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In my report of last year, I called your attention to private banks and bankers, doing business in this State without restriction or supervision, and asked that some measures be taken that would at least give the customers of these so-called banks the same opportunity of obtaining a knowledge of their condition, that the depositors in incorporated banks now have.

I would again call your attention, and the attention of the Legislature to

I ask it, not to oppose or antagonize these institutions but because I have, during the past two years, been repeatedly urged to bring this matter more prominently before the Legislature, by customers of these so-called banks in villages, where there are no other than private banks, and the farmer, the mechanic, the laborer and merchant are compelled to use them in the transaction of business.

A banking law with the supervision it provides, is supposed to stand between the people and banking corporations, protecting the interests of all alike; and as the law as it now stands does not give that protection to depositors in all the associations using the name "bank" or "banker" it seems to me it should be amended in the interest of, and for the protection of the public.

The people cannot safely keep their money in their houses, and therefore for safe keeping are almost compelled to deposit it in a bank, and if a private bank is the only bank in the place, then of necessity they must patronize it, and take the banker's "promise to pay" without other security. Now the question is, do the people ask too much when they urge the passage of a law compelling these banks, when called upon, to publish a sworn statement of the amount of capital, the amount of deposits and the disposition of the same, and submit to an examination to verify the correctness of the report?

The public at least have a right to know the amount of capital in these institutions, in the interest of equal and just taxation.

It is hardly just that a merchant, who has invested his money in goods that are seen and estimated by any one who cares to estimate their value, or a farmer, the value of whose property is easily appraised, or that incorporated banks whose capital is known, be taxed for the full amount of their capital stock, while a private banker with more money invested in his business than either, could, if he so desired, pay but half the amount in taxes, simply because there is nothing in sight.

And it certainly is not desirable to allow a banker to return a larger amount of capital for taxation than he possesses, for by so doing he deceives the people, for a purpose which is only too apparent.

Those bankers who mingle their private funds with their public busi ness and then claim the whole as private, should at least be content withtheir private firm, or individual name, and not use the name "bank" or "banker" which implies a corporation.

Some claim that, as their business is that of private bankers, the public have no more right to investigate it than they have to examine into the affairs of the merchant or farmer.

This argument would hold good if the business was really private, but we insist that when they advertise for deposits, the business ceases to be private, and becomes a public matter, and the using the name "bank" or "banker" on their signs, drafts, checks or letter-heads, is prima facia evidence that the public are invited to deposit their money with them.

If this were not their intention, they would use their individual or firm name only, the same as does the merchant or farmer.

I think when the word "bank" or "banker" is used in connection with any business, the State should step in and protect the name, in the same way that the United States protects the word "National," as will be seen by referring to section 5243 of the National Banking Act, which in substance is as follows: "All persons or corporations doing the business of bankers, brokers or saving institutions, except savings banks authorized

by Congress, are prohibited from using the word "National" as a part of their corporate name, and any violation of this prohibition shall subject the party chargeable therewith to a penalty of fifty dollars for each day during which it is committed or repeated."

The government must of necessity protect the name "National" as applied to banking corporations, else by its frequent use by irresponsible parties the public would soon cease to respect a name that to-day has the confidence and respect of the civilized world.

So the State should care for, and by strict laws protect and make honorable the name Bank that implies so much, and allow it to be used only by those corporations organized under State or United States laws, which provide for the greatest publicity.

Our State law protects those who patronize insurance companies. Twelve of the richest and most honorable men in the State cannot individually or collectively engage in the insurance business, unless they incorporate under the law which controls and regulates insurance.

Equal justice demands that the much larger class who patronize banks should have the same protection.

It is not sufficient that private bankers advertise their " responsibility" as so much. What the people want is to know what amount of capital they really have, and who furnishes it, that they can draw their own conclusions as to the responsibility of the institution.

Perhaps the greatest anxiety that a customer of a private bank has, is that by the death of the banker, or one of the partners, the business might possibly be closed up, and that through the tedious process of the probate court; and experience teaches that no business could be thus summarily closed out without great inconvenience if not loss.

The Legislature of 1875 enacted a law calculated to prevent unincorporated banks using the name "bank" in connection with their business, as will be seen by turning to chapter 85, section 3133 of Howell's Annotated Statutes, but the proviso in said section nearly makes nugatory that which they sought to correct.

Two private banks have suspended during the year, viz.: Reeves, Patterson & Co., of Berrien Springs, who closed their doors February 10, 1890, and J. H. Schmck & Co., of East Tawas, who suspended payment December 11, 1890.

These, with the three so-called private banks which failed last year, make five banks which have suspended payment since the Banking Department was organized two years ago.

In a spirit of fairness, and with a just regard for the rights of the few who desire to transact a strictly private business, and in view of the failures of the past two years, I would suggest that a law be enacted forbidding any person or persons using the name "bank" or "banker" for business purposes of a financial nature, unless they are incorporated under the general banking laws of the State, or of the United States.

