El Paso herald. (El Paso, Tex.) 1901-1931, 1910-05-09

The Clearing House Association Of Chi
cago was the pioneer in the establish
ment of an independent system OF exam
nations in this country. Its system was
inaugurated on June 1, 1906, with re-
suits that have more than fulfilled ex-
pectations. The Chicago examiner
operates under the following condit1onS'
The examinations extend to all the asso-
ciated banks of Chicago and to all non
member institutions. The work is con-
Quoted with the aid of five regular
assistants, each fitted by experience TO
thoroughly do that part of the work
assigned to him. The examinations IN
clude, besides a verification of the
assets and liabilities of each bank. SO
far as is possible, an investigation into
the workings Of every department anu
are made as thorough as is practicable
Directors Kept Advised.
After each examination the examiner
prepares a detailed report in duplicate,
describing the banks loans. bonds, IN
vestments, and other assets, mention
ing specially all loans, either direct OF
indirect, to officers, directors, or en-
ployes, or to corporations in which they
may be interested. The report also con-
tains a description of conditions founo
in every department. One of these re-
ports is filed in the vaults Of the clear
ing house. in the custody of the exam
liner. and the other IS handed TO the eX-
amined banks president for the use or
its directors.
The individual directors are then noti-
fled that the examination has been made
and that a copy Of the examiners re-
mort has been handed to the president
for their use. In this way every dlrec-
tor Is given an opportunity TO see the
report, and the examiner, in every IN
stance, insists upon receiving acknoWl-
edrement of the receipt of these notices
The detailed report retained by the
examiner is not submitted to the clear
ing-house committee, under whose d.
rect supervision he operates, unless the
discovery Of unusual conditions makes
it necessary A special report In brieI
form is prepared in every case and read
to the clearinghouse committee al
meetings called for that purpose Inc
report is made in letter form, and des-
cribes in general terms the character OF
the examined banks assets. points out
all loans, direct or indirect, to OFFICERS
directors or employees, or to corpora
titons in which they may have an IN
tereSt.
Other Associations Follow.
The example of Chicago was followed
in less than a year by the Clearing
House association of Minneapolis ana
later by the banks of St Paul, ST LOUIS
Kansas City, st. Joseph and Philadel-
phta. The methods differ somewhat In
different cities, but are directed to the
same result Of more rigorous examina-
ton of assets and methods than are
assumed by the national bank examin-
ers under the federal law.
In dealing with the panic or $780, Mr
Cannon points out that, beginning with
1860. the issues Of clearing house certl-
ficates at New York alone, have amount
ed to the enormous aggregate or SZos'-
$4,000, all of which have been redeemed
without the loss Of a single dollar, ana
at periods ranging from three to seven
months from the date of the first issue
while no attempt is made to enter upon
an academic discussion Of the causes OF
the manic. the remark of prominent
banker and economist is quoted to the
following effect:
THE truth is that responsibility ior
the panic of 1907 lies at the door OF our
currency system. No other adeQuaIe
cause can be found. We do business
nv the modern system Of bank credits
b,,t we have failed to supplement TINS
machinery with the means for readliy
converting bank credit into cash.