by Paul R. Spitzzeri
On the heels of a long editorial on 18 February 1876 by the Los Angeles Express on why the Temple and Workman bank, which failed a little more than a month earlier, should go into assignment and not bankruptcy and which also accused the Los Angeles Herald of advocating for the latter, the Herald offered its own response.
In its issue of 20 February, the paper made reference to two issues. One was that bank president F.P.F. Temple, who won election in September 1875 as Los Angeles County Treasurer, was due to take office in March. The very unusual circumstance of having a failed banker as the custodian of the county’s funds, especially given that $23,000 of the City of Los Angeles’ money was tied up in the bank, caused no small amount of concern among some observers in town.
So, when the Express staterd “we understand that certain parties in town have secured a legal opinion . . . to the effect that if Mr. Temple be adjudged a bankrupt he cannot qualify as the fiscal officer of this county” and the referred to “the motives of the sudden outbreak of the hoodlum editor in favor of throwing the affairs of Temple & Workman into bankruptcy,” the Herald, naturally, struck back.
First, it answered to its rival’s use of the “pet name” of “hoodlum editor” by stating “to our mind the term is preferable to that of walking editor—one of those fellows who walks off and forgets to pay his board bill.” Recall, from an earlier post, that the Express‘s owners were debtors to the bank.
Then, the Herald asked
Why does not the Express act frankly and admit that the objective point of all this bosh is the postponement of the payment of what it owes the creditors of Temple & Workman’s bank?
In an article titled “An Army of Lawyers,” the Herald ridiculed the supporters of assignment, stating, “we are assured by those who are debtors to the bank of Temple & Workman and would like to postpone payment to the end of time, that to settle the estate in the bankruptcy court will be more expensive than to leave it in the hands of the assignees.”
The paper argued “this is not true and we will produce a single item of assignee expense that will prove that it is not true.” Simply put, lawyers’ fees. The Herald reported that four firms in Los Angeles were hired by assignees Edward F. Spence and Daniel Freeman to assist in use means of legal compulsion on debtors to the bank. Not only were there twelve lawyers (imagine how many attorneys would be involved today if four big Los Angeles law firms were hired by a company!) being paid by the assignees, but
We have reason to believe that all those lawyers not now employed need do to receive a retainer is to drop a remark in favor of throwing the estate into bankruptcy.
To the Herald, it was obvious that “the creditors of the bank will see by this item how little truth there is in the assertions of the assignee’s organ [the Express] that the busines will be more cheaply settled up by them than the bankruptcy court” and added that one of the firms (Glassell, Chapman and Smith) was working both for the assignees and for a major creditor. Consequently, the paper concluded, “let us hear no more about the economy of settling the business of the firm by the assignee process.”
The following day, Colonel George H. Smith, a Confederate officer who relocated to Los Angeles after the Civil War and became a prominent attorney, wrote the Herald denying that his firm were hired by Spence and Freeman. Instead, he stated they were employed in a case or two against the estate and withdrew against the wishes of the assignees from the employ of Workman’s estate. Moreover, Smith added that his firm were representing Elias J. “Lucky” Baldwin, who loaned the bank the funds used to reopen the institution.
Also on the 21st, the Express published an editorial concerning a proposed bill in the state legislature that would require the filing of semi-annual financial statements by banks. The paper observed that
a semi-annual bank statement is good as as it goes; byt if these statements are left alone to the officers of the bank, they will cook them up in such a manner as to make their affairs appear perfectly sound, whether they are or not.
The paper note that there were suggestions for having a regulatory officer, who could examine a bank’s books, check on the stability of its securities, and have other responsibilities. This would mean that “the depositor would then have a guarantee which would render him about as safe as he could well be made.” The paper also pointed to the efficacy of such as position and law with regard to insurance companies in California.
To have a commissioner overseeing banks “would compel them to carry on a safe, conservative businss. It would prevent wild and visionary speculation with the money of depositors.” Moreover, this would be to the advantage of banks, the argument continued, as the law would be “opening the eyes of their managers to irregularities which they frequently fail to discover themselves till it is too late.”
With that officer and the law behind him, “we would not now have to lament of a number of disastrous failures” and the paper asked
Would the Temple Bank have run along in its unbusiness-like career without having been fully warned of the danger ahead . . . a concern that was pursuing a headlong business, even though it were backed by a valuable estate?
Tomorrow’s post continued with the story of the Temple and Workman bank assignment, specifically covering the first filed report of the assignees, as well as a more detailed list of debtors through overdrafts as well as unpaid drafts.