[Volume XXVII
THE CHICAGO BANKER
14
Editorial Comment
minimum unit of capitalization in the organization of state banks. This limit has been raised from $5,000 to $10,000 under the new law. To a certain extent the new statute is unique in requiring many of the banks of $5,000 capital to increase their capital, the condition being that whenever the deposits of a bank exceed ten times the capital, then the capitalization shall be raised to $10,000. The larger banks are affected by these conditions by limiting the maximum of deposits legally acceptable to a sum equal to fifteen times their capital stock. This will affect banks in the state which have a capital of only $25,000, but are carrying deposits of nearly a million dollars.
Another feature of the South Dakota law is the elimination of receivers for embarrassed banks. In this it follows New York State. The public examiner comes into control under such circumstances and is required to wind up the business of the bank with no more than the ordinary charge. This is an added protection to depositors and a wise one. Some of the most disgraceful exhibitions of irresponsible banking have been seen in South Dakota in connection with building and loan financing, and it is to be hoped that the revision of banking laws and the enlargement of examining powers will afford more protection to the trustful investor in the future than in the past. One of the worst things a state can do for itself is to allow its financial institutions to disregard obligations assumed through accepting outside capital.
Really, the future greatness of Chicago, as a banking and financial center could be advanced a decade by a new Illinois law, such as they have in Minnesota, Wisconsin, Indiana, Michigan, South Dakota, New York, California or Missouri. The good points of all these new laws should be put into one. The insurgent doctrine of guaranty and postal banks could be sidetracked in this state by intelligent broad-gauge action at Decatur. Has Illinois a financial Moses of the needed kind to pick up the banner and tell the boys to “come on?”
The Decatur Convention
The Illinois convention at Decatur is an important event to the banking interests of the state. There are important amendments to the constitution to come up, to be pushed by those who think the association not quite modern in some of its customs. Possibly a movement may be set on foot to give Illinois a much needed new banking law. It would be highly appropriate also, for the convention to ask recognition for the state associations at the big A. B. A. conventions. State secretaries should be made, ex officio, delegates-at-large with the full privileges of the floor and platform. They are the most vital force in the banking organization field to-day.
Their association should be one of the sections. Mr. Farnsworth, the general secretary, is their secretary and W. F. Keyser is their
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curity. Given these latter two and London and Paris money and credit will readily find their way to Chicago. This is the fourth city in size in the world and its steadily broadening banking power is linked with the wealth of the middle west. The money is here and merely because an attempt has not been made heretofore to establish a private banking firm is no argument that one should not be organized.
There is heard occasionally in La Salle Street the suggestion that J. Ogden Armour and associates might successfully found a house that would not only not interfere with the operations of local banks but would be on the other hand an aid to them. Certainly the banks having a large trust department understand the importance of a private banking institution. Given the underwriting to such a concern, the banks themselves would profit through participation in commissions and the profits from the distribution of the securities. The field for the large private bank is here and all that is lacking is the financier or financiers who can see in such an undertaking both an honorable and highly remunerative venture.
A Revision of the Banking Law
It is alleged that, under cover, there is a strong-sentiment in Illinois favoring the adoption by this great state of an up-to-date banking law. Mr. Appel in his able talk and brilliant interview, during convention week, in Chicago, helped matters considerably. Such able papers as the Wall Street Journal are doing a great public service in advocating “Better Banking Laws.” On this subject the Journal says:
One of the after effects of financial panic and depression is the revision of laws relating to financial institutions. Among these New York was the first to inaugurate revision of statutes relating to banks and trust companies, after making thorough inquiry at the hands of men who understood conditions and knew what was best for the financial community as well as for the larger function of New York in its relation to the business of the rest of the country. At the other side of the continent California has adopted a revised set of banking laws, most of which will contribute to the strength and security of all concerned. On July ist, South Dakota puts into force a new set of laws with several features deserving of attention.
Among these is the increase of the
Big Private Banking House for Chicago
(Reprinted from Chicago Tribune by Request.)
Continued development of banking power in Chicago and the middle west is emphasizing the fact that Chicago is without a private banking firm of large resources and financial prestige. That there should be such a firm, that there is a field for one, is acknowledged by the bankers familiar with that line of banking activity. Its usefulness and power would grow with the fast development of money resources of Chicago and the territory which looks to it as the monetary center of the west. The time has certainly come when under proper auspices the flotation of bond issues can be successfully undertaken here. The only argument heard against this amounts to the assertion that it has not hitherto been done. But because such operations have never been undertaken on a considerable scale by the regular banks does not afford sufficient reason why a private banking firm should not attract underwritings and consequently additional capital to Chicago.
Here and there it may be said that New York has such a distinctive advantage in private banking matters that Chicago cannot hope to successfully compete with the east. But those who believe in original underwritings being undertaken here do not contend that the business must be taken from New York. The demands of business are large and varied. The field is a growing one, and the wealth tributary to Chicago is sufficient to render feasible and make profitable underwriting on a considerably scale. Already some issues have been openly floated, while one big Chicago trust company furnishes the money with which certain influential bond houses in the east purchase blocks of bonds to the extent of $10,000,000 and more.
This is sufficient evidence of what jt is possible to do, even without a house organized for the purpose mentioned. A private banking firm having behind it large means and a good name would command the support of Chicago banks just as do eastern houses with established reputations. Formerly the firm of N. W. Harris & Co., in its bond operations, was the most important institution of its kind west of New York. The firm has now, however, been converted into a bank and does not stand in the same relation to corporation issues as do such firms as Kuhn, Loeb & Co., J. P. Morgan & Co., and other concerns that might be mentioned.
It has been said that inasmuch as New York houses have European connections they possess greatly superior advantages over a Chicago institution which might undertake to handle issues at first hand in its own name. This is only true so long as Chicago has no private banking house. New York had to make a beginning and so will Chicago. So far as European connections are concerned credit is mobile and will extend to Chicago as it did from London to New York. It is but a question of resources and liquid se-