic Work
I'ostage
Express Charges
Geo. F. Orde, Expenses at Meeting of Executive
Council at Briarcliff
Credit Balance September 1, 1000

$20.00
5.00
.75
53.70

79.45
$520.55

BANKING SECTION.
FEDERAL LEGISLATIVE COMMITTEE.
New York, September 1, 1909.
From September 1, 1908, to August 31, 1909.
RECEIPTS.
Oct. 1,

1908, By Appropriation
DISBURSENIENTS.

$1,500.00
$580.55
28.00

Traveling Expense
Stationery and Printing
Credit Balance September 1, 1909

608.55
$891.45

COMMITTEE ON VOUCHER CHECKS.
New York, September 1, 1909.
From September 1, 1008, to August 31, 1909.
RECEIPTS.

$1,000.00
1, 1008, By Appropriation
551.84
May 5, 1009, By Resolution of Executive Council

Oct.

$1,551.84
DISBURSEMENTS.

Printing and Stationery
Traveling Expenses
'Sundries
Postage

$682.54
304.15
44.65
520.50
$1,551.84

COMMITTEE ON REVISION OF THE CONSTITUTION.
New York, September 1, 1009.
From September 1, 1908, to August 31, 1909.
RECEIPTS.

May 5, 1909, By Resolution of Executive Council

$192.50

DISBURSEMENTS.

Traveling Expenses

$192.50

STANDING PROTECTIVE COMMITTEE.
From September 1, 1908, to August 31, 1909.
RECEIPTS.

1, 1908, By Appropriation
$25,000.00
May 5, 1909, "
20,000.00
Received from Union State Bank, San Francisco,
Cal.
37.50
Received from Salisbury Say. Bank, Salisbury, Mo.
12.05

Oct.

$15,040.55
DISBURSEMENTS.

Pinkerton National Detective Agency', service per
Contract for one half fee due November 1, 1908,
.8,998 members at $1.50
$13,497.00
Same due May 1, 1909, 10,010 members at $1.50 15,015.00
Account of special cases
15,824.07 44,336.07
Credit Balance, September 1, 1909

$713.48

SPECIAL COMMITTEE ON TRAVELERS' CHECKS.
New York, September 1, 1909.
DISBURSEMENTS.
Expenses

Attending Meeting at Saratoga July 15 and 16, 1900.. $103.43

Report of Executive Council, by F. 0. Watts, Chairman.
To the American Bankers' Association:
Through the "Journal of the American Bankers' Association"
the members have been so well informed from month to
month of the work of the Executive Council and the Special
Committee and officers under its control, that for the long established custom of having a written report for each Convention,
and my constant purpose to fall in with all good customs and
precedents, I would have no further report.
To say something of the Association and its work not already brought to your attention through the "Journal" is a
difficult task. The Executive Council, as at present constituted, is the largest and most representative in the history of the Association. At your Convention in Denver last
year you made radical changes in tile method of selecting
members of the Council, State vice-presidents and members
of the Nominating Committee—putting such responsibility on
the members of this Association when assembled at the
Convention of the various States. This departure has worked
so well that even those opposing it in the early stages of
the movement would, not, I dare say, return to tile old
method.
It may be recalled that at and prior to the Convention
at Atlantic City there were marked dissensions, and what
might be called the rank and file of the membership became
so restive under what they considered unequal representation,.
that a spirit of resentment was surely abroad. It is most
pleasing to report that under the new plan of having every
State select its own representatives, the feeling formerly existing has entirely subsided, and tile year just ended has
been marked as one ill which harmony prevailed in every department of the Association. In addition to the satisfaction
as to a proper representation—the new order of things re.




145

suited in bringing this Association into closer touch with
the various State Associations, increasing interest at the
State Conventions, and in materially increasing the membership of this Association. This added impetus, taken with the
untiring and effective work of the Secretary and his assistants,
and the assistance of the Executive Council and the State
vice-presidents, has resulted in an increase of this Association to 10,700 members.
Following custom, the Executive Council held two meetings since its last report to you—one just after the adjournment of the Denver Convention, and the second at Briarcliff,
N. Y., during May. The details of these meetings were published in the May and October numbers of the "Journal" and
will not be recounted in this report. Though doubled in size,
there surely could never have been any meetings more business-like and harmonious, and the attendance at the May
meeting was 66 out of a total membership of 71. This is
quite remarkable consideripg that the members came from all
parts of the country, from California to Connecticut and
from the State of Washington to Florida.
While no new work was planned during the year, close attention and increased activity were given to the various
special lines of work as well as to the regular and most valuable work, such as that especially looked after by tile Protective Committee, the Trust Company Section, the Savings
Bank Section, tile Clearing House Section, tile American Institute of Bank Clerks, the Secretary, the General Counsel
and the treasurer. The detailed reports of all such work
will be very thoroughly presented to you during tills Convention by those ill whose immediate charge It was placed.
Practically all of the special work undertaken by tile Committees of this Association in the past has been well done and
of real value, and while the record stands so, It seems a
most opportune time to call attention to the disposition of
most of similar bodies to constantly increase the number of
Special Committees—out of proportion to the importance of
the work and without due consideration of the cost to be
incurred.. The record of your present Council is most excellent on this point, as only two special committees were
created and the Council unanimously approved a ruling that
the term of all committees created by it should end at the
first meeting of the body thereafter, unless appointed for
some other specific time or continued by affirmative action.
The Association and its sections have been especially active
in opposing those after-panic proposals, "the Bank Guarantee
of Deposits" and time "Postal Savings Bank." Equally wrong
in principle, the latter seems more formidable because of
the power and influence of its advocates and because the
defects of the guarantee scheme are more glaring. and therefore more effectively placed before the public. The Currency
Commission has not been as active during the last year as
during the previous one. This apparent inactivity should not
be misunderstood. Tile interest of the Association as a whole
and that of the Currency Commission has not been abated
one whit, nor can it be denied that tile best thought among
bankers has been crystallizing more and more upon the true
principles of currency reform as set out In the report of our
commission. The principles they enunciated are not altered
or affected by the growing sentiment among tile best bankers
favorable to a central bank. After the appointment of the
Special Currency Commission by Congress, a committee of
tile highest type and apparently seeking after the plan most
suitable to our conditions and necessities, the officers and
committees of this Association considered their duty lay in
rendering to the Congressional Commission every possible assistance, and in awating the result of the latter's most
thorough and non-partisan investigation.
Before concluding, I take this opportunity to publicly express my appreciation of the official and personal association
during the year with the President, First Vice-President, Secretary, Treasurer, General Counsel and the entire membership of tile Executive Council. Surely no men ever worked
more harmoniously to the common end of building up our
profession in America.

Report of General Counsel Thomas B. Paton.
During the year since the Denver Convention, the work of
General Counsel has been' devoted to time promotion of legislation having for its object the greater safety of banking
transactions, as well as general uniformity of commercial
law, and has also included active and continuous services
rendered the various sections and committees and the members
in general.
LEGISLATIVE MEASURES.

I am pleased to report that the various legislative measures
drafted and recommended on behalf of the Association in the
banking interest have met with abundant success during the
past year. No less than thirty-seven Association bills have
been enacted in different States, and this does not include the
Negotiable Instruments Law, which has been enacted in two
additional States, and the Uniform Warehouse Receipts Act,
which has been passed in eight States tills year.
1. The bill to punish the making or use of false statements

146

BANKERS' CONVENTION.

summary of guarantee and other legislation relating to banks
to obtain credit, drafted by General Counsel, and made broad
which has been enacted this year.
enough to punish the officer who obtains money or credit for
Contemporaneous with the growth of the guarantee of dehis corporation by means of a false statement, has been passed
posit theory, it is to be noticed that another principle is makby the legislatures of Michigan, Minnesota and Montana;
ing headway in State legislation, namely, the segregation and
also in Tennessee with certain modifications, and in Illinois
safeguarding of savings deposits. Massachusetts last year
the principle of the bill was incorporated in an amendment of
enacted that savings deposits in trust companies must be
the existing law. It also passed both houses of the New
separately kept and that such deposits and the securities in
Jersey legislature, but was vetoed by the Governor without
which invested be appropriated solely to their repayment.
statement of reasons.
This. year California enacted a general banking law under
2. The bill drafted by General Counsel relating to bills of
which one bank may have separate departments for savings,
lading has also been passed in four States this year. I leave
commercial and trust company business; the cash, securities
for the Chairman of the Committee on Bills of Lading
statement of the details concerning this measure.
and property of each department must be kept separate and
3. The bill drafted to punish the circulation of derogatory
not mingled with that of any other department, and all
statements affecting the financial standing of banks has been
moneys and investments of each department are to be held
solely for the repayment of the depositors of that department,
passed by the legislatures of Michigan and Pennsylvania.
4. The bill precluding a depositor from questioning the payany overplus to be applied to other liabilities. Texas also
ment of a forged or raised check unless he notifies the bank
excludes savings deposits from the operation of its guarantee
within a specified period after the return to him of the forged
law, and provides that the business of savings departments of
banks and trust companies be kept separate and distinct, and
or raised cheek as a voucher has been passed this year in
Montana, with a time limit of one year; in Iowa and .North
in case of insolvency savings depositors have an exclusive
prior lien upon assets, including cash of the savings depart.
Carolina, time limit six months; in Wyoming, time limit three
meat. Also in the trust company law of Wisconsin enacted
months, and in North Dakota, time limit thirty days.
this year time deposits, not subject to check, must be held
5. The bill defining and punishing the crime of burglary
or invested separate from other funds or property and in
with explosives has been enacted this year in the three addicase of insolvency are made primarily liable for the payment
tional States of Idaho, Washington and Wyoming; and bills
of such time deposits.
making it a crime to have burglars' tools in possession have
In this connection it may be mentioned that the whole subbeen passed in North and South Dakota and in South Carolina.
ject of segregation and safeguarding of savings deposits, in
6. The bill making it a crime to give, with intent to
all classes of banks, has been taken up and is being given
defraud, a check or draft on a bank without sufficient funds
exhaustive investigation and consideration as to its practicon deposit to meet it has been passed this year in Wyoming;
ability by the Law Committee of the Savings Bank Section,
and in South Carolina and Tennessee in modified form.
and after the matter has been brought before the other law
7. The bill amending the Negotiable Instrument Law, by
committees of the Association it is probable that certain conclearing up all doubt when a time instrument made payable
clusions will be reached and recommendations made..
at a bank may be paid, specifying that payment must be
CORPORATION TAX AMENDMENT.
made on the day of maturity only, has been passed in Missouri,
On August 5 Congress enacted a Corporation Tax law as
Montana and New Jersey.
part of the Tariff bill. By this a special excise tax equivalent
8. The bill authorizing payment of a deposit in trust to
to one per cent. upon the entire net income of corporations
the beneficiary upon the death of the Trustee has been passed
over $5,000 is imposed, and all incorporated banks, State and
in Michigan and Montana, and in South Carolina in modified
National, are subject to this tax. The law provides that the
form.
net income shall be ascertained by deducting certain specified
9. The bill authorizing the payment of a deposit standing
expenses, losses and payments front gross income. When
in two names, upon the death of one, to the Survivor, has
this law passed the Senate on July 3. It contained the folMichigan, Montana, Nebraska and New
been enacted in
lowing specification of interest payments which could be deHampshire. It also passed both houses of the Wisconsin
ducted from gross income:
legislature, but was vetoed by the Governor on the ground
"Third. Interest actually paid within the year on its
that it might afford an opportunity for evasion of the Inbonded or other indebtedness to an amount of such bonded
heritance Tax Law.
and other indebtedness not exceeding the paid-up capital
10. The bill qualifying a notary, though a stockholder of
stock of such corporation, joint stock company or assoa bank, to take acknowledgments and protest paper where
ciation, or insurance company, outstanding at the close
the bank is a party, has been enacted in Michigan, Montana,
of the year."
New Jersey and Wyoming.
As applied to a bank, the term "other indebtedness" would
The promotion to enactment of such a large number of bills
cover deposits and a reasonable construction of this provision,
has entailed a large technical correspondence, together with
as passed by the Senate, would have prevented a bank from
the preparation and making of a number of legal arguments,
deducting from gross income all interest paid on an amount
and the result is most gratifying. But in this connection it
of deposits in excess of capital. This would have been a very
must be understood that all these Association measures, soserious hardship on a large number of banking corporations
called, while drafted or prepared by General Counsel and
whose line of interest-bearing deposits are far in excess of
put forth with the approval and recommendation of the
their capital. Accordingly, General Counsel immediately preStanding Law Committee and other committees of the Assopared a brief showing this defect and this hardship in the
ciation, have not been directly urged in the various States on
law, which was forwarded to the President of the Association,
behalf of the General Association, but have been sent to the
approved by him and immediately sent on to the proper comState Bankers' Associations merely as suggested measures for
mittee at Washington. As a result I am pleased to report
use of the local committees, to be taken up and advocated if
that in the law as finally passed, this defect was corrected
local needs and conditions required; and it has been chiefly
so that banks are allowed to deduct from gross income all
through the efforts of these State Committees that such splendid
interest paid on deposits during the year. This correction
results have been achieved.
was made by an addition to the clause I have quoted of the
These specific Association measures, it is seen, strike, on
following language:
the one hand, through the criminal law at the bank burglar,
"and in the case of a bank, banking association or trust
the bank slanderer, the giver of the bad check and the swindcompany, all interest actually paid by it within the year
ling customer who obtains money on a false statement; and,
on deposits."
on the other hand, through the civil law, protect the bank
WORK IN GENERAL.
by surrounding the payment of deposits in specified instances
In the progress of his work, General Counsel has accumulated
with certain safeguards, and also by increasing the security
the Banking Laws of all the States, together with the latest
and value of instruments of credit which the bank handles.
amendments; also the current decisions affecting banks and
Aside from the enactment of the Association measures, conbanking transactions, which have been arranged Sand classified,
siderable legislation has been passed during the year in a
the whole constituting a bureau of legal information for ready
number of States relating to banks and the banking business.
reference.
Among other legislation, four States have enacted GuarDuring the year, 127 legal opinions have been prepared
antee of Deposit laws this year, and Oklahoma has materially
for various members of the Association on questions of bankamended its original law of 1907, the constitutionality of
ing law arising in their business, and in addition a large and
which is pending before the Supreme Court of the United
constant correspondence has been conducted conveying inStates. Nebraska has enacted a Guarantee law under which
formation on various legal and banking subjects and in reassessments apparently go on indefinitely, but the operation
lation to the work of the committees and sections.
of this law has been enjoined by the Federal Courts pending decision as to its validity. Texas has passed a law proConsiderable time has been given in the way of legal editors:iip of the "Journal" of the Association and of the "Bulletin"
viding for a depositors' guarantee fund or, in the alternative,
of the American Institute of Banking, and constant service
a bond security system. Kansas and South Dakota have also
passed laws for the establishment of a depositors' guarantee
has been rendered the Institute in the legal branch of their
fund; but in these two States such laws are optional and
educational work, including the delivery of thirteen lectures
not compulsory upon the bank. Deposit guarantee laws have
on subjects of banking and commercial law.
been introduced in a large number of other States, but have
In the mattery of bank burglary insurance, six companies
have been led to insert in their policies, clauses which insure
been rejected by their legislatures. I append to this report a




BANKING SECTION.
the bank in event of "night hold-ups," a kind of loss which
has not heretofore been covered'. This is the result of agitating the subject in the "Journal."
A considerable number of legislative committee hearings
upon measures of interest to the Association have been attended, as well as all the sessions of the conference of Commissioners on Uniform State Laws, at which have been perfected uniform laws on the subjects of Warehouse Receipts,
Bills of Lading and Transfer of Title to Stock Certificates.
In connection with the work of the Committee on Bills of
Lading, the Standing Law Committee, the Savings Bank Law
Committee, the Committee on Trust Company Laws, the
Voucher Check Committee, and other committees of the Association, many meetings have been attended and legal briefs
and other documents prepared, the details of which need
not be given.
In conclusion, General Counsel desires to express his appreciation of the hearty co-operation which has been given him
by the general officers and members of committees of the
Association, as well as by the secretaries and legislative committeemen of the State Bankers' Associations.

SUMMARY OF STATE LEGISLATION DURING 1909
AFFECTING BANKS.
ALABAMA.
The Alabama legislature convened July 27, 1909. A number of bills
were introduced in behalf of the Bankers' Association, one of which
re-enactment of the negotiable instrument law which was
• is for
defectively passed at the last session of the legislature.
Several other bills, purely of a local nature, were introduced.
relating more particularly to the examination of banks and the
preparation of statements. These measures were still pending at
the date of preparation of this statement.
ARIZONA.
Section 138 of the Revised Statutes, relating to reserve, was
amended by Chapter 90 of the laws of 1909, so that instead of
the required reserve of at least fifteen per cent, of deposits being
kept "on hand," it is provided that two-fifths must be cash on hand
and three-fifths on deposits with other banks approved by the Comptroller.
ARKANSAS.

•

A general Banking Law, providing a State Banking Department,
and containing provisions for the organization of banks and regulation of the banking business, was introduced in the legislature, but
failed to pass.
No measures materially affecting the banking business were
enacted this year.
CALIFORNIA.
A new Banking Law, which was prepared under the supervision
of a committee appointed by the California Bankers' Association, and
a commission appointed by the Governor, was enacted this year.
Under it banks are divided into three classes, viz.:
(a) Savings Banks.
(b) Commercial Banks.
(c) Trust Companies.
Corporations may be formed to conduct any one or all of such
classes of business.
Separate provisions governing each class are made. Where the
corporation conducts more than one kind of business It must keep
the books, investments and transactions of each class separate, and
In the event of insolvency the depositors of each class are preferred
as to the cash investments belonging to that class.
Sections 26 and 27, which provide this separation and segregating,
read as follows:
"Sec. 26. Every bank having different departments shall keep
separate books of account for each department of its business, and shall be governed as to all deposits, reserves, investments and transactions relating to each department by the
provisions in this act specifically provided for the respective
kind of business.
"It shall keep all investments relating to the savings de•
part men t entirely separate and apart from the investments
of its other department or departments.
"Every bank shall conduct the business of all its departments in one building, or in adjoining building, and shall keep
entirely separate and apart in each department the cash, securities and property belonging to such department, and shall
not mingle the cash, securities and property of one department
with that of another.
"See. 27. All money belonging to each department, whether
cash on hand or with other banks, and the investments made,
shall be held solely for the repayment of the depositors in said
department, until all depositors in such department shall have
been paid, and the overpius then remaining shall be applied
to the other liabilities of such bank."
The Uniform Warehouse Receipts Act was passed this year.
COLORADO.
A Guarantee Deposit Law, along the lines of the Oklahoma law,
was introduced but failed to pass.
The Trust Company Law was amended with reference to the
amount of capital stock required in cities of first and second class.




147
CONNECTICUT.

The legislature of Connecticut passed certain laws affecting
banks, of local interest only, relating to certain items of loans and
investments by savings banks, fixing the minimum salaries of savings
bank presidents, and increasing the salaries of the Bank Commissioners.
DELAWARE.
The Delaware legislature passed a law requiring all State banks
and trust companies to keep a reserve fund, which, in the case of
banks in the City of Wiln.ington, must be 15 per cent, and as to
all banks outside of the city 10 per cent.
Five per cent, of this reserve fund must consist of cash in bank;
the remainder of deposits in reserve banks.
FLORIDA.
The legislature of Florida passed an act authorizing the employment
of an additional bank examiner, and also an act defining due dilli•
gence in the collection of checks, drafts, etc. The last stated act
provides:
"That when a check, draft, note or other negotiable instrument is deposited in a bank for credit, or for collection, it
shall be considered due diligence on the part of the bank in
the collection of any check, draft, note or other negotiable
Instrument so deposited, to forward enroute the same without
delay in the usual commercial way in use according to the regular course of business of banks, and that the maker, endorser.
guarantor or surety or any check, draft, note or other negotiable
Instrument, so deposited, shall be liable to the bank until
actual final payment is received by it, except in case of want
of due diligence on its part, as aforesaid."
(Similar due diligence laws now exist in Vermont, Kentucky and
South Dakota.)
GEORGIA.
No legislation materially affecting banks was enacted at the
present session. A bill for the guarantee of deposits was introduced
but failed to pass.
IDAHO.
The legislature enacted the Association measure to define and
punish the rime of burglary with explosives with a penalty from
ten to twenty-five years.
A further law adds Decoration Day and Labor Day to the holiday s now observed.
ILLINOIS.
By Act approved June 8, 1909, the legislature adopted the principle of the Association measure to punish the making of statements
for credit, by amending Section 97 of the Criminal Code, so as to
extend the crime and punishment of an officer who obtains credit
for his corporation, or a member who obtains credit for his firm.
Section 97, as amended, is given. below; new matter in blackface
type, words eliminated in brackets:
"Sec. 97. Whoever by any false representation in writing of
[his own] the respectability, wealth [or] mercantile correspondence or connections, or assets or liabilities of himself, or of
any firm of which he is a member, or whoever, being an officer
of a corporation, by any false representation in writing, known
by him to be false and signed by him, of the respectability,
wealth, mercantile correspondence or connections, or the assets
or liabilities, or any or all of them, of such corporation, obtains
credit for himself, for such firm or for such corporation, and
thereby defrauds any person of money, goods, chattels or any
valuable thing, or uhoever procures another to make a false
report in writing, signed by the person making the same, of [hisj
the honesty, wealth, mercantile correspondence or connections,
or assets or liabilities of himself, or of any firm of which he
is a member, or whoever, being an officer of a corporation, procures another to make a false report in writing, known
by
him to be false, signed by the person making the same, of the
,
honesty, wealth, mercantile correspondence or connections, or assets or liabilities of such corporation, and thus obtains credit
for himself, such firm or for such corporation, end thereby lefrauds any person of any money, goods, chattels or other valuable thing, shall be sentenced to return the money or property
so fraudulentl)' obtained, if it can be done, and shall be fined
not exceeding $2,0430 and confined in the county jail not exceeding one year."
A law was passed making the 12th of October, or Columbus Day.
a legal holiday in each year.
INDIANA.
The State Depository Law enacted two years ago makes it obligatory
on all treasurers of public funds to keep them in designated depositorles, who have qualified under the various Finance Boards.
The original law required that the bank should furnish either
surety bonds, or personal, for the full amount for which they qualified. It was amended this year so as to allow the depository to
furnish surety company bonds for 50 per cent, of the award, or
if personal bond is given, 60 per cent.
The reason for this amendment is that it rarely happens that a
depository secures an average deposit of more than 50 per cent.
of the amount it qualifies for.
Another amendment to the Depository Law provides for the filing
of municipal. street and sewer bonds as security for public deposits.

BANKERS' CONVENTION.

148

A bank guarantee bill and an inheritance tax bill were before
the legislature, but did not pass.
IOWA.
The Iowa leg:slature enacted the forged check measure recom
mended by the American Bankers' Association, through its Standing Law Committee, with a six months' limitation as follows:
"No bank shall be liable to a depositor for the payment by It
of a forged or raised check unless within six months after the
return to the depositor of the voucher of such payment, such
depositor shall notify the bank that the check so paid is forged
or raised."
Sec. 1857 of the Code, providing for dissolution of savings bank.,
was amended by including State banks.
Sec. 1875 of the Code, relating to the appointment of bank examiners and their fees, etc., was amended.
KANSAS.
The legislature of Kansas enacted a Bank Depositors' Guarantee
Law. This law is not a compulsory measure, but banks which
are qualified (banks having surplus of 10 per cent, of capital and
new banks with like surplus after doing business one year) are
"authorized awl empowered to participate in the assessments and
benefits and to be governed by the regulations of the Bank Depositors'
Guarantee Fund."
Certificates are issued by the Bank Commissioner to the guaranteed banks.
There must be a bond deposit (or cash in lieu thereof) with the
State Treasurer of $500 for every $100,000, or fraction, of average
deposits eligible to guarantee before a bank can receive a certificate,
and in addition, an annual assessment in January, beginning 1910,
of one-twentieth of one per cent, of average daily deposits until
the guarantee fund (exclusive of the cash in lieu of bond deposit)
approximates $500,000. In the event of depletion, additional assessments will be levied of not more than five assessments of onetwentieth of one per cent. in any one year.
After the first annual assessment of 1910, banks seeking to par.
ticipate to be assessed an amount approximately equal to their
proportionate share of money then in the Depositors' Guarantee
Fund; this not required from banks consolidated or recognized from
banks previously complying. Upon payment of such assessment, together with the deposit of bonds or money, as above provided, such
banks entitled to certificate. The State Treasurer holds the fund
in State depository banks (as provided by law governing other
State banks) subject to the order of the Bank Commissioner. In
case of failure, Commissioner takes charge of bank, issues to depositors, upon proof of claim, 6 per cent, certificates upon which
dividends paid and interest (except in case of deposit at contract
After assets are realized upon,
rate, certificate at that rate).
Including double liability of stockholders, funds so collected are paid
to depositors. Balances due on guaranteed deposits (if any) are
certified to the Bank Commissioner, who checks on the State Treasurer pay-able out of the Depo;itors' Guarantee Fund: If the fund
is insufficient, after five additional assessments in one year are made.
the depositors are paid pro rata and the remainder when the
next assessment is available. When dividends are paid to depositors
out of the Depositors' Guarantee Fund, claims of depositors revert
to the Depositors' Guarantee Fund until the fund is fully reimbursed with interest at 3 per cent.
If an assessment is unpaid thirty days after receipt of notice, a
,
5 per cent. penalty is added and sufficient of the defaulting bank's
bonds are sold by the Bank Commissioner to pay the assessment.
Any balance from the proceeds of sale remains to credit of bank
in Depositors' Guarantee Fund. Such balance, with remainder of bonds
(or cash deposited in lieu) is forfeited to fund if bank does not
remit in sixty days after default full assessment and penalty and restore bonds, etc. If bank does not comply, it is examined; if insolvent, taken in charge; if solvent, certificate as guaranteed hank
is cancelled.
Deposits which are guar- nteed are deposits not bearing interest;
One certificates payable not less than six months nOr more than
one year, with interest not more than 3 per cent., on which interest
ceases at maturity; and savings accounts not subject to check, not
exceeding $100 to one person, bearing interest not over 3 per cent.,
.
upon which bank has reserved right to require notice of withdrawal.
Deposits which are primarily rediscounts or money borrowed and
all deposits otherwise secured are not guaranteed.
Deposits are limited to ten times paid capital and surplus.
The Banking I.aw of the State was also amended in severs. pa:ticulars. A tank director to be eligible must be the holder of at
least $500 of the stock; a uniform time, each January, April, July
and October, is fixed for the holding of board meetings; the requirements as to cash reserve are modified, making it one-quarter instead
of one-half of the legal reserve which must be held in cash.
•• The Uniform Warehouse Receipts Act was passed this year,
MAINE.
The following .bills were this year passed by the Maine, legislature
relating to tanks: •
House No. 71.. Investment of deposits of savings banks.
House No. Si. Clanging official designation of head of Banking
Department anti more clearly defining his powers in relation to expenses and to the employment of clerks.
House No. 160. Providing for joint examinations of State and
National banking institutions occupying the same rooms at least




once a year, at times and under conditions to be agreed on by the
two departments.
House No. 262. Giving savings banks power to loan, maintain anti
let safe-deposit boxes and vaults.
Relating to taxation of loan and building asSenate No. 83.
sociations.
Senate No. 152. Exempting State and municipal bonds from taxation.
House No. 692.
savings banks.

Amending the law relating to investments of
MASSACHUSETTS.

Bills have been enacted into law as follows:
Chapter. 342, Acts of 1909, .for taxing deposits in savings departments of trust companies. Last year trust companies were compelled
to segregate savings deposits and to invest them under the savings
bank law, but were given the privilege of doing it in instalments
during the next five years. This new law provides for taxation of
these deposits under the law applying to savings banks, and also
that the tax shall be applied in instalments during the period allowed for changing investments.
Chapter 419, Acts of 1909, amends the savings bank law in a
number of particulars, I. e., prevents the use of "bank," "banking"
or "trust company" in connection with "company" in title of organizations not incorporated under the bank and trust company laws;
provides fees for issuance of certificates of incorporation; regulates
stolen pass-books and leaves the method of issuing duplicates optional
with the banks; makes certain further restrictions with regard
to bond investments; excludes from the limitation of one-third of the
deposits and income, personal loans on collateral authorized for investment by savings franks; provides the routine for delivery of accountant's report of a borrowing corporation; enlarges the uppertunities for investment in bonds or notes of railroad companies maturing within one year; provides that a loan secured by mortgages
as collateral must not be more than 60 per cent. of the value of
the property mortgaged, instead of requiring that each mortgage
assigned as collateral shall not be more than CO per cent. of such
value; further defines jurisdiction of Board of Bank Incorporation
and of Bank Commission; exempts deposits by Credit Unions from
restriction of amount of the deposit in a savings bank.
MICHIGAN.
The legislature of Michigan enacted the following measures
recommended .by the American Bankers' Association:
1. An Act to punish the making or use of false statements to
obtain credit.
2. An Act to punish the making, circulating or transmitting of
statements, rumors or suggestions derogatory to the financial condition or standing of a bank.
3. An Act in relation to the payment of deposits of money in
banks and trust companies in the names of more than one person,
and relating to the payment of trust deposits.
4. An Act concerning notaries public who are stockholders,
directors or employees of banks or other corporations.
5. An Act defining bills of lading, prescribing as to the form,
issue and surrender thereof, with penalties, etc.
Certain amendments to the banking laws were also enacted relating to meeting of directors, separation of commercial and savings
banks, repairment of impaired capital, reorganization of banks,
salaries of department officers, and appointment of receiver.
The Uniform Warehouse. Receipts Act was passed this year.
MINNESOTA.
The legislature of Minnesota enacted the following measures recotn•
mended by the American Bankers' Association:
Chapter 414. An Act relating to bills of lading.
Chapter 431. An Act to punish the use or making of false statements to obtsin credit.
Other laws relating to banking were enacted as follows:
Chapter 103. Amending Section 1 of Chapter 111, Laws of 1907,
defining "bank," "savings bank," and limiting the right to use the
same as a business name.
Chapter 124. Amending the law relating to the bonds of county
depositories.
•
Chapter 157. Amending the law making it a felony to make or
have in possession burglars' tools.
Chapter 178. Prohibiting the use of the words "Savings," "Trust"
or "Safe Deposit" except by authorized corporations; but allow.
ing State banks to establish and maintain a savings department, to
solicit and receive deposits in said savings department, and advertising same as such.
Chapter 179. An Act providing for anti regulating proceedings
against and liquidation of delinquent financial corporations and
bankers.
Chapter 201. An Act to create and establish a Department of
Banking, and to provide for a Superintendent of Banks and the
appointment of examiners; defining the powers and duties of such
Superintendent of Banks and examiners, and fixing the compensation: and to provide for a system of examination, audit and control
of State banks, savings banks, building and loan associations, and
other financial corporations.
Chapter 362. An Act . relating to the securing of public moneys
by State, county and city depositories.
Chapter 436. Fixing five months as a reasonable time within
which to present for payment promissory notes payable on demand.

•

BANKING SECTION.

149

MISSOURI.

NEVADA.

Tile legislature of Missouri passed the following act recommended
by the American Bankers' Association:
Amending Section b7 of the Negotiable Instruments Law by the
addition of the words in blackface type:
Sec. 87. Where tile instrument is made payable at a bank it
is equivalent to an order to the bank to pay the same for . tile
account of the principal debtor therm "But where the instrument
is made payable at a fixed or determinable future time, the order to
the bank to pay is limited to the day of maturity only."
An Act to regulate the payment by banks, banking histitutions and
trust companies of deposits made in trust upon the death of the
trustees, and to make payment to a trustee upon his signature, conforming to tile words of deposit.
Also the following measures:
Amending Sections 3, 9, 12, 18, 40, 60, 64, 76, 82, 84, 87, 99, 112,
124, 125, 130, 173 and 191 of the Negotiable Instruments Law.
This law is to correct various clerical and other errors in the
Negotiable Instruments Act adopted in 1905, and It includes Section
87, which was amended as above.
An Act to repeal Sections 401 and 462 of Chapter 5 of the Revised
Statutes of Missouri for the year 1899, relating to public holidays,
and to enact in lien thereof a new section designating certain days
as public holidays.
MONTANA.

The legislature of Nevada, by Act approved March 24, 1909, passed:
"An Act to define and regulate the business of banking, creating a State Banking Board and defining its powers and duties,
and providing for a bank examiner and the examination and supervision of banking corporations; and for the appointment of
receivers in certain cases; fixing penalties for the violation.
thereof; and other matters relating thereto."
While the above measure was pending it contained provisions for
a guarantee fund for the protection of depositors. This feature was
voted down and the law as passed omitted the guarantee fund
provisions. This was done near the end of the session, and the
guarantee feature was eliminated by going through the bill ane
supposedly striking out every section relating to it. This elimination, however, was not completely made, and Sections 46, 48, 52
and 57 of the law as passed contain provisions based on the existence of the Depositors' Guttrantee Fund, while the law itself
does not provide such a fund. As the law stands, references
made to the Guarantee Fund in those sections are meaningless.

The legislature of Montana passed the following acts recommended
by the American Bankers' Association:
An Act to punish the making of false statements to obtain credit.
An Act to amend the Negotiable Instruments Law in relation co
the time when an instrument may be paid by a bank.
An Act concerning notaries public who are stockholders, directors,
officers or employees of banks or other corporations.
All Act relating to the payment of deposits in two names.
An Act concerning the payment of deposits in bank in trust.
An Act fixing the liability of a hank to a depositor for the payment of forged or raised checks. (One year limit.)
Lincoln's Birthday. February 12, and Columbus Day, October 12,
are made legal holidays in every year.
A State Depository Law was enacted, and a further law, requiring
banks in Montana, before declaring ally dividend, to set aside 10
per cent. as a surplus fund, until such fund shall equal 20 per
cent. of capital.
NEBRASKA.
The legislature of Nebraska amended tile Banking Law by providing
a guarantee fund for protection of depositors in banks. The Act
took effect July 2, 1909. The fund is to be accumulated by assessments on average daily deposits (averaged in six .month periods),
as follows:
(1) One-quarter of one per cent. sixty days after taking effect of
Act.
(2) One-quarter of one per cent. January 1, 1910.
(3) One-quarter of one per cent. July 1, 1910.
(4) One-quarter of one per cent. January 1, 1911,
(5) And every July 1 and January 1 thereafter one-twentieth of
one per cent. of average daily deposits.
There seems to be no maximum limit to the fund, but assessments are provided to go on indefinitely. Special provisions are
made in case of new banks. When assessments are levied the
amount is set apart in each bank, payable to tile State Banking
Board on demand. Prior to July 1, 1910, if the fund is depleted or
reduced to less than one-half of one per cent., or subsequent to
July 1, 1910, to less than one per cent., the deficiency to be made
good by the levy of special assessments, not exceeding one per cent.
of average daily deposits in any one year.
In case of failure, preference in payment is given to (1) Federal.
State„ county and municipal taxes; (2) claims of depositors and
holders of exchange. The above are a first lien on assets, including
stockholders' liability, and are to be paid out of immediate avallabie
cash. If insufficient to pay depositors, the State Banking Board
will draw against the Depositors' Guarantee Fund, prorated among
the solvent banks according to the respective amounts held, anti
transmit to receiver to pay depositors. The State Banking Board for
the use of the Depositors' Guarantee Fund is subrogated to the claim,
.
of creditors to the extent of the amount paid. The amount collected by the receiver is deposited by the State Banking Board in
solvent banks, subject to the provisions of the Depositors' Guarantee
Fund, the several deposits to be proportioned to the assessments
levied against each of said banks. Private banking is prohibited.
A graded. capitalization of banks is provided, minimum $10,000:
$15,00 from 100 to 500 population; $20,000 from 500 to 1,000;
$25,000 from 1,000 to 2,050; $35,000 from 2,000 to 5,000; $50,000 from
5,000 to 25,000; $100,000 from 25,000 to 100,000; $200,000 for
100,000 or over. The amount of deposits is not limited, but intere,,t
oil deposits is limited to 4 per cent. There is also a graded savings
bank capital with a minimum of $15,500; $35,000• from 50,000 to
100,000; and $75000 for 100,000 or more.
The legislature also passed the law recommended by the'
Standing
Law Committee of the American Bankers' Association, relating
to the
Payment of deposits in the names of two or more persons.
Two new laws were passed affecting depository bonds in
case of
county or State deposits. Under these tile bank may use
certain
securities in place of buying a surety bond.
The Uniform Warehouse Receipts Act was passed this year.




NEW HAMPSHIRE.
By Act approved April 8, 1909. the legislature of New Hampshire enacted the Unifoim Instruments Law, to take effect on the
first of January, 1910.
Also the measure recommended by tile Standing Law Committee
of the American Bankers' Association, authorizing the payment by
savings banks of deposits made in two names.
Certain arnendn:ents were made to the laws relating to investments of savings banks, and limiting the dividends to be paid by
savings banks prior to the accumulation of a guarantee fund of 5
per cent. of deposits.
NEW JERSEY.
The legislature cif New Jersey passed the following laws recommended by the Standing Law Committee of the American Bankers'
Association:
Amending Section F5, of Negotiable Instruments Act by inserting
the words "or becoming payable" after "falling due."
Amending Section 87 of Negotiable Instruments Act by adding:
"But where the instrument is made payable at a fixed
or
determinable future time, the order to the bank to pay is limited
to the day on which the instrument is payable."
All Act concerning the administering of oaths and protesting
of
negotiable instiuments by notaries public who are stockholders,
directors, officers or employees of banks or other corporations.
An Act amending the holiday law.
The bill to punish the making or use of false statements
to
obtain credit, passed both houses, but was vetoed by the Governor.
A bill seeking to impose a collateral inheritance tax on
the
estates of residents and non-residents, and making banks liable for
the amount of tax, with interest, and a fine of $1,000 in case such
tax was not paid, was defeated.
NEW MEXICO.
Tile legislature of New Mexico passed a law amending the former
banking law as to making of semi-monthly statements and reports
to the bank examiner, and providing for tthe appointment of a
deputy bank examiner. The law also provides for the payment of
the examiner in making examinations of banks; for the taking over
of imolvent banks and closing them, and for the liquidation
thereof
by the examiner.
The Uniform Warehouse Receipts Act was passed this year.
NEW YORK.
No measures materially affecting banks were enacted
by the New
York legislature this year.
The "Consolidated Laws of the State of New York,"
being the sixth
compilation of the general statute law of the State,
prepared under
legislative authority, were enacted.
NORTH CAROLINA.
The legislature of North Carolina passed the following laws
recommended by the Standing Law Committee of the American Bankers'
Association:
An Act authorizing payment of deposits in trust.
The Act is
limited to deposits in trust for any person who is a minor of the age
of fifteen years and upward, and further limited to deposits not in
excess of fifty dollars.
An Act fixing the liability of a bank to its depositors for payment of
forged or raised checks.
The time limit is fixed at six months.
A further law passed amends the Negotiable Instruments Law by
striking out the Saturday half-holiday provision, so that thbre shall be
no difference between Saturday and any other business day, as far as
negotiable instruments are concerned.
A further law provides for the punishment of any person who utters
or publishes any forged, false or counterfeit bill, money order or
security, or who'negotiates same.
A further law amends the Association measure, passed in 1907, to
punish the giving of checks or drafts without funds, by adding:
"The giving of the aforesaid worthless check, draft or order shall
be prima facie evidence of intent to cheat and defraud."
The object of the amendment is to protect any one that may undertake to prosecute a person who has gilen a worthless cheek and afterwards pleads ignorance.

BANKERS' CONVENTION.

150
NORTH DAKOTA.

The ,legislature of North Dakota passed the Act recommended by the
Standing Law Committee of the American Bankers' Association, concerning forged or raised checks, with a time limit of thirty days. It
provides:
"That any bank shall be liable to a depositor for the payment by
it of a forged or raised check, unless within thirty days after the
return to the depositor of the voucher of such payment, such depositor shall notify the bank that the check so paid is forged or,
raised."
A further Act makes it a criminal offence to be found in possession
of burglars' tools.
OKLAHOMA.
The Negotiable Instruments Law was passed by the legislature of
Oklahoma.
Important amendments were made to the Depositors' Guarantee La*.
The Guarantee Law of 1907 provided for a fund to be maintained equal
to 1 per cent. of average daily deposits, less deposits of State funds
The amended law provides a guarantee fund of 5
properly secured.
pr cent. of average daily deposits of banks and trust companies during
the banks' continuance in business, one-fifth to be assessed during the
first year and one-twentieth each year thereafter until the 5 per cent.
is made up: assessments heretofore paid to be credited as payments on
the 5 per cent. Emergency assessments may be levied to restore impairment of fund; not to exceed 2 per cent. yearly. If the fund and
emergency assessments are insufficient to pay depositors of all failed
banks, the State Banking Board will issue 6 per cent. interest-bearing
certificates of indebtedoess, consecutively numbered, payable upon call
of the State Banking Board, the same as State warrants.
.
Emergency assessments to be levied yearly until all certificates and
Assets of a failed bank are to be first applied to (1)
interest paid.
expenses of liquidation; (2) repayment to guarantee fund of all money
paid out to depositors of failed bank; (3) refunding of emergency
assessments. The depositors of a failed bank are to be paid in full
out of the cash of bank immediately available and from the guarantee
fund anti emergency assessments when required. Seventy-five per cent.
of the guarantee fund is to be invested in State warrants, or in
such other securities as State funds are invested. Banks and trust
companies who have complied with the law are eligible to act as
State depositories. In case of new banks, 3 per cent, of i:apital must
be paid to guarantee fund when they open for business, to constitute
a credit fund subject to adjustment on basis of deposits at end of
year. This is not required of new banks formed by reorganization or
The State has a first lien on the assets and on all
consolidation.
liabilities of stockholders, officers and other persons for the benefit of
Certificates are issued to guaranteed banks and
the guarantee fund.
trust companies that the law has been complied with, and safety to
depositors is guaranteed by the Depositors' Guarantee Fund. A bank
may advertise that its deposits are guaranteed by the Depositors'
Guarantee Fund, but it is a misdemeanor to advertise they are guaranteed by the State of Oklahoma.
The amended law took effect June 11, 1909, and new assessments
The deposits of a bank are limited to 10
begin one year thereafter.
per cent. of paid-up capital and surplus, deposits of other banks not
included.
A graded capitalization is provided, with a minimum of
$10,000, fully paid up, for places of 500 or less; $15,000 from 500 to
1,500; $25,000 from 1,500 to 6,000; $50,000 from 6,000 to 20,000; and
$100,000 over 20,000. Banks may pay interest, but the State Banking Board has power to lix the maximum.
OREGON.
A Depositors' Guarantee Bill was introduced in the Oregon legislature, but did not pass.
PENNSYLVANIA.
The following legislation was enacted by the Pennsylvania legislature:
An act restricting the use of the word "Trust" as part of a corporate name; forbidding advertising or doing budness as a trust company except by corporations under the supervision of the Banking Department. and providing the penalty, etc.
Approved April 22, 1909.
An Act to amend an Act entitled "An Act Relating to Negotiable Instruments."
This Act was passed to overcome a decision of the Pennsylvania
Supreme Court and provides that "the mere retention of such bill
(check or domestic bill) by the drawee, unless its return has been demanded, will not amount to an acceptance, and provided further, that
the provisions of this Act shall not apply to checks."
This bill entirely eliminates checks from the operation of Section
137 of the Negotiable Instruments Law, passed May 16, 1901.
An Act further defining embezzlement by officers, employees or agents
of banks. Approved April 23, 1909.
An Act recommended by the American Bankers' Association, making
it a misdemeanor for any person to make, utter, circulate or transmit
false or derogatory statements affecting the solvency or financial
standing of any bank, banking house, banking company, trust company, surety company. guarantee company, title insurance company
or other financial institution in this Commonwealth, and providing
penalties for violation of this Act.
Approved April 23, 1909.
The Uniform Warehouse Receipts Act was passed this year.
•
SOUTH CAROLINA.
The South Carolina legislature passed the following laws:
An Act declaring it a misdemeanor to utter a check, draft or money




order without sufficient funds to meet the same, and providing punishment therefor. The Act contains a proviso:
"That if such person shall deposit with the drawee of such paper
within thirty days thereafter funds sufficient to meet the same,
with all costs and interest which may have accrued, the Prosecution under this Act shall be discontinued."
A further Act to provide punishment for a person who makes or has
in his possession burglars' implements under circumstances evidencing
an attempt to commit a crime.
SOUTH DAKOTA.
The legislature of South Dakota passed an Act authorizing the formation of a State Association of Incorporated Banks, and to permit the
voluntary creation and maintenance of a bank deposit insurance fund
and the insurance of the deposits of such banks, and providing for the
supervision and regulation of such insurance by the Board of Commissioners, the maintenance of such fund and the payment of losses therefrom. The State Association of Banks provided for is to be created
whenever not less than one hundred existing State banks, with aggregate capital of not less than one million dollars, shall send specified
statistics, together with membership fees and premiums for one year,
to the State Treasurer. This bill is purely a voluntary measure and is
not expected to become operative in the State.
A bill was passed relating to burglary implements and materials, and
making it prima facie evidence if any burglary tools are found in the
possession of anyone that their intent is to violate the law. The law
fixes a penalty not exceeding five years or one thousand dollars fine.
A new General Banking Law was enacted (Chapter 222), entitled,
"An Act to revise the laws authorizing the business of banking, providing for the organization and control of banks and to establish a
banking department for the supervision of such business."
TENNESSEE.
The legislature of Tennessee passed the Act to punish the making or
use of false statements to obtain credit, with certain amendments.
A further Act was passed making it unlawful to utter a check where
the drawer has not had an account or credit with the drawee for a
period of sixty days from the date of drawing; also to make it unlawful for any person to utter a check knowing that there are not funds
to meet the same and that the same will not be honored. Penalties
are provided.
A further Act was passed to authorize the County Court in each
county, when in quarterly session assembled, to adopt a resolution to
contract with a bank or banks to pay interest on daily balances of the
county funds; to create a County Finance Committee, and define its
duties and powers; and to define the duties of the County Trustee.
A further Act provides for the organization of bank corporations,
and that holders of stock in same shall be liable to its depositors, in
addition to their stock, individually in an amount equal to the par
value of their stock.
The Uniform Warehouse Receipts Act was passed this year.
TEXAS.
The State of Texas enacted a law providing for a Depositors'
Guarantee Fund; also providing a Depositors' Bond Security System.
Under this law banks must protect their depositors by complying either
with the provisions of the Depositors' Guarantee Fund or Depositors'
Bond Security System before January 1, 1910, and the option must be
exercised on or before October 1, 1909, by the holders of the majority
stock. The limit of the Depositors' Guarantee Fund is fixed at
$2,000,000. It is accumulated by the payment on January 1, 1910. of
1 per cent, of the daily average deposits for the preceding year, ending
November 1, 1909, not including public funds otherwise secured. The
assessment must be paid to the State Banking Board; annually thereafter one-quarter of one per cent, of average daily deposits, for the
year ending November 1, must be paid; payments stop when the fund
reaches $2,000,000; provision is made to restore the fund in case of
depletion, but emergency assessments cannot exceed 2 per cent, in any
one year; 25 per cent. of assessments must be paid and kept in cash,
to be deposited by the State Banking Board with the State Treasurer
as bailee, and 75 per cent, by credit of the amount to the State
Banking Board as a demand deposit subject to check. Newly organized banks pay 3 per cent, of capital and surplus, subject to adjustment on basis of deposits at end of the first year; this not required
of reorganizations or consolidations. Upon failure, claims of guaranteed
depositors must be proved within forty-five days; otherwise only share
to extent of assets in hands of Commissioner equitably applicable
thereto. In declaring dividends, guarantee fund entitled to such portions of amounts due and payable to guaranteed depositors as have
been paid out of fund with 6 per cent. interest; the Commissioners
distribute the dividends among the State banks. Depositors are to be
paid in full out of immediately available cash; remainder out of
guarantee fund; but interest-bearing deposits and deposits otherwise
secured are not insured under Act and only share pro rata. The
State in behalf of the guarantee fund has a first lien on assets.
Banks electing the Depositors' Bond Security System must on January 1, 1910, and annually thereafter, file with the Commissioner of
Insurance and Banking, for anti on behalf of lawful depositors, an
approved bond, policy of insurance or other guarantee of indemnity in
an amount cqual to the capital stock. Such bond, etc., secures depositors who are such at the time it is filed and approved, and for
twelve months thereafter. Detailed requisites as to bond are provided. Whenever deposits exceed six times capital and surplus there
must be additional bond security equaling amount of excess.
On and after January 1, 1910, all banks must hold a certificate of

-BANKING SECTION.
authority stating either that "the non-interest bearing and unsecured
deposits of this bank are protected by the State Bank Guaranty
Fund" or that "All deposits of this bank are protected by security
bond under the law of the State of Texas."
If the average daily deposits for the year ending November 1, 1900,
or any subsequent year, of banks
With capital of $10,000 are more than five times capital and
surplus,
With capital of $10,000 to $20,000 are more than six times capital
and surplus,
With capital of $20,000 to $40,000 are more than seven times
capital and surplus,
With capital of $40,000 to $75,000 are inure than eight times capital and surplus,
With capital of $75,000 to $100,000 are more than nine times
capital and surplus,
With capital of $100,000 or more are more than ten times capital
and surplus,
the capital must be increased 25 per cent, in sixty days. Where one
bank purchases the assets of another, it must before the purchase
have capital enough to be in ratio to the increase.
The law contains, in addition to the above features, special provisions
regulating the operation of savings deposit departments in banks or
The business must be kept separate and distinct
trust companies.
savings deposits and funds and securities in which the same are
invested must be segregated from and not mingled with other
moneys and funds; not more than 85 per cent, is to be invested
In specified securities and not otherwise; provision is made for sixty
day's notice of withdrawal; in case of insolvency savings depositors
shall have an exclusive prior lien upon assets, including cash, of
savings department; after payment in full the remainder goes to the
general creditors. The directors may provide a rate of interest for
savings depositors, and if the earnings of the savings department are
Insufficient the deficiency is to be paid out of general funds. At
dividend periods the bank may transfer to its general funds the accumulated earnings of the savings department after payment of expenses and interest due. In computing average annual deposits to determine whether increase of capital is necessary, or to determine the
amount payable to the guarantee fund, savings deposits are not included.
WASHINGTON.
The legislature of Washington passed the following Association
measures:
The Bill of Lading Law, omitting the provision for the taking of a
bond by the carrier in the event of delivery of the property described
In aa order bill of lading without requiring surrender of the same.
The law making "burglary with explosives" a separate offense.
A further act was passed designed to protect banks and relieve them
from annoyance in cases of garnishments before justices of the peace.
Three laws were passed which authorize the State Treasurer and
county or municipal treasurers to accept as security for public deposits certain bonds, warrants and other securities, specifically enumerated, in lieu of a surety bond.
The General Banking Law was amended in certain particulars-authorizing the appointment of an additional deputy examiner; providing that the amount of capital of banks organized prior to the
State Bank bill should be paid up in full in five monthly instalments; providing that no bank can open a branch in another place
without fist setting aside specially time amount of capital required for
opening a new bank in that city.
A Guarantee of DuposIts bill was Introduced but did not pass.
WEST VIRGINIA.
The only measure affecting banks passed by the legislature of West
Virginia was one whicb slightly corrects the taxation of banks in the
State.
WISCONSIN.
The legislature of Wisconsin enacted a new trust company law, with
tc.rtalit notablo features. Trust companies are prohibited from receiving deposits subject to check and dealing in bank exchange, but may
receive time deposits and issue notes, certificates, etc., therefor, payable not earlier than thirty c:ays from date of deposit. Provision is
'nude that time deposits must be kept separate, and the funds and
Investments made therefrom primarily applied to payment of such
deposits in the event of insolvency. On this point the law provides:
"All such deposits so received shall at all times be held or invested separate from other funds or property held by the corporation, and in case of insolvency or liquidation all such funds and
Investments made therefrom shall be primarily liable and used
for the payment of such deposits."
Further, separate books must be kept for trust accounts and trust
funds anti property must be kept separate so as to be readily Idealtable. On this point the law provides:
"Every such corporation shall keep its trust accounts in books
separate from its own generai books of accounts. All funds and
Property held by It in trust capacity shall, at all times, be kept
separate from the funds and property of the corporation, and all
deposits by it of such funds in any banking institution shall be
deposited as trust funds to its credit as trustee, and not otherwise. Every security in which trust funds or property are invested shall, at once, upon the receipt thereof, be transferred to
It as trustee, executor, administrator, guardian, receiver, assignee
or other trustee as the case may be, for each particular trust or
fund by name and immediately entered in the proper books as be-




151

longing to the particular trust whose funds have been invested
therein. Any change in such investment shall be fully specified in
and under the account of the particular trust to which it belongs,
so that all trust funds and property shall be readily identified
at any time by any person."
A further law was passed expressly forbidding banks to "establish
and maintain branch offices or branch banks," but this provision does
not.apply to branch banks now in existence.
A bill relating to the payment of deposits in two names was passed
by both houses, but was vetoed by the Governor, as in his opinion it
would have left open an opportunity for the evasion of the inheritance
.tax law.
The Uniform Warehouse Receipts Act was passed this year.
WYOMING.
The legislature of Wyoming passed the following Association
measures:
Chapter 114. An Act defining the crime of burglary with explosives
and providing punishment. (Penalty not more than twenty years.)
Chapter 115. An Act fixing the liability of a bank to depositor for
payment of forged or raised checks. (Three months limitation.)
Chapter 131. An Act relating to bills of lading.
Chapter 142. An Act concerning notaries public who are stockholders, directors, officers or employees of banks or other corporations.
Chapter 143. An Act to punish the giving of checks or drafts on any
bank or depository by any person not entitled to give the same.
A further Act was passed (Chapter 162) prohibiting false or exaggerated statements or publications concerning corporations intended to
give an apparent value to shares, bonds or property greater than they
possess.
A further Act (Chapter 194) amended the law regulating the safekeeping and deposit of public money.

Report of Committee on Bills of Lading.
Four important results are to be reported since our last
report:
1st. The Commissioners on Uniform State Laws, after four
years of careful consideration, have completed their draft of
the Uniform Bill of Lading Act for State adoption, and have
recommended same for enactment into law by the legislatures
of the various States.
2nd. The Canadian rallorads have all adopted the Uniform
Bill of Lading recommended by our Interstate Commerce Commission, including form, colors and with but slight and unimportant changes in its provisions.
3rd. Four States have enacted into law the bill of lading
measure drafted by General Counsel on behalf of our Committee, under instructions of the various Banking Association
13111 of Lading Committees last September.
4th. The carriers in Official Classification Territory have
authorized all agents who issue "order" bills of lading to
place the official stamp of their agency on such bills; and
further have issued a ruling that "all straight and order
bills of lading should be made out in ink, indelible pencil or
should be typewritten, and all 'order' bills of lading should
haN e the number of packages shown in words as well as in
numerals."
In addition, important progress has been made to secure Congressional legislation on bills of lading, which will cover interstate shipments.
Since our last convention, and in accordance with its instructions, specimens of the new Uniform Bill of Lading
recommended by the Inter-State Commerce Commission, were
distributed through the several Bill of Lading Committees of
State Bankers' Associations to bankers throughout the country.
At this time we are glad to report that practically every
railroad is using the new Uniform Bill of Lading, on the forms
and in the colors recommended by the Inter-State Commerce
Commission, the yellow form for order bills and the white
form for straight bills of lading, and your committee recommends that bankers loaning on bills of lading make sure that
the form they receive is the "order" or yellow form.
It is with some regret that we notice a few railroads are
nullifying some of the provisions of the Uniform Bill of Lading
agreed upon, by stamping new conditions on the face. Bankers
should carefully scrutinize and reject any such bills. A few
Southern railroads, also, have been led to issue a form similar
in appearance, but with a number of vital provisions differing
from those recommended by the Interstate Commerce Commission.
This is a situation foreseen and contended by our committee
in the proceedings before the Commission—a contention combated but afterwards conceded to be correct—namely, that
that body had no power to prescribe, but could only recommend provisions or conditions to be contained in a bill of
hiding; and this situation can only be fully remedied when
uniform conditions and provisions have been enacted into law
as forming part of the terms of every bill of lading, with the
prohibition of the insertion in the bill of inconsistent or
derogatory provisions. In the meantime the best corrective is
the creation of a universal sentiment favoring the recommended uniform bill and the discountenancing of modifications
or substitutes, through united action of the banking and shipping public in refusing to accept other than the 'recommended
form.

152

BANKERS' CONVENTION.

Turning from the matter of form to the subject of State
and National legislation covering bills of lading, we have now,
for the first time, in the bill just perfected by the Commissioners on Uniform State Laws, a full and complete draft a
law which provides full negotiability for order bills, regulates the manner of their transfer and negotiation, defines the
obligation and rights of the carrier, including the essential
feature of liability upon bills although issued without receipt
of the goods, provides the printing of the words "order of" on
order bills of lading, and, in brief, regulates fully all matters
connected with the issue, transfer and redemption of these
documents, containing all the points argued by our counsel,
Mr. Thomas B. Paton, who has regularly attended the sessions,
covering the security necessary to bankers and merchants, as
far as the law can give such security. We append to our
report the full text of this measure (Appendix "A"), and our
Committee will use its best efforts to promote its enactment
in the respective States.
In view of the postponement last year by the Commissioners
on Uniform State Laws, of action on the pending draft of
uniform law, and the urgent requests for immediate action
from various sections of the country, and in pursuance of resolutions adopted at the conference of State Bill of Lading Committces at Denver last September, General Counsel of the Association, under the supervision of our committee, drafted a
Bill of Lading Act for introduction in the legislatures of those
States where the laws were grossly deficient, and where some
legislatures convened in 1909 and not again until two or more
years later. This draft provided all the requirements as to
form recommended by the Inter-State Commerce Commission,
which it is practicable to make permanent by legislation, and
as its main feature covered the liability of carriers to bona fide
holders upon bills issued without receiving the goods, upon
unmarked duplicates, and for delivery of the goods without
taking up the bill. Copies of this draft were promptly sent
to the Bill of Lading and Legislative Committees of the State
Associations, and introduced in the legislatures of ten States:
Pennsylvania
Minnesota
Illinois
Washington
Iowa
Michigan
Oklahoma
North Carolina
South Carolina
Wyoming
and we are glad to report that the Act was passed in four
States:
Michigan
Minnesota
Wyoming
Washington
and also passed one House in Iowa, North Carolina and
Oklahoma.
We attach a copy of this law as part of our report (Appendix "B").
This result is due not only to the efforts of the Bill of
Lading and Legislative Committees and bankers of those States,
but to the strong support given the measure by the mercantile
interests.
At a meeting of your committee held prior to the opening of
the short session of Congress last December, the provisions of
the Maynard bill, introduced into Congress at its previous session, were carefully considered, and a new measure drawn
restricted in provision to the same vital points necessary to
the security of bankers and merchants, which were covered by
the draft of law designed for State enactment, it being the
judgment of your committee that there was a fair chance of
securing a favorable report and the enactment of Congress
of the new measure. A copy of this draft is appended to our
report (Appendix "C"). In advocacy of this measure your
committee last winter appeared with counsel at four hearings
before the Sub-Committee of the House Committee on InterState and Foreign Commerce, urging with many mercantile
organization the adoption before that committee of the new
measure.
These hearings were largely attended by the representatives
of all interests, including the carriers ; full discussions were
had and the merits of the proposed measure urged and opposed
from different viewpoints.
The sub-committee was composed of Congressmen Stevens of
Minnesota, Lovering.; of Massachusetts and Russell of Texas,
who gave the matter close attention, showing an intense interest and gratifying fairness in examining witnesses at their
several hearings on the bill.
As a result of these hearings and those of a previous session,
we believe the proposed Congressional legislation now successfully meets all fair objections, and when urged at the next
session, your committee feels confident of final success.
At the suggestion of a number of important boards of trade.
our approval was granted to the form of resolutions which
have recently been passed by the various boards of trades and
exchanges throughout .the country, which provide that hereafter
no drafts be paid by their members when the bill of lading
attached shall have been issued by the carriers without the following safeguards:
1. Every bill of lading must, in addition to the signature,
bear also the official stamp of the authorized issuing agent,
such stamp giving date of his signature.
2. All the writing on said bill of lading must be in ink or
Indelible pencil, and the quantity receipted for must be written in full in addition to the numerals.




With the belief that the universal adoption by the carriers
of these safeguards will reduce disputes, claims and fraud,
your Executive Council at its spring meeting adopted resolutions endorsing this action of our mercantile friends, and
recommended in the "Journal" that members of the Association
only handle bill of lading drafts where the bill of lading attached conformed to these requirements. As already stated
at the beginning of our report, the carriers in official classification territory have adopted these requirements, and it is expected that railroads in other sections of the country will do
likewise.
At the request of Congressman Stevens, of Minnesota, Chairman of the Sub-Committee of the House Committee on InterState and Foreign Commerce, counsel prepared a digest of
State laws on bills of lading, covering civil liability of carriers
and criminal liability of their agents for issuing false bills
and delivery of goods, without surrender of documents; also
a digest of the bill of lading laws of foreign countries, including England, Belgium, Denmark and Russia, France, Germany,
Holland, Italy, Mexico and Spain, all of which is made a part
of this report (Appendices "D" and "E," respectively).
The vast and intricate nature of the subject and the fact
that four separate interests are affected, has rendered progress necessarily slow, yet comparison of the situation to-day
with what it was three years ago, when your committee was
created, shows a most satisfying degree of progress.
Our goal is now in sight, and we feel that with active assistance of our fellow bankers and interested trade organizations,
it will not be long before the National and State legislation, so
carefully prepared, will be enacted into law.
Your committee is grateful for the valuable assistance of
many bankers throughout the country, and has been glad to
heartily co-operate with the hard working committee of merchants, appointed at the Atlantic City Bill of Lading Conference, two years ago, particularly Mr. George W. Neville, Mr.
L. Mandelbaum of the New York Cotton Exchange, and Messrs.
C. F. Droste and H. Dunkak, of the New York Mercantile
Exchange; Mr. Theodore F. Whitmarsh, Vice-president, and
Mr. William C. Breed, counsel of the National Wholesale
Grocers' Association, and Mr. Albert M. Read, President of the
National Board of Trade.
We also wish to express our appreciation of the valuable
assistance rendered by the General Counsel of the Association,
Mr. Thomas B. Paton, and of Professor Samuel Williston, of
Harvard University, who have been acting as counsel to your
committee.
LEwfs E. PIERSON, Chairman;
FRANK G. WETMORE,
WILLIAM LIVINGSTONE,
WILLIAM INGLE,
J. A. LEwis.
Six appendices were attached to the report, as follows:
APPENDIX A. Fourth tentative draft of an Act to make uniform the law of Bills of Lading. Approved and recommended
for enactment in the respective States by the Conference of
Commissioners on Uniform State Laws, Detroit, Mich., August
23, 1909.
APPENDIX B. Draft of an. act relating to Bills of Lading,
prepared for State enactment in pursuance of resolution adopted
at Denver, Colo., September 28, 1908, by joint conference of
State Bill of Lading Committees and Committee on Bills of
Lading of A. B. A., and enacted in year 1909 in Michigan,
Minnesota, Washington and Wyoming.
APPENDIX C. A bill relating to Bills of Lading prepared
for Congressional enactment and made the subject of four
hearings before a sub-committee of the House Committee on
Inter-State and Foreign Commerce during the winter of 19081909.
APPENDIX D. State statutes covering (1) False Bills of
Lading; (2) Unmarked Duplicates; (3) delivery without surrender of bill; in force January 1, 1909.
APPENDIX E. Foreign laws governing the negotiability of
Bills of Lading And especially the carriers' liability on a bill
of lading when no goods were received and the carriers' liability on an order bill of lading not taken up by the carrier
on delivery of the goods and, subsequently, endorsed to a
bona fide bolder for value.

