POSTAL SAVINGS BANKS.

I am not in favor of the establishment of postal savings banks by the government. I believe it tends towards centralization. When listening to the statements of its beneficient results in the old world, we should not forget that there are several lines of steamships bringing us the population of those countries enjoying some of these alleged blessings.

BUILDING AND LOAN ASSOCIATIONS.

The last legislature had before it a bill to place building and loan associations under the supervision of the Commissioner of Banking. The bill did not become a law. In my opinion, a separate and distinct department for the supervision of these associations is desirable.

THE IMPORTANCE OF ACCUMULATING A SURPLUS FUND.

I find in too many instances that managers of banking institutions attach too little importance to the necessity of the accumulation of a surplus fund.

I find the banks as a whole in a much better condition than for some years past, and as a rule strongly fortified for any emergency that may arise..

Some of them have large items of losses, but fortunately a number of these are banks that have prepared for a "rainy day" by the accumulation of a surplus fund. The importance of a surplus fund here asserts itself. I am of the opinion that many of our banks do not make themselves fully cognizant of the provisions of the law as to what constitutes insolvency. To illustrate: A bank with one hundred thousand dollars capital and no surplus fund, should it meet with a loss of one thousand or of one hundred dollars, is, under the letter of the law, insolvent, and there immediately begins a serious personal responsibility and liability for the officers and directors.

A bank with fifty thousand dollars capital and a fifty thousand dollar surplus fund, in my opinion, is much more desirable than one with one hundred thousand dollars capital and without surplus. I am aware that this statement may be criticised by some upon the theory of the additional liability of stockholders in the latter case, but I must respectfully refer those to the statistics of receivers of failed banks as to the fruitfulness of this additional liability.

I desire to say a word in regard to our "general banking law." I some

law of the State of Michigan as the best and most perfect banking law within the several states. There have been comparatively few disasters during its existence, and if banks are conducted within its provisions there need be but few if any bank failures. There can be no law making dishonest officials honest, nor any law of sufficient wisdom to give incompetent men good judgment.

THE DUTIES AND LABORS OF THE COMMISSIONER OF BANKING.

The public cannot fully understand or comprehend the peculiar and many times delicate duties of the commissioner. Under the law the commissioner, his deputy, the examiners and all persons in his department are bound by oath to keep secret all vital matters pertaining to banks, and his relation to banks is like unto that of the family physician, and like the physician he is seldom without invalids upon his hands whom he is trying to restore to financial vigor, and this requires the utmost secrecy, otherwise in many instances disaster would ensue. The managing officers of many of our banks are young men who have not yet acquired the experience that years of service in this line will bring them, and the commissioner, if he be a practical banker, can be of much service to such in the way of giving kindly and timely warning of wherein lies the danger line. Many disasters have been averted by the good offices of this department that if permitted to have occurred would, in some instances, have been wide spread and disastrous.

EXCESSIVE INTEREST PAID ON DEPOSITS DETRIMENTAL TO THE BUSINESS INTERESTS OF A COMMUNITY.

Referring again to the matter of interest upon deposits, I am of opinion that there is no one thing so detrimental to the business interests of a community, and nothing that so hinders the establishment of legitimate lines of investments, as does the paying of high rates of interest upon deposits. We can all see and to some extent comprehend the changed condition of things that would ensue if the owners of money were themselves seeking to invest it. This condition would not necessarily lessen the deposits, as money in itself does not enter into anything, and would most naturally still be with the banks. There is a general inclination among bank managers to strengthen their institutions by both a reduction of interest in this direction, and to largely decrease their par list in the matter of personal checks upon interior and remote points. At this point I desire to call attention to the inconsistency and foolishness of banks transacting a large portion of their business for

nothing, namely: making collections without compensation. I am solicitous in this matter not from the standpoint of additional profit to the bank, but a bank to be a safe depository for the people's money should not carry on a business at a loss.

In this connection I quote from an address before the Bankers' Club of Detroit, delivered by Mr. M. W. O'Brien, president of the People's Savings Bank of Detroit. First, Mr. O'Brien quotes from the address of the president of the Michigan State Bankers' Association to that body in 1889, as follows: "Cannot some means be devised by which a moderate compensation can be obtained for a great deal of that business which banks are now, owing to unwise and, in many cases, absolutely foolish competition, compelled to do for nothing? Take, for instance, collections. Why should any bank be forced to undertake the business of collecting without charge? Remember, not only the mere absolute trouble, which is often great, and the cost of stationery and postage, but the risk of being compelled to pay the customer in consequence of default or omission by others."

