(1847.) REPORT OF THE SPECIAL JOINT COMMITTEE, ON THE BANK OF THE STATE AT CHARLESTON. To the Honorable the Senate and House of Representatives of the State of South Carolina. The Joint Committee of the two Houses, appointed at the last Session to inspect and report upon the affairs of the Bank of the State of South Carolina, report: That it being the first duty of your committee, "to examine minutely into the affairs and situation of the Bank, and to report the result thereof, and particularly all mismanagement in the affairs of the said Bank, if any such have occurred;" and being for these purposes clothed, under the Act of the Legislature of 1824, with power to investigate fully the Books, Accounts and other documents of the said Bank, they, on the 28th of August last, did proceed to the investigation. They resorted to every means that seemed to them available for arriving at correct conclusions. They examined, carefully, all the public and private accounts, with the view to ascertain, at least with reasonable certainty, on what sort of security the money of the State had been invested, and how far these investments had been safe and judicious. They went through all the note accounts, and the securities in bonds and stocks. They weighed and counted the specie, investigated all the assets of the Bank of every kind and amount, and the profit and loss account, and your committee believe they have not left any department of the institution without investigation. In these examinations we take pleasure in stating that the officers of the Bank afforded every assistance and facility; every thing was spread out to view, without the least reserve, and a scrutiny invited and promoted, by all the means apparently in their power. After such examinations as satisfied every member of your committee, they have come, unanimously, to the conclusion, and have agreed to report to your honorable body, that although your committee will not say that there have not been errors in their administration, yet they feel bound to declare, that so far as they have been able to judge, the affairs of the institution have been managed with prudence and circumspection, and the interests of the State seem generally to have been held in view, as the primary object of their operations. To the profit and loss account, your committee turned their particular attention. This account contains, in general, the names and debts of men, principally merchants, who have been known to the whole community from year to year to have failed in business, from the time of the foundation of the institution to the present. Most of them were already known to the members of your committee as unfortunate bankrupts, who had not been able to pay their debts. Very few of the losses were at all extraordinary, and if the average of these losses, for the course of years, be compared with the average clear annual profits of the bank for these same years, they will not be found greater in proportion, than must reasonably be expected in all operations of this kind, however prudently conducted, and much less than generally befall commercial operations of the same extent. There does not seem to your committee any motive to conceal the names on the profit and loss account of the bank from the public eye, except the honorable one of adhering to the pledge contained in the charter, and on which the money had been originally borrowed by these unfortunates, that their names should not be made public, and a praise-worthy unwillingness, to expose to unnecessary humiliation those, or the relatives of those, whose only fault, in most instances, had been, that they were unfortunate-persons who failed to pay their creditors, generally, and not the bank in particular. There seems not to be any valuable object or practical result to be obtained by the publication of these names, even if it could be honorably done, whilst that idle and childish curiosity, which would be indulged and promoted by such an exhibition, would be any thing but creditable to our people. These losses, as we have said, are not large when compared with the annual profits from which they have, from time to time, been deducted. Nor do they seem to have been incurred either by the negligence or imprudence of the officers of the institution. They seem rather to be the amount of those contingent losses, from which no prudence could entirely guard, and which are necessarily incidental to all banking operations. Indeed, without the risk of which, in some sort, no profits could be made. Some loss of this kind will always occur in banking concerns; and the only fair estimate which can be made of their degree, must be by comparing them with the clear average profits, which at the same time have occurred. Your committee also turned their attention to the accounts of the Directors. But as these are submitted to the annual inspection of the members of both Houses, it does not seem incumbent on them to canvass the accounts themselves. Each member can examine and judge for himself. Your committee would, nevertheless, respectfully suggest, that frequent changes in the direction must, necessarily, have an injurious effect on the operations of the institution. Every new director becomes a new borrower. The State pays no salary to these gentlemen for their services, and it must always be understood, that the candidate for a director's place can be secking nothing in the attainment of this office, but pecuniary facilities of some sort. Not that your committee would be understood to imply that the simple fact of the director's borrowing from the bank, is