Report of the Committee on Express Companies and Money
Orders.
GENTLEMEN: Your committee has three' important subjects
upon which to report, and will take them up separately in the
following order:
EXPRESS COMPANIES' MONEY ORDERS AND TRAVELERS' CHEQUES.
1st. The case of the American Bankers' Association vs. the
Express Companies has had two hearings, the first before Commissioner Clark, in New York City, at which evidence was
placed before the commissioner by witnesses from various States,
showing the nature of the banking business done by the Express
Companies and exposing the vast power these companies have
over the Exchange Market, due to their branch banking system,
as represented by their agencies and their ability to ship currency for themselves at practically no cost. It was shown that.

BANKING SECTION.

153

are only issued in small denominations, any one having the
they were able to ship currency in or out of towns and cities
ability to make even inferior .counterfeits could better place his
against the currents of Exchange, thus forcing bankers to make
time and energy in some other direction, as it would be imposshipments of currency that would otherwise be unnecessary.
sible to realize any large sum from counterfeit cheques without
Admitting, for the sake of argument, that the Express Comtraveling about from place to place, obtaining small amounts,
panies do not abuse the unusual powers that they lave, due
such as an ordinary tourist would require. This would take
to the fact that they are bankers and common carriers, it was
time, during which the first cheques cashed would make their
shown that they are a constant menace to legitimate bankers
appearance and the forger could be easily traced.
as long as they carry on the two lines of business, as they
The relentless activity of the Protective Committee of the
are in position to cllange the tides of currency shipments whenAmerican Bankers' Association in its pursuit of criminals is a
ever they desire to do so. It was also shown that the ordinary
feature that serves to protect bankers and others who cash
demands of their business actually caused this discrimination
the cheques, as well as the public who carry them, and is a
against other bankers and in favor of themselves as bankers;
safety feature possessed by no other Travelers' Cheque issued.
yet their actual transactions of this kind are not a circumCheques are issued in denominations of $10, $20, $50 and
stance to what could happen should unscrupulous men obtain
$100, the different denominations tinted respectively blue, green,
control of the companies, as their banking business is subject
straw and orange. Upon the face of the cheques, in addition to
to no State or National supervision and they can run with unthe denomination in dollars, appears the foreign equivalents in
known reserves.
the moneys of the principal European countries.
The banking business of the Express Companies has grown
As there are over twenty thousand independent banks in the
under the protest of bankers during the whole course of its
United States, it was necessary to have some central institution
develoPment, and while no criticism has been made of the honsupply the checks to banks and arrange for their protection
esty of purpose or ability of the officers or employees of the
throughout the world.
companies, yet exception is taken to the principle which allows
The Travelers' Cheques are in the form of drafts drawn by
branch banking to be done by institutions not properly orIssuing banks upon the Bankers' Trust Company, of New York,
ganized as bankers, and particularly when such institutions are
who have entered into a contract with the American Bankers'
the recognized common carriers in our land, upon whom reguAssociation to handle the business. The acceptance of the
larly organized bankers are obliged to depend for shipments of
Trust Company appears upon the face of the cheque, which
currency.
makes it two-name bankers' paper, a form most acceptable to
The second hearing was held before the Interstate Commerce
foreign bankers. The acceptance also serves as a means of
Commission as a whole, November 11, 1908. No testimony was
placing one signature upon the cheque that can be made known
taken at this hearing, the attorneys for both sides taking up
throughout the world. This eliminates the necessity of bankthe time allowed in the presentation of arguments upon the two
ers, hotel keepers and others who may be called upon to cash
'main points involved. The decision of the Commission on these
the cheques, being familiar with either the signature or standtwo points was handed down January 5, 1009.
ing of the issuing bank, which, on account of the large number
The first point (that of jurisdiction) was decided in favor of
of banking institutions in the United States, would not only be
the American Bankers' Association, and the Commission stated
impracticable, but impossible.
in the opinion rendered by Commissioner Clark, that there could
The word "Cashier" has been engraved upon all of the cheques,
be, no doubt as to the jurisdiction of the Interstate Commerce
again for the sake of uniformity. This official title was selected,
Commission in the case. To quote from our attorney on this
as it is the one more generally used. Where other officers sign,
point, "One vital thing that the opinion of Commissioner Clark
it makes it possible to use the smallest abbreviation of their
decides is that the }nterstate Commerce Commission has jurisofficial title. The great majority of bankers prefer to sign the
diction to entertain the complaint. This point was vigorously
Association cheques themselves, although some institutions have
contested and line been put at rest in our favor."
filed signatures with the American Bank Note Company to have
The second point, which was a request for the production of
them placed upon the cheques at the same time they are printed,
the books of the Express Companies on the part of the Assoas is done in the case of National bank notes.
ciation, was denied. Further tearing of the case-was set for
As the acceptance of the Trust Company appears upon all
April 26, but has been postponed until fall.
American Bankers' Association Travelers' Cheques, each bank
2nd. MONEY ORDERS. The Money Order system started by
desiring to issue them must make satisfactory arrangements
the Association some years since, which Las been handled by
with the Trust Company for its protection before it can obtain
the American Surety Company for the Association, was started
them.
successfully and developed quite rapidly, until some 890 banks
A charge of $10 a thousand is made for the cheques. This
were using the Money Orders. It has been found necessary,
does not nearly cover the cost, and the charge is not made
however, to make certain changes in the system in order to
for that purpose. If the cheques could be obtained without cost,
have it perfect, as the element of exchange worked somewhat
many banks having no demand for them might order their name
against the plan as it was originally drawn up.
printed upon large numbers of the cheques and thus put a
The Committee and the Surety Company have been working
heavy and useless tax upon the system. This would tend to
to bring about the changes thought necessary, and while they
delay shipments to banks requiring cheques and prevent their
have had considerable success in eliminating certain undesirable
orders being filled promptly. All other supplies, such as lists of
features, your Committee has not as yet been fully successful
correspondents, covers for cheques, instructions to purchasers
in securing the co-operation of certain clearing house cities
and advertising signs are furnished without cost.
which is necessary to the full and complete success of the plan.
While it has been the custom in the past for institutions
When this co-operation is secured, the Surety Company intends
issuing Travelers' Cheques to require a remittance of half the
to push the matter with even greater vigor.
profit from bankers selling them when the cheques were sold
3rd. TRAVELERS' CHEQUES. The Travelers' Cheque plan
for use in the United States, and while the contract with
of the Association is now thoroughly established, and as it is a
the Trust Company originally authorized them to require such
new system and has been in operation only since the middle of
a remittance, yet as banks throughout the United States genlast April, we will present it in some detail.
erally agreed to cash the Travelers' Cheques of the American
Traveler's' Cheques, in order to give the service for which they
Bankers' Association at par, the Trust Company volunare intended, must be distinctive pieces of paper that will imtarily waived its right to any of the commission. This
press themselves readily upon the minds of those who are apt
additional profit in itself more than offsets the small charge
to be called upon to cash them. They must also have proper
made for the cheques, and while our opposition has also waived
credit and standing back of them, and must be available as
this commission, they did so because of this action by the Trust
exchange without cost in every part of the world.
Company, and banks which sell Express Company Money Orders
The system of the Association has been planned to meet these
are obtaining the benefit of the work of the Association.
requirements and the experience of the last few months, during
Banks generally order their name printed upon from 500 to
which time thousands upon thousands of the cheques have been
1,000 Travelers' Cheques, although some institutions, whose
cashed by tourists, both in this country and abroad, has proved
demand is small, have had as few as 250 cheques printed at a
that the system as established meets the requirements fully.
time.
First we will consider the cheque itself: The form was decided upon by the Committee, after consultation with European
The American Bank Note Company holds in its vaults at all
bankers, artists, experts of the American Bank Note Company,
times cheques ready for the names of issuing banks. As banks
and attorneys. The design which was finally selected seemed
sell the cheques they hold in sufficient quantities to make it
advisable, the Trust Company ships further cheques from the
to cover all the requirements of safety, individuality, availability and legality.
supply it holds. As its supply of printed cheques for any one
The cheques are engraved from steel plates, on paper specially
bank runs low, it notifies the bank in order that it may have
manufactured for them, and have upon the back a multi-colored
further cheques printed from the stock held by the Bank Note
Company. This system is working very smoothly and serves
lathe work which it is practically impossible to counterfeit.
many valuable purposes. In the first place, banks selling the
While this makes a very expensive cheque, and consequently
cheques are not required to hold in their own vaults, at their
puts quite a tax upon the system, yet it has already proved
own risk, any larger amount of cheques than they actually
its worth. It lends dignity to the undertaking of the American
require. Second, the total amount that the Trust Company has
Bankers' Association and gives bankers issuing the cheques a
outstanding is reduced to a minimum and the chances of delay
piece of paper that they need not be ashamed to sell to their
while new cheques are being printed and a consequent loss of
customers. Appearance carries ‘
weight with those called upon
business in the meantime, are almost eliminated, as three differto cash cheques, and this one is acceptable to all concerned. The
ent institutions are keeping track of the matter—the bank
American Bank Note Company informs us that it is more diffiselling the cheques, the Trust company receiving the remitcult to counterfeit than a government bill, and as. the cheques




154

BANKERS' CONVENTION.

tances for the cheques, and the Bank Note Company printing
judging from the net sales of the cheques to date, the advertising
the cheques.
campaign has been carried on along right lines.
The Trust Company has been 'making daily shipments from
It is no more than fitting that we call attention to the recent
the cheques held by it to replace cheques sold by issuing banks.
action of the Bankers' Trust Company in increasing its capital
As the demand upon the part of each bank develops, the number
and surplus to a total of nine million dollars ($0.000.000), as
of cheques it holds in its own vaults can be easily regulated to
this was done largely out of courtesy to the Association and to
meet it. When placing orders to have additional cheques
show that the company has undertaken this large proposition
printed, adjustments of the proportion of each denomination can
for the banks of the United States in good faith, and intends to
be easily made to conform to the demand.
carry it out in a broad way in the interest of the Association.
Banks do not remit for the face value of the cheques until
It is important that our bankers understand that the money
they are actually sold, and in some cases where issuing banks
remitted to the Trust Company in payment of orders sold is held
have clients of high standing who make it a habit to carry larger
by the Trust Company as trust funds.
amounts of cheques than they expect to have use for, in order
While Congress, the Currency Commission of the American
to be prepared for emergencies, they are sold against guaranty.
Bankers' Association, and the Monetary Commission have been
The application blanks the customers fill out when purchasing
working to devise a plan by which our country may be served
cheques are printed in copying ink, in order that banks may
with a more adequate currency system, your committee on Money
keep a clear record of all transactions without unnecessary
Orders and Express Companies believe that they have solved the
bookkeeping. Banks using the carbon system take two applicaproblem for a large part of our population who travel, by protion blanks for each order. The system is, therefore, very simple
viding them with a most safe, elastic and popular form of
for banks to handle and requires no expert knowledge of Foreign
emergency currency.
Exchange or complicated bookkeeping in order to supply their
That the public appreciates this service is shown by the fact
customers with the best possible service.
that during the first four months the system has been in operaAlthough the system was only started the middle of last
tion, over $2,000,000 of these orders have been in actual cirApril, over thirteen hundred banks, including the majority of
culation. At this rate it will mean that before it has been in
those in reserve cities, are to-day selling American Bankers' Aasooperation one year, at least $6,000,000 worth of these orders
elation Travelers' Cheques. This is as large a number as could
will have been put in circulation by the traveling public.
possibly have been supplied with the cheques since the time of
Individual banks in the United States to-day are in position
their issue, as the American Bank Note Company has not been
to issue to their customers Travelers' Cheques, over their own
able to keep pace with the orders, and today, with the height
names, good in any part of the world, that will give as good or
of the traveling season past, they are about a week behind in
better service than they would be able to if they were huge
deliveries.
branch banks. The co-operation on the part of bankers throughThe Trust Company originally made arrangements at some
out the United States is most gratifying, and the quick results
ten thousand points outside of the United States for the encashobtained by the Association in this matter proves the value and
ment of these cheques, and has since added to this number daily,
power of concerted action on the part of our banking instituand is continually obtaining the co-operation of new banks in
tions, when exerted along right lines, and shows the possibilities
all parts of the world.
of our development as individual institutions. By co-operation
In addition to such arrangements, circulars of instructions,
we can accomplish things which would otherwise be impossible
together with a reduced fac-simile of the cheques, have been
Without a branch banking system.
forwarded to hotels throughout the world. Realizing that some
Respectfully submitted, .
of the papers have been lost in the mails, or possibly destroyed
JOSEPH CHAPMAN, Ja.,
without consideration, special letters have been written: and
Chairman.
duplicate papers forwarded to several thousands of the principal
M. E. AILED,
hotels.
THORNTON COOKE,
A representative of the Trust Company is in Europe, making
E. D. DURHAM,
the rounds of all the principal hotels and shops for the purpose
FRED I. KENT,
of explaining the system. In Paris he covered sixty-two hotels
Committee.
and over three hundred shops, and in London a much larger
number. Holland and Belgium have just recently been covered,
Report of American Institute of Banking Committee.
and with entire success. Wherever necessary, this means is
To the American Bankers' Association:
being taken to see that the system is thoroughly understood.
Since becoming a section of the American Bankers' Association a
In other parts of the world different methods have been puryear ago, the membership of the American Institute of Banking has
sued. For instance, in Switzerland the Schweizerische Kredit
increased from 8,833 to 11,015, included in 51 city chapters and the
Anstalt, Zurich, sent their own representatives to all the hotels
Correspondence Chapter. With the development of American banking
and cafes in the country, as well as to many of the principal
greater efficiency is required in all bank employees from the president
shops. A report of the entire success of this work was sent
to the m-ssenger. To make such officers and employees in the quantity
recently to banks issuing the cheques.
The railroads of the United States are generally sending out
demanded there is only one way, and that is to make them make
notices to their agents to accept Association cheques in payment
themselves. This can only be done by utilizing the power of the united
of tickets, etc.
effort la some such Manner as the Institute provides. The Institute
Newspaper articles were published in the newspapers and in
is an organization of chapters under the general government of chapter
the languages of the principal countries of the world, explaining
representatives. This form of administration begets some politics
the system and advising hotel proprietors of the entire safety
and frivolous fellowship, but in the main develops initiative, selfwith which they could cash American Bankers' Association
reliance and serious and systematic study. The wisdom as well as the
Travelers' Cheques.
justice of placing responsibility for Institute government on Institute
Special arrangements have been made at many principal points
members seems to have been demonstrated.
where an unusually large number of tourists congregate. For
The increasing interest in systematic study is the most gratifying
instance, a special representative was sent to Seattle and ardevelopment of the past year. At the Seattle convention the followrangements were made with the Exposition authorities of the
ing declaration of Institute objects and methods was adopted:
Alaska-Yukon-Pacific Exposition and the concessionaries, as well
EDUCATIONAL STANDARD—The paramount object of the Instias within the banks and hotels in the city, to protect tourists
tute is to fix and maintain a recognized standard of education in
carrying American Bankers' Association Travelers' Cheques.
"Banking and Finance," and "Commercial and Banking Law," by
Similar efforts for the comfort of travelers carrying them were
means of official examinations and the issuance of certificates. Such
made in Salt Lake City before the meeting of the G. A. IL, and
certificates are issued in the name of the "American Bankers' Associahave recently been made in New York City in preparation for
tion," "American Institute of Banking Section," and signed by officers
the Hudson-Fulton Celebration. Very few banks in the past in
of the American Bankers' Association and the American Institute of
New York City have ever cashed any travelers' paper, but we
Banking, in accordance with arrangements made by the Executive
are assured, since our representative made the rounds of the
Council of the Association at its spring meeting.
New York banks, that travelers will meet with every courtesy
EXAMINATIONS FOR CERTIFICATES—Examinations for certifi•
in all of them.
cates are termed final examinations, and are conducted under such
All of the principal hotel companies in New York have been
regulations as the Institute may determine. Credit is given severally
seen and have stated that they have been cashing Association
for final examinations successfully undergone, but certificates are issued
cheques during the whole season and will continue to do so.
only to students who have passed final examinations in both "BankIt might be well to mention here that savings banks and
ing and Finance" and "Commercial and Banking Laws." Graduation
trust companies in many cities, particularly in the East, are
at approved schools of banking and finance will be accepted as
not allowed to do an exchange business. A list of such States
equivalents of Institute final examinations in that subject. Graduation
is being prepared by the counsel for the Association and they
at approved schools of law or membership at the bar will be accepted
will be mentioned in the "Instructions to Purchasers" as soon
as equivalents of the Institute final examinations in "Commercial
and
as the list is ready.
Banking Law."
Without going into further detail as to the various means of
PREPARATORY WORK—To be eligible for final examination in
publicity that have been used in order to make the cheques
either of the subjects of "Banking and Finance" or "Commercial and
current everywhere, we will say that nothing that could be
Banking Law," any student must have done at least fifty hours of
done has been left undone, and that every new necessity that
class or correspondence study in that subject under one or
more aparises is and will be taken care of as fast as it develops.
proved instructors and have passed a satisfactory preliminary examiIn order to aid banks issuing the cheques, very extensive adnation conducted either by the Institute or by some duly qualified
vertising has been undertaken by the Trust 'Company, and
examiner to whom authority has been officially delegated. Credit




155

BANKING SECTION.
will be given severally for preliminary examinations successfully undergone, but no certificates will be issued in connection with preliminary examinations.
Full returns have not yet been received of examinations conducted
during the past year, but so far as reported 57 students have thus
far completed the study courses and passed the required examinations in accordance with the system provided. The indications are
that this number will be materially increased next year.
The educational work of the Institute in large city chapters and
through correspondence instruction as conducted by the Correspondence
Chapter, is satisfactory, but the problem of small city chapters has
not yet been solved. To meet conditions in small cities where schools
of finance and law are not available, the Institute has prepared
courses of lectures in "Banking and Finance," and "Commercial and
Banking Law." Such lectures are typewritten and are intended to be
read in chapters by some chapter member appointed for that purpose.
In connection with each lecture are quizzes to be conducted by the
instructor in charge, who will have a key to the quizzes for his
personal use. The lectures thus provided are not intended to supersede
chapter work conducted by professional instructors, but may be used
to supplement such work wherever desirable.
While knowledge obtained through books and lectures is of primary
Importance, and is the only kind of knowledge that can be inventoried,
the development of personality through association in Institute chapters
and conventions is equally Important. In the making of progressive
bankers a combination of knowledge and personality is commanded.
That the Institute makes such bankers is evidenced by numerous appointments of Institute lriell to official positions in banks, and the
banking departments of leading States and the National government.
The substantial benefits of the Institute, however, are not so much
In the official recognition of its members, gratifying as such recognition is, but in the general benefit of the rank and file of bank employees.
Following is a statement of Institute receipts and expenditures
for the fiscal year ended August 31, 1909, in which statement are
Included expenditures in connection with both the Providence convention, held in 1908, and the Seattle convention held fit 1909.
RECEIPTS.
BALANCE Sept. 1, 1908, from former Institute
ganization
Balance Sept. 1, 1908, from associated chapters
Fellowship dues 0160 incidentals ($10)
Bulletin subscriptions lesss exchange
American Bankers' Association

or$1,690.07
388.22
176.00
10,438.19
7,604.50
$20,362.98

EXPENDITURES.
Salaries of Educational Director and assistants
Bulletin and stationery
Postage ($421.15) incidentals ($237.53)
Editorial contributions and press clipping'
Traveling expenses of Educational Director
Addressograph Stencils
Bonds of Treasurer and Educational Director
Work on text-book
Commercial and Banking Law lectures
Prize essay contest
Stenographic report of Seattle Convention
Executive Council expenses for Providence and Seattle
Correspondence and traveling expenses of officers and committees

Balance on hand August 31, 1909

$3,345.00
6,575.50
658.58
95.00
985.00
357.79
60.00
200.00
255.00
350.00
98.15
1,052.40

Report of Standing Law Committee.
To the American Bankers' Association:
On the occasion of the annual convention at Denver last year a
Joint Conference of Legislative Committees of State Bankers' Associations was held, under the auspices of the Standing Law Committee.
Conditions in the various States were presented, legislative needs discussed and valuable suggestions made for proposed legislation during
the coming year.
On November 12, 1908, the committee held a session at the BellevueStratford, Philadelphia, at which the subject of proposed legislation
was discussed.
General Counsel was requested to prepare a pamphlet
containing drafts of a number of laws to be submitted, as suggested
measures, for the use of Legislative Committees of State Bankers'
Such
Associations, before the legislatures which met during 1909.
pamphlet was prepared, submitted to and approved by the members
of our Committee, and issued to the Legislative Committees of the
Copy of this pamphlet is attached to this report.
State Associations.
It contained drafts of the following proposed laws:
1. An act to punish the making or use of false statements to obtain credit.
•
2. Au act to punish derogatory statements affecting banks.
3. An act fixing the liability of a bank to its depositor for payment
of forged or raised checks.
4. An act to punish the giving of checks or drafts on any bank or
other depository wherein the person so giving such check or draft
shall not have sufficient fuuds or a credit for the payment of the
same.
5. An act defining the crime of burglary with explosives and providing the punishment therefor.
6. An act relative to the payment of deposits in two names.
7. An act relative to the payment of deposits in trust.
8. An act to establish a law uniform with laws of other States,
relative to the transfer of stock to corporations.
9. An act concerning notaries public who are stockholders, directors, officers or employees of banks or other corporations.
10. An act to amend the maturity section of the Negotiable Instruments Law by the insertion of the words "or becoming payable" after
"falling due" therein.
11. An act to amend the Negotiable Instruments Law by limiting
the payment of a time instrument made payable at a bank to the day
of maturity only.
The enactment of the uniform Negotiable Instruments Law was also
recommended in those States wherein that law had not yet been
passed, a list being published of the States and jurisdictions wherein
the law was, and was not, in force.
The Uniform Warehouse Receipts Act was also recommended for
State enactment.
We are pleased to report that a large number of the measures approved and recommended by our Committee have been eacted this year
in a number of States. This legislation is fully set forth in a report
.of General Counsel to the Association.
Our Committee held a meeting at Briarcliff Lodge, Briarcliff Manor,
N. Y., on the occasion of the spring meeting of the Executive Council,
May 3, at which all the members of the committee were present.
At this meeting various subjects in connection with proposed legislation were discussed, and arrangements were made for a Joint Conference of State Legislative Committeemen at Chicago, on the occasion of
the present annual convention.
Respectfully submitted.
STANDING LAW COMMITTEE.
Wm. J. Field, Chairman, Secy. and
Treas. Commercial Trust Co. of New
Jersey, Jersey City.
Henry Dimse, Vice-Pres. Century Bank,
New York City.
P. C. Kauffman, Second Vice-Pres. Fidelity Trust Co. of Tacoma, Wash,
John K. Ottley, Vice-Pres. Fourth Nat.
Bank, Atlanta, Ga.
Henry B. Wilcox, President First National Bank, Baltimore, Md.
Thomas B. Paton, Counsel and Secretary,
11 Pine St., New York City.

855.60
$17,488.12
2,814.86
$20,302.93

It will be seen from the foregoing statement that notwithstanding
the fact that the expenses of two conventions are included in the
fiscal year, the Institute under the policy of self-government has
made a creditable financial showing. The educational work of the
Institute is done at less than cost, and it is the option of your
Committee that it is both just and expedient that the financial deficiency. If kept within proper bounds, should be met by the
American Bankers' Association rather than by bank employees. The
Association has provided the Institute with commodious office facilities,
effecting a saving to the Institute in rent of some six hundred dollars
a year. The economy and convenience of this arrangement aro
appreciated. A still deeper feeling of appreciation, however, is felt
for the cordial co-operation of Secretary Fred E. Farnsworth anti
his assistants. The value of their work for the Institute cannot
be expressed in dollars and cents nor fully expressed in words.
In view of the fact that the Association now provides the Institute with a suitable office, an appropriation of only $9,000 will
be necessary for the coming year.
Tito broadening character of Institute educational work as exemplified in the study courses in "Banking and Finance" and
"Commercial and Banking Law," implies expenditures substantially
•equivalent to the increase in Institute receipts, but your Committee
believes that such expenditures are a profitable investment not only
for the Institute but for the American Bankers' Association.
Respectfully submitted,
j. H. PUELICHER, Chairman;
E. D. HULBERT,
JOHN F. THOMPSON.




September 16, 1900.

Report of the Federal Legislative Committee.
To the Members of the American Bankers' Association:
Your Federal Legislative Committee begs leave to report:
That during the past year numerous inquiries on legislative questions have been receivbd from the membership, and so far as it has
been possible we have supplied each with the desired information
or have referred them to sources where we thought it could be obWhile your committee keeps at hand books and records for
tained.
reference on subjects likely to come up, yet we do not have many
books or paper's for distribution and the time involved in answering
questions is at times considerable.
Your committee begs to acknowledge receipts of many suggestions
and recommendations from different members, and in all cases they
have been given due and careful consideration, and at times we have
found it desirable to refer some of these to the Executive Council
and to other committees of the Association.
Your committee has, when called upon, and when deemed for the
best interest of the membership, rendered such aid as it could to
your other committees.

156

BANKERS' CONVENTION.

Your committee has kept up its auxiliary organization in the
different Congressional districts of the United States, and we are very
much indebted to these gentlemen, and are grateful for the valuable
assistance they have rendered us in times of emergency, thereby
benefiting the banking and business interests of the country.
Your committee has been in close touch with several committees of
Congress, with the committee representing the State Bankers' Associations, and with the leading commercial organizations of the country,
and have rendered each such assistance as was in our power.
We have, whenever measures have been presented, which seemed
to be detrimental to the Association, taken immediate steps to put
the proper information before legislators so that no unwise laws
might be passed.
CURRENCY LEGISLATION.
The question of currency legislation, which is unquestionably the
most important to be considered by the American people, has not been
lost sight of by your committee, and while there has not been that
publicity given the subject as heretofore, yet there has been devoted
to it more careful thought and study than in any previous year.
There has been no attempt made to secure banking or currency
legislation during the last regular session of Congress.
Your committee, as well as the Currency Commission, recognize the fact that
the Monetary Commission appointed by Congress are exerting every
effort to secure unbiased opinions and accurate information of the
various banking institutions of foreign countries, and have thought
best to await their report. This Monetary Commission has representatives in every country getting together information, which, when.
published, will be the most accurate and complete history of •the
various forms a banking ever published.
What the report of the Commission will be is, at this time, unknown, and probably unformulated.
However, when all of the information obtained by them is put in shape, a bill embodying their
views will be presented to Congress for enactment.
The question of some form of a Central bank with exclusive noteissuing powers may come up; also the possibility of authority being
given to create branches in various cities to afford redemption
facilities, etc., and the membership of this Association should be
alert to this situation. With you rests the solution Of this problem.
Your committee has been opposed to any form of a Central bank
yet suggested by legislators and particularly to branch banks.
BANK INDIVIDUALITY

SHOULD BE PRESERVED.

We believe the individuality of our banks should be preserved and
that it is essential and fundamental that any plan for the issuance
• of currency to prevent and dispel trouble should be such as would
enable individual banks to meet such conditions largely within themselves, at least with a minimum of inconvenience which would afford
a maximum of security.
We are assured that the bankers of the counery will be given an
opportunity through the committees of the Association to voice their
views.
Your committee accepted an invitation and was present at a meet
ing of the Federal Monetary Commission, held in Washington the
early part of last December, with the Secretary of the Treasury and
the Comptroller of the Currency, which had for consideration the
administrative features of the National Bank Act, and we wish here
to express our appreciation of the cordiality and universal courtesy
extended by the Monetary Commission to each of us. We believe
this meeting will ripen into still closer relations.
THE GUARANTY OF BANK DEPOSITS,
Your committee wishes to call attention to the fact that the legislatures of several States have passed laws looking toward the guarantee of banking deposits, and notwithstanding that advocates of such
laws are actively engaged in pushing this movement, yet after careful
consideration of the principles involved, your committee is unqualifiedly opposed to such legislation, and wishes to reiterate the principles adopted at the last annual convention at Denver:
"Your committee is opposed to the guaranteeing of deposits by
either State or Federal governments, or the assuming of a trusteeship
by either of a guaranty fund, believing that it would be a function
wholly outside of any purpose for which State or Federal Governments were organized, and for the further fact that the assuming of
a trusteeship would be misleading to the general public, as it is not
a guaranty by either State or Federal Government; and that such a
law would work to the detriment, not only of the banks, but of the
depositing public as well.
"A mutual guaranty does not make all banks individually strong.
The most and the best that can be claimed for it is that it will bring
the weak ones up, so far as safety to depositors is concerned, while
at the same time bringing the strong ones down. Average mediocrity
would be the result; but would the impairment of our system stop
It taxes conservatism in the interest of profligacy;
with mediocrity?
It compels legitimate business to bear the risks of speculation; it
takes away the high ideal involved in establishing character and
building up good-will; it compels the conservative banker to place his
character, standing in the community and financial strength at the
command of incompetent, venturesome, or dishonest rivals, and thus
enables them to buy away his deposits and his business. It is a
premium upon bad bankinr and unsafe business, and portends disaster to all commercial interests and threatens the welfare of the
entire nation.
"In view of the conditions that confront us at the present time,
we deem it important that the American Bankers' Association place
itself on record again. We, therefore, recommend and move the adoption of the following resolutions:
"Resolved, That the American Bankers' Association is unalterably




opposed to any arbitrary plan looking to the mutual guaranty of deposits either by a State or the 'Nation for the following reasons:
111
.
It is a function outside of State or National Government.
"2. It is unsound in principle.
“
3. It is impractical and misleading.
"4. It is revolutionary in character.
It is subversive to sound economics.
It will lower the standard of our present banking system.
It is productive of and encourages bad banking.
It is a delusion that a tax upon the strong will prevent failure
of the weak.
"0. It discredits honesty, ability and conservatism.
"10. A loss suffered by one bank jeopardizes all banks.
"11. The public must eventually pay the tax.
"12. It will cause and not avert panics.

"Resolved, That the American Bankers' Association is unalterably
opposed to any arbitrary plan looking to the mutual guaranty of deposits either by a State or the Nation, believing it to be impractical,
unsound and misleading, revolutionary in character, and subvsersive
te.sound economics, placing a tool in the hands of the unscrupulous
and inexperienced for reckless banking, and knowing further that
such a law would weaken our banking system and jeopardize the interest of the people."
We would urge upon the members of the Association who are in
harmony with our view on this subject that they personally use their
influence to prevent the passage of unwholesome measures in their
respective States. Unless this is done, the committee from either the
Natpnal or the States Associations will be unable to overcome the
growing sentiment in favor of such legislation.
POSTAL SAVINGS BANKS.
The live question this year before Congress was that of the proThis had back of it the
posed postal savings bank legislation.
pledges of all the political parties during the' last Presidential campaign save one, and this was the cause of it being extremely difficult
There were several
to get a proper consideration of such legislation.
bills introduced in Congress for the establishment of postal savings
banks. We secured copies of these bills, and after carefully considering each of them had them briefed, and a complete list of the
objectionable features of each measure carefully noted, so as to be
prepared to assist in the defeat of any bill that might be presented.
Your committee called upon tile individual banks for expression
upon the question of postal savings banks, and more than 08 per cent.
of the bankers of the country are opposed to the passage of such laws.
Your committee's greatest work during tile past year was that
of preparing plans and assisting the Committee of the Savings Bank
Section in 'defeating the numerous measures for tile establishment of
a postal savings bank system for the United States.
We will not at this time discuss the various bills, as they are all
dead (peace to their memory), but will say that no bill was presented
which could have been put in practical operation.
Your committee wishes to call your special attention to the fact
that the advocates of the postal savings banking measures, published
and used as statistics, figures, absolutely inaccurate, and misleading
to the public, and in no instance were ccrrect figures given as to the
amount of savings deposits, the number of banks receiving savings
deposits, the number of such depositors in the United States, the
average amount per capita of such deposits, nor the average rates
of interest paid on such deposits.
If the statistics of foreign postal and savings banks are correct as
published, then the United States has more than double the savings
of England, Wales, Austria, Belgium, Canada, France, Hungary,
India, Ireland, Italy, Netherlands, New South Wales, New England,
Queensland, Russia, Scotland, Australia, Sweden and Japan combined.
The advocates of this measure have claimed that the establishment
of a postal savings banking department would be of advantage to the
Government, whereas, the facts are, that such departments have
caused a deficit in many foreign countries, and are there, as they
would be here, under any measure so far advocated, a burden and
not self-sustaining.
One of the arguments advanced is that we should encourage foreigners of a certain class to deposit their savings in United States.
postal savings banks.
'The intelligent foreigners do deposit
their savings with the banks of this country, and we do hot
understand why there should be such solicitude for that superstitious
and anarchistic class of foreigners, who scarcely have intelligence
enough to buy a foreign draft or postal order. What is needed is
better immigration laws rather than upset the banking system of this
country, which has proven so successful, by creating postal savings
banks.
To establish postal savings banks would be contrary to the general
plan of our government, wherein the originators of the Constitution.
sought to leave the largest measure of liberty and freedom to the
people to transact their own affairs.
Establishment of postal savings banks would be a movement on thepart of tile Government to take from intelligent and progressive
citizens the savings bank business of the country and place its control'
in the hands of any office-holding class.
The danger of the political
use of such a power should cause all patriotic men to hesitate before•
adopting such a radical measure.
Your committee does not believe that it is wise statesmanship to
urge upon the American people the passage of certain laws, solely
for the reason that there was a clause in a party platform inserted'
without due consideration or opportunity being given to those con..
versant with the subject to show the fallacy of such legislation, and:
only for the purpose of furthering political interest.

BANKING SECTION.
A MENACE TO OUR NATIONAL CREDIT.
The credit of our Nation has been a source of great pride to us all.
America has stood at the forefront.
Her bonds have borne the lowest
rate of interest and her securities have had the widest market. Do
we want a blot on this magnificent record? Do we want the credit
of our country restricted? Do we want in times of emergency the
question to be raised as to the amount of demand deposit liabilities
the Federal Government has outstanding? Do we want an incubus
placed upon our credit in the shape of the money borrowed from the
people by the Government?
If so, give us the postal savings bank.
Do you know that England had at the time of the Boer War one
billion six hundred million dollars of postal savings accounts? What
was the result? The Government was engaged in a long drawn out
conflict.
The people became frightened and the country was confronted with the double necessity of financing the war and paying off
frightened depositors.
Your committee is opposed, should a postal savings bill pass, to
the investing of such funds in either United States, State or
Municipal bonds, and we are opposed to the investment of $600,000,000
or $700,000,000 in United States bonds as has recently been advocated
by our Chief Executive, knowing full well that such an action would
be a serious mistake and a menace to our Nation's credit, as it is
to that of other countries where such investments are 'made.
It is the belief of your committee that the agitation in favor of the
guaranty of bank deposits and the establishment of the postal savings
banks has created sentiment with a certain class of our people that
some form of protection can be secured without cost to them. While
we believe that both of the plans suggested are .in principle fundamentally wrong, yet it is apparent that the question must be met and
some solution proposed which will afford ample protection to good
•
business principles.
We believe the demand for a postal savings bank arises largely
from the inability of certain classes to discriminate between banks
and also from the facts that various Postmasters-Generals for years
have been recommending the establishment of such a bank, and have
endeavored to arouse public sentiment to that end.
We believe this end can be accomplished through another channel,
to wit: That of State and Federal supervision, which is a function
entirely proper to exercise.
SAVINGS DEPARTMENTS IN NATIONAL BANKS.
Your committee last December presented to the Monetary Commis
sion of Congress a method or plan to accomplish the desired result
without introducing new or radical features or questionable efficiency.
The suggestion was made that National banks under supervision
of the General Government be authorized to establish savings departments, segvgating the assets and designating the class of investments to be held Against tile liabilities so incurred, such assets to be




157

held for the protection of these deposits, at the same time reducing
the reserve requirements of the savings department to correspond with
the reserve of State institutions.
This we believe should afford the same security now accorded by
mutual savings banks in New York and other Eastern States. These
banks have been a bulwark for the workingman and a boon to the
country.
If savings deposits were protected in this manner, and it must, be
admitted that the savings of the laborer are very largely placed in
savings accounts, we believe that very little would be heard of the
postal savings bank from this class of depositors, and this plan of
handling savings accounts affords to us a solution of this vexing
question, along lines fundamentally correct.
While it would be our purpose for all banks to co-operate in the
matter of protecting savings accounts, in the manner suggested, and
it is not our intention to in any way interfere with the.business done
by any of our banking institutions, yet we sincerely believe that if
such a law as has been suggested herein were passed by Congress, it
would prove extremely attractive to State banks, and many of them
would undoubtedly convert into National banks, and it would in the
end do more to unify the banking business than all the laws passed
for many years.
We would recommend the adoption of the following resolutions:
Resolved, That It is the senie of this Association that we should
condemn in unqualified terms the proposition for the establishment of
postal savings banks or any other system by which the Government
enters directly into banking relations with the people.
Resolved. That the American Bankers' Association is opposed to any
financial legislation based upon the argument that it was a party
pledge and should be redeemed.
Resolved, That we believe the proposed plan to invest postal savings
banks deposits to the extent of six or seven hundred million dollars
in United States bonds simply to maintain such bonds at par is unsafe and unwise legislation, and if enacted would ultimately lead to
lack of confidence in our National credit.
Resolved, That the committee representing us before Congress be
urged to use all honorable means to defeat tile proposed legislation,
and that we recommend as a substitute therefor the maintenance of
separate savings bank departments in the National Banking Associations now operating under the law, the assets to be segregated and
accounts separately maintained for the protection of all deposits
entrusted to such departments under proper regulations to be
prescribed in the act.
We want to thank all those who have assisted us in our efforts to
defeat such legislation, and we want to commend the splendid work
done by the Legislative Committee of the Savings Bank Section in
their campaign of education and for their co-operation with tills coin.
mittee in our work.
Respectfully submitted,
ARTHUR REYNOLDS.
E. F. SWINNEY.
JOSEPH A. McCORD.
W. V. COX.
JOHN L. HAMILTON.

ESTABROOK & CO.
BOSTON
131 East German St.
24 Broad Street
New York
Baltimore
Conn. Mutual Building
Hartford

Investment Securities
Members New York and Boston Stock Exchanges

Detailed Report of Proceedings,
THIRTY-FIFTH ANNUAL CONVENTION HELD AT CHICAGO, SEPT. 14, 15, 16 and 17, 1909.
FIRST DAY'S PROCEEDINGS.
Tuesday, September 14th, 1909.
The convention was called to order by the President of the
Association, George M. Reynolds, president of the Continental
National Bank, of Chicago, Illinois.
The invocation was offered by Rev. Joseph A. Milburn, D.D.,
pastor of Plymouth Congregational Church of Chicago.
The President: I take great pleasure in presenting Honorable Charles S. Deneen, Governor of Illinois, who will extend to the Association the welcome of the State.

Address of Welcome by Gov. Chas. S. Deneen.
I am pleased to welcome to Illinois this gathering of rep-

461

resentatives of the banking interests of the country, The
custom which has been rapidly growing among business men
of late years, of gathering to discuss subjects which are of
special interest to them in the conduct of their business, is
of the greatest benefit both to the businesses concerned and
to the community at large. In these discussions of business
affairs in their larger aspects, the truth is sure to come to the
surface that the greatest requisite of business prosperity in
any special line is the general welfare of the community.
Especially is this the case in business of such magnitude,
and one which bears such intimate relation to all other lines
of business, as that of banking. It has become a maxim
that the best register of business conditions in a community
Is the volume of business transacted by its banks. • It is an
equally well recognized business truth that there is no class
of men upon whose unflagging attention to their business, and to
the maintenance of its credit and stability, the general industrial welfare so much depends.
The important relation which banking bears to other lines
of industry has also been recognized in the law which has,
to a large extent, clothed that business with a public interest and regulated and safeguarded its administration in
ways which are designed at once to protect the public and
the well conducted banks of the country against the unscrupulous practices of those who seek to take advantage of
the general confidence in banking institutions to carry on
unsound or nefarious practices at the public expense.
No business requires more skill or experience in its conduct than that of banking; and there is none in which the
successful exercise of skill and sound judgment over, a period
of years creates such a valuable asset in the confidence of
the business community. This is, in fact, the great asset of
the banker. Hence the almost mercurial change which the
slightest breath of suspicion as to the stability of a banking
institution creates in the community.
This increased sensitiveness is characteristic of modern
business conditions. Its most obvious features, as contrasted
with old fashioned methods of business is the greater interdependence of industries in the modern system. Everywhere
the tendency is to industries in the modern system. Everywhere the tendency is to establish closer relations between
different branches of business, so that prosperity or adversity
of one branch becomes the concern of all.
As I have said this is especially true of your business, which
is more sensitive perhaps than any other to the failing or
prosperous conditions which obtain in other industries. The
old transition from barter to purchase by money, is now
being replaced by the still more refined transition from cash
to credit transactions; and in the transition, the gain in
economy is accompanied by this increased sensitiveness which
makes more than ever Important the widest knowledge of
business conditions and the most scrupulous honesty of administration. These alone can beget and maintain the necessary condition of business upon a credit basis—implicit confidence.
To secure this, it is necessary that you not only join to
prevent, as far as possible, the recurrence of those disastrous
failures which it is impossible always to avoid in the administration of any single institution, by forming associations for
the mutual protection of their members; but it is aiso necessary that the best means should be adopted to weed out
from so honorable a calling as that of banking, all who have
entered it for nefarious purposes.
The latter object can only be attained through the perfecting of the laws in relation to banking, and it is gratifying
to note that in the effort of the State and National governments
to throw around banking an unusual share of legal protection,
both for their own and the public safety, the bankers themselves have taken the initiative and lent their aid.




Doubtless among the purposes for which your convention
has assembled will be the consideration of methods and means
for still further adding to security in the administration of
the banking business; and whatever you accomplish in this
direction will be of the highest benefit to the business
community.
As representatives of the great moneyed interests of the
country your deliberations will be of special interest to the
business men of the metropolis, one of the financial and
commercial centers of the country and of the world. This
great city, through the wide range of its business transactions,
is affected by financial and business conditions in all parts
of the world. Our citizens will, therefore, follow with eagerness the accounts of your proceedings as reported in the daily
press reports, and will await with the keenest interest whatever conclusions you may reach as to the future of the banking business.
But I shall not detain you any longer with my remarks,
I welcome you to this city and to our State. You have
already contributed much to the welfare of both, and we
look forward with confidence to the results of your present
deliberations. I trust that your stay with us will prove agreeable and that we shall have the pleasure oi greeting you
again on some future occasion.
The President: We will next be favored with an address
of welcome by Joseph T. Talbert, President of the Chicago
Clearing House Association, and also President of the Coin.
mercial National Bank of Chicago.

Address of Welcome by Mr. Joseph T. Talbert, President of
the Chicago Clearing House Association.
It is a pleasure and a privilege to be called upon to extend
in behalf of the banks and bankers of Chicago an official
welcome to the members of the American Bankers' Association
on the occasion of this, their third convention in our city.
Occupying as you do a position unique in American finance
and representing as you do not only the small and remote
banks, but also the great and strong among our financial
institutions, this privilege becomes an honor.
It is easy to say that you are welcome and that we are
glad to have you with us: but we intend to try not only
to make you feel at home but to give evidence of the fact
that you are genuinely welcome. In carrying out this purpose
we have not sought to make a display of entertainment, nor
to prepare a tedious program, consuming every moment of
time, through which each visitor must be forced, whether
or no; but there has been left opportunity for all to visit
their friends and correspondents, or to go sightseeing and to
the places of amusement for which cards are supplied, or to
do anything else which individual fancy prompts. We have
thought that true hospitality lies in making a guest feel first
of all that he is welcome, and then, after providing the things
necessary for his comfort and physical well being, to place
him at ease by allowing reasonable freedom to indulge personal inclinations. It is hoped that this will sufficiently account for all gaps or omissions there may appear to be in the
official program. If there be any among you who has not
found suitable and comfortable quarters, every effort will be
made to procure them and to make them satisfactory on application to any person you see wearing a Reception Committee badge, or at the Information Bureau at headquarters.
It is our earnest wish that every guest be made to enjoy
the visit here and no effort on our part shall be spared to
accomplish that end.
We are particularly glad to entertain our visitors from the
East, for we want them to know more about this young Queen
of Western Cities. We wish to show them the things which
have made her a Queen, and which in time shall enthrone
her as the "Empress of Them All." We are delighted to
have with us our guests from the South and Southwest, for
we wish to become acquainted with them, to have them
know that we are neighborly and friendly disposed, and that
we are not half so bad as we have been painted. We intend
to show them that here is the near and natural market for
their raw products, and here the place for the purchase of
merchandise and for the establishment of new banking connections. It is unnecessary to say that we welcome our
friends and neighbors from the West and Northwest and all
the way from the Pacific Coast, for they know us—indeed
they are a part of us. They know that Chicago is great,
industrially and financially, and they also Low that it is due

BANKING SECTION.
to the fact that they themselves are great, and growing in
greatness, and that the strength and prosperity of this city
Is but a reflection of their own happy condition. Therefore,
I am upon safe ground when I extend to visitors from every
section a thrice cordial welcome.
I might. make a lengthy speech reviewing the growth in
Importance and power of your Association, numerically and
financially since first you met in Chicago, twenty-four years
ago, and again 1893; and in contrasting the modest beginnings
of those days with your present membership of over ten thousand, including banks whose aggregate resources are over
fourteen billion dollars. I might call attention to the growth
in population, wealth and banking power of Chicago, which
has been no less remarkable. Within fifteen years the deposits of the associated banks of the city have increaseu nearly
five fold, growing from $172,000,000 to about $750,000,000.
This is an impressive, almost a startling fact. Much that is
interesting and significant might be said about it, but I fear
It would be an encroachment upon your time and upon that
of the distinguished speakers who are to follow. Chicago
will continue to grow, not only in mere numbers of individuals who dwell here, but in business importance and in
financial power. This is inevitable because of its geographical
position in the heart of this great empire; because of the unequalled network of railways, the veins and arteries of trade,
which flow inward and outward; and more than all, because
its famous hinterland is rich and productive and populous.
In this respect no city in the world has ever been more advantageously situated. These things make Chicago the City
of Destiny, the splendor and glory of whose future it is vain
to prophesy.
I might also with pardonable pride call attention to the
excellent example which Chicago in recent years has been
giving to other cities and to the world in improved methods
for the examination and regulation of her associated banks—
an example which I am glad to say has been followed by a
number of progressive cities. It is sufficient to say that
this great industrial and distributing center is justly proud
of its excellent banks, and feels fortunate as well as safe in
the possession of a number of them which rank among the
strongest and best managed in this country.
There is just one central thought which I wish to impress
upon you, and it is neither about Chicago nor her banks. It
is this: The most important work to which this Association
can presently devote itself lies in influencing and in shaping
State and National legislation along the lines of sound
economic laws; I mean those which embody correct principles
and which will promote sound banking. We have been sailing
for a long time through financial fog, and while in some
quarters the sky seems to be clearing, the harbor of popular
soundness on financial subjects unhappily is not in sight;
nor can we yet discern the shore line of terra firma in our
monetary system.
Away back in 1885, when this Association first met in
Chicago, the chief subject of discussion was the then overshadowing cloud—the Silver Question. Such men as Lyman
Gage, W. L. Trenholm, George Hague of Montreal, Edward
S.
Lacey, then Comptroller of the Currency, and others. argued
for the immediate repeal of the Bland Act of 1878, and
against the enforced coinage of standard silver dollars.
They
pointed out the Inevitable truth that failure on the part
of
Congress to repeal the Act would end in a panic. The wisdom and sound judgment of these men, all of whom were experienced in finance and whose opinions were entitled to
respectful consideration, went for naught; but eight years
later the panic came, during which we passed through one
of the most disastrous periods in our financial history. In a
few months, more than 150 National banks and no less than
500 State, savings and private banks closed their doors. The
loss to the business interests of the country was incalculable
for the depression following the panic was great and prolonged. . Then came the repeal of that obnoxious statute and
three years later when the question of the free and unlimited
coinage of silver was submitted to the people as the leading
political issue, that delusion was definitely and finally settled.
It required twenty years to educate tile people to a proper
understanding of it, while the patriots who fought the silver
heresy and sought to place our monetary system soundly upon
a gold basis were branded as criminals and conspirators.
It would be difficult to find now an intelligent banker or
business man who would contend that the question was not
wisely and properly determined. Although the revival of
business and the years of great prosperity which followed the
repeal of the Bland Act killed, embalmed and buried the
free silver question forever as a political issue, we should
not lose sight of tile fact that it stood for months, if not for
years, a hideous nightmare, the very sight and fear of which
paralyzed business industry and almost destroyed the confidence of the world in us. We should remember, too, that
although the issue finally was settled rightly, it was done by
a margin perilously narrow, and entirely too small upon which
to stake again any great issue involving national finance and
with it national honor. It is, indeed, doubtful. whether our
national honor would have been saved had we not been blessed




159

at that critical moment with a President possessed of that
splendid courage and strength of character which rises equal
to such occasions and which is as rare as it is admirable.
Just so it will be necessary to educate the people and probably as much time will be required in which to do it, concerning other menaces and weaknesses in our financial system. But when this has been done and the people fully apprehend the dangers to which they are needlessly exposed and
when they realize that tile remedy is in their own hands
there can be no question but that their verdict will be equally
conclusive. I refer, of course, to our defective currency system; and, I may fairly say, to the alarming tendency towards
unsound and dangerous State banking laws. We have reason
to hope for good results in the way of popular education from
the work of the Monetary Commission of the House and
Senate. There is also reason to believe that the Currency
Commission have undertaken their work seriously and in good
faith, and that they are doing it thoroughly. When their
report is made it is expected to embrace broad and comprehensive measures to reform. However, it is not out of
place to point out to you and to emphasize the fact that
sound and correct, instead of artificial and political legislation in our finances is imperative, and infinitely more important than the tariff or any other issue that has been before us in recent years. It is discreditable, not to say disgraceful, that we have not a currency system that will meet
every legitimate need of business. There are no valid reasons
why we have not such a system. After recent experience
failure to perfect the currency and place it upon a basis as
sound as that of any other country in the world would be it
national shame. The Currency Commission no doubt will
report a wise and safe solution of our problems, but when
it comes to framing and enacting laws based upon
their
recommendation they will need the support, not only of
bankers, but of the business interests of the whole country
and most of all the influence of the press to stimulate
Congress to action.
To those of you who were in the banking business during
the panic of 1907 no arguments in favor of reformation are
necessary. But there was a feeling among bankers outside
the larger cities that the disturbance might have remained
local, or at least that its effects would have been nearly imperceptible in the West, had not the Chicago banks, following
the example of New York, without warning suspended currency payments and resorted to Clearing House certificates.
Perhaps there are yet a few who think it was unnecessary
for us to have done so, but to all who have any such lingering
beliefs, I wish to say that there are within my hearing bankers from New York, Chicago, and perhaps from other cities,
who know it is a fact, and who will confirm the statement
that London (which is the market of last resort to which we
can turn in such crises for the purchase of gold) as definitely
and finally refused to sell and ship gold to the United States
before we ceased currency payments, as New York and Chicago banks were obliged to do afterwards.
Instead of censure, therefore, it is but scant justice to say
that the great banks of New York, and in a less degree perhaps our own banks, deserve the highest praise for their
prompt action and the greatest measure of admiration for the
courage they displayed in thus calmly facing a crisis calculated to test their strength and prove their soundness.
We have learned by experience how to deal with panics
and by the use of credit how to mitigate some of the evils
which they entail; but we shall not be able to prevent panics
until the Government, which itself harmfully meddles in the
business of banking, shall permit its chartered banks, always,
of course, within proper limitations and under safe regulations, tile use of the civilized weapons of financial warfare,
and the employment of defenses or protection of individual
credit. Without such weapons and defenses we are, and shall
remain almost helpless.
The matter of State legislation with respect to banks and
the business of banking is of nearly equal importance and
should not escape attention. It would seem that much good
might be accomplished by systematic co-operation with State
Bankers' Associations. It is a singular fact that the delusions
which have found expression in the passage of State laws
compelling all good, sound and carefully conducted banks
to guarantee the mistakes or frauds of bad and recklessly
managed ones, do not seem to take root nor to flourish in industrial and financial centers so much as in those sections
where less relative use is made of banks; and curiously
enough these delusions seem to possess classes who never
have been richer or more prosperous than they are now.
If this suggests anything it is the fact that these are the
sections where the greatest amount of educational work must
be done. Such laws are the natural outgrowth of the unsound doctrines taught in those sections in the past. It
may require ten, twenty or thirty years to undo this harm,
but it is not to be doubted in the long run that we shall
have a national system which will protect us against disastrous
panics and currency famines, nor that we shall have sound
and wholesome State banking laws providing abundant regulation (which after all is the best safeguard), and that under

160

BANKERS' CONVENTION.

these laws there shall flourish a system of banks as safe and
as efficiently managed as any in the world. But we cannot
hope for so precious a possession without labor, 6o-operation
and patient effort on our part.
Again you are assured that it is a pleasure to extend each
of you a cordial welcome to Chicago, and you are invited
to visit our banking institutions, and to become acquainted
with our bankers.
The President: We will have the pleasure of listening to
a response to the addresses of welcome by our friend and
comrade, Col. Robert J. Lowry, of Atlanta, Ga.

Response to Addresses of Welcome by Colonel Robert I.
Lowry, of Atlanta.
Your Excellency, the Governor of the Great Commonwealth
of Illinois, to you, Mr. Talbert, the distinguished President
of your Association of Clearing House Banks, to His Honor,
the President of the American Bankers' Association, Ladies
and Gentlemen:
Upon being requested to respond on behalf of the members
of the American Bankers' Association to the words of cordial
welcome which have been spoken to us this morning from this
platform, I was at first somewhat puzzled in an effort to decide why I was named to perform this pleasant duty. After
considerable thought, I decided that your committee, with
an eye single to the fitness of things, thought that it would
be appropriate to have this beautiful welcome on the part
of the Chicago of the West accepted on behalf of the Association by a member who hails from the city known as the
"Chicago of the South."
I shall be brief, for I am sure that You have a most attractive programme before you this morning. I am frank
to say, however, that I greatly appreciate the honor of being
selected to acknowledge your beautiful courtesies, and to
thank you for the royal welcome you have given us. I am
sure that I voice the sentiment of this entire body when I
say that we appreciate your hearty welcome, your openhanded hospitality, and your unstinted generosity. In expressing our thanks, however, for the kind and encouraging
words that have been spoken to us by these honorable gentlemen this morning, we hasten to say that this was no less than
we did or could expect from Chicago: This is a city renowned
for the prodigality of its welcome and entertainment, a city
that does nothing by halves, a city that extends the right
hand of fellowship and the optimistic word of good cheer
and godspeed to all American citizens, no matter what State
in the galaxy of this Union they may call home.
Some of us have had the pleasure of enjoying the hospitality
of Chicago before, and we are prepared to say, for we know
by past experience, that the best is none too good for the
guests of this great city. On behalf of those of us who have
enjoyed your splendid entertainment in the past, I say that
we are glad to be with you again, and on behalf of those who
have not • had this pleasure in the past, I know I can safely
say they will be glad to come again.
We are not disposed to take unto ourselves any great
amount of chesty pride, however, upon receiving your warm
welcome, for we know it is for the cause that we represent
that we are the recipients of your courtesy. This is a great
Association, numbering some 11,000 banks among its membership, and representing assets of many billions of dollars. It
has been my privilege and pleasure to watch its phenomenal
growth from the small nucleus of a few prominent banks of
this country associated together to the mammoth organization
that exists to-day with this enormous membership. It has
been an inspiriation to me to see it branch out into educational
lines, protective lines, and other lines of endeavor for the
material uplifting and development of the banking profession
throughout the length and breadth of this land. Every bank
and banker in this Association feels naturally and justly
proud of membership in this organization, not only on account
of the high prestige of the Association as such, but on account
of the great influences it wields for the benefit of the masses
of the people and the whole country. This Association has
grown alike in power and beneficence. It has helped to shape
wise and beneficent legislation; it has raised. its voice against
fanaticism and misguided popular clamor, and in time of
financial disturbance, has brought order out of chaos and restored confidence.
Like a great throbbing heart-center, It has sent out through
the length and breadth of this broad land a healthful and inspiring influence, which has left its impress not only upon the
banking fraternity, but has permeated the channels of business and commercial and professional life, and has injected
• -into the arteries of our daily commerce, safe, sound, and sane
principles of commercial honor and honesty. The beneficent
influence of this great organization is felt from Maine to
California, from the Lakes to the Gulf, and where is the
man, the banker, who would not feel a just pride in his membership in an organization which is such a power for good in
this great country?
So I say it is for the cause that we represent that Chicago
extends her hearty hand of welcome. It is her recognition
of this great power for good amongst us; it is her spirit of




co-operation with all that makes for the uplifting of the
people of our country, that she has such a royal welcome extended by these, our distinguished and honored friends.
As Individuals, making up this great whole, the most indifferent of our number could hardly fail to be sensible to
the gracious hospitality extended, and the pleasant,stay we
shall have among this cultured and hospitable people. Were
It not for the fact that the feeling, which I know exists in
the heart of every member of this Association, must be expressed by some one, or else be voiced by all, I would stand
mute, and simply look my thanks to the distinguished
gentlemen.
We are glad to be here; we are glad to have this meeting
of our Association in this great city of the West, full of
enthusiasm, wide-awake on all occasions, thoroughly progressive, modern, American! We appreciate the freedom and
hospitality of this great city, which has been so freely tendered
us, and, on behalf of ,the grateful membership of this Association, let me thank you most heartily, and say that we
know that our visit will be both pleasant and profitable.

Annual Address of President. George M. Reynolds.
Members of the American Bankers' Association .and Guests:
Assembled, as we are, at a time when prosperity again smiles
on our country and our people are at peace with the world
and among themselves, I congratulate you upon the favorable
auspices under which the Thirty-fifth Annual Convention of
this Association begins its deliberations.
The large attendance at the convention this year, exceeding
by far that in any previous year and reflecting, as it does,
an increased interest by our members, is both gratifying and
encouraging.
While the past year has not brought as great activity in
business, nor as satisfactory returns on capital invested nor
for labor performed as we could have hoped, still, blessings
have been showered upon us in increasing measure as time has
passed; and where a short time ago there was hesitation in
busineks and doubt, we now find activity and confidence. The
financial sky which, during the closing days of 1907, became
so filled with clouds of doubt and distrust as to affect our
confidence and chill our hopes and which brought such . complete paralysis to our business, thus causing a long period Of
depression and entailing incalculable loss to our people, is rapidly clearing. Hope deferred has given place to hope realized
and the fulfillment of our wishes. Activity and progress,
guided by courage and conservatism, are again the watchwords
of our people..
Nature, directed by a Divine Providence, has showered upon
us her products in such generous measure that our storehouses
are filled to overflowing, and we still have much to spare to
Europe and other countries, the disposition of which will create for the United States a large international credit.
With the tariff question settled, thus removing the chief
handicap to a greater revival in business during the past
year, and with the latent energies of our people now fully
awakened to activity, we will, if our efforts are directed by
Intelligence and accompanied by frugality on the part of our
people, soon come into a full fruition of our hopes, through a
speedy return to normal conditions in business.
During the year that has passed since our last convention,
this Association has prospered ; its business affairs are in excellent condition ; there has been a satisfactory growth in its
membership; our treasury reflects a strong condition, and the
various reports show that the officers, the members of the
Executive Council, the different Sections and the various committees have been active and alive to the interests Of the
Association.
The offices of the Association, in New York, under the control and management of your efficient Secretary, Mr. Fred E.
Farnsworth. are a veritable beehive of industry, in which the
affairs of the Association are conducted along modern business
lines; order and method prevail, and efficiency of service, together with courtesy and affability on the part of all, in their
contact with the public, makes a visit to that office a pleasure.
The past year has been our first experience under the increased membership of the Executive Council and the manner
of its election, and I am happy to be able to say to you that I
believe the change has proven to be a wise one, and great credit
is due to those who were instrumental in bringing it about.
The fact that the members of the Council are now elected by
the delegates from the various States, at the time and place
the conventions of the State Associations are held, has brought
about a much closer relationship between this Association and
the various State Associations, and in addition has eliminated
from these meetings much of political activity.
During the year the officers and employees and various
sections and departments of the Association have been brought
together in one building, and all have worked in complete harmony for the common good of the Association.
The main work of the Trust Company and Savings Bank
sections has been Rion" lines of interest to State institutions
doing a trust and savings bank business, but bankers, generally,
are greatly indebted to the Savings Bank Section for the
valiant work it has done in opposition to the establishment
in our country of a system of postal savings banks.

