state, on what terms the same may be deposited, and the general situation and circumstances of such deposite, with leave to report by bill or otherwise: and with power to send for persons and papers; also, Resolved, That they inquire into the propriety of requiring interest and security for such funds, and also to inquire what kind of funds have been paid out on the public works: Report, That in pursuance of the foregoing resolutions, the y proceeded to the State Bank of Michigan, on the 4th March last, and commenced the examination required in the resolutions. The committee would state, that upon their request, all the books of the institution were laid before them, or statements were made and sworn to, from them, in the most prompt manner, and that every facility for a thorough investigation, was afforded by the officers of the institution. The result of their examination they will briefly detail, which is not as satisfactory as they could wish, or the state desire, The amount due the state, on the 20th of March, was as follows: The treasurer of the state, do of contingent fund, internal improvement fund, $1,396 39 1,224 66 do 358,813 14 do 1,891 73 The "general situation and circumstances" of the deposite, and the liabilities of the institution are, Stock paid, $220,000 00 Leaving a balance due, over and above all assets, including the entire means, available and unavailable, of the institution, of $21,610 96. The causes of the difference do not appear from the balance sheet presented to the committee, nor can the commit. tee assign any reasons for the discrepancy. They can only say that the above statement has been submitted to the officers of the institution, and no objection was made to it by them. The immediate liabilities of the institution are: Deposites of the state, Due to banks, Deposites, Circulation, Drafts, Immediate available resources to meet liabilities: Due from other banks, Specie, State drafts, State stock, *Eastern funds, Items in transitu $504,984 10 14,218 00 20,000 00 80,000 00 188,000 00 $807,202 10 67,403 13 6,597 78 50,000 00 22,675 00 156,373 62 9,783 00 Drafts and cash from T. Tredwell, 40,000 00 Leaving a balance unprovided for, of $352,832 53 $454,369 57 The committee would state in reference to the solvency of the institution, and the safety of the state debt, that it depends wholly upon the character of their discounted paper, the debt due from other banks, and over drafts. But they are constrained to say, it is not of that character which they could wish, nor does it show *This item is in New York, to pay drafts. that regard for the interests of the state which should be exhibited by an institution made by law the sole depository of its revenue, and from which the state had a right to demand and expect a course of unbending integrity, without fear, favor or affection. The committee consider it a part of their duty to place before the Senate their opinion of the character of the whole debt, as it may have the beneficial effect of serving, in a measure, as a guide to the judgment of the legislature, in reference to any settlement or arrangement to be entered into with the institution. The whole amount due the institution, is $1,077,018 40 And unavailable, $59,288 69 155,600 26 67,403 13 185,105 89 10,000 00 Real estate security, 11,545 52 Specie, 6,597 78 Making a deficiency in available assets to pay its liabilities, which are beyond doubt or risk, of about $425,000 00. This unnecessary and unlooked for deficiency in available means, to meet its liabilities, can only be attributed to an indiscriminate and heedless manner of transacting the business of the institution. The institution has received from the state, in drafts on New York and bills of eastern banks, the sum of $900,000, which has yielded a profit, as stated by the acting cashier of the bank, of They have had the use of a sum of money equal to $500,000, at an interest of 7 per cent, Making a total gain from the state funds of $36,000 35,000 $71,000 By all fair and legitimate banking operations, the institution ought now to be in good credit, able to redeem its present liabili ties, and discharge that paramount duty which it owes to the state, of protecting it against loss and sustaining its credit. The cause of the suspension of the bank was four fold, and is easily deducible from the preceding statements of your commit tee. 1st. The enlarging of their discounted paper, and upon the state funds alone. 2d. The allowing over drafts, without limits, by individuals, without security, and in many instances without responsibility; and to public contractors. 3d. Loans and over drafts to public officers, in violation of law, and without any appropriation being made; thereby indirectly assisting public officers to evade the law, and to realize funds, where the legislature had thought it fit to restrict them. 4th. The receiving of safety fund notes, and the large credits given to safety fund banks, in some instances amounting to $40,000. The three last causes of suspension amounted the enormous sum of $417,186 05, being more than three-fourths of the whole amount of the state debt. It is with deep regret that the committee believe it to be their duty to say, that most of the blame attaches to the cashier of the institution, who, it appears, has the sole control of the bank, and has disposed of its funds without reference to the best interests of the state. It has been satisfactorily shown to your committee, that a portion of the funds exhibited as belonging to the state, and being worthless or nearly so, were bought in by the cashier of the institution at a discount of 20 per cent, and then placed among the funds of the state said to be on special deposite; the bills being identified by reference to the affidavit marked (A,) and the accompanying letter marked (B,) as the same bills therein described. It is but an act of justice to say, that the cashier affirms that the bills so bought were returned to the banks which issued them. But the committee can hardly conceive why the state should again receive the funds at par after they had once been bought in at 20 per cent discount. It is affirmed by the officers of the institution, that about thirty thousand dollars of various kinds of the safety fund notes of this state are now on special deposite; but your committee finds upon the books of the bank, only about $14,365 78, marked as special, and belonging to the different funds of the state, as follows: General state fund. Bank fund. School fund. Sinking fund. In reference to the school fund, your committee called on Mr. Pierce, Superintendent of Public Instruction, who denies that any special deposites were ever made by him, or by his authority; and has furnished your committee with his affidavit, marked (C,) together with a statement showing in part what funds were deposited in behalf of the school fund, marked (D.) both of which are submitted for the consideration of the Senate. There can be no doubt of the propriety of requiring security of all persons or corporations, who have in charge the money of the state. Experience has shown that however exact and honest they may be in regard to individual transactions, yet, when the state is concerned as a party to the transaction, it presents no obstacle to the general abuse of confidence reposed in the one or the other. In conclusion, the committee would respectfully urge a liberal policy in settling with the institution, so far as is consistent with the honor and integrity of the state towards its creditors. A portion of the stockholders have filed a bond for the security of the state, a copy of which is annexed. The stock of the institution, or a majority of it, as the committee are informed, is owned by eastern capitalists, who have had no knowledde of the transactions of the institution, and so far as appears by the books, are not in any manner indebted to the same. One of the stockholders of the institution, owning nearly one thousand shares, has lately been before a portion of the committee, and has expressed the opinion, that the state can and will be saved harmless, if that liberal policy is adopted. The committee believe it to be impossible to coerce the payment of the debts due to the institution, without creating great pecuniary distress to the inhabitants of this state, who are principally its debtors. The committee are of the decided opinion that the safety fund notes on hand in the State Bank, said to belong to the state, cannot and ought not, by any legal, equitable, or fair claim, to be so allowed. The committee would also recommend that so far as any advances made to public officers are just and proper, although made in violation of law, if the state has received the benefit of the same, the same be allowed in a settlement with the institution. All of which is respectfully submitted. O. HAWKINS, S. V. R. TROWBRIDGE, Senate Chamber, April 16, 1839. |