injurious. On the contrary, it would seem that he ought to be entitled to some such privilege as a compensation for his services. Gratuitous service in any department, is perhaps the most costly the State can receive; and good borrowers are precisely that class of citizens out of whom the profits of the bank are expected to be made.. But your committee doubts much, whether the present method of exhibiting these accounts to the Legislature, is productive of any good practical results. Under these impressions, they have submitted an enquiry to the President of the Bank on the subject, which enquiry, together with his reply, accompanies this report, and will be found in the appendix. Serious losses are more apt to occur to the Bank from the Directors' accounts, than from any other. We believe this has been found practically true in the past experience of the institution; but the true security of the State consists, not so much in watching your public servant invidiously after you have invested him with the trust, but in taking due care, in the first instance, to elect those only in whom you may fully and securely confide. The losses of the bank of the past year, demonstrate that the existing method of scrutiny is not effective. On the other hand, there is no doubt but that this method has had the effect of removing some of the ablest and most experienced merchants from your board, who now direct the private institutions with ability and success. It must also be recollected, that whilst the directors of these private institutions are selected, generally, with reference to their mercantile skill and credit, yours are selected rather according to the influence of friends and the number of votes they can command on joint ballot in the Legislature. There are some very peculiar features in the Constitution of the Bank of the State, which it seems to your committee not amiss at this time to bring more particularly to the view of your honorable body. This Bank is, in many respects, an Independent Treasury. The funds of the State are, in effect, kept by herself, or by a corporation entirely under her own control. None of her assets go into the private institutions, either to be kept or banked upon; but are in her own vaults, and only to be used, so far as the theory of the establishment is concerned, for the benefit and at the will of the State. The Bank, under these circumstance, not only brings the State an annual income, but it also manages nearly the whole of her fiscal concerns. Being the place designated by law for the deposit and safe keeping of all the public funds, it also takes an important part in negotiating and administering her aid in the management of the public debt and loans of every description, and in their payment. In this point of view, it is unquestionably of great value to the State, and we much doubt whether her fiscal affairs could be managed by any other plan with equal facility and precision. Under circumstances as they now exist, the aid of the Bank seems to your committee indispensable; and this, not with reference to the revenue derived or to be derived from it. This is, perhaps, the least of the benefits accruing to the State. Were the institution for the first time to be now established, and the profits to be derived from its operations held out as the prominent inducement to give it a charter, we are free to admit, that we should not, probably, be found among those who would lend their aid to its creation. But it has already been established. Its interests have become interwoven, in many important respects, with those of the State, and they cannot be torn asunder, without serious and extensive disaster. There is another point of view, in which this institution seems peculiarly valuable to the commercial relations of the State at large. The State herself being the guaranty for its stability, there is scarcely a possibility of the failure of the bank. The consequence resulting from this feature is, that it operates as a great and salutary check in times of commercial distress on the disastrous panics which at those periods occur. When distrust is abroad and deposits and specie withdrawn on every side from the private corporations, then the beneficent effect of an institution under the guaranty of the State is more peculiarly felt. At such times it becomes the grand depository of all those funds which have been thus drawn from the private banks, and which would otherwise be withdrawn entirely from circulation and hoarded, and by this withdrawal would increase two-fold the general suffering. Your committee are informed that at periods like these, the deposits received at this institution are immense. Your honorable body can easily perceive the substantial benefits which must always accrue to the commerce of the city and State, from this feature in the bank. To have one safe place of deposit which can weather any commercial crisis, short of those produced by civil commotions, must, at such times, be worth more to the people of the State than all the private banking companies together. This benefit, which is, perhaps, the most substantial derived from this institution, seems not to have been at all in the contemplation of those who first projected and established it. It seems to have grown out of the natural course of events-the security of the capital, resting on the powerful guaranty of the State, being thus beneficially brought to bear on the Should the Bank continue to be prudently transactions of her commerce. and effectively managed, this may long remain a main sheet anchor to our people, in times of