BANKING SECTION.
The Institute of Banking has made splendid progress during the year, and is doing much to equip your men for future
responsibilities in banking.
Inasmuch as under our constitution the actual business of
the Association is transacted and much of its real work is
done by the Executive Council and through various committees,
the reports which will follow will give you detailed information
concerning all matters taken up by the Association; and I
urge upon you a careful study of these reports, in order that
you may have a full realization of the character and magnitude of the work that has been done.
The growth and usefulness of organizations of this character
depend very largely upon the individual members. Measured
by this standard, the magnificent audience at this convention
is both a realization of our hopes of the past and,an inspiration for the future. No word in the vocabulary means so
much as "co-operation" when it is applied in a practical way
to every-day business life, and if this Association stands for
anything it stands for co-operation among the bankers of the
United States.
No matter what the object may be in the formation of an
organization of this kind, if it is to survive and be successful
its sustenance must come as a result of the benefits that
accrue to the individual members through their co-operation—
the pooling of interests which makes the cause of the weak
and the cause of the strong the common cause of all.
The fact that this Association has continued to show a
steady growth, until it now numbers among its members
nearly eleven thousand of the principal bankers of the United
States, surely justified the belief that some good is coming to
the bankers of this country through these annual meetings.
There are still a few bankers who, regret to say, shrug their
shoulders when the name of this Association is mentioned, and
who say that it does not accomplish anything of real value,
and that its meetings are nothing more nor less than excuses
for junkets.
Can any intelligent man who possesses a knowledge of the
science of human nature stand before this splendid audience
and look into its faces and then have the temerity to say that
the coming together of you, gentlemen, from every section of
the country, in social intercourse, for the exchange of ideas
and experiences and for the consideration by you, as an organized body, of questions of vital interest .to the banking fraternity is only an excuse for a junket?
That these assertions are made is due to the fact that those
uttering them do not know of the great work this Association
has done to promote a higher standard of banking and a better
conception by the individual banker of his responsibilities and
duties. They have not experienced the thrill of the pleasure
given by the handshape of the friends meeting annually at
these conventions; they are entirely unconscious of the fact
that wide-awake bankers of the country wonder at their failure to accept the opportunities this Association has taken to
their very doors.
For twenty years I •have been a regular attendant at these
annual conventions, and I have seen hundreds of men, young
and old, who began their experience in banking in small cities
and country hamlets, grow in experience, capacity and personality as a result of the associations their attendance at these
meetings has afforded them, until I see them located in all
sections of the country, occupying many of the most responsible positions in banking the country affords.
The first convention of this Association I ever attended had
a registration of only about three hundred, and I have seen a
steady increase in the number, year by year, until to-day the
delegates are counted by the thousands instead of by hundreds,
and these meetings have grown in interest as the membership
of the Association has increased.
The panic of 1907 was probably the most severe one ever
experienced in this country, and since we were forced into a
period of financial confusion and disaster to business at a time
when the physical conditions of our country were apparently
in such a healthy condition, it is plain that there existed some
great cause for such a sudden upheaval: and since the cause
has not as yet been removed, our felicitations upon the return
to better conditions should be tempered with conservatism and
caution until ,this has been accomplished.
That we are so rapidly approaching a more satisfactory condition is due not so much to any change in our economic
conditions as to the wonderful recuperative powers given
us by
the richness and fertility of the soil of our country.
I believe you will agree with me that much of the cause
for
or last panic is properly chargeable to our currency
system,
since under it the banks of the country were unable to
expand
their notes rapidly enough or to the extent necessary to
meet
the requirements of the situation.
The fact that we had to go into the workl's marts
and buy
gold in such large quantities for immediate delivery, in
order
to secure the means by which we could restore confidence
and
assist our industries, depleted the reserves of the
banks of
the principal countries of Europe to such an extent that
confidence was shaken abroad and their business was
seriously
affected.
The business of the United States has become so interna-




161

tional in its character that anything which affects us either
favorably or otherwise has a like effect abroad. This interdependence between the principal countries of the world has,
in a measure, retarded our return to more active conditions in
business, for we cannot hope for normal conditions here until
a larger measure of business prosperity is enjoyed by Europe.
The United States being the greatest producing country in
the world, we are ambitious to extend as far as possible the
sale of our products to other countries, thus securing a large
share of the world's trade and Increasing our international
business. But how can we hope to do this so long as we do
not have a system of currency which will command international respect and international confidence?
I do not claim there is nothing of good in our present
financial system, for until our volume of business increased to
a point where it was so entirely out of proportion to
the
increase in our circulating medium it served its purpose fairly
well, and, considering its good features and with a view
of
disturbing existing conditions as little as possible, it should,
for the present at least, be continued, with such additions as
would be calculated to meet our needs.
While there has been much agitation of the currency question for many years, it is only within the past eighteen months
that the Government has taken any action in the premises.
The result of the initial effort by Congress to provide us
with laws under which we would have the means, through our
currency system, to protect the business interests of the country was the passage of what is known as the "Emergency Circulation" or the "Alarich-Vreeland Bill."
This was not
Intended to be more than a makeshift, which it was hoped
would meet our needs in an emergency, pending consideration
by Congress of the whole subject, and is not, therefore, given
serious consideration in any discussion of the subject at this
time.
The appointment by Congress of the National Monetary
Commission was the first step taken by the Government with a
view to enacting such legislation as would provide for us an
adequate system of currency.
The National Monetary Commission comprises eighteen members, nine of whom were selected from the Senate and nine
from the House; it includes some of the ablest and most experienced members of both houses and of the two great political parties, thus forming a body of very capable and strong
men. They are charged with the duty of studying the whole
question and the formulating of a plan to be embodied in
a
bill to be presented to Congress for its consideration and
possible enactment into a law.
The commission, as a body and individually, are making
a
most exhaustive study of the whole subject and are accumulating for their use information and statistics of every character which can seem to have any bearing on the subject.
The
Executive Committee of this commission, consisting of nine of
its members, went abroad during the summer of 1908 for
the
purpose of making a careful study of the systems of currency
In operation in England, France and Germany. In addition to
securing such information as could be obtained through personal interviews with the managers of the principal banks
of
Europe, the commission arranged to have written, by the foremost students of political economy in the various countries,
a history of the finances of those countries for one hundred
years. They also arranged to have prepared for their use, by
experts in that line, statistics on all subjects which could have
any bearing on the currency question in those countries.
The report which the commission will make to Congress will
be a complete financial history of the principal countries of
the world, for the past one hundred years. It
will form a
text-book upon currency and will be given • general
distribution
among our people.
In view of the magnitude of the work the
commission is
doing, its report when rendered will certainly be
worthy of our
most careful consideration; and, knowing, as I do,
the earnest
desire of the members of the commission to frame a bill
which
will, if enacted into a law, meet our real needs for a
currency
system, I hope you will all receive the report with open
minds
and give it the most careful consideration. In the meantime,
we should be in a rebeptive mood, and by open-minded
discussion acquire a better understanding of the subject.
•
As the result of a study of the financial systems of the
various countries of the world and the knowledge gained from
actual experience in business of some of the changes necessary
in order that we may secure a system of currency that
vill
meet all the requirements of our rapidly growing business
and
which will at the same time command the confidence
and
respect of the entire business world, I am convinced
that we
should hard established in this country a central bank,
with
power of note issue, to be operated under governmenta
l supervision of control.
In the brief time I have at my disposal I can only
touch
rpon some of the salient points of such an institution,
but
since this is a live subject at this time, I am going to
presume
on your good natsre and your interest in the
subject to at
least suggest some of the principles which should
have careful
consideration
in
connection
with forthcoming financial
The people of the United States, while keenly alive to
every

162

BANKERS' CONVENTION.

question involving a national problem, are slow to cast aside
well-known practices to adopt entirely new theories which contemplate radical or revolutionary methods. Therefore, I would
recommend for your serious consideration only that which
would, for the present at least, insure the continuation of our
present National banking system, with slight modifications, to
which I will refer later, and with such additions to it as will
be necessary to correct the evils in the system or cover the
omissions from it.
In Considering this question it is necessary for us to first
aseertain wherein our present system fails to furnish us what
we need, and to suggest • a remedy for such imperfections.
• Under existing conditions the requirements on National
banks for reserves are such that in times of need the banks are
forced to contract their credits, instead of expanding to meet
the requirements of business, thus reducing, rather than increasing their credit-giving power. Again, under our present
system there is not sufficient flexibility in our bank notes to
enable banks to meet the reasonable demands of business on
them during times of emergency.
With about $650,000,000 of our circulating medium consisting of National bank notes secured by United States 2% bonds,
carried by the banks at a highly inflated value, the only flexibility shown has been a material expansion of our bank notes
during the past few months, when we have had a plethora of
money and interest rates have been abnormally low; and since
Our banks could not have followed any other course without
suffering great loss through the sale of their United States
bonds, it proves that our system is wholly unscientific and in
times of stress impractical.
The rapid decline in the market value of United States
2% bonds owned by National banks and pledged to secure their
circulating notes is a subject that is engaging the attention
of the bankers of the country, now that the Secretary of the
Treasury has been empowered to sell a large issue of 3% bends.
If the new threes were to be issued at this time and could be
used as security for circulation of National banks without
an increase in the tax on notes secured by them, 2% bonds.
would undoubtedly sell below par; in which event the banks
of the country would suffer still further financial loss and our
bank notes be discredited.
I think bankers need not be fearful of this result, for our
worthy Secretary of the Treasury is keenly alive to the necessity of maintaining a parity for the 2% bonds, and since he
has the right under the law to issue one-year 3% certificates
to the extent of $200,000,000, I am sure we can depend upon
him not to put out any of the 3% bonds, the issue of which
has just been authorized, until after the next meeting of
Congress, when, I feel confident, the tax on circulating notes
secured by 3% bonds will be increased sufficiently to insure
a parity for the 2% bonds that are pledged by our banks as
security for their circulating notes.
Thus the process of having the banks support United States
bonds at a price much above their intrinsic value is to be
reversed and the fictitious value of the large amount of outstanding twos is to be maintained by a discrimination against
bonds bearing a higher rate, which I think you will agree is
far from scientific or satisfactory.
To my mind our foremost requirements are to have established an institution which could in time of need furnish credit
in proportion to the reasonable needs of business and which
would by law be given the power, under proper restriction, to
issue its notes to be used as a circulating medium.
A central bank, organized under a charter which would give
it these powers and operated under an intelligent management,
would go a long way toward solving our financial problems.
First, it must be a central bank in fact as well as in name,
and its powers and functions should be restricted to the needs
of business; its plan of organization and operation should be
such that it would automatically support the needs of and be
the servant, and not the master, of business. Its capital should
be large enough to command respect and confidence—say, not
less than OND HUNDRED MILLION dollars. Whether the
capital stock should be subscribed for by the National banks
of the country or sold to the public under a guarantee of a
small dividend by the Government, with the right of the Government to share in the profits above the amount of that
dividend, is only a matter of detail. Personally, I believe
the latter plan would be the better, as it would do away very
largely with the feeling that such an institution would be run
for the especial benefit and profit of the banks of the country.
This plan would make it a people's rather than a bankers'
bank, and would popularize it and greatly assist in solving the
political problem, which seems to be quite as difficult or even
more difficult of solution than is the economic problem.
While such bank should be the fiscal agent of the Government and have all Government funds deposited with it, the
bank should not be given the power to support the
public
credit, as that should be done by the Government itself
and
by the people in an individual capacity. It would not
be wise
to give the Government supervision or control over a
central
bank and at the same time allow the bank to be used by
those
who direct its policy, in maintaining the public credit.
The bank, in addition to 'Government funds, should
receive
as deposits the funds of National banks in the three
central




reserve cities, acting RS reserve depository for banks in those
cities, just as they act as reserve depositories for the banks in
regular reserve cities. This would not affect the relations now
existing between the banks in the country, either as to reserves
or deposits.
A central bank, in its operation, should not, at the beginning
at least, interfere with the functions of the National banks of
the country, and the only effect of the adoption of the plan I
suggest would be to take away from the National banks all of
the funds of the Government now deposited with them.
The charter under which the bank would be organized should*
provide that the bank would have branches in each of the cities
where there is now a sub-treasury and in such other cities as
would be necessary to give an adequate service to the whole
country; and since the bank would be the fiscal agent of the
Government this would do away with all sub-treasuries.
Up to this point the whole plan seems to be very simple, but
we are now brought to a consideration of the most important
principles involved in the whole question, viz.: From whom
shall the bank accept discounts; what shall be the character of
the paper eligible for discount; and how shall it account to the
public for the proceeds of discounts when the requirement
for credit by the business interests of the country is exceptionally large and its coin reserves are not sufficient to cover same?
These are subjects upon which many of our leading financial
authorities, as well as many of our statesmen, differ in opinion,
for upon the settlement of these questions depends the success
or failure of the whole enterprise, as it embodies the determining
of what is the best kind of a credit, as well as what is the most
available security for the note issue of the bank.
I feel sure we all agree that a short-time credit created in
the actual conduct of business which represents a real transaction between two or more solvent concerns and which bears
a solvent endorsement in addition to the credit which is most
desirable, as it is the credit which will be first redeemed, since
a completion of the transaction through which it was created
automatically retires the obligation.
I would then restrict the discounts of the central bank to
short-time credits of this character; those which would run,
say, not to exceed ninety days; I would make the bank a bank
of discount for the National banks of the country; and if it
would be necessary to do so to enable it to employ Its funds.
I would allow the bank to accept discounts from the public, but
it should not • receive deposits from the public. Whether or
not the right of discount should be extended to State banks
also is only a matter of detail and is not important from the
standpoint of a discussion of the plan of a central bank.
If the bank has a large credit-creating power and is able to
discount for the public and the banks of the country large
amounts of paper during crop-moving seasons and in times
of emergencies—and it must have this power and be able to
do this if it meets our requirements—the proceeds of these
loans would be required in some form of money which could be
used as a circulating medium. The only possible way to provide for this would be to give the bank the right to issue its
own notes. "Very well," you say, "but how shall these notes
be secured?" This is the rock upon which the craft of many a
financial student has been wrecked, and it has provoked the
most heated discussions among political economists and practical business men.
The security for a bank note, first of all, should possess the
qualities of safety and availability. The safest form of security
would be gold coin, but since it would not be available in
quantities sufficient to enable the bank to carry a coin reserve
equal to its outstanding notes, we must find some other way by
which we can require that these notes will be secured and at
the same time give us a safe and elastic form of currency which
will expand or contract automatically as the requirement for
discounts increases or decreases.
Permit me to say in this connection I believe the notes of
the bank should be secured in part by a coin or metal reserve,
but if we secure the relief we need, a considerable percentage
of the notes thus issued must be secured in some other way.
What shall we require this security to be? It should be a
security which, in the natural course of business, will first be
redeemed and through its redemption or payment bring into the
treasury of the bank actual money.
What character of securities have we in this country that
is most available for this purpose? Is it bonds which do not
mature for years to come and which, in the nature of things,
even then will be renewed? Is it mortgages on real estate
running for a shorter period, but still having a maturity some
years in the future? No, it is neither bonds nor real estate
mortgages.
If it is wisp to restrict the character of the paper which
will be eligible for discount at the bank to that which will be
first paid—to a commercial credit or to paper representing
an actual transaction in business between solvent concerns—
why should we not make paper of that character, with a certain
required percentage of coin reserve, the basis of security for
its bank notes? Its use for this purpose would insure an
elasticity in the note as a circulating medium, and the notes
which would be issued by the bank in times of stress would automatically contract and be retired from circulation when the
transaction creating the credit had been completed and the credit
paid.

BANKING SECTION.
This is the method employed by the Imperial Bank of Germany and the Bank of France. In the case of the former, a
metallic reserve of 33 1-3% is required. Under this its average
reserve in metal to its outstanding notes is around 75%, and
during the panic of 1907 its reserve of metal against its notes
did not go below 41%.
The Bank of France, while not required to carry any definite
percentage of coin reserve against its outstanding notes, is
given the right to issue its notes to the extent allowed in its
charter, so long as it maintains a coin payment of its notes as
they are presented. In practice, the Bank of France, like the
Imperial Bank of Germany, carries a very large metal reserve.
I would provide for the supervision of this bank along lines
somewhat similar to those governing the Imperial Bank of Germany, or the Reichsbank, by the appointment of a general governmental supervising or overseeing board, the members of
which should be appointed jointly by the President of the United
States, the Secretary of the Treasury and the Comptroller of
the Currency. I would require that the appointment so made be
approved or confirmed by the Senate, and I would so arrange
their term of office that the majority of this board should not
go out of office during any period of eight consecutive years—
thus providing against a change in the policy in the management of such a bank, even though we should have a "freak"
administration for two consecutive terms.
I would have another board selected by the stockholders, the
members of which would confer with the officers and this supervising board, but in order that the management of the bank
might be entirely removed from politics, and to prevent the possibility of any syndicate gaining control of the bank, I would
have the supervising board, after they had conferred with the
board representing the stockholders, vested with full power to
appoint the directors and president of the bank to their respective positions for long periods of time, or for life, subject, of
course, to removal for incapability or malfeasance in office.
Many believe that a provision in its charter which would
provide that the Secretary of the Treasury and the Comptroller of the Currency be members of its board of directors
would give the Government sufficient supervision over a central
bank.
This is only a matter of detail—important it is true, but
still a matter of detail, since its charter could be such as to
keep the bank free from political influence or intrigue.
The restriction regarding paper eligible for discount should
be so severe that no paper representing a speculative transaction would be admissible.
When the United States bond-secured, National-bank-note
circulation is retired, the central bank should have the exclusive right of note issue, but that would come about largely
through a process of evolution which would not disturb business
conditions.
The establishment of a bank along these lines, with the
details properly worked out and fully described in its charter
would, with some slight modifications in our present National
bank law, give us the desired relief.
In 1907 we had in the United States one billion seven hundred
and eighty million dollars of gold coin, of which amount one
billion one hundred million dollars was held in the Treasury,
yet we turned to Europe for assistance, with the result that the
Bank of England alone furnished us directly and indirectly
about one hundred million dollars of gold.
When you consider that the average amount of gold carried
by the Bank of England during 1907 was only about two hundred million dollars, or one-ninth of the amount in this country,
or one-fifth of the amount carried in the vaults of our Treasury,
it will furnish Mod for reflection. At that time our Treasury
held over one hundred million dollars more gold than was
held by the Bank of England, the Bank of France and the
Iteichsbank of Germany combined, and we had in this country
Just about double the amount of gold carried by all of these
banks; still, we were forced to turn to them for help, simply
because we were not able, under our existing currency laws,
to use the facilities that we possessed.
There should be a change in our present laws governing
National banks, giving them greater powers to compete with
State banks and thus encourage a growth in the number of
banks in the National system under Federal control.
National banks should be allowed to act as trustees and they
should be given the right under a specific declaration of law to
accept savings deposits, but the savings deposits thus received
should be segregated from their general deposits. Furthermore
than this, the law should define definitely the character of investments the banks should carry against savings deposits, which
investmats should be segregated from the general assets of the
bank, and in case of a failure of the bank the savings depositors
should have a first lien upon the specific securities held in the
savings department and in addition be general creditors. The
published statements should show just the amount of savings
deposited and securities held against same, and the savings
deposits held by National banks should carry the same requirements as to reserve and be subject to the same notice of withdrawal that is now required under the various State and
savings-bank laws. If this were done and the laws in the
various States were so changed as to require a State bank or
trust company to segregate their savings deposits and securities
in the same manner, with the same restrictions, it would go




163

far toward answering any arguments advanced in favor of
the
establishment in this country of a system of postal savings
banks.
Whether or not we get proper financial legislation depends
very largely upon you, gentlemen, and those like you
who are
members of other organizations throughout the country
which
represent the various lines of business.
All great National problems are settled by
the people, and
the enactment of laws at Washington, by
Congress, is only
a reflection of public sentiment. In matters
of legislation we
usually get what the people want, for our
representatives in
Congress desire to follow the wishes of their
constituents when
they can ascertain what they are; and if you
want to exert that
influence on legislation which it is your duty to
your citizenship
to exert, let your activities at home be such that
your influence
will be felt, and see to it that your representatives
in Congress
know the sentiments of yourself and your friends
on all matters
of impending legislation. Public sentiment is a force
as resistless as the tides, and no man or set of men nor any
political
party can withstand its force when it is directed
against them.
If you oppose the establishment by this Government of
postal
savings banks, a parcels post and such other fallacies—a
nd I
take it that you do oppose all these schemes which tend
so much
toward paternalism—and if you would discharge your
duty to
yourself, to your community and to your country, you
will do
what you can to exercise in your respective communities
an
influence on public sentiment on the currency question
which
will be reflected in the votes of your representatives in
Congress
when laws are enacted giving to us a system of currency
which
will make the United States dominant in the business
affairs of
the world as she is now the leader in all that goes
to promote
human comfort and human happiness.
The President: The next order of business
will be the report of the Secretary.

•

Annual Report of the Secretary.

[The report of Secretary Farnsworth will be found
on page 140.1
The President: We have with us to-day a man
who perhaps more than any other man in this country
has directed
the legislation that has been enacted at Washington.
He is
a man who, regardless of the changing tides of public
opinion,
has gone forward discharging his duties as he
has been
given the light to see it, apparently indifferent to
criticism,
and certainly impervious to public opinion and
personal persuasion. It is a great pleasure to me to be able to
introduce
to you to-day for an informal address, Hon. Joseph
G. Cannon,
Speaker of the House of Representatives. (Applause.)

Address of Hon. Joseph G. Cannon, Speaker of the House
of Representatives.
Mr. President and Gentlemen of the American
Bankers'
Association: I really was not aware that I was to
attempt
to make any remarks here until yesterday. The Association
was kind enough to invite me, but as the weather was
warm
and as I had been occupied for some months, it seemed
to
me that I could not and I did not take the time
to put in
black and white, as I should have done if I should
hope to
be upon a par with your honored President and with
others
who will address you. But I see your committee have
put
on the programme that there are to be impromptu
remarks
from me, and that is just what you will find it to be.
So, as
I take your time, if I entertain you I shall be fully
satisfied;
I am quite sure that I will not instruct you.
This is a bankers' convention, and a wonderfully
important
one to all the people, as well as to your
organization. You
are just one spoke in the immense wheel
that we have, in this
country, all the spokes, making the country
from the material standpoint.
We have a banking system. It is a little
bit like Topsy—it
growed (laughter), and I recollect when It
began to grow. It
grew in the commencement, because it was
necessary that it
should grow. I am a little older than most of
you gentlemen
that compose this convention. I recollect the
days of the
Red Dog and the Blue Puppy Bank Bill. If you
got one of
them you would take the fastest horse to go and
unload it
on a creditor before it become worthless. (Laughter.)
It was
in this condition that after Lincoln was inaugurated
the great
civil strife came, and before the great war the National
Bank
Act passed under the leadership of that eminent
Indiana
banker, who many years ago crossed over—McCullough.
It
was pretty well—and I am not going to discuss its provisions;
I think the Comptroller of the Currency, if he be
here, will
bear out the remark that in all these years, numbering
almost one-half of a century, everywhere within the
boundary
of the United States, and after the close of the
civil war
and resumption everywhere around this globe, the
National
Bank Currency was and is as good as gold, and
there never
has been one poor mill lost for want of redemption.
Aye,
more. I think without having verified the results, I will venture, and I know the Comptroller of the Currency will
contradict me if I am wrong, the statement that in all that
almost
fifty years, with the immense deposits all over the
country
in those banks, the loss to the depositors has not
been onehundredth part of one poor mill to the dollar. (Applause.)
This system grew. The people are familiar with it. It
is

164

BANKERS' CONVENTION.

not perfect, but in my judgment It can be perfected. There
is something of legislation required for its administration,
but with our almost one hundred millions of peoplea
sovereign people, each man walking under his own hat rim—
and if re does not, he ought to—(laughter and applause), it
is difficult to enact proper legislation. A government of the
people, like all other forms of government, at times moves
slowly; at times it makes mistakes. The people whom you
select from time to time to represent you in the National
Congress, and one-third of the Senate to be chosen every two
years, six' years being the tenure, and the whole 392 representatives, a majority of whom are chosen every two years
—of course, it is halting; but there are some good points
about this, for hasty legislation, ill-advised legislation, is harmful. It is a maxim among lawyers that no legislation is good
legislation. In many respects that is true. Coming up from
90,000,000 of people are all kinds of demands for legislation.
If a man has lost all other power to affect public opinion
and cannot call attention otherwise to himself, he comes
around with a currency scheme and cries aloud and spares
not, and Sends to the members of Congress this scheme and
that scheme and the other scheme, and each one, in his opinion,
is absolutely perfect. (Laughter and applause.) Benny Bernstein, of New York City, if you never heard of him—I get, I
think, on an average six or seven letters a week from Benny
with all kinds of schemes for the benefit of the currency
and the uplift of the race. Benny is only an example. You
can see at once that legislation touching great vital questions
moves slowly to enactment, because it comes from selfish
standpoint, each Representative and Senator saying to himself, "I wonder what my district is going to think about it,
and I have got to go and face them in a short time."
(Laughter.) You find there are men and men in Congress just
as well, Senator Teller (turning to Senator Teller, who sat
behind him on the platform), as there are men and men who
are bankers and merchants and farmers.. Once in a while
you will find a man who has the courage of his convictions;
yes, twice in a while you will find a man. I want to be fair
to the body of which I am a member. In both the House and
the Senate I think the majority have the courage of their convictions; but once in a while—hardly twice in a while—somebody breaks in. (Laughter.) I know there is nothing so
good on this earth as a sound spinal column, and most of the
citizenship in the United States has the courage when a duty
is to be perfoimed of being willing to perform it and walkilg
in the light of their best judgment and taking the consequences—taking their stand, and if it comes their way according to their judgment and their light, they have done
well. Such men have spinal columns. But I have thought
once in a while that there is a constituent here and there in
our various States who, once in a great while, gets into Congress, that God, when He created man, ran short of material
for spinal columns and put in an angle-worm in its place.
(Laughter and applause.) However, I won't abuse them;
,
they are not to blame for it. As I said a moment ago, when
a man cries aloud and spares not, having solved the whole
question of money and currency, and knows it all—ugh! you
might just as well quote that famous couplet as to such
people: "Abandon hope all ye who enter here."
Now, so much of system as we have got. It came to my
mind as vividly in 1907 as it ever came before. After all,
do you know there is a great deal in kindergarten instruction?
A child never knows that a 'stove is hot until it puts its
finger on it. You may preach to It and talk to it, but they
don't know the stove is hot until their finger touches it. Then
the lesson remains with them throughout life. That Is what
I call kindergarten instruction. So we have run up against
legislation, you know, and get hurt by it. See wherein the
fault is. That is just what they are doing all over this country to-day, and you have a most useful purpose to accomplish,
and if you can assist in forming public sentiment and bettering the status, you will have done a great work. It Is a
disease, not that the currency was not good, not that the banks
were not solvent. They were never more solvent in this
or in any other country. It was not that the country was
poor. Why, bless *my soul, we have more of capital in the
-United States than any other nation on earth. It leaped
from sixteen thousand millions of dollars in 1860, to one hundred and twenty thousand millions of dollars to-day—substantially one-third of the 'capital of the whole civilized world. No,
that was not the trouble. The trouble was in the extraordinary
good times and with the extraordinary growth In the development of the resources and population of the country,
that the money piled up from ten, fifteen or twenty thousand
little banks scattered all over the country, making an enormous aggregate in the great commercial banking centers.
Well, there was something about this num going wrong, and
something about some other man going wrong, and then the
bulls and the bears are ever present, and the bears proceeded
to get their inning and so forth. Oh, you recollect all about
it. The result was that there was no one that culled upon
his depository for money .because he thonght he was going
to lose it, but he was afraid that the disease would
spread and that shortly his depositors would come in and




say "Pay" through fear of a panic. Therefore, with one accord, you said, "We will get our money out of the great commercial banks and the great centers"; and, as you all
jumped at once, no bank on earth that ever existed or ever
will exist could pay every depositor that it had. That was
the trouble.
Now, then, has anything been done? Can anything be done
that will prevent a second edition of that panic? That is the
question. And if It has not been done, what is the best thing
to do? And if we can find It out, let us enact it, and then,
in my judgment, without quarreling with anybody, with such
proper administrative legislation—a savings department for
National banks, if you choose—In my judgment, the best
banking system in the world for us will be evolved. (Applause.)
It does not necessarily follow that the English banking system or the German banking system is better than ours. They
have evoluted. It is better for them, because they keel) it.
But did you ever think that if you could get one of these
great big magnificent megaphones, figuratively speaking, and
get in the very center of England or in the very center of
Germany or of France and speak In an ordinary tone into the
mouthpiece, and have the megaphone half a mile in diameter, you could make yourself heard from the center to the
circumference of these magnificent countries? (Laughter and
applause.) Here we stretch three thousand—aye, three thousand five hundred—miles from the Atlantic to the Golden Gate,
and from the 49th parallel down to the southern boundary,
and we just begin to develop. The next century, the swing
of the 20th century, will see the ninety millions of people
of 1909 grow to two hundred millions, or two hundred and
fifty millions in 2010, and we will double the population again
when we are fully developed. So it does not follow that a
system that is suited to us would be the exact system that
they have.
Now, what did we do? In Congress, all the currency experts
—I didn't say cranks (laughter)—all the currency experts
rushed in to Congress and it was about as doxy which was
orthodoxy or else he would not play (laughter). And what did
we do? We enacted a law, the chief weakness of which, Senator
Teller, in my opinion, is that it only lasts six years; but then,
that could be cured by just taking the limitation off. I hope and
I pray that we will never have any kindergarten instruction
under it, if it ceases to operate six years from its enactment,
and I believe we will never have that experience, which would
justify that currency amendment that we passed; because as I
see it and see the people move around—when I see the merchant
filling up his shelves, when I see the restored confidence now
that the revenue bill has passed—not perfect, but a substantial
revenue producer along the protective lines that you, Senator
Teller, in your younger days and in your mature manhood, voted
for, and which was one of the strongest pillars that helped to
develop legislation (applause), I say, when I 'pass along the railways and can hardly sleep, if I am trying to sleep on a railway
car, as I hear the corn pop as it grows, a great crop; when I see
the great labor centers, we have been fairly busy in agriculture
in our country, and the people busily employed, and that there
is inquiry everywhere for more men; that the great railway
systems need strengthening with new iron and new ties, and
men are being called for; the railway shops are being filled—as
I see all this, I realize that after five weary months of consultation and compromise, it is worth while. Somebody said,
"Why, we ought never to compromise." Great Heavens! If it
takes under our form of government a majority of 392 men to
legislate at all, coming as we do from all districts, and it being
a representative government, will you inform me how that legislation is ever going to be enacted unless conflicting opinions and
interests are compromised? The compromise was made, and it
was made substantially—not principally--along the lines of the
policy of protection that has dominated this country substantially from its enactment, under the leadership of Merrill at
the breaking out of the war, to the present time. And everybody is glad, except the kicker (laughter). And we will not
tinker it, in may judgment, for the next decade. Do you know
it costs at least five hundred million dollars in cessation of
production, waiting for fear that they won't get the cost of
production, and the consumer, who is a producer as well, waiting to see what Congress is going to do. It is not perfect. It
never will be.
.Now, I say—and I forget just where I was. That is one of
the privileges of age and one of the weaknesses. You get a
thing in your mind and the first thing you know something pops
in and you get oft on a byway and you have got to go back. I
was at the point of revenue legislation. What did we enact?
We enacted that that class of securities which would take
money from the United States Treasury and deposit it in the
banks, other than Government bonds—that class of securities,
without taking the time to describe them—when deposited with
the Secretory of the Treasury, he and the Comptroller agree
that the currency should be issued just like every other bank
note; not marked "Emergency currency," but just the same as
every other bank note that is to be issued in the future. And
we provided that it should be printed by the hundreds of millions
and deposited in the vaults, ready to be issued, if the time ever
came that it was necessary to issue it. And it has been printed

BANKING SECTION.
and it is there in the vaults. How are you going to get it? you
may ask. You are going to get it, if you need it, by depositing
that class of securities, and if your debtor in the great commercial center is called upon to pay, he will furnish the securities. There is not a banker here, you know, but what has had
some experience of that, when there was necessarily a default in
the payment of the currency. Why, out of one hundred thousand
dollars, and that multiplied by a million, it was worked out
rapidly, even if we had to creep along, Mr. Reynolds, as we did.
Do you know what I hope? I hope that if 1907 is ever
duplicated, the knowledge that twenty or twenty-five thousand
bankers have, who fear a run by their depositors, that the great
central or commercial bank can get the currency and assist them
In getting the currency with these securities, and that they will
not be scared. You were not scared because you thought any
of these banks ,were. insolvent; you just wonted to protect yourselves its if you had a run upon your bank—you fifteen or twenty
thousand bankers. My belief is that if that law had been upon
the 'statute books, there never would have been in 1907 suspensions temporarily by resorting to Clearing House Certificates
(applause). There is the law. You want to think about it and
you want to keep on thinking about other remedies. Discuss it.
Do you know one part of that law provided that a currency
commission should be appointed consisting of members of the
House and of the Senate? I had the honor to appoint that
currency commission, and it was done without fear or favor,
and I do not 'believe .that any man exercising power in the
appointment of a commission could have chosen better than I
chose, because I tried to get really courageous men who possessed patience and industry. The Senate Commission was
equally good, and those men are at work now. You ought to
co-operate with them. A man said to me, "My God, this bank.
Will that Commission report by the first of November so its
report can be printed before Congress meets, and then before the
first of January we can get the legislation enacted?" I said,
"I don't know. I cannot see into the future, but I know one
thing—that if it does, it will prove its unworthiness, because,
touching this great subject, it takes time and investigation and
Inquiry. It not only requires consultation among bankers, but it
requires consultation with journalists, and with people in every
walk of industry. It takes time to do it. If it was to report.
on the first of November, without further discussion, the people
not having had an opportunity to fully consider it, nothing
except the power of God could make this session of Congress
that is to assemble on the first day of November next pass it."
It takes time, gentlemen, you see, to do those things. It was
good faith upon our part; it was good faith upon your part, and
you are acting accordingly.
Now that is all I want to say about that. Oh, if this was a
political meeting (laughter) I could talk about it longer, but I
will not. My time is pretty nearly up, and I will keep my watch
before me and not detain you longer than the hour for luncheon.
There is much of misinformation in this world, and we all
get it (laughter), and it is our fault. Do you know what the
Yankee made his razors for? He made them to sell ; that is
what everybody labors for. Self-interest is at the foundation of
all civilization; each unit hustling, and the aggregation of units
make the civilization. Now, I said it—we all get much of misinformation. The seventh great manufacturing establishment
The output
In the United States is the publishers' establishment.
is tremendous. Why, they have an army of bright, smart men to
write the articles; two or three armies who help to make the
material out of which comes the paper every morning and
evening. Well, they cannot print it for nothing, and they
furnish it to you for less than the cost of the blank paper.
How? They get a great circulation. They magnify the circulation a little bit, and that perhaps is all right. Perhaps if they
magnify it, the advertising customer will believe it, and the
advertiser comes in and they pay expenses and make great'
profits. The good will of a successful greater paper or publishing
house cannot be built most short, as a general rule, of a generation. Now, they have experts, the correspondent, the man that
sends the despatch, the Associated Press, and the United Press,
and they get it on the hop, skip and jump, all the world, and in
It comes and it must be utilized at once; and then they have
one or more "Headliners," it seems to me that is the most important individual in a great newspaper establishment, because
one half of the people read the headlines and there stop, and,
as I said once before, and I want to repent now, one half of the
headlines, if you will read the despatch that is headlined, tell a
different story from what the despatch does, but it catches the
eye (laughter). Well, now, it is all proper. You cannot abolish
them, and there is nO use to swear at them. I know. I take it
good naturedly. It wouldn't do any good, because I might talk
for a million of years and I could not in all that time get as
many hearers as two or three of these great journals get once
or twice a day; so I have just got to go along, as we all have,
and if they are wrong in their views the people gradually find
it out. If the newspapers of this country and the magazines
of this country, the good, the bad, the indifferent, the red flag
newspapers, the uplift magazines, and so on—that is, "uplift,"
because they confess it that they are uplift (laughter), they
do not have to prove it, they just confess it. you know
(laughter)—for six months with one accord, would write down
Any 'public policy, any piece of legislation, any individual in




165

public life, even if he spread over a State, Governor Deneen,
or over the whole country, Senator Teller, they could temporarily damn him by a complete loss of confidence upon the
part of the great citizens of this country. What is the remedy?
Grin and bear it; and if you be all ready to do things, and if
you have put legislation upon the statute books that was the
best you could get, when you get to the kindergarten, when
you come to try it and under it your prosper, and you realize
that they have been mistaken—some of them—and that others
have lied (laughter), then the public servant goes along harmless. But you cannot change it. I do not know but what,
upon the whole, we better take it just as it is, because, with
responsibility, don't you see, for our actions we must have
freedom of the press, and we must have freedom of action for
each citizen, and the press, and the citizen has complete liberty
up to the point of interfering with some other individual's
liberty, because no man's liberty ends where another •man's
liberty begins, and all under law. (Applause.) There has
been a good deal of talk—I don't think it has fooled you bankers—and there is yet a good deal of talk about Czarism. (Applause.)
What is it? Reed founded the alleged Czarism.
What was his Czarism? In substance, just that much (snapping fingers) in print. In substance, that no member of the
House of Representatives could be present from mischief and
at the same time absent for business. And be counted them
up—a quorum—and he was denounced in every platform of
the opposition party with great fierceness. They carried the
country; they carried it upon that cry, and they yelled that
It was a billion-dollar Congress. We have a two billion dollar
Congress now since 1890. "A billion dollar Congress." We,
just about the first of November, passed the McKinley law.
Business had not had time to adjust itself to it, and with all
these things we lost out. Lo and behold, Reed Czarism and
within less than eight months after our efforts the enemy
came into power, and they met and elected Mr. Crisp, of
Georgia, Speaker, and adopted identically the same rules; and
they have been adopted from that time to this time substantially the same as they have been since 1890—"Czarism."
Oh, upon what meat does the Czar feed that he hath grown so
great. (Laughter and applause.) What is it? I spoke of some
men that had angle-worms for backbones. I didn't speak of
others that hunt for "Good enough Morgan" for that race.
There are some of those in the country and in polities—
good enough. Morgans for that race. You -older men will understand the meaning of the term "Good enough Morgan."
Let me tell you something. Ever sineak Thomas Reed, under
his leadership, the majority folio
, made that reform
in the rules—and it took a majo
—why, Reed would have
been as powerless as a bird without wings if he had not had
a majority right back of him. They would appeal from him,
and we would come up and sustain him by our votes. That is
the way it was done. The popular idea is that Reed was a
great big powerful fellow, and that when he spoke everybody
trembled and submitted. • It was not quite that way. He was
powerful when he had a majority with him. From that day to
this there has never been a legislative day but what inside
of three hours a majority—if there was a majority for it—
Senator Teller could have taken up any bill upon the calendar.
Well, now, why didn't they? Because a majority either did
not want to, or wanted to do something else more; and you
know, when this man and that man and the other man got
jacked up by his constituents, he said it was that damned
Czar Speaker would not let him do it. (Laughter and
applause).
I will not be Speaker a great while, but I am not going to
resign, and as long as a majority wants to make me Speaker,
if I am a member of the House, I will be Speaker. (Applause
and laughter.) But in the course of events somebody else will
soon be that, and whatever party may be in power, they will
retain the so-called Reed rules, and still the sun will come
up and the sun will go down, and the uplift magazine that Is
either ignorant or false, and the cowardly member in whatever
State he may be that misrepresents his vocation will disappear.
because "you cannot fool all of the people all of the time,"
said Lincoln; and he was right. (Applause,)'
I promise to quit time enough for your luncheon. There
comes trooping in our great increase in population money and
expense. Shall we run this country in debt, three, four, five
thousand millions of dollars to do things that somebody here
and somebody there wants done? Why, they get together a
great convention, and they have commissions appointed for
this, that and the other—all worthy objects—and they get together, and one set of people, nearly all of them employed or
seeking employment, want from the United States Treasury
money to make good roads everywhere in this great republic.
Now, it costs, as they would like to have them made, about
$10,000 a mile to make them. We have only got 60.000 Mlles
of roads in Illinois. I don't know how many we have in Iowa
and so on, but that runs, and the proposition is to issue thousands of millions of bonds. Is your credit and mine to make
roads all over the great republic, instead of leaving it to the
people in the respective States to make them as they need
them, and administer it all from Washington? Not that alone,
but swamp lands to drain under private ownership, and there
is another five hundred million? Great conventions these. We

BANKERS' CONVENTION.

166

drained our swamp lands in Illinois, outlets and all, at an
expense of about $15 an acre, and on an average every acre
is worth $150 to $200. It has doubled its capacity. As the
population increases, if the land is worth draining, the localities will find a way to drain it and administer it right in that
township and that county, don't you see? Then again, waterways. We have got the great coast; we have got the great
oceans. We did go in debt, or had the power to go in debt.
We have not gone in debt much yet for the Panama Canal, but
we have the power to issue bonds for that—a great, worthy
• enterprise. They come and say: "Well, we want to spend a
thousand millions of dollars in improving the internal waterways." Well, within a hundred years—within fifty, we may.
When we get two hundred or three hundred or five hundred
million people, we will, but we will improve these waterways
in a sensible way. That which needs doing, do first, and I
want to notify you now that I do not believe the Congress of
the United States will ever bond futurity to the extent of
two thousand, three thousand or five thousand million dollars
at the behest of these agitators for such purposes. I know I
will never vote for it. (Applause.) Well, I am not abusing
anybody. We have got to increase expenditures. Why, it
costs us more to live and to educate the fourteen millions of
children in the common schools than it costs the balance of
the civilized world. We pay for education in the United States
of the incoming sovereigns, and they feed in as the old fellows
feed out and cross over. We pay one-half of all that is paid
in the civilized world for education. That is absolutely necessary, because unless the sovereign who is ruler is intelligent
as well as patriotic, the government will be wrecked. (Applause.) Expenses will increase. Yes. Why, we could not
stand it at all to live as we lived on the Wabash and on the
Ohio a generation ago. By invention, by investigation, by the
use of capital, by the shilling of labor, not measured by dollars,
but measured by muscle effort cross on intelligence, to-day, by
that measure, the necessities and luxuries of life are one-half
cheaper than they were sixty years ago, when quinine was
worth $4 an ounce, and they gave it in 20 grain doses, and
when you could catch malaria in a night.
I trust that the luncheon will be good, the appetite keen,
and that the stomach will get away with all you eat, because,
after all, I am inclined to think, Mr. President, it is a mistake
about this (indicating the head) being the seat of understanding. I am inclined to think it is in the stomach.
Mr. John J. Sullivan, of Cleveland, Ohio: I move that the
thanks of this convention be tendered to Speaker Cannon for
the able and truly eloquent address just delivered.
(The motion was seconded from various parts of the auditorium.)
The President: All in favor of the motion—although it occurs to the Chair It is quite unnecessary to put the question—
will signify by rising.
Unanimously carried.
Mr. Cannon: Gentlemen, I thank you.
The President: I want to call the attention of the convention, before it adjourns, to the addresses scheduled for the
afternoon, and to say that those addresses will be delivered
promptly at the times specified on the programme.
We will now stand adjourned until 2 o'clock.
Recess until 2 R M.

4FTERNOO1V'S SESSION.
The President: The next order of business is the annual report of the Treasurer.

Report of Treasurer.
Mr. P. C. Kauffman, of Tacoma, Wash.:
[The report of Treasurer Kauffman will be found on page 142
of this publication.]
On motion the report was accepted and ordered published in
the Proceedings.
The President: The next order of business is the report of the
Auditing Committee.

The Audit Company append to the above the following certificate:
"We certify that the foregoing balance sheet correctly sets forth
the financial position of the Association as of August 31, 1909, and
that the income from membership dues, interest and all other sources,
together with the disbursement of such income, has been accounted
for by us."
This is signed by the Audit Company of New York under date of
September 8, 1909.
We were also furnished with a certificate from the Bankers' Trust
Company of New York, stating that they held for account of the
American Bankers' Association $50,000 Chicago, Burlington & Quincy,
Illinois Division 4s of 1949.
$10,000 U. S. Government Registered 4s of 1925.
$30,000 Atchison, Topeka & Santa Fe General Mortgage 48 of 1995.
$30,000 New York City 32 per cent. Corporate Stock of 1940.
/
1
$20,000 National Surety Company Bond in behalf of P. C. Kauffman.
$2,500 Etna Indemnity Company Bond in behalf of William G. Fitzwilson.
$10,000 National Surety Company Bond in behalf of Fred E. Farnsworth.
We are also furnished with a valuation of the securities held by
the Bankers' Trust Company at the present time on the Stock Exchange. The total of the present valuation is $119,725, which is carried
on the books as $117,193.75. which means that the assets in bonds of
the Association are really worth $2,631.25 more than they are carried
on the books of the Association.
We respectfully submit this as our report.
The President: Gentlemen, you have heard the report of
the Auditing Committee. What is the pleasure of the convention in regard to it?
On motion the report was accepted and placed on file.
The President: The next order of business will be the
Annual Report of the Executive Council, by Mr. F. 0. Watts,
its Chairman.

Report of Executive Council.
Mr. F. 0. Watts, of Nashville, Penn.:
Mr. President and Gentlemen of the 9.inerlean Bankers'
Association. Through the "Journal" of the Association the
members have been so well informed from month to month
of the work of the Executive Council and the work of the
special committee and officers under its control that it is not
necessary for me to read this report to you in full. It is in
print, and I will summarize it as briefly as I can.
[The report of the Executive Council will be found on page
145 of this publication.]
On motion the report was accepted and ordered published
in the Proceedings.
The President: Next in order is the report of the Committee on Express Companies and Money Orders.

Report of Committee on Express Companies and Money
Orders.
Mr. Joseph Chapman, Jr.: Mr. President and Gentlemen, the
report is as follows:
[The report of the Committee on Express Companies will
be found on page 152 of this publication.]
Mr. Crabtree, of Illinois: I move that the report be received and the committee continued.
Mr. E. D. Durham, of Illinois:
The Committee on Express Companies and Money Orders
would prefer to have the word "Adopted" used instead of
"Received."
Mr. Crabtree: I accept the amendment.
(The motion was seconded.)
The President: All in favor of the motion that the report
be adopted and the committee continue will signify it by
saying aye; opposed no.
Adopted.
The President: Next in order is the report of the Committee
on Bills of Lading.

Report of Auditing Committee.

Report of Committe on Bills of Lading.

Mr. E. J. Buck: Mr. President and members of the American
Bankers' Association: On behalf of the Auditing. Committee appointed by the FInatr2e Committee of the Executive Council, I beg to
report that the committee has been furnished with a certified report
of the examination of the books and accounts of the Association made
by the Audit Compav of New York. We find that the condition
as reported is, briefly, as follows:

Mr. Lewis E. Pierson, of New York: Mr. President and
Gentlemen of the convention.
[The report of the Bills of Lading Committee will be found
on page 151.]
Mr. P. C. Kauffman, of Tacoma, Wash.: I think every
member of the Association will recognize the fact that when
this Bills of Lading Committee was appointed four years ago
they found the law, the practice and the custom relative to
bills of lading in a state that might almost be termed chaotic.
Such a thing as a uniform bill of lading seemed very elusive.
The work of the committee has been wonderful and deserves
all praise. I therefore offer the following resolution :
Resolved, That the American Bankers' Association expresses its
hearty appreciation of the splendid work of the Bills of Lading
Committee; heartily congratulating the members thereof upon the
signal success that has thus far crowned their labors;
Resolved, Further, that the report of the committee be accepted and
Its recommendations adopted by this convention and the committee
continued to further prosecute its splendid work.
The resolution was seconded.
The President : Unless there is opposition, the minutes will

ASSETS.
Investment securities (book value)
Cash in bank
Total assets
LIABILITIES AND SURPLUS.
Membership dues, 1909-1010 prepaid
Surplus
Total liabilities and surplus




$117,093.75
2.107.86
$119.201.61

. $7,775.00
111,426.61
$119,201.61

BANKING SECTION.
show that the resolution is unanimously adopted. The Chair
hearing no objection, it is so ordered.
The next order of business will be the report of the Currency
Commission, which will be presented by its Vice-Chairman, Mr.
James B. Forgan, of Chicago.

Report of Currency Commission.
Mr. James B. Forgan, of Chicago, Ill.:
Mr. President and Members of the American Bankers' Association:
The Currency Commission has had only a little work to do during
the past year, but we think the Association should continue the Commission for the purpose of representing it in watching developments
and in conferring with and affording such assistance to the National
Monetary Commission as may be within its power.
The Commission is very hopeful that the National Monetary Commission may suggest a plan that it may be able to endorse. The
attitude of the Currency Commission is one of hope, to see something
done that will be effective in correcting what is wrong in our
present system; and it will be its sincere endeavor to assist in
promoting apy sound plan that may be proposed.
The Currency Commission, therefore, desires to report progress and
to ask that it be continued and that an appropriation be made to
enable it to carry on Ihe work.

The President: You have heard the report of the Currency
Commission. What is your pleasure?
Mr. F. 0. Watts, of Nashville, Tenn.: I move that the
report be received, spread upon the Minutes and its recommendations adopted.
The motion was seconded.
The President: All in favor of the motion will signify it by
saying aye; opposed, no.
Carried.
The President: We are honored to-day by the presence of
a gentleman who occupies one of the most important business
positions in this country, for he carries in his hands the destinies of nearly 7,000 National banks, representing nearly
$10,000,000,000 of assets. He has kindly consented to come
here and address us. I take great pleasure in introducing to
you Hon. Lawrence 0. Murray, Comptroller of the Currency.
(Applause.)

Some Problems of the Comptroller's Office.
[Comptroller Murray's address in full will be found on pages
123 to 126 of this publication.]
The President: Recently in company with several gentlemen
prominent in business life the subject of individuals and their
achievements came up, whereupon one gentleman stated that
he thought one of the foremost men, if not the foremost man,
in that respect in this country is the gentleman whom it is
now my pleasure to present to you. This gentleman has a
constructive mind, and, through his knowledge of the resources
of this country and his belief in the possibilities that would
come through utilizing them, has done a wonderful work in
the upbuilding of the great Northwest. I refer to Hon. James
J. Hill, Chairman of the Board of Great Northern Railroad.
Mr. Hill has devoted the major portion of his life to the
development of the resources of the Northwest. He built a
railroad from St. Paul through to the Pacific Coast over a
stretch of desert and barren country. Many people doubted
the wisdom of his course, but the result has justified his keen
foresight. We are indeed favored in having Mr. Hill as our
guest on this occasion. He will address us upon the subject
of "National Wealth and the Farm." (Applause.)

National Wealth and the Farm.
[Mr. Hill's paper appears in full on pages 126 to 130 of this
publication.]
Mr. A. J. Frame: I think it would be unjust if we passed
this occasion without presenting our compliments to these two
gentlemen who have so ably given us these two addresses—
one by Mr. Murray, to which all honest men can say amen,
and of which only the evil doer need be in terror, also the
eloquent address of our nation builder, and I move you that
it be expressed as the sense of this meeting that thanks be
extended to both of these gentlemen.
The President: You have heard the motion, and you will
signify your co-operation in it by the usual signal.
Unanimously carried.
The President: I wish to refer now to page 27 of the
programmes which you have in your hand. You will note
that the bankers of Chicago have provided for your entertainment several functions which will take place before the time
we meet again in this house on Friday.
The bankers of this city have purchased the entire seating
capacity of four of the theatres for this evening, and in the
little book which was given to you at the time you registered
you will find tickets for these entertainments. You must bear
In mind that these tickets must be exchanged at the information bureau for tickets of admission to the theatre. If you
have not already done so, I would suggest that you go to the
information bureau on the second floor of the Auditorium Hotel
and make such exchange.




167

On Wednesday afternoon at 2 o'clock two steamers, the City
of Benton Harbor and the City of South Haven, will leave the
Graham & Morton docks, at the foot of Wabash avenue, for
an excursion to Lake Michigan, the objective point of
which will be Gary, Ind. At this point the boats will
stop for an hour or an hour and a half to give those who may
wish to do so an opportunity to get at least a look in at Gary
and the great steel plant of the United States Steel Corporation
which is located in that city.
In this connection, I desire to say that since the Trust
Company Section of this Association will hold its meeting tomorrow, and with a view of preventing any interruption to
that meeting through having the delegates to the Trust Company Section on our boat ride, we have provided for their
exclusive use on Thursday—which is not shown in this programme—a special train which will leave the Lake Shore Station at 2 o'clock, and which will convey any of the gentlemen
of the Trust Company Section, who may want to go to Gary,
to that city, and they will be returned to Chicago in the evening in ample time for the ball. The Council Club dinner,
which will be held in the gold room of the Congress Hotel on
Wednesday evening at 8:30 o'clock, is not a function provided
by the bankers of the city of Chicago, but it is a function
provided by the club itself, which is composed of the exmembers of the Executive Council of this Association, and
those who are expected to attend that dinner, will have received invitations from the officers of that club.
On Thursday afternoon special trains over the South Side
Elevated Railway will leave the old Congress street station
at 1 :30 o'clock for the Stockyards, returning at 4:30 P. M.
The plants of the packers and other places of interest in that
section of the city will be visited on this trip. You will
find in your books tickets which can be exchanged at the
Information bureau for tickets for this excursion.
On Thursday evening there will be given by the bankers
of Chicago in this theatre a reception and ball to the visiting
delegates and their guests, the reception of which will begin
at 8:30 and the dancing at 9 o'clock. In the little books which
have been given you you will find tickets for this ball. I wish
to call your attention to the fact that those tickets admit a
single person; therefore, the ladies who are with gentlemen
will want to bring the ticket from their books in order to
gain admission to the building on that evening.
I take great pleasure in announcing at this time that we
have been fortunate in being able to secure President Taft's
attendance at that ball for a short time, some time after 11
o'clock.
I hope you gentlemen and ladies and all of the delegates and
guests present will utilize the tickets which we provided for
your entertainment, and I hope that you will all avail yourselves of all these functions, and we trust that you will find
them enjoyable. (Applause.)
The Secretary: I have some important announcements to
make which will take only a moment.
The Vice-President of the States and Territories of Alaska,
Arizona, Delaware, District of Columbia, Maine, Nevada, New
Hampshire, New Mexico, Rhode Island, Utah, Vermont,
Wyoming, Canada, Cuba, Hawaii, Mexico, Porto Rico, and the
Isle of Pines will meet at the club room 2, Auditorium Hotel,
on adjournment of the convention to-day, to nominate one
member of the Council.
Mr. Sherman was announced to make an address tomorrow
afternoon. We received word that he would not be here. However, we have since received a letter that he would be here to
fill his place on the programme to-morrow afternoon at 2 o'clock.
To those of the Council Club, which is composed of the
gray heads and bald heads—ex-members of the Executive Council—I am requested to announce that those who have not
made arrangements to attend the Council dinner to-morrow
night, must do so by 9 o'clock to-morrow morning at the
latest.
The Committee on Transportation, in order to facilitate
transportation to and from the Stock Yards, wish to urge
upon you that promptness is very desirable, and that you be
at the old Congress street station of the South Side Elevated
Railroad at 1 :30 o'clock P. M. sharp. Those that wish to go
must be there at 1 :30 P. M. sharp.
The President: The next regular order of business is the
report of the General Counsel of the Association, Mr. Thomas
B. Paton, of New York.
Mr. Paton: Mr. President and members, at this late hour
and with such a vanishing audience, I will not attempt to read
my report. It is printed and anybody who is interested in the
subject of what the General Counsel has done during the year
can obtain a copy thereof.
In brief, I might say that the report contains a detailed
account of the legislation in which the Association has been
interested, which has been enacted in the different States this
year. We have been very successful, as no less than twentyseven different measures have been enacted in different States,
covering bills of lading, false statements, for credit forged
checks, and the payment of moneys in two names and so on.
I will simply ask leave to hand that report in without reading it, and thank you for your attention. (Applause.)

168

BANKERS' CONVENTION.
Report of the General Counsel.

[The report of General Counsel Paton is printed on pages
145'to 151.]
The President : The next order of business is the report of
the American Institute of Banking Committee. Mr. J. H.
Puelicher, of Milwaukee, is the Chairman. I understand that
Mr. Puelicher was called away on account of the death, I
think, of his grandmother, and if he has not left his report
with some one to be read—
The Secretary: He has.
The President: Will you read it?
The Secretary: I think, Mr. President, perhaps if I just
make a short announcement and briefly refer to some of the
headlines, and then have the report published, it will be better.
The American Institute of Banking is a very important adjunct
to the American Bankers' Association. Those of us who are
working with it know how much good it is doing.
The Secretary then read some of the headings of said report.

Report of the American Institute of Banking.
[This report is printed on page 154.]
The President: You have heard the report as read, gentlemen.
What will you do with it?
A Member: I move that it be received, approved, adopted
and filed.
Motion seconded, put and carried.
The President: Next is the report of the Standing Protective
Committee. Mr. Farnsworth, the Secretary, will read the
report.
The Secretary: If it is agreeable, I shall only refer briefly
also to this report. As a matter of record it should be presented.
It has been presented to the Executive Council of the American
Bankers' Association, by them approved, and is now referred
to the convention.

Report of Standing Protective Committee.
[The report of the Standing Protective Committee may be.
found on page 143.]
The President: You have heard the report, gentlemen. What
will be its disposition?
A Member: I move that the report be received, adopted and
flied.
Motion seconded and carried.
The President: That concludes our programme for the day,
with the exception of the practical banking questions, discussions on which are limited to thirty minutes for each topic,
open to delegates under the five-minute rule. On account of the
lateness of the hour, and on account of the scantiness of the
attendance at this moment, unless there is some objection, we
will omit this for to-day, since we have the same thing appearing again on Friday. If there is no objection, we will omit
this discussion and stand adjourned until Friday morning at
10 o'clock, to meet in this same place. I hope we will assemble
promptly.
Adjourned to Friday, September 17, at 10 A. M.

SECOND DAY'S PROCEEDINGS.
Friday, September 17, 1009.
The President : The meeting will please come to order. We
will now join in prayer led by Rev. William P. Merrill, D.D.,
Sixth Presbyterian Church, Chicago.
PRAYER.
Oh God, our Eternal Father, as we begin the tasks and the opportunities of this day, we would bow before Thee asking that we may
be conscious in every moment of Thy presence with us.
It is hard
for us, children of this busy age with its exacting demands, with the
many conflicting interests that claim every moment and every thought
—it is hard for us to make Thy presence real as men did in days
passed.
We pray Thee that thou wilt help us to realize the great
truth that we need the presence of God and the reality of Thy presence in our thoughts as no man ever needed it in the past, for that
clearness of judgment, for that strength of purpose, for that in.
domitable moral courage, for that subordination of small things to
large, for that clearness of vision without which we cannot have true
success in any line in this modern life. We need Thee, oh God, for
those things come best to those who down at heart are men of God.
We pray Thee, therefore, that we may realize Thy presence with us
to-day and all the days.
We ask Thy blessing upon our country, upon its President, and all
associated with him in the government of this land, that they may
guide the people in ways that make for righteousness and peace and
joy.
We ask Thy blessing upon all who are in positions of any
responsibility in our educational life.
Grant that we may feel that
the truest and greatest wealth we have is the wealth of manhood and
womanhood. We ask Thy blessing upon our leaders in industrial and
business life—men of large responsibilities—the men who are here
to-day. Oh God, we pray Thee that the institutions from which they
come and in which they have power and influence may be not only
institutions which succeed in the preservation of our wealth, and in
the fostering of material comfort for the people of this land.
May
they be institutions which will teach and guide the young men and
women in them in the ways of strength and honor, and in the Rubor




dination of outside things to the inner things of character, and grant
that through the blessing of Thy spirit that the time will soon come
when every man and every woman shall feel that his or her task is
the more pleasant when walking in the ways of God, and will know
that the Only thing on earth worth doing is the will of God.
And so may Thy kingdom come and Thy will be done on earth, as
It is in Heaven, we ask in the name of .the true workmen and the
heroes of the past, and in the name of Him who taught us to pray for
Thy kingdom and Thy wili. Amen.

The President: Mr. Thomas, of the Information Bureau,
would like to make some announcements.
Mr. Thomas: The Bureau of Information wishes to announce
this morning that we have in our possession a number of
letters and a few telegrams for the delegates. I will read
the list, so that if any of those names are here they will
please call at our headquarters and get these communications.
Reading list.
In addition to that we wish to call attention to the fact
that this is the last day for alidation at the headquarters
of the transportation of the Western Passenger Association,
and also that we have a great many tickets which have been
validated which we would like to have the delegates call for
at their earliest convenience.
The President: We will now proceed with the Reports of
Committees. The first report is that of the Sections. Do the
officials of the Trust Company Section wish to make any report?
If not, does the Savings Bank Section have a report that it
wishes to submit? Or the Clearing House Section? Or the
Institute of Banking?
No response.
The President: Next is the Report of the Standing Law
Committee, Mr. William J. Field, Chairman.

Report of Standing Law Committee.
[The full text of the report of the Standing Law Committee will be found on page 155 of this publication.]
The President: Gentlemen, you have heard the report of
your Standing Law Committee. What is the pleasure of the
convention respecting it?
Mr. James H. Tripp, of Marathon, N. Y.: I move that it
be accepted and its recommendations adopted.
Mr. H. R. Smith, of Rockville Centre, N. Y.: I second the
motion.
The President: Those in favor of the motion will manifest
it in the usual manner by saying aye; opposed, no.
Carried.
The President: The next report will, be that of the Federal
Legislative Committee, which will be read by its Chairman,
Mr. Arthur Reynolds, of Des Moines, Iowa.

Report of Federal Legislative Committee.
[The report of the Federal Legislative Committee will be
found printed on page 15,5.]
POSTAL SAVINGS BANKS CONDEMNED.
Mr. Arthur Reynolds: I would like particularly to have the
resolutions incorporated in this report adopted if it meets
with the sense of the convention. Therefore, I move the
adoption of the resolution.
Resolved, That It is the sense of this Association that we should
condemn in unqualified terms the proposition for the establishment of
Postal Savings Banks or any other system by which the Government
enters directly into banking relations with the people.

A Member from Illinois: I second the motion for the
adoption of that resolution.
The President: Is there any discussion? If not, all in favor
of the resolution will signify by saying aye; contrary, no.
Adopted.
Mr. Arthur Reynolds: I now move the adoption of the resolution (reading as follows):
Resolved, That the American Bankers' Association is opposed to any
legislation based upon the argument that it was a party pledge and
should be redeemed.

The motion was seconded.
The President: Is there any discussion? If not, all in favor
of the resolution will signify by saying aye; contrary, no.
Adopted.
Mr. Arthur Reynolds: I move the adoption of this resolution:
Resolved, That we believe the proposed plan to invest Postal Savings
Banks' deposits to the extent of six or seven hundred million dollars
in United States bonds simply to maintain such bonds at par, is unsafe and unwise legislation, and, if enacted, would ultimately lead
to lack of confidence in our national credit.

The motion was seconded.
The President: Is there any discussion? If not, all in favor
of the resolution will signify by saying aye; contrary, no.
Adopted.
RESOLUTION IN FAVOR OF' SAVINGS DEPARTMENTS OF
NATIONAL BANKS REFERRED TO CURRENCY
COMMISSION.
Mr. Arthur Reynolds: I move the adoption of the following:
Resolved, That the committee representing us before Congress be
urged to use all honorable meals to defeat the proposed legislation,

BANKING SECTION.
and that we recommend, as a substitute therefor, the maintenance of
separate savings bank departments in the National Banking Associations now operating under the law, the assets to be segregated and
accounts separately maintained for the protection of all deposits entrusted to this department, under proper regulations to be prescribed
In the act.
In other words, we have not undertaken to outline this in
detail, but we simply offer it to be worked out hereafter.
I move the adoption of this resolution.
Mr. Myron Campbell, of South Bend, Id.: I doubt the
propriety or expediency of this Association undertaking to
recommend any affirmative legislation. There is no objection,
I think, to our ratifying the negatives that have been brought
forth in this report of the committee; but it seems to me
that it would be better to refer this particular clause to the
Baniang and Currency Commission with power. I would also
suggest that we add the work "Banking" to that "Currency
Commission."
Mr. Arthur Reynolds: In reply to Mr. Campbell, I have
this suggestion to make. While bankers, under their breath
and to each other, are expressing a fear that this Postal
proposition is going to prevail, I think it might be important
that this Association should take some steps to provide protective measures for the deposits which it is expected to protect.
Mr. Robert E. James, of Easton, Pa.: It appears to me that
this committee has gone out of its province in order to avoid
what they conceive to be a disease—that they are endeavoring
to employ a new method of treatment; they are endeavoring
to put on a liniment or salve to the other side of the body
to ease up the pain. In doing so, it appears to me, sir, that
they are doing just what the conventions of the political
parties did two years ago. When it comes to the matter of
segregaton of deposits, look at it for a second in a practical
way and see whether it will accomplish what you desire. Are
you gentlemen of National banks going to divide your deposits
into two classes, and secure the one with the best assets you
have got? If you do, what becomes of your depositors on the
other side? Are they going to remain with you when you
have taken the core of your assets and turned them over to
your time depositors? I am in favor of securing all deposits.
They have been secured from time immemorial by the laws of
the country. Why, it was no longer ago than yesterday that
the Superintendent of Banking of the Empire State told the
Trust Company Section of this Association that under the
present laws of New York not one dollar had been lost to
depositors of any class in the crisis of 1907-8.
I believe in guaranteeing the deposits by the assets of the
Institution which are in its *vaults, but I do not believe in
any guarantee of deposits by fictitious outside securities.
Mr. Allen W. Johnston, of Schenectady, N. Y.: The gentleman who has just spoken, in giving us his idea of segregation,
misrepresents the matter; he is entirely misleading in what
he says. Do you know why there has been no money lost
in New York? One reason is because, with the mutual consent
of the bankers of the State, nearly two billions of dollars of
the savings of widows and orphans and incompetent persons
are segregated. That is the condition in the State of New
York.
Mr. James: That is the condition in every State, so far as
that goes.
Mr. Johnston: The gentleman from Pennsylvania misrepresents the situation in stating that the segregation of the deposits takes off from the proper investments and robs the commercial banks of the opportunity to make proper investments.
Commercial banks take paper, notes and so on. Now, in the
State of New York savings banks are not allowed to take
comrdercial paper.
Mr. James: If the gentleman sees fit to reiterate that I have
, misrepresented in what I have stated, I shall be under the
painful necessity of stigmatizing him as a member of the
Ananias Club.
Mr. Johnston: I do not cast any aspersion upon the gentleman personally. I wish to be understood as not inferring
that he has wilfully misrepresented anything—simply that the
effect of his remarks, and the way he said it was that it left
a wrong impression. He made a one-sided statement, and a
one-sided statement of anything is always a misrepresentation.
Mr. Campbell, of Indiana: I move that the resolution before
us be referred to the Committee on Banking and Currency with
power.
The President: We have no such committee as that at the
moment, Mr. Campbell.
Mr. Campbell: Well, then, I move that it be referred to
the Currency Commission, which consists of the Federal Legislative Committee, I believe, and ten others. By doing that
we will get a committee of fifteen as representative men as
there are in the Association, and I think we can rely with
confidence upon their threshing out the whole matter and
making good recommendations.
Mr. Arthur Reynolds: Mr. Chairman, it is not the intention
of this committee to have any proposition acted on immediately if it is not desirable to do so. It is not the intention to
railroad anything through the convention on the spur of the
moment. We have been engaged in this legislative work for
several years, and we have tried at all times to co-operate
with the interests of the majority of the bankers of the




169

country, and we want to do that now, and we are perfectly
willing to have this matter referred to the .Currency Commission, or to. any other body of financiers, to pass upon the
subject properly. We have simply thrown it out here with
the view of getting such discussion as we could upon the subject and finding out what the ideas of the various members are.
We have taken it up with the bankers of the country, and we
know what is the opinion of the bankers, as a body. throughout the country. They are almost unanimously in favor of
this proposition, but we do not want to insist as a committee upon something to be brought immediately and spontaneously before a convention, because we know that it might be
very difficult to act upon it, and we accept the motion of
Mr. Campbell, and will be very glad to have it referred to
the Currency Commission.
A Member: I second the motion.
Mr. Johnston: Do I understand that by referring this question to the Currency Commission that it is placed there by
the. American Bankers' Association, and is taken out of the
hands of the Savings Bank Section?
Mr. Arthur Reynolds: That would only be true relative to
the question of National banks. The Savings Bank Section
would continue its work exactly as it has been, and would act
Independently and also in co-operation with the Currency Commission.
Mr. Johnston: Yes; but does not the gentleman, in referring
to the segregation of deposits, refer to the savings banks also?
Mr. Arthur Reynolds: Well, he refers, as I understand it—
my resolution here only referred to the segregation of deposits
in National banks, and his resolution, as I understand it. refers
to my resolution.
Mr. Campbell: That can only refer to Federal legislation.
Mr. Durham: I ask for the re-reading of the resolution before
we vote on it.
The President: Will you please read the resolution again,
Mr. Reynolds?
Mr. Arthur Reynolds: (Reading.)
Mr. Rother: There are two subject matters in that one resolution, and they should be separated. I think that this body
is prepared to vote for the first section, but not for the second,
in favor.
The President: The motion at present before the house is on
the reference of this entire resolution to the Currency Commission.
Mr. Rother: I only wanted to call your attention to the fact
that there are two propositions in the resolution.
Mr. Campbell: My motion said that the affirmative part of
the resolution—there are two parts, one negative and one
affirmative—that the part that recommends legislation be referred to the commission.
The President: You have heard the question. All in favor
of Mr. Campbell's motion will please signify it by saying aye;
contrary, no.
Motion carried.
GUARANTY OF DEPOSITS CONDEMNED.
Mr. Arthur Reynolds: I want to offer one resolution that i
read, and which I. will now re-read.
Resolved, That the American Bankers' Association is unalterably
opposed to any plan looking to the mutual guarantee of deposits
either by the State or nation, for the following reasons:
1. It is a function outside of State or National Government.
2. It is unsound in principle.
3. It is impraztical and misleading.
4. It is revolutionary in character.
5. It is subversive to sound economics.
6. It will lower the standard of our present banking system.
7. It is productive of and encourages bad banking.
8. It is a delusion that a tax upon the strong will prevent failure
of the weak.
9. It discredits honesty, ability and conservatism.
10. A loss suffered by one bank jeopardizes all banks.
11. The public must eventually pay the tax.
12. It will cause and not avert panics.
I now offer that resolution.
Resolution seconded and adopted unanimously.
Mr. Arthur Reynolds: Now, the second resolution:
Resolved, That the American Bankers' Association is unalterably
opposed to any arbitrary plan looking to the mutual guaranty of deposits either by ti State or the Nation, believing it to be impractical,
unsound and misleading, revolutionary in character, .and subversive to
sound economics, placing a tool in the hands of the unscrupulous and
inexperienced for reckless banking, and knowing further that such a
law would weaken our banking system and jeopardize the interest of
the people.
A Member: I move the adoption of that resolution.
The President: Gentlemen, you have heard the resolution.
Those in favor will kindly signify it by saying aye contrary,
no.
Unanimously adopted.
Mr. Durham: Mr. President. I move that the report of this
committee be received, with the thanks of the convention for
the consideration they have given the matter entrusted to
them, and that the committee be continued.

