USA > California > History of California, Volume V > Part 28
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amount he added fifty per cent and arranged for all to open on the same day. The liabilities of Ralston to the Bank of California, and to outside banks, and to firms and individuals on bank stock, Spring Valley Water stock, and the thousand and one other ventures, were so great, and so complex and interwoven were the interests that it was impossible to move on one part without moving on the whole if the bank was to be resurrected. It was an extraordinary scheme, but the large sized brain of the syndicate manager was equal to it, and all of the banks, including the Bank of California, resumed payment.
On the day of Ralston's death (August 27, 1875) he had executed a deed to Sharon of all his real and per- sonal property wheresoever situated and under this conveyance Sharon proceeded to settle up Ralston's indebtedness and recover the property pledged to secure the same. The claim of the bank, $4,655,973.36, he settled for $1,500,000. To some creditors he gave fifty cents on the dollar and to some more, settling with each as best he could. There were certain irregu- larities connected with some of the transactions and Sharon was not slow to avail himself of the opportunity these offered in effecting settlement.
At the request of the Chartered Bank of India, China, and Japan, which offered to protect the credits of the Bank of California abroad, D. O. Mills took the presi- dency of the rehabilitated bank for two years. At the end of that period he resigned and nominated William Alvord for the position, and transferring all his stock to his private secretary, in certificates of one hundred shares each, he instructed him to sell the stock as the
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market would take it, and to see that it was transferred on the books of the bank. Mills was done with the bank forever. From the date of its reopening the Bank of California has gone steadily ahead. When all the old affairs were settled up, the capital account was in pretty bad shape. It was reduced from $5,000,000 to $3,000,000, but in a few years the balance was made good by earnings. The prestige of its name, the ro- mance of its history and the hold it had on the imagina- tion of the people, the character of the men in control, the large amount of its syndicate guaranty as well as the strength and standing of its guarantors, all told in its favor, and proved the perfect success of the rehabili- tation-a success more wonderful than was dreamed of by the managers-for, from being the great bank of the state, the Bank of California has become one of the great banks of the nation. Several of the banks involved in the transactions with Ralston were obliged later to retire from business.
In Los Angeles the banking house of Hellman, Temple, and Company was formed in 1868, and out of it was organized, in 1871, the Farmers and Merchants Bank which in 1903, obtained a national charter. On the organization of the Farmers and Merchants Bank, the banking house of Temple and Workman was formed. Francis Pliney Fisk Temple was a Massa- chusetts man who came on the American bark Tasso from Boston on a trading voyage in 1841. He was then twenty years old. Four years later he married a daughter of William Workman, an Englishman, who came from New Mexico, also in 1841, in command of an immigrant party. The two continued the banking
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business until 1875 when they made a bad failure. The Los Angeles County Bank was established in 1874 and continued until 1894 when it retired, paying its deposi- tors in full. In 1876 the Commercial Bank was organ- ized and in 1880 was granted a national charter as the First National Bank of Los Angeles. In 1883 was organized the Los Angeles National Bank, now ab- sorbed by the First National. On September 12, 1912, Los Angeles had 9 national banks with assets of $80,037,000 and 10 state commercial banks with assets of 17,329,000
Total $97,366,000 Some of the state banks are savings banks that do a commercial business. The commercial assets alone are taken.
In Dutch Flat, W. and P. Nicholls established a banking house in 1860. The house is still in existence. Decker, Jewett, and Company had a bank in Marysville in 1858 which they incorporated in 1888 under the same name, and the bank is still doing business. In Napa, James H. Goodman opened a private bank in 1858, and in Placerville, A. Mierson had a bank in 1861. Both of these have been incorporated and both are still in business.
Among the private bankers in business in San Francisco in the sixties were Belloc Freres, Donohoe, Kelly, and Company, Daniel Meyer, Lazard Freres, Parrott and Company, and J. Seligman and Company. Belloc Freres failed in 1891. Donohoe, Kelly, and Com- pany have been accounted for; Daniel Meyer is still doing business though the venerable head of the house died a year or so ago .* Lazard Freres turned their dry
*Since writing the above this bank has retired from business.
