Arizona republican., 1908-12-07

supervision falls to the directors. When
 a bank fails, or even when it finds it.
 self involved in difficulties, 1t is usual
 for criticism to center upon the bank
 examiner. But the bank examiner en- counters .this practical difficulty in his efforts to prevent unWise banking; a
 transaction of which he cannot ap-
 prove has been cOnsummated, usually,
 before he learns of it. It is then up
 to him to do the best he can toward
 finding a remedy. If it is loan in
 which he has no confidence and 1t
 is in such amount that it's loss would
 impair the banks capital. the bank
 comptroller Gin the case of a territorial
 bank) may in his discretion order the
 stockholders at once to make uD the
 loss. But how is it practicable for the
 time being to assert that there will be
 the loss that the examiner fears2
 There is usually the possibility of
 mistake on the part of the examiner in
 his estimate of the loan, and if he Is
 conscientious he wishes to avoid being
 unjust and unnecessarily harsh and
 arbitrary But the directors do know,
 or may readily know, before the loan
 is made whether it is good; or, if it
 is a safe loan of itself. whether the
 bank in view of it's business generally
 should make the loan. In short, when a bank finds itself in difficulties it is
 invariably through having directors who don't direct
 It is practicable, I am convinced. to frame a new law that would compel bank directors to perform at least part of the duties which they under take when they become directors. Rarely. indeed. have our bank officers or bank employees been guilty of crim- inal misapplicatiOn of funds-the en- tire history of banking in the terri tory is in that respect most gratifying. But when such cases have occurred that the banks usually was seriously hurt if not ruined, and great hard ships were thrust upon stockholders, if not upon the depositOrs. And it has been my observation that invatiably all such evils would have been pre- vented by proper vigilance on the part of the directors. If an embeZzlement by a bank clerk occurs, the bank eX aminer finds it our sooner or later, but bank directors can nearly always pre- vent an embezzlement.
 Bank directors who fail to discharge their duties as directors should get off the board and make way for others who will do the work
 It may sound like a radical sugges- ton. but I believe. nevertheless, that it would be wise to have law requir- ing stockholders to remove without publicity a bank director who has been proved negligent of his sluties. A prop CT feature of such removal machinery would be notice to the stockholders !. and directors as to the alleged negli- . geuce of a director, and due proof 1. thereof at a private hearing to be giv- | rn him by the stockholders in the 1. presence of the bank examiner
 One of the serious problems which . confront the federal and territorial of l ricers who are charged with the duty | If supervising the banking business is ! that of making the examinations more [ -feici-~t Undoubtedly the inefficiency If official examinations has been re sponsible in no small measure for failure to bring to light the abuses which ultimately resulted in some of he heavy bank failures in the east
 l have no fear that the suggestion of more rigid supervision will disturb any member of this association. The time las gone by. if it ever was. when the good banker regarded a visit from the bank examiner as an intrusion. The business is a public trustee ship. And the banker who has a due of his solemn responsibil- ties to the public is always ready to acknowledge the right of the people. through their delegated authority. to airly supervise the banking business.
 Indeed, so thoroughly have good bankers come to realize the wisdom md benefits of frequent examinations. hat there is a tendency among them O supplement the federal and state made by representatives 'f the bankers associations. For eX- ample, in the constitution adonted De- oher 26, last, by the California State Gearing House Association there are rticles providing explicitly for exam nations of the banks which are mem ,ers of the association by examiners mployed by a central board Such a rovision as this would have been con 'idered a few years ago revolution