Then Mr. O'Brien also quotes Mr. H. C. V. Hart of the committee on united action to secure to banks proper and remunerative compensation for services rendered:

"Whereas, It has become the almost universal custom of country dealers to make remittances by checks upon their local bankers, which checks, by the par list method adopted by most of our metropolitan banks, are credited at par upon receipt, thereby making the banks of the entire State a combination by which they assume all the risks (such as failure to protest, etc.), also the enormous additional expense attendant upon sustaining the collection department, without adequate returns for such service; therefore be it

"Resolved, That we hereby recommend the abolition of 'par lists,' and that all country bankers make a reasonable charge upon all items received by them for collection and remittance or credit."

Then, among other things, Mr. O'Brien says: "From what I have already stated you will perceive that collections are not made at par points without cost to the bank, and that the custom of receiving on deposit out-of-town checks at par is not only unprofitable, but it is so extremely absurd that it is cause for surprise and astonishment that it should be permitted to prevail so long among shrewd and sensible business men. In estimating the cost of such collections, we have:

"One, The use of the space and machinery of our collection depart

"Two, Clerk hire;

"Three, Books and stationery;

"Four, Postage, which is a large item;

"Five, The risk of liability from lack of diligence, from neglect to protest, and from the failure of a corresponding bank;

"Six, The scattering of our resources in order to secure more extended correspondence on more favorable terms for the greater convenience of our customers;

"Seven, The loss of interest while in transit, on checks deposited as cash.

"Before the scientific progress of modern banking invented the 'par point plan,' the metropolitan merchant, whenever he received a check from his country customer, never failed to debit the maker's account with whatever charge was made to him by his bank for its collection. This custom of receiving on deposit at par out-of-town checks does not directly benefit our customers. The benefits accrue entirely to their customers, who, whatever the condition of their bank accounts, can circulate their checks and trust to providence to provide for them, when in the course of time they arrive home again for presentation and payment.

"Our banks are and should be willing to extend to their patrons every inexpensive service or accommodation demanded by them without charge, but is it not too much for our patrons to require us to furnish crutches and financial tonics for their lame and halting customers?

"Thus the banker is made the pack-horse, and all unite in taking advantage of his seemingly incurable folly."

I also quote from Mr. Bump of Bay City, before the Michigan Bankers' Association in 1892:

"Let us first consider the topic which is perplexing ourselves and our correspondents throughout not only Michigan, but the entire country, at the present time, perhaps, more than any other one thing. That is, the question how to make our collection departments at least self-sustaining. We shall have to charge our metropolitan city banks with most of the responsibility of having brought about the unpleasant and unprofitable condition which now exists, by their adoption of the par list system, which, of course, could not have been accomplished without the co-operation of the country bankers, but the country bankers could not, and did not, organize it. In fact, I know of one who changed his account from a city correspondent who first adopted the plan, giving

"We think the time has arrived when all banks and bankers are heartily sick of it, and are looking for some safe line of retreat that will not create too much friction with their custom. There seems none more feasible than for the country banks and bankers of the State to simply unite in a resolution that hereafter a reasonable charge will be made upon all items received for credit or remittance. Such a course would not antagonize our city correspondents, as the benefits of the present system do not accrue to them, but, quite to the contrary, they are subjected to a large correspondence and legal liability, all for the benefit of others, without compensation."

THE STABILITY AND SUCCESS OF THE STATE BANKS OF MICHIGAN.

While a bank failure is a deplorable thing in the distress and hardships it many times brings, yet in nearly all cases the general public have a wrong conception of the extent or lack of extent of the disaster. In nearly all cases the noise is made by others than those who are involved in the misfortune. We are now entering upon the tenth year of the existence of the present State banking law. We have at the present time 177 banks and three trust companies with a deposit of about seventy-five millions of dollars. We have passed through the worst and most aggravated money panic that this country ever saw, and this was followed by three years of absolute grief to the banking interests of the State, yet considering all this, there has been but an average of one failure a year, and the magnitude of these has been greatly exaggerated in the public mind by a lack of information as to the actual condition. There is no other line of business of this magnitude that can make a better showing, and much credit is due the officers and directors of the banks of Michigan for their good management.

I do not mean to be understood in this communication that all the banks of Michigan are in a satisfactory condition. There are some exceptions, and these the department is endeavoring to correct.

At the time of the passage of our present banking law there were in the State 80 State banks and 115 National banks. There are now 177 State banks, 3 trust companies and 82 National banks. Seventeen National banks have changed over to the State system, 10 have failed, and six have gone into voluntary liquidation. During this period but