commercial revulsion and distress. Whilst we thus endeavor to set forth fairly and impartially, some of the benefits derived and to be derived from this institution, your committee deem it also their duty to touch on some of the evils it may be calculated to create or foster. The first and most important of these, is the facility But it must with which it may be used as an engine of political influence. be recollected that this danger, (and it is a great one) springs, more than any other, from the action of the Legislature itself, and the manner in which it has linked itself with the Bank. None but a man of considerable strength in the Legislature can be elected its President, and all its Directors rest on the same foundation for their appointment, and the keeping of their places. This money power is not peculiar to the Bank of the State. It appertains to every corporation, where large capital is concentrated in the hands of a few. The fact of this institution being entirely under the control of the State, rather impairs than enhances its possible means of monied influence. Money is power in all places, and those who have the A banking corporation management and direction of it, wield this power. of equal capital, entirely beyond the control and supervision of the State, would be far more formidable; because, its operations would be out of our sight and reach, and we would only know of them by feeling their effects. It therefore would wield entirely an independent influence, more to be dreaded, and far more calculated to act injuriously on the free suffrages of the citizens, than that of a bank which may be called to account for any indirection in this as well as in other respects, or be abolished at the will of the State. It is a gross mistake to suppose, that were the possible money power in the Bank of the State abolished, this influence itself would end. We should only transfer it to the private institutions, on whom the Bank is now a check, to be used by them without check or stint, for their own purposes, or that of their directors, whenever they should think proper. Neither would we be able to discover but casually whence this secret influence is derived. Men who have power of any sort are prone to use it, and in most instances, for their own personal and exclusive objects; and it would be difficult to shew how, by transferring this control over the monetary concerns of the State entirely to private corporations, we should promote the welfare, either of the State as a political body, or of her citizens. So long as we are satisfied that the influence of the Bank of the State is not wielded for political purposes, and whilst it continues in the exercise only of its lawful functions, and in the pursuit of objects for which the State invested it with power, it is but reasonable that it should not be embarrassed by any undue action of the Legislature. On the whole, your committee would respectfully submit, that every part of the monetary concerns of the State has become connected and interwoven with its action. These monetary concerns are well managed, and her credit sustained, at all times up to the highest point. Whilst the bank has never had, nor could have had, any agency in creating the debts of the State, it has ever, since its formation, been the main staff on which she has rested, either for assisting her in raising new funds in times of diffi culty, or of liquidating and paying off all her pre contracted liabilities. The debts of the State are large. It is on the management and efficiency of the bank we principally rely for their payment, and whilst we should continue to watch narrowly, that it does not swerve from its duty, we should, on the other hand, render every reasonable aid and encouragement to its officers, in the furtherance of the all important objects for which it was instituted, and in which the public welfare is so deeply involved. There being certain subjects on which the committee desired to be informed, but were unable, by any investigation they could institute, to reach, they sought of the President the information, by propounding to him the following QUERIES. 1st. Will the Bank be able to meet and pay off the instalments of the public debt, charged upon it, as they fall due? 2nd. Can the public debt be paid off at periods earlier than now arranged for; if so, how can it be effected? 3d. Is the mode established by the resolution of December 9th 1842, for ascertaining the fitness of directors, by exhibiting in a private report the state of their accounts on the 1st day of each month, useful or injurious? What is its effect? Can any better plan be suggested? 4th. Is the present the best method for collecting your debts? Could it be improved so as to benefit the public without injury to the debtor? 5th. Does the circulation of this Bank depend, for its maintenance, on the same principles as that of the private institutions; if not, what modifies or affects it differently? 6th. Is the amount charged on the debtor side of your general account, as "Bank notes issued," the amount in actual circulation? 7th. Have all the notes which the Bank has issued, from its commencement, been charged against it in the statement of issues?-or has any deduction or credit been made for what may have been lost or destroyed? The answers to these queries are added, as an appendix, to this report, and will be found valuable for the information contained in them, and as affording practical suggestions for amending and improving the laws on these subjects. JAMES SMITH RHETT, Chairman Com. of the House of Representatives. |