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The Banker's magazine
Digitized by t^ooQle
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THE
Bankers Magazine
RHODES JOURNAL OF BANKING AND THE BANKERS' MAGAZINE CONSOLIDATED
VOLUME LXXXI
JULY TO DECEMBER
1910
NEW TORE
THE BANKERS PUBLISHING CO.. Publishers 263 BROADWAY
Digitized by t^ooQle
COPYRIGHT 1910 BY THE
BANKERS PUBLISHING CO.
Digitized by t^ooQle
INDEX
July to December, 1910
I. EDITORIAL COMMENT AND LEADING ARTICLES
Adjusting branch bank finances 786
American Bankers’ Association 142
American Bankers’ Association con- vention 443
Ancient and modem millionaires 622
Automobile owners being watched.... 447
Bank atmosphere 783
Bankers and banking problems 448
Bazo v. Gonzales (credit insurance).... 628
*' Bicentral banking” 610
Bills of lading controversy 616
Business and the crops 444
Canadian banking and commerce .... 293
Casualty Insurance, cost of 444
Central bank, a modified 609
Central bank of limited scope 621
Central bank, the use of public funds
for 781
Central bank, President not for 4
Central bank with branches, a 776
Chicago banks consolidated 1
Commercial reports by banks 8
Comptroller’s credit bureau 611
Congress and banking legislation.... 620 Continental National Bank, Chicago, consolidated with Commercal Na- tional, Chicago 1
Cotton bills of lading 460
Country’s foreign trade 289
Credit for farmers 6
Credit information for examiners 6
Credit insurance 612, 623
Credit, the straining of 291
Crop conditions 446
Currency reform at last 449
Death of eminent financiers 291
Department store banking 289
Deposit guaranty defended 288
Division form of bank organization.. 144 Driving out capital 616
Eckbardt, H. M. P. (adjusting branch
bank finances) 786
Eckhardt. H. M. P. (Canadian hanking
and commerce) 293
Ellis, Leonora Beck (picturesque In- dustries of a unique state) 451
Express business, regulation of the... 290
Forcing bank liquidation 146
“Get rich quick” schemes 613
Greenbacks, changing the denomina- tion of 782
Harmon, Gov., on the passage of new Irwb ...... . . ................... 446
Hopkins, Prof. G., (the soli as a bank) 776
Impending political changes 286
Inflation and high prices 618
Interest on deposits, proposal to limit 6
Is suspension the remedy in a crisis.. 287
Lyford, F. E., on suspension in a crisis 287
MacVeagh, Secretary, on formation of
national currency associations 143
Making the corporations behave 611
Mexican centennial 139
Mexican railways listed in Paris 5
National bank charters to be limited
in number 2
National bank examinations 446
New York bankers’ convention 140
Obstacles to railway construction 617
Our unappeasable appetite for cur- rency 445
Perkins, Geo. W.f on regulating big
corporations 6
Picturesque Industries of a unique
state 451
Politicians and the critics 2
Postal savings bank, the 145
President Taft's ambition 444
Prices and production 292
Private bankers, regulation of 286
Production and consumption 143
Promissory note, criticism of 4
Republican' opportunity, a 619
Reserve city banks .. 460
Reserve lending power 146
Smith, Wm. Henry (U. S. Treasury). 9, 147
Soil as a bank, the 776
Sprague, Prof. O. M. W., on strength- ening the national banking system.. 449
State bankers’ associations 621
Stilwell Arthur E.t a plea for honest
business methods 285
Stockwell, Herbert G. (bank atmos- phere) 788
Tainted money 7
Taxation question, the ; 627
The straining of credit 291
Travelers’ checks and bankers’ money orders 8
United States Treasury, the 9, 147
Value of courtesy 618
II. BANKING AND FINANCIAL LAW AND REPLIES TO QUESTIONS
Accommodation indorsers — order of
liability 15
Banks right of set-off — deposit made for special purpose 20
Cashier — liability for acts of assistant
cashier 18
Cashier — powers of 311
Check of corporation drawn by treas- urer to his own order— notice to bank 168
Check payable through a bank — right of a drawee bank to refuse payment
when otherwise presented 467
Deposit slip made out to wrong name
— effect of entry in pass-book 172
Discount procured by false representa- tions— right of bank to rescind and
charge back 178
Forged check — duty of drawee bank to know drawer’s signature — guaranty of Indorsements 635
256138
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IV
THE BANKERS MAGAZINE
Guaranty of indorsements — effect of — recovery money paid 315
Negotiable instruments — necessity for use of word “order” or “bearer” — construction of negotiable Insruments law 793
Payment of check of corporation not
properly countersigned 16
Payment of forged check — notice by
depositor— delay — demand 797
Presentment of draft for payment —
effect of retention by drawee 316
Promissory note — bona fide holder — in- dorsement “without recourse” — state- ment of consideration 17
Wrongful refusal to pay customer’s check — amount of damages 465
LIST OF CASES.
Bank of Sampson vs. Hatcher 17
Ellis vs. Western Nat. Bank et al 16
Farmers’ Bank of Nashville vs. John- son, King & Co 467
First National Bank of Omaha vs. Whitmore 316
Havana Central R. R. Co. vs. Knicker- bocker Trust Co 163
In re McCord 15
National Bank of RoHa vs. First Bank
of Salem 634
New York Produce Exchange Bank vs. Twelfth Ward Bank 315
Pensacola Bank and Trust Co. vs. Na- tional Bank of St. Petersburg 311
Pratt vs. Union National Bank 797
Rio State Bank vs. Amondson 19
Rosalie Flatow, admr., etc., vs Jeffer- son Bank 173
Schwartz vs. State Bank 172
Third National Bank of St. Louis vs.
Ober 465
Wagner vs. Citizens' Bank & Trust
yu. *w
Western Nat. Bank vs. Louisville
Trust Co. et al 16
Wettlaufer vs. Baxter et al 793
CANADIAN LAW.
