The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1905-10-12
ton, butts Its reading was suspended
+ III order that Mr.. vanderlip might nd

Z p.
4 ton, Butts It's reading was suspended,
III order that MIR. vanderlip might nd
\ dress the assefnblase,
4 W. 3. Ridsely. Comptroller Of tho Curl
rency, followed FIR. Vanderbilt
He spoke Oh '13nnit Examination and
Supervision. a saying III part.
After careful Study Of the cases ,
! which have como under my observation
during the past four years, am firin-
| ~ convinced that no system OF bank
| examination or supervision from the out :
sido Of tho bank can abolutely prevent
fraudulent bank failures. The more
through and efficient the supervision, the
moro stirely and Quickly frauds will be
ton will tend to prevent thcr. but they
cannot be surely and In every case pre-.
vented by any practical inontls outside
Of the bank.
I an, also equally convinced by the
same experience that with careful and
liner, aided by Intelligent and thorough
letters of criticism bnsed on the. ex-
ariner's reports. any board OF bank
directors OF fair intelligence, with an
honest desire to obey the law, cnn, by
cooperation with tho examiner and the
comptroller. make tho fnlure of their
bank practically. II not absolutely, I'M
IL.
majority Of It, arc not doing their duty
in this respect. ~ respectable minority.
and honest men can, il they
will, secure for their shareholders
and creditors this protection to which
they are entitled.
am sure that in this direction, tho
cooperation between tho directors Of
Il bank and tho supervising authority,
lies the best hope Of decided and per-
mnnent Improvement In the supervision
OF banks and tho reduction OF bnnle fail.
urs to minimum.
The Harm Done.
An examiner always works under one
great and unavoidable disadvantage. He
can DO little or nothing until after the
law has boon Violated and much, Il
not all, Of the harm Is done. II, the
trouble is bad, excessive, or fraudulent
loan. 1t has bcen made before he can
act. II there Is n shortage in the cash,
through defnlcaton or robbery the
money Is gone before he can know It,
and often with l1tte or no chance FOR
It's recovery. A good examiner does his
whole duty in the discovery Of such n
case. 1t Is not reasonable to ask him
70 prevent 1t. Only so far rs tho fear
OF discovery deters bank officers from
lra udulent acts can any supervision,
SNORT or frequent and complete auditing.
prevent their occurrence. 1t Is extremely
rare 10 find bank has failed without
some or the officers committing fraud
ulent or illegal acts to hide It.
a common device is to put forged notes
INTO the bank, ostensbly signed by peopls
Or good credit. Another is to fail to
cancel and deliver to customers, notes
when have been paid and to keep them
IN the bills receivable. One can readily
see now hard 1t Is for an examiner 10
discover such frauds, when they are per-
petuated by shrewd scoundrols who have
every advantage of being In the ba TX all
the time. while tho examiner comes only
twice q year.
However his suspicious may be aroused,
the examiner Is, as I have said, under
the great disadvantage Of only being
able to act after the crime is committed.
lie can discover them, but he cannot
surely prevent such frauds.
Our system of national bank examI-
tons is much the most extensive which
has ever been undertaken by any country
or government, and the experience accu-
nulated during the forty-two years of
coivable trouble or complication into
which the affairs faof bank may be
brought, either by dishonesty incom-
potency or neglect.
A Good Record.
OF the seven4t thousand nine hundred
and thirty national banks which have
been organized four hundred and thirty
eight have failed, or five and onc-half
7rer cent of the whole number. as against
about seventeen and one-half per cent.
of banks other than national in the same
period. The national banks which have
failed have paid their creditors over
seventy-eight per cent Of the amount
due them, while the other banks have
paid only about forty-five per cent. OF
the billions and billions Of dollars they
have had on deposit, the national banks
have lost for their creditors in the whole
period of their existence only about thIr-
ty million dollars.
The weakest feature of the present 4
system of examinations Is that the cx-
aminers are paid by fees Instead of sala-
res. I believe every Comptroller of the
Currency has advised a change In this
system; certainly Ill those of recent
years have done so.
AS l said In beginning, tho direction In
which we can look for the greatest i'm
provement In bank supervision is In CO.
operation between the directors of the
banks and the supervising authority. !.
The government supervision can and
should be improved, both by change In
system and better administration, ana 1t
can do great deal to help the directors
realize their responsibilities and do their
duty For some months past there has
been a most determined effort on the
part of the comptroler's Office to fix the
responsibility Of bank management on the
directors of the national banks. and es-
.pecInlly to see that the directors are
promptly informed of what the bank ex-
amincrs find in the condition OF the banks