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goods house into a bank and in 1884 it became the Lon- don, Paris, and American Bank, an English corporation. The dry goods house of J. Seligman and Company also became a banking house and in 1873 was incorporated as the Anglo California Bank, an English corporation. These two banks united in 1909 under a national charter as the Anglo and London-Paris National. Parrott and Company became merged in the London and San Fran- cisco Bank in 1871 and this bank was later absorbed by the Bank of California. Thus have the private banks, which constituted the original California system, all but disappeared from San Francisco.
When congress adopted the national bank system as a war measure and to float the government loans, California did not respond. All the traditions of the state were against the establishment of banks of issue and the people refused to recede from their stand for hard money, but when the act was amended to author- ize the issue of $45,000,000 in gold notes, redeemable in gold coin by the issuing bank upon demand, the First National Gold Bank of San Francisco was organ- ized in November, 1870, and opened for business in January, 1871. In 1872 the National Gold Bank and Trust Company of San Francisco was formed, a con- version of the California Trust Company, organized in 1867. Two gold banks were organized in Oakland, one in Sacramento, one in Stockton, two in Santa Barbara, and one each in Petaluma and San José, ten banks, all issuing gold notes. After the resumption of specie payments in 1879, and the establishment of parity between all government paper and gold coin, the gold banks retired their gold charters but the
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number of national banks increased very slowly. The people clung to their gold currency and refused to . accept the paper money. On March 10, 1885, there were but fifteen national banks in California, with total resources of $12,956,800. Of the fifteen, ten were in the northern and five in the southern section of the state. With the rapid growth of the south during the next fifteen years came the demand from the new element for the national system to which they had been accustomed in the eastern states, and by September, 1902, there were in California:
South of the Tehachipi, 29 nationals, with resources of $30,213,989 North of the Tehachipi, 20 nationals, with resources of 62,769,504 A total of 49 nationals, with resources of $92,983,493
After this the progress of the national banks in Cali- fornia was more rapid. While gold coin remains the circulating medium and all contracts are made therein the people seemed to realize the fact that there was greater protection for them in the federal supervision of the banks than under the state system, and during 1909 and 1910, the last of the great state banks in San Francisco were granted national charters. The reports to the comptroller of the currency under date date of September 4, 1912, show:
San Francisco, 9 banks, resources $240,847,989
Los Angeles,
9 banks, resources 80,037, 174
Other sections of the state, 213 banks, resources 179,581,562
Total 231 banks, resources $500,466,725
Add commercial deposits of state banks, 129,115,954
$629,582,679
Deduct for duplicated bank deposits 60,000,000
and we have banking resources of the state $569,582,679
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The report of the comptroller of the currency for 1913 shows that in the matter of savings deposits California is the fourth state in the union, the banks having $453,500,000 savings deposits to the credit of her people.
The great fortunes made in the Comstock mines of Virginia City were represented in the establishment of the Nevada Bank of San Francisco which opened for business October 2, 1875, under the presidency of Louis McLane, who had come to California in 1846 as passed midshipman on the frigate Savannah and was present at the raising of the flag at Monterey. He served as lieutenant of Fauntleroy's dragoons, and was captain in the California battalion, having charge of the artillery. Later he had the rank of major and was one of Frémont's commissioners in the treaty of Cahuenga. In 1850 he resigned from the navy and returned to California. He was for many years manager of Wells, Fargo, and Company's express, was one of the first directors of the Bank of California, and from 1875 to 1882, president of the Nevada Bank. The owners of the Nevada Bank were the so-called "bonanza firm" of Flood, O'Brien, Mackay, and Fair. The bank opened with a paid up capital of $5,000,000 which was increased about a year later to $10,000,000 and afterwards reduced to $3,000,000. In 1887 Flood and Mackay engaged in an attempt to corner the world's wheat supply and the deal, carried on through the Nevada Bank, was so disastrous in its results that, but for the interposition of James G. Fair, who put a large amount of cash into the bank, it would have been obliged to close its doors. Fair, who had withdrawn
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some time before from the bank and from the "bonanza firm," took the presidency of the bank until it re- organized with new capital and new people who brought it into the front rank. In 1897 the bank obtained a national charter and in 1905 it absorbed the Bank of Wells, Fargo, and Company. It is now the second largest commercial bank in California, under the name of the Wells Fargo Nevada National Bank.