170

BANKERS' CONVENTION.

A Member: I second the motion.
The President: You have heard the motion which has been
seconded. All in favor signify it by saying aye; contrary, no.
Motion unanimously carried.
The President: I find that a representative of the Trust
Company Section is in the building at this time prepared to
report. We will now have the report of the Trust Company
Section.
Mr. McIntosh: Mr. President and Gentlemen of the Convention. I will make a brief report by reading extracts from
the report of the Executive Committee, which was adopted by
the Trust Company Section. The part of the report that I
do not read will be found in the printed proceedings.
The President: You have heard the report of the Trust
Company Section. What will you do with it?
A Member I move that it be received and adopted.
Motion seconded.
The President: It has been moved and seconded that the
report of the Trust Company Section be received and adopted.
Those in favor of it signify it by saying aye; contrary, no.
Motion carried.
The President: In following out the programme earlier in
the session we called for the report of the Savings Bank Section. Is there any one in the house prepared to report for
the Savings Bank Section? If not, we will pass that.
No response.
The President: The next is the reports of the special committees. Are there any special committees present or represented by any one who desires to report?
No response.
INVITATIONS FOR CONVENTION.
The President: If not, we will pass that. The next order
of the programme is the reading of the invitations extended
to the Association for the convention next year. Mr. Farnsworth, the Secretary, I think, has some letters on this subject
which he will now read.
The Secretary then read invitations from the following
cities: Richmond, Va., for 1911; Saratoga Springs, N. Y.;
Put-in-Bay Island, Cedar Point, Ohio, and Rochester, N. Y.,
for 1910; New Orleans, La.; San Antonio, Tex.
Mr. N. S. Graham, of San Antonio, Tex., stated that on
behalf of his city, which had extended an invitation for the
Association to hold its convention there, that be wished to
defer to Los Angeles, while extending a like invitation on the
part of San Antonio, Tex., for the year 1911.
Governor Bailey, of Kansas, stated that on behalf of the
large number of delegates from the Missouri Valley section, he
was instructed by them to second the motion that Los Angeles
be designated by the convention as the place of next meeting.
LOS ANGELES TO HAVE 1910 CONVENTION.
A Member: In order to bring this matter properly before
this convention, I move you that the request of Los Angeles, that
we hold our convention there in 1910, be accepted, and that the
Executive Council be urged as a Council to accept that invitation, and that the convention may be held there next year.
Motion seconded.
The President: The motion before the house is on the acceptance of the invitation from Los Angeles to hold our next convention in that city. All in favor will signify by saying aye;
contrary, no.
Motion carried unanimously.
(Applause.)
Mr. Joseph D. Radford: On behalf of the committee, Mr. J. M.
Elliott and myself, appointed by the Clearing House, I want to
thank you. On behalf of the State of California I want to
thank you, and more and more on behalf of the city of Los
Angeles I want to thank you. It is up to us now to demonstrate whether your confidence has been misplaced or not.
We invite you all to come and inspect us closely in 1910.
(Applause.)
The President: Gentlemen, before proceeding with the regular programme, I wish to state to you that we are fortunate
in having with us today, Dr. Kilgo, President of the Trinity
University, Durham, N. C. I regret exceedingly the fact that
Dr. Kilgo's name does not appear upon our programme. In
explanation of this I desire to say that a few days ago, or
just as the programme was ready for the press, we were
advised by Dr. Kilgo that his health was in such condition
It would be impossible for him to keep his engagement with
us. With a view of having the programme represent only
that which we hoped to be able to have in the way of entertainment for you, and in the way of a programme, Dr.
Kilgo's name was left off. Dr. Kilgo's physician at that
time forbade his coming. Having given his acceptance, however, and in his desire to keep his promise, he has violated
the wish of his physician and is with us to-day, and I want
to say, inasmuch as his name does not appear upon the
programme and the members of this convention have not been
advised as to the hour at which he wil speak, that he will
immediately follow the address of Mr. Forgan.
Ladles and gentlemen, I am a firm believer in the law of
compensation in this world, in whatever line of work one may




be engaged. I believe that a man reaps in proportion as he
sows, and I believe his harvest is as the seed that he sows.
We have with us to-day a gentleman whom I think is a splendid illustration of this theory. We have with us a gentleman
who will address us, who, I think, represents what it is possible for a man to reap if he is wise In what he sows.
A few years ago a poor boy from Scotland emigrated to
America—a boy without influence or friends in this country.
By sheer force of ability he has gradually worked his way
from that of an inconspicuous clerk in the Bank of British
North America until he is to-day, and has for some years past
been, one of the most conspicuous figures in banking in this
country. This gentleman is a big man; he is large of stature,
big in intellect, great in character and strong and forceful in
all that he does. He came to Chicago and took charge—
active charge of one of our banks some years ago—perhaps
fifteen—when it had only twenty million dollars of deposits.
To-day it is the largest bank—considerably the largest bank
In the city of Chicago. And when you measure the character
of the business done by that bank and the character of business done in New York and the size of the accounts, I venture
the assertion that, as measured by that standard, it is the
largest bank in the country. (Applause.) This gentleman has
for some years been the leader in banking circles in this
city. He has been Chairman of our Clearing House Committee, and as such has done wonderfully good work in the upbuilding for the standards of banking in Chicago. I regard
it as a great honor to have this gentleman as our guest today, and I am sure that you will appreciate an address
from him. I refer to Mr. James B. Forgan, as you all must
know. It gives me great pleasure, ladies and gentlemen, to
now introduce to you Mr. Forgan, who will address you upon
"The Efficacy and the Limitations of Bank Supervision by
Examination and the Responsible Source of Bank Management." (Applause.)

Efficacy and Limitations of Bank Supervision.
[We print Mr. Forgan's paper in full on pages 130 to 136.1
A rising vote of thanks was tendered to Mr. Forgan for his
interesting and instructive address.
Recess was taken until 2:30 o'clock P. M.
AFTERNOON SESSION.
The President: The next on the programme is the roll call
of the various States for the purpose of hearing from the
Vice-Presidents.
M. E. D. Durham, of Onarga, Ill.: In view of the fact of
the great patience shown by the delegates in their attendance,
the lateness of the hour, and the fact that the Executive Council has changed the time of its meeting from 8 o'clock this
evening to immediately after the adjournment of the convention, as many of its members vanted to lake evening trains
for their homes, I move that the reports of the Vice-Presidents from the various States be printed in the minutes of
the convention, if they so desire, and that we now proceed
to other business
(The motion was seconded and carried.)
The President: The next order on the programme is the
discussion of "Practical Questions." Is any one prepared
with any question to be discussed? If not, we will proceed.
Is there anything under. the head of unfinished business,
Mr. Secretary?
Secretary Farnsworth: I do not know of anything, sir.
The President: The next is "Resolutions."
AMENDMENTS TO CONSTITUTION.
Mr. F. 0. Watts (Chairman of the Executive Council): Mr.
President, and gentlemen of the convention. As Chairman of
the Executive Council, I am instructed to report to you such
amendments to the constitution as have been proposed, and
such resolutions as have been presented in a constitutional
manner.
First is .an amendment to the constitution proposed by Mr.
John H. Johnson, of Detroit, Mich., as follows:
Amend the Constitution, as printed in the annual proceedings of
1908, by inserting the word "general" before the word "secretary" in
each of the following places:
In line 15 of sub-division A of Section 3 of Article 3.
In line 18 of sub-division A of Section 3 of Article 3.
In the last line of sub-division B of Section 3 of Article 3.
In line 4 of Section 4 of Article 3.
In line 3 of Section 4 of Article 3.
In line 14 of Section 4 of Article 3.
In line 4 of Section 7 of Article 3.
In line 6 of Section 7 of Article 3.
In line 2 of Section 9 of Article 3.
In line 1 of Section 11 of Article 3.
In line 3 of Section 12 of Article 3.
In line 1 of Section 14 of Article 3, after the word "the."
In Hoe 2 of Section 2 of Article 4.
In line 2 of Section 4 of Article 4.
In line 4 of Section 4 of Article 4.
In line 10 of Section 1 of Article 5.
In line 3 of Section 1 of Article 7.

BANKING SECTION.
In line 3 of Section 1 of Article S.
In line 3 of Section 1 of Article 10.
In line 4 of Section 1 of Article 10.
These amendments are suggested with a view to drawing a distinction between the Secretary of the Association and the Secretaries of
the Sections, in preference to the plan proposed of the title of
Assistant Secretaries for the Sections. If the title of "General Secretary" for the Association is adopted, the Secretaries of the Sections
would then retain their present titles.
I move that the changes in the constitution, as proposed by
Mr. Johnson, be adopted.
(The motion was seconded.)
The President: Are there any remarks? If not, all in
favor of the motion signify it by saying aye; opposed no.
(Motion carried.)
RESOLUTION TO ENCOURAGE ORGANIZATION OF COMPANIES FOR INSURING DEPOSITS REFERRED.
Mr. Watts: A resolution offered by Mr. John Schutte, President of the savings bank at Manitowoc, Wisconsin, reading
as follows:
Wher.ms, Bank failures are the only causes of bank runs and financial panics, resulting in immense losses to all interests, besides nerve
racking the entire populathn; and,
Whereas, The government has recognized this evil and proposes to
remedy it, by the establishment of over forty thousand postal savings
banks that will guarantee deposits, and if established will draw more
deposits from banks than any other measure could possibly do, even if
limited as now proposed, but which, we may confidently expect, it will
from time to time be extended; and,
Whereas, 00 per cent, of bank failures originate from losses sustained on unfortunate loans, which would not occur if such loans
could be insured; and,
Whereas, It is most important to safeguard all banks, thereby
minimizing bank failures, especially if the government should establish guaranteed banks, or deposits or guaranteed by legislative enact
ment or by insurance companies, under all of these conditions the insuring of bank assets will be an unquestionable safeguard; therefore,
Resolved, That the Committee on Credits, or a special committee to
be appointed by the president, are hereby requested to do all in their
power to encourage the organization of insurance companies for the
insuring of commercial notes or to induce or encourage existing
casualty insurance companies to add this as a special line of insurance, and they are hereby authorized to expend any reasonable amount
out of the treasury of the American Bankers' Association for this
purpcse.
I move that this resolution be referred to the Savings Bank
Section.
(The motion was seconded and carried.)
RESOLUTION FROM COMMITTEE ON INTEREST RATES
LAID ON TABLE.
Mr. Watts: The next resolution is one offered by Mr. Henry
C. Swords, President of the Fulton Trust Company, of New
York, reading as follows:
Resolved, That a committee be appointed to study the rates of interest paid on deposits in the various parts of the United States, said
committee to report at the next annual meeting of the American
Bankers' Association.
There was some question in the minds of the Executive
Council as to the advisability or non-advisability of appointing such a committee—as to whether there was any necessity
for it at this time—and not desiring to take the resolution out
of consideration, the Council decided to present it to you
without any recommendation.
Mr. Slack, of Ft. Worth, Tex.: Mr. President, I move that
it be tabled.
(The motion was seconded.)
The President: Are there any remarks?
Mr, E. D. Durham: I am glad this resolution is going on
the table, and I would suggest in case it ever be taken from
the table, that the same committee be instructed to consider
par point. (Laughter.)
The President: All in favor of the motion to lay it on the
table will signify It by saying aye; opposed no.
(Motion carried.)
RESOLUTION IN FAVOR OF NEGOTIATIONS WITH
SURETY COMPANIES ADOPTED.
Mr. Watts: The next is a resolution offered by Mr. William
Ingle, Vice-president of the Merchants' National Bank, Baltimore, Md., which reads as follows:
Whereas, A number of corporations doing business as surety companies have, as the result possibly of an agreement among themselves
advised their banking clients that the charge heretofore made by such
surety companies in underwriting depository bonds, is to be increased
100 per cent.; and,
Whereas, Such additional charge is onerous, especially when uniformly made in situations of widely differing character; therefore be it
Resolved, That the Executive'Committee of the Agsociation name a
committee from the membership of the Association to consider the
subject matter of this resolution, and by negotiation with the surety,
companies, or otherwise, endeavor to secure such reasonable abatement




171

of the present charge made when underwriting depository bonds as
shall relieve solvent banks from an undue burden and at the same
time permit such reasonable profit to the surety companies as the
value of their service rendered should suggest.
The Executive Council present this resolution, giving it
their unanimous approval. Therefore, carrying out the instructions of the Executive Council, I move its adoption.
(The motion was seconded and carried.)
Mr. Geo. L. Ramsey, Helena, Mont.: Mr. President and
gentlemen of this convention, while the text of this resolution
Is such that I feel certain it would receive the ready assent
and unanimous approval, perhaps, by the body of this Association, nevertheless, I feel that its serious nature to the
financial interests of the banks is such that we ought to
give it a moment's consideration, and that we ought to let
the surety companies of the United States know that we
have in mind that they are charging us unfair rates for what
are known as depository bonds. The surety companies of the
United States were aided by the bankers of the country in
getting through the legislatures of the various States laws to
the effect—in some States—that such bonds sould be furnished
only by surety companies, and that none other would be accepted, and in other States that a surety company or an individual bond might be accepted; and now, that most of the
States have adopted such legislation, they are taking advantage of the situation, and have, in my judgment, actually
increased the rates. At the Bankers' Convention in San
Francisco I took the stand against the proposition of this
Association considering at all the matter of going into the
business of writing Fidelity bonds or burglary insurance. At
that time, I did so hesitatingly, because the Association in
the convention in New Orleans appointed a committee, of
which Mr. John L. Hamilton was the head, and that committee met for the purpose of settling that question, and
they offered a resolution that this Association should consider
the writing of such bonds. Along with Col. Sullivan, of
Cleveland, Ohio, I opposed the resolution. The convention
at San Francisco was a draw, but at the offering of the
resolution in New York City, it was carried—the surety people
won out. That is a number of years ago. I wish to say that
I have occasion at this time to have changed my opinion
somewhat, and to have reached the conclusion after all that
Mr. John L, Hamilton maybe was pretty nearly right, because
the surety companies have apparently taken advantage of
the sentiment of this Association as expressed in New York
City. They have quadrupled their rates on depository bonds
as against what they were in the days of the San Francisco
and New York conventions. I want to submit this opinion
particularly as to the writing of surety company bonds.
Now, gentlemen, I simply wish to say that I am hoping
this matter may come into the hands of the John L. Hamilton
Committee, which was discharged some seven years ago, and
be given further consideration.
The President: Is there any further comment on the subject? If not—
Mr. John L. Hamilton: Before the adoption of that resolution or voting upon it, it seems to me, if it is advisable to
take up this question at this time, that it should be broadened,
and I would suggest that we recommend to the Executive
Council the consideration of burglary insurance, as well as
Fidelity insurance, as they are closely allied and might just
as well be both considered as one.
Mr. Watts: Mr. President and Gentlemen: If Mr. Ingle,
the author of the resolution is in the house—and I believe
he is—his acceptance of such an amendment as proposed by
Mr. Hamilton would probably be in order, and if he accepts
the amendment, I will include it in my motion upon the adoption of the resolution. What is your pleasure, Mr. Ingle?
Mr, Ingle: I have not the slightest objection to amending
it in accordance with the wishes of Mr. Hamilton. I can only
add this. I have personally been in correspondence with
some of these companies, and I believe they are already in
a mind in which they will recognize the fairness of the proposition as submitted in the resolution which I prepared. I
believe that they will accept the suggestion and that the
moral pressure brought to bear by the adoption of such a
resolution as has been read will be helpful. Whether or not
it will help that particular situation by confounding with it
a larger question, is altogether another matter. If, in the
wisdom of the convention, it is thought best to make the
resolution embrace a wider subject, I am in entire accord
with it, but I think as it stands it will come very close to
accomplishing its purpose in connection with the underwriting
of depository bonds.
The President: Unless Mr. Ingle is willing to have his
resolution amended as suggested, it will not be possible to
have it put in.
Mr. Ingle: I entirely accord with the amendment.
The President: Does the seconder accept this amendment?
Mr. ---: I do.
The President: Mr. Watts, please read the resolution again.
(Resolution read.)
The President. Are there any further remarks on the ques-

BANKERS' CONVENTION.

172

tion? If not, all who are in favor of the adoption of the resolution kindly say aye; contrary, by the same sign.
(Resolution adopted.)
The President: Mr. Thomas, of the Information Bureau,
has some letters and telegrams for members, a list of which
I will be glad to have him read.
(Mr. Thomas read the list, and also stated that to-day was
the last day for validating railroad transportation.)
The President: I want to announce that the new Council
will meet immediately after the adjournment of this convention this afternoon in the banquet hall on the sixth floor of
the Auditorium Hotel—not the Congress Hotel, but the old
'Auditorium, in the banquet hall on the sixth floor.
I want also to take this opportunity to again assure you
gentlemen and ladies who have attended this convention that
Chicago feels highly honored by the magnificent attendance
which we have had. I want to say too that the entertainment which has been accorded you during your stay among
us has not been provided by the Chicago Clearing House
Association alone. It has included all the banks in the Clearing House Association, but it has also included the non-Clearing House banks—in fact, all the banks; and I think it is
only fair that you should 'know that the smallest banker in
Chicago, as well as the largest, has helped to contribute to
the best of their ability to your entertainment. (Applause.)
Gentlemen, those of us who are charged with the management of financial responsibilities, believe that we carry large
resopnsibllities with us. The management of a financial institution of any character does create a responsibility—a very
great responsibility, but I want to tell you, my friends, that
peace of mind and contentment and happiness cannot come
alone through the accumulation of large wealth or volumes of
business, for those qualities only come as the result of qualities of heart and mind, which, when applied to our business,
teach us that we should do our duty each to the other and
each to the community in which we live, to the commonwealth and to the nation.
We have with us to-day, gentlemen, a gentleman who, in
my opinion, occupies a position quite as, if not more, responsible than the position held by the manager of a financial
institution, for he is charged with the responsibility of moulding the character of the young people whom he has under
his charge, and to whom he is teaching and preaching. We
have with us today Dr. John G. KiIgo, President of Trinity
College of Durham, N. C., and it gives me great pleasure to
introduce to you Dr. KiIgo, who will talk to you upon the
subject of "Our Industrialism and Americanism."

Industrialism and Americanism.
[We print Dr. Kiigo's address on
The President: The next order
of the Committee on Nominations.
report.
NOMINATIONS AND

pages 136 to 139.1
of business is the report
Is the committee ready to
ELECTIONS.

Mr. A. G. Lupton (Chairman Committee on Nominations:)
Yes, sir. We beg leave to submit the following:
REPORT OF NOMINATING COMMITTEE.
For President: Lewis E. Pierson, president, Irving National Exchange Bank, New York City, N. Y.
For First Vice-President: F. 0. Watts, president, First National
Bank, Nashville, Tenn.
For members of Executive Council, as nominated at conventions of
State Associations and certified to this Association by the secretaries
of the respective State Associations:
Georgia: Jos. W. lIefferman, cashier, Hibernia Bank of Savannah.
Idaho: B. F. O'Neil, president, State Bank of Commerce, Wallace.
Illinois: Frank P. Judson, secretary, Commercial National Bank,
Chicago, and William George, president, Old Second National, Aurora.
Indiana: Jonce Monyhan, president, Citizens' State Bank, Orleans.
Kansas: W. J. Bailey, vice-president, Exchange National Bank,
Atchison.
Massachusetts: Henry M. Batchelder, president, Merchants' National
Bank, Salem.
Michigan: L. G. Kaufman, president, First National Bank, Marquette.
Minnesota: 0. H. Hay!11, president, Merchants' National Bank, St.
Cloud.
Missouri: J. Fletcher Farrell, assistant cashier, Third National Bank,
St. Louis, for two years; W. C. Harris, president, Callaway Bank,
Fulton. for three years.
Nebraska: E. R. Gurney, vice-president, First National Bank, Fremont, Neb.
New York: E. F. Tefft, cashier, First National Bank, Syracuse.
Pennsylvania: D. McK. Lloyd, president, People's Savings Bank,
Pittsburgh.
Tennessee: T. R. Preston, president, Hamilton National Bank, Chattanooga.
Texas: A. V. Lane, vice-president, American Exchange National
Bank, Dallas.
Wisconsin: A. J. Frame, president, Waukesha National Bank, Waukesha, and John J. Sherman, cashier, Citizens' National Bank, Appleton.
Wyoming: Arthur M. Marble, vice-president, Stock Growers' National
Bank, Cheyenne.




FOR MEMBERS EXECUTIVE COUNCIL FROM STATES AND TERRITORIES WHERE THE MEMBERSHIP IN THE AMERICAN AsSOCIATION IS LESS THAN 100, THE TOTAL MEMBERSHIP AGGREGATING 567 MEMBERS.
Arthur H. Marble, vice-president, Stock Growers' National Bank,
Cheyenne, Wyo.

FOR MEMBER OF THE EXECUTIVE COUNCIL REPRESENTING THE
TRUST COMPANY SECTION.
Lawrence.L. Gillespie, Chairman of Executive Committee, vice-president, Equitable Trust Company, New York City, N. Y.

FOR MEMBER OF THE EXECUTIVE COUNCIL REPRESENTING THE
SAVINGS BANK SECTION.
Alfred L. Aiken, Chairman of Executive Committee, president,
Worcester County Institution for -Savings, Worcester, Mass.

FOR MEMBER OF THE EXECUTIVE COUNCIL REPRESENTING THE
CLEARING HOUSE SECTION.
George Guckenberger, Chairman Executive
Atlas National Bank, Cincinnati, 0.

Committee, president,

FOR MEMBER OF THE EXECUTIVE COUNCIL REPRESENTING THE
AMERICAN INSTITUTE OF BANKING SECTION.
Ralph C. Wilson. Contmercial National Bank, Chicago.

FOR VICE-PRESIDENT OF THE DIFFERENT STATES AND TERRITORIES.
Alabama: W. G. P. Harding, president, First National Bank. Birmingham.
Arkansas: Henry Thane, president, First National Bank, Arkansas
City.
California: Jas. K. Lynch, vice-president, National Bank, San Francisco.
Colorado: H. M. Rubey, Woods-Rubey National Bank, Golden.
Connecticut: C. C. Barlow, cashier, Yale National Bank, New
Haven.
District of Columbia: W. D. Hoover, president, National Savings &
Trust Co., Washington, D. C.
Florida: Dr. II. Robinson,•president, Commercial Bank, Jacksonville.
Georgia: E. W. Stetson, cashier, Citizens' National Bank, Macon.
Idaho: F: F. Johnson, president, First National Bank, Wallace.
Illinois: Walter S. Rearick, of Skiles, Rearick & Co., Ashland.
Indiana: J. L. McCulloch, president, Marion National Bank. Marion.
Iowa: E. L. Johnson, vice-president, Leavitt & Johnson Trust Co.,
Waterloo.
Kansas: J. R. Burrow, president, Central National Bank, Topeka.
Maine: Sumner C. Parcher, president, Saco & Biddiford Savings Institution, Saco.
Maryland: John M. Littig, president, National Marine Bank. Baltimore.
Massachusetts: Alfred L. Aiken, president, Worcester Co. Institution
for Savings, Worcester, Mass.
Michigan: Henry Idema, president, Kent State Bank, Grand Rapids.
Minnesota: J. S. Pomeroy, cashier, Security National Bank, Minneapolis.
Mississippi: F. W. Foote, vice-president, First National Bank of
Commerce, Hattiesburg.
Missouri: Grahant G. Lacey, vice-president, Tootle-Lemon National
Bank, St. Joseph, Mo.
Nebraska: S. K. Warrick, cashier, First National Bank, Alliance.
New Hampshire: Arthur M. Hoard, president, Amoskeag National
Bank, Manchester.
New Jersey: W. IT. Taylor, cashier, First National Bank, Somerville.
New York: Hiram R. Smith, president, Bank of Rockville Centre,
L. I.
North Carolina: H. W. Jackson, cashier, Commercial National Bank,
Raleigh.
North Dakota: J. H. Terrett, cashier, Michigan City Bank, Michigan
City.
Ohio: W. W. Brown. vice-president, Merchants' National Bank, Cincinnati.
Oklahoma: W. A. Brooks, secretary-treasurer, Columbia Bank &
Trust Co., Oklahoma City.
Oregon: R. L. Durham, vice-president, Merchants' National Bank,
Portland.
Pennsylvania: James A. Brady.
Rhode Island: George B. Waterhouse, president, Centreville National
Bank of Centreville.
South Carolina: John W. Simpson, vice-president, Central National
Bank, Spartanburg.
South Dakota: John R. Hughes, Delmont.
Tennessee: Walter Howell, cashier, First National Bank, Union City.
Texas: L. L. Jester, president, Jester National Bank, Tyler.
Utah: J. E. McGurrin, president, Salt Lake Security & Trust Co.,
Salt Lake City.
Vermont: II. 0. Carpenter, president, Rutland Savings Bank, Rutland.
Virginia: Allen Cucullu, cashier, Lynchburg National Bank, Lynchburg.
Washington: W. D. Vincent, cashier, Old National Bank, Spokane.
Wisconsin: E. I. Wing, cashier. Batavian National Bank, La Crosse.
Wyoming: B. F. Perkins, president, Bank of Commerce, Sheridan.
Canada: Alexander Laird, general manager, Canadian Bank of Corn
merce, Toronto.

BANKING SECTION.
Isle of Pines: William Mason, vice-president, Isle of Pines Bank,
Nueva Gerona, W. I.
Mexico: 'John Clausen, manager, Foreign Department, Mexico City
Banking Co., Mexico City, Mex.
New Mexico: Alfred F. Kerr, cashier, American National Bank,
Silver City, N. M.
Mr. G. L. Ramsey, of Helena, Mont.: In the report of
the Nominating Committee I did not Observe that Montana
was called; and, on behalf of the Montana delegation, I
move that Mr. G. H. B. Lyman's name be inserted as VicePresident for that State.
Mr. James Dinkins, of Louisiana : I see Louisiana is left
blank in that report, and I wish to nominate Mr. N. E. North,
ca shier of the First National Bank of Lake Charles, as VicePresident for Louisiana.
Mr. E. M. Gilkeson, of Parkersburg, W. Va.: The name of
a Vice-President from West Virginia is left blank in the
Nominating Committee, and I nominate Mr. W. W. Woods,
cashier of the Peoples 'Bank of Keyser, as Vice-President
for West Virginia..
The President: The chair would state to the delegates that
any vacancies that are to be filled will be attended to if
members from those States where no nominations have been
made will forward their nominations to the Secretary's office.
The mere sending in of the name to the Secretary's office
will be sufficient and considered as completing the record.
All in favor of adopting the report of the Nominating Committee will now manifest it by saying aye; those opposed, no.
(Carried.)
Gentlemen, I declare the nominees regularly and duly
elected. (Applause.)
(Turning to Mr. Pierson) Mr. Pierson, I salute you. Gentlemen of the American Bankers' Association. If you were seeking for a man to become the president of your bank, I am
sure you would want to know that the man you had in mind
should have had experience in some financial institution; you
would want to know that he had had experience as a messenger, as a bookkeeper or as a teller; and I am sure that
you would want to know that he had shown executive ability, that he had been close to those who had in charge large
and important financial undertakings. I present to you as
your newly elected President a man who has had all this
experience. For several years last past Mr. Pierson has been
an active worker in the ranks of the American Bankers'
Association. He began in the humblest way, and, as time
passed, his fidelity to the cause and his willingness to lend
his assistance to anything that was to the benefit of the
organization, has caused him to be promoted along the various
lines, until in recent years he has occupied some of the most
prominent places in Association work. He has been Chairman
of the Bill of Lading Committee, and has exerted great influence in directing legislation along other lines. It affords me
great pleasure to introduce to you Lewis E. Pierson, and I
am sure that you may look forward to his administration in
the assurance that the work of the Association will go forward with greater and greater impetus.
And now, Brother Pierson, it affords me extreme pleasure
to put this button, insignia of office, upon you, and I think
the greatest wish that I can express is that you will have as
.
large a measure of joy in your connection with the members
of this Association as I have had during the time I have
. worn it, and I relinquish to your hand this office feeling that
you will administer it more efficiently than I have, and I
bespeak for you with confidence the earnest support and good
will of every member of the Association. (Applause.)
President-elect Pierson: Mr. Reynolds, Ladies and Members
of the American Bankers' Association. In spite of this very
flattering introduction I assure you that I feel hardly worthy
of the high honor conferred upon me. However, it will be my
earnest endeavor to further the best interests of the American Bankers' Association. Before I take up this gavel I
wish to express to Mr. Reynolds the real pleasure that it has
been to me to have been associated with him in the work of
this organization. I have always had the greatest admiration
for the efficient manner id which he has conducted the duties
of the office he now relinquishes. The American Bankers'
Association has grown in membership and influence tremendously since Mr. Reynolds first came into the direction of
its affairs as Chairman of the Executive Council; and, gentlemen, it is no small task to take up the work where he now
leaves it as President and continue the progress, he has made.
In order to properly attempt it the assistance of all the
officers, and particularly of every member of the Association,
is necessary; and members should take an interest to see that
at their stated meetings when delegates are elected they select the best men for membership on the Executive Council,
for it has been the endeavor of the officers of the Association
in the last few years to attract to membership in the Executive
Council the best banking talent in each State, particularly
men who would attend the meetings regularly and take an
active interest in the work.
I thank you and assure you that I deeply appreciate the
honor you have paid me. (Applause.)
I now introduce to you the gentleman whom you have elected




173

Vice-President. He has not only been honored by the Executive Council by their electing him Chairman, but in his own
State he has held the highest office possible to be given to
a banker, and he enjoys the confidence and respect of every
man who knows him.
I take great pleasure in presenting Mr. Frank 0. Watts,
President of the First National Bank of Nashville, Tenn.,
whom you have just elected Vice-President of this Association.
(Applause.)
Vice-President-elect Watts: There are times in one's life
when the heart throbs so strong as to leave upon the memory
marks never to be forgotten. If I could present to you on
canvas a chart of my heart throbs, beginning with the time
when you first showed your confidence in me, and passing on
to the time when my associates placed within my keeping the
affairs of the bank with which I am connected, and the time
when my State association placed me upon its governing
board, and then to the time when I was elected Chairman
of your Executive Council and down to this occasion when
I am elected your Vice-President, the chart of my heart throbs
would show a constantly higher and higher point. Indeed,
the high point shown to-day has been exceeded only twice
in my life—first, when a loving mother implanted upon my
lips her kiss as she bid me go forth into the industrial world,
of which Dr. Kilgo has so eloquently spoken, to make my
way, and, second, when the little woman who is now my
wife left her father's house and the home of her childhood
to share With me the joys and sorrows of a lifetime. (Applause.)
I promise you that nothing of my own doing shall for one
moment cause a failure on my part to appreciate the high
honor you have now paid me. (Applause.)
SILVER

SERVICE PRESENTED TO RETIRING
PRESIDENT REYNOLDS.
It is always a pleasure to be the bearer of good tidings,
but it is a special pleasure to me on this occasion that I
have been accorded the privilege of presenting a substantial
evidence of the friendship and good will of the members of
the American Bankers' Association to our retiring President.
Mr. Reynolds, I am charged with a message to you, sir, and,
while I deliver it, I would ask that you stand out here where
the eye of every person in the house can be upon you.
(Applause.)
Just one year ago, sir, you were called to take your place
In this illustrious line of imperial leaders as President of the
American Bankers' Association. The lofty character of the
men who had attained that distinction and the high standard
which they set demanded the utmost wisdom in choosing
their successor. The unqualified success of your administration as President has proved that no mistake was made in
your choice as President. (Applause.) At no time has this
honor been more worthily bestowed or this mantle more
gracefully worn. Your friends come now to express to you
their appreciation and esteem. They bid me to tell you how
much they admire you personally, and how appreciative they
are of the success that has attended your administration;
and, more than that, they have procured for you, and wish
you to accept this beautiful silver service as a memento of
your incumbency of this high office.
(At this point a set of silver in a large mahogany case suitably engraved was brought in and laid upon the platform.)
We do not present this to you because of its intrinsic value
nor because we are fearful that you may forget us; we know
that you cannot forget us, as we cannot forget you. 'We
present it to you that you may have ever have before you a
constant reminder of our love and friendship. (Applause.)
And now one word more. In laying down the gavel after
your most successful administration, it gives me pleasure to
say that you have qualified yourself for membership as a loyal
and worthy member of the Down and Out Club. (Laughter
and applause.)
Mr. George M. Reynolds, of Chicago, Ill.: Mr. Brown, and
Members. When I observe the character of this memento I
,
am impressed at once with the fact that the committee who
selected it must have been of a practical turn of mind because it seems to me they observed my rotundity of figure
and endeavored to supply me with that of which I most stand
in need, and it is particularly unfortunate, with all of these
implements for use along that line, that I should feel too
full for utterance. (Laughter and applause.)
Gentlemen, it was not necessary for you to present me
with a memento to cause me to remember the many friends
whom I have made in this organization nor the many honors
that have been showered upon me. I need no reminder of
that sort. However, as I use this beautiful silver service
and take up a spoon or a knife or a fork I shall imagine that
I am grasping the hand of some loved friend among you, and
shall in fancy see a picture of you there. (Applause.) And if
the portion with which I partake through the use of these
articles shall cause me to reminisce, I am sure that in fancy I
shall come back to you often. It has been said that in every
heart there is a secret chamber filled with pleasant memories
and lavender leaves, and if I have a chamber in my heart
large enough to contain tile memories that have been so

174

BANKERS' CONVENTION.

pleasant to me as I have been working in association with
you it would require a heart larger than this building in
which to put them. I appreciate more than I can tell you
the many acts of kindness you have shown me and the many
times that you have expressed your confidence in me, but I
care ten times more for your friendship and your expression
of confidence than I do for all the souvenirs in the world,
highly as I shall always prize this memento.
I cannot refrain from taking this opportunity to say that
unconsciously you have all been very helpful to me in achieving the little of success I may have had, for had it not been
for this Association and the friendship engendered by it, I
perhaps would still be running a little country bank in Iowa.
I hope you will not think I am sentimental in referring to
this, for I am sincere when I say to you that unconsciously
through your friendship, support and confidence you gave me
strength and courage to achieve, and you more than I are
responsible for the positions of trust that have come• to me
in later years.
Again and again, I thank you. (Applause.)
Mr. J. M. Elliott, of Los Angeles, Cal.: Mr. Reynolds, you
will have to stand up once more. On behalf of the Association and by the hand that merely represents your thousand
and one friends from one end to the other of this country,
I decorate you with the President's badge. Last year the
Association honored you with the Presidency, and you have
honored the Association by your incumbency of the office.
May this badge ever be a reminder of that fact to you and to
your descendants afterwards. (Applause.)
Mr. Reynolds: Thank you. I can only say that if I had
a vocabulary that would respond equal to the promptings of
my heart I might be able to properly express my thanks.
(Applause.)
THANKS TO CHICAGO.
President Pierson : Is there any further business to come
before the convention?
Mr. P. C. Kauffman, of Tacoma, Wash.: As a slight expression of appreciation on the part of the delegates to this
convention for the many courtesies that have been extended
to us while in Chicago, I beg leave to introduce the following resolution and move its adoption by a rising vote:
Resolved, Tha: the members of the American Bankers' Association
hereby express their hearty thanks to the associated banks, bankers,
and business men generally of Chicago for the very efficient entertainments that have been given them and all the courtesies so hospitably
extended; to the press for the splendid report of the proceedings of
this convention; to the telegraph and telephone companies for courtesies received; and to all who in any way have contributed in making
this, the thirty-fifth annual convention of the American Bankers'
Association, the most successful in the history of the Association.
The motion to adopt the resolution was seconded from all
parts of the hall.
President Pierson : The Chair takes great pleasure in putting the question on this resolution, and will request that it
be adopted by a rising vote.
Adopted.
Mr. August Blum: If there is no other business to come
before the convention, I move that we adjourn.

41




Secretary Farnsworth: Before adjournment is taken,
President, I wish to announce that the meeting of the
Executive Council will be held in the banquet hall, on
sixth floor of the Auditorium Hotel, immediately after
convention adjourns.

Mr.
new
the
this

MEN PRESENTS COMPLIMENTS.
I would also read the following telegram, addressed to the
Secretary, under date of September 14, from the National
Association of Credit Men:
The National Association of Credit Men presents its compliments
to the American Bankers' Association and extends its best wishes for
a successful convention. The following resolution was unanimously
adopted:
Whereas, The American Bankers' Association and the National Association of Credit Men have many interests in common, which can be
and are best advanced through co-operation;
Be it resolved, That we, the members of the National Association
of Credit Men in convention assembled, do express our sincere gratification at the cordial relations existing between the two organizations,
and take this occasion to declare that it is our earnest desire to cooperate with the American Bankers' Association in any movement
looking to the improvement of credit conditions which its members
may become interested in furthering.
President Pierson: Gentlemen, you have heard the communication from the National Association of Credit Men. What is
your pleasure in respect to it? It would seem to the Chair
that it would be in order for the Secretary's office to make a
suitable response to it.
Mr. IL S. Hall, of Waterville, Me.: I move that the Secretary be instructed to extend a suitable response to the communication.
The motion was seconded.
President Pierson : All in favor of the motion instructing
the Secretary's office to suitably acknowledge the greetings
of the National Association of Credit Men will say aye; opposed, no.
Carried.
Secretary Farnsworth: I would announce that we had prepared for the Vice-Presidents of the various States a permanent badge for them to wear during this week and to take
away with them and retain to wear at future conventions.
Quite a number of those badges have not been called for, although we sent out notices to the Vice-Presidents and asked
them to inquire for their badges when they registered. If
there are any of the Vice-Presidents here who have not called
for their badges I would request that they do so this evening
at the registration headquarters, otherwise we will mail the
badges to them.
President Pierson: Are there any other announcements to be
made?
ASSOCIATION

OF

CREDIT

Secretary Farnsworth : That is all, sir.
President Pierson: Then the motion to adjourn will be put.
All in favor of adjourning will say aye; opposed, no.
Carried.
Adjourned sine die.

TRUST COMPANY SECTION
AMERICAN BANKERS' ASSOCIATION
Fourteenth Annual Meeting, Held at Chicago, Ill., September Fifteenth, 1909
INDEX TO TRUST COMPANY PROCEEDINGS
Post-Mortem Administration of Wealth
Trust Company Growth for Five Years
Detailed Proceedings - Address of Welcome -

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175
178
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18o

Address by President Report of Secretary Report of Executive Committee Report of Committee on Protective Laws

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181
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183

Post-Alortem Administration of Wealth.
BY DANIEL S. REMSEN, of the New York Bar. Author of "Remsen on the Preparation and Contest of Wills."
Death is the great conveyancer. To-day we own our
property, to-morrow death works a transmission to others.
It fulfills the conditions upon which settlements and trust
deeds depend. It sets in operation the law of intestate
succession and gives effect to wills. Thus in our country
property to the value of billions of dollars passes each year
under some form of post-mortem administration. In all
such administration trust companies have a peculiar interest, but for the sake of simplicity let us confine our
attention to testamentary administration and consider our
subject from the viewpoint of a person about to make
a will.
REQUISITES OF TESTAMENTARY ADMINISTRATION.
The first requisite of a proper testamentary administration is a properly planned will. The second requisite is a
carefully prepared will. The third requisite is the selection
of proper executors and trustees.
PLANNING A WILL.
The first thoughts of a person about to make a will
relate to its plan: (1) what property he may give, (2) to
whom he will give it, and (3) whether his gifts shall be
absolute, conditional or in trust. With these points in
mind the wise testator seeks sound legal advice. He remembers that many things, expected and unexpected, may
or may not happen before or after his death. The amount
or character of his property may materially change. His
real estate may be converted into personal property or
vice-versa. His securities may be paid off or otherwise
changed in form. The value of his property may increase
or decrease. Innumerable changes may occur through marriage, birth or death among the objects of his bounty. His
own condition may change so that he may no longer have
capacity to amend his will to meet new conditions as they
arise. In short not only probabilities but possibilities must
be considered and the will planned accordingly.
WRITING A WILL.
In the preparation of no legal document is the, inaccurate
use or location of a word or phrase more serious than in a
will. Under the most favorable conditions every person
experiences difficulty in writing the English language so as
to convey his exact meaning beyond the possibility of a
misunderstanding or a double reading. In testamentary
writing this difficulty is increased tenfold, for the writer
must look into the future and prepare an instrument which
is to deal with such conditions as time may bring to the
testator, his family and estate.
INSURANCE OF WILLS.
A will cannot be insured against a contest as can a house
against fire. The only known method of insuring a will




is to employ the most skillful of professional experts to
draw the will in the first instance or to vouch for its accuracy before death renders amendment impossible. No
one can prevent a judicial inquiry into testamentary
capacity, but much may be done to prevent disputes conterning the meaning and legal effect of the instrument and
to render litigation improbable. The will of Samuel J.
Tilden is a far-famed but unfortunate example in testamentary writing of what "might have been." It is not
generally known that in scrutinizing that will the late
James C. Carter pointed out the very defect that proved
fatal and that the Governor's failure to make the correction was due to his procrastination in directing Mr. Carter
to prepare an amendment. As Hon. John Bigelow puts it:
Governor Tilden was "surprised by death before he had
executed his intention to profit by the counsel" of Mr.
Carter. Thus it appears that a letter or telegram from
Greystone doubtless would have saved the Tilden will.
Trust companies, as prospective executors and trustees,
have a special interest in proper testamentary writing that
they may accept such trust business as comes to them
without being subjected to unknown liabilities in the performance of duty. Consequently they have done much for
the betterment of testamentary writing, but still the safe
and sound will is the exception rather than the rule in
America. Where testators subject their wills to a rigid
critical interpretation before death fully three out of five
discover satisfactory reasons for making amendments.
Most testators seem to proceed on the theory that it is
better to let their estates take the chance of defending
a cheap or home-made will at any cost rather than themselves to take the necessary steps to insure a proper document. Thus it is that an undue number of estates pass
under defective or ambiguous wills, creating family feuds
and paying what may be termed salvage to the legal
profession.
Americans do not appreciate the value of constructive
law. American lawyers and law schools need more to
stimulate English patience and perseverance in the preparation of legal documents. Their attention is riveted upon
the remedial at the expense of the constructive. While in
case of disaster the proper handling of a wreck is as necessary in law as at sea, constructive law is of equal if not
greater public utility, for it insures peace and prosperity
and, in the case of wills, prevents disruption of families
and a ruinous waste of assets. Constructive law should
receive more attention than it has in the past and law
schools should aim to turn out architects-at-law as well
as masters of the remedial arts.
When laymen and their legal advisers are more fully

176

BANKERS' CONVENTION.

guaranty for the performance of its duty, but not as a
guaranty for the performance of duty by a co-executor or
co-trustee. Where the possibility of loss through a coexecutor or co-trustee is not cut off by a surety company
bond it is generally well hedged about by a trust company
for its own convenience and protection. The practice of
HUMAN AGENCY IN ADMINISTRATION.
trust companies acting as co-executors or co-trustees in asLet us now consider from the testator's view the human suming the custody of securities is in itself an important
agency upon which he must rely to carry the plan of his element of safety. Some testators insert provisions in their
will into effect. We must accept the testator's point of wills looking to this end, often to the relief of their indiview, for he is entitled to make his own selection. When a
vidual executors and trustees.
person makes a will and Selects his executors and trustees
Both plans of safety involve a corporate custody of sehe has several courses open: (1) he may select one or more curities, in one case joint and in the other absolute. They
individuals with or without bond; (2) he may select a trust differ in that the liability of the surety company is limited
company to act alone, or (3) he may select a trust com- to the amount of its bonds while the liability of the trust
pany jointly with one or more individuals. Each one of company is co-extensive with the estate. The difference
these agencies has some advantages and some disadvantages also extends to compensation. The former receives an
over the other two. We cannot say :that one of these annual premium as for insurance while the latter receives
agencies is always better than another, for the personal
no compensation except for the performance of its duty as
equation varies with each selection. We are told that executor or trustee.
nature has not produced a perfect blade of grass, a perIn England a new feature has been injected into trusteefect flower or a perfect fruit and we might add that human ship. Corporations with powers somewhat corresponding
nature has never produced a perfect trustee, but as one
to our trust companies are sometimes appointed custodian
blade of grass, one flower, one fruit is more perfect than
trustees for the purpose of holding securities subject to the
another, so among trustees the testator has room for choice. trust, while the other duties of the trust are performed by
The duties of executors and trustees are two-fold: they individuals, known as managing trustees.
are not only business and financial but also human and
Experience has shown that both surety companies and
personal. A testamentary trust is more than a business; trust companies under proper capitalization and manageit carries with it a confidence. Under some wills the busiment offer excellent plans for reducing to a minimum the
ness and financial sides predominate, but there is always
possibility of loss attending post-mortem. administration.
present a feature incident to the lives, character and we-. Thus the testator has at hand ample means for the profare of the beneficiaries. This element of post-mortem ad- tection of his estate from dangers to which it would otherministration demands a most delicate touch of human kindwise be subjected.
ness sometimes even paternal in its .nature, often sought
WISE MANAGEMENT.
and too seldom found. The executor and trustee, whether
To insure an estate against loss from embezzlement and
individual or corporate, should command the respect and
dereliction of duty is of course a wise precaution but it is
confidence not only of the testator but also of the benewholly negative in character. The testator seeks affirmaficiary. Whether an individual or a corporate official, he
tive qualities. He demands sound judgment, wise and effishould be one to whom the beneficiary not only may but
cient management during the whole term of the adminiswill be likely to go for counsel and advice. In short he tration, but above all at its inception when an unwise
should be one who will take a personal interest in the welexercise of discretion has often resulted as disastrously
fare of the beneficiary and conscientiously, with gentleness as embezzlement or dereliction of duty.
and firmness, carry out the wishes of the testator as the
The first duties under a will are performed by the execfirst law of his being.
utor. After a thorough study and understanding of the
will he realizes on the testator's assets, pays his debts and
SAFETY OF TILE ESTATE.
distributes the surplus or turns it over to trustees for inThe prime factor in post-mortem administration is the
vestment according to the terms of the will. 'Where the
safety of the estate. It often determines the selection of
duties of executors end the duties of trustees begin. The
executors and trustees. The old method before the days
estate to the trustees in such
of trust companies and surety companies was to rely upon executor turns over the trust
form as the will directs. The trustees must 'thereupon
the character and financial standing of the individuals apthe investments and square them with
pointed, supplemented in some jurisdictions by individual review the state of
the law and the terms of the will. If under the will the
bonds. Such appointments have been the occasion of much
executors have already performed that duty the task of
unsatisfactory administration. They have resulted in loss
the trustee is much reduced. Thenceforth the duties of the
embezzlement and dereliction of duty. To seboth from
trustee are those of investment and re-investment and the
cure. safety from these hazards trust companies and surety
collection and application or payment of income. Thus it
each offered a solution which has proved
companies have
is that the duties of executors are less routine in their
satisfactory to many testators.
character, more difficult to perform and more temporary in
surety companies is the appoint• The plan advocated by
their nature than the duties of trustees. Consequently
ment of individuals of known character and business ability
testators are disposed to look more for mature experience
under a legal or testamentary requirement that suitable
and discretion in the selection of executors and less to
bonds be furnished, preferably by a surety company at the
longevity. In the selection of trustees testators, in a large
expense of the estate. Such testamentary provisions are
measure, seek the same qualities with an added care for a
at the request of prospective executors
sometimes inserted
continuity of the trusteeship during the trust term. The
and trustees on the ground that the joint control of assets
element of personal interest in the beneficiaries is usually
and the accompanying supervision of surety companies is
more or less present in the mind of the testator in the
an aid to proper administration, a protection against misnegligent or wrongful selection of both executors and trustees and is frequently
takes and a safeguard against the
consideration, sometimes even at the expense
acts of employees or of a co-executor or co-trustee. The a determining
of good business administration.
bonds thus advocated guarantee the estate against loss
INDIVIDUALS AS EXECUTORS AND 'TRUSTEES.
arising from dereliction of duty as well as from misappropriation of funds.
While in the selection of individuals as executors and
The plan advocated by trust companies is their own aptrustees the testator has a wide range of choice there are
pointment with or without the addition of one or more
certain qualities which he cannot overlook. He must have
individuals as co-executors and co-trustees. If a trust
integrity and ability and should have good business habits.
company is appointed its capital and surplus stand as a In selecting such persons the testator usually relies on
alive to the importance of better testamentary writing
litigation concerning wills will be materially less; testators
will act with more confidence; families will be more harmonious; beneficiaries will fare better and executors and
trustees will be more free from personal liability.




TRUST COMPANY SECTION.
personal acquaintance, observation and reputation. He
looks with confidence upon persons of good personal habits
and associations, upon males rather than females, upon
married rather than unmarried men, upon the man who has
no .adverse interest, who is morally sound, whose family is
not extravagant, who has a means of livelihood, who does
not live beyond his means, who has good and regular business
habits, who is moderately successful, whose business is not
speculative, who does not buy and. sell on margin, who has
a mind of his own but is not self-opinionated and who is
'free from prejudice, 'capable of discrimination, sound in
'judgment and considerate of the rights of others.
This may be a high standard to set for post-mortem
administrators of wealth, but to me it seems to be the
true one.. It certainly is one testators are continually, applying and therefore should receive serious consideration
,in the selection of directors, officers and employees of a
:trust company if it is to attain any degree of success in
this important branch of its 'business.
KINDRED AS EXECUTORS AND TRUSTEES.

In selecting executors and trustees the mind of the
'testator usually turns first to his family, ..then to his
friends, business associates, legal advisers and trust com'panies. , In his family he is most likely to find an element
of personal interest which strangers do not possess. Yet
So frequently are other qualities absent that no general
'rule can be stated as to the wisdom of placing post-mortem
'administration in the hands of kindred.. So much depends
'Upon the individual, the estate and the will that each case
'must be a law unto itself.
Fortunately the testator is usually the best fitted to
'judge of the situation. For example, if the testator's estate
is small and is given absolutely to his wife, she practically
becomes the owner of the surplus and under ordinary cir'cumstances she may well be entrusted with power over
her own. If, on the other hand, the estate is large or somewhat involved or trusts are present in the will, the necessity for outside assistance becomes more apparent.
Where the will contains no trust, and the corpus is to be
divided on the settlement of the estate, usually there can
be no objection to the selection of executors because of
interest or kinship. Where business qualifications, honesty
and ability are sufficient and family jealousies not likely
to be aroused, such appointments are eminently proper. If,
however, the will contains a trust very different considerations necessarily enter into the selection of a trustee. Thus
a beneficiary, whether a life-tenant or remainderman, is an
unfit person in law and in fact by reason of interest. Near
relatives are objectionable for the same reason and because
they are "less able to withstand the importunities of beneficiaries." In the same way, where a husband, wife, parent
or other near relative is appointed trustee such relationship
"is too often made an excuse for lax management, and the
knowledge that a breach of trust is likely to be condoned
not infrequently leads to a disregard of strictly legal management which is the only safeguard of trust estates."
•

LAWYERS AS EXECUTORS AND TRUSTEES.

In many respects the legal adviser is the logical executor
and trustee of his client's estate. It is a recognized part, of
his business. He is acquainted with its duties and obligations. He is the testator's confidential adviser in all domestic, personal and financial affairs. He is acquainted
with the wishes, purposes and estate of the testator more
intimately than any other person. He is accustomed to
weigh reasons and to advise in difficult situations. His
Mind is usually more free frOM,prejudice, more amenable
to reason and less subject to undue influence 'of a beneficiary than a person otherwise situated. If wise in counsel
and clothed with power and discretion he is often an important peacemaker between adverse interests.
, Nevertheless, the lawyer has the frailties of human nature and trust funds are not always safe in his custody
unless he gives ample bonds for the performance of his
duty. Where. however, lawyers are competent and honest
the English practice of mak ing the testator's solicitor one




477

of his executors and trustees has probably given more
general satisfaction than the selection of any other class
of individuals outside of his immediate family.
CORPORATIONS AS EXECUTORS AND TRUSTEES.

Trust companies have earned an excellent reputation as
executors and trustees and offer valuable qualities to the
testator. They offer security of assets, continuity of existence, experience, business management, readiness of access,
opportunity of favorable investment and due consideration
for beneficiaries. In these respects the record of trust com-.
panics as a whole is most satisfactory and honorable.
.Where, however, trust company management is open to
criticism its defects relate to individual companies rather
than to trust companies 'as a class and arise from undue
routine in business, undue pressure of business on individual
'officials, 'disinclination to asstime liability, a lack Of proper
.self inspection and the unfortunate selection of directors,
officers, counsel and employees. Vigilance in these matters
is soon discovered by testators and is the price of corporate
success in testamentary administration.
While the character •and general reputation of a trust
company is often responsible for its appointment, yet,in
,
very many cases the personnel of its management is decisive. Of the importance of the personal element in a trust
'company there can be no doubt; it is much more the subject of discussion among testators and their counsel and
more often. the determining factor than is generally
supposed.
Hon. Lyman J. Gage has well described the situation. He
says: "Character and capital are the best assets of a trust
company. Its officers and directors, therefore, should be
men of wide experience, men who have been tried and who
devote themselves with honorable zeal to the high duties
,of their positions."
•

COMBINATION OF COUNSEL AND TRUST COMPANY.

Generally speaking and without specifying particular
situations or testamentary conditions, the best results seem
to have been attained in, post-mortem administration of substantial estates by combining as executors and trustees a
trust company and the testator's counsel, sometimes alone
and sometimes joined with one or more of the testator's
family or friends. Thus are secured the advantages •of
corporate management as well as personal responsibility
and individual discretion.
This is not merely a personal view. It is the opinion of
many persons, including some of the greatest financiers in
this country. To quote again from Mr. Gage: "Where the
family counsellor acts with the trust company as cotrustee advantages are obtained which explain in a large
measure the success of the trust company." I might add
that it is often an inducement for counsel to act if they
know that they are to have the co-operation of a first-class
trust company with its experience and facilities for receiving and paying out money, making investments, safeguarding securities, keeping accounts and otherwise handling a multitude of details more or less burdensome to an
i
v idual
CONCLUSION.

Whatever we may think or say concerning executors and
trustees the fact remains that administration of property
after death depends kimarily upon the testator. He may
direct it into any 'channel, giving or withholding such directions, powers .and discretions as seem to him best. As
he has the power he must accept the responsibility. If he
plans his will wisely, makes sure that it will stand the
strictest scrutiny after death and selects his executors and
trustees carefully, requiring bonds where desirable, he may
reasonably expect satisfactory results but not otherwise.
The trust company, after adopting proper business methods and squaring the human agency behind the corporate
name with the qualities which carry confidence.and make
individuals desirable for positions of trust, can render no
greater service to itself and to the interests it is to serve
than by educating the public as to the importance of a
sound will and the advantages of corporate administration
after death.

178

BANKERS' CONVENTION.

Trust Comfttny Resources and Revenues: A Five-Year Summary.
BY EDWARD T. PERINE, President of The Audit Company of New York.
BASIS OF THE SUMMARIZED FIGURES.
The Executive ComMittee of the Trust Company Section
have once more honored me with an invitation to prepare
and present to the Section a statistical statement of the
affairs of all the trust companies. In seeking to fulfill this
request, and in the no small task of compiling the essential
figures, as of a period of five years past, a basis of research
has been available at the present time which did not exist
at the beginning of that period. I should, therefore, at the
outset, make my acknowledgments to the valued collections of statements and other data which have been issued
annually since 1903 by the United States Mortgage and
Trust Company, of New York City, under the title "Trust
Companies of the United States."
These statements and other data show, even on the most
casual inspection, that the trust companies are growing,
alike in numbers, in resources, and in earning power, and
an interesting question presents itself, therefore, as to what
the precise measure of this growth has been. Phases of
this question affect many trust company accounts. With
expanding aggregates of capitalization, have surplus funds
and undivided profits also expanded, and in what amounts?
With increasing deposits, general and in trust, have relative
cash holdings been equally maintained, if not established
on a higher ratio? Have the failures, and other disappearances from the lists of companies reporting in former
years been frequent or important, as bearing upon the aggregate position of all the companies? Has the volume
of dividend disbursements been well sustained? Moreover,
what have the effects of the recent business depression been
upon the trust companies as a whole, and how completely
have they rallied from that depression?
These queries are now to be answered, in so far as aggregates and averages of dollars and cents will show, and
answered in a manner which cannot fail to be gratifying
to those in interest in the administration of trust company affairs.
Tabulations have been prepared by the speaker, using the
figures contained in the 1904 to 1908 editions of the reference book before alluded to, together with the figures
shown on advance sheets for 1909, the latter having been
courteously loaned for this purpose by the publishers. The
resources, and corresponding liabilities, are as of the date
June 30 in each year; while the dividend summaries are
on a basis of the annual rates reported down to December
31 in each previous year.
The tabulations show many interesting results, and your
attention is invited to certain of the totals, such as these.
GROWTH IN NUMBERS AND IN CASH HOLDINGS.
There has been a marked growth in the number of companies reporting. The totals are:
994 Companies in 1904
1,115
" 1905
"
1,304
" 1906
"

1,480 Companies in 1907
" 1908
1,470
"
" 1909
1,496
"

an increase for the five years of 502 companies, which num-

ber represents an increase of over 50 per cent. since 1904.
The combined cash on hand and in bank held by the
trust companies on June 30 five years ago, amounted to
the sum of 622 millions of dollars. In the succeeding years,
down to 1908, the respective totals were 633 millions, 588
millions, 637 millions, and 804 millions. On the same date
this year the remarkable total was reached of 999 millions
of dollars, which sum carried with it a sufficient number
of odd thousands of dollars to make the cash holdings of
this year's 1,496 trust companies only a shade less than a




round aggregate of one billion dollars. The increase in the
cash and bank accounts in 1909 over 1908 has been found
to be 195 millions of dollars, an increase of 24 per cent.,
while the increase for the.five years is 377 millions of dollars, or nearly 61 per cent.
DEPOSITS BEFORE AND AFTER THE PANIC.
In 1904 the trust companies were liable to their depositors, general and in trust (including other trust companies
and banks), in the sum of 2 billions 361 millions of dollars.
A year later this liability aggregated 2 billions 955 millions.
In 1906 and 1907 the respective amounts were 3 billions
18 millions, and 3 billions 222 millions. Then, in. 1908 there
occurred, for the first time in trust company history, a
heavy shrinkage in their deposit liabilities. From June,
1907, to June, 1908, there was a contraction from 3 billions
222 millions to 2 billions 913 millions, the decrease being
309 millions of dollars, almost 10 per cent., and leaving a
smaller aggregate than in any year since 1904. The total
for June of this year is, therefore, a sum worthy of especial
scrutiny. In it is to be read the story of a hoped for
recovery. In all the figures which have been summarized
there is none more satisfying, none more convincing of the
fact that panic conditions have been superseded by an era
of real prosperity, than to know that with only a slight
increase in the number of trust companies—the number
reporting this year being 26 more than last year—the total
deposits for 1909 have reached the important total of 3 billions 567 millions of dollars, an increase of 654 millions for
the year, or 22 per cent., and an increase of 1 billion 206
millions for the five years, which is an increase of 51 per
cent.
In considering the various totals of deposits it is to be
observed that the percentages borne thereto by the totals
of cash on hand and in bank, taken together as total reserve, have at no time during the five years averaged less
than 19.5 per cent., the average percentages on June 30
in each of the years having been:
1904
1905
1906

26.3 per cent.
21.5
"
19.5
"

1907
1908
1909

19.8 per cent.
27.6
"
28.0
"

an increase for the year of .4 per cent., and for the five

years of 1.7 per cent.
THE TOTAL OF RESOURCES AND LIABILITIES IN 1909.
The summarizing of the total liabilities of the trust companies, and of their corresponding resources, naturally leads
into aggregates of imposing size. It is found that the
statements of all the trust companies reporting in 1904
showed an accumulation of 3 billions 138 millions of dollars. The succeeding years of 1905, 1906 and 1907 show
3 billions 802 millions, 3 billions 944 millions, and 4 billions
221 millions respectively. In 1908 there was a contraction
to 3 billions 917 millions, but the recovery of 1909 marks
a great growth, the total being the vast sum of 4 billions
609 millions of dollars. These four and three-fifths billions
of total resources and liabilities show an increase since a
year ago of 692 millions of dollars, or over 17 per cent.,
while the increase for the five years is 1 billion 471 millions
of dollars, a 47 per cent. increase.
TOTAL CAPITAL AND SURPLUS SUMMARIZED.
Considering next the figures tabulated to show total capitalization, it appears that the share capital of the present
1,496 companies is 415 millions of dollars, being an increase
of 85 millions over the 330 millions of capital outstanding
on the part of the 994 companies of five years ago. The

TRUST COMPANY SECTION.
average capital per company at that time is thus found to
have been 332 thousands of dollars, yet even in the face
of the great growth which has occurred in numbers during
the five years, the average trust company of to-day is
now an institution with no less than 277 thousands of
dollars of capital.
The totals under surplus and undivided profits show
growth in a marked degree. The figure for five years ago
was 379 millions; to-day it is 502 millions, an increase of
123 millions.
When these totals of capital and of surplus and undivided
profits are united in a lump sum of liability to stockholders, it is found that the aggregate of such liability is now
917 millions of dollars, as against 709 millions five years
ago. The same figures afford a basis of determining the
average percentage of book value applicable to all of the
capital stock of the companies, and it is found that the
average book value is at present $221.06 for each $100 of
par, as compared with an average of $214.88 in the year
1904.
DTY MILLIONS 01. EARNINGS PER ANNUM:
1
Interesting results appear in the 'tabulationsas regards
dividend payments throughout the five year period. On
December 31, 1903, there were 560 companies on a dividend
paying basis. The number has grown in succeeding years
to 661, 777, 900, 954 and 984, respectively. The average
rate paid upon the shares of those companies which have
been dividend paying has increased from 10.3 per cent. to
11.9 per cent., while the average percentage of all the companies, dividend paying and non-dividend paying, has increased from 7.7 per cent. to 9.4 per cent. The total
amounts disbursed each year have been computed, with the
result of finding that there has been a constantly increasing
volume of dividends in each of the past five years. The
totals so disbursed have been:
1904
1905
1906
1907

$28,000,000
32,000,000
38,000,000
30,000,000

1908

$39,000,000

A total of..$176,000,000

which if it be taken together with the augmentation of
surplus and undivided profits, as already referred to, would
show that the revenues of American trust companies, during five years past have been approximately 300 millions
of dollars. It should be stated that in this sum is included
some element of paid in surplus, chiefly in respect of newly
formed companies, but if this be deemed to be equal to
50 millions of dollars (a sum which represents more than
half of the amount of capital stock of all the new companies), there would still remain an aggregate of trust
company revenue since the close of the year 1903 amounting to at least the sum of 250 millions of dollars.
Referring again, and briefly now, to the discussion of
aggregate condition. In all the statistics heretofore compiled on behalf of the trust companies, the conclusions of
the compilers have been affected by two elements of growth,
one the increasing numbers of the companies, the other
their increasing size. It is a pertinent inquiry, therefore,
as to how many concerns which were in business five years
ago are no longer in operation, what the status was at
that time of the concerns which are still in business, and
what it now is, as apart from the concerns which have been
formed in the meantime. The facts have been ascertained
to be these.

