The New York herald., 1879-10-31
Comptroller Knox Drops Them a
Gentle Hint.
ABOUT OVER-CERTIFICATION
Latest Phases Of the Stock Clear
ing Project.
PHlLADEl PHlA'S SYSTEM.

which stirred mn anew the discussion about
tcaton Of brokers checks by Vail street banks The
letter was addressed to Examiner Meiggs. who has
supervision of national banks here. and said. In SUD-
stance. that the Comptroller observed from the
newspapers that Decentralization to accom-
modate patrons an acknowledged prac-
tce among what are known as brokers
banks while it was in direct violation of
the law. The Comptroller directed Mr.. Meggs
to inquire among the national banks, find what In
Btitutons indulged in that line of business call their
attention to the fact that it was forbidden by the
National Banking law. and report to washington
such banks as were deepest in the practice. Mr.
Aeggs declined to give the letter for publication as
1t came in the way of private instructions to him.
SELF but said that the substance OF what the
Comptroller wrote. The Examiner yesterday visited
sixteen of the downtown national banks. showed the
letter he had received and his inquiries
to the extent of certifcation done by them. Holm
formed the reporter that only the "brokers banks
engaged in over-certifcation. while more than half
of the institutions he visited made it rule not to
over-certify. They declined doing it on principle
though the Examiner said that where the accommo-
dation was practised it was, far he could OBJ
serve. done with all due caution. He did not believe
that more than ten of the fifty national banks in
New York in the habit OF certifying checks for
their dopositors beyond the amount of their de-
explicit upon this point and he had called the atten
ton thereto Of such bank offices as he met.
THE YORK.
It was said among the brokers tnat the Bank of
New York was the only institution that took imme-
date action upon the letter Of the Comptroller.
though the reporter heard from good sources that
there or two others. Certain 1t is that
about noontime the depositors of the Bank of
New York were sent for and informed that
the institution must comply with the Banking law
as interpreted by tho Comptroller of the Cur
rency. There some excitement on Change in
consequence. and temporary interference with
contracts. Mr. Joseph u. Fry, the president OF
the Bank New York. is Of the committee of three
bankers recently appointed to consider some plan OF
simplifying the present system of account between
brokers and the banks. He last evening requested
Mr. Brayton Ives president of the Stock Exchange to
explain that The Bank of New York. while intending
to comply with the law. did not mean to shut of
Internationally on the accommodations heretofore
extended to its customers.
To reporter who called at the Office Of
the bank the vice president explained what had
occurred After the visit of the Examiner, he said,
they called in the brokers who deal with them and
informed them that bank have full security
before certifying their checks. He said they had
not stopped certifcation by any means.
"What form OF security did you requireY' asked
the reporter.
mer," replied hc I'm some cases they brought
bonds to Increase the banks security. Then
toner inna to draw %pon Which would do awny
with the necessity for overcertifcation. wouldn't
The reporter asked If contracts were required by
the bank and was answered In the negative. An,
other banker told the reporter that the Bank of New
York had on the day before yesterday begun to shut
down the hoodgates of certifcation, requiring de-
postors to secure the bank 30 somewhere ehb for
their accommodation. 1t had resulted, he saiI in
reducing the banks exchanges at the Clearing Iouse
from s170.O00 on Tuesday to $4,000 Wednesda md
$4,000 yesterday. This banker firmly approvd Of
the new departure and said all the banks oil the
street ought to follow suit.
STOCK CLEARING.
The complaint against over-certifcation ard the
call for system OF stock clearing hav, Zone
arm in arm along Wall street. the inference being
that the operation of clearing would in itself
reduce the responsibilities of the banks. There
has has for three days been some kind Of
hitch in the progress of the stock clearing ,roject
What has been tho precise reason for dely 1t was
not possible to ascertain. but the bankes' CON-
languishing from pure lack of confidence in their
project. Yesterday, however. Mr.. Fry requested
President Ives. OF tho Stock Exchange to appoint
conference committee. which the latter will DO this
morning. There viii! likely be joint dscussion
bankers the reporter concluded that tisy were
not quite unanimous in the present movement
So far clearing house for stock is con.
cerned they are agreed that it wuld save
much labor. besides allaying the risk in
volved in transferring from place 10 place
large sums OF money or amounts of stoc.. Most of
these. too. think plan of the kind is racticablc.
but the majority despair OF inducing tie oStock Ex-
change to take the same view. There vas loud OBJ
lection from brokers to the gold cle,ring house
until IT became an established succes but there
~"'. ten times as many objections to such an in,
upon the stock market. 1t 4 found that
y 4, operators of any weight oppose a clearing |
, 'th would expose the volume of their
- their line OF dealing. NO acIumont to |
t. i'ssss g has been able to ''''''"' their fears
Q. isdom OF large certihcations the bankers
arc wa. at variance. The report1r yesterday |
met q president OF national bank Who claimed |
that the law did permit IL in spirit IL not in
this opinion. Tho banker allowed thdro should be |
other security than the simple balance belonging to
broker. and claimed there was a way in which |
broker could be held good for the null extent of the
banks accommodation. The reporters inouiries |
showed that the banks that do this kind of thing to |
large extent uniformly careful AZ to tie char
scter OF the men they accommodate. and then have |
some means OF sef-protcction. either In the way OF
col!aterals or by special contract with the party
considered of the most inyiolate of oplipa- |
tions. and In case OF disaster would be considered
preferred claim. Long as the practice has been in
vogue IL is claimed by its supporters that the banks
have not suffered from IL. Even "Dlack Friday"
the losses of the banks were tring Since that time
there have been losses from ovcrcertication
In of rascaty, and who would swindle |
bank by overdrawing his account would, II is |
argued swindle them in some other way IL the first
was closed. The president of prominent bank ex-
pained to the reporter that II there was risk |
IN tho business OF overcertihcaton It was
not enhanced pcrceptbly in lively times like tho
present Brokers to-day did not want to overdraw |
their accounts any further than they did in dull
sons; ihey merely repeated the operation oftener.
Moreover. he said their deposits were heavier when
speculnton was brisk and they liked ut such times
TO make q good showing with their banks. They |
might overdraw their accounts $4,000 at noon, aud
ten minutes later deposit checks or urities worth
xloVoO0. The reporter in his Investigations found
that some OF the most reputable banks In the city |
brokers.