New-York tribune., 1881-11-21
SECURITY F0R NATIONAL BANKS.
SECURITY FOR NATIONAL BANKS

SECURITY FOR NATIONAL BANKS.
BANK EXAMINERS AND TIE CONTROLLER OF TIE
CURRENCY UNABLE TO PRoTECT BANKS FROM
RUIN-sAFFTY ONLY TO BIZ sECU ED by UNKE-
MIrrING VIGILANCE ON THE PART OF THE d.
RECToRs-LEssoNs FkoM TIE RECENT FAILURE
IN NEWARK.
TO The razor Of The Tribune.
SIR: The recent Newark bank failure has made a
profound impression iii all banking circles. Every
bank throughout the country is Ouzling like hive
threatened with demolition. Directors and stock
holders are everywhere asking What shall We do to
be saved from such a disaster If neither the Bank
Examiner nor the Treasury Department at Wash
ngton can protect us. who can 7 most profound
ignorance exists in tie public mind upon this point
md The newspaper press during the past week has
loepened rather than cleared up tho guCrancc anu
confusion. As | SAID to director the other day,
pointing behind the cOunter of lns bank; Unless
The men employed there honest and faithful all
he Bank Examiners i'll the country. supplemented
by the utmost vigilance Ot the Controller of the
Currency canaot you. Upon the integrity OF
lhe men who handle yOu money and keep your ac
counts your salvation finally depends. and no one
5 i'll 50 good a position to know the character and
habits oi these men as the directors themselves"
Il is time the stockholders of national banks knew
md realized thoroughly that they have taken pas-
,iicered ard manned. and that the General Govern
nent has only furnished them a chart to run by,
md from time to time sends It's agents to that
Die instructions arc kept; but if the engineer Is
anfathiul, OF the captain betrays the vessel into
he bands Of pirates. why abuse the Government or
l. agents for the disaster
There are some things that a Bank Examiner
ascertain. and good many thing that he cannct
ascertain lie could not for instance. bo absolutely
pertain that the officers of the bank were not steal
Ing misappyng its funds, unless hc took months
TO make his examination and aHaly lyIed all the az
counts How is he to know that the 500 which
was deposited yesterday was not $1,000. the differ
encc having been pocketed by tin teller or 10y the
cashier | know a case wherc a finn dcpusItrd
ElO,50O in a bank. and the cashier credited them
with $500. and used the $4,000 his
count When the hrm account had to bo made
good. be transferred the money from another
count covering up his tracks 10y false entries No;
q Bank Examiner cannot know that tho deposit
Dccoupt rs it stands upon the general ledger or as
It appears upOn trial balance is correct, unless
be calls ia every depOSitors book, and has the
counts written up and this would take weeks if not
months. | have known cashier who WAS above
suspicion but who was steadily stealing his banks
funds, tu go a neghbOring bank and borrow. the
credit Of his bank $50. 600 Instead Of entering It
upon the books to Bills Payable TO the credit of
the bank from which he borrowed IL, he sent 1t to
New-lork, charged II to the bank there. and drew
two drafts covering the amount against it,, which
drafts duly credited The transaction did not
change the NowYOrk balance and unless closely
scrutnzcd upon the books OF the deiaultng cashier
ii seemed all right. IT, when the Examiner came
he had sCTutlnIIed every entry made upon the
books of the bank during the year that had inter
Vened siuCe his last visit, an undertaking that
would have consumed many days, ne might have
asked where this 5000 came from, as there was
no corresponding credit on the other side. iut this
no Examiner does or can do. When the bank failed
and the accounts were analyzed, the transaction
was revealed; Also the manner in which the
peighbOring bank was again reimbursed, which
was by the borrowing of another sum of outside
parties and covering up the proceeding by false
entries, or by no entries at all small country
bank in this State failed few years ago for sum
nearly equal 10 its capital stock, and yet the Bank
Examiner bad paid it a visit only week or two
previously and pronounced the bank in excellent
condition. it upon the DriraG fdcie evidence
The cashier was also secretary of the local savings |
bank, which the Examiner of course did not exam |
iDe and he had been stealing and selling it's secur
ties TO make good his stealing or misapprOprlatiun |
from the funds of the national bank.
Many such cases might be cited showing rotten |
ness or actual insolvency IN hank that is beyond |
the reach of any ordinary examination ! have |
known a cashier to a large lot of 6cttious notes
through has discount register. thus swelling his |
apparent earnings and his bills receivable and |
deccivng both directors and Examiner. The notes |
were represented payable abroad and had been |
sent of for collection 10 different banks all the
country
An Examiner can know little about banks dis
counted notes in any case. For aught ho knows |
they may all be fOrgeries. But the directors should |
know. aS they supposed to see and to pass upon
every piece of paper offered for discount.
repeat, therefore, that the safety of both de |
positors and stockholders of national banks finally /
rests in the honesty and efficiency of the men en-
ployed behind their counters, and that the guar
hans of this circle are the directors The directors
must know their men, what their habits are who
heir associates are. and the nature of any outside
business they may be engaged in. Here is where
The directors of the Newark bank failed IN their |
luty. II they had known as much about the habits
and engagements OF their cashier outside Of his
bank as WAS learned by the directors of a New |
York bank when his name canvasscd for the |
position of cashier in their bank the disaster
night have been ayerted. JOIN BURROUGHS
EsOpas, ". T., Nov. IL, 1881.