The failures of 1875 demonstrated the necessity of publicity regarding the new system of corporate bank- ing and the legislature of 1876 passed a law requiring all corporations and all persons doing a banking business in the state to publish on the first of January and July of each year statements of condition. The passage of the law was opposed by many of the banks and the statements were made in such a manner as to disclose as little of the condition of the banks as possible. The private bankers refused to comply with the law and the foreign agencies treated it with contempt. As there was no penalty for non-compliance the law was a farce. There was no supervision and the banks could publish what they pleased. In 1878 the bank commission act was passed under which a board of three bank commissioners was appointed with power to call for statements from the banks, make examinations of their affairs, regulate the conduct of their business, and to close insolvent concerns. The commissioners were appointed in the spring of 1878 and at once began their work. The first bank examined, the Masonic Savings and Loan Bank of San Francisco, was found to be insolvent and was closed and put into liquidation. The second passed safely through the ordeal, but the
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third, fourth, and fifth, viz: the Farmers and Merchants Bank of Savings, the French Savings and Loan Society, and the Odd Fellows Savings Bank, all of San Francisco, were found deficient and put into liquidation. Among the country banks the alarm caused by the action of the commissioners was such that a number of them closed their doors and went into voluntary liquidation. Having by its initial action justified its existence the bank commission rested on its laurels and the board soon became a refuge for broken down politicians, ap- pointed without regard to efficiency. Most of the bankers resented what they considered an unwarranted prying into their affairs and continued to conduct their business according to their own fancies. The "examinations" of the bank commissioners were no more farcical than were the published statements of the banks, so far as showing the true condition of the banks was concerned. It is to the credit of the bankers of California that there have been so few betrayals of trust among them. A disastrous failure was that of the California Safe Deposit and Trust Company which closed its doors October 30, 1907, with liabilities to depositors amounting to $9,072,741 on which has been paid to date one dividend of ten per cent. This bank, incorporated in 1882, had built up a great business by personal and persistent effort and by the payment of four per cent on savings accounts, two per cent on accounts subject to check, and from two and one-half to four per cent on certificates of deposit according to the period of time for which they were issued.
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In March, 1903, in order to get rid of some objection- able bank commissioners appointed by the former governor, the legislature repealed the act creating the board of bank commissioners. In the interim before the passage of a new law seventy-one charters were obtained for banking privileges, most of them for speculative purposes. The provisions of the new act created a board of four commissioners and fixed the minimum amount of capital required at $25,000 for small towns and up to $200,000 for towns of twenty-five thousand or more inhabitants. The court having ruled that provision unconstitutional the legislature of 1907 adopted a law requiring a capital equal to ten per cent of the deposits of a bank until a maximum capital of $1,000,000 was reached, but permitting no bank to be organized with a capital of less than $25,000. This was where the ad interim charters became valuable and many were sold from $1,000 to $2,500 each.
The indignation caused by the revelations concerning the California Safe Deposit and Trust Company were such that there was a general demand for more stringent regulations for banks and a better system of super- vision. The legislature appointed a joint committee of the senate and assembly to investigate the cause of bank failures and suggest a remedy and the Common- wealth Club of California took up the matter and after several reports and debates following careful investi- gation by its banking section brought in a report submitting a number of changes in the law. Several meetings were held with the legislative committee and a bill was prepared and submitted to the legislature. The result of this movement was the bank act of 1909,
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which provided for a superintendent of banks, in place of four commissioners of equal power; provided for a cash reserve; a limit to loans; authorized department banking by banks of sufficiently large capital; limited the amount of bonds a bank could hold; prohibited loans to officers and employees and to directors without consent of two-thirds of the other directors and of the superintendent of banks; prohibited the purchase of shares of other corporations, and limited loans on stock of other banks; provided for examinations by directors; for reports to superintendent, and for publication of such statements as the superintendent should direct, and many other necessary requirements.
