Page images
PDF
EPUB
[blocks in formation]

With two or three exceptions, the State Banks are under efficient management, and are in excellent condition.

The directors' meetings are well attended, and the business of the banks, carefully looked after.

The stringency in the New York money market, together with the recent failures there and in Chicago, have had a depressing effect upon business interests in Michigan, and the last two reports called for, found many banks below their legal reserve.

This however, was only temporary, as the amount was, in most cases, made good within a very few days.

A number of banks have found it difficult to obtain the necessary amount of mortgages required by law to secure savings deposits, and the Commissioner has allowed them the benefit of that section in the banking law relating to the changing of securities, as the compelling old established banks to immediately change the commercial paper they had on hand for mortgage securities, would have seriously interfered with the business interests of the State, and greatly damaged the banks, which was not the intention of the law.

However, bank officers claim to be making every effort to improve in this respect, and I believe will make good this deficiency before the close of another year.

RESERVE.

I would again call your attention to the reserve of savings banks.

Section 27, of the banking law, requires that savings banks shall keep on hand at least, fifteen (15) per cent of their savings deposits in money, but does not require them to keep any portion of this reserve in their own vaults. It can all be deposited in other banks in reserve cities.

Now is this consistent with good, sound, conservative banking; is it for the best interest of the depositing bank; is it safe for the bank receiving the deposit; in times of panic, or financial stringency would not both be injured?

Would it not be better if the law required savings banks, to keep a portion of their reserve in their own vaults?

Some good bankers affirm that the locking up of three million dollars in the vaults of the different banks, would seriously effect the business interests of the State, claiming that the retiring from circulation for eight or ten years this large amount of money, in order to meet an emergency (that experience teaches only occurs once in that time), is not good banking..

Perhaps this may be so, yet the conservative banker who, by keeping a reasonable reserve in his own bank, would be greatly pleased that he could successfully meet that one emergency.

While banks are in a measure dependent upon each other, the Commissioner is of the opinion that there should be a certain independence, which can only be experienced by those who hold a certain portion of their reserve in their own vaults.

[ocr errors][merged small]

In his anuual report for 1889, the Commissiouer refrained from suggesting any amendments to the banking law, believing it better that the present law be given a few years trial before changing.

The wisdom of such a course is now more apparent, as many suggestions and amendments proposed at the last session of the legislature, have been found unnecessary for the banks, and of doubtful benefit to the public. What then seemed necessary for banks in the lumbering and mining districts, was undesirable in other parts of the State.

In view of this fact the Commissioner is not inclined to suggest any material change in the banking law at the present time, but two amendments at least seem necessary, to make more plain the present law, and to afford customers of banks, as well as the bankers themselves, greater advantages.

In reading section 28, of the General Banking Law, it appears that savings banks cannot issue certificates of deposits and enter the same as savings deposits, but that all savings deposits must be entered in a pass-book. The commissioner has ruled, that, according to this section, certificates of deposits must be classed as commercial deposits, as defined in section 24. This ruling has met the approbation of bank officers in lumbering and mining districts, as it lessens the amount of savings deposits, 51% of which must be loaned on mortgage security, which in those localities is difficult to

be loaned on negotiable or commercial paper with personal security, which is more easily acquired.

On the other hand, bankers in other parts of the State, think this ruling is to their disadvantage, as they desire that certificates of deposit be classed as savings deposits, which, according to section 28, enables them to loan on mortgage security, which in farming districts is very desirable.

In view of these differences of opinion, both of which are reasonable, as viewed from the different standpoints, I am inclined to think that section 28 should be amended, so that certificates of deposit, subject to the rules governing savings deposits, be classed as savings deposits, and that demand certificates, with or without interest be entered as commercial deposits.

One other amendment the Commissioner would suggest, and that is to amend section one (1) of the banking law, so that banks with a capital of $15,000, may be organized in towns or villages the population of which does not exceed one thousand inhabitants.

Many of our best bank officers do not favor the organization of banks with a capital of less than $25,000, believing that a less amount would stimulate a certain class of individuals to engage in the banking business, who are neither qualified by experience or education to safely handle or invest the savings of the depositor, but make the experiment because it costs but little.

On the other hand, there are many towns and villages in the State, whose inhabitants are deprived of the benefits of banking facilities, because an incorporated bank, with $25,000 capital, will not pay the incorporators a fair rate of interest.

This, more than anything else, accounts for the large number of private bankers in the State, several of whom have expressed a desire for this amendment, which will enable them to incorporate under the banking law, with a capital commensurate to the business.

It certainly is better for the community, that five men incorporate with a capital of $15,000, and a liability of $15,000 more, than it would be for one man to do the banking business of a town, with an unknown capital, and a mistrusted liability.

EXPENSES.

The expenses of the department for the year ending December 31, 1890, were $7,594.09, and are made up of the following items:

[blocks in formation]

The receipts of the department for the current year have been $5,619.15, and are made up of fees received from the different banks.

The following is a list of the banks examined, and the amount paid by each, which has been deposited with the State Treasurer in accordance with law:

3

[blocks in formation]
[blocks in formation]
« PreviousContinue »