The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1892-02-08

last five years The creditors hove received,
on an average, 90.G5 per cent, the attend
ant expenses being 4.oS per cent.
The report of the comptroller of the cur
rency for 1879 shows the failure OF 10
state banks during the three years ended
January 4, 1870. having liabilities OF Sss,-
440,02s. with losses to creditors OF s52,olo,-
G6l, or an average loss OF $40. sI2,222o Tor
each Of these years. Bradstreet reports
the failure OF III institutions, bankers.
brokers, savings banks, trust companies
and banks other than national during the
year ended January 80. 1891, representing
losses to creditors of ST., Az, 4l9, an amount
in excess Of the total losses OF all the
banks Of the national system for twenty
nine wears. These figures clearly show
the superior security of national banks
over all banks other than national. Fur
thermore, the losses of the national banks
appear uncomfortable when contrasted
with the immense volume OF business
transacted.
The report OF the comptroller of the
currency for 1891 shows that the amount
tional banks during the year ended June
80 last aggregates s12, 752, 2l2, 495. OF the
transactions Iiquidated through these
banks only 694 per cent. of actual money
was employed, and 1905 was accomplished
by the use of bank credits. The receipts
of 3 1854 national banks on the first day of
July, 1890, aggregated $i2l, s24. 726, and the
total receipts of these banks for q single
year aggregate S129, 247 100000, or q sum
greatly in excess of the estimated value of
all the real and personal property of Great
Britain and the United States combined.
These figures make it clear that under
the national banking system we have
reached a condition of safety in banking
never before realized. Not less than 961z
per cent. of the national banks have filled
the requirements of absolute security, and
Comptroller of the Currency Lacey in
quires, in the current number of the North
american Regier, what new restrictions
can be imposed toward preventing loss to
the creditors of the remaining 81 per
cent. without imperiling the present gen.
eral success of the system. The govern
ment can only inspect and supervise, and
so long as bank officers are deficient in
judgment or integrity failures will occur.
The prominent causes of failure are
depreciation in securities, injudicious
banking, fraudulent management, defalca-
ton of officers, excessive loans to officers
and directors, real estate and real estate
loans, excessive loans to customers and
failure of large debtors. Comptroller
Lacey thinks the law should forbid the
purchase by national banks of shares of
any incorporated company as an invest
ment, and should require the sale of all
shares taken to secure doubtful debts.
Investments in bonds issued by such cor
porations should be subject to the same
limitations as to amount as may be ap-
piled to direct loans to individuals.
The remedy for injudicious banking
rests with the boards of directors, who
should exercise greater care in selecting
officers and practice greater dill
gence in instructing and supervis-
ing them. Fraudulent management can
be met by more exhaustive examinations,
proper division OF duties, occasional
changes of desks among employees, and
systematic and thorough audit of the
affairs of the bank by expert accountants
of known skill and integrity. The defal-
cation of officers is seldom detected by the
directors whose continuous supervision is
frequently superficial and perfunctory.
Excessive loans to officers and directors
may be largely curtailed by the adoption
of an amendment to the present law for
bidding the active officers or employees
from becoming liable, directly or indi-
rectly, TO the bank with which they are
connected. The liability of directors also
should be, by law, made subject to reason
able limitations rs 10 both loans and dis
counts, inclusive of Endorsements and
guarantees for the accommodation of
others.
Losses on real estate loans result in the
main from securities taken as last resort
to secure doubtful debts originally made
upon personal security. Mr.. Lacey thinks
limitation should be placed upon the
amount which may be lawfully invested in
clearinghouse as serious loss and some
times insolvency result from locking up
an undue proportion of the capital in re-
atty, which is thus rendered unavailable at
critical periods.
To guard against the consequences of
the failure of large debtors Mr.. Lacey
would so limit by law the discount of large
lines of commercial and business paper,
including bills of exchange drawn against
actually existing values as 10 prevent the
solvency OF a bank from being dependent
upon the success or failure of one
or more Of its chief customers.
Against the inefiiciency and inattention
OF directors all the government can do is to
clearly define by law the duties of directors
arid sternly refuse 10 permit them to abdl-
cate their powers while retaining office,
and 10 avoid the responsibility for losses
resulting from disObedience of law by
pleading ignorance which could only re-
suit from the most persistent neglect.
The supervision of the bureau Of cur
rency is OF the greatest value to the safety
of national banks. for it is charged with
the duty of seeing that the bank is properly
organized and the capital actually paid in;
with the duty of enforcing those pro-
visions of law which require that loans
shall be made upon personal security only:
that 4 lawful money reserve shall be NAM
tanned that surplus fund shall be &C
camuIated; that dividends shall not be
declared until earned; that the total
liabilities Of any person. company,
corporation or firm for money Dor