Banking — security for debt — assign- ment of lease — transfer of business —
operation of bank 472
Banks and banking— check initialed by local manager — cashed by another bank— first bank refused payment — right to recover on check from, first
bank — custom of bankers 475
Banks and banking — insolvent bank taken over by another bank — agree- ment as to — validity of agreement- power of directors to make agree- ment— bank act. s.s. 99-111 24
Bill 9f exchange — acceptance for ac- commodation of third person — evi- dence — admissibility — rejection at trial — admission by affidavits on ap- peal— indemnity — implied contract — county court — jurisdiction — removal
of action into high court — costs 304
Cancellation of instrument — company — winding up — mortgage by insolvent company to bank to secure existing
debt 800
Chose in action— assignment of— notice to debtors — right of assignee to moneys collected by assignor and
handed over to another creditor — estoppel by conduct — duty of assignee to notify other creditors of the as- signment 640
Contract — construction — sale of busi- ness— covenant of purchasers to make annual payments — covenant of vendors not to engage in similar business — independent covenants —
performance of substantial part of
contract 176
Contract — equity running with — offset — accounting — form of action 644
Promissory note — accommodation mak- er— liability of — payee pledge note to bank after maturity as collateral security — right of bank to recover amount due bank by payee — bank trustee for payee for balance of note — bills of exchange act. s.s 54 and 70 474
Promissory note— incomplete instru- . ment — delivery — holder in due course — bill of exchange act, secs. 31, 32 —
leave to appeal 320
Promissory note — indorser — bills of
exchange act, R. S. C.. 1906, c; 119, s. 131 — holder in due course — estoppel 642
Promissory note — procurement of sig- natures of makers by fraud — dis- count by bank — payment made on account - by perpetrator of fraud be- fore maturity — holder in due course — acquisition by plaintiffs from bank — liability of makers confined to bal- ance paid to bank by plaintiff — notice of fraud — circumstances put- ting plaintiffs on enquiry — liability of payee to indemnify makers — costs.. 27
Promissory notes — consideration — transfer of bank shares — illegal traf- ficking by bank in its own shares — directors — bond — notes given to re- pair wrongdoing — holder in due course — acquisition of several notes after maturity — notice of Illegality to others — evidence — onus — costs 178
Succession duties — New Brunswick statute — foreign bank — special deposit in local branch — depositor domiciled In Nova Scotia — debt due by bank — notice of withdrawal — enforcement of
payment 174
Suretyship— simple contract — discharge of due surety under seal — confirma- tion of original guarantee — death of surety — powers of executors — contin- uance of guaranteee 317
LIST OF CASES.
Bank of British North America vs.
Wood 640
Farrow vs. MacPherson 804
Graham vs. Driver (1 O. W. N., p. 767) 27
Hammond vs. The Bank of Montreal.. 800
Hubbard vs. Home Bank of Canada . . 320
Knectel Furniture Co. vs. Ideal House Furnishers, Ltd 642
Lovltt vs. the King 174
Merchants Bank vs. Thompson 474
Ontario Bank and the Bank of Montreal 24
Ontario Bank vs. Chas. B. McAllister and Jane B. McAllister 472
Royal Bank vs. Schaffner 644
Scott vs. The Merchants Bank of Can- ada 475
Stavert vs. McMillan 178
Telford vs. Sovereign Bank of Canada 176
Union Bank of Canada vs. Jane E Clark and Alexander Gray Farrell, executors of James Maitland Clark.. 317
Digitized by t^ooole
INDEX, JULY TO DECEMBER, 1910
v
REPLIES TO LAW AND BANKING QUES- TIONS.
Deposit to meet outstanding check —
charging off depositor’s note 479
Draft on savings account with interest 181
Giving information as to depositor's account 180
Obligation of endorser of check where discrepancy between words and fig- ures occurs 805
Payment of interest coupons on called
bonds 180
Promise over telephone to pay check.. 64$
Right of administrator to deposit trust
funds in his own name ...... 29
Right of shareholder to inspect books of national bank 478
Suit by bank where draft indorsed “for collection’’ 479
III. BANKING MISCELLANY, REPORTS, ETC.
Adams. Samuel G.. portrait of
Adverse influences
Advertising, backing up
Advertising criticism
Advertising, how banks are
Advertising, how banks are
Advertising talks
Alcorn, Edgar G. (keeping a record of
open and closed accounts)
Alcorn, Edgar G. (the rubber stamp as
a time saver)
Alvarez. Bernardino, sketch of with
portrait
American Bankers’ Association, annual
convention of
American Bankers’ Association, annual
program of convention
American Bankers’ Association conven- tion
American Bankers’ Association pro- gram
American dock article
American Exchange National Bank of
New York
American Institute of Banking, con- vention of
American Institute of Banking. New
York chapter
Americans not conversant with South
American conditions
American Trust Co. of Charlotte,* N. C.
Andrew, A. Piatt, portrait of
Andrews, Wm. E., portrait of
Are bonds a purchase?
