The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1867-06-17
THE NATIONAL BANKS.
SPECIAL CORRESPONDENCE OF Tine HERALD.

Further Exposures Of the System-Flngvant
| Violations Of tho Law-lIilhens Of Govern
| ment Deposits NJ she Mercy or the Bank
Omcers-lt IL Not Secured by s"nicient
| Bonds-A National Bank President De-
| nOunces the System Rotten.
ST. LOUIS June II, 1867.
Ny last letter. exposing the sumpa character OF the
national banks, written from Chicago before had
opportunity Of fully investigating their management
in the interior have just visited Of the prfn-
cpal towns in the rural districts and startling
revelations the result.
One OF the great items Of business advances to grain
and stock dealers To illustrate this will give an in
stance. In one OF the interior towns there is bank
whose capital stock $500 0oo In the same town re.
sides large dealer, Who supplies the Eastern market
with cattle. This dealer is who has DO personal
| assets TO offer as security for accommodation;
yet he has made arrangements with this
bank by which no draws upon it without limit
/ When he purchases from hundred TO five hundred
head OF cattle he pays for them in the shape Of drafts
| upon the bank, in which he has no funds The bank
honors the drafts frequently TO the amount Of 500
week, fifty per cent Of its entire capital in direct
violation OF section fortysevcn OF the act which pro-
vdes that "the total liabilities OF any or Of any
company or firm Including in the liabilities OF COM
| pany or Arm the liabilities Of the several members
thereof to any association including liabilities as
acceptor Of bona de bills OF exchange payable out OF
the State where the association is located shall at no
time exceed one.thrd; exclusive Of liabilities as
acceptor, one6fth; and erciusve of iabies on snea
bills Of exchange onen part Of the amount of the capital
stock Of such association actually paid in"
inc aea,er SHIPS me ca,e 20 .ne Eastern us -
his Indebtedness to the credit Of the bank Should he
feel disposed TO profit BY the Conscience OF the bank he
easily pocket the proceeds OF sale and leave the
bank in the lurch, with half Of It's capital lost in
ono transaction. am aware that one bank accommo-
dates dealer to the amount Of half s capital stock
weekly, and how much they accommodate others il is
impossible to Is certainly, to the least Of IT,
loose and dangerous way OF doing ~nca can
Of the bank interested In the profits accrung ON the
sales This is representative case, and one half the
banks OF the interior are guilty Of like violations every
day using the government deposits for their own benefit
which is not unfrequently twice the amount for the
security Of which they have deposited bonds IN the
| Treasury.
Section 81 OF the act provides for an examination Of
the banks py an officer appointed by the Comptroller OF
the Currency. This examination is huge humbug.
learn that all through tho West the banks are In
the habit OF hood~inkng tho examiners by various
round and visits bank kilograms like the following
sent by the President his cashier to their correspond
ents-"Examiner is inspecting us to-day. he goes TO
- to. morrow. Be ready for him."
The officer receiving this despatch at prepares his
account to make good showing and should i BE- un;
other paper, and under the mysterious heading OF
cash iems &c, the work OF preparation is complete.
frequently these checks borrowed from other banks
for day to enable cashier 10 make up his sworn
statement and returned to the party from whom Dor
Cases have been reported to mo where these examiners
have been dnsd and wned until they were longer
acondition TO examine the books when they were in
vited behind the counter and After turning few
leaves they would remark, "Oh you al right; it Is
unnecessary examine your institution" The result
OF this laxity that the examiner makes his report TO
the Treasury that such banks in . fourishing
dtion, the stockholders the government and the de-
Suspension and the dsveIopmsn. of rsscstos such Is
those that have recently dsgraced New Orleans Selma
and other places
In most nsances tho small depositor is the sufferer;
but occasonally the government 10 loser also the
banks hold out inducements OF from two TO four cent
frequently largely exceed ths amount Of funds deposited
at Washington to secure this ITEM could name banks
wnch Is sscur s' By less Ssn p Sonda
One bank this city, with capital stock Of but
500 GOO has g. GOO deposits much Of which Is oy
BY bonds What nne opportunity 10 here presented for
Lei me illustrate this BY a dialogue that took place
few weeks ago between gentleman In Chicago and the
president Of q Western national bank.
Il is so profitable
Mr.. BIN what way
ono million dollars government deposits, which we turn
70 account for increasing the dividends
Mr. BIS It possibles And how much have you de-.
posted TO secure these depositsf
PREsDESr-Ony one hundred thousand dollars
Mr.. B.-t Ii strange the government will conduct
business SO hazardousy How does come they are not
PRESIDENT with a smc,-0h that is easily explained.
The government officers find profitable TO deposit with
TEE BANKS or MISSOURI
The total capital OF this State in national banks Ia
is pursued As in Illinois but as general thing the
banks OF this city are conducted with more caution
From % the d9 s APP
Loans, &c. ....-$9, 72l, 500 Individual depo-
y 8. bonds. 4See,e5o sits SO 2I9, COZ
Capital ....... 1885, 800 Profits. ....... S3i,o7s
Circulation 49,. 240S23 Surplus fund.-. COS sos
banks ondeavor 70 mOnopo.c the entire business, and
instead OF combining themselves TO general business
they descend TO common brokers and deal IN gold,
United States bonds State and national military bonds,
indeed everything. They have sent out circulars oner
ing as high four per cent current accounts and
time deposits. Under the Law they are permitted to
charge eight per interest discount but take
II Is customary for them TO buy bills on local points,
thereby realizing from ten 10 sws,s Der cen. on ths,
transactions. Some OF the banks have individual de-
posts running from one TO one and half million, and
loosely is their general business conducted that
not uncommon for them TO borrow to prevent . run
upon their institutions.
Some time ago 81 Louis bank had $4,000 OF It's
drafts protested, and came very going under. Two
stories are told ~ the cause OF this diculty One Is
that the money had been sent by mail meet these
drafts and failed TO arrive in time. few days after
another substituted--the remittance had
been placed 70 the credit Of another bank 10 The
Officers BY newspaper puhs and explanations, are
deavoring 10 show that the fault mot theirs but
business circles arc suspicious OF STILL and should the
pass before the confidence OF the public in The stability
Of the bank viii be complete Az result OF this dim
Guilty many persons have Withdrawn their deposits and
accounta and 10 believed they do business than
their capital and deposits justify.
Some few Of the officers Of the banks in st. Louis
have . genius for specuaaing but AZ u has been
mainly in Missouri state bonds which have been con-
stanty approaching until they worth 9sk, 10 safe
TO presume that the banks have not been impcrled
whether they 70 any great extent in other paper
does not clearly appear Nevertheless the business
eenersy loosely conducted that they unrs-
qusnty under the nsecesty Of calling upon private ban
10 aid them One instance may BE- given ustra-
ton drAn amounting 70 $50. 900 was presented at
the counter OF OF the city banks aud payment
manded They had not the funds After several hours
sskirmishng' the money was borrowed the draft
PAID With view OF not being taken by surprise and
preventing repetition OF this case effort 10 being
made TO establish q clearing house In S. Louis
Upon this subject lot me say few words few
days ago was In the company Of prominent capitalist
who had been President Of national bank and the con-
vsrsation turning upon banks requested his opinion
70 tho probable success or failure Of the system His
reply ssruck me - forctbie:--
"wsl, sir properly managed they arc source OF
benefit business and TO the stockhodsr