179

ported as being no longer in trust company business (having in most instances become National or State banks),
together with 23 companies whose statements have not
been obtainable this year. These disappeared and nonreporting companies represent only 50 millions of total
resources. The remaining companies, inclusive of 21 mergers, number 807. These are the survivors, the veterans, so
to speak, of the trust company army. A summary of their
aggregate position, contrasted with the corresponding aggregate for 1909, reveals striking conditions of past growth
and present strength.
These 807 "veteran" companies had, on June 30, 1909,
stock and bond investments of 978 millions of dollars, an
increase over 1904 of 264 millions. Their loans, including
mortgages, and their bills receivable amounted to 2 billions
38 millions, an increase of 468 millions. Their cash on
hand and in bank amounted to 897 millions, averaging over
a million dollars per company, and showing an increase in
total holdings, as against five years ago, of 293 millions.
Their real estate, banking houses, safe deposit plants, and
furniture and fixtures accounts, totaled 117 millions, an
increase of 37 millions. Similarly their capital stock
showed an increase of 19 millions, being now 320 millions.
Their surplus and undivided profits showed an increase of
99 millions, being now 468 millions. Their deposits increased during the five years 883 millions, an average of
over a million dollars per company, the present total being
3 billions 174 millions. In aggregate resources and liabilities these 807 companies now hold 4 billions 72 millions,
an increase of 1 billion 48 millions for the five years. This
aggregate of 4 billions 72 millions represents 88 per cent.
of the 4 billions 609 millions of aggregate trust company
wealth of the country, the remaining 12 per, cent. being
held by 689 companies organized within the five years, or
not reporting in 1904, and now showing as their share of
the total wealth 536 millions, or somewhat less than oneeighth of the whole.
Add to this the fact that the companies which are five
or more years old disbursed in dividends during the calendar
year 1908 upwards of 351 2 millions of dollars, or over 90
/
per cent. of the aggregate dividends of all the companies,
and it is a fair claim to make on behalf of these 807
companies of five years ago, and of the present, that they
have recently established a record for growth and for earning capacity as well, unequaled by the accomplishments of
any similar number of financial institutions anywhere during an equivalent period of time.
A CONTRAST WITH NATIONAL BANK FIGURES-

The growth of the trust companies since 1904, enormous
as regards the older institutions and substantial in the case
of the newer ones, is clearly proven by the summaries made
of each year's figures. With a volume of wealth nearly
approaching 5 billions of dollars, the entire number of trust
companies are approximately equal in size to the National
banks of ten years ago, the fact being that 3.583 National
banks reported on June 30, 1899, to the Comptroller of the
Currency that their total resources and liabilities were 4 billions 708 millions, or only 99 millions of dollars more than
the total wealth of the trust companies of to-day. During
five years past the percentage of increase in the total resources of the National banks has been 42 per cent., that
of the trust companies 47 per cent. To-day the deposits of
the trust compaines, exclusive of amounts due other banks.
WHAT IS SHOWN BY 807 "VETERAN" COMPANIES.
are a sum approximating 70 per cent, of the same liability
Of the 994 companies reporting in 1904, there have been
on the part of the National banks; while the total re52 failures, without subsequent resumption of business. sources of the country's 1.496 trust compaines are nearly
These failures occurred in 26 different States, but no con- 47 per cent. of those of the country's 6,926 National 'btifiks.
siderable number took place in any one section of the
The entire record is ti gratifying one. The figures, and in
country. It is true, however, that 37 of the failed comparticular those of the present season, are a demonstration
panies were located east of the Mississippi River, and only
of the strength and stability of the corporations here repre15 beyond. The total resources of these 52 companies are sented at this convention time. In this fact there is reason
found to have been .64 millions of dollars, or only about • for much congratulation, ;the -e is cause for every' tncour2 per cent. of the aggregate of all the companies for 1904. agement. May the growth and abounding success 'of the
There were, in addition, 91 companies which are now retrust companies continue in other years—and always!




Detailed Report of Proceedings,
Fourteenth Annual Meeting TRUST COMPANY SECTION, Held at Chicago, III., September 15, 1909
MORNING SESSION.
WEDNESDAY, SEPTEMBER 15, 1909.
CHICAGO, ILL., September 15, 1909.
The Fourteenth Annual Meeting of the Trust Company
Section was called to order by the President, Mr. A. A. Jackson, Vice-President of the Girard Trust Company of Philadelphia, Pa.
The President: It gives me very great pleasure, gentle.
nun, to call to order the Fourteenth Annual Meeting of the
Trust Uempitny Section of the American Bankers'. Association.
.The Rev. Herman Page, rector of St. Paul's Church of Chicago, will ask the Divine blessing upon our gathering.
PRAYER.
.
By Rev. Herman Page.
Our Heavenly Father in whom we move and live and have our
being!
We beseech Thee to give us a realizing sense of our sonship to
Thee and cur fellowship to one another.
We thank Thee for the many blessings that have been vouchsafed
to. us, and especially for the privilege of living and working in this
great ahd beautiful land in this wonderful age.
We beseech Thee to increase in us a deep sense of our responsi•bility to Thee and to our fellows, and may we find In the work which
Thou [mast given us to do our chief opportunity for serviCe.
Grant that we may more and more appreciate the virtue of honesty,
and especially the relation of brotherhood that still will lead us to
the service of our fellowmen and give us joy in our work.
Be with the members of this organization in the meeting to-day,
and grant that Its deliberations may redound to their good and to
Thy honor, and that all who are present may receive inspiration and
strength from their attendance hereat.
We ask it all in Jesus' name, Amen.
The President It seems like going back to the halcyon
days to find on this platform a man who has presided over
the destinies of this Section from 1904-5, and who has always
been active in the Executive Committee. So it is needless for
me to introduce him to you, but I know we are all extremely
glad to have Mr. E. A. Potter, President of the American
Trust & Savings Bank of Chicago, welcome us to his city.
(Applause.)

Address of Welcome, by E. A. Potter, of Chicago, Ill.
Mr. President and Gentlemen: It is my agreeable duty to
welcome you to this city on behalf of the trust companies
of Chicago, and I do so most heartily, expressing the hope
that your sojourn will prove one of great pleasure and much
profit. It is needless to say that I refer to mental profit.
You have gathered from all quarters of the United States
for an interchange of ideas, for the unselfish and patriotic
consideration of policies and methods for the best administration of trust companies on lines which shall still further safeguard and protect, and by which we may wisely manage the
interests in our charge.
I believe that the value of these conventions is appreciated
by the bankers of the country, but I feel that they are and can
be made of particular value to trust companies. While our
National banks owe their existence to and are controlled by
the Federal Government, trust companies are organized under
the laws of the various States. These laws, while all enacted
with the same general purpose, namely, to make our banking
system safe, are greatly at variance; and I think we should
take advantage of opportunities such as this convention offers,
to study each other's methods and be prepared to exert our
influence in procuring regulations as nearly uniform in all the
States as is possible. This impresses me as especially desirable in view of the growing tendency on the part of the public
to make use of the facilities which trust companies have to
offer.
We meet on the common ground of good for our clients and
ourselves, free from selfish or sectional jealousies, with open
minds to consider, digest and advance those methods and ideas
which seem best for all of us, knowing that what is best for
us in one section of the country is best for all in all sections,
striving to one end, namely, to serve the public and ourselves
for the good of both.
Chicago seems to me a most appropriate place for your deliberations, located as it is near the center of the country, with
unequaled transportation facilities radiating in every direc-




'lion. Chicago is a great metropolitan and cosmopolitan city,
of which I am sure all citizens of the United States are justly
proud: A book lately compiled by our city administration
shows a population of two and a half millions, in an area of
190 square miles, which population comprises thirty-six different nationalities. It is the largest market for grain, live
stock, lumber and iron and steel in the world, also the most
important railway center. Its growth as a financial center is
best. illustrated by a comparison of its bank capital, deposits
and. clearings with those of ten years ago. Its bank clearings
in 1908-9 were $11,853,814,000, as against $5,517,335,000 in
1898. - The combined capital and surplus of its banks at the
present time is $99,070,787, as against $47,619,365 in 1898.
The total deposits of its National and State banks is $779,
579,336, as against $302,089,547 in 1898—in each case an increase over 100% in the ten years.
In an able article written by our fellow trust company
President, ex-Comptroller of the Currency Charles G. Dawes
and published in a recent number of "The World To-Day," he
shows that the gain in what he terms the banking power of
the whole country during the past eight years was 65%, whereas,
in the sixteen States of the Middle West tributary to Chicago
the gain was 118%.
But it is not my purpose to weary you with statistics nor
to enumerate our varied industries and resources, our many
elements of financial strength and material beauty—of which
you are no doubt as familiar as am I—besides, thirty-seven
years' residence in Chicago has developed in me the characteristic modesty of most Chicagoans which makes us all reluctant to boast.
The citizens of Chicago, realizing the great material growth
of the city and the enormous 'traffic congesting its streets
daily, realizing, too, the natural advantages the city has for
development along more attractive lines, but keeping in mind
the practical, are interesting themselves in what is known
as a "Plan of Chicago," looking to wider and better streets,
more conveniently constructed and connected for handling
traffic; a more imposing water front, statelier public buildings—all making our city more beautiful and more worthy
of the grand proportions to which it has grown.
But without waiting for the consummation of this plan of
"Chicago Beautiful," I believe as it is you will find the city
attractive and our parks and boulevards delightful for motoring. The streets and parks are yours at not to exceed fifteen
miles per hour. You will be cordially received at our various
places of business, our clubs and our homes, in short, as the
Spaniards say, but which we mean, for this week at least "our
house is yours"; come and occupy it.
With every good wish for your health, comfort and pleasure,
I again bid you a hearty welcome. (Applause.)
The President: Mr. Potter has told us that the city is ours.
When I arrived here and registered I thought the local committee was to be criticised because they gave us so few
souvenirs to carry away (laughter), and when I found in the
box containing a. picture of the water front of Chicago a little
packet I thought perhaps It would contain a key to the city.
But it did not, and now I realize why. No key is needed;
everything is wide open—even on Sunday. (Laughter and
applause.)

Reply to Addresses of Welcome and Annual Address of
President A. A. Jackson.
It has been the custom, I believe, in former meetings of
this Section, for the Chairman, in his reply to the address of
welcome, to dwell upon the hospitality extended to our members and upon the charms of the 'city in which it is the good
fortune of the Association to assemble.
I think that you are with me in the belief that in this
instance the necessity for such voicing at length does not
exist. The open-handedness of our Chicago friends is too well
known, and the varied and compelling interests of this city
are so far felt as to make any fulsome mention here superfluous. Rather let me state in simple • words our appreciation
of the many courtesies that we find extended to us, our sensibility of the care with which have been performed the labors
of the Committee of Entertainment looking to our comfort
and our pleasure, and the satisfaction that we feel in meeting
at the financial and commercial centre of the country west of
• the. Alleghenies, and let me add to this our delight at being
welcomed by you, sir, an ex-President of this Section who
have devoted yourself for years to its welfare.

TRUST COMPANY SECTION.
Perhaps it will be fitting for me to dwell for a few moments
upon the progress that has been made by this branch of the
American Bankers' Association. The affairs of the parent
body are properly the theme for consideration at the iueetings
of the general Association, but to us belong particularly the
happenings in this Trust Company Section, which forms no
mean part of the whole.
'We are not old. Only thirteen years ago a small number of
men met at the call of one of us who is here to-day to consider the incorporating as an indidividual segregation the trust
companies of this country, which until that time had been
Meeting unidentified, and merged with the general banking
interests of the United States. Through the efforts of these
men certain trust companies signified to the American Bankers' Association their desire to form themselves into a section
of trust companies for the purpose of considering affairs relating to their own particular business. Immediate and favorable' action was taken by the Executive Council. An amendment to the by-laws was passed establishing the Section, and
the. trust companies thereupon took the important place to
which they were entitled in the life of the Association; not as
a separate body, but one with the whole and yet representing
the important collateral relationship which the millions of
their resources bear in the financial life of the nation.
Since then. the wisdom of this action has been amply demonstrated. By a progression, at some times more rapid than at
others, from this small beginning the Trust Company Section
has grown to its present membership of nearly one thousand
companies, with aggregate resources in the neighborhood of
four billions of dollars.
It may be argued that such a growth is only natural .by
reason of the steady increase in the number of companies in
the country during the years of the existence of the Section,
but had not the advantages of membership been proved there
would have been no such regular progression in the ranks of
this body. And we must remember, also, that every company
bearing the word "trust" in its name is not admitted to
membership; a scrutiny as careful as may be had in such a
large organization is devoted to the standing of the applicant,
and while an earnest effort is made to bring to us legitimate
institutions, no welcome is extended to those transacting a
business foreign to our field, and always the efforts of a
committee are devoted to the protection of the use of the
word "trust" in corporate titles.
As each year brings a new meeting of this Section. it seems
to me that there becomes more patent to those who attend
them the benefits of coming 'together for deliberation upon
general topics of interest to the trust company world. But
this to my mind is perhaps the smaller part of the advantages
to be derived from this membership. Not only do we meet
at these conventions men whom we have known perhaps only
in correspondence, and thereby bring ourselves together for
the promotion of future business of mutual interest, but the
fame of these gatherings induces the enlargement of the Association, and so by natural increase the beneficial work of
the Section is augmented. And the benefits of these meetings
are not the only ones enjoyed. As the Trust Company Section
Is a part of the whole Association, so does membership in it
carry the advantages of membership in the general body. Not
only have we now the office of a Secretary of our own
equipped as it has never been before, and at its head an official who devotes his time to the work of this Section, undivided with that of any other interest, but in common with
all other members of the American Bankers' Association we
have the services of its General Secretary's office and the
various committees that devote themselves throughout the
year to the interests of the banking fraternity of the country.
And as to our own committees chosen from the members of
our Executive Committee, as to that Executive Committee
and as to the officers of the Section (always speaking impersonally) let me congratulate you. They are men chosen.
wisely from throughout this'great Union of States, who have
been diligent in the discharge of their duties to this body,
who during their terms of office attend the various meetings,
and are at the call of their Chairman for assistance and
counsel in person or by correspondence, and in their elevation
to their several offices are free from the imputation of politics
that is so often rife in lar:re organizations of this nature. To
all these men I hope you -will let me extend not only my own
thanks for their efficient services rendered, but the thanks
of this meeting. And not to them only, but to the officers
of the general Association with whom there exists the harmony that promotes our welfare and whose courtesy and readiness to be, of assistance to this Section has been demonstrated
many times during the past year.
And what of all of the great make-up—the membership—
of this branch of the American Bankers' Association? Perhaps it has been said that conventions in general are .for the
most part somewhat for the purpose of providing a holiday
for the members who attend them. and that there is lost sight
of the true interests which a charter may set forth as the
objects of the body. I believe that such criticism may not
justly be made as to this Section. Certainly of late years the
attendance at the meetings of the Trust Company Section has
proved that in the face of attractive entertainments provided




181

by their hosts they have sat throughout sessions lengthening
year by year in their duration, and have made by their enthusiasms in speech and discussion those successful gatherings
that are to be desired.
It is unnecessary for me to tell you what has been done
during the past twelve months, by those whom you have intrusted with the management of our affairs. This will be
submitted to you in the reports of your several committees,
and that of your Executive Committees, as phrased by its
able Chairman, nor need I indicate what shall be done for
our welfare during the coming period, for such recommendations will come from you in our discussions of to-day.
It remains then for me, who in an hour or so am to relinquish this desirable office in which I have had so much
Pleasure and so much help, to urge that in the year to come
that bears such promise of prosperity, we join in making this
Trust Company Section of the American Bankers' Association •
bigger, more powerful and better than it has ever been.
The President: The next business is the report of the Secretary of the Section, Mr. Philip S. Babcock.

Report of Secretary.
New York, September 1, 1909.
To the Members of the Trust Company Section American Bankers'
Association.
Gentlemen--The financial statement for the past year is as follows:
RECEIPTS.
October 1, 1908, by appropriation
May 5, 1909, by appropriation
4 copies Trust Co. Proceedings
24 copies Proceedings, 1896-1903
Book case
95 copies Pioceedings, 1904-1908
57 copies Trust Co. laws
Stamped envelopes, returned
Expense Executive Committee overpaid

$7,500.00
4,000.00
2.00
72.00
15.00
284.40
198.50
15.40
7.25
$12,094.55

Credit balance September 1, 1909

$704.82

DISBURSEMENTS.
Salaries
$4,015.23
Postage
238.64
Postage, account Proceedings
E4.00
Printing and stationery
201.10 Petty cash
105.00
Sundry expense
46.97
15 gold badges
97.50
Rent
110.00
Expense Denver convention
477.15
H. P. McIntosh, account postage, telegrams, express, telephone, Herrick, salary and expense, and stenographer
350.28
Committee Trust Co. forms
80.15
Trust Co. forms
15.00
Loving cup for Col. J. R. Branch
90.00
Express on Proceedings and Trust Co. laws
218.10
Insurance
19.22
Proceedings, 1908
759.36
2,000 Trust Co. laws and preparing same
2,379.58
1,000 Proceedings, 1904-1908
1,355.55
Executive Committee at Briarcliff
740.90
Balance August 31, 1909
704.82
$12,094.55
Cash in bank, advanee subscriptions to book of "Trust
Company Forms"
$915.00
Membership September 1, 1908
931
Loss by non-payment of dues, consolidations, liquidations and
other causes
77

New members to August 31, 1909

854
127

Membership September 1, 1909

981

MEMBERSHIP TRUST COMPANY SECTION BY STATES.
August 31.
August 31,
1906.1907 1908 1909
1906 1907 1908 1909
Alabama
13 13 20 20
Kansas
1
1
2
3
9
9 10 12
Arizona
Kentucky
16 18 18 18
Arkansas
16 18 20 18
Louisiana
11 15 17 17
25 29 29 31
California
Maine
12 16 20 22
9 11 11
6
Colorado
Maryland
15 14 16 16
Connecticut
16 21 24 25
Massachusetts 29 29 32 34
5
6
Delaware
5
S
Michigan
4
6
6
6
5
5
D. of Columbia 5
5
Minnesota
4
4
3
3
5
5
7
Florida
6
Mississippi .
9 12 15 17
9 12 13
Georgia
8
Missouri
17 20 24 22
5
Ida ho
9
9
Montana
5
T
8
8
Illinois
32 41 50 56
Nebraska
3
3
4
5
Indiana
19 21 24 30
Nevada
4 10 10
3.
Iowa
8 10 14 14
New Hampshire 3
4
3
3

BANKERS' CONVENTION.

182
August 31.
. 1906 1907 1908 1909
New Jersey
49 56 59 64
New Mexico
2 2
2
3
New York
78 80 91 89
N. Carolina
15 16 16
17
N. Dakota
1
1
1
2
Ohio
34 41 45 40
Oklahoma
9
4
1
Oregon
11
7 12 11
Pennsylvania .132 145 151 151
Rhode Island 10 11
21
11
S. Carolina
4
3
5
4
S. Dakota
4 4
5
3
Tennessee
17 27 26 29

August 31.
1906 1907 1908 1909
9 18 21 26
Texas
3
3
3
Utah ...
.. 2
10 13 13 14
Vermont
12 12 12 12
Virginia
Washington
7 12 14 18
9 10
10
11
W. Virginia
Wisconsin
5
5
5 10.
Wyoming
1
2
2
4
Alaska
1
1
Cuba
2
2
2
Hawaii
2
2
1
1
— — — —
Total
718 846 931 981

Membership by years, since formation of the Section in 1896 with 17
members: 1897-114; 1898-150; 1899-190; 1900-253; 1901-348;
1902-414; 1003-501; 1904, 566; 1905-638; 1906-718; 1907-846;
1908-931; 1909-981.
States having a membership of five are entitled to a vice-president
of the Section.
Respectfully submitted,
P. S. BABCOCK, Secrtary.
The President: What is your pleasure respecting the Secretdry's report?
Mr. E. J. Buck, of Mobile, Ala.: I move that it be approved
and printed in the Proceedings.
The motion was seconded.
The President: All in favor of the motion that the Section
approve of the Secretary's report and that the same be printed
in the proceedings of the Section will manifest the same by
saying aye; opposed, no.
Carried.
The President: The next item on the programme is the
report of the Executive Committee, which will be presented
by Mr. Fuller.
REPORT OF EXECUTIVE COMMITTEE.
:
Mr. Oliver C. Fuller, of Milwaukee, Wis.
Mr. President and Gentlemen: I have the honor to read
the report of the Executive Committee as follows:

Report of the Executive Committee, by Oliver C. Fuller,
Chairman.
To the Members of the Trust Company Section of the American
Bankers' Association:
In pursuing the course so well laid out by the Executive Committee
last year, and in endentoring to carry out as nearly as possible the
many excellent recommendations contained in its annual report at
Denver, your committee has been quite busy throughout most of the
past year.
Besides the regular spring meeting of the committee, held at Briarcliff, which was attended by all the officers of the Section and every
member but one of the committee, as well as by several of the State
vice-presidents and members of special committees, numerous meetings
have been held during the year between officers of the Section and
the Chairman and other members of the committee in regard to the
several branches of work being carried on, and in arranging the programme for to-day's meeting. Also several meetings have been held
during the year with the officers of the American Bankers' Association in regard to finances and other matters relating to this Section.
Among the recommendations made by your committee a year ago was
the publication of a new book of Trust Company Forms. Pursuant
to a resolution passed at the spring meeting of your committee, the
Secretary addressed a circular letter to members soliciting advance
subscriptions for the book. Responses to this letter were deemed
sufficient to warrant the publication, and the sub-committee appointed to take charge of this work was instructed to proceed, and
the book will shortly be ready for distribution. Copies of the circular letter of the Secretary setting forth the scope of the work, together with subscription blanks, may be had at the registration office
here, and, as this will be a very complete and valuable work, it is
hoped that members who have not already subscribed will take advantage of this opportunity to enter their subscriptions.
During the year your committee has had published in one volume the
proceedings of the annual conventions of the Section for years 1904
to 1908 inclusive, being a supplemental volume to one containing the
proceedings from 189C to 1903. These volumes contain a great many
important reports and interesting addresses and your committee feels
that every trust company in the United States should have one or
more of these volumes in its library for the benefit of its officers and
employees. The Sectetary reports that something over one hundred
copies of this work have been purchased by the members, and your
committee is confident that the demand for them will be more than
sufficient to cover the cost of the number published.
Another recommendation made by your committee last year was:
"To gather and keep up to date, as nearly as possible, statistics regarding trust companies. . . . To collect and have published matters of interest to trust companies."
In line with that suggestion your committee requested Mr. Edward
T. Perine, president of the Audit Company of Kew York, to
prepare
a paper to be read to you at the tneeting to-day, and we feel
.
sure
that you will be much interested in Mr. Perine's address on
the subject of "Trust Company Resources and Revenues."
' Also in accordance with the same suggestien, after several
confer-




ences with the officers and general counsel of the American Bankers'
Association regarding the expediency and expense of the work, a
compilation of laws relating to trust companies of the United States
was published and distributed without charge to the members of
the Section. About one hundred 'extra copies have been sold, and
plans are under way through which it is hoped that a sufficient
number of these volumes way be sold to cover the major portion of
the cost of those distributed free to members. But, even if the
hopes of the committee in this respect are not fully realized, the
voluntary expression of appreciation by so many of the members upon
receipt of the book has made your committee feel that the thought,
time and labor, as well as the expense, involved in this publication
were more than justified. By direction of your committee this work
was compiled by a member of the New York bar under the supervision of the general counsel of the Association and is original in the
field it covers, no such compilation having been heretofore published,
and besides its great value to our members it has done much to
advertise and make our Section better known through the complimentary and, in many cases, extended notices of it in the financial
magazines. In the opinion of your committee it will add greatly to
the value of this work if hereafter a record be kept of all new laws
and changes in laws affecting trust companies and from time to time,
say every two years, a pamphlet containing such changes be published and sent to the members, and your committee recommends that
this be done.
The financial and membership statements of the Section for the
past yeas, have been set forth in, the„Secretary's report, which you
have just heard read. Although the expenses of the Section during
the year have been larger than those of any preceding year, your
committee feels that in view of the steadily Increasing membership
and the importance of the work being done, the increased appropriation granted to this Section during the year by the parent body have
not been excessive and that the money has been wisely expended.
The standing Committee on Protective Laws was enlarged to five
members during the year and, under the direction of its experienced
Chairman, Mr. Lynn H. Dinkins, has made much progress in this
excellent work, as you will learn from the report of the committee
to be read at this meeting. Your committee believes that the work
of the Protective Committee is one of the most important that is
being carried on by the Section, and recommends that the committee
be continued as a standing committee of the Section.
The wisdom of the amendment to the by-laws passed at the last
convention lacreasing the number of State vice-presidents has been fully
demonstrated, and the Executive Committee takes this opportunity
to express its thanks for the assistance it has received from many
of these officers during the year, especially in the work of increasing
the membership of the Association.
Although the increase in membership. as shown by the report of the
secretary, is gratifying, your committee desires to impress upon members the importance of their assistance in our efforts in that direction.
Your committee believes that the benefits of membership in the American Bankers' Association and in this Section are so great that no institution will tefuse to join if its officers fully understand the scope
and purposes of the Association.
Your committee feels that it cannot too strongly emphasize the advantages gained by the Section through having employed a year ago
an experienced and capable secretary to take charge of the office
of the Section in New York and devote his attention exclusively to
the work of the Section. The Secretary has had active charge of
practically all of the work mentioned in this report as having been
accomplished during the year, and besides attending to the numerous details in connection therewith, has carried on a large part of
the routine correspondence that has heretofore devolved upon the
Chairman of the Executive Committee. As stated by our President,
Mr. Jackson, in his report to the Executive Council at Briarcliff, "the
office of the Secretary of the Section is now a well-equipped bureau
working in harmony end hi connection with the office of the general
Secretary of the Association." and the wisdom of gathering together
in one group all of the sections of the American Bankers' Association, so that they may be in touch with each other and close at
hand, as they now are, to the Association headquarters, is apparent
to an.
In this connection your Committee desires to express its apprecia
tion and thanks for the uniform courtesy and consideration shown
it by the executive officers of the American Bankers' Association. On etery occasion when questions have arisen affecting the
interests of this Section the officers of the Association have evinced
a lively interest in the welfare of the Section and the enjoyment of
the close and friendly relations growing out of our mutual interests
and frequent intercourse has made service on your committee an agreeable duty.
Respectfully submitted,
EXECUTIVE COMMITTEE,
By Oliver C. Fuller, Chairman.
The President: What is the pleasure of the Section with
reference to the report?
Mr. A. M. Barrett, of New York: I move that the report
be received, approved and placed on file.
The motion was seconded.
The President: All in favor of the motion will signify their
intention by saying aye; opposed, no.
Carried.
The President: I am very glad to see that the President of
the American Bankers' Association is in the room, and that
we are honored by his presence. I know' he is a very busy
man and is loath to make a speech, but I will ask him to

TRUST COMPANY SECTION.
step forward and tell us at least if he is as glad to be here as
we are to have him. (Applause.)
Mr. George M. Reynolds, of Chicago, Ill.:
Gentlemen, I am very glad to see so many trust company
representatives this morning, and I congratulate the officers
of the Section upon. this evidence of the interest taken in this
work. I know the officers of the Section, as well as the
officers of the parent organization, have labored earnestly to
bring up the membership, and it is very gratifying indeed to
observe such a substantial result as is shown in the attendance at this meeting.
As a Chicago banker I am heartily glad to see you, and as
President of the American Bankers' Association I am particularly glad that you are here in such numbers.
I am sorry that the arrangement provided for the entertainment of the other 3,500 or 4,000 delegates this afternoon
Is such that you will not be able to finish your programme in
time to take part in it, but a special train has been arranged
for to-morrow afternoon to take you to Gary, leaving at 2
o'clock and returning in ample time to prepare for the banquet in the evening. (Applause.)
I am very glad to have had this opportunity to look you in
the face, and I hope you will have a very successful meeting
and a pleasant stay in our city. (Applause.)
The President: In connection with what Mr. Reynolds has
said as to a special train to visit Gary, our Executive Committee came here with the idea of making this" meeting of
our Section a success, and when it was found that our programme was of such length that it could not be disposed of
in time for our members to take the boat trip to Gary this
afternoon, Mr. McIntosh and Mr. Gillespie called on Mr.
Reynolds and, with his help, arranged for a special train to
make the trip to Gary to-morrow. Therefore, I trust that
everybody interested in the work of the Section will remain
here to-day and finish our work and then we can the more
thoroughly enjoy ourselves to-morrow.
Mr. H. P. McIntosh, of Cleveland, 0.: I might state that
Mr. Holliday was also a member of our committee, and on
our way to see Mr. Reynolds we met Mr. Fuller and took him
along with us. I mention this merely that Mr. Gillespie and
myself should not be given all the credit for securing Mr.
Reynolds' assistance in procuring this special train.
Mr. F. H. Fries, of Winston-Salem, N. C.: It has been the
custom for the Section at this time to have a committee
appointed to receive nominations for members of the Executive
Committee. Therefore, in line with that custom, I offer this
resolution:
"Resolved, That a Nominating Committee of five be appointed by
the Chairman, which Committee shall receive names in writing from
delegates present, from which the nominating committee shall select
five members of the Executive Committee for the term ending in
1912 and which shall be reported back to the convention for its
action."

•

The resolution was seconded.
The President: Gentlemen, you have heard the resolution
offered by Mr. Fries, and seconded by several members. All
In favor of its adoption will manifest it by saying aye; opposed, no.
Adopted.
The President: I will name the members of that committee
later.
The next order of business scheduled on the programme is
Report of Committee on Protective Laws, which was referred
to in the report of the Executive Committee. The report will
'be read by the Chairman, Mr. Dinkins.
REPORT OF COMMITTEE ON PROTECTIVE LAWS.
Mr. Lynn II. Dinkins, of Mobile, Ala.:
Mr. President and Members of the Trust Company Section.
The report of the Committee on Protective Laws is as follows:

Report of the Committee on Protective Laws.
To the Chairman and members of the Trust Company Section.
We beg to report that we have continued since your last meeting
the effort to promote interest among the bankers of the several
States in special legislation for the protection of the use of the
word "trust," for the establishment of suitable public provisions for
State supervision, and for the denunciation as a crime of the circulation of false reports concerning the condition of banks and trust
companies. Legislative sessions in forty separate States have made
this year particularly important to our undertaking.
Seventeen States—Colorado, Connecticut, Indiana, Iowa, Kansas,
Maine, Massachusetts, Minnesota, Montana, New York, New Jersey,
Oregon, Rhode Island, Texas, Washington, West Virginia and Wyoming—had already enacted suitable legislation. Florida also protects, more or less adequately, the use of the word "bank."
Four other States—California, Nevada, Pennsylvania and Wisconsin—enacted laws this year which are based upon the bill recommended by this Section of the American Bankers' Association. The
laws so passed in Wisconsin are particularly gratifying for the reason that their requirements concerning the incorporation and regulation
of trust companies are very definite and very rigid. They provide that
the word "trust" shall form part of the name of every such cot/R:1ra.
tion hereafter organized there and that the word "bank" shall not be
used as a part of such name.




183

Banks with whom we corresponded in three other States—Arkansas, North Carolina and North Dakota—advised us that it was unwise, at that time, to attempt special legislation.
Seven bills on banking were already pending before the General Assembly of North Carolina, and it was feared that the introduction of
another might defeat all. A Senate bill to provide State supervision
was under debate in the Arkansas Assembly, and it was thought
that any attempt 'to protect the word "trust" might jeopardize that.
North Dakota had only two trust companies; as her statutes contain
all the protective provisions desired, except one for the word "trust,"
It was urged that an attempt to amend the law in this particular
might suggest to the Legislators, at the same time, other amendments not desirable.
Missouri has no special law which protects the word "trust," but
it is the general opinion of her bankers that the present law is adequate, and that additional protection is not needed.
The Committee tried, through Mr. Latham, of Springfield, to have
the statute adthorized 11 this Section enacted in Illinois, but we
were informed that the State Chairman of the Committee on Legislation did not deem it advisable to present a new bill on this subject
during the life of the present Legislature.
The General Assembly of Tennessee convened on January 4, and
our legislation was taken up with the Secretary of the State Bankers' Association too late to procure the passage of, an Act.
Idaho, Nebraska, New Hampshire and Utah have not reported at
all.
•
Three States—Delaware, Oklahoma and South Carolina—reported
conditions such as to make Immediate action unwise.
South Carolina, in particular, reported that a preliminary campaign of education is necessary.
The Trust Company interests in Georginia, Michigan, New Mexico
and South Dakota assure the Committee that action will be taken on
our measures at the next session of their legislatures. The bills to
be propofed in two of these—Georgia and Michigan—will correspond to the laws of Pennsylvania, both already having State bank
examiners or commissioners.
We cannot emphasize too strongly on our members in these States,
and in all others in which satisfactory legislative protection has
not already been provided, that they be especially prompt in presenting their drafts of desired legislation to their respective legislatures immediately upon the opening of an assembly. Your committee
has learned from experience that delays are dangerous. The whole
movement in South Dakota failed this year, not because of any
radical and sustained opposition to our proposals, nor because it could
not muster all the support required for its passage—but because the
bill itself was not formally offered until the time limit upon the intro
duction of new bills had expired.
One State alone, in all the list, rejected the bill prepared by the
Committee—Arizona. The Senate of Arizona passed the measure,
but the House postponed it indefinitely.
Twenty-three, then, of these forty States, the General Assemblies
of which were in session in 1909, provide protection of some degree
or other; four more are about to enact protective legislation of a
satisfactory sort; and thirteen are left for the incoming committee.
Of the other six States, Alabama, Mississippi and Ohio have passed
satisfactory statutes.
Kentucky, Louisiana and Virginia are still
practically without safeguards.
It seems to us an important question whether or not we should
continue to extend our agitation iu those States which have given
only partial protection—n hether or not it would be more advisable to
go forward toward larger results, or to rest content with those already won, to seek entirely satisfactory statutes, or to satisfy ourselves with those we have.
The Savings Bank Section charged a Committee during the year
with the duty of securing the passage of uniform laws for the
segregation of savings deposits, and to provide proper safeguards in
the investment of such funds. It asks, on the advice of Mr. Paton,
for the co-operation of our own committee, Mr. Paton believing that
several Legislative Committees acting independently might create
needless confusion.
Respectfully submitted,
ARTHUR ADAMS,
F. H. FRIES,
P. C. KAUFFMAN,
LYNN H. DINKINS,
Committee.

The President: 'What is the pleasure of ,the meeting with
reference to the report just read?
Mr. Edwin Chamberlain, of San Antonio, Tex.: I move that
It be received, approved and placed on file for publication in
the Proceedings.
The motion was seconded.
The President: All in favor of the motion will manifest it
by saying aye; opposed, no.
Carried.
The President: It is a source of great regret to me that
the Vice-President of the United States, Mr. Sherman, is not
here. By an arrangement made with Mr. Bell, of Washington,
the Chairman of the Executive Committee and myself called
upon Mr. Sherman in Washington and he gave us his assurance that he would endeavor to attend our meeting at this
time and address us. Congress sat so late, however, that he
wrote me he feared it would be impossible for him to keep
his engagement, as he had pressing business matters to attend

BANKERS' CONVENTION.

184

,
to as soon as Congress should adjourn. However, I took the
liberty of going to see him again. He was extremely courteous, and said that he had to go to Kansas City about this
time, but would try and stop at Chicago and address us on
his way home. Unfortunately, he went through Chicago
yesterday instead of to-day; and, while he stopped in at
the general Convention for a few moments yesterday, although he did not make a speech, he could not stay over for
our meeting. I know you all join in my expression of regret
that he is not to be with us.
We are fortunate in having present a gentleman well known
as a writer, as well as a man who is active in trust company matters. I take great pleasure in presenting to you
Mr. Daniel S. Remsen, of New York City. (Applause.)
Mr. Daniel S. Remsen, of New York: Mr. President and
Members of the Trust Company Section of the American Bankers' Association.

Post-Mortem Administration of Wealth.
[Mr. Remsen's address on the above topic is printed on
pages .175 to 177 of this publication.]
The K?resident : I feel, as I am sure every one present does,
that we' have been greatly int&ested and Instructed, by this
address. We do not get it entirely from a member of the
legal fraternity, for Mr. Remsen is one of us; he ii a trust
company man as well as a lawyer.
• Mr: E. J. Parker, of Quincy, Ill.: I have a suggestion which
I think would be proper to make at this time.' in view
of the very great value to trust companies 'of this address.
Now, my suggestion is that as the Secretary prepares and . has'
printed the proceedings of this Section he also have printed
at the same time a few extra copies of Mr. Remsen's address
and send them out to .our members, so that the, members in
time can have a sufficient number of copies reprinted to send
out to their customers. I think this address is the best
statement we could possibly have in our possession showing.
the advantages of trust companies.
The President: Mr. Parker, do you make that as a motion?
Mr. B. J. Parker: Yes, I will make it as a motion. I move
that the Secretary furnish to the members of the Section
extra leaflets of the address delivered by- Mr. Remsen at this
meeting.
The motion was seconded.
• Mr. J. Jaster, of Cleveland, 0.: I would amend the motion
by providinu that the Secretary have such leaflets published
at once and distributed to the members.
Mr. IL L. Remmel, of Little Rock, Ark.: In view of the
general expression of sentiment among the members here that
Mr. Remsen's address• is what we all want for distribution, I
would like to add to the motion that has been made the suggestion to the Chair that when the question is put it be emphasized by 'a rising vote, thus thanking Mr. Remsen for his
able address.
Mr. Edwin Chamberlain, of San Antonio, Texas: I think
the idea of Mr, Parker is simply to have a few extra copies
sent out by the Secretary so that each trust company if it
desires to do so may have printed any number of copies for
its own use.
Mr. E. J. Parker: That is my idea precisely.
: It seems to me that we
Mr. Taylor. of
have overlooked for the moment, in our expression of appre-,
elation for Mr. Remsen's paper, the fact that out of courtesy
to the author we should ask his permission to do what is
proposed.
Mr. Daniel S. Remsen: I am quite willing that the Section
do what it likes with the paper, as I consider it as belonging
now to the Section.
The President: It has been moved, amended and the amendment accepted, and the suggestion variously seconded, that
the address delivered by Mr. Remson shall be published as
soon as possible and that at least one extra copy shall, be
mailed by -the Secretary to each member of the Section. In
putting the question upon this motion the chair requests
that the members will express their appreciation of Mr. Reinsea's courtesy in delivering the address by rising. Therefore,
all in favor of the motion as stated will manifest it by rising,
(Adopted.)
The President: The motion is unanimously carried. Mr
Remsen, we all thank you very much indeed. (Applause.)
Pursuant to the action of the Section in adopting the motion made by Mr. Fries, that a Nominating Committee be appointed by the chair, I name as such committee:
NOMINATING COMMITTEE.
F. II. Fries, of North Carolina (Chairman); S. IV. Raven,.
of Arkansas; Dewitt Van Buskirk, of New Jersey; Joseph E.
Otis, of Illinois; Herbert H. Rhoades, of • Massachusetts.
I would suggest that the members of this committee meet
during, recess.
We will now have the pleasure of listening to an address by
Mr. Perine, President of the Audit Company of:New York, w:io
has been good enough to prepare some statistics for us that
I , know will prove most interesting. I Anke great pleasure in
presenting. Mr. Edward T. Perine. (Applause.)




Trust Company Resources and Revenues.
•
[The full text of .31r. Perine's address will be found on pages
'
178 to 179 of this issue.)
Mr. IL P. McIntosh, of Cleveland, Ohio: I move that the
thanks of the Section be -and the same are hereby tendered
to Mr. Perine for his address, this being 'another instance in
which lie and his company have placed this Section under.
obligations.
(The motion was seconded.)
The President: All in favor of the motion will manifest it
by saying aye; opposed, no,
(Carried.)
The President: This address and others to be published in:
the proceedings seem to me to form a most valuable addition
to the library of statistics of trust companies.
Gentlemen,. the time' has now come for open discussion of
various topics named on the programme or any other topics
'that may suggest themselves to the minds of members. The
chair -would ask whether it is the sense of the meeting to
have such discussion now, or to take a recess until two
o'clock?
Mr. F. H. Fries: I move that we take a recess until' two.
o'clock.
Mr. Edwin Chamberlain: Before we adjourn, I would state
that it has occurred to me that the various financial journals.
will doubtless contain a full report of Mr. Remsen's address
to-morrow morning, and that will save the necessity of the
Secretary having it printed at once, as all the members here
can get copies of the papers in .the morning. I notice in.
"The Economist," published in Chicago, a daily edition of which
is being gotten out during this convention, that they have
published this morning a full report of all the addresses delivered yesterday, and doubtless they will do the same everyday while the convention is in session.
The President: That is very good indeed, and possibly will.
meet the point aimed at in Mr. Parker's motion..
Mr. F. H. Fries: I would request that the members of the
Nominating Committee meet immediately after adjournment
in this room.
. The President: Gentlemen, without formally putting the
motion, the Section will stand adjourned until two o'clock.
Recess until 2 P. M.
AFTERNOON SESSION.
The President: Gentlemen,'we will proceed with our further
The Committee on Nominations is not yet ready
business.
to report; I understand they are still deliberating. We have
before us certain topics for discussion that you see listed on
the programme. The programme was made up after a lengthy
correspondence among members of the Section, and these
topics were selected' from the very large number that were
suggested as being ones that were more or less in the majority.
The first is "Limitations of the Functions of a Trust Company," and the prime mover in suggesting that question was
Mr. G. C. Morrison, Vice-President of the Baltimore Trust and
Guaranty company, who wrote to the Secretary suggesting
the subject. Ile has been unable to come here, but has sent
a letter, which I will ask the • Secretary to read.
LIMITATIONS OF THE FUNCTIONS OF A TRUST
COMPANY.
The Secretary: Mr. Morrison, ill sending this commu..ication, states that he has no objection to having it read, but
desires it to be understood that he is presenting a query and
•
not a thesis. He says:
1 think that the subject should be discussed from two aspects.
The first, which, of course, suggests itself is the limitations necessary
But this is not the only side.
for the protection of the public.
There is a grave question as to how far it may be prolitablO, in the
long run, for ths trust company to become the department store of
financial institutions.
Mistakes in trust company matters are very
costly, and therefore each extension requires a properly trained
This makes the operation of
executive head for that department.
the various departments very expensive in executive salaries; and
unless. the department can become sufficiently large to be practically
in itself a little trust company, there is great question whether the
risk of loss is not greater than is imagined in its operation.
Savings banks are limited in their business, and National banks
should be even more so, possibly, than they are now in order to pro
lect them from the temptation. to speculate in securities rather than
to provide funds for the necessary commercial 'activities of the country.
They conduct a general
Trust companies ere very little limited.
banking business, and in many cases discount paper; they finance large
undertakings; they operate savings departments; they manage estates;
they become stm age places for valuables; and they become fiscal agents
of edrporations and act for them in other capacities; and are even
now operating as bond houses for the sale of securities. This makes
them really the department store of finance. It does not necessarily
make them unsafe, but it does raise the question as to what the
future of financial institutions will be under such conditions. I think
that the subjeet is a' broad one and worthy of a considerable study,
which I have not been able to give it. I think it worthy of study

TRUST COMPANY SECTION.
on' the side of the stockholders of ,the trust companies as to what Is
the most profitable, business for them, considering the expense of conducting the business in proportion to the return of the risk.
President: Now, gentlemen, we are ready for discussion.
Mr. Fuller: It seems' to .me from the reading of the letter
of Mr. Morrison, that his company is probably one that does
more of a banking business than a trust business. He seems
to have sonic doubts as to the profitableness of it, as compared
with what he thinks is the risk of a trust company business..
I should • say from his letter that he has an undue apprehension as to the risks involved in the acceptance of trusts.
In Wisconsin, we are confined almost exclusively to a trust
business pure and simple, and I think the risks in the business are almost nil in a properly managed company. There.
are grave responsibilities, but very little risk. I notice the
President of Mr. Morrison's bank is in the room, and perhaps he would like to speak to us upon this subject.
The President: Mr. Bowles, we would appreciate it very
much if you would take part in the discussion.
Mr. Thomas H. Bowles, of Baltimore, Maryland: As that
letter was written by our Vice-President in the absence of
the President on his vacation this summer, you will have to
relieve me of any responsibility that may be attached to it.
Mr. Morrison told me about the matter, but this is the first
time I have heard the letter read. I am very glad 'that it has
been read, because, in a way, it furnishes an opportunity for
me to differ' from the deductions made by Mr. Fuller as to the
apparent fear that trust companies are not able to carry out
all of their undertakings. I would rather go to the other extreme, having graduated only within a year from the distinguished school of my friend, Mr. Clark Williams, of New
York; I had conic to believe that there were no limits to
the operations of trust companies, either in the handling of
trust assets or in banking departments, or in savings departments, or in the handling of bonds. In fact, with that
view of the case and the knowledge that the world needs'
trust companies—that was one of the inducements for me to
become President of the company that I have the honor
to represent. I think, perhaps,' Mr. Fuller has not made just
the deduction that Mr. Morrison, from my acquaintance with
his views as he has expressed them to me, intended to convey by his letter. Mr. Morrison is a man of rather an inquiring turn of mind, and I believe he thinks that a trust company can do all sorts of things; but he would like perhaps to
have the experience of more experienced men along that line.
I don't know that I am prepared to discuss technically the
question of the service of a trust company in this country,
but it does seem to me that its field of operation is almost
unlimited. It is one of those many institutions which has been
the development of the great industrial and commercial growth
of America which has taken place in the last quarter of a
century; and it seems to me that instead of considering limitations as the country grows, as there is a constant demand
for great financial institutions to carry on the business of
the country, that we would be called upon to do more and
more things than we are doing to-day. This is the view, of
course, of a man who has Only had sufficient time and experience to take, as it were, a bird's eye view of the present
and future operations of trust companies. It seems to me, if
I needed any argument to support that position, it was furnished this morning in the statistics read by the gentleman
from New York (Mr, Perine) showing what a tremendous
business is now carried on in the trust companies, which as
I understand it, is a comparatively new business as compared
with the business of National and State banking institutions. If I remember correctly he stated that the deposits
for example, of the trust companies were about 70% of the
deposits of the National banks. That impressed me as establishing in a most etoquent way the faith of American business
and professional men, and the faith of the man of small means,
as well, who establishes a savings account. It showed that
at least a large percentage of the people of this country, one
way and another, are calling upon the trust companies, not
only to take care of their deposits and conserve a large part
of their wealth in that way, but in handling assets and being
trustees and doing a thousand and one things which banks,
owing to their peculiar conditions and laws, are not able to
handle so well. I think it would be more or less an easy
task to let one's imagination play a little upon the unlimited
possibilities of good work by trust companies, and if this subject is up for general discussion I would like to have some
light thrown upon the unlimited possibilities of its activities.
Mr. Benjamn I. Cohen, of Portland, Oregon: I might, perhaps, throw a little light upon the gentleman's own trust
company—I have never seen Mr. Bowles before, although I
know him very well by reputation, but I am acquainted with
Mr. Morrison. Mr. Bowles, with that modesty that always
characterizes a successful life insurance man, has failed to
bring out °certain points connected with the Baltimore Guarantee and Trust Company. It is an old institution, started a
great many years ago in a small way on Calvert street, in
Baltimore, and it was built up to a very good size by a
gentleman who afterwards left the country, and It had a few




185_

years ago, a Board of _Directors who were ultra-conservative—
so :much so, that they practically objected, to everything that
the younger members, including Mr. Morrison, proposed. At
that time, my friend, Mr. Decker, was President of the Trust
Company. The company had a very good capital and they had
such an enormous surplus that every time .Mr. Decker proposed something in the way of up-to-date modern trust company work, the Board would say, "Oh, we are making money
enough; let us go along and get our three per cent." Well,,
after a while, that thing, of course, came to a natural end,
and Mr. Bowles came into the Presidential chair; and, as I
said, I. never saw Mr. Bowles before, but I expect to .be in
I3altimore in a week or so, and then I shall take pleasure in
calling upon him. Two years ago the way that company was
run was admirable, from the standpoint of safety, but was
deplorable from the viewpoint of one who wanted to develop'
a concern into a modern trztst company. Now, I am sure,
with new blood in the presidential chair that the old company
is going to grow and prosper. Mr. Morrison is a man comparatively young, and he is, as Mr. Bowles has said, a gentleman of rather an inquiring turn of mind. He is a lawyer by
profession, and he has seine very original ideas. I was pleased:
and amazed the last time I had a conversation with him
when he told me that the directors ought to give him a free
rein, and I think Mrt. Bowles is the kind of a than who will'
do it. That company can be developed if they push their
business; they have got the best blood in Baltimore behind
them.
Now, to come to the general subject under discussion, my
opinion is that the limitations of a trust company business
practically have no existence. I think that what will really'
limit, the activities of any one trust company is the maxim
that all forces move upon lines of least resistance. I am the
President of a comparatively small institution, but I have
noticed this: In the early years of our history we paid a
great deal of attention to our trust business. In Oregon
there is no law authorizing trust companies to act as administrator or executor'. Consequently, all our trusts are trusts
by private agreement. We have found that branch of business, however, pleasant and profitable. We got in the habit
of loaning a great deal of money op mortgage, and I devised
a system of mortgages by which all loans are evidenced by
promissory notes or other form of paper, and are secured
by mortgages running to the Portland Trust Company • of
Oregon, as trustee. So, if we .wish to sell a note we do not
have to assign the mortgage; we are trustees for whoever
holds the note, and we may combine one, two, three or four
notes under the same mortgage. The result of that system
of doing business and serving the public is that we acquired
a fire insurance department, and we have found that our fire
insurance department is fairly profitable, so that I would not
be without it under any consideration. Then we Found that
It was necessary to do a little bit of commercial business, and
as I like to have everything insured, when a man came in for
a loan, if I thought the moral hazard was all right, I would
say, "I am willing to lend you this money, but suppose you
die. Now, you insure your life in our favor, and we will make
you the loan." That led to a combination of life insurance bust- .
ness, so that we did more or less of that business. Then
various agency matters came up so that we had to establish
sort of a tax department. Then we found, by consulting
statistics, that there were just as many women in the world
as there were men. The result was that after some time we
were fortunate enough to secure the services of a very fine
business woman, and we established a woman's department.
That woman's department is to-day one of the best things
we ever did. This lady waits upon the female customers and
makes business easy for theni. Lately we have found it almost
absolutely necessary to extend our commercial business. We
are feeling our way very cautiously in that respect, however.
We have no expectation of competing with the National
banks, but I find that certain lines of business rather drift our
way. For example, take the building trades. A builder will
come in and say: "I would like to have a loan of five or ten
thousand dollars for ninety days; I am putting up a building."
Of course, when the building was completed we would like to
make a mortgage loan on it, because the chances are we
would be very glad to get the mortgage; so, in order to keep
that business, we make him the loan on his note of hand,
assuming, of course, that he is good. So we are doing a little
commercial business—not confining ourselves to the building
trade, but that branch is receiving our attention; and there
are certain other trades that seem to be drifting our way, too.
So it is my belief that there is no end to the functions that
a trust company can assume, but extreme caution must be
observed to limit the functions to the conduct of those classes
of business that the investors and the assets of your particular business require at'your hands.
Mr. Witt, of Kentucky: It seems to me that the question
under discussion has been amended, or should be amended
now, so as to read: "There are no limitations to the functions
of a trust company." (Laughter.)
The President: We might consider that the question,' as
printed, is a typographical 'error, I suppose.
Mr. Witt: I feel like having a free rein in almost every,

186

BANKERS' CONVENTION.

thing I do, but it seems to me that this is opening the question
rather too wide. We come in contact, in our business, with
every other form of business, and • we touch every point of
business if we extend this principle as suggested by the
gentleman who last spoke.
The commercial business seems to be the point of contact
between trust companies where most of the difficulty arises,
and we are getting into it all over the country. We are assuming the functions of banks engaged in commercial business,
and it seems to me that it would be long before we meet with
active opposition. We not only reach out at the banking
business, but we put ourselves in opposition and in competition with it, and with the life insurance companies, and
with the fire insurance companies, and with the guaranty
companies; and the first thing we know we will have everybody down on top of us.
It seems to me, gentlemen, that it would be a wise thing to
confine ourselves to our legitimate line of business, touching
these other things only where it is proper that we should
come in contact with them, and not undertaking to take up
the activities of the business world generally. It seems to me
that would be broadening the functions of a trust company
rather too much. (Applause.)
The President: Now that we have heard from the East and
the West and the centre of the country, we should be glad
to' heard from all parts generally on this subject.
Mr. H. L. Remmel, of Little Rock, Ark.: I am in accord
'with the gentleman from Oregon. I am •connected with a small
institution in a thriving city of 65,000 inhabitants, and we
are doing a business something like his. We are not running
a life insurance business, but we happen to have friends that
are in the life insurance business, and if we need a little
security of that character we can readily get it. We are
running a fire insurance business, in a way, but we are not
in opposition to the fire insurance companies, because they
are very glad to have good active agents in a trust company.
We have a real estate department. The combination is very
similar to that spoken of by the gentleman from Oregon, as
existing in his company. We do not do a commercial business.
We have enough business in the lines that we are conducting
to make our business very profitable, and I would recommend,
especially in the country districts, that they do business along
the lines laid down by the gentleman from Oregon.
Mr. H. P. McIntosh, of Cleveland, 0.: I have written something on this subject, which I will read:
Reading:
What are the ordinary functions of a trust company?
1. To act in well defined trust capacities, such as agent, administrator, executor, registrar, trustee, et cetera.
2. To conduct a savings bank business.
3. To coilduct a commercial bank business.
4. To conduct a safe deposit business.
5. To conduct a real estate business.
6. To conduct title insurance business.
7. To conduct an insurance or annuity business.
Some or all of the above functions are now being performed
by trust companies in various sections of the United States.
It would therefore seem that a proper limitation for trust
companies in one section of the country might not be applicable
in other sections.
There can be no question or argument that numbers 1, 2, 3,
4 and 5 are proper functions for trust companies in all parts
of the United States. We think its authority to act as administrator, executor, agent or trustee should be as unlimited
as those of a person acting in one of these capacities.
Under proper regulation a trust company can be as well
qualified to conduct a commercial bank business as a National
bank, and In the event that it does a commercial banking
business, it should be governed by about the same regulations
as those governing National banks in respect to loans, deposit
reserves, et cetera, and none of its savings deposits should
be employed in this department.
In view of the recommendation of President Reynolds of
the American Bankers' Association that National banks be
authorized to accept trusts, and savings deposits, is it not
advisable for trust companies to enlarge their functions by
adding to them a commercial banking business? I know of
a National bank which recently erected. a handsome building
for its use, which seems to have foreseen the movements suggested by President Reynolds, because it has provided a space
In this building to accomplish a trust company business.
All of the first five functions named seem proper and legitimate ones for trust companies to engage in. The limits within
Which they shall perform these functions should be well
defined. For instance, the character of the trusts that may
be assumed should be definitely set forth—anything of a trust
nature which might mislead or tend to defraud the public
should be barred. The investment of trust funds should be
limited to only the safest and best securities.
Safe deposit business should be limited to, the rental of
safes to customers and storage of valuables.
Real estate operations should be . restricted to acting as
agent or trustee for others, and to the management and con.




trol of properties held in trust, and companies should not be
allowed to buy and sell for their own account.
Numbers 6 and 7 do not seem to be proper functions for
trust companies to assume, because of the liabilities created
in performing the functions created thereby.
Trust companies should not be permitted to incorporate and
assume trust functions unless sufficient capital be paid in to
assure the performance of their undertaking.
In general it seems that the functions of a trust company
should be broad enough to enable it to do any trust work
that an individual is allowed by law to do, and its functions
should be limited so as to restrain it from doing such business as would tend towards speculative ventures.
To sum up the whole proposition, I think the test of the
limit to trust company functions is determined by the answer
to the question as to whether the particular function sought
to be exercised is one of trust or one in which the company
acts as principal. If the latter, the function should be forbidden. For this reason I think the trust companies should
be barred from the work of abstracting, writing title insurance or bonds or assuming the role of underwriting principal
in the organization of corporate interests.
The use of the word "Trust" should be prohibited when
used for or by any others than companies incorporated to do
a trust company business, as provided in Nos. 1 to 5 above.
The trust company is bound to grow in importance and in
usefulness as the years go on. In order that it may keep the
confidence of the people and conduct its affairs on broad lines
of usefulness, its operations should be confined to those of a
trust nature only; otherwise, opportunities for speculation and
desire for large profits may cause it to become too aggressive
in a speculative way, which, if followed generally, might work
its own undoing, and cause the enactment of laws destroying
those functions to which it is rightfully entitled.
Mr. J. T. Jaster, of Cleveland, 0.: I am very glad that a
fellow-citizen of mine has seen fit to speak upon this subject,
for it is a subject that has been in my mind for a number of
years. The bank that I am connected with is a State bank,
organized under the General Laws of Ohio and doing a general
banking and trust business. We pay more attention to the
business of general banking than we do to trust business, but
we have a savings department and we loan on mortgages and
also upon business paper. We are doing some trust business,
however. We believe that a bank should do all the business
that is connected with the banking business. For myself, I
cannot see how a bank can be a complete institution that does
not do so. If a customer has money on deposit there, they
should accommodate him when he comes in to get paper discounted.
Now, a National bank, of course, cannot do a
trust business; they cannot loan on mortgages. I have observed by the address of Speaker Cannon yesterday that he
thinks it ought to be so arranged that National banks could
take savings deposits. Mr. Reynolds, the President of our
Association, also spoke upon that subject, as did Mr. Murray,
the Comptroller of the Currency. Now, my idea is that if the
National banks could adopt savings bank rules and handle
savings, it would not be long before they would be loaning on
real estate. I am very glad this subject has been brought up.
Mr. J. H. Holliday, of Indianapolis, lad.: I am by nature
a strict constructionist, and I sympathize entirely with the
views of my friend Mr. Witt on this subject. We have in
this country different methods of banking. The State has
conferred upon trust companies the right to do certain things
in corporate ways that have heretofore been done by individuals. Owing to the complexity of our civilization that
was a necessary step to take. The State, however, has heretofore created methods for banking. A trust company is not
necessarily a bank. Incidentally it becomes a bank, because
it has to have a large capital, or should have—at any rate, it
has a capital—on which it must earn an income. It also
has funds belonging to trust estates which it must handle, and
permission has been given to it by law to receive deposits.
Now, naturally, if you are permitted to receive deposits, you
have to make use of that money. It is perfectly proper for
a business to develop along the lines, as Mr. Cohen suggested,
of real estate and Insurance; but when it comes to the banking
side of the proposition I take issue with him. I think, too,
that Mr. McIntosh has not been consistent in his conclusion
that a trust company should confine its business to trust matters or to matters involving trusteeship. Commercial banking
does not do that. We have two systems of commercial banking
In this country, Ets a rule. The first is that which has grown
up from the beginning, superseded or extended by the National
system. Those banks are supposed to be, as far as the National system is concerned, and they are, absolutely commercial banks. The business of the trust companies along their
banking line, to my mind, should be absolutely distinct and
should not partake in the least of the features of a commercial bank. I know it is done in many States. In my own
State I am thankful to say it is permitted by law, although
for a reason not necessary to mention, on account of the law
forbidding reduced capitalization, a good many institutions
have sprung up in the smaller cities that do a commercial
business to a certain extent. I maintain that a trust company should do no commercial business . whatever. It has

TRUST COMPANY SECTION.
sufficient business in its own line if it will stick to that
line.
Now, the point I want to make particularly is this: That
if we antagonize all these other institutions it will be the
worse for us one of these days. Mr. Jaster speaks about the
addresses yesterday in the convention advocating permitting
National banks to open savings departments and taking trusts.
I want to say to you, gentlemen, that it is my firm conviction
that if ever such a law is passed it will be good-bye to the
prosperity of trust companies, and it will be like the darkey
who said: "You may lose yo' hoss, and you kin git another
one; yo' kin lose your wife, and you kin get another one;
but if you lose yo' soul, boss, it is good-bye, John." (Laughter
and applause.)
The President: There is a gentleman present who knows so
much about what a trust company should be and what it
should not be—a man whom all of us who know him love, and
whom those present who do not know him would love if they
knew him; a man who was active in the affairs of this
Section from its beginning and as finally President of it, and
who is now Superintendent of Banking of the State of New
York, and yesterday was elected President of the Association
of Supervisors of State Banks. I assume the liberty of
taking a very unfair advantage of him in asking that he say
a few wol'is to us. I' present Mr. Clark Williams of New
"
'York. (Applause.)
Mr. (lark Williams, of New York: Mr. President and gentlemen: I am exceedingly grateful to Mr. Jackson for this expression of his personal opinion as to myself. It is always
a great pleasure to meet with trust company men, and particularl',with members of the Trust Company Section of the
American Bankers' Association in convention assembled,
which pleasure I have had for the last eight or ten years,
with only one exception, occurring in the fall of 1907, when
in the city of New York and in that State we were exceedingly
busy. I doubt if my opinion on the question under discussion
would be of particular interest, and I should' dislike to commit myself specifically upon it except in the broadest way,
because if one commits oneself without a clear definition of
the terms, his opinion may be misleading, and it is necessary
to define commercial banking before we know how we should
vote on the proposition. But I say emphatically that I am
inclined to the position taken by Mr. Witt and by Mr.
Holliday, as along the conservative line. That is the line
which has given the trust company movement its success, and
it is worth while to adhere to it. You have been given interesting and instructing figures this morning. It may be
that one figure has not been given you, however, and it is
this. I should like to call your attention to the effect and the
recovery from the panic of 1907 upon trust companies in
the State of New York. I mention these two figures because
I feel I owe that to the institutions under our supervision.
The loss in deposits in the trust companies in the State of
New York between August, 1907, and December, 1907, were
$368,000,000. The recovery from December, 1907, to the present time in deposits amounts to $561,000,000. (Applause.)
Although at that time there were $117,000,000 of assets of
delinquent corporations, I am pleased to quote to you that
there Is not a prospective loss of one dollar to a depositor.
(Applause.)
Your President has alluded to the honor which was done
me yesterday in my election to the presidency of an organization of which I think probably you know very little—The
National Association of Supervisors of State Banks. I make
bold, because of my friendship for you and my loyalty to this
organization to make a suggestion as to your future work.
I know something of the work which your Legislative Committee has given to the particular points which seemed at
one time to be worthy of their consideration. We have now
in a great many of the States a proper protection to the term
"Trust"; but, gentlemen, while doing that work, could they
not broaden their efforts so that each State might be aided
by the efforts which are now making for more adequate
supervision of the institutions taking charters from the States?
And would it not be possible for you to endeavor to secure
such laws as the Liquidation Law, for example, that we have
in New York? A broader sphere for usefulness seems to me
to be open to your legislative committee in its approach to
this question of securing sound banking and efficient supervision; and I ask the co-operation of this body in the efforts
which you wig notice on the part of the different supervisors
in the respective States. And, gentlemen, if they are not accorded the funds which will respectively enable the Banking
Commissioner or the Superintendent of banks to do his duty
by the depositors, will you see to it that your Legislature
gives it, to him.
1 thank you, gentlemen, for this opportunity of addressing
you and I shall hope always to meet with you in your conventions. (Applause.)
Mr. J. T. Jaster, of Cleveland, 0.: I would like to ask
Mr. Williams if the law to which he referred as the "Liquidation Law of New York," is a State law?
Mr. Clark Williams: Yes, sir, it is.
Mr. Jaster: I think that ought to . be brought before the




187,

Executive Committee for discussion, so that, if possible, we
can recommend that a similar law be enacted in every State
in the Union.
Mr. Clark Williams: May I be indulged to give you in two
lines the result of the operation of this law? I read from
a copy of a placard which is now on exhibition at our State
fair at Syracuse:
Liquidation under the New Law. Banking department took possessior. of Binghamton Trust Company April 6, 1909. First dividend to
creditors, 50 per cent., paid September 1, 1909.
Amount collected,
$1,560,000.
Cost of collection, two-thirds of one per cent. Under
old receivership system cost has frequently been from 20 to 30 per
cent. In the case of thirty-four insolvent National banks in New
York State, the average cost was eight and seven-tenths per cent.
(Applause.)
Mr. Witt: I would suggest that it might be dangerous so
far as trust companies are concerned. It would be entrenching upon the functions of a trust company, and I do not
think it would do to cut us out of receiverships. (Laughter.)
Mr. McNair: I wish Mr. Williams would state to us the
cost in dollars and cents of the liquidation of three or four
of the New York State institutions before the first bank was
liquidated by the banking department of that State.
Mr. Clark Williams: There were 13 failures of State institutions. Several of them went into the hands of receivers
appointed by the court and are now in liquidation. Many of
them have resumed business, but receivers were appointed
prior to their resumption. In the case of the Hamilton Bank,
which resumed, a receiver was appointed and the receivership
lasted three months. The cost for receivers' fees and legal
fees, no other expenses involved, amounted to between thirtyfive and forty thousand dollars. In the case of the Brooklyn
bank the cost was sixty thousand dollars, I think. In the case
of the Knickerbocker Trust Company—I believe that has been
settled now—it was twenty thousand dollars to each receiver,
and seventy thousand dollars to the counsel employed. Immediately after the passage of this law the department took
possession of the Home Bank of Brooklyn. That was our
first trust. We performed a partial liquidation, returning the
bank to its shareholders, at a cost of $666, after forty-two
days; or a total cost, including other expenses which brought
the amount up to $1,200. We performed this liquidation in
the case of the Binghamton bank, at a cost, including counsel
fees and receiver's fees of my deputy, of $3,500. (Applause.)
Mr. Stone, of Detroit, Mich.: I want to cite an illustration.
I happen to know of a trust company—modesty forbids my
mentioning its name—that administered the affairs of an insolvent bank where the expenses were a trifle under 2% of the total
resources of the bank. (Applause.)
The President: Is there any further discussion of this subject? I assure Mr. Williams that the recommendations he
has made will be brought before the Executive Committee.
Mr. Dinkins: At the Briarcliff meeting last spring it was
the sense of the members of the Executive Council that it
would be inadvisable for the Legislative Committee to initiate
legislation in any State, because we could not ascertain the
atmosphere locally, so to speak. We find in a number of
States that there is an indisposition on the part of trust
company officials to suggest new legislation; they are afraid
that the members of the Legislature will take the bit in
their teeth and go too far. I think the bringing about of
better conditions which Mr. Williams has mentioned is certainly desirable all over the country; but I think it will
necessarily be very slow, and I think the Supervisors of
State Banks are really in a better position to further such
legislation than any committee which this body might appoint
could be, because, as a rule, they are more closely in touch
with political conditions.
The President: We have present a Chicagoian—a banker,
known by bankers here; a business man, and, more than that,
a gentleman who is known far and wide as an authority on
the topics of the far East, the Hon. Charles R. Crane, who
is about to leave this country for his post as Minister to
China. I see him sitting here and I have been wondering
whether he would not say a word to us—of course, not about
the banking business in China, but about anything that comes
to his mind. (Applause.)
PRESIDENT

TAFT'S

POLICY REGARDING THE FAR
EAST.
Mr. Charles It. Crane, of Chicago, Ill.: Mr. President and
Gentlemen. I am afraid that I do not know very much about
the banks in the far East, but I am very glad to say a word
or two to you as I know President Taft is very anxious that
every one in this county should become interested in our far
Eastern affairs, because he feels that there has been a great
shifting in political interests in the powers. As you know,
the century opened with two great wars, between China and
Japan, and between Japan and Russia, and those two wars
have shown that the opportunities in the Pacific are and
what our responsibilities are; and we are very fortunate in
having a President who understands the Pacific so well at
this particular time. I might say that it was President Taft's
speech at Shanghai just two years age next month that made

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BANKERS' CONVENTION.

me vote the Republican ticket for the first time. That speech,
I think, some day, will be regarded as a very famous one, and
I advise you if you can get hold of a copy of it to read it,
as you will find it very valuable in throwing light upon the
problems that face us out there. President Taft is also very
much pleased that my friends have shown so much approbation of my appointment, because it is his theory that the
American . Minister in the far East. should ,be appointed from
the West, and everything that can be done to give that section the appearance of solidarity will help our affairs, and
especially help us in taking care of the problem of the open
door. President Taft's policy is a very simple one, perfectly
easy. to. understand, and one not at all needing any justification.
It is a problem that menaces no government in the world,
and is merely the policy of giving China a sufficient amount
of support and protection to enable her to solve the very
difficult problems before. her—problems of administrative 'reform, problems of education, problems of currency reform, and
the problem of the opium traffic—anti the President feels that
if she is let alone and allowed to take care of herself she can
handle them in her own way, and, as she develops, our interest. in her will develop. The general theory is that whatever
is for the benefit of China will benefit not only our own country, but every other country in the world; that we have no
interest in keeping China down or in menacing her in any
way, but our whole policy is one of friendship and support,.
and President Taft thinks that ought to be the policy of
every other country in the world; but that is our policy, and
that is. what I go out there to help to maintain. (Applause.)