Art of saving money
As to railroad dividends
Atlantic City banks
Attractive investments
Auto and the bond market, the
428
505
558
398
731
882
400
454
706
688
520
81
218
544
402
79
723
102
418
150
151 678 357
46
890
511
508
Bacheller, J. H., portrait of
Bailey, Geo. E., portrait of
Banco de Coahuila. building of
Bangs. J. E. (the art of saving money)
Bank Advertising, a broad view of
Bank advertising and its educational
value
Bank examinations by directors
Banking and Financial Notes
121, 265, 426, 583, 759 899
Banking legislation, a review of 714
Bank of British North America 895
Bank of Montreal 259
Bank, the employee, and the pension
and participation fund 368
“Barometer Industry.” the 835
Bass, J. H.. portrait of 408
BeUamore armored bank car, the 739
Bernstein, Joseph E.. portrait of 571
Blcentral banking system, the 725
Big railroad deal that went wrong. . . . 334
Bills of exchange, international con- ference on 713
Black iston, G. P. (a successful bank
advertisement) 232
Blackiston, G. P. (going one better
than four per cent. Interest) 881
Boal. A. G. (seeking business from
shareholders) 165
Boldt, Adolph (Industrial Houston) .... 850
Bond. Frederic Drew (our overdone stock market) 665
414
571
878
367
103
230
42
Booklets and house-organs 105
Book Reviews 107, 263, 425, 888
Bowman, D. Arthur ' (municipal bonds
as investments) 512
Bond, Frederic Drew (the ethics of
finance) 198
Boston Safe Deposit & Trust Co 263
Brown, E. N., portrait of 875
Brown, James N., portrait of 247
Budd, Thomas J.. portrait of 274
Bughman, Henry C., portrait of 663
Bush, Irving T., portrait of 370
Bush Terminal Co., sketch of opera- tions 371
Byllesby, H. M. & Co. (article on) 77
Byllesby, Henry M., portrait of 77
Cabell, Royal E., portrait of
Cad well, E. B. (some facts about timber
bonds)
Calder. Wm. M., portrait of
Colwell, Chas. S., portrait of
Cambell. 8. S., portrait of
Cannon, James G., sketch of with por- trait
Carter, S. F., portrait of
Gastello, Geo. E. (selling bonds)
Gastello. Geo. E. ( the personal equation
In the bond business)
Caverly. Edward F.. portrait of
Certificate of deposit, a unique
Chance, Merritt O., portrait of
Clarke, Courtney (things that are worth
while)
Clarke, Lewis L., portrait of
Clearing situation, a
Clements, Judson C. (railway regula- tion)
Commercial and Continental National
banks of Chicago consolidated
Commonsense about the trade balance
Contest over railroad rate increases
Continental Bank & Trust Co., Shreve- port. La
Copper accumulation
Corn Exchange National Bank, Phila- delphia
Corporation publicity
Cotton bills of lading
Crane. A. A., portrait of
Crawford. Coe L, portrait of
Cromwell, Casper (as to railroad divi- dends )
Cromwell. Casper (short-term notes as
investments)
Crop and business situation, the
Current railroad strategy
Curtis, J. F., portrait of
Danger of current speculation in land Darrell, Chas. A. (the question of the
capital supply)
Davidson. Harold A., portrait of
Dawson, Hon. Thos. C., portrait of
Definitions that define
Diamond National Bank of Pittsburgh Diaz. General Porflrio. portrait of ....
Diaz. President of Mexico
Diaz. President of Mexico, annual mes- sage of
Dillingham, Chas.. portrait of
Domestic corporations in Mexico
148
47
247
764
760
653
862
69
342
276
813
151
354
285
190
498
1
670
352
754
67
84
676
378
906
226
46
826
244
54
*950
13’
188
673
721
704
672
749
876
876
707
861
219
Digitized by c.ooole
VI
THE BANKERS MAGAZINE
Doty, p. B., portrait of 767
Dunn, D. C., portrait of 854
Earl, Edward, portrait of 762
Economical and efficient handling of
freight at terminal points 371
Economic position of the trust com- pany, the 482
Ekirch, Arthur A. (that bank across the
way) 396
Ellet, John S., portrait of 437
Engineering and commercial skill ap- plied to the operation and manage- ment of public service corporations.. 77 Escher, Franklin (danger of current
speculation in land) 188
Escher, Franklin (the auto and the
bond market) 508
Ethics of finance, the 198
Europe’s investment in American se- curities 824
Expert financial service as applied to business enterprises 721
Fairchild, Julian D., portrait of 422
Farnsworth, Fred E., portrait of 691
Fassett, J. Sloat, portrait of 226
Finch, Frnnk B. (timely illustrated safe
deposit advertising) 94
First National Bank of Davenport, Iowa 116 First National Bank of Fort Wayne,
Ind 405
First Nat. Bank of Pittsburgh, com- ment on house-organ 847
Folsom, Clyde H., portrait of 427
Foreign Banking and Finance
30, 166, 310, 480, 656, 788
Fourth National Bank of New York,
alterations on building 114
Fowler, Willis J., port! ait of 14
Franklin, A. (big railroad deal that
went wrong) 334
Franklin, A. (current railroad strategy) 64
Freeman, H. R., portrait of 409
French purchases of American bonds . . 53
From a foreign viewpoint 336
From a western viewpoint 675
From the Rio Grande to Panama 867
From the savings banks’ point of view 196 Fulton Savings Bank, Fulton, N. Y 582
Gardner, James P. (the bank, the em- ployee and the pension and participa- tion fund) 368
Givens, J. A., portrait of 283
Glendining, Geo. R. (bank advertising
and its educational value) 230
Going one better than four per cent.
interest 881
Gorman, J. J., portrait of 670
Guaranteed stocks 185
Guarding against the carelessness of
safe deposit box renters 844
Guild, Curtis, portrait of 226
Gunnison, Frederic E., portrait of 246
Hamburg, A. V., portrait of
Hamilton, Alexander, portrait of .... Hamsher, C. F. (bank examinations by
directors)
Handling incoming dividends
Harper, Benj. F., -portrait of
Harris, B. D., portrait of
Hasking, James G., portrait of
Hepburn, Hon. A. Barton, portrait of.. Hepburn, Hon. A. Barton, portrait of. . Hepburn, A. B. (the crop and business
situation)
Herrick, Clay, trust company articles
32, 161, 329, 482, 630, 806
Hill, Frederick (guaranteed stocks) .... 185
Hill. Julien H., portrait of 437
Hills, Chas. D., portrait of 160
Hill, Wm. M., portrait of 437
Home Trust Co. of New York, Brook- lyn 245
Hord, John S., sketch of with portrait 387 Hotchkiss, Thomas W*. (guarding against the carelessness of safe de- posit box renters) 844
416
888
42
661
J51
862
670
139
761
244
Houston, Texas, article on 860
Howard, L. M., portrait of 767
Howell, J. Flank (a clearing situation) 190
How to find outstanding drafts 324
Human nature as seen in a safe deposit
vault 216
Huseman, L. E., portrait of 753
Huttig, Chas. H., portrait of 690
Illustrated advertisements 737
Improvement 826
Increasing business by publicity 847
Industrial Houston 850
Industrial preferred stocks 202
Instalment plan, the 368
Insurance companies’ dilemma 838
Interest rate on government bonds 836
Investment of surplus funds 192
Ironbound Trust Co. of Newark, N. J. 413
Kane, Thos. P., portrait of 12
Keeping a record of open and closed
accounts 809
Keisler, Rufus, Jr., portrait of 415
Keplinger, H. A., portrait of 409
Kings County Trust Co. of Brooklyn.. 422
Kloepfer, John A., portrait of 275
Kniffin, W. H., Jr., savings bank
articles by 36, 153, 297, 457, 648, 814
Kniffin, W. H., Jr. (utility the basis of
mortgage loans) 489
Knowledge of investments 346
Kreeck, Geo. L. (why not an American system of banking?) 390
LaFarge, O. H. P. (a mortgage loan
register for savings banks) 305
Lavallette, M. C. (Wall Street and
Washington) 486
Layton, Caleb, portrait of 151
Little, Malcolm C., portrait of 879
Livingstone, W., portrait of 689
Los Angeles chapter A. I. B. show 642
Lough, William H. (dividend payments) 831
Ludlow, Samuel, Jr., portrait of 568
Ludlow, Walter W., portrait of 150
MacFadden, F. D., portrait of
Machado, Francisco deP., sketch of
with portrait
MacVeagh, Franklin
“Magnificent unit” of $1,000
Management of a safe deposit depart- ment
Maturity guide for bankers
McAllister, J. R., portrait of
McAshan, J. E., portrait of
McCarthy, J. T., portrait of
MtaClung, Hon. Lee, portrait of
McConway, Wm., portrait of
Mexican Centennial commissioners
Mexican railways hitching up with the
Pan-American
Mexico, banking status in
Mexico’s centennial, official program..
