State banking law, believing that it should be given a thorough test before any material changes are attempted.

The events of the past two years, however, have suggested the propriety of one amendment that will, in my opinion be of permanent benefit, and that is, the restriction of loans to directors and officers.

It would not be prudent to prohibit a director from borrowing from his bank. Such a course would often deprive a bank of its best and most desirable loans, and have a tendency to prevent active business men from becoming directors.

It is a well known fact that in the majority of cases, men engaged in active business make the most discreet, prudent and careful directors. They are in touch with the people and well informed as to the financial standing and business habits of the borrower, which is the leading characteristic of a good banker.

There is a great difference between a money loaner and a banker. The one, "Shylock" like, is ever selfishly seeking the "pound of flesh," which degrades and impoverishes a community, while the other encourages business, promotes philanthropy, and benefits humanity.

That bank officers and directors may be, in a measure, debarred from using the bank's money, to the exclusion of other patrons, I would suggest that section 52 of the banking law be amended by adding the words, "but no officer or director of a bank shall be allowed to borrow the funds of a bank, of which he is an officer or director, except by a vote of a majority of the members of the board of directors of said bank, duly recorded in the record book of said association.

It is well known, that insecure loans are often made to a director by the bank officer under pressure, that would not be made if left to a vote of a majority of the directors. And I am equally certain that loans to officers would, in many cases, be better secured, if the matter was decided by a majority vote of the board.

I would also suggest that the Legislature make some provision for the extension of bank charters.

The charters of several banks in the State will within the next few years terminate by limitation, and the banking law should be so amended that these banks, if they so desire, may extend their charters, instead of re-organizing, as they are compelled to do at the present time.

PRIVATE BANKS.

I have repeatedly called your attention and the attention of the legisla ture to those private bankers, who conduct their business under a corporate name, instead of their own individual or firm name.

The most successful private bankers in the State are those who use their own names in advertising their business, and they, with the officers of incorporated banks, have repeatedly urged that a law be enacted that will prohibit private bankers using the title "exchange bank," "city bank," "farmers' bank," and other names which carry the idea of incorporation. It is urged by many, that section 3133 of chapter 85, Howell's annotated statutes is sufficient for the case, but a careful reading of the section will convince any one versed in law, that it is incomplete, insufficient and without proper provision for its enforcement. It permits the using of a corporate name, if the individual or firm name is used in connection there

with, which in many cases is in such small type, as compared with the name of the bank, that the ordinary observer fails to see the names of the

owners.

Since our present banking law went into effect, 28 private banks have incorporated under its provisions to the satisfaction of those banking corporations in reserve cities with whom their reserve is kept.

Nearly every private banker that has incorporated under the State law, has increased his deposits one-half, and in some instances doubled the business within the year.

It is well understood by depositors in private banks, 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 can be thus summarily closed out without great inconvenience, if not loss.

This fact, no doubt, more than any other, has induced so many private bankers to incorporate under the State law during the past six years, both for their own defense, and the protection of their depositors.

BUILDING AND LOAN ASSOCIATIONS.

Inasmuch as the people of Michigan have placed the business of banking, insurance and railroads, under State supervision, with a proper reserve for their business risks and liabilities, and even provided for the health and morals of the people through the health board, and board of correction and charities, it seems strange that the request of the people should be disregarded when they ask that building and loan associations, savings and loan companies, and other like associations be placed under State supervision.

We have a game warden to see that our game laws are obeyed, and an oil inspector to see that we conform to the requirements of the statute in regard to illuminating oil, but for the protection of laboring men and others who, week after week, month after month, and year after year deposit their savings, with a promise of large gains at some future time, we have no supervision; no one to see that the law, under which they are operating is obeyed.

If the money deposited could be withdrawn without loss, at the will of the depositor, there would even then exist a necessity for supervision. But when the depositor has to wait from seven to ten years before he can receive back his savings, the necessity for a judicious supervision is ten fold more necessary as is unmistakably apparent to all.

With many of the national associations, after the first deposit is made, the depositor is in the power of the association. It is true he can withdraw at any time, but it is equally true he cannot get back all it cost him to become a member. The depositor must remain, or make a large sacrifice for the benefit of those members who do remain. If he would receive the full benefit of his membership, he must continue to pay, no matter what anxiety he may have as regards the management of the association, or the financial excitement in the country.

I am not criticising the system, the methods, nor impugning the honesty of officers of these associations; I am simply calling your attention and the attention of the legislature to the facts in the case, to show

We are willing to concede that the officers of these associations are honest, but not more so than officers of state and national banks. Then, why should the depositors in these associations have less protection than the depositors in our banks?

Hardly a week passes that I do not have an inquiry from members in regard to the financial standing of some building and loan association or savings and loan company, both within and outside the State, and I speak for these depositors and not for myself, when I ask that they be placed under State supervision.

RECEIPTS AND EXPENSES.

As required by section 40 of the State banking law, each bank has paid into the State treasury through this department, the one-hundredth part of one per cent of the gross assets of the bank, as shown by its books at the time the examination was made.

From this source the receipts for the year have been $7,769.24.

For list of banks examined, and the amount paid by each, see succeed

ing pages.

The expenses of this department for the year ending December 31, were $9,342.02, viz.:

In closing my report, I desire to acknowledge the faithful and efficient services of Mr. E. A. Sunderlin, deputy, and Mr. L. M. Sherwood, clerk and examiner, who, being associated with me in official duties, have assisted greatly in the labors of this office.

The efforts of this department have been directed towards making the State banking system as successful and efficient, if not more beneficial to the public, than any other banking system, and in our efforts we have been heartily supported by officers of both state and national banks throughout the State.

The business relations between the state and national banks are so closely interwoven, that each is benefited by the prosperity of the other. This is especially true where the same stockholder is elected as a director in both a state and national bank.

As required by section 43 of the banking law, on succeeding pages, I present for your inspection a summary of the state and condition of every bank from which reports have been received during the year.

Following the reports of the state banks you will find an abstract of the condition of each national bank in the State as reported to this department.

From these reports the commissioner is enabled to determine the condition of those banks in Michigan receiving a deposit of reserve funds, and also enables him to give to the public a complete report of the business of the incorporated banks of the State.

T. C. SHERWOOD, Commissioner of the Banking Department.

Resources.

companies.

Abstract of reports made by the State banks to the Commissioner of the Banking Department, the reports being called for on past days unknown to the bank officer, viz.: May 4, July 18, October 2, and December 19, 1894. For reports of individual State banks see succeeding pages.

May 4, 160

banks, 3 trust | banks, 4 trust

companies.