The Washington times., 1911-07-09
CLEARING HOUSE EXAMINATIONS
By ]. CASTLE RIDGwAY.

| The scope of the clearing house as
sociation within the last few years
has greatly broadened, until now in
every city of cohmercial Importance,
it has become the pilot toward safe
banking and a safeguard in times of
financial distress.
Where the plan of clearing house
examinations has been adopted, is the
clearing house no longer merely a
place for the exchange of checks only.
The objection to supervision being
| exercised over a bank, except by its
own officers, is that it is an interfer-
ence with its business, and while ex-
pecting support and relief in time of
| trouble. the opponent to the clearing
| house plan of examinations, Is un-
willing to cooperate in the upbuild
| Ing of strong financial system and
the advancement of right banking
principles within the community.
Chicago claims the distinction of
being first to inaugurate the plan of
examining banks within its jurisdic-
tion by its clearing house examiner.
This step was taken early in 1906,
growing out of the failure in Decem-
ber, 1905, of the two banks in Chicago
owned and controlled by John r.
Walsh. Standing high in the financial
world, and rated several times mill
lfonaire, Walsh was the last banker
who 1T was thought would misapply
the funds entrusted to his care or
conduct the business of his two insti-
tutions in such a manner as to cause
disaster. His previous record had
warranted this theory.
The deplorable effects resulting from
corrupt and incompetent banking were
In evidence and to ward off such an
other calamity. the Clearing House
Association Of Chicago proceeded to
employ James B. McDougal, a former
EGas IRg noufs fhadepRa s.n%Rsf fa9p co.
Los Angeles, Minneapolis, St Paul.
Cleveland, New York, st: Joseph,
Nashville, and Oklahoma City have
Other cities. like Boston. Baltimore,
and Kansas City, have examinations
made by chartered public accountants,
who make report directly to the bank
under examination.
where the clearing house system of
examinations has been adopted. is
similar and includes not only the
clearing house banks. but all asso- |
ciated banks coming within its super
vision.
Examinations are made at irregular |
intervals, not oftener than twice a |
year, except where within the dis !
cretion of the examiner more frequent /
examinations are deemed desirable or |
necessary
without notice as in the case of a /
State or National bank examinations, |
the clearing house examiner proceeds |
to examine the books Of each of the |
banks within his Jurisdiction.
When the examination is completed. |
he makes duplicate reports showing |
the results of his investigation. The |
report sets forth in detail a descrip-
tion of the banks loans and other
assets: whether the institution has
the required amount of cash on hand;
the exact amount of its past due !
paper: what. If any. bad debts; the
amount Of accommodation extended
to directors as payers, indorsers, or
by corporations in which they are
interested: the amount of stocks.
bonds. and other securities carried and
whether held on the books in excess
Of the market value; whether the
amount shown on the books as capi-
tai surplus, and undivided profits is
represented by good assets; in other
words describing generally conditions
found in each department and with
any suggestions or criticisms, which
In his Judgment sound banking re- |
luires that an examiner should make.
One of these reports Is sealed and
fled in a vault under the control Of
the clearing house examiner The other
report is delivered to president of the
bank examined, and each director of
that institution notified by mail of such
requesting the director to
make acknowledgment of the receipt
IF such notice.
If at the end of two weeks, the exam
neer has not received an acknowledge
nent from each director. a second. or
third notice is sent to the diIatory
iirector. the purpose being to establish
he fact that every director shall be ad-
Used of the condition of his bank as
disclosed by the examiners report.
Only in aggravated cases Is the at
ention of the clearing house commit
ee called to Irregularities or condi-
itons demanding careful consideration
nd correction. II an examination dis
loses undesirable assets or losses like
v to jeopardize the safety Of depositors.
he committee from the clearing house