Miller, Theo. 8., portrait of
Mississippi Valley Trust Co. of St.
Louis twenty years old
Modern co-operation at its best
Mtoran, B. Nathan (the real bond mar- ket)
Morrison, John W. (witn regard to
prices)
Mortgage loan register for savings
banks, a
Moving the crops
Mundy, Floyd W. (relative merits of
railroad stocks and bonds)
Municipal bonds as Investments
Murray, Lawrence O., portrait of ....
415
701
160
194
651
663
600
861
697
148
566
226
98
589
385
415
808
118
628
604
305
183
63
612
148
National Banks of twenty-five million
dollars capital 323
National currency association of the
city of New York, by-laws of 403
National Railways of Mexico buys Pan-
American Ry 638
National Rys. of Mexico, comment on earnings 710
Digitized by t^ooQle
INDEX, JULY TO DECEMBER, 1910
vu
Nelson, Godfrey N., portrait of 908
New era in railway finance 182
New York savings banks show large
gains 308
New York trust companies 806
Not too much gold 679
Nolting, Frederick E., portrait of 128
Officers of trust company section .... 807
Orr, J. H., portrait of 409
Our overdone stock market 665
Our transit department 325
Overman, Lee S., portrait of 226
Palmer, Col. Wm. H„ portrait of 436
Paraguay 103
Patterson, Brown A., portrait of 563
Pennsylvania Railroad, New York sta- tion of 692
Pennsylvania terminal, the new 359
Peoples Trust Co. of Brooklyn 108
Perils of unsound legislation 211
Personal advertising 556
Personal equation in the bond business,
the 342
Peru's resources 379
Phillips, W. O., portrait of 753
Pierson, Lewis E., portrait of 443
Plainfield Trust Co., Plainfield. N. J... 891
Postal savings bank soon to be a re-
ality 463
Posting and proving methods in sav- ings banks 457
Posting and proving methods in sav- ings banks 816
Potts, W. W. (a trust department outfit
for the smaller trust company) 161
Price. Wm.. portrait of 748
Prosperous South America 635
Question of the capital supply, the.... 673
Railroads and the government, the 495
Railway regulation 498
Raser, William Heyl (a trip to Alaska
and British Columbia) 86
Reading the financial page 51
Readjustment 501
Real bond market, the 828
Redfern. Samuel, portrait of 122
Relative merits of railroad stocks and
bonds 63
Rendon. M. Cervantes (domestic cor- porations In Mexico) 219
Rendon, M. Cervantes, portrait of 219
Retrospect and prospect 681
Reynolds, Geo. M., portrait or 1
Rice. J. 8., portrait of 854
Ridgely. Hon. Wm. B., portrait of .... 724
Robinson, Chas. L., portrait of 722
"Robinson Crusoe’s father" 41
Rogerson, Chas. E., portrait of 252
Rook, Cot Chas. A., portrait of 226
Rubber stamp as a time saver, the.... 454
Sabin, Chas. Hamilton (sketch of with
portrait) 80
San Antonio, a progressive commercial
center 521
San Francisco’s notable new bank
buildings 234
8a\ing» bank buildings as an asset.... 153
Savings bank men in Los Angeles 648
Savings banks and the bond market . . 62
8av4ngs bank, the helpfulness of the. . 666
Savings deposits, big increase in .... 309
Savings deposits in trust companies . . 808
Scaling down deposits in savings banks 654
Schober, Howard C.. portrait of 151
Schreiner, Geo. A., portrait of 521
Schreiner, Geo. A. (San Antonio, a pro- gressive commercial center) 621
Schumacher, Chas. p. (how to find out- standing drafts) 324
Scott, Wm. A. (a review of banking
legislation) 714
Scovll, C. L. (French purchases of
American bonds) 63
Bcovil, Chas. Lee (knowledge of in- vestments) 846
Scranton (Pa.) Savings Bank
Second National Bank of Pittsburgh.. Seeking business from shareholders.... Segregation of savings deposits, the....
Selling bonds
Short-term notes as Investments
Simmons, Peter (corporation publicity)
Slnton, Jas. W.» portrait of
Sloat, Homer (the new era in railway
finance)
Small bank and office building
Smith, Matt O., sketch of with portrait
Some facts about timber bonds
South Texas National Bank of Hous- ton
Speculation In bank stocks
Sperber, Otto (Peru’s resources)
Sprague. Charles E. (surplus and divi- dends)
Stair, Joseph P., portrait of
"Steel” and the tariff
Stephens, Geo., portrait of
Stevenson, Charles W. (speculation in
bank stocks)
Stilwell, A. E., on conditions abroad... Stilwell, Arthur E. (the railroads and
the governments)
Stoll, Horatio F. (San Francisco’s new
bank buildings)
Successful bank advertisment, a
Surplus and dividends
Swartz. Wm. K., portrait of
Taylor, H. Prentiss (retrospect and
prospect)
Taylor, Kendall (contest over railroad
rate Increases)
Teller and his cash, the
Teller and his task, the
Terret, John (Europe’s investment in
American securities)
Terret, John (moving the crops)
Terret, John (readjustment)
That bank across the way
That safe deposit booklet you’re plan- ning
Things that are worth while
Thomas. L. E., portrait of
Three billion bushels of corn
Thrift experiences
Thrift stories
Timely Illustrated safe deposit adver- tising
Tinker, H. N., portrait of
Tonsmelre. A. C. (our transit depart- ment)
Tonsmelre, A. C.. portrait of
Trichel, J. C.. portrait of
Trip to Alaska and British Columbia.. Trust companies and the central bank Trust companies with foreign branches
Trust company forms
Trust company men at Los Angeles . . . Trust department outfit for the smaller
trust company, a
Turn for the better, a
Tyler. Ralph W., portrait of
Union Trust Co. of N. J., Jersey City,
N. J
Unique saiety vault building
Utility the basis of mortgage loans . . .
