perhaps a railroad that exists only in the imagination of some expert prospectus writer, are not proper assets for savings deposits, as contemplated by the framers of the banking law. The course pursued by promoters and vendors of issues on this class of property will surely result in drastic legislation in the future; and it is to be deplored that firms or corporations handling timber bonds of unquestionable value are to be hampered on account of the nefarious operations of unscrupulous com petitors. SEGREGATION OF DEPOSITS. I submit the following table for the purpose of showing that the absolute separation and segregation of savings deposits and investments has not retarded or restricted in any way the commercial or business interests of the state. An analysis of the above shows conclusively that the commercial needs of the state have not been restricted on account of the operation of the law. The report of November 26, 1912, shows that commercial or business needs were amply supplied. State banks on that date had discounts of this character in the savings department aggregating $41,774,582.07, notwithstanding the fact that they could, if necessary, have availed themselves to the amount of $74,066.094.13. The segregation of savings investments has not, in Michigan, led to any lack of confidence on the part of either savings or commercial depositors. This is evidenced by the fact that since the law went into operation savings deposits have increased approximately $50,000,000.00, while the commercial deposits show a gain of approximately $27,000,000. RECOMMENDATIONS. I again desire to call your attention to the recommendations made in the annual report of this Department for the year ending December 31, 1911, as to changes in present banking law, and am still of the opinion that these amendments are needed to strengthen the law and make for safer banking and better supervision. Briefly, the recommendations are as follows: To give the Department authority to investigate the character, fitness and responsibility of persons seeking to organize banks, and to pass upon the necessity of new banks in localities already afforded banking facilities. To require bonds of all officers or employes of banks, handling or hav To provide the machinery whereby a state bank may enforce the statutory lien upon its own stock, and to provide for the cancellation and sale of same. To provide that directors shall subscribe to an oath that at least ten shares of bank stock is not, or will not be, transferred or hypothecated. To require all state banks twice each year to make report of all loans or lines of credit exceeding $2,000 and upwards. To require banks in reserve cities to maintain a 20 per cent reserve on commercial deposits, and to give the Department authority to take from any bank not conforming to the provisions of the law, either as to reserves or otherwise, the right to act as a reserve depository. To amend the law with reference to steamship bonds in the direction of requiring that a bulk freighter must have a carrying capacity of 7,000 rather than 5,000 tons. To make it unlawful for any officer, director or employe of a bank, or any other person, to overdraw their account, and provide a penalty therefor. To increase examiners' salaries from $2,000 to $2,500 per annum. To make a director ineligible as such in any state bank for a period of five years who misses three consecutive monthly meetings of directors, unless absent on account of sickness or absence from the state. To fix the loan limit to directors, officers or employes of any bank at 10 per cent of capital and surplus, and then only upon approved collateral or endorsements. To make it mandatory upon the Department to examine all banks seeking to go into voluntary liquidation, either for the purpose of winding up their affairs or consolidation with another bank. To make it the duty of the commissioner of banking to examine into the affairs and conditions of bank receiverships before directing payment of any dividends or accepting final report. To provide that the commissioner of banking shall take possession of banks where corporate existence has expired, and where such banks have failed to receive approval of extension of corporate existence on account of not removing certain bad debts or doubtful assets. To provide that a director who is also the active officer or manager of a state bank shall not participate in the examination of the bank by the directors. To require all reserve city banks to maintain a reserve of twenty per cent on commercial deposits and to furnish daily statements of accounts to their correspondents, thus making it possible for bank examiners to make a thorough reconcilement of such accounts. To provide that the minimum fee for examination of banks be increased to $50.00, and such other change or changes in the present law in order that the Department may be self-sustaining. REGULATION OF INVESTMENT COMPANIES. I heartily recommend legislation in Michigan similar to what is known as the "Blue Sky Law" in Kansas. The purpose of such a law is to require the licensing and examination of all local or foreign corporations, companies, co-partnerships or associations, excepting building and loan to sell or negotiate in Michigan, stocks, bonds or other securities other than United States or municipal bonds. The investing public of Michigan, and especially the small investor, the unwary and uninformed have been outrageously victimized and fleeced in the past by unscrupulous vendors of worthless securities. Their nefarious operations can be stopped by the enactment of proper legislation, and I earnestly recommend that the present law creating a securities commission be amended in such a manner as to give such commission full power and authority in the direction of regulating and supervising investment companies. I believe, as a general proposition, covering a term of years, better results and a better enforcement of this law will be obtained by placing it in the hands of a commission consisting of at least three state officials, rather than having any one state offcial responsible for its operation. TRUST COMPANIES. Your attention is called to the opinion of the attorney general, to the effect that trust companies may receive deposits and issue their certificates therefor; and especially to the last paragraph, which reads as follows: "It will be noted that trust companies are not expressly required to maintain a reserve as is required to be maintained by state banks, in that they are expressly required to maintain as reserve only 20 per cent of their matured obligations, while state banks are required to maintain 15 to 20 per cent of all obligations. We doubt somewhat the policy of permitting a trust company to do a deposit business without maintaining at least the same reserve that is maintained by state banks. To this question we wish to direct the attention of the legislature to the necessity of express legislation requiring the maintaining of suffcient reserves by trust com· panies in case the authority which the present law gives them to receive deposits is to be continued." From the above opinion the conclusion is drawn that both the retiring and incoming attorney general appreciated the manifest injustice to state banks of the present law governing trust, deposit and surety companies. In view of this opinion, I further recommend that the trust company law be amended in such a manner as to prohibit advertising for and receiving other than trust deposits, or that such companies be required to maintain the same reserve as is now required of state banks. All of which is respectfully submitted. For Day |