New-York tribune., 1910-12-30
DRASTIC CHANGE
FOR NATIONAL BANKS
Controller Murray, Following
Failure in Texas, Orders
Uniform Bookkeeping.
HIS EXAMINERS DECEIVED
Quanah Institution Insolvent
Two Years, Although Regu-
larly Ispected-Omcers Con-
cealed It's True Condition.

Washington, Dec. 29.-Disclosures fol-
lowing the forced liquidation of the
Quanah National Bank of Quanah, Tex
ten days ago. caused Lawrence o. Muir
ray, the Controller of the Currency, to-
day to issue an order directing every one
of the 200 national banks in the United
States to install what practically
amounts to uniform system of book
keeping.
To insure a system by which the true
condition of a national bank can be de-
termned at any moment, the order
directs examiners, on finding a bank
whose exact condition they cannot de-
termne, to report the fact by telegrap pin
to Washington and give the manage
ment of the bank thirty days to install
the necessary system.
AT the end of that period says the
Controller, 1.-The examiner will return to
the bank at its expense to determine if
instructions have been complied With
and if the necessary books have not been
installed he will remain in the bank at
its expense until such books are installed
.he examiner"
Investigation of the Quanah Bank
showed that it had been doing business
for the last two years, although un-
doubtedly insolvent. 1t had been in
spec:ed at regular intervals by national
bank examiners all this time. The ex-
aminers We're unable to learn the true
condition of the bank. largely because
the management refused to keep
proper record of it's transactions. 1t was
also shown that the, entire capital of
$4,000 and probably some of the sur
plus of S3S, 600 were paid to stockholders
as dividends
In d statement issued to-day Con-
trcller Murray comedies that his ex-
aminers were hoodwinked for two years
bv Tie way the bank handled its notes
During these two years." the Con-
troller says, .'the bank carried compare
lively little past-due paper, all of the
notes having the appearance of being
promptly paid or renewed. The bank
had no discount register, and the vari-
Gus earning accounts were kept in such
a manner as to make it practically i'm
possible to audit them. BY this method
of accounting the bank, without de-
lection by the examiners, had the doubt
FIJI and worthless notes renewed, with
the interest added to the note at the
time of renewal. This interest on worth
less paper which had not been collected
was credited to some one of the earning
accounts, and as the dividends were reg
ularIy paid this resulted in paying the
capital out to shareholders as divi-
dends.'
Reports TO headquarters show that an
examiner finally did become suspicious
shortly before the bank was closed. and
insisted that a new set of books be in
stalled. The bank officers did this under
protest, the report says, but abandoned
the new system and returned to the old
one two days later after the examiner
had left town. Returning to Quanah un-
expectedIy, the examiner found the
change and reported it by telegraph to
Washington.
When a special representative Of the
Controllers office rushed to Quanah h.
found the banks capitai and surplus
wiped out. By taking real estate and
notes from directors and officers and dis
counting the notes the bank was re-
stored to so:vency, SO that it could be
forced into voluntary" liquidation. A
new Institution named the Citizens Ma
tjonal Bank Of Quanah was Immediately
formed under the direction of the Con-
troIler. and it took over the old bank
No criminal or other proceedings to
fix the responsibility for the Quanah
National s kcondition have been taken.