Vernon. W. T.. portrait of
Virginia bankers’ convention
Vosburgh. L. F., portrait of
Wadsworth. P. C. (the bicentral bank- ing system)
Wall street and Washington
Warehouse problem, the
Watts, F. O., portrait of
Welngarton, Carl (the commonsense
about the trade balance)
Welsh, Thomas W. Jr., portrait of
White, Chas. E., Jr., (a small bank and
office building)
White, Edward (modem co-operation at its best)
898
659
165
329
59
826
676
437
182
745
366
47
574
337
379
814
247
67
420
337
264
495
234
232
81
24
$
567
552
489
148
73
686
725
486
544
688
670
663
746
118
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THE BANKERS MAGAZINE
■ Whitlock, James P. (handling incoming
dividends) 661
Why Mexico needs foreign capital .... 99
Why not an American system of bank- ing? 390
•Willoughby, H. H., portrait of 906
Wills, D. C., portrait of 749
Wise saws and modern instances 510
With regard to prices 504
Wood, W. H. portrait of 420
Worden, C. H.. portrait of 409
Young James M., portrait of 563
Youngman, Elmer R. (perils of un- sound legislation) 211
Zambrano, Francisco de P., portrait of 878
BOUND VOLUMES OF THE BANKERS MAGAZINE
Beginning with July, 1895, the volumes of The Bankers' Magazine comprise the numbers- for six months. Price, bound in cloth with leather backs and corners, 3* per volume, by mail or express prepaid 40 cents additional.
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GEORGE M. REYNOLDS
President Continental Commercial National Bank, Chicago; Former President American Bankers' Association
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BANKERS MAGAZINE
ELMER H. YOUNGMAN. Edfot
SIXTY-FOURTH YEAR JULY, 1910 VOLUME LXXXI, NO. I
IMPORTANT BANK CONSOLIDATION AT CHICAGO
/k RRANGEMENTS have been prac- tically completed for the merging of the Commercial National Bank and the Continental National Bank of Chi- cago into a single institution, to be known as the Continental and Commer- cial National Bank. This consolidation also includes the American Trust and Savings Bank, an institution owned by the Continental National, and the Com- mercial Trust and Savings Bank, owned by the Commercial National, the suc- ceeding institution to be the Continental and Commercial Trust and Savings Bank.
The following financial statements were used as a basis for the merger:
Continental (old)
Stock dividend
Continental (new)
Commercial (old)
New stock at $200 per share
Commercial (new)
Total new bank
merged institutions representing more than $200,000,000. The chief executive officers of both the old banks are widely known throughout the country. Both are Iowa men. Mr. Reynolds, presi- dent of the Continental National Bank, was formerly president of the American Bankers’ Association. It is well known that he was offered the post of Secre- tary of the Treasury by President Taft, but declined, preferring to remain in the banking business. Mr. Roberts, president of the Commercial National, was for several years Director of the United States Mint. He is recognized as an authority on banking and finan- cial subjects.
|
Capital. $9,000,000 1,800,000 |
Surplus. $4,500,000 1,800,000 |
Undivided Profits. $4,147,000 |
|
$10,800,000 |
$2,700,000 |
$4,147,000 |
|
8,000,000 |
2,200,000 |
2,825,000 |
|
1,200,000 |
1,200,000 |
|
|
$9,200,000 |
$3,400,000 |
$2,825,000 |
|
20,000,000 |
6,100,000 |
6,972,000 |
In brief, the Continental National makes new stock of $1,800,000 of its surplus and the Commercial National pays $200 a share for $1,200,000 of ad- ditional capital, in order to equalize the book values at $165 a share in the con- solidation.
This consolidation is one of great im- portance, as the Continental Commer- cial National Bank will at once take rank with the very large banks of the United States, the total resources of the
Mr. Reynolds will be the president of the Continental Commercial Nation- al, and it is probable that most if not all those who have been officially con- nected with the old banks will be re- tained in the new.
George M. Reynolds, president of the Continental Commercial National Bank of Chicago, is one of the best known and the best liked bankers in the United States. Born on a farm in Iowa about forty-five years ago, he has
l
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risen through successive stages of bank- ing experience to the head of one of the most important banks in the country and has also been honored with the highest position the organized bankers have to bestow. He has attained these places of responsibility, power and dis- tinction by the exercise of exceptional business ability joined to a remarkable aptitude for making a wide acquaintance among bankers and business men, with the result that these acquaintances de- veloped into friends of Mr. Reynolds personally and of his bank as well.
Perhaps in few banks in the coun- try— in none anywhere that we recall — has the spirit of genuine courtesy be- come so firmly instilled into the entire personnel of the bank as it did at the Continental National Bank under the presidency of Mr. Reynolds.
Of course, something more than cour- tesy is required to make a successful banker, and Mr. Reynolds is known to have the other necessary qualities. But a share of his success — and, we believe, no small share — has been due to that fine quality of consideration for others which we term courtesy, and which is the surest mark of a gentleman. Many bank officers possess this attribute as fully as does Mr. Reynolds. Few of them have succeeded so well as he in diffusing it among their associates and in making it an inviolable rule of the bank.
It has been declared by those in a position to know that the failure of one Chicago banker was largely due to a lack of courtesy. And the contrast af- forded by these two examples — the one of failure, the other of success — may well furnish a lesson to be profitably studied.
