The sun., 1910-07-09
JUGGLING COUNTRY BANK Cash
ENlNINERS SAY RISkr FINtN-
CING ~ BEING DONE.
spsruIaIsrs are Ba, iax On. 10 Ise Dep".'7
tors None, for Their O~n schemes
HH Doesar stop There WIN be Ar
rest, How Loans Are COaerairf.

reSts hoN toau> NTo
National bank examiners have infoT-
nation of tue doinEs Of some real estate
operators and other speculative fnSnci-rs
IN Now York who are buying up country
banks with the intention of using the
capital of rural dcposiiors 10 further
queer operations hereabout. The bank
examiners wont say precisely what they
are going 20 do about It. but they hint
that unless the men who are spoc'Iiatng
with other folks money don't stop there
will he a number of arrests.
Along with tho schemes To divert the
capital ot country hanks into wildcat
enterprises. the examiners say, ave other
plans TO make a given amount Of capital
do a double puT pose by means Of con-
ccalinE the loans Of the bank Lawrence
D. Murray. Comptroller ~ the Currency.
has devised method Of checking this
abuse. however. which no thinks will
Ue effective The changc involves
different system Of making out reports
Of condition from that now in use.
Thssc matters wero discussed At
meeting OF national bank examiners
which has been in session this week at
the Custom House All the examiners
Of the second district: coInpr Sing New
York. New Jersey aud Delaware. were
present at tho meeting Besides Mr..
Murray they were Frank W Alderman,
Howell y Bennett. Francis NJ. Buck.
Alvan l.. Fowler. Edward J. Graham.
Charles 4 Hanna. Benjamin Marcuse.
Charles S,aroi. Charles r.. Van Bi ocklin.
J. Van VTanken and r. D.. Watts.
The bank examine7H say ther" are
three methods commonly used, especially
in the West and South. by which money
10 borrowed by rural banks without
showing liability In their published re-
purts The loana, nevertheless. constitute
an indirect liability although for the time
bein they are not iogal liabilities.
An examiner pointed out yesterday
what these methods are. His explanation
took the form OF a written statment.
He said that by the first plan when a
country bank wants TO borrow money
from a New York correspondent without
showing redHcounts or bills payable on
it, printed statements IL sells a number 81
ita bills receivable 20 its president or
cashier or 60 one 81 its directors. who
then uses the paper as collateral 20 a
psrsonAl note for a like amount. This
the hanks New York correspondent de
counts
But the New FORK correspondent doesn Z
take any risks Both banks have an i'm
| phed or agreed understanding that the
| hank offering the paper will take care OF
| ~ when IL COMES due The bills recsivAbl,
are usually indors.d without rsCours"
| nv the s.llinR hank. but that statement
| ler't taken seriously IL usually appears
IN pencil 80 that the declaration can b.
rubbed out when the time comes for the
pap p.r 10 rs taken mp by the hank which
sold it
This plan has been used extensively
! aid the examiner. in the past by officers
nf some Of the Western and Southern
hanks. notably by William Adler OF the
state National Bank Of New Orleans and
| ? O. Bgelow Of Milwaukee. both Of whom
came To grief because OF their ambitious
| financial plans. OF which this system oi
/ raising the wind WAS a most important
! detail
! he second pan loI accomplishing Nif
same result doesn I involve a sale 10 an
| on Ger Of the hank and his reslle toxa
! New York correspondent The bank does
/ the business for itscf The bills are in
dorsed az Ieforc. without recourse.
with the same understanding that the
rank will take care of them when they
fall due There are often written in
structions in the New York bank that the
bills be charged To- the account of the
country hank when they come TO ma
turity. or els~ It IL understood that the
cashier is under moral obligation IN looI
out for them. no matter what his techuica
liability may he
The third plan - simpler II involves
merely the sale on the Part Of the country
hank 20 its New York correspondent ot
some of its railroad securities with the
understanding that the hank may repur
chase them at the maturity Of the obliR ga
ton
An thess plans said tho examiner
! are for the purpose Of heating the devil
around the stump by borrowing money
and not having to show u on the bank
reports
Mr. Murray's scheme for meeting thes'
practices ~ he presented IL tn the meet
ing of the examiners was this. The
hanks ars To he required to show in thei
reports NJ condition whsthsr or not thel
hav. sold any of their unmaturcd bill'
receivable bonds or other assets tn on
GERS. directors or others for the purpos'
or borrowing money for the benefit ~ th'
hank
Jus; how far New York sp"cul ativ'
fnanciers have gone into the purchSss o
establishment OF country banks for th'
purpOss Of acquiring the money Of farme
dspositors for uss in enterpriss- OF a
questions bls character. the hank "N'
aminsrs wouldn't commit themselves
But they said they were convorsant with
the facts and that unless thees instittl
tions changed their methods their pro
inotsrs would find themselves in trouble
ILLINOIS COUNTS To DECIDE
Appellate DiS lsIou Refuses to interfer