The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1859-11-01


such Is the caAe, and then proceeds to overhaul
bundle Of collateras, rendered by JONES' consisting
OF notes, drawn by men Of whose names he has
able at long periods and geographical distances 10
match while the remainder fall due at the store Of
| Jones' firm in the city. Although no other man
save Jones would dream OF calling such stuff roll
| the President passes the removed note and Jones
leaves tho Office to make room for brother direc-
| tor On similar errand, which he accompanies
uron a deposit of collateral OF much reliability
as that hypothetical by Jones; and in this wise
portion Of the bank capital is applied to the Of
Iavortes, while SCORE Of dealers are disappointed
IN reasonable expectations, and forced to dispose
| of good business paper Ut sacrifices in 'the
| street" where Jones' collateral would not be
touched with forty foot pole.
| II tho directors appropriate the spols during
days Of prosperity. during tight times they be-
themselves identified In credit with that of the in
stitu,ion, should they find themselves "shaly' they
absorb all available resources to sustain their indi
ydua credit, under the spec0us plea that the event
OF their failure would diminish public confidence in
| the bank they assume to direct Again, during
ines OF pressure, directors, heretofore Don-bor-
rOwers, stimulated by desire OF reAping excessive
| gains through purchase Of deprecated securities
forced into the market insist upon their claims for
discount, and threaten resignation in case Of nom
compliance proceeding On na the part Of maa
rious to institution during panic the public
rarely fail to place sinister construction upon
| such withdrawal Here, again, the director tri.
| umpbs, and employs for hs personal advantage
money which should be allotted among meritorious
depositors. upon whom the effects Of both actions.
although eventuatng differently to the interests Of
| the bank, weigh with equal force.
Although operations of this character cannot fail
| to be recognized by intelligent subordnates,
| knowledge Of favoritm rarely penetrates to the
| stockholders Such an occurrence is anticipated
by the imposition OF an oath Of secresy upon all
bank clerks, who thus wear lock upon their lips,
and are denied alluson to transactions behind
the counter. Should any subordinate break through
tins ban Of secresy, and the corruption OF the
governing officials be exposed, he ncurs the enmity
of directors, who fail not to render his position
| disageeable as to render his resignation compul.
sorry should it be impossible to enforce dismisson
by impeachment Of his integrity. Beside bank
! tenure of their office, and having no means Of
| tenance in other business, bow meekly aud blindy
to the financial tyrants, until, after the commits
| sion of some frauds on their own part they
| employ their knowledge of prior bank doings to
| avert any punishment which might otherwise
/ follow their msdoings Then their relations change,
| and the djrectoTs-honest HONORABLE men-fnd it
TO their advantage to compound the felony OF dis
honest servant, nay, even 10 advance him money to
| leave the metropolis, from well grounded appre
hension that he may compromise the institution by
| disclosing some mysteries Of their calling. as
general rule Independent intelligent clerks despise
| and contemn their presumed masters while dis
honest ones feather their own nests, and terminate
| by defying prosecution at the hands of men whose
characters are far from thoroughly uniInpeaohable
And let remark, parenthetically, that the retire
| ment Of clerk Of acknowledged capacity and in
| tegrity from bank should be regarded by the
shareholders as matter of as much significance
the resignation OF director; for, upon investiga-
tion it will prove almost certainty that his retire
ment originated from reluctance to loan his con-
science to the conservation Of secresy as regards
drectorial man9uvres repugnant to his sense of
moral right
THE PHILOSOPHY OF LOANS AND DISCOUNT.
Money is usually borrowed from bank by its
dealers in three different ways by overdraft, call
loan and discount. An Overdraft il casual and
exceptional accommodation, granted by the first
teller with the sanction of the cashier who charges
interest daily during its continuance relying gene
lodged by the dealer for collection, as guarantee
against loss Now. as checks, creating these over
drafts, are held by the teller az cash items, and are
counted as evidence Of his cash on hand without
being recorded In any book, the system of allowing
overdrafis is the most reprehensibe and dangerous
form OF bank accommodation, and against which
the Bank Department at Albany has apparently
directed its suspicious by requiring the Quarterly
statements to furnish specific information on this
point; which, however, it never receives inasmuch
As the Oyerdraf is almost invariably counted in the
teiler's cash; and should further eonceament be
requisite, the cashier removes it thence to the
account of temporary loans At all events, over
drafts are ffutulSour Of fraud; and from being
generally intended TO gain good will from directors,
ters osfavortism, designedy encouraged to escape
revisatory examination by the Board of Directors,
which had better be rendered apparent by regular
entries as call loans sbould the teller be honestly
inclir ed to serve che shareholders.
! But it is chiefly through overdrafts that the
cathier manages to propitiate foreign banking
| friends, whose checks are paid 10 expectation of
receipts OF remttances by mall as he urges in ex-
| PLANTATION, if detected by the president; still remit
| tances, being transmitted directly TO the bank,
should invariably arrive anterior to documents
passing through the hands of second party. Over
drafts by bankers constitute system beyond dlrec-
| toria comprehension, and are Consequently blindly
committed by the cashier, as professor of econo.
mics whose fiat of all right is accepted as being
| with them law and gospel.
The sum total of bills discounted according TO
correct banking, should never exceed that formed
by ADDITION Of the capital to surplus and reserved
profits; for all other moneys, beng held in trust
liable TO instantaneous liquidation should be loaned
IL such a manner as to be convertible ato cash
within a reasonable time. Discounted paper bears
on ts ACE definite term for payment and the pro-
ceeds OF bills discounted remain unavailable until
after their payment, while temporary loaus being
payable on demand, are based upon moneys depo-
sited, and colecable as the drain of deposors
! dera@ payment requisite But this simple distnc-
lion to the method Of loaning bauk funds rarely
penetraies in the brain of officers, who, bewidered
| by threatened pressure in the money market,
seek salvation by an indscrimnate onslaught upon
| borrowers, slasbing ana cutting down loans dis
| conDts as may suit their convenience, until that
plain in inception is rendered confused in practice.
Loans founded upon money deposited, which are
generally given to dealers at retail and to brokers'
| and private bankers at wholesale should be adj
vance d only upon notes payable on demand and Sc
| cured by hypohecation of marketable securities,
with margin in value adequate to cover probable
interest and cost of conversion inao specie. A pl
discounted can optiooaly be renewed upon being
due, or compromised after protest, for the bank
| deals in its own money; but on the other hand a
loan called should be met forthwith or the security
sold in default for the banker, having employed che
money OF depostor, held in trust, must place it
| on the depositors demand otherwise he is aithiess
to his charge Finally, such thing as clicked"
or dead loan--one upon which neither principal nor
| interest be collected-should never be in exist
ence for should it be discovered to exist it is ev
dence not only of the bankers lack of discretion
but Of absolute culpabilty in dsregardng the only
| correct use to which moneys deposited can be le-
| Ultimately applied without implied breach Of faith
| While bank officials rarely indulge applicants, non
dealers, Offering unquestonabe securities they find
| It convenient to lend upon call in large amounts,
| at lew interest, to brokers, who relend to an
| inferior or@er OF the same tribe, who put the mo-