In 1876 the San Francisco Clearing House Association was organized with fifteen members. They were the Bank of California, the Bank of British Columbia, the Bank of British North America, the Bank of San Francisco, B. Davidson and Company, Belloc Freres, Donohoe, Kelly, and Company, the First National Gold Bank, Hickox and Spear, London and San Francisco Bank, Merchants Exchange Bank, Sather and Com- pany, Swiss-American Bank, Anglo-California Bank, and Wells, Fargo, and Company. In 1877 were ad- mitted the Nevada Bank, Lazard Freres, Pacific Bank, National Gold Bank and Trust Company, and Tallant and Company-in all twenty banks. The Swiss- American Bank mentioned above was not the present bank of that name but an earlier bank incorporated in Geneva, Switzerland, in 1873, with $2,000,000 capital. It retired from business in 1878. Other banks were admitted from time to time but the asso- ciation has at no time had more than twenty members,
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the number varying from fifteen to twenty. In 1910 the assistant treasurer of the United States became a member. In 1887 the Los Angeles Clearing House Association was organized, in 1906 the Oakland and San José Clearing Houses and in 1907 the Sacramento, Stockton, Fresno, and San Diego Associations were formed, and in 1910 that of Pasadena.
The panic of 1893 caused the suspension of four national banks in California and a number of state banks and private bankers. Three of the four nationals resumed business and are today strong banks. A number of state and private banks were obliged to close their doors, but as there was no notice taken of their action by the bank commissions, they waited for the clouds to roll by and then reopened, as if nothing had happened, only to succumb later under the with- drawal of public confidence. The panic of 1907 caused the failure of twenty state banks including the Cali- fornia Safe Deposit and Trust Company and its Franches, and for the first time in its history the San brancisco Clearing House Association resorted to the issue of clearing house certificates in settlement of balances to the amount of $13,040,000. The clearing houses of San Francisco and Los Angeles have each a special bank examiner to examine all banks belonging to the clearing house and all banks clearing through members.
The fire which swept San Francisco in April, 1906, put its hot seal on every bank vault in the city. Warned by the bankers of Baltimore that it would be unsafe to open the vaults under three weeks from the date of the fire, a meeting of the San Francisco Clearing
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House Association was called for April 23d to devise ways and means to relieve the distressed people who had lost homes, business, and all, and had not money to buy the commonest necessities of life. For a few days following the fire all stores of provisions were held by the military, but in a week the military grip was loosened, and those who had money could buy what little there was to sell. At this first meeting of the clearing house a measure was adopted for the relief of the depositors of the banks, which, when worked out, provided for the establishment of a union bank at the United States Mint, which had escaped the fire, to which could be transferred from New York through the subtreasury such sums as might be re- quired. Each bank was to look after its own depositors, and was permitted to advance to them such sums as might be necessary up to a total of $500 in each case.
The banks transferred funds from New York and the manager of the Clearing House Bank, as it was called, opened a set of books and credited each of the seventeen members with its deposit. The officers of each bank signed across the face of the depositor's check a request to the Clearing House Bank to pay and the checks so endorsed were charged to the bank. The limitation of amount was because the books of most of the banks were in the hot vaults. The clearing house met daily, and soon the measure of relief was expanded to meet pressing business necessities. At last, May 23d was set for reopening for business without limit and the banks prepared to leave their temporary quarters in various residences and reestablish themselves in their old locations, erecting temporary structures within
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the walls and upon the sites of their former buildings. Bank vaults were opened, and in most cases their contents were found uninjured. After being closed down for more than a month business was resumed without the slightest disturbance of any kind, and thirty-five days' clearings went through in one day.