As was quite fully pointed out in the April, 1909, issue of the Magazine, banking in Chicago has had a remark- able growth in the past ten years. With the development of banking in the city and surrounding territory, the consoli-
dation of some of the existing banks was naturally to be expected, and the present merger can hardly fail to be advantageous.
We have frequently expressed the be- lief that a reduction in the number of the banks and an increase in their cap- ital equipment would be beneficial. Pos- sibly, in time, by this process a number of banks will be evolved, properly equipped and managed, for performing the functions of reserve banks.
LIMITING BANKING COMPETI- TION
J^ATELY announcement was made by Comptroller Murray that greater care would be exercised hereafter in granting charters for new national banks in places where the need for banking facilities appeared to be ade- quately supplied by the existing State banks.
This decision will tend to limit unwise banking competition and to improve conditions generally among the banks, for the too eager bidding for business is generally recognized as a fruitful source of disaster to banks that engage in it.
There is much ground for believing that the public would be benefited just now not by multiplying banks but by improving those we already have.
POLITICIANS AND THE CRITICS
"FROM different sources, both of high authority, come severe denuncia- tions of the critics — those superior souls who from their serene retreats tell how everything ought to be done from gov- erning the country to playing a Bee- thoven sonata.
First, Colonel Roosevelt, in his Paris lecture, declared, “It is not the critic who counts/' As the Colonel himself is one of the most vigorous critics the
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world has ever produced, what he prob- ably meant to say was, " Other critics do not count”
And we suspect that Colonel Roose- velt's successor in the White House also regards the critics as a low-browed lot. In the June number of the ‘'World's Work,” William Bayard Hale has an article on “The President at Work,” giving, no doubt, a substantial- ly accurate representation of the daily routine at the White House. Speaking of the President's attitude toward pub- lic sentiment, Mr. Hale says: “In
newspaper criticism he takes no stock. He puts his trust in the good friends around him and the consciousness of his own integrity.” Possibly, also, he may trust too implicitly to his own infalli- bility.
Newspaper criticism, especially of persons of the opposite political faith, is often narrow and prejudiced; but he who “takes no stock” in it neglects one of the chief sources of gauging public opinion aright, and public opinion can hardly be totally ignored in a republic.
No doubt the “good friends” of whom Mr. Hale speaks generally try to make themselves agreeable. The buzzing of the court flies always tickles the ruler's ears though it may dull his ability to hear the truth.
Neither the indifference of the Presi- dent nor the denunciation of the ex- President will deter the conscientious newspaper critics from pointing out their conceptions of public dutyi Should they do so, we are sure that in the end Mr. Taft and Colonel Roosevelt would be as sorely grieved as the exploiters of the public would be elated. The pri- vate interests desiring to gain special advantages by legislation and to put their hands deep into the public treas- ury would be glad to see the newspaper critics silenced. But our two most illustrious citizens have nothing to fear from just and honest criticism of their acts.
COMMERCIAL REPORTS BY BANKS
/"\NE of the many gratuitous services performed by banks is that of giving information regarding the finan- cial standing of persons or firms. The banks have come to be regarded as a sort of gratuitous commercial agency.
An interesting case, involving such service, was recently decided in Eng- land. It seems that one of the London banks addressed to a private banking firm a letter of inquiry as to the finan- cial standing of a certain person, to which the reply was given, “considered good.” It turned out not to be a good guess, and the private banking firm was sued for damages, but escaped because the answer to the inquiry did not bear the firm's seal. But the manager was held liable in damages amounting to £ 1,000. The ground of the verdict was that the manager gave his opinion recklessly and carelessly, without hav- ing fully satisfied himself as to the ac- curacy of his report. In giving his de- cision the judge said that he thought banks “should not give information at all if it was not to be complete; they were bound to make a thorough inquiry before they answered the question, or not to answer it at all.”
Commenting on this decision, the London “Bankers' Magazine” says that if this principle is upheld it will be fatal to the whole system of such in- quiries, “a system which, whatever its defects, is of enormous use in the fabric of credit. It is perfectly certain that that system is carried on, and the in- formation obtained under it accepted and acted on, on the understanding that the underlying principle is not the one enunciated by Mr. Justice Ridley, but the one put, quite accurately, by Mr. Bankes, counsel for the defendants. He said: ‘This is not a case of paying an enquiry agency to make a thorough investigation; nothing is paid here, and no one could complain that the defend-
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ant did not make enquiries; all he was bound to do was to give an honest opin- ion on such facts as he had before him/ A moment's reflection will show that no other principle is possible."
As the case is to be further heard in the Appeal Court, it is possible the de- cision as above stated may be set aside.
In this country the practice of giving information of the character involved in this case is widespread. As the na- tional banks at least have no authority to give a general guaranty, they usually escape legal responsibility for their opinions.
PRESIDENT NOT FOR CENTRAL BANK
VTITHEN it was announced about a year ago as a result of his speech at Boston that the President favored a central bank, we said that this was a most important piece of news, for it showed that Mr. Taft had fallen under the then potent spell of Mr. Aldrich and indicated that the leaders of the Republican party were preparing to override public sentiment and push the central bank scheme through. But evi- dently the President has received some light on the subject. He probably real- izes by this time that neither the central bank plan nor any other plan which Mr. Aldrich is likely to favor will meet with the approval of the people.
Recently the Washington (D. C.) “Post" published the following inspired statement, coming from Mr. MacVeagh, the Secretary of the Treasury:
“Mr. Taft was misquoted in the re- ports of his Boston address. The Presi- dent is not in favor of a central bank at the present time; and he has person- ally requested me to advise you that he is not advocating the establishment of such an institution."
It seems that the President found it necessary to make this declaration, as many bankers and others were of the
belief that the central bank scheme had the President's support and was to be made a party measure. They did not hesitate to express their disapproval of such a course, hence the President's dis- claimer.
Recent Washington dispatches state that the central bank plan is dead. But it may be that the advocates of this plan are playing a waiting game, and that the snake is only scotched, not killed.
President Francis B. Reeves of the Girard National Bank, Priladelphia, aptly said some time ago that even if the country should get the central bank started it would be short-lived. As Richard Third remarked ungallantly of Lady Anne: “I'll have her, but I'll not keep her long."
