Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1881-12-03
COMPTROLLER KNOX.
He Explains Why Defalcations Are Posi-.
BILE In National Banks In Spite Of Ex-
amiuers.

BILE in National Banks in Spite Of Ex-
aminers.
WARRINGTON. Dec. 2.-The comptroller Of
the currency, in his annual report, says: "The
recent failure of the Mechanics bank of New.
ark, has called the attention of the public di.
rectly to the duties of bank directors and OF
examiners of national banks. Sections of the
revised statutes and bylaws Of national banks
are cited and the report continues:
The duties of the board of directors are
plainly defined, and however innocent they
may be OF any intention Of wrong they are
responsible for the safety Of funds COM
mitted to their care. II it can be shown any
of them had notice of illegal transac-
tons it is serious question whether
they are not legally bound to make good the
loss which may occur, and it Is q question
whether they are not also liable for losses
which may occur from neglect Of duty, even
without notice. If this is not a Just and
proper construction Of the present law, then
1t becomes question for the consideration of
this subject Is not required. The examiner
can have but limited knowledge of the habits
and character Of those employed in the
bank. If the teller is making false entries
and daily ahstracting the funds of the bs nix,
if the bookkeeper is keeping false accounts and
rendering untrue statements, If the cashier is
placing forged paper among the bills receiv-
able and upon the register book, and trans
mitting such paper to distant places, where It
is purported to be payable, it is not possible
for the examiner In day or two to unravel
this evil work, which may have continued for
months, and obtain correct balance sheet.
Examinations should be periodically made by
competent committee, elected
from the board Of directors.
They have the whole resources of the bank at
their command, and II they have any reason
to suspect dishonesty or fraud 1t IL their busi-
ness to investigate thoroughly, and they
should employ experts to assist them in so
doing. The directors must continuously look
after the acts Of the directors.
The report of the examiner Is confidential.
It is for the use of the comptroller's office
only, and it is no sense certificate Of the
good condition of bank. In many instan-
ces the capital stock of bank has thus beer
found to be impaired and the deficiency has
been made up without the knowledge Of tn.
general public.
In other instances banks have been obliged
to pass their usual dividends, using their earn.
iugs to liquldats all bad and doubtful debls,
The number OF banks having dividends the
present year are It's. In 1880 $50. In
1879 304 and in 1878 34S. Hundreds of IN.
stances occurred annually, and many are
occurring daily wherein banks under reports
OF examiners are notified of violations of the
act and are brought under discipline of the
law. The records of this Office show only one
among all the examiners appointed has been
found guilty of wrong doing.
Speaking of the Pacific National bank oil
Boston, the comptroller says the directors had
full information in reference to the irregular
and illegal methods of the bank, which have
since caused its ruin. In any properly con-
Quoted bank, a letter addressed BY him to the
board of directors, composed as was the case
in this instance Of prominent merchants and
business men, should seem sufficient to cor.
rect the abuse and save the bank from the dis
aster which occurred. The law should certain
ly be so amended as to make it a criminal
offence for the officer of bank clandestinely
to make loans, either by use of certificates, az
in this case, or otherwise.
A considerable part of the report Is given
to subjects, substituted for money, the pro.
portion of bank checks used, from data fur.
nished by President Garfield. OF checks and
drafts in the principal cities the comptroller
says: SIT would be an interesting subject for
investigation to determine what proportion OF
checks received by banks in New York city,
given in day, represent operations at the
stock exchange, and what proportion of these
operations represent legitimate, and what
speculative Transactions"