411

DUTIES AND RESPOSIBILITIES OF TRUSTEES UNDER
CORPORATE MORTGAGES.
The President: The next business is the second subject on
our programme for discussion—"Duties and Responsibilities of
Trustees Under Corporate Mortgages."
Mr. Willard V. King, of New York: Mr. President and
Gentlemen. In opening this discussion let me touch upon one
phase of the subject without attempting to cover even in a
superficial way the entire ground.
Even tie casual observer must be conscious that a gmeral
elevation of thought, particularly in the field of business, is
marking this decade—a searching of methods with an eye to
their morality, where previously we had studied them only
in respect of their economy. The movement is generally called
a "reform wave," and dismissed as an ephemeral matter like
woman's fashions—to be endured patiently and with the
philosophic consolation that it will pass in a season. I believe that the movement is more like a geologic disturbance,
evidencing the progress of readjustment of the world, and
resulting in the rupture of the strata under strain and the
establishment of new elevations. These changes are permanent—at least they endure until another convulsion pushes
the work farther along. The industrial world has moved at
an unprecedented pace this last fifty years, and it was necessary that there should be a readjustment of relations between
men. Public opinion, which ordinarily walks a few paces before enacted law, has run ahead, leaving a wide gap, so that
people have discovered with surprise that, for instance, there
are no statutes under which certain prominent pirates can
be sent to jail. Other statutes, enacted in advance of their
need, and therefore unsupported hitherto by public opinion
and ignored, are now enforced by that opinion and consequently by the courts. (I may cite the recent decision against
the trustees of the Trust Company of the Republic in
New York.)
I mention this matter not as an invocation to the higher
life, but as pertinent to the duties of a trustee of corporate
mortgages; because I believe we will be held to a stricter accounting as time goes on of our actions and omissions. We
must give thought to the bondholder—constantly more thought,
and not lean contentedly on the clauses exempting the trustee
from any duty except to collect its fee. Of course I do not
mean that we are now ignoring the bondholder altogether,
but we are discussing the matter here en fannille, and in family talks only the faults are mentioned and enlarged.
I do not mean that the trustee's certificate on a bond
should be a guaranty of the title to the mortgaged property,
or of the validity of the issue, or of the sufficiency of the
security; it should always be made plain that the certificate
means nothing of that sort, for reasons that become obvious as soon as the subject is studied, but I believe we
should use our endeavors first to prevent the issue of worthless bonds, and secondly to prevent impairing the security
of outstanding bonds.
Too many trusteeships are accepted without proper scrutiny
of the mortgaging company. We should insist on responsible
introductions, written statements of the affairs of the company, and covenants that it is possessed of property and authorized to pledge it. We should reject doubtful enterprises
and avoid like the plague promoters with shady reputations.
The commission appointed by the Governor of New York to
investigate the field of speculation and investment, of which
I was a member, found many deplorable cases of successful
plundering of the public—wonderfully successful. We must be




scrupulous to prevent the use of our names, either as trustees
or as registrars, by those robbers of the poor, because whatever our legal liability, the moral responsibility is undoubted,
and I feel that in the march of events a legal liability may
some day., be imputed.
One fruitful source of wrong is the common clause directing the trustee to certify and deliver the bonds upon the mere
order of the company's officers. It is no doubt proper that the
trustees should be relieved of the responsibility of seeing to
the application of the proceeds of a bond issue; but could we
not require an engineer's certificate, or an affidavit of some
officer, stating that the proceeds had been spent for the security of the bondholders, or that the property described in
the mortgage had been acquired or constructed for their
benefit?
As to the second point—we are confronted with the dilemma
that we owe our appointment as trustee generally to the
favor of the mortgaging company, but our allegiance to the adverse interest—the bondholders. Our compensation, our hope
of more business, lie on the one hand; on the other, our
simple, tedious duty to an indefinite number of unknown persons who will give us nothing—except it be a lawsuit for
things done or left undone and not to their taste. In a spirit
of accommodation to our patrons, we are tempted to deliver
bonds, it may be, or to release some property, without full
compliance. with the letter of the trust deed, under circumstances possibly that would justify the act if performed by
any one but a trustee. Now while a trustee *should not be
over-technical, and should in times of need measure the risk
and even assume it, if good judgment requires, we should'
consider every case that arises in the course of a trusteeship,
from the point of view of the bondholders, and bear in mind
that we favor our patrons at our peril. I need hardly say
that it is bad advertising as well as expensive to defend a suit'
for a violation of trust.
• The President: Is there anything further to be said on this'
subject?
Mr. McNair: I regard the acceptance of a trusteeship under•
a corporate mortgage as the most important act that trust
officers are called upon to perform. It is beset with many
dangers that we do not realize, as was 'brought home to me
quite vividly several weeks ago. We often act as trustee in such
cases, and sometimes the papers are prepared by our own attorneys, but more frequently by other attorneys. Those men
have a personal feeling of pride in their own work, you know,
and they oftentimes object to making changes that we suggest
for our own protection. Several weeks ago a gentleman brought
in a mortgage under which he asked us to become trustee. We
suggested certain changes. He objected to several of them, and
I finally told him that as I understood it we were only
certifying that there were so and so many bonds issued, that
we did not go into the question of title at all, and we did not
guarantee the bonds. He took the position that we certainly
did so because our certificate read "Bonds mentioned and described therein," referring to the mortgage. Within the week
or so we were asked to act as substituted trustee in the ease
of an issue of bonds. We looked over the mortgage, which had
evidently been drawn by some one not familiar with drawing
corporate mortgages, and in it we found a description of "First
mortgage bonds." The certificate of our predecessor as trustee
was that It was "one of a series of bonds described therein."
In investigating the facts we found that it was a second mortgage, and that there was a first mortgage issue outstanding held
as collateral by a bank. Before we would accept the trust
we obtained a consent signed by all of the bond holders, and
we also got an agreement from the company that they would
issue no more bonds under that mortgage.
Mr. Edwin Chamberlain : I believe we are here for instructions
and to learn something in our business, and for that reason
I wish to speak on this subject. I certainly appreciate this
afternoon's discussion a great deal more than I would have
appreciated the excursion. We have had several cases in my
section, and we have adopted the general policy where we
are called upon to act as trustee of going into a valuation of
the property. A special committee is appointed. Our object
is first for our own information. Then we have an abstract
presented to us, and our own attorney passes on it. The abstract is prepared and paid for by the corporation that is
seeking the mortgage. A minute is made of all these things
on our books, and everything has got to be satisfactory before
we will accept the trusteeship. We simply certify then what
has been done, without assuming any responsibility whatever.
Mr. McNair: What is the charge for such service as you
perform preliminarily to accepting the trust?
Mr. Chamberlain: We have no fixed charge. We make our
charge according to the work that we have to do.
Mr. McNair: Do you examine all the titles?
Mr. Chamberlain : Yes, and the abstract, and the corporations
applying to us have to pay our attorneys .for doing that work.
Mr. McNair: Does not the fact. that you undertake to assume and pass upon the title bind you and make you responsible to a certain extent?

TRUST COMPANY SECTION.

189

us will
Mr. Chamberlain : We do not think so. Our institution will .pay more strict attention to these matters some of
be brought up with a very sharp turn some day.
not act as trustee until we are satisfied that the mortgage is
Mr. Cohen: Do you .think that the mere statement that this
all right, and then we certify that we are not responsible for
is a bond, without saying whether it is a first mortgage bond
anything beyond our own act.
or a second mortgage bond, would be binding upon you?
Mr. Sontag, of Indiana : There is one feature of trusteeship
Mr. King: That depends upon what you mean by "bond."
that we have run on to lately that seems to me very serious.
To-day, according to the decisions of the courts, it does not
That .is the matter of insurance on a piece of property. The
legally bind you; but I think in all good morals it ought to
control of a manufacturing property passed into the hands
bind you.
of a trustee and he neglected to keep up the insurance. He
Mr. Cohen: If the mortgage says that it is a first mortgage
was written to several times to look after it, but he ignored
bond, and it is in point of fact a first mortgage bond, and
the letters. In case of the destruction of the buildings by
hereafter you refer to it as one of the bonds "described in
fire the bondholders would only get half of the security that
the mortgage herein," do you think that either legally or
they expected when they made the loan. Now, it seems to me
.morally the trust company has been guilty of negligence?
that trust- companies ought to be careful about assuming such
• Mr. King: Oh, no. The property might be sold for taxes
liability. In the case I speak of the insurance was about 50
and then, of course, the taxes would become a first lien ahead
per cent. of the bond issue.
of the mortgage.
'Mr. King: Ordinarily a trust deed provides that in case of
Mr. Ralph Stone, of Detroit, Mich.: Do you recommend the
default in keeping up proper insurance the trustee is authorized
taking of a certificate of an engineer, the constructing engineer
to step in and do it. The premiums are not large and usually
of the mortgagor company, for instance?
the trustee would rather pay them than have any trouble
Mr. King: That is usually done. If you do anything else
about the matter.
you are going to duplicate work extensively. I think we should
As to the other matters that have been discussed here, I
require something such as is done in England. I think the
would say that where a trustee goes on record before the pubpoint is covered in an Act known as the Directors' Liability
lic as assuming any responsibility in regard to the title to
Act in England, wherein it is provided that any promotor who
property or the value of it, I think he would stand in an unbrings out by circular or prospettus any securities, or 'lends
doubtedly bad way in a lawsuit if he were to certify any
his name to be used on any such prospectus or circular as a
bonds without successful as well as careful scrutiny. No two
director, becomes liable to anybody that buys the security and
men in a hundred might agree as to the value, for it alight be
incurs a loss, unless he can show affirmatively that the facts
a prospect, an unbuilt railroad, and who could say what it
stated in the prospectus or circular are true. If the facts
was worth? Suppose we were offered the trusteeship of a
are quoted from the reports of an expert, an engineer, he
new issue of bonds of the Rock Island Railroad - or of the
must show affirmatively that the expert or engineer was qualiPennsylvania Railroad, how could we tell how good the title
fied as an expert or engineer to make the statements. In
would ever be? It might take years to determine that. Even
other words, the promotor cannot take Bill Jones and say.
the Board of Directors of the Railroad are bound in case they
-"Why, some one came in and said Jones was an expert and I
have overbonded. I believe if ever the trust companies put
took his word for it." The English Act, does not permit anythemselves in the attitude of passing ,on those things as far as
thing of that sort. The English people have been civilized
the public is concerned with any idea that the bonds will
beyond that.
become more saleable the trust companies will be open to
Now, I think that possibly when it comes to an engineer's
attack if they carelesslly exceed the deed of trust.
certificate in a matter of that sort it would be an act of good
should not take
What I tried to bring out was that we
conscience for us to require a statement from somebody of
these absolutely worthless trusts that are offered. We ought
some responsibility that the engineer was an engineer of • repute
are reputable people
to be sure that the parties offering them
and character, and not the mere tool of a group of promoters.
and are really mortgaging a going business for the benefit of
Mr. Ralph Stone: I know of a case where the engineer was
you would not have to go
the bondholders. To ascertain that
the engineer of a railroad company and he made a false cerwould get a fair stateinto the value of the property. You
tificate; and when the matter was brought up in court the
ment by somebody of reasonable responsibility that there was
trust company was criticised very severely: and I think if
was a first mortgage,
property there, that the mortgage offered
there is any likelihood of any such thing as that occurring it
that the property belonged to the company and that the comwould be a good provision to insert in a mortgage that the
mortgage it. Covepany had a right to mortgage it and did
trustee might employ its own engineer to report on the facts.
nants such as those occur in some mortgages, but not in every
at the expense of the mortgagor; not only an engineer in
where
mortgage. I have had some unpleasant experiences
cases of construction, but to take up any previous requirement
companies intended to construct a trolley line, and they
as to the issuance of bonds, and not take the mere statement
brought the bonds out and got them certified, and they were
or resolution of a board of directors as being conclusive on
sold to school teachers, stenographers and all sorts of people
the facts.
who could not afford to loose their money, and people who
The President: We will proceed to the next subject—"The
did not have access to Moody's Manutil, and then the trust
Value and Responsibility of a Safe Deposit Department."
company was besieged for years and years by these people
We had hoped to have Mr. Bell. of Washington. here to talk
who wanted to know why their bonds were not paid.
on this spbject, but he was not able to come.
all to be a little more careful, and we ought not
• We ought
The Secretary : Mr. R. L. Rutter, secretary of the Spokane
to accept anything that puts us on notice either as to the
& Eastern Trust Company. of Spokane. Wash., has sent a
or the validity of the bonds or the value of
title of property
communication bearing on the subject "Mortgages as Investthe mortgaged property without very careful investigation.
ments for Savings Minds of a Trust Company."
The President: Then, if there is no discussion of the subMr. Benjamin I. Cohen, of Portland, Ore.: I would like to
ject upon which Mr. Bell was to speak, we will take up the
ask Mr. King what his opinion is about the phrase "bonds
subject that Mr. Rutter has written about. I will ask the Secmentioned and described in the within referred to mortgage," as
retary to read Mr. flutter's communication.
to the responsibility assumed in such a case?
Mr. King: I think that is one of the questions that is going
MORTGAGES AS AN INVESTMENT FOR TRUST FUNDS.
to be threshed out in the court and where very likely we will
The Secretary (Reading):
suffer more than we have. There have been cases where a
Beyond a question, the world's greatest investors of trust
mortgage was called a "first mortgage" and there were prior
funds are the American life insurance companies. and it is
liens on the property, and where the trustee was not held
a matter of keen importance that they are steadily increasing
accountable for it. Only a few years ago the Clover Leaf
their relative holdings of mortgages and are, cutting down
Railroad was reorganized, and they calmly put out a first
their proportion of bonds.
mortgage 4% bond and at the same time put out a prior lien
This is partly due to the operation of the recent insurance
2
/
31% lien ahead of it, while anybody picking up a first mortgage
legislation in New York, but in even greater degree it has
bond might be unaware of the existence of the prior lien. I
been brought about by the experience of the great companies
think the Baltimore & Ohio Railroad called their bonds "first"
In handling mortgage investments. They have found that real
mortgage bonds, and yet they had a prior lien ahead of them.
estate loans, carefully selected, combine in the highest degree
So I think there is enough, so far as the decisions of the courts
the three elements of investment for trust funds—absolute
are concerned, to justify a trust company in certifying a bond
safety, prompt payment and the highest obtainable interest rate.
as a first mortgage bond even though there may be some prior
Take, for instance, the Penn Mutual Life Insurance Comlien ahead of it,. but I do not know of anything in good conpany, which, together with the Northwestern of Milwaukee,
science that will justify it. I think it is very bad practice.
ranks among the leaders in handling mortgage loans. The
You can always persuade your client if you try to make it
Penn Mutual closed the year 1908 with practically $40,000.000
"First Consolidated" or "First General Mortgage," or some
in mortgages on which there was not a single dollar of deother way that will call the attention of a. purchaser if he
linquent interest. In many years the company has not foreknows anything at all to the fact that the bond is issued
closed a mortgage, and President Johnson advises that on
under some condition requiring that he should look into it.
the foreclosures that were formerly made, the company sold
I think we ought to be scrupulous not to call those bonds
out at a price to break even.
"First Mortgage Bonds." As I have watched the decisions
Since the life insurance companies are the greatest investors
of the courts in these matters and in holding trustees and
of trust funds -that we have, their experience in handling
trusteeships to strict accountings. I think we are gradutilly
mortgages should be satisfactory evidence .for consideration
drifting into a little higher moral plane, as, the older counby the trust companies. The Spokane & Eastern Trust Corntries of the world have in these matters: and, if we do. not




190

BANKERS' CONVENTION.

pany, of which the writer is Secretary, makes it a rule to
keep 50% of its savings deposits invested in mortgages. In
the largest degree possible we keep the trust funds in the. trust
department, also invested in mortgages. In order to do this,
we maintain a mortgage department with a staff of four people who give their entire time and attention to this branch of
the business. In the past year and a half this department has
handled mortgages aggregating more than a million dollars,
and has been able to work up the average rate of mortgage investments in the savings department to 7%.
On a nominal 4% interest basis, we actually pay out about
3 4/10% interest to savings depositors, so that with half
the deposits invested in 7% mortgages, the income from that
source alone pays interest on the entire line of savings and
still leaves a half of the savings held either in reserve or invested in bonds or warrants. Under this system it is easy
to see that the savings bank department can be made a profitable business.
As to safety, in thirteen years the bank has never made a
single mortgage foreclosure nor come into the possession of
a piece of real estate on which it held a mortgage. As for
delinquency of interest, overdue interest is reduced to such a
small fraction as to be negligible.
All our loans are made on the recommendation of the manager of the mortgage departments. subject to the approval of
the Executive Committee of the bank. As for the percentage
of loans on city business property in Spokane, we lend up to
40% of the valuation in cases where the loan does not exceed
twice the value of either the ground or of the improvements.
All loans are made with annual reductions, usually amounting
to one-tenth of the loan. These are obligatory on the part of
the borrower and prompt payment of them is insisted upon.
Thus the security is constantly being improved by virtue of
the annual reduction on the amount of the loan.
In residence loans we have had a very good success under
a plan of mortization, under which the borrower makes a fiat
level payment of the same amount, including both principal
and interest, payable monthly during five, six and seven
years. This is almost identical with the Credits Fonder of
France, with the trifling exception that our- amortized house
mortgage bears interest at 10%, whereas the French pay
around 3% and 4%. In loans under this amortized plan we
will make mortgages up to 60% of a conservative appraisal of
the land and improvements. Under our scale a monthly payment of $21.25, including principal and interest, will pay a
loan of $1,000 in 60 months; a monthly payment of $16.60 including principal and interest will pay a loan of $1,000 in
84 months.
This plan is admirably suited to savings banks when they
will fit themselves with a competent mortgage department
to keep the funds reinvested as fast as they are paid in.
We consider our mortgage department the most profitable department in the trust company, because not only has it succeeded in lifting the average income on mortgages in savings
investments up to 7%, but it also makes a gross profit of
about $1,000 a month in the sales of mortgages. When you
can build up a reputation for handling only first class
mortgages, there is practically an indefinite demand by purchasers who want to own real estate loans for their separate
investment. We are constantly called upon to furnish more
mortgages than we can supply. The commissions on this class
of business constitute a very important feature of the trust
company's business.
The President: With us in Pennsylvania what are known as
legal investments are first mortgages on real estate, United
States bonds, and State and municipal bonds. Mortgages
really form the bulk of our investments for trust funds.
Mr. Gillespie, of New York: Is a trust company under any
circumstances permitted to invest its trust funds in mortgages
which have been negotiated by it? I have in mind a trust
company which has a mortgage loan department? It charges
a commission of 2% on a three year loan. The State in which
that corporation is organized permits the company to invest its
funds in securities "now owned or otherwise secured for trust
funds"—which means, as many good lawyers say, that it is
legal in that State for trust companies to purchase mortgages
of itself. In that company the trust department is entirely
separate from the mortgage loan department, and the officers
of each department confine their efforts to their respective
departments. Now the question I want to ask is this? Does
the common rule apply under the circumstances, namely that
a trustee shall not deal with himself and make a profit aside
from his regular commission as trustee?
Mr. Fuller: That is a question that my company has had
occasion to give a great deal of consideration to. I should
say that under the law a trustee has no tight to deal with itself in' that manner. I question very (niiich the right of a
trust company selling to a trust estate in its hands its own
securities, unless the law expressly gives the company that
right. In a law enacted in our State by the last legislature
a clause was inserted to the effect that a trust company
may transfer trust funds without other liability than if purchased from a third party any mortgages or securities owned
by it that complied with the statutes for the investment of




trust funds. I think without such a law that under the general law such a transaction as mentioned by the last speaker
is very questionable, and, in my opinion, wrong.
The President: It seems to me that the moral criticism
might undoubtedly be made. I do not think it is ordinarily
done in our locality. There is such a scarcity of mortgages
from time to time that we take for the benefit of a trust fund
certain securities when we can get them. One day there
may be very little money for investment, and the next day
there may be something paid off and funds would come in,
and then we would give to our client the benefit of an investment. But we would never sell at a profit and take a
commission for doing it.
Mr. Fuller: The purpose of having our law changed in the
way I have mentioned, was to avoid what we considered the
absolute liability that we incurred in making such transfers.
It is impossible in our, community to get mortgages always
when we want them. We have got to take them when we
can get them in order to supply the requirements of our trust
funds. We take every good mortgage that is offered to us.
We are not so fortunate as Mr. Rutter is apparently in being
located in a community where we can always get guilt edged
mortgages. It has been our practice for years to transfer
good mortgages to trust estates in our hands, but' we have
always felt that in doing so we took nbt a mortal lability, but
an actual litibility ; and for that relAon we had' the law'
changed;
Mr. Benjamin I. Cohen: Some years ago I know of a case
where a large trust company in Baltimore became a subscriber
to a bond issue. They got the bonds, we will say, at 95.
Thereafter a very highly respected citizen died ,and the trust
company was put in charge of his estate, and they transferred
to the estate a large amount of these bonds at 102%, the
then selling price. Time went on, and the bonds dropped in
the market price. Then the heirs of the estate sued the trust
company, and the trust company had to make good the difference
between 102% and 95.
In view of that decision, and also following out my own
ideas about the matter, I long ago concluded that it was
legally as well as morally wrong to deal with yourself; but I
recognize the fact that we have to take good mortgages
when we can get them. If we get a mortgage to-day that is
gilt edged and we haven't the trust funds on hand and tomorrow the trust funds come in, why, we transfer them to
that particular mortgage. We have made it a rule to have a
specific clause inserted authorizing us to deal with ourselves,
As it were, in that way. In some cases where temporary investments are to be made we have a clause providing that
we can put the money in our own certificates of deposit, but
at the highest rate of interest granted to our most favored
customer. We never make a commission at the expense of our
trust. Unfortunately in our section of the country we do not
get any commissions when we make a mortgage. It. is a
question of turning the mortgage over at the full rate of interest, and then charging the trust for proper compensation
for our work.
Mr, Ralph Stone: This same question was asked at the
first meeting of the Trust Company Section twelve years ago,
and one of the members present at the time answered it by
calling attention to the case of the St, Paul Trust Company
that had taken the benefit of the difference between what the
security cost and what it sold for; and in that case the court
held the Trust Company liable for several hundred thousands
of dollars in one estate and it was obliged to refund. It
finally broke the company.
Mr. King: Under the common law the iniquity does not lie
in taking the profit, but in dealing with yourself as trustee.
I think in any State where special statutes have not been
passed the measure of damages against the trust company
would be the shrinkage in the mortgage value of the investment from the time it was turned into the estate until it
was reduced to cash. What the company that I was formerly
connected with has done after consultation with several firms
of lawyers was practically what you say you have done: We
bought mortgages for account of trusts and so labeled them,'
and we declared our policy at the time to be investing our
capital only in the mortgages, and, buying mortgages from day
to day and from year to year, we would have trust funds
that we would be able to reinvest. I think with a declaration
of policy of that sort—especially if it was shown on the books
that those mortgages were bought for trust account—it would
Ilot be likely that the courts would hold you liable for any
los.
s
Mr. Cohen: Wouldn't you be dealing with yourself in just
the same way?
Mr. King: No, because you would be really advancing the
money.
The President: I assume that you would not use the funds
of the company for the purpose. You would keep the trust
funds separate and apart from the funds,i9f the company?
Mi.'19ng: In New York we do not keep'our funds In that
way:'
AIr' Edwin Chamberlain: I think it would bel a very good

TRUST COMPANY SECTION.
idea to get the same kind of a law passed that Mr. Fuller
said they had in his State.
The President: If you knew as much about the hard work
that Mr. Fuller had to do before his legislature as I do, you
would realize that any law that he had passed would be a
good law.
Mr. Robert E. James, of Easton, Pa.: I am frank to say
that in view of the discussions this afternoon I am somewhat
disconcerted. The only thing we are alike in is in title.
The only thing in common in all this membership is our
similarity to title. As to powers, they differ as widely as
there are individuals in this room. One gentleman inquires
what would you do under certain circumstances? Why, follow your statutes. That is the only thing you can do. But
your statute and the statute of my State differ so widely that
there is no possibility of predicting anything on what I do as
to what you shall do. So the gentleman from Oregon can
issue circulation, he can build railroads and canals, or run
steamships, or he can establish an oyster bed under the magnificent authority given him under the statutes of his State.
In Pennsylvania, however, we are tied hand and foot. We
must point to the letter of the law to find what our authority
is. We cannot say that we can do all this, because It is not
permitted; we must find the letter of the law in the statute
books indicating what we pay do. In New York a trust, company can do general banking business. In Pennsyiyania we
are precluded from it, not only by our statutes, but by the
constitution of the State. In looking over the magnificent
book issued by this Association recently I found that when
you come to certain sections of the country the powers are
enumerated in blank; there is nothing specific, and the presumption seems to be—nothing being specific—that you can do
anything you like. It is like the characters issued by some
States. In Idaho you can do anything in the wide world—
even to claiming the discovery of the North Pole and swearing
that the other fellow who said he discovered it is a liar.
(Laughter.) Under these circumstances it is almost impossible
to arrive at any common ground on any subject. One gentleman says, "We do such and such a business. We don't take
deposits." Well, we can all refrain from taking deposits if
we find it profitable so to do. Unfortunately in our neck of
land I have heard of no one who has yet declined to receive
deposits on the same old terms.
Now, what suggested this thought to me is the topic suggesting the use of mortgages for saving funds. What are savings funds? In Pennsylvania they are described by the statute
to be a certain kind of money deposits in savings institutions.
A saving fund in Pennsylvania is money deposited in an institution created by a special law of the State which provides
without capital for the regulation of that institution, the
preservation of the funds deposited under certain circumstances and for a division of the profits after salaries are
paid. In other States savings funds are established on an
entirely different basis. Still by reason of this common term
"savings funds," we all get at sea as to the basis upon which
to form a conclusion. Some forty odd gentlemen, supervisors
of banks of various States, and the Comptroller of the Currency himself are widely at variance upon this matter. Why,
the Comptroller of the Currency speaks of "segregating"
savings funds. Where in all the National Currency Act do you
find such a thing as a "savings fund"? A gentleman here
at this convention said that the National banks might go
into this business. Why, bless you soul, they have been in
it for three years. Didn't you know that? The theory of
the National bank is that all its deposits are on demand.
Outside of that a National bank cannot live under the statute.
I am astonished to hear a Comptroller of the Currency speak
of two kinds of National bank deposits. Why, it is absurd.
Impossible!
SEGREGATING DEPOSITS.
This only brings me to the topic—the segregation of deposits
sometimes called the seggregation of savings deposits. How
are you going to do it? Time deposits and demand deposits
are of two classes, indicated by their titles. Many people call
time deposits savings deposits. Savings deposits are time deposits. I can conceive of such a situation as that the
seggregation of deposits should be made. For instance, where
an institution has three or four million dollars of so-called
saving deposits or time deposits with the privilege of notice;
and, on the other hand, one or two millions of dollars of demand deposits, and the notice is placed upon the time depositors. You cannot put it on the demand depositors. They
might exhaust their active assets, and when the time depositors came along in thirty or sixty or ninety days afterwards they would find a depleted treasury. So far as that is
concerned, I can conceive how there should be some effort to
save the corresponding amount of assets in the event that
the time depositors withdraw promptly at the first sign of
trouble. The remarkable condition of 1907-8 was that the demand depositor, notwithstanding that the time depositors
had a clause placed u0On them, daily walked in and out with
deposits, did not withdraw a dollar, smiled at the misfortune
of his fellow depositors who were on the time side of •the




191

account, but himself did not disturb his account. As long as
that condition existed the general assets of every institution
must pay the general debts of every institution. The only possible phase upon which he seggregation of deposits can arise
is upon the basis that you find that your demand depositors
are taking advantage of the time deposits in periods of great
public disturbance. How are institutions like trust companies
organized in every State? They are authorized by the law to
do business in a certain way. They undertake to do it.
When John Smith comes up to the counter and lays down $50,
and says "I want to deposit this on an interest account," we
give him that privilege. Or if he wants to deposit it on a demand account, we permit him to do that. If he asks for interest he must take the attendant circumstances. The contract is between the institution and him. He understands it.
The institution understands it. Why should an outsider
come in and say "You must make a better contract with John
Smith, a contract that will compel you immediately, the moment you take a hundred or a thousand or ten thousand dollars
of deposits and place it upon the counter to reach into the
vault and get out the securities and say, "Here is the security." Why, practically that is an impossibility. At the
close of the day you would have to .add up your deposits for
the benefit of a certain class of depositors, and figure the
amount of excess over the totals of the preceding evening.' Then if there was a diminution on your demand side the demand collateral is deposited and you take the bond out. So
at the end of each day there is a see-sawing merely because in '
these days of reform there are more fanciful reformers than
there are practical schemers. I do not say that I am opposed
to the .segregation of deposits. I merely say that in one
point of view every institution ought to take notice, and if the
Act is passed to cover that point I am entirely satisfied.
Those of you who receive deposits, are you ready to accept
the proposition that a legislative act shall be passed requiring
you at any moment of the day to discriminate between your
assets and your liabilities and to keep a constant running
change from one to the other in order that you may not be
guilty under the law of an offense which would send you to
a different habitation from any you are familiar with? I
speak with some knowledge, because we had a bill up in our
legislature the last session to seggregate deposits. a bill
recommended by reformers which provided for the morals of
the people, it looked after the spiritual welfare of the officers
of financial institutions, it covered a multitude of subjects.
physical, mental and political—and the legislature did not
pass it; in fact, it did not receive a single affirmative vote
in committee. If there is a united effort to impose upon the
financial institutions of this country a burden of this kind,
if it is right let us meet and encourage it. I believe it is
always wise to meet a proper public demand. There is not a
statute on the books in Pennsylvania regulating trust companies, or establishing the department which supervises them
that was not originated by and pressed by the trust companies of the State. We maintain that attitude to-day. So
if there is anything good in the segregation of deposits, let
us meet it half way and urge it on. But if it grows out of
that one-sided information that comes from the theory of
the office without the practice of the counter, let us look at
it carefully and scrutinize it. I think when the proper time
may come this organization should care for its own interests
in looking after this very question which, originating two or
three years ago in the height of the panic and fostered by
four or five of the State Superintendents, and now spreading to a larger body numbering something like forty and consequently represented in every State in the union, that it
behooves us to see what the effect of so great a departure
is going to be; what the effect is going to be upon the capital of the institutions by the infusion of them into savings institutions, and whether it is wise to convert all of the State's
financial institutions, at least as to one side of their operation, into institutions which can only be denominated savings
banks. (Applause.)
Mr. H. A. Rhodes, of Boston, Mass.: I think it is the law
in Massachusetts that all trust companies having savings departments must segregate their accounts. The accounts of
the various departments are run entirely independently of
each other as though in separate rooms. In our trust company
we have a savings department, and we keep a separate bank
account for it—not with ourselves, but in another institution—
and every dollar is kept entirely independent and is invested
entirely independent of all other funds. That law went into
effect the first of January last, and we started our savings
department on the first of February in competition with mutual savings banks. We have received up to the present
time about 125,000 savings deposits, and all that money is invested entirely independently and in the kind of investments
permitted under the law of Massachusetts. Certainly, in
Massachusetts, the law is working exceedingly well. I think
there are some ten trust companies in the State doing a savings department business.
Mr. James: May I ask tile gentleman a question In order
to ascertain how it works, practically?
Mr. Rhoades: Certainly.

BANKERS' CONVENTION.

192

• Mr. James: In Pennsylvania • all trust funds are required to
be invested in government bonds or in first mortgages. There
are no State bonds. Now, if you buy United States bonds
at a premium you cannot very well pay much over 2% to
your depositors. Now, of these so-called savings funds or
time deposits, if a depositor sees fit to ask for interest on
his deposit, whether it is a deposit of $50 or $500 makes no
difference. In Pennsylvania I should say, on a rough guess,
that there are $350,000,000 of deposits of that • kind. Now
suppose the Pennsylvania institutions were required to invest
that great amount of money in first mortgages when there
wasn't a first mortgage on the market, what would become
of them if they undertook to pay 3% interest.
Mr. Rhoades: In Massachusetts we are not obliged to invest any more money than we see fit to in first mortgages
or in any other kind of securities. The investments are limited
by law to a certain class. We cannot invest over 70% of
our deposits in first mortgages, and the investment in first
mortgages is limited to • 60% of the appraised value of the
property. That appraised value is fixed not by the assessor's
value, although that is taken as a basis, but by the value of
outside appraisers, just as the board of investments in the
bank sees fit to decide. We are limited to United States
bonds and to certain railroad bonds. The Commissioner of
Banking issues a circular giving the kinds of investments
permitted by the State for savings department funds.
Mr. Ralph W. Cutler, of Hartford, Conn.: What is true of
Massachusetts in this respect is also true of Connecticut.
Under a recent law the eleven trust companies that have savings deposits and savings departments were given five years
In which to invest in such securities as are made legal investments for Connecticut savings banks. The investments of the
savings banks are mainly in the form of mortgages. I think
it is perfectly feasible and quite proper to segregate the savings deposits from the regular deposits.
• The President: Perhaps, Mr. James, if the law were so
framed as to give the savings deposits the right to be invested
in other securities than is permitted in Pennsylvania at present it might have some bearing on your objection.
Mr. James: Yes; but the great difficulty at the bottom of it
all is, What are savings funds?
. A Member: I understand that by• a resent law in California
each department of a trust company is kept separate even
though they are under the same roof. This movement for
segregation is going throughout the country. The law in Ohio
and in Michigan does not go quite so far as the California
law. Now, if I understand it correctly, the Massachusetts
law provides that the savings funds shall be segregated. The
savings depositors have a first lien on the securities of the
savings department and a general lien on the other assets of
the company. In that connection I would like to ask whether
the subject of class legislation has ever come up, and is this
not class legislation and therefore unconstitutional?
The President: Perhaps Mr. Rhoades can answer that question.
Mr. Rhoades: The law of Massachusetts is that all investments of savings departments shall be held for the payment of
the savings depositors, and those are kept entirely separate.
Then in case the investments of the savings department are
not sufficient to pay the depositors in full the savings depositors
become general creditors with the other creditors of the institution and the capital and the surplus is held for the payment
of the excess indebtedness.
Mr. James: What do you do with the general depositors—
those whom you cannot class as savings depositors?
Mr. Rhoades: I say that the savings depositors become general creditors.
Mr. James: Then. you give the savings depositors a specific
lien upon a specific line of securities?
Mr. Rhoades; Yes.
Mr. James: And you give them the opportunity of dividing
with the general depositors the rest of the assets of the company?
Mr. Rhoades : Yes, sir.
Mr. James: But you do not give the general depositors an
equal opportunity with the savings depositors. That is, you
discriminate against the general depositors?
Mr. Rhoades : Yes, in that case.
Mr. James: Well, if that is so. I don't think you will have
many general depositors in a few years time when the public
generally becomes aware of that law.
A Member: As I said before, that is what I would call class
legislation.
Mr. H. P. Beckwith. of North Dakota: Every State in the
Union, I believe; has different laws on this subject. We have
a law in North Dakota that savings funds shall be limited
In investments to certain specified securities and approved collateral under • the supervision of the State bank examiner.
ROLL CALL OF STATES.
'Ilhe President : Gentlemen, is there any further discussion
of this subject? If not, we will pass to the next item of
business on the programme, which is the roll call of States, to
be answered by the Vice-Presidents in brief reports of the




conditions concerning trust companies in their respective
States.
Mr. Edwin Chamberlain: I move that this order of business
be dispensed with, and that the Vice-Presidents from the different States be permitted to send in their statements to the
Secretary for publication in our Proceedings.
The motion was seconded.
Mr. Cutler: I 10 not think that would be quite fair to
those gentlemen who have come here prepared to answer on
this roll call.
Mr. Remmel, of Little Rock, Ark.: I am not a Vice-President,
but I for one would like to hear what the conditions are
throughout the country. I think we should proceed with the
regular order.
Mr. William G. Edens, of Chicago, III.: The hour is quite
late, and we have had a very long and interesting session.
and I think it would not detract at all from the interest of
the proceedings if we might have an opportunity to read the
remarks of the Vice-Presidents instead of waiting here longer
to-day.
Mr. Abrahams, of Denver, Col.: I don't care whether the
Vice-Presidents get a chance to talk or not, but I am going
to get a chance to say just one word, and that is this. When
you go to Los Angeles next year we want you to stop over
in Denver, and we will give you a good time.
Mr. Bowles, of Maryland I hope the gentlemen who are
Vice-Presidents and who want to speak now will stand up.
That will settle the question.
Mr. Remmel: I think that would be very unfair, because we
don't want to embarrass anybody.
(Cries of Question! Question! Question.)
The President: The question before the house is on the
motion of Mr. Chamberlain, that the Vice-Presidents send in to
the Secretary their remarks for incorporation in the Proceedings. All in favor of the motion will say aye; opposed, no.
Lost.
Mr. Gillespie: I now move that those Vice-Presidents who
desire to do so send their remarks to the Secretary, and that
those who desire to speak from the floor be permitted to do so.
The President: It is not necessary to make that motion,
because the meeting has already decided to proceed with the
regular order of business. Of course, as the roll is called those
who do not desire to report now may send in to the , Secretary
a written statement, and it will be incorporated in the Proceedings.
Mr. Ralph W. Cutler, of Hartford, Conn.: Mr. President, I
desire to leave immediately and I ask unanimous permission
to hand in my report to the Secretary without reading it.
The President: Unless objection is made, the report of the
Vice-President from Connecticut may be handed in. The
Chair hearing no objection, it is so ordered.
(The Secretary then called the roll of States. The only responses made were from Connecticut, Missouri and New York,
and responses from other States are to be sent to the Secretary
and incorporated in the published Proceedings.)
NOMINATIONS AND ELECTIONS.
The President: Is the Committee on Nominations ready to
report?
Mr. F. H. Fries: The Committee on Nominations reports
recommending for election as members of the Executive Committee to fill the vacancies caused by the expiration of the
terms of members expiring this year the following:
E. K. Boisot, Vice-President First Trust & Savings Bank,
Chicago, Ill.
John D. McKee, Vice-President Mercantile Trust Company,
San Francisco, Cal.
Charles J. Bell, President American Security & Trust Company, Washington, D. C.
F. N. Goff, President Cleveland Trust Company, Cleveland,
Ohio.
Edwin Chamberlain, Vice-President San Antonio Loan &
Trust Company, San Antonio, Tex.
The President: Gentlemen, this does not exclude nominations
from the floor. Are there any nominations other than these?
On motion, nominations were declared closed.
On motion, the Secretary cast one ballot for the election
of the gentlemen nominated, and they were declared duly
elected.
The President: Nominations for President and First VicePresident are now in order.
H. P. McIntosh, President of the Guardian Savings & Trust
Company, of Cleveland, 0., was thereupon nominated for
President.
There being no other nomination for President nominations
were declared closed and, on motion, , the Secretary cast one
ballot for the election of Mr. McIntosh as President, and lie
was declared duly elected.
The President: Gentlemen, I present to you the Presidentelevt. (Applause.) Mr. McIntosh, it becomes my very pleasant duty to turn over to you the insignia of your office, and
to assure ,you that I know from the work you have done in
the past that you will do good work for this Section in the
future. (Applause.)
President McIntosh : Gentlemen, I thank you sincerely. It

TRUST COMPANY SECTIOIN.
I
is too late to detain you with a speech. I promise that
to
will endeavor to so discharge the duties of my office as
me.
justify your action in conferring this great honor upon
(Applause.)
Company
Oliver C. Fuller, President of the Wisconsin Trust
Viceof Milwaukee, Wis., was then nominated for First
President.
There being no other •nominations, on motion the Secretary
cast one ballot for the election of Mr. Fuller as First VicePresident, and he was declared duly elected.
President McIntosh: Mr. Fuller, it gives me extreme pleasSection.
ure to greet you as First Vice-President of the
(Applause.)
Vice-President Fuller: I appreciate the honor you have
done me, gentlemen, and trust I may be able to perform the
duties of the office ,to your entire - satisfaction. (Applause.)
President McIntosh : Next in order is the election of VicePresidents to represent each State.
Vice-Presidents from each State were then elected as follows:
Savings
Alabama: Arthur W. Smith, President Birmingham Trust &
Company, Birmingham.
Arizona: Byrd Brooks, cashier, Merchants' Bank & Trust Company,
Tucson.
Arkansas: Clifton R. Breckinridge, president, Arkansas Valley Trust
Company, Fort Smith.
California: R. G. Tognazzl, manager, Central Trust Company of
California, San Francisco.
Colorado: J. Arthur Connell, president, The Colorado Title & Trust
Company, Colorado Springs.
Connecticut: B. 0. Bryan, secretary, Colonial Trust Company,
Waterbury.
Delaware: Richard Reese, treasurer, Equitable Guarantee & Trust
Co., Wilmington.
District of Columbia: Chas. I. Bell, president, American Security &
Trust Company, Washington.
Florida: John Trice, president, Citizens' Bank & Trust Company,
Tampa.
Georgia: Sigo Myers, president, Oglethorpe Savings & Trust Company, Savannah.
Hawaii: E. D. Tenney, president, Hawaiian Trust Company, Honolulu.
Idaho: W. P. Hurlbut, president, Commercial Trust Company, Lew.
iston.
Illinois: D. A. Wyckoff. cashier, First Trust & Savings Bank,
Alton.
Indiana: J. L. Entitle], secretary, Central Trust Company, Greencastle.
Iowa: A. T. Bennett, president, Bennett Loan & Trust Company,
Sioux City.
Kentucky: B. G. Witt, cashier, Ohio Valley Bank & Trust Company, •
Henderson.
Louisiana: Frank Roberts, Calcasien Trust & Savings Bank, Lake
Charles.
Maine: E. G. Merrill, Merrill Trust Company, Bangor.
Maryland: Maurice H. Grape, assistant treasurer, Continental Trust
Company, Baltimore.
Massachusetts: Wilbur B. Tenney, Fitchburg Safe Deposit & Trust
Company, Fitchburg.




193

Minnesota: Eugene A. Merrill, president, Minnesota Loan & Trust
Company, Minneapolis.
Michigan: Ral3h Stone, secretary, Detroit Trust Company, Detroit.
Mississippi: R. L. Bennett, vice-president, Hattiesburg Trust &
Banking Company, Hattiesburg.,
Missouri: H. S. Schwitzgebel, secretary, Commerce Trust Company,
Kansas City.
Montana: Walter Collins, trust officer, State Savings Bank, Butte.
Nebraska: W. E. Barkley, Jr., president, Lincoln Safe Deposit &
Trust Company, Lincoln.
Nevada: Owen Young, president, Bull-Frog Banking & Trust Company, Beatty.
New Jersey: William C. Reppenheimer, president, Trust Company
of New Jersey, Habokeu.
New York: William C. Poillon, vice-president, Mercantile Trust Company, New York.
North Carolina: Matt J. Beyer, president, Atlantic Trust & Banking
Company, Wilmington.
Ohio: W. R. Craven. secretary, Dayton Savings & Trust Company,
Dayton.
Oklahoma: J. W. McLoud, president, Union Trust Company, Tulsa.
Oregon: E. A. Wyld, vice-president, Security Savings & Trust Company, Portland.
Pennsylvania: E. C. Enierick, treasurer, Susquehanna Trust & Safe
Deposit Company, Williamsport.
Rhode Island: Charles Perry, president, Washington Trust Company,
Westerly.
South Carolina: John F. Ficken, president, South Carolina Loan &
Trust Company, Charleston.
South Dakota: Ernest E. Hart, president, State Banking & Trust
Company, Sioux Falls.
Tennessee: W. Z. Dozier, cashier, Farmers' Bank & Trust Company,
Fayetteville.
Texas: H. N. Tinker, vice-president, Union Bank & Trust Company,
Houston.
Utah: Jos. F'. Smith, president, Zion Savings Bank & Trust Company, Salt Lake City.
Vermont: Bradley B. Smalley, president, Burlington Trust Company,
Burlington.
Virginia: M. S. Quarles, vice-president, Virginia Trust Company,
Richmond.
Washington: John Schram, treasurer, Washington Trust Company of
Seattle, Seattle.
West Virginia: B. Walker Peterson, president, Dollar Savings &
Trust Company, Wheeling.
Wisconsin: C. C. Brown, of the North-Western Loan & Trust Company, Kenosha.
On motion, the members of the Executive Committee were
given power to fill any vacancies occurring in the list of officers.
On motion, a rising vote of thanks was tendered to the
bankers of Chicago for the hospitality and courtesies extended
to the members of the Section.
A vote of thanks was also extended to the retiring President.
President McIntosh: Is there any further business to come
before the meeting? If not, I declare the fourteenth annual
meeting of the Trust Company Section adjourned sine die.

SAVINGS BANK SECTION
AMERICAN BANKERS' ASSOCIATION
Eighth Annual Meeting, Held in Chicago, Ill., September Sixteenth, 1909

INDEX TO SAVINGS BANKS PROCEEDINGS
Segregation and Safe Guarding of Savings Deposits Page
Real Estate Loans and Their Amortization - Page
Mortgage Loans for Home Buyers - Page
Pattial Payments Compared With Sinking Funds Page
Branch Savings Banks - Page
The Department of Mercy - Page
Report of Executive Committee - Page

194
197
199
200
202

203
205

Report of Secretary Report of Committee on Savings Bank Laws
Report of Committee on Auditing
Report of Postal Savings Bank Committee Report of Committee on Membership Detailed Proceedings Address by President -

-

Page 205
Page 205
Page 206
Page 207
Page 208
- Page 209
- Page 2og

The Segregation and Safeguarding of Savings De,osits.
BY HON. H. M. ZIMMERMAN, Commissioner of Banking for Michigan.
Mr. President and Gentlemen of the Savings Bank Section
of the American Bankers' Association:
I am not unmindful of the honor you have conferred
upon Michigan bankers, the Banking Department of their
State and myself personally, and I would not be at all responsive to my feelings of appreciation did I not at the outset thank you for the very kind invitation which I received
through my esteemed friend, your President, to say some
things to you on the subject of the segregation and safeguarding of savings deposits.
I fear that I can say but little, if anything, that may be
either new or instructive to you on the subject assigned to
me. The splendid work which your Association has already
done through the medium of its members—men of the highest talent and attainment in the profession of banking-places one who has not given the subject under consideration
the same diligent investigation and mature consideration
at great disadvantage in the discussion of this very important subject. If, therefore, anything that I may say
shall at all prove worthy of your consideration I shall feel
that I have accomplished all that I could possibly hope for.
I feel assured that in the end your large experience and
knowledge as bankers and the most worthy and commendable purpose of your organization will solve this financial
as well as economic question in a manner so that the
greatest good to the greatest number will be subserved,
reflecting full credit upon the high character of our American bankers.
There has been much discussion within the last year or
two on the subject of the insurance of bank deposits, one
of the great political parties having incorporated the proposition in its platform. Likewise has there been much argument in favor of postal savings depositories, and the other
great political party has incorporated this proposition in its
platform, while Congress has had both plans under consideration, but as yet has reached no determination.
What has prompted this agitation? Some have said these
were matters of mere political expediency, an appeal to the
masses for their votes, and so on. Now, is that really the
fact, or have we not drifted from our moorings and, under
the trials of a panic, been reminded that perhaps not all
of this discussion and agitation has been prompted without
good reason?




KINI:S OF SAVINGS BANKS.
Originally a bank organized to receive savings deposits
was properly and commonly regarded as a philanthropic
institution, and its policy was influenced by educational
considerations, its object being to promote provident habits
and to increase the resources of the laboring classes, its
first concern being the safety of its deposits. Such a bank
was conducted solely in the interests of its depositors. The
banks of this character in America are the "trustee" or
"mutual" savings banks located principally in the New
England States. This was the characteristic type in England, and, no doubt, accounts for their establishment in the
colonial States of this country. That these Winks have not
been more generally established in the States is, no doubt,
due to democratic rather than aristocratic social conditions.
There has grown up in the last quarter of a century in
this country another kind of savings bank, commonly called
a "stock" savings bank, spreading particularly in the extreme and middle West. This is a corporation having the
same function as a mutual savings bank, but it is conducted
for the profit of the owners of the capital stock. The depositors receive interest on their deposits at a rate fixed
by the directors.
Besides, in the United States there are building and loan
associations, savings and loan associations and co-operative
banks which, in many of their functions, are practically
the same as savings banks.
There are also State banks, National banks and trust
companies which now operate what are known as "savings"
or "interest" departments, although organized to transact
solely a commercial business.
Then, again, in some States—notably Michigan, California, Massachusetts, New Hampshire, Connecticut, Rhode
Island, Ohio and Texas—banks may incorporate to transact
both a commercial and a savings business, although the
statutes of these States prescribe certain limitations on the
character of the investments such as banks may make with
savings funds and require the separation of the commercial
and savings business of such banks.
As we look over the history and development of these
various institutions can we not see that the deposits of
tradesmen, mechanics, laborers, servants, minors and other
persons, commonly designated as savings deposits, have been

SAVINGS BANK SECTION.
rapidly drifting into commercial channels? The encroachment through the medium of the various and sundry socalled "savings" and "interest" departments in our commercial banks, trust companies, building and loan associations, etc.—now so common everywhere—gives us much evidence of such a condition of affairs. Thus it is not surprising that the insurance of deposits and the postal savings
plans have and are now being so vigorously and effectively
discussed.
Savings deposits have always been regarded as "trust
funds" when left with "trust" or "mutual" savings banks,
and surely should be so regarded, both legally as well as
morally, when placed with any other institution. The character. of such deposits is certainly not changed, no matter
what the character of the corporation or association may be
into whose hands they are placed. The investment of such
funds in ordinary commercial business ri*s would not be
countenanced by the courts if in the hands of administrators
or guardians. Neither should it be countenanced when these
funds are in the hands of corporations which are not required by the laws of the State in which they operate to
invest them in the most stable securities to be had.
The commercial depositor's money is received under far
difter"it circumstances. He expects to leave his money
with the bank for convenience and as he may need it in his
business. It does not represent his "all." His deposit is
very frequently made and received by the bank with the
express understanding that in consideration of the use of
his funds the bank should extend a line of credit to him to
carry on his business. A loss to him in case of suspension
or failure of the bank does not mean so much in any sense
as it does to the savings depositor. The distinction between
a savings deposit and a commercial deposit is so apparent
and well understood that it requires no elaboration.
The lawmakers of the States *which I have mentioned—
in which banks may be organized to transact both a commercial and savings business—have recognized this important distinction and have sought to safeguard savings
deposits by requiring the banks to segregate such deposits
and invest them only in the most stable securities. Michigan, I believe, is conceded to be the pioneer State in the
adoption of such legislation.
DISTINCTION NOT UNDERSTOOD.

Though some States have incorporated such provisions in
their banking laws, yet it is known that the people as a
rule do not understand the distinction between a bank
chartered to receive savings deposits and the ordinary bank
of discount and deposit or other institution operating a
so-called "savings" or "interest" 'department, maintained'
clearly in evasion of its chartered functions. It is for that
reason that we should go farther, in my opinion, and urge
the adoption of a general law in the nation as well as in the
States that any institution chartered by either which holds
itself out to the public to receive savings deposits should
be required to segregate them and invest them in a definite
and prescribed manner. Thus, in my opinion, many, if not
all, of the alleged reasons for the insurance of deposits
and the establishment of postal savings depositories would
disappear.
We cannot turn back and undo the past, but can urge
the adoption of such general laws as shall bring about these
much-desired results. In this connection the suggestion may
not be out of place that the Monetary Commission might
very properly give this subject its very best consideration.
BREAKING AWAY FROM ESTABLISHED PRINCIPLES.

We may disagree with the advocates of both the insurance
of deposits and the postal savings plans, but we must admit
that we have been gradually breaking away from some of
our more conservative and well-established principles, so
far, at least, as the safeguarding of our savings deposits
are concerned.
This is apparent in the masterly argument of Professor
Laughlin, in the July Scribner's of last year, in opposition
to the insurance of deposits. Though he treated his subject




195

from a purely national standpoint, yet he found occasion to
remark:
"Protection for depositors in savings banks (or small
private banks) is a little different problem from one dealing
with commercial banks. It is for the protection of the
saving depositor that government postal banks are suggested
as conferring absolute safety."
Again, Professor Kinley, in his able article in opposition
to the insurance of deposits, which appeared in the March
number of The Review of Reviews last year, uses this significant paragraph:
"The only kind of deposits for the insurance of which
there seems to be any reasonable ground are savings deposits. If it be true, as is generally admitted, that these on
the whole represent the hard-won earnings of the working
people, public policy requires that they should receive all
the security necessary to insure against their loss. This,
however, is done by institutions of those StEstes who have
proper savings banks—like Massachusetts and New York.
There is something to be done in this direction where savings banks of the mutual type do not exist, but are simply
branches of commercial banks. This, however, is something that cannot be reached by any national law. The
deposits of the National banks—the only ones that can
be reached by national law—are commercial deposits.
These deposits belong to the class in a community that is
peculiarly able to take care of itself. These deposits
fluctuate rapidly and largely from day to day. They need
no special protection, either from the viewpoint of the
interest of depositor or the banker."
It is apparent that, while Professor Kinley admits that
there seems to be reasonable ground for protecting or guaranteeing savings deposits, he is mistaken in his assumption
that such deposits are not accepted by National banks. The
Comptroller of the Currency reports that on June 23, 1909,
the date of the last call, the savings deposit in the National
banks amounted to $380,494,508. Besides, it is well understood that not only the National banks receive these
deposits, but State banks, trust companies, private banks
and building and loan associations also hold themselves out
for their reception, and that a large volume of such deposits
are also held by these institutions.
If Professors Laughlin and Kinley are taken as authority
on one proposition they should be taken as authority on
another. While it may be impracticable or unwise to adopt
the insurance of deposits plan or urge the establishment of
postal savings depositories, yet it would seem there is an
apparent need at least for the segregation and safeguarding
of our savings deposits.
OTHERS HAVE RECOMMENDED THE SAFEGUARDING OF SAVINGS
DOPOSITS.

I am pleased to endorse what the distinguished now exCommissioner of Banking of the State of Massachusetts,
Mr. Pierre Jay, said to you a year ago on this subject:
"The more I study this subject the clearer it seems to me that
morally and essentially savings deposits wherever deposited are trust
funds, and should be invested accordingly. It is also argued by the
State banks and trust companies that to be required to invest savings
deposits in securities of more established value than mercantile credit?,
will seriously diminish their profits. The answer is, first, that for
savings deposits safety rather than large dilidends is the essential
thing, and, second, that profits will not be so largely diminished as
they imagine."

The very able Commissioner of Banking of the State of
New York, Mr. Williams, it is evident from his late reports.
has given the subject under consideration much thought and
attention, and I take pleasure in referring you to the
language he employs in this regard:
"While we may oppose the plan of State or Government insurance
or guarantee of deposits, we must sympathize with the desire of the
.
people at large to have their deposits made as safe as they can possibly be made. It Is not sufficient for us as bankers merely to oppose
this proposition. It is incumbent on us to take rteps to make impossible just as nearly as we can the failure of any State or National
bank, and we shall fail in our opposition unless we are able to present
a plan which will practically accomplish the desired end and at the
same time be based on sound business principles. Is it better to

BANKERS' CONVENTION.

196

regulate your own affairs or to have them regulated for you? Is it
better to be compelled by government influences to do what is right
or do it of your own initiative?"

I wish to congratulate the Association of Supervistors of
State Banks for having last year unanimously recommended
the segregation and safeguarding of savings deposits.
I am especially pleased to find that among the officers of
your association you have such ardent advocates of this
subject as my good friend Mr. Johnson, your President, and
I am pleased to remind you of what he said in part to the
Savings Bank Association of the State of New York in an
address made by him last May. After referring to the
guarantee of deposits and the postal savings plan, he said:
"Each of these questions being prominent in itself, I will pass on
without further comment, other than to say that we must meet this
popular cry. The mere fact that we have protested publicly .and
otherwise against both of these prominent features is not sufficient
to convince the masses of their undesirability. We must give them
something as good or better, and prove it to them."

In fact, there is such an unaminity of opinion on this
subject by those who have given it serious thought that it is
unnecessary to quote as authority the opinions of others
who are high in the profession of banking as well as in
authority in supervision over our banks. To me it seems
very clear that the advocates of the segregation and safeguarding of savings deposits have proven their case and that
the recommendations made are irresistible.
I have just had an intimation that your Committee on
Legislation has already concluded to adopt the segregation
and safeguarding of savings deposits as its legislative policy.
If that be true, then I am pleased to know that the jury
has already, in fact, agreed upon its verdict, and this, so
far as you are concerned, the subject would need no further
argument.
IN MICHIGAN.