To establish a bank as a conservator of the public credit upon what must prove a temporary foundation, would seem to be an act of supreme folly. Those who propose such a course are apparently so enamored of their own opinions that they are blind to actual conditions.
THE PROMISSORY NOTE
REIGN financial writers and others who have compared our credit in- struments with those employed in Europe have criticised the American promissory note, which occupies so im- portant a place in the portfolios of our banks.
Perhaps the safety and flexibility of our money market might have been greater had our banks developed a larger use of the accepted bills so wide- ly used in Europe. Nevertheless, the promissory note has been of the highest service to the business community, par- ticularly to the farmers and small trad- ers who might find it difficult in provid- ing commercial paper of the character required by the European banks.
In this country there are many bor-
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COMMENT
5
rowers also who can not offer collateral in the shape of stocks or securities, but they need banking accommodation and deserve it. Indeed, it will probably be found that the payment of loans of this character occasions less disturbance to the money market than the call loans which are better secured.
We have no doubt that the greater employment of the accepted bills used in Europe would be of much advantage here, but at the same time it should not be forgotten that under conditions as they exist the single-name promis- sory note is a credit instrument of great usefulness.
MEXICAN RAILWAYS LISTED IN PARIS
1^’UCH comment was occasioned b;
the recent announcement that the second preferred stock of the National Railways of Mexico had been admitted to the regular list of the Paris Bourse.
While the negotiations that led to this result were directed by Messrs. Laden- burg, Thalmann & Co., who with Kuhn, Loeb & Co., Speyer & Co., Hallgarten & Co., and other bankers were readjust- ment managers of the Mexican Rail- ways, there is no doubt that Finance Minister Limantour greatly assisted in the matter. French investors are heavily interested in railways and bank- ing in Mexico already.
LIMITING INTEREST ON DE- POSITS
AT the last annual convention of the New Jersey Bankers’ Association action was taken looking toward an agreement to pay no more than three and one-half per cent, on savings and time deposits and to limit the interest on active accounts showing a balance of not less than $500 to two per cent.
We believe that the St. Louis bankers a short time ago took some action of a
similar character, but they were in- formed that such an agreement would be a violation of the anti-trust act. It is hoped that Jersey justice may not be invoked to prevent the bankers of New Jersey from carrying out what is cer- tainly a laudable purpose.
Undoubtedly the offering of high rates of interest to secure deposits con- stitutes a serious evil, and one that it is extremely difficult to cure except by concerted action. For if a few banks persist in offering a high rate, the other banks are almost forced to adopt a sim- ilar policy, however much they may dis- approve of it in principle.
The New Jersey bankers in this mat- ter have acted in a way that will still further raise the already high reputa- tion borne by the banks of that State.
REGULATING THE BIG CORPO- RATIONS
DDRESSING the Graduate School of Administrative Science of Har- vard University recently, Geo. W. Perkins, of the firm of J. P. Morgan & Co., said:
“The officers of great corporations should realize that such concerns are more nearly public institutions than pri- vate property. I firmly believe that sub- stantial progress in this direction is being made. While the agitation of the last few years has been unfair and harmful in many instances, on the other hand it has set business men thinking; has awakened the business conscience, and has brought a new realization of the fact that it is as true of business as it is of the individual that there is no permanent success unless it be based upon integrity of character.
“Let those of us who are in business be fair with the people and the people will be fair with us; let us see and ac- cept the tendency of the times; let us realize our responsibilities, and our
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THE BANKERS MAGAZINE
problems will be far easier of solution. If we believe that in our Republic the people's word is law, let us believe it in all things, and if the people have de- cided that the time has come to take a hand in how business shall be con- ducted, is it not plain business sense to meet the question at least half way rather than fight it all the way? Poli- tics has fought business and business has fought politics until both have been sorely wounded, and in the general scrimmage the public has had a pretty hard time, and under the circumstances has been long-suffering and patient.
“Giant corporations would be, not a menace, but a great public benefit, if managed under laws that would compel proper publicity and punish officers for improper methods.
“How can this be done? Here is the problem for us all to think about. For my part, out of the multitude of sugges- tions there seems to be but one possi- ble course, viz., national control, ac- companied by publicity. State control is impossible because steam and elec- tricity have largely wiped out State lines in commercial undertakings."
CREDIT FOR FARMERS
AN interesting suggestion comes from Rome, written by David Lubin, delegate of the United States Interna- tional Institute of Agriculture. It deals with the provision of better means of supplying credit to cotton-growers and farmers. Mr. Lubin says that these producers now sell their product at the lowest price and procure their money or credit at the highest price. In order that the agriculturists may have access to a cheaper source of obtaining credit, he proposes “the formation of coopera- tive groups among the farmers, and by the syndicating of their individual as- sets into one collective negotiable bond. The formation of such rural groups,
and the offering of such bonds as secur- ity, would soon attract the serious at- tention of capital, direct from its prin- cipal and its first sources."
In view of the enormous importance of the agricultural interests of the United States, it is remarkable that Con- gress has not legislated for the estab- lishment of some kind of an agricul- tural credit institution. The national banks were, properly enough, prohibited from lending on real estate, but nothing was done to supply the need which this prohibition was bound to create. It may be justly said that the demands for agricultural loans have been fully sup- plied by institutions originating under State laws. But it may be possible that if national institutions had been estab- lished the securities issued by them would have more readily found access to the world's supply of capital than has been the case with the mortgages negotiated by the State banks or by local mortgage companies.
Congress has authorized an agricul- tural bank in the Philippines, but has not apparently been favorably im- pressed by the arguments looking to the establishment of such an institution here.
A national corporation designed espe- cially to make advances to farmers on real-estate security might be beneficial in relieving the State banks of some of the business of this character, thus leav- ing their funds freer for ordinary com- mercial purposes.
CREDIT INFORMATION FOR EXAMINERS
^CCORDING to recent reports, ex- aminers of national banks are to be supplied with information regarding the credit of borrowers from these in- stitutions.
Reports conveying information of this character are to be made to the
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Comptroller's office semi-annually after the meetings held at those periods by the district examiners. They are to show the general conditions in the dis- tricts, the number of examinations of banks that have been made, a list of those requiring examination more than twice a year, a list of defalcations, of financiers of “questionable methods," of the “outside or foreign" paper of bor- rowers whose principal headquarters or places of business are outside of the dis- trict covered by the reports, doubtful or questionable paper in which officers or directors or persons or firms are inter- ested, and large or extended lines of credit.
