Evening star. [volume] (Washington, D.C.) 1854-1972, 1919-11-23
SHOULD KNOW ALL BORROWERS
AS WELL AS THEIR COLLATERAL
Some Comment on the Financial Develop.
ments of the Past Week-Elimination
of mo Fund.-" Checks Suggested
By i. A. FLEMING.

of No Funds {
BIZ ]. A. FLEMING.
Developments during the past week
have been interesting, and while not
profitable, have certainly furnished
very striking object lesson on the
importance of knowing the man back
of the note. as Just as important
proposition as knowing collateral
Bankers have come to realize That
Identification of the man presenting
p check for payment, unless KNOWN 10
the officials of an institution, per
sonally. is absolutely necessary. TheE
are also alert enough to recognize
that what purports to be CASHIERS
check is not always cashiers cnecA-
They must know the man present.
ing the check or he must be ldentlneo
aud in case of uneasiness. 1noo.se
5nent of the document is reqoirso on
the identifier. In the event OF the
check. draft, etc. calling for a large
sum of money-not drawn dneSty
on the bank where payment Is ASHu'
ton has been very generally adopted.
Recognized custom prevails WIN
regard to securities Stocks pass cur
rent between brokers and oahhs anu
customers with Endorsements properE
attested, without transfer OF actual
ovuership on the books of the cor
purati issuing the security.
We're Not Transferred.
had the securftie. which have fig
urrd in the weeks Developments as
obtained through alleged coiiusion VI
land been sent to the parent com
pany for transfer. as CUSTOMARY Wiz
permanent investments are maoe. ~
fact that they had been obtained otnsr
Than by legitimate means woon h~'0
Immediately developed
IL Is. as stated before, c0stoMdIy
for brokers and others TO :.
loans on Endorsed certificates, anu ~
reuuires caution and also Know
edIe of the borrower when hah"s
loans on this collateral
Bankers, brokers and commisslon
houses handling annually nhhonS
a nd millions of dollars either IN cai
rency or valuable securities Oh one
kind or another, must trust some one
sThey cannot keep all the thousAHo
:. nd one threads of the business IN
Iheir own hands: cannot run cranes;
I, ,eu books and count the dollars anu
know every one individually.
Ne is this fact that gives business 20
bonding companies. ana the
banker goes practically the required
liuait in bonding even the most
trusted employee. and In that ac'io'i
lies q large measure OF Safety
Caution in Opening Accounts.
II is poor policy for a bank to as
sumo business relations with any one
not properly introduced or who rs
not known by some official or the
Institution.
one or two honored checks or drafts
do not establish confidential reia-
1ionship between bank and customer:
That should come only after years OF
satisfactory business relationship
ALL of which leads to the story OF
SAFETY plan adopted years ago by a
large national bank in Chicago:
4 would-be customer. presenting
his letter of Introduction. is greeted
cordially. and initial business relA-
tons are on. with a deposit of checks.
money or draft. perhaps for eoilec-
1ion only. depending on the character
Of the deposit and Of the Introduction
Immediately eonndendai enpioye
of the hank is placed on the job OF
finding out all that can be ascertAlned
concerning the-new customer. and he
stays on until the bank has very
good record OF business activities. OK
fice location. associates. etc. from
business importance of the new de-
position.
II false business address is given.
false information rs to the character OF
the business in which the depos3tor Is
engaged. the bank knows it in short or
der and the account is ordered closed. or
the bank will be waiting for the Gus
toner to disclose his game, il he has
one.
There Is Protection in It.
There is protection in knowing your
customer. just as much as knowing
The collateral that he offers.
Washington bank depositors are
legion. but the number of depoSitors
who are likely to figure in collateral
loans is relatively small. while the
business people, as rule. are we'll
known to the banking fraternity.
Bankers have the protection of the
business statement from this class OF
customers. when seeking credit. with
the severe penalties for false infor-
nation as a deterrent against it.
Make Accounts Pay.
While proceeding with this discussion
IT is not out Of place to again call
q attention to the very serious condi-
Tions prevailing with regard to mo
funds" checks. Scores Of these checks
"a re sent back from banks to institu-
lions honoring them, day after day.
and day after day they again make
their appearance with the same sig
natures.
While the banks of the District
could not agree unanimously upon
the; proposition advanced to charge
q small gum monthly for the handling
Ofrunproitabl accounts, 1t is worthy
of note that bank after bank. some
NO CT onnnnAntS
clnrge. have dropped into line and
are. now making accounts pay their
way or eliminating them from their
records.
Ose bank official produced records
ouY about 100 accounts the other day.
zach OF which was costing the bank
directly 81 or more a month for the
labor needed to handle the checks
and deposits, the balances being OF
s.IGh limited amounts as to bring no
,rofit to the institution.
J;he result was the impost on the
: ccounts mentioned of 81 a month,
18th advice to the depositors to see
70 il that the deposits increased or
The checks decreased in the immediate
future.
Seek Bad Check Law.
Perennial efforts for the enactment
OF a bad check law have been resumed
with the current autumnal corrective
persed Time and again this measure
of arelief has been attempted for
hanks and abandoned without results.
There is very positive difference
between bad checks and the no
funds" documents. Banks have a
cry easy method of relief from the
later deposition. il they would but exer-
Else il, as some of them have found
Iosti1eir profit-close the accounts