It may be of interest, however, to the members of your
Association to know how tanks permitted to transact both a
commercial and savings bank business are regulated. To
those familiar with the statutes requiring the segregation
and safeguarding of savings deposits in Michigan, it must
be plain indeed that the savings depositors there were the
special objects of care and solicitude on the part of the
lawmakers, since the statute provides that separate books
of account shall be kept, that all investments in the savings departments shall be kept entirely separate and apart
from the other business of the bank. Originally the law
did not provide for the preference of savings depositors,
but the law was amended from time to time. In 1893 this
provision was inserted evidently after due deliberation and
with the plain intent of taking special care of savings
depositors.
The reasons for this are quite evident. The lawmakers
returned *to the original idea or purpose of savings banks,
as it was understood in the New England States when the
English savings bank plan was adopted. It is apparent that
the lawmakers of Michigan were convinced that savings
banks should be established to encourage thrift among wageearners, to offer safe and profitable depositories for their
funds, and provide safeguards against loss, since the law
expressly provides that savings tanks may receive deposits
from tradesmen, mechanics, laborers, servants, minors and
others. While this enumeration of the persons from whom
deposits may be received by savings banks in Michigan may
have no particular legal significance in itself, yet it indicates• very clearly the character of the business intended
for a savings bank. The Michigan law also provides the
amount of reserve to be kept on hand, and details how the
remainder of the deposits of a savings bank shall be invested, which, for convenience, may briefly be stated as
follows:
Fifty-one per cent, of deposits shall be invested as follows:
1. In notes secured by first mortgage on property worth double the
value of the loan.
2. Bonds of the United States.
3. Bonds of any city, county, township or village in the United
States.




4. Bonds of steam railroad corporations (subject to certain re.
strictions).
5. Street railway, steamship, gas and electric light and power
.bonds, under certain restrictions and provided they are approved by
the Securities Commission, consisting of the State Treasurer, Attorney-General and Commissioner of Banking.
6. Banks may loan on negotiable paper secured by above classes
of securities.

Thirty-four per cent. of savings deposits may be invested
in collateral loans with collateral of known marketable value
worth 10 per cent. more than face of loan; or a portion of
this 34 per cent. (not exceeding capital and additional
stockholders' liability) may be invested in negotiable paper,
approved by directors.
Since such investments as these are not readily turned
into cash the bank is given the right to provide against
sudden calls for money in the savings department. In
pursuance of such statute the bank may lawfully adopt a.
by-law calling for ninety days' notice of withdrawal of savings deposits. On the other hand, in the case of commercial
banks, the lawmakers aimed to satisfy the needs of business
life and the demands for credit in mercantile transactions.
Investments made by banks of this character, it is evident.
must be readily convertible into cash. By specific provisions
of the statute all commercial deposits are payable on demand
without notice, except where there is a special contract
with the depositor to the contrary. Real estate investments
are not suited to the requirements of commercial banking,
since they cannot be readily turned into cash, and this
statute thus prohibits the commercial banks from investing
in real estate securities except in amount not exceeding onehalf of the capital stock, and then only when authorized by
a two-thirds vote of its board of directors. No limitation
is otherwise placed upon the investments which may be
made by commercial banks.
These dual functions conferred upon the State banks of
Michigan have been taken advantage of by more than 90
per cent. of the banks organized in the State, there being
comparatively few strictly commercial banks and strictly
savings banks. This must be convincing that the plan operates successfully and to the advantage of both banker and
depositor. If we had no such law it is evident that in the
smaller communities banking facilities would be seriously
handicapped, since in such places if a strictly savings bank
were established it would not meet the commercial demands
of the locality, and so, on the other hand, if a purely commercial bank were established savings depositors would not
have the same advantage or protection as the law intended
for such depositors.
In case of failure or dissolution the savings depositors in
Michigan have a first lien on the assets of the savings
department of the bank, and if these are insufficient then
an equal claim with other creditors of the institution on its
general assets as well as on the investments of the capital
stock and on the stockholders' liability.
The Supreme Court of the State of Michigan has held,
in line with the courts of those States in which mutual
savings banks are established, namely, that savings deposits
constitute a trust fund, and, in Peter vs. Receiver of the
City Savings Bank of Detroit, reported in 131 Michigan
322, the court used this significant language:
"So long as it is entirely possible to trace the fund which
was invested in these securities as a fund derived from the
savings department, we think there is no difficulty in saying
that it should be impressed with a trust in favor of the
savings depositors."
In Michigan there are now 365 State banks, with a total
capital and surplus of $29,467,038. The aggregate of commercial deposits therein is $56,348,000, while savings depositors of the State have to their credit in these institutions
$147,708,000.
Thus the lawmakers of Michigan, while recognizing the
paramount necessity of safety, stability and permanency in
the reception and investment of savings deposits, also kept
in mind the first requisite of a commercial bank; ease of
negotiation of its investments made from commercial de-

SAVINGS BANK SECTION.
posits, and, while artisans, mechanics and laborers were
contemplated as prospective savings depositors, the business
men were contemplated as prospective commercial depositors, and thus the laws were framed to encourage thrift in
the one case and to assist trade operations in the other.

197

In conclusion I wish to congratulate you upon this most
successful convention, ,and especially, upon the good work
which the Savings Bank Section is doing. I amoyery grateful to you, indeeq, for both your courtesy and the kind
attention given me. I thank you.

zag
Real Estate Loans For Savings Banks and Their Amorti on.
BY R. M. WELCH, Cashier of the San Francisco Savings Union, San Francisco, Cal.
From the very inception of saving banks, loans on the
security of real estate have been regarded as pre-eminently
a legitimate and desirable form of investment for the funds
of such institutions. In volume they are virtually inexhaustible, and they afford the most remunerative employment that can be found for funds where security is the
first essential. Their immobility in time of stress and panic
is the only objection that can be advanced against them,
and is the reason why a savings bank is forced to limit them
to a certain proportion of its assets. It is an interesting
incident in the history of one of the oldest, and what is now
the largest savings bank in this country, that having invested its funds exclusively in loans on real estate, the panic
of 1837 found it with nothing but these immobile assets.
But, even so, it was able to sustain itself by exchanging
certain of its mortgages for municipal bonds, which it in
turn hypothecated, thereby obtaining the needed cash. Were
savings banks restricted in the employment of their funds
to bonds of the class prescribed for them by law their earnings would be wholly inadequate to pay depositors a rate
of interest that would be sufficiently attractive to encourage savings.
One of the most potent arguments against the wisdom of
a postal savings bank system in the United States is the
very reasonable apprehension that it will drain away from
localities where needed, and absorb in other forms of investment, funds that would otherwise be available for the development of the realty values of those localities. Realizing
this, and further realizing that the rate of interest proposed
to be paid by the government will be so trifling when compared with that paid by the savings banks as to discourage
deposits at the post offices, friends of the measure are
gravely suggesting that the government arrange to lend the
postal savings funds on real estate security so that a rate
of interest approximately as high as that of the savings
banks be paid. The spectacle of the Government of the
United States adding to its already numerous activities that
of making loans on real estate to individual borrowers is
too absurd to be dwelt upon.
It is a question, however, whether savings banks have
not permitted to drift away to another class of institutions
loans of a character that have proved exceedingly profitable
to those institutions, and which would have conferred on
the banks benefits that might be termed cumulative in their
value.
There will come to the savings bank two classes of applicants for loans on real properly: one the owner of large
holdings in city or country seeking funds to improve or
add to their holdings and requiring large sums therefor; the
other small farmers or city residents with comparatively
moderate needs. To the savings bank of vast resources
the single loan large in amount appears more desirable than
a number of loans aggregating a like amount; the economy
of detail is enormous. There is virtually as much detail
in the making of a loan of $2,500 as one of $25,000, but in
making the ten loans the bank has become known to and
has added to its clientele, not alone the ten individual borrowers, but the members of their immediate families and
their connections. The savings bank which desires the
greatest possible degree of success should seek large individual loans only when it cannot find a sufficient number
of smaller borrowers to employ its loanable funds.
There is, however, not to be lost sight of a class of loans




as a rule individually large in amount Which are exceedingly
desirable for savings banks. They are those for building
purposes to religious, fraternal, beneficial and social organizations. A loan of such a character renders the bank
making it at least known to each member of the organization. Such loans are particularly sought by life insurance
corporations as an introduction to the membership of the
borrowing organization.
There cannot exist between the great mass of the depositors of a savings bank and the management that degree of
acquaintance and community of interest which exists between a commercial bank and its depositors. The latter
are to a great extent corporations and men of affairs who
have frequent occasion to call on their bank for accommodation. It is unusual to regard the average Savings bank
depositor as a possible borrower. During the entire period
of his dealings with the bank he may never get beyond the
receiving or the paying tellers' desks. It is when he be
comes an applicant for a loan that the opportunity offers to
identify him with the institution as a permanent friend
or client. In all probability his account is the nucleus
he has been creating for the acquisition of a home, and,
having accumulated sufficient for the purchase of the ground,
he is now seeking to borrow sufficient to erect the house.
The loan sought in such an instance may be beyond what
a savings bank would ordinarily seem warranted in making.
It may seem to be more properly within the province of a
building and loan association. There is no intention of
discrediting the beneficial work of these institutions. They
have enabled many an individual of small means to obtain
his home who would never have acquired it otherwise.
What is in mind is to endeavor to show that instead of sending the depositor to the building and loan association the
loan might be made by the bank to the advantage of both
itself and the depositor. The methods of the building and
loan associations call for a series of payments beginning
with the making of the loan, which, within a fixed period,
will discharge it, principal and interest. But as the result
of these payments will also be to give the borrower certain
shares in the association, in the profits of which he will
afterward participate, the payments must necessarily extend
over a somewhat lengthy period, and aggregate a considerably larger sum than the principal of the loan plus a reasonable rate of interest. In fact, so burdensome do these
payments often become that the borrower surrenders the
property he has been. endeavoring to acquire, and all he has
paid, and these defaults, which are not unexpected, prove
a great source of profit to the association.
When application is made for a loan of this class there
is to be considered first the lot. Is it well selected, worth
what the applicant has paid for it? What are the surroundings? Is it in a locality where values are likely to
enhance rather than depreciate? A very important factor
is the street work: is it complete and accepted by the city?
Many a homeseeker, lured by what seems cheap property,
finds himself ruined by the excessive taxes imposed for
street improvements. Next, the character of the applicant.
Is he industrious and provident? If a depositor, this will
be indicated to a great extent by the frequency and regularity of the deposits to his credit. Mat is his business
or employment? To what extent is it precarious or hazardous? Does he carry some form of life insurance with
which his family can clear their home from debt in the

198

BANKERS' CONVENTION.

event of his death? In these days of industrial and other
discharge the debt in the end as any other plan. There is,
forms of moderate priced life insurance, the borrower should
however, a more scientific plan, and possibly more interbe urged to make use of this means of assuring his family
esting, by which the payment of so many equal monthly
against the loss of their home. All these points being
installments will discharge the principal and interest of the
satisfactorily determined, such a loan may safely be made. debt. The problem is, what sum of money paid monthly
There is not lost sight of the added security of fire insurwill in a given number of months discharge the principal
ance, which it seems unnecessary to tell an assemblage of
and interest of a certain debt. The solution calls for
savings bank men should be taken, the loss under the policy
familiarity with algebraic formulas and the use of logarbeing made payable to the bank.
ithms, but it is entirely within the capacity of any comBut it would be wholly imprudent for a savings bank to
petent actuary, or, indeed, any one who has not forgotten
make the principal sum of a loan of this character payable
his school mathematics. It would be tedious, ineffective and
at the expiration of a term of years. The improvements
unnecessary to attempt within the limitations of this paper
necessarily deteriorate from year to year. Even though
to work out an exemplification of the problem, but for any
the upkeep be thorough, in these days of advanced methods
one .who may ask "What is the answer?" it will be said
of construction and introduction of new facilities and con- $16.57 paid monthly will in six years discharge a debt of
veniences houses soon become old-fashioned, out of date and
$1,000 with interest at 6 per cent. per annum. Of the first
undesirable. If there be neglect in the upkeep the deinstallment $5 will be applied for interest and $11.57 for
terioration is rapid. Although the amount of the loan may
principal; of the second, $4.94 will be for interest on the
have been confined to the value of the land the improvereduced principal and $11.63 for principal—and so it will
ments represent the margin of security, and as they dego on, the amount required each month for interest growing
teriorate the loan becomes less secure. It is to the ad.
less and the amount applicable to the principal larger, until
vantage of the borrower that through the exercise of thrift
when the final installment is reached but eight cents will be
and industry he free his home from debt as rapidly as he
required for interest and the balance, $16.49, will close the
can do so, and it is the duty of the bank as an exponent
loan. Or a simpler proposition—the accuracy of which
of. economics to inculcate the practice of these virtues.
can be readily verified—is that twelve monthly installments
A plan of repayment should, therefore, be determined on
of $86,07 each will pay a debt of $1,000 with interest at 6
which within a given time will amortize the loan—at least
per cent. per annum. Of the first installment $5, of course,
in part, if not as a whole. It is entirely reasonable, too,
will be applied in payment of the first month's interest on
in view of the additional bookkeeping imposed that a slightly
$1,000 and the remainder, $81.07, for principal.
higher rate of interest be charged. The custom usually is
The form of note taken for a loan repayable in a given
to charge one-half of 1 per cent. per annum higher on the
number of equal monthly installments is as follows:
installment loan than on the simple flat loan; but, even so,
"$1,000.00
San Francisco, September 1, 1900.
the borrower gets his money far more cheaply than he could
"For value received I promise to pay to the
Savings
get it under like conditions from any other source.
Bank, a corporation duly incorporated and doing business as such, or
to its order, at its office, and in seventy-two (72) equal monthly inThe form of amortization should preferably be the paystallments, each of the amount of sixteen and 57/100 dollars ($16.57),
ment of monthly installments, of which so much as necesthe principal sum of one thousand dollars ($1,000.00), and interest
sary would be applied to pay the month's interest on the
at the rate of one-half of 1 per cent, per month on the monthly
decreasing balance of said principal sum which will remain unpaid
balance of principal and the remainder in reduction of the
after the payment of each of the said monthly installments, whereof
principal sum. In determining what the amount of the
the first shall be payable on the first day of October, one thousand
installment is to be the borrower should be urged to agree
nine hundred and nine, without grace, and one of the remainder shall
to pay such an amount monthly as would approximate the
be payable on the first day of each and every succeeding month
thereafter, without grace, until all are paid.
rental he would have to pay for similar premises for the
"And I hereby covenant and agree that each Installment, when paid.
occupancy of himself and family. We read the repeated
shall be applied, by the holder thereof, first, so much thereof as shall
suggestion by real estate dealers that the payment of rent
be required to the payment of interest accrued, as above specified, and
be stopped, that the rental money be applied to acquiring a
next the balance thereof to the repayment of the said principal sum.
"And I hereby promise to pay both principal and interest in United
home, and the suggestion is an excellent one. Unhappily,
States gold coin, waiving any right which I may have now or here.
though, too often the payment of rent is stopped through
after to pay the same in any other currency.
the incurring of debt, and the monthly expenditure for the
"And I further agree that in case of default in the payment of
payment only of interest being so much less than was thereany of said installments in the manner aforesaid, then such installtofore necessary for the payment of Tent, an apparent surments shall bear interest from the date of maturity until the date
plus is created—which is expended in unnecessary indulg- of payment at the rate of one-half of 1 per cent, per month; and
at any time during sue)) default the entire unpaid balance of said
ences instead of being applied in reduction of the debt.
principal sum shall become immediately due and payable if the holder
In some instances the loan may be of such an amount
of this note shall so elect, and shall bear interest at the rate of onethat the attempt to repay it in any reasonable number of
half of 1 per cent, per month from the date of maturity of the last
paid installment until the whole principal sum and interest shall be
monthly installments will prove too burdensome to the perpaid."
son of small means. In such cases the loan may be divided
into two notes, one to run for a term of years and for such
The instrument to secure this note may be either a mortan amount that the bank would feel warranted in renewing
gage or a deed of trust of the real property pledged.
it if it were not paid at •its maturity, the other for an
This form of loan was at one time very generally made
amount to be repaid in agreed installments.
by the San Francisco savings banks, but gradually fell into
One of the principal savings banks in San Francisco, with
disuie—largely as the result of the peculiar working of
an especially large line of loans on small parcels of real
the mortgage-tax provision of the State constitution. This
estate, principally the homes of the debtors, has adopted
declared that a mortgage is an interest in the real estate
this plan in remaking such loans and in granting new loans
it covers, but directs that it be assessed to the lender, the
of this character. When the installment note has been disborrower being credited with a corresponding amount on
charged the remainder of the debt will in all likelihood be
the assessed value of the property as a whole. That is, in
so amply secured that the bank will be quite content to
assessing a piece of encumbered real property the amount
carry it indefinitely, but there is the strong probability that
of the mortgage is assessed to the lender and the remaining
the debtor having formed the habit and having realized the
value of the property, if any, is assessed to the owner. 'the
advantages of systematically providing for the payment of lender was formerly prohibited, under penalty of forfeiture
his indebtedness will be incited to attack the remainder in
of interest, from contracting for the payment of the morta like manner.
gage-tax by the borrower. The tax was in reality paid by
The simplest. form of monthly installment is the payment
the borrower, for the lender added to the normal ruling rate
of a fixed sum in reduction of the principal and so much
of interest the equivalent of the tax, plus a little more for
as necessary to pay the month's interest on the balance of
contingencies. This was all very well, except in the ens'
principal. This is entirely effective and will as thoroughly
of a loan repayable in frequent installments. The balance




SAVINGS BANK SECTION.
of the debt as existing on the first Monday of March in each
year was assessed to the lender, and he paid a year's taxes
on it, but he did not get a year's interest on that balance,
because it was steadily decreasing each month through the
payment of installments. So the loan repayable in installments fell into disuse among lenders, and another hardship
was thereby imposed by the provisions of the State constitution on the very class of persons for whose benefit those
provisions were intended.
More recently the prohibition of the agreement between
the lender and borrower as to the payment of the mortgage
tax has been removed by constitutional amendment, and
while the mortgage is yet taxed the borrower agrees to pay
the tax, and gets his money at the normal ruling rate of
interest. This removes the objection to installment loans
noted on the part of lenders, and it is likely that such loans
will again come into more general use in California, especially in San Francisco, where loans are needed for rebuilding purposes, often in excess of what is warranted by a
conservative estimate of the ground value.
An instance is known where there was needed for the
completion of a large and very valuable building—the returns from which were assured once it could be completed
for occupancy—the sum of $100,000 in excess of what had
been estimated and what it had been agreed to lend. The
note for this additional $100,000 was taken repayable in

199

thirty-six monthly installments of $3,042 each. This is a
larger transaction than it is usually contemplated to cover
with a note payable in monthly installments; it is merely
cited as an instance that the system can be applied with
advantage in a large transaction as well as in a small one.
. But it is to the small borrower, the home-builder, that the
loan repayable in monthly installments of moderate amount
is particularly applicable, and if obtained from a savings
bank the borrower not only gets his monty at a more reasonable cost, but may expect a greater degree of indulgence
should misfortune overtake him than could be extended by
an association whose rules of forfeiture must be rigidly
enforced for the average of the general membership. A
savings bank may suspend the collection of the monthly
installment for a time, being content until more prosperous
cona ions return with the payment of interest on the
remaining balance of principal, or, if the reduction of princi:'al warrants it, may make a new loan for a definite term
of years, with the balance of the old loan as the principal
sum of the new, thus enabling the debtor to save his property, which, under other conditions, he might ha- been
,-1
forced to sacrifice.
It may with certainty be accepted as a general proposition that the greater the number of small borrowers a sav•
ings bank has among its clientele the greater will be its.
degree of popularity and success.

A Morigage Loan for Home Buyers.
BY WM. R. CREER, Secretary Cleveland Savings and Loan Company, Cleveland, Ohio.
In fire insurance a dwelling house or home is designated
a preferred risk. In savings bank mortgages this kind of
property should receive the same classification, for where
there exists the home-making and home-owning idea the
physical condition of the security does not suffer that degree of depreciation as some others, owing to the pride and
care of the owners.
There are two criticisms frequently made regarding real
estate mortgages; the first, on the part of the bank:
(1) Admitting that a mortgage on improved realty is ideal
security, it is argued that in times of financial stress it is
hard to realize cash from it. (2) The careful person planning to buy or build a home, for the first time, is appalled
at the size of the debt involved in the undertaking.
To overcome these objections on both sides of the business transaction the following described rdan of installment
mortgage has been designed and has proven popular with
borrowers.
Conditions differ in various communities and the rate of
interest is governed by local demand, so in presenting the
plan it is ' understood that the plan and rate are to be
adapted to meet local requirements. In fact, its adaptability is one of the attractive features of this form of
mortgage contract.
In the following example the interest rate is 7 per cent.
for the first 25 per cent. of the loan, 6 per cent, for the next
50.per cent. and 5 per cent, for the last 25 per cent. of the
loan. These proportions can be changed as well as the rate
of interest.
Take, for the sake of illustration, a loan of $2,000 written on this plan, the obligation would read as follows:
"Homestead, III., September 10, 1909.
•
"The condition of this obligation is such that, whereas the said
John Brown and Mary Brown have received the sum of two thousand
dollars ($2,000.00) from the Homestead Savings Bank as a loan, for
not less than one year from date, and agree to pay interest on said
loan, monthly, at the rate of 7 per cent. per annum, until the principal of said loan Is reduced to $1,500.00, and from that date interest
at the rate of 6 per cent. per annum until the principal is reduced
to $500.00, and from that date interest at the rate of 5 per cent.
per annum until said loan is paid in full. During the continuance
of said loan they further agree to pay monthly on said loan such
additional sum as will, together with the interest aforesaid, amount
to not less than the sum of twenty dollars ($20.00) per month, at




the office of said bank. The first of said installments payable the
fifteenth day of October, 1909, and one of said installments on the
fifteenth day of each and every month thereafter, until all of the
said loan and interest, up to time of cancellation. is paid. The
monthly amounts so paid shall be credited (annually or semi-annually
as desired) on said loan as follows: At the expiration of the (annual
or semi-annual) period from date of said loan (or on the regular
interest dates if desired) so much of the amount so paid during the
preceding (year or six months) shall be applied to the payment of
interest up to said time, and the balance shall be credited on the
principal, the amount remaining due forming a new principal for
the succeeding period, on which interest shall be charged as before.
When three monthly payments become due and remain unpaid thirty,
(lays, then the entire amount of the principal and interest to become
due at the option of the bank."

The average person has been a rent-payer before becoming
,
a home-buyer, and this plan follows the line of least res' I
ance by adjusting itself to his former habit. The man who
can pay twenty dollars each month would not have $120
at the end of six months, in the majority of cases, were
the payment deferred until that time. Like rent, only
twenty dollars becomes due each month, and there is no
apprehension of the whole amount being called at any time.
Again the rate is fixed for the entire length of the contract,
even though nothing but the minimum amount be paid
monthly. After one year the loan may be canceled at any
time. Additional payments in sums of $100 or multiples
thereof, may be made at any time, applying directly on the
principal, and any amount in addition to the monthly payment can be made at the end of any yearly or half-yearly
period. There is a constant incentive on the part of the
borrower to reduce the principal in order that a lower rate
of interest may be obtained. The contract is simple, easily
understood, easy to reckon. Every man owes it to his family to own his home fiee of debt. The savings bank owes
it to the citizens of the community to assist them to accomplish this desirable object. An installment loan is an
easy way to get out of debt—a "straight" loan makes it
easy to stay in debt.
The advantage to the bank of this form of loan is that
it removes largely the consideration of the element of depredation, for the loan is being reduced regularly, and the
security is growing better each month. It provides a constant income each month from mortgage loans, instead of a
large amount once in six months, thus keeping the *funds

, BANKERS' CONVENTION%,

200

of the bank constantly employed, and furnishes reserve
without cost. It enables the bank to make a larger loan
with safety than on the "straight" loan plan. If money
gets tight the bank simply stops making loans. Experience
has shown that a million dollars in mortgages of this form
will bring in from $15,000. to $35,000 in cash each month.
This, of course, includes extra payments and cancellations;
and this income, which can be counted on, will often prevent the calling of good loans in the other form.

In conclusion, while this form is not' practical for all
cases, it is very desirable for loans on homes. Objection
will be raised by some against it, because there is an impression that monthly payment loans are necessarily more
expensive. The fact remains that the person who has been
paying rent to a landlord monthly and objects to
paying a Monthly installment in order to own a home
would be a questionable risk for any other form of mortgage loan.

Partial Payments Comftzred With Sinking Funds.
BY ROBERT M. BOTHER, President Hopkins Place Savings Bank, Baltimore, Md.
The borrowing of large sums of money for long periods
by corporations of every description has reached such large
proportions that it is an important question to determine
the most advantageous provisions for the liquidation of
these loans. That there are serious objections to the sinking
fund plan is generally recognized, but the substitute for it
—partial payments—finds favor as yet with but few men.
Is it because of lack of investigation or indifference, or is
it because of a desire to perpetuate a "system" which
gives "opportunities"? The fact remains that sinking
funds, with all their shortcomings, are provided for in nearly
all loans marketed where provisions are made for the liquidation of the debt. This is especially so with States and
municipalities where liquidation by a certain period is
obligatory by constitutional requirements, and where partial
payments can easily be applied.
Generally speaking, the promise of a sinking fund appears
to give a proposed issue of bonds a tone of strength and
security in the mind of the intending investor, because the
ultimate liquidation at maturity of the money borrowed is
theoretically assured through its operation.
Few men, however, ask how sinking funds operate. Experience teaches us that they are a doubtful assurance to
the lender and an expensive undertaking to the borrower.
To have any value at all the provisions for a sinking
fund must be conscientiously carried out, and the accumulated funds must be advantageously invested. That the
first is not always done is well known, and that the investment of the fund is subject to all sorts of contingencies is
self-evident.
However sound in theory a sinking fund may be, its administration cannot be placed beyond the pale of human
weakness; it always was and always will be an unknown
quantity—a speculation.
Sinking funds are under the control of the debtor—the
borrowing municipality. If badly invested, misused or
squandered they are even dangerous. There are uncertainties in the management of a sinking fund which should
receive serious consideration by all public-spirited men. It
may be depleted by dishonest or incompetent officials, or by
unfriendly legislation. Even with wise management the
rate of interest yield cannot be controlled, and when the
securities must be sold to obtain the funds with which to
pay the debt for which it was accumulated the proceeds may
or may not cover the loan.
In England the successive failures of sinking funds made
the term almost one of reproach.
A. D. Chandler reports: "There was a fraudulent misappropriation of over $80,000 connected with the Boston
sinking fund in 1880, and in 1904 about $290,000 was taken
from the sinking fund for current expenses. Chicago sink.i.vg funds have been generally used for current expenses.
In Mississippi a sinking fund was begun in 1832 with
$20.O00; in 1839 it amounted to $800,004; in 1848 it had
shrunk to $100,000 from bad investments." These are but
a few cases of a large number of mismanaged sinking funds.
Another uncertainty of the sinking fund plan is that at




the maturity of a loan for which provision has been made,
the amount necessary for the loan may have been properly
accumulated in the fund, but only a part of the fund will
consist of the particular loan to be redeemed; the balance
will have been invested in other securities, which must be
sold whether conditions are favorable or not to obtain the
funds necessary to pay the loan for which it was accumulated.
The partial payment plan is free from these uncertainties. The specific amounts to be paid each year on account
of principal and interest are determined in advance, and the
liability of the issuing corporation is reduced with every
payment made. There is no guessing; it is fixed figures
and facts from first to last.
Bonds issued under the sinking fund plan mature on the
same date, no matter what the desires of the prospective
purchaser may be. If a loan is for thirty years the buyer
must bid for the thirty-year bond, or not at all. Under
the partial payment plan the bonds mature in from one
year to the last year of the life of the loan, and the desires
of every intending buyer can be accommodated.
The only way to sink a debt is to pay it, and the safest
sinking fund, with no uncertainty, are partial payments.
There are no doubts about partial payments. If you owe
$1,000 and pay $100 you know the balance due is $900,
neither more nor less. This is partial payment. By this
method the debt is reduced annually by payments on account of principal, thereby reducing each year the liability
and the interest charge.
Compared with the sinking fund plan the partial payment method applied to the same loan costs considerable
less in the aggregate, as will be shown by the figures given
later on. The results given are brought about by the fact
that the gradual extinction of the debt by annual payments
.
operates as if the latter were invested at the same rate
which the obligation bears. It works automatically without
loss of interest. There can be no mismanagement, nor dishonesty, nor manipulation; nor can any unwise or unfriendly legislation interfere.
One of the objections advanced to the partial payment
plan is that the earlier payments are too large on account
of the large interest payments and a heavy drain on ,the
taxpayers. This only applies to the plan of paying a,n
equal amount of the principal each year; it does not apply
to the plans proposed here. The annual charge can be made
less from the beginning than the sinking fund requirements
would be.
The scheme is flexible and a plan can be worked out to
suit almost any condition. The larger the payments on account of principal in the early years the larger the saving
in interest on the loan.
The following two plans worked out for a fifty-year
4 per cent. bond issue of $5,000,000 will illustrate the
meaning of the above, and it may be proper to say that
similar plans may be worked out for any given amount of
loan at any rate of interest and for any Period:

201

SAVINGS BANK SECTION.

44
45
46
47
48
49
50

Amount
of interest
to be paid
annually.
$200,000
198,680
197,320
195,920
194,440
192,020
191,320
189,680
187,960
186,160
184,280
182,360
180,360
178,280
176,080
173,800
171,440
169,000
166,440
163,800
161,040
158,160
155,160
152,040
148,800
145,440
141,960
138,320
134,520
130,600
126,520
122,280
117,840
113,240
108,440
103,480
98,320
92,920
87,320
81,520
75,480
69,200
62,680
55,880
48,800
41.440
33.800
25,840
17.560
8,964)

Amount paid
on account
of principal
annually.
$33,000
34,000
35,000
37,000
38,000
40,000
41,000
43,000
45,000
47,000
48,000
50,000
52,000
55,000
57,000
59,000
61,000
64.000
66,000
69,000
72,000
75,000
78,000
81,000
84,000
87,000
91,000
95,000
98,000
.102,000
106,000
111,000
115,000
120,000
124,001)
129,000
135,000
140,000
145,000
151,000
157,000
163,000
170,000
177,000
184,000
191.000
199,000
207,000
215.000
224.000

Amount to
be raised
by taxes
annually.
$233,000
232,680
232,32Q
232,920
232,440
232,920
232,320
232,680
232,960
233,160
232,280
232,360
232,360
233,280
233,080
232,800
232,440
233,000
232,440
232,800
233,040
233,160
233,160
233,040
232,800
232,440
232,960
233,320
232,520
232,600
232,520
233,280
232,840
233,240
232,440
232,480
233,320
232,920
232,320
232,520
232,480
232,200
232,680
232,880
232,800
232,440
232,800
232,840
232,560
232,900

$6,637,800

Year.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
1
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43

Amount on
which interest
must be paid
annually,
$5,000,000
4,967,000
4,933,000
4,898,000
4,861,000
4,823.000
4,783,000
4,792,000
4,699,000
4,654,000
4.607,000
4,559,000
4,509,000
4,457,000
4,402,000
4,345,000
4,286,000
4,225,000
4,161,000
4,095,000
4,026,000
3,954,000
3,879,000
3,801,000
3,720,000
3,636,000'
3,549,000
3,458,000
3.363,000
3,265,000
3,163,000
3.057.000
2,946,000
2,831,000
2,711,000
2,587,000
2,458,000
2,323,000
2,183,000
2,038,000
1,887,000
1,730,000
1,567,000
1,397,000
1,220,000
1,036,000
845,000
646,000
439.000
224,000

$5,000,000

$11,637,800

On the sinking fund plan the above loan would require
fifty annual payments of $244,327.80 each, a total of $12,216,390-a difference in favor of partial payments of
$578,590.
.
ANOTHER PLAN.

Yea r.

1
2
3.......
4
5

0
7

8
6
t()
11
12

Amount
Amount paid
Amount on
of interest
on account
which interest
of principal
to be pald
must be paid
annually,
annually.
annually.
$200,000
$40,000
$500.000
.
198,400
40,000
4,960,000
196.800
40,000
4,920,000
42,000
195,21)0
4,880,000
44,000
193.520
4,838,000
46,000
4.794,000191,760
48,000
189,920
4.748,000
188,00050,000
4.7e0y000
52,000
186,000
4.650,000
54,000
4.598,000183,920
56,000
181.760
4.544,000
58,000
179.520
4,488,000




Amount to
be raised
by taxes
annually,
$240,000
238,400
236,800
237,200
237,520
237,760
237,920
238,000
238,000
237,920
237,760
237,520

Year.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

Amount on
which interest
must be paid
annually,
$4,430,000
4,370,000
4,308,000
4,2441000
4,177,000
4,107,000
4,035,000
3,960,000
3,882,000
3,802,000
3,720,000
3,635,000
3,548,000
3,458,000
3,366,000
3,271,000
3,173,000
3,073,000
2,969,000
2,862,000
2,752,000
2,637,000
2,517,000
2,392,000
2,262,000
2,127,000
1,989,000
1,847,000
1,700,000
1,549,000
1,394,000
1,235,000
1,072,000
905,000
734,000
558,000
377,000
191,000

Amount
of interest
to be paid
annually,
$177,200
174,800
172,320
169,760
167,080
164,280
161,400
158,400
155,280
152,080
148,800
145,400
141,920
138,320
134,690
130,840
126,920
122,920
118,760
114,480
110,080
105,480
100,680
95,680
90.480
85,080
79,560
73,880
68,000
61,960
55,760
49,400
42,880
36,200
29,360
22,320
15,080
7,640
$6,389,920

Amount paid
on account
of principal
annually.
$60,000
62,000
64,000
67,000
70,000
72,006
75,000
78,000
80,000
82,000
85,000
87,000
90,000
92,000
95,000
98,000
100,000
104,000
107,000
110,000
115,000
120,000
125,000
130,000
135,000
138,000
142,000
147,000
151,000
155,000
159,000
163,000
167,000
171,000
17(1,000
181,000
186,000
191,000
$5,000,000

Amount to
be raised
by taxes
annually.
$237,200
236,800
236,320
236,760
237,080
236,280
236,400
236,400
235,280
234,080
233,800
232,400
231,920
230,320
229,640
228,840
226,920
226,920
225,760
224,480
225,080
225,480
225,680
225,680
225,480
223,080
221,560
220,880
219,000
216,960
214,760
212,400
209,880
207,200
205,360
203,320
201,080
198,040
$11,389,920

On the sinking fund plan the above loan would require
fifty annual payments of $244,327.80, a total of $12,216,390-a difference in favor of partial payments of $826,470.
'lhe specific advantage of the plans here given is that the
payments on account of the principal are so arranged that
the taxpayer derives the benefit of the saving at the very
beginning, the amounts being graded in such manner that
the aggregate sum of principal and interest required each
year is less than the amount it would be necessary to pay
into a sinking fund including interest.
The first table showing an aggregate saving of $578,590
is so arranged that the annual saving of $11,576.78 per
annum is distributed almost equally each year.
In the second table, which shows a saving of $826,470,
the payments of the earlier years are somewhat larger, but
even then they are less than the requirements under a
sinking fund plan.
That the defects of sinking funds are gradually being
recognized is evidenced by the various devices resorted to by
a large number of municipalities to reduce their debts by
a partial avoidance of them. In some instances partial
payments are adopted, but without grading, which is objectionable to the taxpayer. Others reserve the right to redeem at stated periods in the life of the bond, and another
resort is to make the bonds optional on a certain date, long
before they mature. All are 'but partial remedies and disadvantageous to the borrower, but will ultimately lead to
partial payments applied on scientific principles.

202

BANKERS' CONVENTION.

Branch Savings Banks.
BY EDWARD B. CARNEY, Treasurer of Lowell Institution for Savings, Lowell, Mass.

Mr. President and Members of the Savings Bank Section of
the American Bankers' ASsociation:
The Legislature of the Comomnwealth of Massachusetts,
during the session of 1908, codified, revised and amended the
laws relative to savings banks and institutions for savings.
Very few of the old laws were stricken out, but a number
of new ones were. added. One of the important amendments to the statutes was that allowing savings banks to
receive deposits outside of the banking rooms. This statute
as amended is as follows:
"Such corporation shall carry on its usual business at its banking
house only and a deposit shall not be received or payment on account
of deposits be made by the corporations or by a person on its
account in any other place than at its banking house, which shall
be in the city or town in which the corporation is established; except
that the corporation may, with the written permission of and under
regulations approved by the commissioner, maintain and establish one
or more branch offices or depots, for the receipt of deposits only, in
the city or town in which the banking house is located, or in towns
not more than fifteen miles distant therefrom in which there is no
savings bank at the time when such permission is given. The annual
meeting and meetings of the trustees or board of investment of such
corporation may be held at any place in the city or town in which its
banking house is located."

In compliance with this statute, written permission was
given by the Bank Commissioner, July 7, 1908, for the
Lowell Institution for Savings to establish and maintain
branch offices for the receipt of deposits only at the factories of Abbot & Co., worsted manufacturers, and C. G.
Sargent's Sons, makers of wool washing machinery, in the
town of Westford, which is ten miles from. the city of
Lowell, and the first deposit was received July 18, 1908.
The operatives in these factories had for many years been
depositors in this savings bank, as it offered them better
accommodations when they came into the city Saturdays
than the other banks did. They formerly depended on the
steam railroad for transportation, and the last train left
for their homes at 5 o'clock, but now an electrip car line
has been built from Lowell to Westford, so that the time of
their departure from the city is not limited as it was.
Each Friday afternoon—which is pay day at these factories—one of the clerks of this bank leaves at half-past 1
on the electric cars, reaches the first of the mills about
half-past 2 and finishes at the last mill shortly after 5
o'clock. The carfare for the trip is thirty-five cents. For
the first few weeks the clerk remained in the office of the
superintendent while word was sent to the overseers of the
various rooms that the "bank man" was ready to receive
deposits. This method did not prove a success, as it was
afterward found that an operative seldom went to the office
for any other purpose than to receive chastisement, and he,
therefore, kept away, as much as possible. Another reason
offered was that the operative did not want the superintendent or the management to know that he was saving
'money for fear that his wages might be reduced. A tour
of inspection was made through the various rooms, and,
after talking with the overseers and many of the operatives
under them, it was decided to go directly to the operative
at his machine and there solicit deposits. This change
proved to be a marked success at once, as in this way we
came in personal contact with the very ones to whom the
idea of a savings bank had never suggested itself, for those
that we reached were the foreigners and the boys and girls.
A large per cent. of the unskilled operatives in the New
England factories are foreigners, and a personal appeal




to them by a representative of a savings bank, with the
assurance and approval of the management of the factory,
has done more, in our case at least, to gain their confidence
in our savings banks than any written guarantee could do.
Within a month of the time that we changed to personal
solicitation one afternoon the clerk opened two new accounts
with .
Polanders, one for $200 and the other for $100. It is
the custom of these foreigners to keep on their person the
actual money that they 'receive, and when a sufficient
amount has accumulated to send it to their native land.
These are the funds that should be brought into our banks.
and in a modest way we have diverted some from their
garments to our banks. One operative allowed his deposit
to accumulate until it amounted to $7, when he withdrew
the full amount. We afterward learned that this was made
a test case to satisfy him and his associates that the
money given at the factories actually found its way to the
bank. He has since opened a new account and, has quite
a respectable deposit.
For a nuinber of months the boys and girls were very apt
to sit in the seats of the scornful and laugh at those who
made deposits. Talking to them brought no result, but
finally a plan was adopted that made eight of them depositors, with the promise that more would become so later. It
had been the custom for quite a few years for a certain
number of these boys and girls to form themselves into
clubs, and each member would deposit weekly twenty-five
cents into the treasury of the club. Some member, previously drawn by lot, would get all of the week's depoSit,
and so each week a different member would receive the
deposits. In this way, while the member of the club contributed twenty-five cents each week, once in so often, depending upon the number of members in the club, he would
receive a good-sized dividend. This' method was very good
for saving, but the one who received the week's deposit was.
quite apt to consider it so much clear gain and spend it at
once. Acting upon the suggestion offered by these weekly
deposits, two clubs, with four members each, have been
started, one of boys and one of girls, to make deposits in.
the bank each week, and as a special inducement to encourage them to save the members of the board of investment,,
personally, have offered to eve $5. bonus when the deposits
on the bank books of each club shall amount to $50. Each
member of a club has the privilege of making deposits besides that received from the club, and so receive a greater
share of the bonus money. when the amount of deposit of
the club to which he belongs shall reach $50.
A number of the overseers have taken a special interest
in having the operatives under them open accounts and'
make regular weekly deposits, for with money deposited in
a savings bank nearby the operative is more contented with
his work. One overseer reports fewer changes among those
under him than before we began to receive deposits.
- We have heard from a number of individual cases where
a good deal of comfort and aid has been possible because
there was a bank account, even if a small one, to draw from.
After thus outlining the methods used to solicit deposits:
it is interesting to note what has been the result:
At the time of the starting of our branch offices these factories, in common with all New England industries, had not
recovered from the financial depression that had so recently'
been felt throughout the whole country. The number of
operatives had been reduced and the hours of labor were
very much shortened. This condition existed well into Octo-

SAVINGS BANK SECTION.
s
&
a
T5
L
.,
"g
Date.
1908.
July 18
7
25
4
Aug. 1
5
8
1
15
1
22
1
29
5
Sept. 5
12
5
19
1
26_
Oct.

3
10
17
24
31
Nov. 7
14
21
28
Dec. 5
12
*19
*26
1909.
Jan. 2
9

2
4
4
5
1
1
1
2
3
-

2
3

&

2
=

a
.
0
t

Fs
.7
g

Date.
at .
Jan. 16
23
30
Feb. 6
13
20
27
Mar. 6
13
20
27
April 3
10
17
24
May 1
8
15
22
29
June 5
12
19
26
July 3
147.50
10
715.50
Totals

Amount.
8
$27.00
10
132.00
14708.80
5
33.00
4
14.00
7
39.00
11
99.00
10
318.00
16
271.00
122.00
11
6
35.00
10
200.00
4
45.00
15
418.00
13
142.00
46.00
7
246.25
20
16
99.00
13
98.00
12
13
17648..000°
17
177.75

7
25

r de

her, when full time was re-established, and the number of
operatives was gradually increased until the full force was
finally taken back. These factories are not large, employing
at the most about five hundred, of which number 120 are
aliens, coming mostly from the Russian provinces, with a
few from the southern European countries. Of these foreigners thirty-three, or about 25 per cent., have become
depositors, with a deposit amounting to $3,442, and only
one of the accounts has been withdrawn, and that was done
because the depositor moved to a Western city.
Deposits have been received during the period of one year
every week,except the two weeks previous to Christmas. For
the fifty times that we have been to the factories 919 deposits
from 156 depositors have been received, amounting to
$13,196, or an average of $84.58 per depositor per year. Of
the 156 depositors 122 have opened new accounts at the
factories. About 31 per cent. of the total number of operatives are depositors, and of this number 24 per cent. have
become new depositors. The average deposit per week has
been $264, with a minimum of $14 and a maximum of
$1,786. The largest number of deposits made by one individual was thirty-three, with a deposit amounting to $52.
This one case is evidence of the success of the undertaking.
In conclusion, we believe that the benefits derived from
the experiment warrant its continuance for three reasons:
First, the spirit of saving and confidence in our savings
banks have been brought to the operative; second, the
amount of deposits in the savings bank has been healthfully
increased, and, third, the operators of these factories have
received the benefits derived from those who are more contented since they have become an active part in the great
financial system of this country.

203

11

=
Z
3
"
2
5
4
3
3
4
1
"
1
1
2
3
1
2
3
5
1
1
4
1
2

Amount.
15u9n.t.
00
19
23
17
30
25
20
22
27
25
26
28
19
31
31
24
34
22
24
IS
23
26
18
27
27
22
35

229.00
513.50
436.50
358.00
145.00
220.00
170.25
346.00
228.00
196.00
139.00
254.00
1,786.00
46 . )
19 . 0
60
3
209.00
148 10
10..08
329.50
659.00
179.50
260.50
632.00
205.00
248.50

122 919 $13,196.23

*Bank not opened.

The Deftartment of Mercy.
BY EDWARD L. ROBINSON, Vice-President Eutaw Savings Bank of Baltimore, Baltimore, Md.
Most of the papers presented for consideration at the
meetings of our Section are technical in thought and presentation; we do not generally seek an audience wider than our
earnest efforts to serve those who honor us by placing in
our hands their hard-earned hoard, expecting confidently to
receive "their own with usury" whensoever they will.
We are practical men of affairs, gathering together for
the interchange of ideas, for the stimulus of the elbow touch
and for the friendly discussion of our mutual problems.
We do not meet in vain if each can carry back to his
institution some helpful mode of doing his work • a little
better than before, and if we can inspire each other with
enthusiastic interest in the work to which our lives are
devoted; yet, after all, the highest end each should seek is
to improve the quality of the service he is rendering his
community, and it is with the modest hope of suggesting
how this latter end may be accomplished that I have accepted an invitation to prepare a paper on "The Department
of Mercy."
At the outset may I define "mercy" as kindness,
beneficence, a willingness to help; definitions countenanced
by Webster, though the word, as we generally use it, conveys the idea of clemency or compassion.
The best of us and the worst of us have a yearning for
something brighter, happier and higher to which we would
attain if we knew how, and the world is looking to the
strong to help the weak to reach the goal of their endeavor:
herein lies our opportunity. "Dum expiro, aspiro" are the
tender words inscribed on a tablet to the memory of a distinguished Southern poet, and they fitly define the buoyant
American temperament. It was an Englishman, not an
American, who said "optimism is possible only by wearing
blinkers"; it was likewise an Englishman who chanted that
mournful dirge, "Alas for the rarity of Christian charity
under the sun." Surely sentiments such as these are not
cherished in the offices of our savings banks, where, though




we see much of the seamy side of life, we still retain an unflagging faith in our fellow man and maintain a patient
and cheerful optimism.
In our savings banks the Gospel of Push does not crowd
out the Gospel of Helpfulness, and it is our nature to "seize
the day" for relieving the pain of the world. Considerations
of profit are subordinated to the great privilege of lending
a hand. The wide range of opportunity for material gain
enjoyed by David Harum is forbidden to us; many legitimate avenues of profit and promotion open to the commercial banker are closed to us. We must keep far from the
strife of business conquest and content ourselves by playing
an humbler part; the great opportunity we enjoy is the
chance to be useful and faithful to our trust.
We must be guide, philosopher and friend to our clients,
and find' our compensation in the exercise of all our kindly
instincts. We are the peculiar stay of the ignorant, the
helper of those who cannot help themselves; from the very
nature of our business we "rejoice with those who rejoice
and weep with those who weep." We note the air of
triumph, the buoyant self-complacency of the one who is
keeping his head above water and adding constantly. to his
"rainy day" fund, and we, too, are glad. Our hearts go
out to the one in whose face we see written pain and defeat
and who is rapidly losing his foothold through the gradual .
depletion of his slender savings, and we show him our sympathetic interest, bidding him take heart again. We must
confess, though, that many conflicting emotions stir us
during the course of the day's work; not all of those who
daily throng our counters appeal to our gentler emotions;
the selfishness and greed of the human•heart are constantly
in evidence; deception and knavery of many kinds often
tempt us to lose faith in our fellows. There are those, for
instance, who habitually hand in less than the amount
named as their deposit; there are others who present orderq
affirming the genuineness of signatures which we know are

204

BANKERS' CONVENTION.

forgeries; there are still others who constantly seek an unfair advantage of the bank. These occurrences sicken our
souls, but the percentage .of such transactions is small indeed, and we disregard them when we consider the multitude
.of those who have a claim upon our more tender side. We
train ourselves to be gentle to those who bear the marks of
sorrow and bereavement; we try to speak a word of courage
to the man who seems to be losing his grip—fighting an uneven battle with forces he cannot master; we try to be
tolerant of those who love to tell their fancied troubles—
in a word, we must be all things to all men, entering deeply
into their heart problems and giving them counsel in their
many-sided business relations with the world.
Does it pay? you 'ask. Yes, it does. After a long experience with many depositors of many minds I can affirm with
truthfulness and candor that the average savings bank depositor is responsive to sympathy and good advice. Wise
ard tactful influence brought to bear upon him often yields
the fruit of good citizenship; a little leaven of kindness will
leaven a big lump of sunshine for those who have to live
with him, for if he can succeed in cultivating the thrifty
and frugal instincts I submit that we go far toward establishing the happy and well-ordered home.
The Department of Mercy in a savings bank should throw
its protecting arms about our unfortunates and incompetents; it should be able to protect its depositors who are
'ignorant of the real value of their property, which others,
wiser than they, are seeking to buy below its value. It
'should protect them when tempted to place their little capital in questionable enterprises advertised under "Business
Opportunities" in the daily press. It should go farther and
warn the spendthrift when he is rapidly frittering away
the little hoard laid aside for his benefit by the self-denial
,of his parents. It should be able to reconcile family difficulties; many domestic problems have been aired in our
offices—a few at least have been solved; young married
folk who find it difficult to make the necessary adjustments (financial and otherwise) during the first year or so
of married life, frequently need friendly counsel. Many
such as these have been helped over thorny places.
A chapter from my own experience, illustrating the selfishness and unfairness of husbands to their wives in money
matters, may be interesting. Money earned through the
joint efforts of husband and wife in a little mercantile
enterprise was deposited in the name of the husband. He,
tiring of the faithful wife, planned to desert her. She
made known her trouble to the bank and appealed for justice; payment was refused when demanded by the husband,
the bank exercising its legal right to require sixty days'
notice. He was advised that his wife claimed a share of
.
the deposit, and that she would be given a chance to establish this claim in a court of equity; meantime the fund
would be tied up. Rather than test the matter in the
courts he weakened in a few days and divided the fund with
tier equally—a practical case of help extended when needed




badly. This occurrence is typical of similar cases, which
many of you doubtless can recall.
Let me cite two other illustrations of the way in which
savings banks have served their depositors:
A large bank in New York a few years ago advertised
for information concerning a depositor whose account had
lain dormant for many years: the bank's record indicated
that the depositor was a private in a certain company of a
certain regiment in the United States Army. A young
woman responded to the advertisement, stating that her deceased father bore the advertised name. Patient investigation by the bank's officers established the daughter's claim
to the fund, and, better yet, the bank's minute record of the
depositor's occupation furnished the missing link in a chain
of evidence required to secure a pension to which the
daughter was entitled. The arrears alone of this pension
represented a sum in excess of $3,000.
The following incident occurred in the office of a large
savings bank in the West: A woman in evident distress was
about to withdraw $500 from her savings account. The
attention of the president was directed to her, and upon
inquiry he learned that her son was in trouble in another
city; a lawyer had just wired his demand for a fee of $500
before undertaking to defend the young man, and the mother
was about to comply. The president advised the woman
to allow her deposit to remain undisturbed, stating that he
would take up the matter with the bank's correspondent in
this other city. The attorney of the latter bank in a few
days reported that the offense was a trivial one and easily
handled without expense.
Such disinterested acts of kindness are by no means uncommon, and go to show that the whole world is knit together by common ties of brotherhood.
"The Department of Mercy" should aid old and infirm
depositors to end their days in suitable institutions. Savings
banks may often work in harmony with other societies for
the betterment of social conditions and will find it possible
to be of great mutual assistance.
Many other means of helpfulness will occur to you without further suggestion from me, and I have no doubt that
the sort of service to which I have referred is rendered frequently and without ostentation in many of the banks
throughout our land. I trust, though, that bringing the
subject to your attention in a concrete way may stimulate
some to greater activity in this line and open up to others
an unexplored field of usefulness.
Having given this imperfect recital of what the savings
banks are doing and of their desire to be even more active
in good works, may I venture to hope that the public may
thus apprehend our lofty aims? Let it be spread abroad
in the land that we are in the vanguard of these forces
working for the uplift of human kind. Let it be known
that we are energetic and faithful in the discharge of our
trust and that each of us feels in a true sense his responsibility as his brother's keeper.

Committee Reports Savings Bank Section,
Annual Report of the Executive Committee.
To the Members of the Savings Bank Section, American Bankers'
Association:
Upon the adjournment of our Denver meeting, on September 28,
1908, your Executive Committee organized by electing Mr. Edward L.
Robinson Chairman and re-electing our worthy Secretary, Mr. William
Hanhart, whose allowance was fixed at $1,500 per annum.
A second meeting was held at Briarcliff Lodge, Briarcliff Manor,
N. Y., on May 3 last, mid it is gratifying to report that preencelly all of our members were present and remained throughout the
entire session, lasting until after 5 o'clock.
The several committees of the Section, viz., the Postal Savings
Bank Committee, the Committee on Savings Bank Laws, the Membership Committee and the Auditing Committee, made interesting
reports of the progress of their work.
The report of the special committee on our proposed new constitution, made to the Denver meeting, was approved and submitted to
the Executive Council for its sanction, which was duly bestowed.
You will be called upon at this meeting to vote upon the final adoption or rejection of this report. We might say that all the changes
made in the old constitution were technical amendments with the
view of harmonizing its provisions with those of the parent body.
Thirty days' formal notice that these amendments will be voted
on at this meeting has been forwarded to our members through
the columns of the journal of the American Bankers' Association.
The Secretary will file a report of the expenditures of our Section
for the past year, which you will observe are heavier than usual,
due mainly to the important and extensive work of our Postal Savings Bank Committee. This committee has prosecuted a vigorous
campaign of education on a subject of profound interest to every
banker, and, indeed, to every citizen in the land. An appropriation
of $4,500 made by the Executive Council at Denver was generously
supplemented by a second appropriation of $5,100, made by the
Council at its spring meeting at Briarcliff. We have spent $8,736.48,
and the balance of our appropriation—$863.52—has been covered back
into the general treasury of the Association.
A third meeting. was held in these headquarters on Monday of this
week, September 13.
The offices of our Section have been moved to the general offices
of the Association, 11 Pine street, where our members may find
every facility for the transaction of their business while in New
York. It is hoped that they will call and become better acquainted
with the work of the Section.
The accounts of the Secretary have been audited by Mr. G. Bryon
Latimer, who was appointed for that purpose at our Briarcliff
meeting.
The day of the annual meeting of our Section has been changed
from Monday to Thursday of our convention week. It is hoped that
the change may result in an increased attendance and a deeper
interest.
The affairs of the Section are prospering; we have gained 113 new
members since last year's report—after striking from our list sixtySince 1902 our memberfour banks merged, failed or delinquent.
ship has grown from 500 to 1,636; by another year we should have
2,000. It is not fair, however, to measure results by growth in
membership alone. The increasing interest taken by our members
and their loyalty are encouraging signs of the times. We have been
generously advertised by our book of printed forms—which, by the
way, should have a much wider circulation than it already enjoys—
and the work of our Postal Savings Bank Committee has attracted
to us the attention of the whole country; our other committees have
likewise contributed their full share toward widening the sphere
of our usefulness.
Respectfully submitted,
EDWARD L. ROBINSON,
Chairman.

Report of Secretary.
September 16, 1909.
To the President and Members of the Savings Bank Section of the
American Bankers' Association:
I beg to report that the membership of our Section on the first of
this month amounted to 1,636; last year at this date the membership
During the year we have enrolled 177 new members and
was 1,523.
have lost sixty-four through mergers, failures and non-payment of
dues, thus giving us a net increase in membership of 113 members.
This increase, while fairly satisfactory, is not what it should be;
there is no question but that our membership should be at least 2,000.
Many of our vice-presidents have worked energetically and successfully
to increase our membership, and I would respectfully urge every one of
our memebrs to endeavor to bring in additional members. Please do
not forget to mention to your neighbor non-member banks that membership in the Savings Bank Section involves no additional dues beyond
the regular annual dues to the general association and that its membership is open to every institution receiving savings deposits, whether




mutual or capitalized savings banks, or National and State banks and
trust companies with savings departments.
Appropriations amounting to $9,600 were made during the year by
the Executive Council of the Association. This amount was larger than
usual owing to the extraordinary work and expenses of the Postal
Savings Bank Committee. All expenditures were kept within the
lowest possible limit, and economy was used in all our expenses.
The following were our expenses during the fiscal year from September 1, 1908, to September 1, 1909:
Printing and stationery
Postage
Stenography and typewriting
Rent
Convention expenses
Allowance of Secretary
Book of Proceedings
Sundries
Expenses, Executive Committee
Expenses, Committee on Postal Savings Banks
Expenses, Committee on Auditing
Expenses, Committee on Sa‘ings Bank Laws
Expenses, Committee on Membership
Expenses, Vice-Presidents
Total

$277.45
408.00
756.00
300.00
280.95
1,475.00
980.30
71.36
602.66,
3,044.58
45.95
364.64
88.85
40.74
$8,736.48

This leaves an unexpended appropriation of $863.52 reverting back
to the general association.
All vouchers for expenses were audited and approved by the
chairman of the Executive Committee, and, as usual, a special committee has audited the financial accounts of the Secretary.
As regards the book of printed forms, the total sales amount to-day
to $7,368,70, the cost so far being $6,032.07, leaving a net balance
of $1,336.03.
During the year we have sold thirty-five books, and
we have new on hand forty-four bound and one hundred unbound
books.
On the first of May, last, the offices of the Section were moved
to the headquarters of the Association at 11 Pine street, where the
library, newspapers, services of stenographer, etc., are always at the
disposal of our members, who are invited to call when in New York,
and who will always be very welcome.
Very respectfully,
WM. HANHARI,
Secretary.

Report of Committee on Savings Bank Laws.
To the President and Chairman Executive Committee, Savings Bank
Section, American Bankers' Association:
That a connected review of the work of the Savings Bank Law
Committee of the Savings Bank Section may be had for the time intervening between the Denver meeting of 1808 and the present it seems
fitting to briefly refer to the several reports already made.
This committee met on February 15 last in the rooms of the association, and on the following day again, in conference with a number of
prominent bankers.
That savings deposits, wherever held, should be segregated and safeguarded was unanimously conceded at this conference. The work of
planning a skeleton banking law which would effect such a safeguarding was placed in the hands of General Counsel Paton, in consultation
with the chairman of the standing Law Committee, with the chairman
of the Committee on Protective Laws of the Trust Company Section,
and the chairman of the Committee on Savings Bank Laws of the Savings Bank Section—the draft to be submitted at the next meeting.
In furtherance of suoh plan it was agreed that Secretary William
Hanhart and the Chairman, Allen W. Johnston. get in touch with the
States which are now lacking laws, that conditions and needs in each
State might be known, and also to learn if help could be rendered by
this committee.
A letter, a copy of which, together with copies of other circular
letters of this committee, is attached to this report, was addressed
to the Governors of States and Territories, to banking commissioners
and superintendents and various State authorities, setting forth the
purpose of this committee and requesting co-operation. Courteous replies were received, and the information thus obtained laid before the
general counsel. Mr. Paton.
A part of the co-operation asked for
was that the Governors of the various States would, in their discretion, call the attention of legislatures to the savings hank needs
which might exist in various States, for improvements and further
laws in the interest of the savings depositor.
At the meeting referred to Mr. Paton had prepared and presented
a list of States showing generally the condition of savings bank laws,
namely: Eighteen States having no savings bank laws; eight States
allowing stock banks to be organized with departments for commercial and savings business; other States permitting organizations of
stock saviegs banks; in New England, some of the Middle States and

BANKERS' CONVENTION.

206

a few of the Western and Southern States trustee savings banks
(without stock) were provided for. ,
It was found that in some States, notwithstanding laws for the organization of trustee savings banks,' few, if any, were in operation,
and, instead, the savings deposits and savings business was cared
for by the commercial banks operating savings departments, without
the restrictions which are generally conceded to be a safeguard in the
interests of savings depositors.
At the meeting of the Executive Committee at Briarcliff Manor, N.
Y., in April last, the action taken, after hearing read the replies to
the circular letter of this committee, placed this•committee in further
communication, by special questions, with many prominent bankers
and banking associations throughout the Union.
Replies to the .second letter, which were placed before Mr. Paton,
evidence such hearty interest in the work that your committee was
encouraged to send a third letter with still more definite questions
as to the matter which must be contained in a skeleton banking law.
The sustained interest in the subject, shown by the replies which
came from practically every State and Territory in the Union, established a desire on the part of many influential bankers to give their
counsel, and any other assistance they can give, for the placing of good
laws upon the statutes of every State safeguarding small savings.
Of the hundreds received, the approval of such safeguarding was expressed in every letter, with the exception of two or three.
It has been manifest at its conferences that this committee has not
considered practical a definite law which would be acceptable in its
details by all of the various States of the Union, but, rather, information has led the committee to feel that a law safeguarding savings
deposits, wherever held, would be acceptable, and it is upon this line
that the work of your committee has progressed.
Communication with the various States has proved that the designing of committee work of the character laid out by the Savings Brink
Section has been timely.
Not a State has been heard from but which has expressed through its
correspondent an interest in the questions involved.
In many States the discussions of savings and other banking laws
have in the past year been foremost in councils of the legislatures.
The extent of the inquiries of this committee made necessary by a
proposition for the safeguarding of savings deposits, wherever held,
has led to much information in its possession which will without doubt
prove of value to the other law committees of the American Bankers'
Association in their councils.
As so great an interest is centering in the present convention of the
American Bankers' Association, your committee has deemed it advisable to await the developments of the informal discussion of the various phases of safeguarding savings deposits, which have lately been
brought anew to the attention of State authorities and bankers throughout the Union, feeling assured that the progress already made and
that which Is in prospect will enable. the Law Committee of the Savings Bank Section to report at the spring meeting of the Executive
Committee of the Savings Bank Section in 1910 that the draft of a
skeleton banking law for the safeguarding of savings deposits is ready
for its consideration.
Respectfully submitted,
ALLEN W. JOHNSTON,
Chairman Law Committee, Savings Bank Section.