The sound, conservative private banker does not need the word bank printed upon his checks or drafts to make them negotiable, and the unsound, questionable, so-called banker who wishes public deposits to enable him to carry on outside speculations is not wanted, as he is a continual menace to the prosperity of the country.


Local building and loan associations have been in successful operation in this country for the past fifty years.

They have demonstrated the fact that they can, if honestly and economically conducted, be of great benefit to those persons who desire to procure for themselves homes.

The Legislature of 1887 passed a law, under which seventy-eight local associations have been incorporated in this State.

These associations so far as I have been able to learn, are being conducted very successfully.

Their expenses are small, and the business conducted under the immediate supervision of the directors, who personally know every member of the association.

By an amendment in 1889, shares of stock in these associations are exempt from taxation, and the law as it now stands, except in a few minor points, seems well adapted to their needs.

Within the past year there have been organized in this State several mammoth corporations known as national associations, with an advertised capital of from twenty to fifty million dollars each. These, by the establishing of local boards throughout the State and country, come in direct competition with local associations already established.

For these, the present law is hardly adequate, and I am of the opinion that legislation is necessary to define more particularly the powers and prerogatives of these national associations which appeal to the public with a new system of investment, and also to correct some evils which have grown out of the too earnest desire on the part of some to increase and control their business.

The law upon our statute books relating to building and loan associations, was enacted with special reference to, and for the benefit of local associations, and if it be a principle of law, that corporations can only do what their organic law authorizes them to do, then many of the acts of national associations are of doubtful legality.

As these associations advertise for, and receive deposits from the public the same as organized banks, it is eminently proper that the Commissioner review their methods of doing business, and point out those features that, in his opinion, are not for the public good.

Section 6 of the building association law of 1887, says, "subscriptions therefor (the shares of stock) shall be made payable in such periodical installments, and at such times as shall be determined by the by-laws, but no periodical payment to be made exceeding two dollars on each share."

This is all there is in the law relating to the payment or receipt of money, and I think this hardly sufficient to permit the issuing of paid up capital stock, and paying interest or dividends thereon, as has been done by some associations.

The prepaid capital stock feature is clearly in the interest of the capitalists, for in the law, "periodical payments" means at stated times; and the limit was made two dollars, so that the poor man would be placed on an equal footing with the rich.

The Legislature certainly never intended that paid up shares would be issued to capitalists, else they would not have exempted them from taxation.

Then there is a question as to whether the payment of ten per cent. interest, payable monthly by the borrower is not excessive interest, and contrary to law.

It is certainly contrary to the best interests of the borrower, no less so, because the monthly amount is so small. It is paid twelve times a year and therefore compounded, and in eight or ten years would amount to a large sum.

The selling of shares of stock, and the establishing of local board in towns and villages throughout the State and country, is another feature that will, in my opinion create trouble, unless legislative action is taken. Experience teaches, that neither an individual nor a company can make loans and conduct its business through an agent or local board all over the country, and not be weakened, if not ruined.

Aside from the question of legality, many associations adopt some features that are questionable, or certainly not for the public good, but rather for the benefit of the officers and solicitors.

I refer especially to the large expense fund, and the voting of proxies. The entrance fee in many of these associations is one dollar per share, which with transfer fees, attorney's fees, and other expenses paid by the borrower, together with ten cents per share per month of the monthly installments upon stock, constitutes an expense fund and is devoted to the payment of operating expenses.

An association having one hundred thousand shares subscribed, would have a fund of one hundred thousand dollars, to this add the monthly installment of ten cents a share which would be $10,000 per month or one hundred and twenty thousand dollars per year, together with transfer fees, attorney's fees, fines, etc., amounting to at least $10,000 more, we have a total of $230,000, $130,000 of which is paid annually month by month.

This is an unusually large amount to take from the shareholders and devote to the expense fund of a mutual benefit association, and cannot but open wide the door for official corruption.

Some think the taking of one hundred thousand shares as an example is hardly fair, as no association has that amount subscribed.

Perhaps not yet, but one hundred thousand shares is only ten million dollars and the advertised capital of one association is $50,000,000.

If one hundred thousand shares is too large an amount to use as an example for computing an expense fund, fifty million dollars is certainly too large an amount to use as an advertised capital.

The fact is, these associations have NO CAPITAL. The word "capital" is misleading and should not be used.

The shares of stock are simply certificates of membership. Nothing is paid in on these certificates at the time of issue, except the first weekly or monthly payment.

The voting of proxies is another feature adopted by some associations, which should be regulated by law.

When a person subscribes for shares of stock, he finds a clause in the application blank which gives to the secretary a perpetual power of attorney, to vote in his absence, at any meeting of the association. This practically gives the secretary, the control of the association, if a majority of the members reside at a distance from the home office.

Under this rule, the secretary if he feels disposed, could call a meeting of the association, elect directors favorable to himself, and the directors elected by him could amend the by-laws in his and their interest, increase

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