There exists a radical difference in the manner in which business is conducted in California and the Pacific states from that which obtains in the east. Eastern merchants close their accounts by notes which they endorse and deposit for credit with their bankers. In California most business is done on open account and the borrower at the bank has little trade or com- mercial paper to offer for discount but gives his note for such accommodation as he requires. Both systems have advantages and drawbacks. The theory of the trade paper is a sound one, where each note the bank discounts represents a transfer of value, and the bank holds each party to the transaction; but in a great many cases the paper represents no trade at all, being merely accommodation, while the most of the great houses issue immense quantities of so-called commercial paper, which is accommodation paper, pure and simple, and sell it all over the United States. These notes are drawn in round sums, without interest, and the rate of discount is regulated by the credit of the house of issue, while the purchasing bank has no means of knowing, even approximately, the amount of paper afloat. The California merchant has only his book accounts and he borrows direct on his own personal credit. The banker in California knows his borrower and all about him-his resources, the manner in which
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he conducts his business, and the amount of money he owes. Except with very large concerns the borrowing is usually all at one bank, a regular line of credit being generally given. The bad feature of this being, where the notes given are payable on demand, and the credit is once established, the paper is liable to lie in the bank, year in and year out. It has no maturity, no time is fixed for payment, and no preparation for payment is made. The bank's money becomes part of the capital invested in the business, and when pay- ment is called for it is usually at a time when money is tight and the borrower frequently cannot pay without great sacrifice-perhaps the closing out of his business. For the credit of the Californian it may be said that this contingency has seldom arisen, and from a some- what extended observation of both systems I am inclined to think the California system is as good as the eastern. From the time of the establishment of corporate banking in California down to 1893 the practice of permitting bank customers to overdraw their accounts prevailed, inaugurated, it is said, by the branch banks of English corporations. This objectionable method of lending money was pronounced irregular by a clearing house resolution in 1893 and has about disappeared.
In 1849 the prevailing rate for money was ten per cent a month. By 1858 money was loaned on mortgage at two per cent a month, and for the next ten years the rate varied from one and a quarter to two per cent per month. It was not until 1871 that mortgage loans were made at an annual rate, and from that date until 1877 the rate was from ten to twelve per cent per
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annum. In 1879 the rate was nine per cent and by 1883 it had fallen to seven. Thereafter the rate became six per cent, the mortgagee paying the tax on the mortgage since 1880. The ruling commercial rate for money has been from five to six per cent during the last thirty years. The foregoing rates are for San Francisco, interior rates being considerably higher. The payment of mortgage tax now being optional with lender or borrower, the mortgage rate is five and one-half to six per cent when the borrower pays the tax.
That time has justified the wisdom of the founders of the commonwealth in their action regarding the circulating medium is proved by the prosperity of the state and the credit of its financial institutions.
fourty Eldredge
ART AND ARCHITECTURE IN CALIFORNIA
I N attempting the wide retrospective survey of the graphic and monumental arts in California and being confronted by the incoherency and vague- ness of the whole American field-the one thing that palpably emerges is just the question: "What then, after all, is one looking for, listening for?"
The historian can answer that question directly: "For some logical and consecutive expression of the American or Californian spirit, speaking through beauty in the distinctive speech of America or of California." To detect the timorous lisp of that spirit, any faltering intimation of what it had or has to say to the future, must be the central preoccupation of the historian; and he perceives (in the face of all the poverty and confu- sion), his task to be that of the sympathetic apologist, who is, ever so sympathetically, to take as the symbol this shining thread of the spirit and to follow it, disen- tangle it, knot the ends together where it has been broken-making it the clue in the maze and finally being content to say, that if the spirit has not always manifested itself in works of beauty, yet the humblest work of art reveals the maker and something of the social temper of his time.
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