Report of Committee on Auditing.
New York, September 16, 1909.
To the President and Members of the Savings Bank Section of the
American Bankers' Association:
Your Committee on Auditing Savings Banks has since its continuance
by you at the last convention, held in Denver. Col., given its attenIn placing the
tion particularly to the subjects hereinafter set forth.
results of the committee's work before you it is our unanimous hope
that this report will meet your approval and that the efforts of our
Section toward the complete safeguarding of the funds of depositors
in savings banks will be advanced by the adoption, where needed, of
the lines of action suggested in this committee's past reports and
herein.
The subjects upon which the committee has been deliberating and
to which it calls your attention may be classified as follows:
First—Examination and audit by professional accountants or by auditing companies.
Second—What are the most suitable periods of the year upon which
bond and mortgage interest payments should be due and payable?
Third—Proof of income.
Fourth—Card ledgers.
Fifth—Postings in depositors' ledgers—"Coupon System."
FIRST—EXAMINATION AND AUDIT BY PROFESSIONAL ACCOUNTANTS OR BY AUDITING COMPANIES.
In our last report this subject was brought to your attention and
the recommendation was made that all savings banks able to do so
have their books and accounts audited by an audit company or by
professional outside accountants. "Passbooks are the hotbed of defalcation, and the hardest item to audit, owing to the practical impossibility of having all pass books exhibited at bank during the same
year, or other reasonable period."
A large bank in New York, which is periodically examined by a firm
of accountants, employs the following system in addition to regular
auditing: Once every year for a period of a week, or sometimes two
weeks, all pass books coming to the bank, either for deposit or with
drawn' or entry of interest, are required to be vised by one of these
outside accountants then present in the banking rooms, and this se-




countant or auditor then and there compares the pass book carefully
This, of course, does not bring about the
with the ledger account.
complete comparison of the pass books with all ledger accou.its, yet it
provides for a fair amount of careful comparisons and appears to have
so far proved effective. A complete comparison of all pass book accounts With their respective books is the only known method of absolute proof of the liability of the bank to its depositors.
Massachusetts savings banks are required by law to call in depositors' books for verification once in three, years. The time occupied
in such verification must be at least one full month, and the method
must be approved by the Conunissioner. Many banks make it a practice at such times of employing an outside, disinterested, person to
receive and compare the books. There are some large banks where
the pass books are verified every time they are brought in, and where
all the clerks are tellers, and receive deposits, make payments or
verify pass books, as occasion may require. Such an arrangement
would seem to be an excellent safeguard, for there is no certainty
that the pass book will fall into the hands of the same clerk twice
in succession, although it is certain that it will be verified by some one
each time it is presented. Under this system nothing short of a collusion among all the clerks would prevent the discovery of an error on h
depositor's book when presented.
In the report of this committee to the convention in 1907 we referred
to the plan inaugurated by a New York State savings bank to secure
from their depositors a comparison and verification of their pass books
with the bank's ledger. The bank referred to writes us as follows in
regard to results of their method, and we take pleasure in quoting
their letter and drawing the attention of our members to this new
system:
"THE SCHENECTADY SAVINGS BANK.
"Schenectady, N. Y., April 5, 1909.
"Mr. Jelin C. Griswold,
"Chairman Auditing Committee, Savings Bank Section, A. B. A.,
Corner 23d Street and Sixth Avenue, New York City, N. Y.
"My Dear Sir: We have your favor of April 3, and take pleasure in
complying with your request for some account of the results obtained
by the publishing of the detailed statement of this bank for January
1, 1907.
"The immediate result of the printing of the entire list of our depositors' accounts by number and amount of balance was the exciting
of an interest in the vicinity of our patronage so great that the
Schenectady Gazette—which published the statement on February 20,
1907, on ten pages of its regular issue—made extra provisions for the
demands for the paper on that morning. We had previously advertised
in surrounding towns that such a statement would be made.
"While we do not attribute our rapid increase in deposits at that
time altogether to this statement, yet it is noticeable, that the increase
during that year of our deposits was over $700,000, while there were
savings banks in our vicinity which fell far short of such an increase.
It is, perhaps, as noticeable that at this date, notwithstanding the
fluctuations in deposits natural to a savings bank located In an Industrial town and subject to the extraordinary depression of business
which affected all banks during the past eighteen months, our deposits
have fallen off comparatively little from total of January 1, 1907.
"In what degree this fact is due to the publicity, which seemed to
meet with such general approval by our depositors and the public, I
am unable to say, but feel assured that our detailed statement worked
for our good when there was more or less distrust in the business
circles throughout the country.
"Some of the results which appeared at our counter were such as
these:
"A well-known citizen had laid aside his pass book years before,
but, remembering the number, saw it in our statement, and presented
his pass book with a remark that he had supposed the account was
balanced. The balance was a considerable amount remaining to his
credit.
"The executor of an estate by the publication had his attention
There were several cases
called to an account he had neglected.
of executors and joint accounts which were straightened out by the
attention of the depositors being called to their balances through the
statement.
"Our bank has received from every part of the Union and from
Canada numerous letters of approval and containing requests for information—so inany that our treasurer, Mr. A. W. Johnston, issued a
circular letter regarding the process of making up the statement, a
copy of which I enclose.
"We have letters on file from some of the most eminent business
men in the country to the effect that they believe it to be the only
complete and satisfactory method for audit of liabilities of a savings
bank.
"The advertising results obtained, although great, were not primarily
sought for, the direct object being a full audit of both the assets and
liabilities of our bank.
"Aside from the publicity and the satisfaction the audit afforded
to the public, I believe that it has helped inspire our clerical force
with a purpose to keep up the exact balances, which they obtain at
each abstract period.
"We are looking forward to a preparation of another such statement
three years from the first statement, Which will be on January 1 next,
it having been deemed by our management that once in three years.
owing to the expeuse and extra work of such statement, would be
sufficient for all purposes.
"Yours very truly,
"EVERETT SMITH,
"President."

SAVINGS BANK SECTION.
To audit a bank thoroughly every branch of its work and the .work
done by, and records managed by, every employee and officer must be
investigated and proved up.
Not only should the records prepared by
clerks, bookkeepers, etc., be well scrutinized and checked by competent
examiners, but the affairs more closely related to the higher employees,
officers and trustees or directors should be minutely gone over to determine if the law is being strictly complied with by such individuals.
"As a rule, clerks' peculations are of minor importance," has been
said, and quite truly, although these must be guarded against as well
as the larger.
After such complete checking up the following or some other similar
form of attestation, printed on the statement of the bank issued to its
depositors and to the public, would no doubt prove acceptable, to wit:
"We have audited the accounts of the treasurer of the
Savings Bank daring the fiscal year ending
, and
have audited all the general boks of accounts, individual ledger, etc.,
for the said, and we have carefully examined in detail all the assets
of tile bank, consisting of stocks, bonds, loans on bond and mortgage,
notes and other assets, and have counted the actual cash on hand and
have compared the bank balances with certificates of the proper officers
in banks and trust companies, and hereby certify that they are
correctly shown in the above statement, and that all securities were
found intact and in their proper places.
"'Signature Audit Company or Public Accountant."
SECOND—LOANS ON BOND AND MORTGAGE.
An interesting question has been raised as to at what dates of the
year payments of interest on loans on bond and mortgage may hest be
In savings banks holding many such loans (some
made to fall due.
Eastern banks have over 3,000 loans) is it desirable to have this inter
est all payable at a given date (usually semi-annually), or is it better
to arrange loans on bonds and mortgages into classes, interest on eacn
class to mature at periods not touched by the other class?
An argument in favor of interest payments being made, say first days of
January and July, is that at those periods Interest on deposits is being
paid to depositors, and the receipts at same periods of the interest
on hones end mortgages provides the bank with funds which have not
been idle to pay its depositors' demands then being made. A drawback to this method is that January 1 and July 1 are the busiest days
in the year for savings bank employees, and that practice of this plan
necessitates such excessive work within the given few days. Some
savings banks make the interest on their loans payable on the anniversary date if the loans, others on the first or fifteenth day of the
current month, while others, as an example, pay depositors' interest,
say January 1 and July 1, and collect bond and mortgage interest
April 1 and October 1.
Considering the work called for in attending
to tire insurance, taxes. etc., on the properties as required, these two
last methods would seem to be preferable, as in practice either would
divide the work and spread it, and, besides, thereby possibly saving
extra clerk hire, sometimes necessary during the rush consequent to
to
payment of interest . depositors and receiving interest on loans on
This question is probably of more particular
one and the same day.
interest to large banks carrying many mortgage loans than it may be
to very small institutions, but the subject does affect all.
THIRD—PROOF OF INCOME.
In the many replies received last year to the inquiries sent out
by the committee it appeared that in some instances our inquiries
on the subject were not thoroughly well understood. Perhaps it might
be well to say that "proof of income," which was recommended by
the committee, need not necessarily be made as an advance proof, but
may be, and is, made by some banks for the elapsed period of six
The fact is that every savings bank should
months or one year.
prove thoroughly its receipts of income by some method that will
satisfactorily show those in charge (as well as show to the audit
company or accountants) that the whole of the income due the bank
on its investments has been really received in cash, and also show
what, if any, interest or other income may be in arrears. We speak
advisedly on the subject, for some savings banks have actually no
proof whatever that their income has all been received at the proper
rate and at the proper time.
FOURTH—CARD LEDGERS.
One of the objections by many savings banks, and by the minority
of this coinmittee in its last report, to the adoption of the use of card
ledgers by savings banks has been the danger of cards being abstracted
front the rack, destroyed and replaced with cards on which have been
placed' figures showing false balances, etc. This objection may be
partly, if not entirely, overcome by having (as now is done in many
banks) the depositor affix his or her signature on the ledger card at
the same time he or she affixes his or her signature on the signature
card or book when opening account.
Should such ledger card be
abstracted and, another substituted it would necessitate a forgery of
the depositor's signature on the substituted card—"a serious matter."
When this "ledger card" is entirely filled in, then at next ensuing
transaction (depositor being present) account may be closed out in
usual manner (by draft), a new account in same name opened, Its
proper cards duly signed by depositor, as before, a pass book issued
therefor, to which new account will be credited the amount of balance
withdrawn from said closed account. Some banks not only take the
signature of the depositor on the ledger card, but also the depositor's
age, and father's and mother's names. In small banks or small savings departments in banks, the signature and full pedigree, etc., of the
depositor may be taken on the top of the ledger card, thus saving




207

some time and cast by dispensing with the other signature and pedigree
cards. This last suggestion, it seems to the committee, might be
considered by banks having less than 5,000 accounts. Your committee
favors the foregoing described method of using card ledgers in which
to keep depositors' individual accounts. By the employment of card
ledgers time and space are economized without question. With the
above method of using card ledgers correctness is in some respects
guarded more surely than ever before.
FIFTH—POSTING IN LEDGER, "COUPON SYSTEM."
There have been received many inquiries as to the system of reverse
or coupon posting. Such system the committee commends to savings
banks. For your consideration several printed examples are shown
hereinafter which demonstrate in a general way the working of the
system.
Examples Nos. 1 and 2 show in reduced form the sheets used on
the teller's desk, and report the daily transactions. These sheets are
each day delivered to the auditor, who separates the parts where per
forated, and next morning hands the larger and unfinished sheets to
the bookkeeper, who fills them in as shown by examples Nos. 3 and 4,
aid returns the sheets to the auditor, who thereupon compares the
completed sheets with their respective stubs, as shown by examples
Nos. 5 and 6, which comparison proves whether or not the postings in
die ledger were correctly made in detail as well as in total, and affords
a proof of agreement between the cash and the ledger.
It is understood that the postings of the daily transactions in the
depositors' ledgers are made in the usual manner, either from tickets
or in any other acceptable manner; the following refers only to the
proof of such postings.
These following forms are used and filled as marked, by the teller:
(We do not attempt to reproduce these forms.]
A sheet of each, as above, is used daily for every ledger or section,
entry of each transaction being made as above. The right hand part
of the sheet is then detached where punctured and kept by the
auditor, who hands the bookkeeper the remaining portion of the
sheets, and from what they find posted in the ledger they fill the
sheets as follows:
[We do not attempt to reproduce these forms.]
Then the said sheets are returned to the auditor, who takes the
coupons torn off from the complete sheets, places them alongside their
respective sheets, returned by the bookkeeper, and compares, as
follows:
[We do not attempt to reproduce these forms.]
Should all entries agree, both as to individual amounts and daily
totals, this should be a practical and reliable proof that the daily
postings have been correctly made in the ledgers and agree with the
cash entries of the same day. The duplex system of bookkeeping used
much in commercial banks, and most highly commended by eminent
authorities for such banks, is of the same nature as the aforesaid
coupon system, which the committee has as aforesaid commended to
savings banks.
The committee takes this opportunity to say that it will be much
pleased at any time to receive from any savings bank suggestions as to
improved methods of bookkeeping or auditing. We might suggest that
savings bank officers having such suggestions to make should forward
them to the secretary, and they would be published for the consideration of our members, the names and figures in such communications
not to be divulged unless such be perfectly agreeable to the writers
thereof.
Respectfully submitted,
JOHN C. GRISWOLD, Chairman.
EDWARD L. ROBINSON.
F. W. JACKSON.
ALBERT I. COUCH.
WM. HANHART, Secretary.

Report of Postal Savings Bank Committee.
By LUCIUS TETER, Chairman.
MEETINGS.
This committee was continued in service by your action at the con.
vention at Denver last September.
We realized, after carefully considering the discussion in reference
to the postal savings bank subject at the convention, that there was
very definite work for us to do. Therefore, as soon as was practicable
after the convention, we called a meeting of the committee, which was
held in the city of New York on November 16, 1908.
This meeting
was well attended, not only by the 'members of the committee, but by
the executive officers of the Savings Bank Section. A very thorough
consideration was given to the entire subject of possible postal savings
bank legislation, and the unanimous attitude of your committee was
that the most desirable method to be pursued in discouraging such
enactments was to carry on a thorough and fair-minded campaign of
education in reference to the savings bank situation throughout the
United States and the relation of the banks to the people.
We, therefore, compiled for circulation a letter addressed to all of
the banks in the United States, whether members of the American
Bankers' Association or not, and sent with this letter a copy of the
then Senate bill introduced by Senator Carter, of Montana; a copy of
an address by Mr. E. R. Gurney, of the First National Bank, Fremont,
Neb.; copy of an address by the Hon. George E. Roberts, of the
Commercial National Bank, Chicago; a press summary to be used by
bankers in advising their local papers as to the facts In reference to
the situation, and a copy of the report made by your Postal Savings

0

208

BANKERS' CONVENTION.

Bank Committee at the Denver Convention. These papers were mailed.
about November 24, 1908, and were received with interest by the
bankers throughout the country. There was such a demand for these
circulars from various quarters, including universities, libraries. etc.,
that five thousand additional copies of the above documents had to be
printed.
There was also a meeting of our committee held in the .city of
Washington February 25, 1909, the committee having been called there
to appear before the sub-Committee on Postal Savings Banks .of the
House of Representatives Committee on the Post Office and Post Roads,
to which hearing reference will be made later.
Different members of your committee have held frequent intormal
meetings for consultation and have been in constant touch by corWe have also had conference with the executive officers
respondence.
of the American Bankers' Association and have endeavored to work in
harmony with its Committee on Federal Legislation.
On February 11, 1909, we sent out 25,000 follow-up letters to the
banks of the United States. again calling attention to our subject and
asking them to send for circulars if the first ones sent had not reached

which otherwise would certainly have been burdensome. We find that
the bankers are entirely alive to their 'responsibilities, and while con
'demning the idea of postal savings banks they are willing to co-operate
actively in the enactment of laws, both national and State, that shall
make for better savings facilities and for better banking methods.
EXPENSES,
The expenses of your committee since September 1, 1908, have been
as follows:
$597.73
Committee meetings
1,067.22
Printing and stationery
1,346.00
Postage
33.63
Express and sundries
$3,044.58
Total
You will notice that the chief expenses have been in connection
with the large amount of literature that has been circulated. The expenses of speakers at State conventions, etc., have in practically every
case been paid by the State associations.

them or had been used.
HEARING AT WASHINGTON.
The chairman of your committee received an invitation from the
Hon. Jesse Overstreet, chairman of the House Committee on the Post
Office and Post Roads, asking the committee to appear before the subcommittee at Washington on February 25, 1909. We accepted the
invitation and were received very cordially and given ample opportunity to explain our point of view in reference to the postal savings
bank proposition.
We were furnished with several copies of the hearing, but so great
was the demand that subsequently we arranged with the government
printer for 4,000 additional copies. Copies have been sent to all of
the members of the Savings Bank Section and to numerous general
inquirers.
STATISTICAL REPORT.
Very early in the year our secretary, Mr. William Hanhart, began
the laborious task of compiling as nearly accurate figures in reference
to the savings deposits throughout the United States as would be
He undertook this work, realizing that the figures subpossible.
mitted heretofore gave a very misleading impression as to the volume
of savings business in the United States. He found the banking departments of the States very kind in furnishing information. At the
suggestion of our committee the Comptroller of the Currency made a
call, requesting the totals of savings deposits in national banks. With
the figures obtained from these various sources Mr. Hanhart was
enabled to prepare a. report showing quite accurately the total of savHis report shows a total of approxiings deposits in the country.
mately six billions of savings, as against three and one-half billions,
which has heretofore been regarded as the total.
Our committee has offered to furnish supplies of these statistics and
copies of the Washington hearing at the various State conventions.
This offer has been quite generally availed of, and thousands of copies
have been distributed to bankers in this way.
THE STATE CONVENTION SEASON.
Your committee very early in the present year realized that the
interest manifested by bankers in the question of postal savings bank
legislation made it desirable that the subject be discussed quite generally at State bankers' conventions. With the thought in mind of cooperating with the Slate associations as much as possible in bringing
the subject before their delegates, our committee prepared a list of
names of men who would accept invitations to speak at State conWhile we have not accurate information from all the
ventions.
States, we are glad to be able to report that in addition to addresses
on the subject at numerous group meetings there were postal savings
bank speakers at nineteen State conventions, at all of which conven
tions great interest was manifested in the subject. At many places
the question was discussed on the floor and resolutions condemning
possible postal savings bank legislation were adopted.
In connection with this work the •committee would like most sincerely to express its npreciation for the loyal services of all those men
who have devoted their valuable time to preparing and delivering
addresses upon this subject.
THE ATTITUDE OF THE BANKS THROUGHOUT THE COUNTRY.
Our year's experience has proved clearly that the bankers of the
country are united in that they do not regard a postal savings bank
system necessary; in fact, hold that such legislation would result in
injury to the American people.
The bankers, as well as the officers of group and State bankers'
associations, have shown by their hearty support and sympathy how
much they appreciated the work which the committee has 'done and expressed themselves as being willing to co-operate heartily in the work
of your committee. The attitude of these men has been a constant inspiration to your committee and has made easy a Volume of work




THE PRESENT SITUATION AND THE FUTURE.
-,ur committee are inclined to think at this date
The members of y.
we can say that there has apparently been a great change in sentiment
throughout the country in reference to the advisability of passing
postal savings bank legislation. In other words, the campaign of education which we started has to a considerable extent had the desired
effect In that it has caused multitudes of people to study carefully a
question to which they had heretofore given only a sulnrficial attention.
The question of postal savings bank legislation, of course, was not
discussed at the recent special session of Congress. We are hoping
that the question will be turned over to the Monetary Commission,
and fully believe that in the final report of that commission will come
promises for a future development of American banking that will
assure all the people that legislators and bankers, working together,
can take care of the banking needs of the American people.
Your committee is of the opinion that so long as this question Is
in the public mind you should have a committee on the subject. We
suggest that you see to it that a committee be kept in charge of this
work.
Your committee has recognized the importance of working in harmony with the Savings Bank Law Committee, realizing that the result
of such work as we do must be closely followed up by the work of
that committee.
In closing this report our committee wishes especially to thank our
secretary, Mr. Willian Hanhart, for his faithful services during the
past year in connection with the enormous volume of correspondence
and other exacting duties connected with our committee's work—the
volume of correspondence at times reached most unexpected proportions. It is our desire thus to express appreciation for work of the
very highest order most loyally done.
Respectfully submitted,
LUCIUS TETER, Chairman.
MYRON T. IIERRICK.
F. R. MORISON.
C. LA RUE MUNSON.
CHARLES E. SPRAGUE.
P. LE ROY HARWOOD.
WM. HANHART, Secretary.

Report of Committee on Membership.
The Committee on Membership has held two meetings—the first • on
March 5 and the second on August 11, 1900—and reports a net in
crease of 113 in the membership of the Section, after deduction of
sixty-four banks which have failed, merged or lapsed in their dues.
It was not thought desirable this year, mainly on account of the
heavy expenditures for the Postai Savings Bank Committee, to cirA circular letter, however, was sent to all the
cularize as usual.
non-member banks of the Association, the cost being defrayed out of
the profits accruing from the sale of the book of printed forms, and
this resulted in securing sixty-one new members.
Secretary Farnsworth informs us that 192 new applications, received
since the first of September last, stand to the credit of this Section,
being traced directly to their solicitation. ,
Many of our vice-presidents have been of great service in increasing.
the membership in their various States, deserving thanks for their cooperation.
We would recommend that this committee, or a similar one, be
elected or re-elected every year, to continue the work which we have
only begun, and we would also recommend that the circularization by•
letters be resumed.
Respectfully submitted.
W. R. CREER,
Chairman.

Detailed Report of Proceedings,
Eighth Annual Meeting SAVINGS BANK SECTION, Held at Chicago, 111„ September Sixteenth, 1909.
MORNING SESSION.
AUDITORIUNI HOTEL,
CIIICAGO, Sept. 16, 1909.
The annual meeting of the Savings Bank Section of the
American Bankers' Association was called to order by President
John II. Johnson at 10 o'clock A. M.
The President: The first is a prayer by the Rev. William 0.
Walters, Rector of Grace Episcopal Church of this city.
PRAYER.
Rev. William 0. Walters.
Almighty God, our Heavenly Father, who (loth commend the hand
to be dilligent, we humbly beseech Thee that Thy blessings may rest
upon all who are In the business ranks of life, and especially upon
those in Convention here assembled. May Thou be pleased to direct and
prosper them to Thy glory, the good. of this nation, the safety, honor
and welfare of all Thy people. Give them strong convictions concerning
personal Integrity and honesty, and such boldness In doing right that
their examples may never be questioned. So direct them that they may
in all their dealings exemplify the consistency of the Christian religion,
and always give the first place to Thy law and commandments.
Through their exalted lives may Thy Church he honored and many souls
be turned to righteousness. We ask all In the name of Him who has
taught us when we pray to say "Our Father who art In Heaven,
hallowed by Thy name, Thy will be done on earth as it is in Heaven."
Amen.

Address by President.

The President : My first thought, gentlemen, was to come
here to-day and act purely as a presiding officer, to do no talking
whatever; but the developments of the last few hours have been
BO startling to me that I cannot refrain from repeating the
sentiment which seems to be crystallizing so rapidly, not only in
the Association, but in the business, commercial and social
world. As a result, 1 have made a hurried resume of the
thoughts of others, amended and polished and rubbed down a bit,
so as to give you an idea to what tremendous importance has
grown this Section. Starting as it did at New Orleans in 1901,
with an attendance all told of, say, 25, the membership at the
end of the first year, naturally of the most enthusiastic members in the savings line, and to-day of over 1,000 ; and instead
of being a sort of a sub-committee of the parent association,
having risen to that importance that they have given us it whole
day and have deferred the deliberations of that august body
In deference to us.
We are gathered here to-day to interchange ideas, not, as our
critics would say, for selfish purposes, but. rather that our business may be developed along safe and permanent lines, and for
the common good, for I know of no interest more vital to
prosperity and peace of the nation than the care and safe
keeping of its funds, and that this Is the first and great pinpose of this Association. How best to do it is the question,
and It seems to me that this is being well answered by the
development of the various types or departments of banking
represented In this Association.
' It is my pleasure to-day to speak to you on the subject of
savings ; and what gives me even greater pleasure is to observe
the splendid unanimity and positive unselfishness of every section of our business, in agreeing that savings deposits must
have our first consideration.
The honored guest of to-day,. President Taft, said but two
days ago that "our banking and monetary system is a patched
up affair ‘vhich satisfies nobody." President Reynolds. in his
opening address, said "There should be a change in our present
laws governing National banks," and further on, "National
hanks should be allowed to act as trustees," and they should
be given the right, under a specific declaration of law, to accept
savings deposits, but the savings deposits thus received should
be segregated from their general deposits. Furthermore than
this, the law should definitely define the character of investments the bank should carry against savings deposits, which
investments should be segregated from the general assets of
the bank. and In case of a failure of the bank. the savings
depositors should have it first lien upon the specific securities
held in the savings department, and, in addition, be general
creditors. The public statements should show the amount of
savings deposited and securities held against same, and the
savings deposits held by National banks should carry the same
requirements as to reserve, and be subject to the same notice
of withdrawal that is now required under the various State
s
and sit vitu, hank laws. If this were done. and the laws in
tl•e various Sin Ics so changed as to require a State bank or
trest company to segregate their savings deposits and securities In the same manner, with the same restrictions, it would
go far towards answering any arguments advanced In favor




of the establishment in this country of a system of postal
savings banks, and I would add, give much better results
than any form of guaranty.
As a further evidence that we are all working along the same
lines, I quote from the address of President Jackson, of the
Trust Company Section: "These laws, while all enacted with
the same general purpose, namely, to make our banking system safe, are greatly at variance, and I think we should take
advantage of opportunities such as this convention offers, to
study each other's methods and to be prepared to exert our
Influence in procuring regulations as nearly uniform in all the
States as possible."
You cannot Make a man honest by regulation, and cannot
positively prevent bank failures, yet you can minimize the
latter, both in .number and effect, by wise and practicai restrictions.
It is not sufficient that we oppose the plan of State or
governmental guarantee of deposits, for the postal bank means
that just as much as the so-called guaranty. We must sympathize with the desire of the people at large to have their deposits made "so safe as they can possibly be. It is
incumbent upon us, as experts, to take stepes to make impossible,
as nearly as we can, the failure of any bank—savings, State
or National—and we shall fall in our opposition unless we are
able to present a plan which will practically accomplish the
desired end, and, at the same time, be based on sound business
principles. Is it not better to regulate your own affairs than
to have them regulated for you? Is it better to be compelled
by governmental influences to do what is right and best, or to do
it of your own initiative? I hold that we should not attempt
to curtail any of the banking facilities now enjoyed in this
country. The people should be given every possible agency
consistent with safety and good business principles. The savings bank man has always held that the National bank should
not receive savings deposits; he said the same thing about the
trust company; and yet each seemed to be doing a very commendable duty, and each seemed to flourish and be prosperous.
And again, I am more than pleased to observe that the divisions are being gradually broken down, and we are fast
hecoming of one mind, at least on the subject now directly
under consideration.
It is clearly evidenced that the people want these various
types of depositories, and I think it is our duty as bankers to
recognize the demand of our clients from a purely unselfish
standpoint, and to permit the people to deposit their savings
where it is most convenient; but for their protection, these
funds should be most sacredly safeguarded and their investment restricted, no matter by whom received. Briefly, a savings
deposit, whether made In a National bank, a mutual savings
bank, a stock savings bank, a State bank 'or trust company,
should be under the law of the State in which those institutions are located, and we should do our part in seeing that
these laws are made reasonably uniform. At first mention
of this to a National banker, he naturally says, as far as we
tire concerned, this cannot be done, but I am reasonably well
advised, and feel positive, that the Federal Government will
co-operate with us, and at least impose restrictions similar to
the standard provisions now being inserted in all of the provressive States : and to show you that this demand is not only
deep-rooted, but world-wide, I need only refer to the new
banking law recently introduced into the land where they
object to everything that is new. namely. China, and which,
according to the London "Financial News," contains many admirable provisions; prominent among them is one clearly distinguishing between commercial and savings deposits, even restricting and defining the investments for the latter.
Gur committee on this subject has done and is doing heroic
work, and will give you facts and figures showing splendid
progress. While the work is well begun, it must be carried on
to a successful finish, and I most earnestly recommend that
this committee, above all others, be continued.
Last month I attended a meeting of the Commissioners on
i'niform Laws; last Monday. in this city, a meeting of the
Superintendents of State Banks, attended by the official represestatives from over two-r-irds of the States. and all are of
one mind on the subject, and what seemed impossible two or
three years ago now seems not only probable but sure, and the
result will be a system of depositories for savings that will
be so permanent and so satisfactory as to entirely satisfy
the demands of the people and to positively set at rest the
fallacies of the hour. (Applause.)
We will now listen, gentlemen. to 'the address of welcome
from Mr. Henry S. iienschen, Cashier State Blank of Chicago.
I take pleasufe in introducing Mr. Henschen. (Applause.)

BANKERS

210

CONVENTION.

Address of Welcome, by Henry S. Henschen.
There is nothing perfunctory or half-hearted in the welcome
which the bankers of Chicago extend to the members of the
Savings Bank Section of the American Bankers' Association.
For months we have been looking forward to your coming as
the chief event of the year, and now that you are among us,
as our honored guests, our pleasure and gratification are
greater than I can express.
Chicago is the ideal convention city and September the ideal
month in which to visit Chicago. Many of you are frequently
called by business or pleasure to our city; others remember
Chicago as she was during the halcyon days of the World's
Columbian Exposition; while others, chiefly, perhaps, our Eastern brethren, are receiving their first impression of the Western metropolis. To one and all we extend our sincerest welcome and the freedom of the city during your stay here.
Standing before the Savings Bank Section, I realize that I
am in the presence of a .body of men who have earned and
are deserving of the confidence of their fellow men. In all
the world there is no more striking example of trust and
faith among men than in the relations existing between depositors and the banker. As savings-bankers you are the custodians of those slowly accumulated dollars which, deprecate
them as you may, still represent food for the hungry, healing
for the sick, education for the young, comfort for the aged-these and a thousand other human necessities.
Your deliberations at this session are fraught with more
than usual moment because of the present state of the agitation for Postal Savings Banks. Every banker is in the first
instance a citizen of the great Republic—an intelligent, wellinformed and patriotic citizen. He is seeking primarily not
his own good, but that of his country. If the good of his
country demands that it shall discard the experience, the
.
knowledge and the judgment of the men who have devoted a
lifetime to caring for the savings of the people and their
proper safeguarding and investment, and to turn over these
functions to third and •fourth class postmasters whose actions
and judgment shall be controlled by the Third Assistant Postmaster General at Washington—if, I say, the welfare of the
nation demands that this be done, the bankers of America
are patriotic enough to acquiesce in the proposed change. But
If, on the other hand, such a radical change would be
detriment not .only to our system of banking and credit, but
to the welfare of the people as a whole, circumscribing their
opportunities for growth and development and retarding
rather than adding to the success of the commercial world,
again the banker will speak and in no uncertain tones, even
though he may be accused of a selfish motive. In this discussion the only arguments entitled to consideration are those
based upon the broad grounds of public policy.
Chicago is proud to count as one of her sons Mr. Lucius
Teter, the indefatigable Chairman of the Postal Savings Bank
Committee of the. American Bankers' Association, which committee by its report at the convention last year and by its
subsequent efforts has done so much to inform the American
people on the subject of Postal Savings Banks.
Before such an intelligent body, I need not take time to
dwell on the size, the financial strength and the many attractions of Chicago, for they are quite apparent. Let me merely
call your attention to the fact that in matters of finance
Chicago has never departed from the most conservative methods, and her reward has been the prestige and high rank
which the world concedes her as a banking centre. Her savings banks are among the strongest and best managed in the
United States. During your stay in Chicago, you are authorized to act as bank examiners and visit the substantial buildings in which Chicago's banks are domiciled.
We sincerely trust that this session of the Savings Bank
Section may be successful in every particular, and that the
delegates to it may remain in our wonderful city as long as
possible, form lasting friendships with its bankers, and depart with none but favorable impressions of Chicago and her
hospitality. (Applause.)
AMENDMENTS TO CONSTITUTION.
The President : It is hardly necessary for me to repeat part
of Mr. Henschen's hearty greetings as to the fact that they
have been waiting for us all these years. I think we can go
even farther and say that we have been waiting to come to
Chicago, and that we are pleased at the realization of our
hopes.
I think, first of all, in order that we may proceed in the
regular order, is the •adoption of the amendments to the Constitution which were submitted at Denver, and the report
"received .and filed. The findings were then submitted to the
Executive Council at Briarcliff last Spring and formally approved, and the amendments are now up to you for adoption.
You will find .
them in the "Journal" of August, 1909, the formal and necessary notice having been given in that way. I
will now .entertain a motion for their formal adoption.
Mr. Edward L. Robinson, of Baltimore, Md.: I move the
adoption of the amended Constitution.
Mr. Allen W. .Tohnston, of Schenectady, N. Y.: I second the
motion.
The President; Gentlemen, you have heard the motion that




the amendments to the Constitution of the Savings Bank Section as submitted in the August number of the "American
Bankers' Association Journal." Any comment? If not, kindly
signify your approval by saying aye; contrary, no.
Adopted.
The President: Please so record, Mr. Secretary.
The President We have with us to-day several distinguished
speakers, and with your permission and by request, in order
to keep a previous engagement, I would like to make a slight
substitution in the order of the programme, and ask Mr. Radford, whom I understand is to read the address of Mr. Welch,
to kindly defer to the lion. Henry M. Zimmermann, Commissioner of Banking for the State of Michigan.
Mr. Joseph D. Radford: I esteem it a pleasure to step aside
in favOr of Mr. Zimmermann.
The President: With your consent, then, we will hear from
him whom we consider a commissioner second to none—as we
call him a "live wire," and not at all afraid of the cars or
the size of the locomotive. Mr. Zimmermann, we would be
glad to hear from you on the subject of the hoar, if you
please. (Applause.)

"The Segregation and Safe-Guarding of Savings Deposits,"
by H. M. Zimmerman.
[Mr. Zimmerman's address will be found on pages 194 to 197..1
The President: I feel quite sure that the illustration of the
practical workings of a subject so important is highly appreciated. On behalf of the Association, we thank you.
While the speaker was telling us of the workings of this
law, I noticed that the chief executive of our Association came
in, and I think we should at least accord him the courtesy of
calling your attention to our chief, President Reynolds. Won't
you say a word of commendation, Mr. Reynolds, as to the work
we are trying to do? (Applause.)
President Reynolds: Mr. President, Ladies and Gentlemen of
the Savings Bank Section: I fear that if I should undertake
to commend all the commendable things that this section is
doing, the time which I am able to spare would not permit of
my finishing my discourse. I am glad to sec the splendid results that are being accomplished, due to your efforts on every
hand, and I compliment and congratulate you upon the efficiency
shown by the Section in this and past years. I wish to especially thank you for your worthy efforts in the work that you
have done in opposition to Postal Savings banks. Just at this
time a great many of our leading journals are strongly in
favor of establishment of Postal savings bank, and I think I he
work done by your Section, and by other members of the Asso•
elation in general will have to be continued, if we may hope
to succeed in thwarting the establishment of these institutions.
As bankers, we can see no reason why they should be established, and I hope we will all continue to register our opposition
to them and be active in that opposition. I have listened with
a great deal of interest to the paper just read by Mr. Zimmermann, and I am heartily in sympathy with the sentiments
expressed therein.
I think I am warranted in saying to you that in a few months
there will be introduced in Congress by the leaders of the
Finance Committee or the Currency Commission, legislation,
or contemplated legislation, which will cover in our National
system, so far as savings deposits are concerned, the character
of the investment of the funds, and the priority of lien of
the investment of those funds. I am confident that in the
year you will see a revision of the National banking laws
which will bring about this end, in so far as National banks
accepting savings deposits are concerned.
I feel I must apologize to you for not being able to be with
you through all of your session, but I think you will appreciate that we are all more or less busy in entertaining the bankers, and while it has been a great pleasure to do so, It has
nevertheless occupied our time, and as we are to have Mr.
Taft with us this morning, I must now answer the call of
duty elsewhere. I appreciate the opportunity of being with
you this morning, and again congratulate you on your meeting and the excellent work which .your Section is doing.
(Applause.)
I omitted for the moment to say that last evening when
I went into my room I found a letter from the Postal Savings
Bank leader—an open letter to the Executive Council of the
American Bankers' Association, addressed to me as President
of the Association. Whether or not you gentlemen have seen
that letter in the morning papers, I do not know. I assume,
since it was stated to he an open letter, that it has been published. I simply call your attention to it. I don't know
whether it is anything that you want to take action on or not.
but I shall refer it at the next meeting of the Council for
their attention.
The President: I might say that the letter has not reached
us, nor has it reached my attention yet. If It should, we
will dispose of it by referreing It to the Postal Savings Bank
Committee.
President Reynolds: The gist of it is that they call upon
the American Bankers' Association to exercise the spirit of
patriotism and to favor the Postal Savings bank establishment
for the general good, to their own detriment. I think that
is about the gist of the letter.

SAVINGS BANK SECTION.
The President: We will now have the report of the Executive Committee. Mr. Robinson, gentlemen.

Report of the Executive Committee.
[The report of the Executive Committee is printed on page
205 of this publication.]
The President: Gentlemen, you have heard the report of the
Executive Committee—
A Member: I move that the report be received, adopted and
filed.
Motion seconded and carried.
The President: The next is the report of the Secretary, Mr.
William Hanhart.

Report of the Secretary.
[We print the Secretary's report on page 205.]
The President: Gentlemen, you have heard the report of
the Secretary. What is your pleasure?
A Member: I move that the report be received and filed.
A Member: Motion seconded.
The President: It has been moved and seconded that the
report of the Secretary as read, be received and filed. Those
in favor will signify the same by saying aye; contrary, no.
The I'resident: It is so ordered.
The next is the report of the Committee on Savings Bank
Laws, Mr. Allen W. Johnston, Chairman.
Before Mr. Johnston delivers his address, I want to pay
special tribute to the time and labor and attention he has
given to securing the details that are indispensable to the ultimate solution of the ptoblem that confronts us.
Mr. Allen NV. Johnston, of Schenectady, N. Y. I thank you.
I may say in that connection that the credit is rather due to
tlw people who have given me these details.

Report of Committee on Savings Bank Laws.
[This report will be found on page 205.1
The President: Gentlemen, you have heard the report of the
Committee on Savings Bank Laws. I think you have been
impressed, or should be, with the importance of the task.
A Member: I move that the report be adopted, with a vote
of thanks to the committee.
The President: Gentlemen, you have heard the motion. Before putting it, however, I would like to call the attention of
the members present to the desirability of continuing that committee. They have the matter well in hand, and while I do
not believe in any way in perpetuating any committee or any
ollicial, this is a matter of great study, and it would take
a new committee quite a time to get in position to handle
it as well as they can. As I understand the motion, it is
that the report of the committee be received, and that the
committee be continued. Do I hear a second?
A Member: Motion seconded.
The President: Are there any comments? Then those in
favor of the motion will signify by saying aye; contrary, no.
It is so ordered.

Report of Auditing Committee.
The President: The next is the report of the Committee on
Auditing, and that being purely a technical report, with certain cuts and diagrams necessary to explain it going with it, I
have the consent of the Chairman of that committee, I believe,
to waive the reading of it and to refer you to the printed
report, which will be sent to you later, and which will he
more effective in your hands than a reading of it here. Is that
correct, Mr. Griswold?
Mr. Griswold: Quite so.
The President: Gentlemen, you have heard the disposition
of the report of the Committee on Auditing, and with your
further permission we will now go through the formality of
receiving and filing it.
A Member: I move that the report be received and filed.
Motion seconded and carried.
[The report of the Auditing Committee is given on page 206.]
The President: The next is the report of the Savings Bank
Committee. Gentlemen, Mr. Lucius Teter, Chairman.

Report of Committee on Postal Savings Banks.
[We print the report of the Committee on Postal Savings
Banks on page 207.]
The President: Gentlemen, you have heard the report of
the Postals Savings Bank as read by the Chairman of that
committee. What is your pleasure?
A Member: I move that the report be received with thanks,
and that the present committee be retained for another year.
They seem to have performed very efficient service in the last
year, and they are familiar with the details of the work.
Mr. Briggs, of Denver, Col.: I may be a little out of order,
but I think we ought to express our thanks to the Law Committee and to the Committee on Postal Savings Banks for
the excellent work they have done. I think very few of us
who have no connection with committee work of this character really appreciate the large amount of time and energy
required to accomplish what our committees have accomplished for us during the past year; and to allow them to
continue in their work without even a vote of thanks seems
to me to look careless and ungrateful, and I aria not willing




211

to admit that this body is careless or ungrateful in regard to
its committees. I therefore move you that we. express to both
committees a vote of thanks for the excellent work they have
done.
Mr. Kauffman, of Tacoma, Wash.; I make the same motion.
I think it is thoroughly incumbent on the Savings Bank Section to express their thanks to the Committees for the work
they have done. I second the motion.
The President: Gentlemen, you have heard the motion.
Motion seconded and carried.
The President: The committees, as represented by their
respective Chairman, will please convey to the individuals
thereof the appreciation of this Section for their splendid work.
The next is the report of the Committee on Membership,
which the Chairman has requested our Secretary to read.

Report of the Committee on Membership.
The President: Gentlemen, you have heard the report of
the Committee on Membership. What is your pleasure?
A Member: I move that it be received and filed.
Motion seconded and carried.
I For report of Committee on Membcrship see page 208.]
APPOINTMENT OF COMMIT'rEE. ON NOMINATIONS.
The President: The next is the appointment of the Committee on Nominations. I would like to ask if Mr. Frederick
C. Nichols, of Fitchburg, is in the room.
No response.
Gentlemen, I will name as a Committee on Nominations
Messrs. Clinton 'I'. Rose, of Syracuse, N. Y.; Mr. It. C. Stephenson, of South Bend, Ind., and Mr. Frank N. Briggs, of Denver,
Col. The committee will meet immediately upon the adjournment of this session—this morning's session—.and will he
pleased to receive from any member present a nomination for
any office.
We would particularly Urge that you go out of your way to
submit a Vice-President for your State; and that you be not
at all bashful about naming yourself, if you happen to be the
only man here, and you think you are all right. We want
men who will work. The assistance that has been given Us
by the Vice-Presidents of the respective States has been very
valuable, so please see that we get as full a list as possible,
and that we be not obliged to turn to the bankers' directory
to fill in with.
As you are probably aware, the coming of the President of
the United States here to-day has caused certain engagements
to be made, and possibly a lessened attendance here at the
moment, and I think that in deference to his presence, and in
order that our members may have an opportunity of seeing
him, that we should facilitate our programme as much as
possible. If, by continuing our morning session up to 12 :30,
we will be able to get some of our business out of the way, you
can see him and meet him at the public reception at 2 o'clock,
and we can resume our meeting here at 2:30. Shall we continue our morning meeting as long as possible, and then adjourn to meet at 2.30?
Mr. Joseph D. Radford: If we continue our morning session and carry out the programme as laid down, how long
will it take us?
The President: I do not think we could possibly finish in
less than two or three hours. There are a great many people
here who would like to be heard on different subjects. 'We
have the real estate mortgages to savings banks—two papers,
one by Mr. Welch and one by Mr. Creer. Then there is an
address by Mr. Bother, as well as one by Mr. Edward B.
Carney and Mr. Edward L. Robinson, as well as the open
discussion, which may be quite lengthy. I think we ought
to give the members an opportunity to meet the President, ir
possible to do so without seriously curtailing our programme.
Mr. Radford: I therefore would move you that when we
do adjourn we adjourn to meet again at 3 o'clock.
Motion seconded and carried.
Mr. Eden: For the benefit of those members who may wish
to attend• the ball game this afternoon, the game will not
begin until after the arrival of President Taft at the ball
park. It is expected he will leave the Art Institute about
3:15 and reach the ball grounds about 3:45; so those who
hold tickets to the ball game will know what time the game
will begin—between 3:45 and 4 o'clock.
The President: Thank you.
The President: The next in order, then, is to take up the
papers that are to be presented to us. The first one is "Real
Estate Loans for Savings Banks and their Amortization." Mr
R. M. Welch, Secretary of the California Bankers' Association,
being unable to present, has asked his good friend, Mr.
Joseph D. Radford, to present same for him. I take pleasure
in presenting to you Mr. Joseph D. Radford. (Applause.)

Real Estate Loans for Savings Banks and Their Amorization.
[Mr. Welch's paper will be found on pages 197 to 199 of this
publication.]
The President: Gentlemen, you have heard this most interesting paper on a peculiar phase of our business, and before
putting the motion I Would say to Mr. Radford that on behalf

BANKERS' CONVENTION.

212

of our Association we know that you will convey our apprecia•
lion to Mr. Welch for his efforts.
Gentlemen, you have heard the paper, and I am sure are
very much interested•in it. At the moment we have another
one similar in character, but of a different type, and. I think
it is quite proper that it should immediately follow. However, before taking up that, and by way of a little momentary
intermission, I want to call your attention to the fact that
we have with us one of, the great bankers of America—a man
who in the emergency of the moment retired from professional
banking to that of Departmental Governor. I refer to Mr.
Clark Williams, Commissioner of Banking of the State of New
York. I notice he is here. (Applause.) I would like to introduce you to the gentleman and he to you,.and have him say
a word or two to you.
CLARK •WILLIAMS' ADDRESS.
Mr. dlark Williams. of New York: Mr. President and Gentlemen. It is a great pleasure for me to be 'with you this
morning, and I assure you I take great interest in the matters you are discussing. I will only take a moment of your
time, and the burden of my talk is to thank you for the opportunity of meeting you face to face.
•
We have in the Stqte of New York, as you well know, mutual savings banks. There are 189 of such institutions, with
total resources of $1,587,000,000: but gentlemen I am very
bappy to say that they give us less trouble in the matter of
supervision than the other characters of financial institutions
under our charge. and I daresay Ova is due to the character
of laws which are on our statute books to some extent; but
I am convinced that whatever those laws might be, unless
because of the character of the individuals having
it wa
in their care the funds of the provident poor—the personal
element—there would be opportunity for as much disregard
of law in the savings bank system as in that of • the State
banks and trust companies and building and loan associations.
During the week there has been a convention, perhaps of
which you have not heard in this city. That convention was
by the National Association of Supervisors of Banks. Those
earnest, harthvorking, underpaid servants of the people,
through me, would ask your co-operation as bankers in the
different States for a. better system of supervision, and perhaps better laws, and I think they have met you In one particular in their declaration of approval of the segregation
of saving deposits in State banks and in trust companies. I
daresay your president will announce this to you, if he has
not done so already; but I bespeak for them in their earliest
efforts for a more satisfactory character of supervision, your
hearty co-operation with them to that end, and I speak to the
point because you can bring the intinence which is necessary
upon your legislators, and upon the executive. If the funds
are not sufficient for the purpose, or if the laws are inadequate, or if there is a general disregard or a lack of appreciation of the necessity for supervision, you gentlemen can
do more than any one in your respective States to bring
about the desired results.
Gentlemen, I thank you for this opportunity of speaking
to you for a moment, and I cannot help but feel that you
each one of you—should be enjoying an intense satisfaction
In the unselfish efforts which you are making for the protection of the moneys of the provident corps. Gentlemen, I
thank you. (Applause.)
The President: We want to assure you, Mr. Williams, that
we are heartily in accord with all the movements of your
Association, and you can count on our support at all times
for the enactment of good and proper laws. There is no
question about it.
Now with this little intermission we will proceed with the
next paper, which is by Mr. Wm. IL Creer, Secretary Cleveland Savings & Loan Co., Cleveland, 0.
Mr. Wm. R. Creer, of Cleveland, 0.: Every corporation
should have for its function the best of service to the general
public. It is not sufficient that a bank shall loan money for
the building of a home, and then be content so long as the
security is adequate. It should be earnestly and actively
engaged in inducing and assisting the home builder to become a home owner in every deed by working out the payment or repayment of the money advanced upon mortgage.
A man can step from the sidewalk of the street below to
the floor if he is willing to come up a stair at the time. A
straight loan is a good way to keep a man in debt if it is
made on good security. An installment loan ;s the easiest
plan in the world for getting out of debt, because that is
what the man has been doing all his life, paying rent once
a month.

Mortgage

Loans for the Home.

[The text of Mr. Creer's address will be found on page 1991
The President: I think, gentlemen, you seem to be very
much interested in that other phase of our business, which
is fast developing, namely, the partial payment plan.
Mr. Mitchell, of Richmond, Va.: I wish to state that the
proposition made by the distinguished gentleman who has




just spoken, is the most admirable one I have heard of since
I have attended the tnectings of the Savings flank Section.
I wish, however, to itiquire relative to the aggregate amount
of Interest on the total amount of money loaned, whether
or not it would exceed the into of 6%. I presume that he
understands what I •mean by that. He starts out, I think,
with an Interest of 7%, and then graduates down to 5%, and
I think that is the most admirable feature of your plan,
but I wish to know, Mr. President, whether or not he has
figured it out to know whether the profit of a bank would, on
the total amount of moll.`y loaned, exceed the amount of 6%
interest?
Mr. Creer: The answer is very evident, and should be
very clear. Ordinarily speaking some one is apt to think
that if we are paying 7% for 25% of a loan, and 6% for 5%
of a loan, and 5% for the other 25%, it is an average of 6%,
but it is very far from that, because you will notice in this ease which I have stated, that 7% is paid on the loan when
the principal is front $2,000 down to $1,500; 6% is paid upon
the loan when it is being reduced from $1,500 to $500, and
5% is only paid upon the loan when it is reduced from $500
to nil; therefore, it produces more than 6%. The virtue in
the loan is an incentive to reducing the principal, .and the
safety of the loan Is in following the habit of a life of a
monthly stipend for a place to live in. (Applause.)
The President: We have a paper to be read, "Partial I'ayments Compared With Sinking Funds," by Mr. Robert M. Rotifer.
president of the Hopkins Place Savings Bank, Baltimore, Md.

Partial Payments Compared With Sinking Funds.
[Mr. Rother's paper in full is printed on pages 200 to 201.1
• The President: I am glat to have had Mr. Bother call our
attention to not only the vconomy, bat the desirability of
this form of bond, because the banker very frequently has
much influence In the Illetation of the form which municipal
bonds shall take. I think it is worthy of your deepest eonsideration that this form of serial bond—which in other bonds
Is handled by many of us, and liked very much by us—should
have your attention.
Before adjourning, I would like to ask the courtesy of the
floor for a moment for our good friend Mr. Radford, from
Los Angeles, who has a personal and an interesting announcement to make.
Mr. Radford: You are patient and long suffering like all
bankers, but I will not bore you to any great extent. I was
appointed a committee with Mr. J. M. Elliott, of the First
National Bank of Los Angeles, to convey to the convention
last year an invitation for the American Bankers' Association
to meet in Los Angeles in 1910, and we were somewhat encouraged then; so we have come back again this year with
the same proposition for you. We expect to-morrow to have
the opportunity of extending this invitation from the platform
in the regular meeting of the Association, and In order to
prepare you people somewhat we have brought along a little
pamphlet, describing the accommodations which •we can offer,
and the facilities that we have for handling such a convention,
These pamphlets are on the table at the door. They are of
a convenient size to go into your pocket, if we get the convention-1r not they are worth nothing. I only hope the convention Is going to meet In Los Angeles next year. We have
lots of things to show you there, and I ant sure that you
‘vould be pleased with your selection of our city as a place
of meeting.
Mr. Creer: I have been asked if I have any printed matter regarding the short paper which I have read. I have none
with me. I will say this, that this plan was evolved in our
own business and has been in successful operation with us
for some years, and to you who will write me after toy return
home I will be pleased to send a pamphlet explaining the
modus operatoll and also such forms of note and mortgage
as sue' 11N1`.
The President: I will now entertain a motion to adjourn to
meet again at 3 o'clock.
A Member: I so move.
Motion seconded aimi I arried.
Adjourned until 3 P. M.
APPERNOON SESSION, 3 P. M.
The President: Gentlemen, you will please come to order.
The counter attraction seems to have had its effect upon our
attendance, but under the eircumstances I think we will have
to forgive them, because we all think a great deal of the
(7hief Executive.
The first in order now Is a paper on Branch Savings Banks,
by Mr. Edward IL Carney, Treasurer of the Lowell Institution for Savings, Lowell, Mass.

Branch Savings Banks.
[On pages 202 to 203 will he found the full text of Mr.
Carney's address.]
The President: I am quite .
sure in this CREW, as in the previous ones, that we have been very 111111,11 interested.
The next, gentlemen, Is—what should be in every bank—the
Department of Merey, by Mr. Edward L. Robinson, Vice-presi-

SAVINGS, BANK SECTION.
dent of the Eutaw Savings Bank, of Baltimore, and the
most valued member of our official staff. Mr. Roldnson, if
you please. (Applause.)

"The Department of Mercy."
[We print Mr. Robinson's address on pages 203 and 204.]
The President: Mr. Robinson, your heart to heart and
sympathie little talk seems to me to be a fitting tribute to the
finish of the formalities of the day—that we should pause
and pour out our hearts to-day, as evidence that we all have
hearts and sympathies, and it seems to me to be very proper.
You know, the average banker is rather harshly regarded in
the community, and I think it delightful that you should
be so reminded of this obligation to our patrons.
Mr. H. L. Remmel, of Little Rock, Ark.: This is such an
unusual paper that I feel like making a motion that this section extend to the author of that paper its thanks. I make
that as a motion.
Motion seconded and carried.
The President: We have now reached No. 10 in the order
of proceedings, and having heard first of all the paper on
the Segregation of Savings Deposits; next the Different Types
of Mortgage Loans, the Serial Bond, the Feature of Branch
Banks, and the one just closed, and we not being particularly
Pressed for time, I hope that we will hear from everybody
and anybody that has the slightest comment to make, and that
any discussion that may be provoked will result in the benefit
of all.
Gentlemen, we would be glad to hear from anybody on any
subject in our business. Before starting, in case there should
be a tendency to tarry a little, let me say that it is customary to limit any remarks to live minutes to one person, and
no person to speak more than once on the same subject.
Mr. Alien W. Johnston: In view of the paper we have just
heard, I think it would be an interesting point for the Postal
Savings Bank Committee to consider, if they have not already
done so, as to how many third and fourth class postmasters,
In the bustle and hurry of the delivery of mail and the receiving of deposits, would take the time to give the depositor
the sympathetic little talk as has been suggested by the paper.
SAVINGS DEPOSITS TO BE SEGREGATED.
Mr. Shea, of Dayton, 0.: I hesitate to make any remarks to
this assemblage, because of two reasons: First, because it is
the first convention that I have attended, and secondly, because I am among the younger men who should sit and listen
while the older men drop these words of wisdom. I think
we all have been impressed with the papers that have been
read here to-day. I know that to me it has been a source of
much instruction, but if there was one paper more impressive
than the others it was the paper which was read by Mr. Zimmermann on the segregation of savings deposits; and I believe we will all agree that the most pertinent question which
is before this body for consideration is as to what measures
may be adopted to prevent the establishment of Postal Savings banks; and if the Postal Savings bank is more injurious
to one branch of the banking business than to another, it is
certainly more injurious to the Savings Department than to
the Commercial Department; and so, I believe it would not
he amiss—in fact, I think it most opportune—that this branch
of the American Bankers' Association—this Section—make
some declaration as to its position with reference to the questions that were discussed to-day, and for that reason I offer
the following resolution:
"Resolved: By the Savings Bank Section of the American Bankers'
Association, that we favor legislation requiring all savings funds to
be segregated, and limitations placed upon their investment, and giving
preference to the savings depositars in the total amount of savings
funds over general creditors of the bank."
I offer that resolution to this body.
The President: Gentlemen, you have heard the resolution
offi,red by Mr. Shea. Is it seconded or supported?
Mr. Oiler: I second the motion.
Mr. Radford: I question very much whether in the last
clause of that resolution we are not on dangerous ground, when
we refer to creditors in any branch of our business. To a
bank doing strictly a savings bank business it is good—it
sounds good, but there are banks all over the United States
which are combining the two. I fully believe in the investment
of savings funds under the strictest possible construction of the
law, but wherever these two come together—the Commercial
and Savings Departments—and you make the Savings Department a preferred creditor, it strikes me you are doing an
injustice to the institution that you profess to be anxious to
help ; and while I stand perfectly with the gentleman all the
way through, I hesitate a little about that. It might he
worded to meet what he wants a little differently, but the way
it sounds there it looks to me as though we were getting out
where the lee was pretty thin, and where it is bound to have
a marked effect upon some of us at some time in some place.
So, were we to take it just as It stands, I fear that out of
justice to my conscience I should vote against it ; not because
I am not in sympathy with the whole purport of it, but I am
a little out of sympathy with that last clause.




213

Mr. Irennnel : I am also in accord with Mr. Radford s views.
I think the last clause is very dangerous. I do not think we
should give our sanction as a body—should pass a resolution
of that kind. I think it would be a very dangerous. break;
and I say, in all deference to the 'gentleman and his ideas
about the matter, which are very well stated, at the same time
I should think it would be a very unwise move on our part
for us to endorse that principle, and I trust he can see his
way clear to eliminate that part of his resolution.
Mr. Teter: I do not want to use a great deal of time, and
yet this has a very definite bearing upon work that is very
near to all our hearts, and we do not want to fumble with it.
I think we all agree with the gentleman who made this motion.
and I would like to make a suggestion here, if he is willing
to have it in the way of a suggestion,. and that is this, that
he withdraw his resolution for a moment, and let him with
the Chairman of our Standing haw Committee withdraw and
prepare such a resolution as they may agree upon.
Mr. Allen W. Johnston, of Schenectady, has this in mind.
He knows all about it. He knows what plans these committees have, and when we go before the public we want to do it
in just exactly the way which we all mean to work. This
is suggested with no thought at all of defeating the object of
the motion, but of getting it in accord with the views of a
committee in which we all have much confidence. I make
that suggestion, Mr. President.
The President: With the permission of the mover and, the
seconder, we will hold the motion over. If you will pardon
me, I will make this suggestion. I think our sentiment is that
we have no objections to savings deposits being preferred in a
departmental institution by the act of segregating the deposits,
but we do not want to put it in specific language; .and the
wording of the committee resolution originally drawn and to
which we have adhered closely during the whole year, has been
that savings deposits be segregated, and that their investment
be carefully safeguarded, and we have stopped there. In some
States, if you will look at the list, you will find that by enactment they are preferred; by inference, sometimes, in other
places. So, as these gentlemen have said, we must approach
this subject gingerly. I do not think any of us are averse
to the idea. I do not think we have any objection to their
being preferred by segregation. We will allow these gentlemen to confer and bring the question up a little later.
Mr. Dinwoodie: I trust the committee will be careful not to
tread on the toes of the savings bank and the Savings Bank
Section. I hear, as I go around among the banks—the savings
banks—a dread or a feeling or an opposition to what seems
to be an attempt to draw into the National banks a savings
department. This segregation proposition never would come
up if it were not for that. This Savings Bank Section is al- •
most ceasing to be a Savings Bank Section, while it encourages
a line of business in direct competition with the savings bank
business, and makes it necessary to bring about a segregation
of deposits. I dislike to see anything come into this part
of the Association that might bring up that thought, and it
seems to me that It would be just as well if this resolution
were not passed at all; that there be nothing passed in the
way of a resOlution concerning the segregation of deposits at
this time. We know that is what we want; that is what it will
come to, but do not let us do anything that will bring about
any opposition in the ranks of the savings banks. I move that
the resolution at least be referred.
Mr. Creer : Mr. Chairman, we want to go carefully and not
precipitate trouble for ourselves. I think if Mr. Shea had
been thoroughly familiar with the work of the Savings Bank
Law Committee he would not have offered that resolution, and
had he paid attention to the report of Mr. .Tohnston, which
stated specifically that they will await the opinions offered at
this convention before presenting any definite provisions, he
would not have suggested it. Now, then, if this committee,
after all the careful work of past years, are not in a position
to offer satisfactory instructions or standard provisions for
this matter, it would seem ill-advised for us on the spur of the
moment to say that we knew what to do and to pass resolutions covering these points. There is still another important
fact which we must bear in mind—that we are a subordinate
body of a parent organization, and this Savings Bank Law
Committee is working along lines and in co-operation with the
Standing Law Committee of the parent body, and if we are
ever going to accomplish anything, we are not going to accomplish it, gentlemen, by passing resolutions, but by getting
together and after carefully determining what is the proper
and best thing to do. having behind us the whole force of the
American Bankers' Association. It is not proper or right that
we should start something without knowing where we stand
on that matter, and therefore, I move you, Mr. President, that
this resolution offered by Mr. Shea be referred to the Savings
Bank Law Committee.
Motion seconded and. carried.
NOMINATIONS AND ELECTIONS.
The President: Is there any other question that you wish
to take up or discuss? If not. it would be in order to hear
from the Committee on Nominations. Mr. Rose is the
• (.11airman.

BANKER'S' CONVENTION.

214

Mr. Clinton T. Rose, of Syracuse: Mr. President and
Gentlemen: I wish to say that in response to the request of
the President a number of names have been handed to is
as candidates for the positions of Vice-presidents in the different States. Still there are several States which have not
recommended any name, and I will thank the members from
those States to make nominations as I read the list.
We recommend as follows:
For President, Mr. Wm. R. Creer, Cleveland, 0. (Applause.)
For First Vice-president, Mr. Edward L. Robinson, of Baltimore, Md. (Applause.)
For Members of the Executive Committee, to serve three
years: Messrs. Henry S. Henschel', of Chicago; H. L. Remmei, of Little Rock, Ark., and R. C. Stephenson, of South Bend,
Mr. Stephenson is a member of our committee, and Mr.
Briggs .and myself have taken the liberty of making this nomination at the earnest request of some of the members of the
Association.
. (Mr. Rose then read the. list of nominations for Vice-presidents, which had not been completed.)
Mr. Rose: If we have suggested any names that the delegation on the floor would rather have someone else nominated,
this report is not yet completed and we are ready for further
suggestion.
Mr. Kauffman: I move that the Secretary be authorized
to cast a unanimous vote of this Section for the gentlemen
named in that report, and as for the few States that
are entitled to a Vice-president, and for which names have
not yet been suggested, that the Secretary take it up while lie
is here with some of the representatives of those States, so
that the list may be complete, and fill in the .proper names
for those respective places.
•
A Member: Motion seconded.
The President: Before putting the motion, let me ask if
there are any other nominations for any office or for any one,
Jr any suggestions to make, objections or corrections? I hear
none.
It seems to me that with your approval the matter is now up
for a vote. Those in favor will signify by saying aye; contrary=
The motion is carried. Mr. Secretary, you are instructed
by the Section to cast a unanimous ballot for the gentlemen
named in the report of the Nominating Committee.
The Secretary : I wish to report, Mr. President, that I have
east this ballot, according to the list read by Mr. Rose, the
eliairman.
The President: It is now in order, gentlemen, to install
the officers elected. I take pleasure in retiring and in calling
'to the platform and presenting to him, first, the emblem of
office, and next, the little power that goes with it, as evidenced
by the instrument I hold in my hand. Mr. William R. Creer.
(Applause.) In the four years that I have served with Mr.
Creer on, the Executive Council, and in committee work, I

have found him a most earnest and sincere guardian of the
savings of the people; up to date, clever, and I am sure that
in hint you will find a most worthy and competent presiding
officer. Mr. Creer, I take pleasure in retiring and in presenting
to you this badge, and in doing so I beg to thank the Association and the Section for the honors that they have conferred on me. I. have not cut a very large figure in the work,
but I have endeavored, as I said to you a year ago, to put
upon that work an impress of earnestness that won(' convince
you I was working from a purely unselfish standpoint, and
that whatever we did should and must be done for the common good, and that we must recognize the demands of our
clients, the people, and meet them upon fair grounds as citizens and not as we are sometimes called selfish bankers.
Thank you very much. (Applause.)
President-elect Creer: Mr. President and Gentlemen: WordA
would fail me if I tried to express to you the keen appreciation of the manner in which you have honored the State
of Ohio, which I represent, and my humble self; therefore, I
will not attempt to do it. I thank you heartily, one and all,
for this great honor which I deeply appreciate..
,You have proven that the Ainericaa liankers' Association
through its Saving Bank Section is magnificently great and
splendidly broad, for it can take within its folds all the savings
institutions that are preaching the gospel of thrift to the
people of the nation, no matter what the style of the corporation or what its bame.
It is now my pleasure to ask Mr. Edward L. Robinson to
come forth and to introduce hint to you as your first Vicepresident.
(Mr. Robinson mounted the platform.)
Mr. Robinson, it gives me great pleasure, sir, to hand you
the badge of office of the first vice-president of the Savings
Bank Section of the American Bankers' Association. In. honoring you, I feel that this Section has honored itself, because
with your rich experience, your high ideals and your splendid
.purposes, you are doing a great work, not only at home but
abroad for all that is best in savings institutions. (Applause.)
First Vice-president-elect Robinson: Thank you, sir. It is
only expected of me, I ant sure, gentlemen, to say a very
small word. I have already been on my feet long enough to
have taxed your patience, but I cannot forbear thanking you
for this distinction—one which I shall strive to wear as
worthily as I may.
President-elect Creer: At the close of this meeting, when
we adjourn, there will be held a meeting of the Executive
Council. I trust that the members newly elected are present
so that we may have the meeting convened at once and without any delay.
Gentlemen, is there any further business to come before this
Section at this time?
Mr. Teter: I move you that we now adjourn.
Motion seconded and carried.
Adjourned.

Fidelity Trust Company
NEWARK, N. J.
Capital, Surplus and Undivided Profits over $9,000,000
Resources over $27,000,000
ALLOWS INTEREST on daily balances of $1,000
or over, subject to check at sight, and transacts
a general banking business.
AUTHORIZED BY LAW to act as Executor,'Trustee, Administrator, Guardian, Assignee, Receiver,
and in all fiduciary capacities, both under court
and personal appointment.

OFFICERS
JERON1E TAYLOR, Trust Officer and Treasurer.
JANIES II. SHACKLETON, Asst. Sec. & Asst. Treas.
PAUL C. DOWNING, Asst. Secy. and Asst. Treas.
EDW. A. PRUDEN, Asst. Secy. and Asst. Treas.

UZAL H. McCARTER, President.
JOHN P. DRYDEN, Vice-President.
ANTHONY R. KUSER, Vice-President.
FREDERICK W. EGNER, ad Vice-Pres. and Secy.




TAKES ENTIRE CHARGE of Real and Personal
Estates.
RENTS SAFES and stores valuables in well-guarded
Burglar and Fireproof Vaults.
GUARANTEES TITLES of Real Estate throughout New Jersey.
ACTS AS TRUSTEE under mortgage, Registrar and
Transfer Agent of Stocks and Bonds of Corporations.