By having such information available the examiners will be able to determine the condition of the banks more accu- rately than heretofore.
It is understood that a similar plan of compiling credit information has been in use by the Banking Department of the State of New York for some time, and has served a good purpose.
Bankers have for many years dis- cussed the propriety of establishing a central credit bureau to collect infor- mation about borrowings from the banks, such information to be available to all the subscribing banks. While the dis- cussion has developed some practical difficulties in the way of the successful working of a bureau of this character, they are not believed to be insurmount- able. Possibly the Comptroller's office and the State banking departments might be the proper channels through which such information could be col- lected and disseminated among the banks under proper restrictions.
No doubt where the banks have adopt- ed clearing-house supervision and ex- amination, it is now possible for the clearing-house examiners to keep watch over the borrowings from different local banks, but this information is very much restricted in character. For instance, the clearing-house examiner of the Chi-
cago banks would know how much a cer- tain firm had borrowed of all the banks of that city, but might have no means of determining how much the same firm had borrowed of banks in other cities. By the system of exchanging informa- tion among the national bank examiners this difficulty will be overcome, but un- less the information is available to the banks, as well as to the examiners, it will fiall short of what could be desired.
When the banks are able to know how much their dealers are borrowing, not only locally but generally, the possibili- ties of losses due to excessive borrowing will be greatly reduced.
TAINTED MONEY
AS the summer approaches, the trou- bles of mankind, actual or pros- pective, seem to multiply. No sooner have we passed safely through the tail of the comet than sun-spots and other dangers menace us. Now comes an en- terprising citizen who coolly tells us that on a dollar bill microscopically ex- amined 92,000,000 germs were found, of manifold variety, including smallpox, scarlet fever, typhoid fever, tuberculosis and diphtheria. On another bill were found 13,518,000 living bacteria.
Still, the presence of these deadly germs on the country's paper does not seem to curtail the lives of the re- ceiving and paying tellers of the banks, who quite frequently live long enough to become assistant cashiers, cashiers and even sometimes vice-presidents and presidents, and those who handle the dirty paper money in the redemption division of the Treasury Department at Washington are accounted pretty good risks by the insurance companies.
Many people minimize the risk of infection from this form of tainted money by keeping bills in their pos- session for a short time only, pass- ing them on to the landlord, butcher.
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THE BANKERS MAGAZINE
milliner and others who seem insensible of the risks they assume in accepting them.
But it would be a good thing if it were possible to have only clean bills in circulation. The “crisp" money of fiction should be realized in fact. There are so many kinds of currency issued in this country that the problem is not a simple one; still, great improvement could be made with a little more •deter- mined effort.
If the Government were to quit is- suing paper money (except perhaps the gold certificates) the cleanest and best kind of a circulating medium — bank checks — might be more widely used. Even some form of check in denomina- tions of one and two dollars might be devised, to be promptly redeemed and not reissued.
TRAVELLERS’ CHECKS AND BANK- ERS’ MONEY ORDERS
/^REAT success has attended the travellers' checks introduced by the American Bankers' Association. These instruments have proven safe and are undoubtedly becoming deservedly popular.
Similar success has not resulted in the attempt to provide what are styled bank “money orders." It seems that some of the banks balked at having these money orders insured by a surety com- pany, and that it has not been practica- ble in all cases to get the banks in the central reserve cities to cash the “or- ders" at par.
It is said that the money-order busi- ness done by the Government and by the express companies reaches the enormous sum of $700,000,000 annually.
The banks have it in their power, at any time they choose, to get this busi- ness away from the Government and the express companies by offering a cheaper and better service. It is perhaps true
that the banks would profit enormously if they would furnish such orders with- Qut extra charge and provide for cash- ing them at par everywhere throughout the country. At first sight this might look like philanthropy, but it would probably be found to be excellent busi- ness policy. The bringing of $700,000,- 000 annually into the banks that now goes to the postoffices and to the ex- press companies would of itself be no small achievement. But the benefit would not stop there, the banks would have many new accounts and their de- posits would be largely increased.
As this Magazine stated several years ago, if the custom of charging on out- of-town checks becomes general, it will have the effect of rendering such charges nugatory. This was admitted by Mr. Wexler, the new president of the Clearing-House Section of the American Bankers' Association, who said, in accepting election to that office at the Chicago convention:
“If all the banks in the country han- dled all the items of their customers en- tirely free of charge, it would be an ideal arrangement, and would work out exactly the same result as if each charged a uniform rate."
Mr. Wexler further declared, how- ever, that he believed it almost utopian to expect them to handle the items free of charge. The reason is, of course, that some banks hope by the existing arrangements to be able to get the ad- vantage of their competitors.
But it has been shown by the experi- ence of the “foreign" clearing house at Boston that it is altogether practicable to carry out a plan which obviates the imposition of these charges.
The banks can easily see the direct profit they derive in charging for fur- nishing exchange and in discounting out- of-town checks. They can not so read- ily see the larger profit that might come to them by a policy that would make bank checks more serviceable to the
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THE UNITED STATES TREASURY
9
business community and that would im- Yet the $700,000,000 annually paid mensely increase the deposits of the for money orders ought to set the bank- banks. ers thinking.
THE UNITED STATES TREASURY— VII
By William Henry Smith
/"\NE of the pleasant memories about the bureau of the Comptroller of the Currency is the fact that among its clerks in the early days were two men who later won wide and deserved fame in literary life — John Burroughs and William Douglas O’Connor, two inti- mate friends and warm defenders of Walt Whitman. Burroughs did not remain long, but rose to be a bank ex- aminer, and was later made a receiver for an insolvent bank, and then retired, to devote himself to literary work, in which he quickly won distinction. His friend, O’Connor, remained in the bu- reau for a number of years, and then accepted a place with the Light House Board, and died in the service.
Mr. McCulloch, in his “Men and Measures of Half a Century,” thus tells how Burroughs got into the ser- vice: “One day a young man called at my office and said to me that he under- stood that the force of the bureau was to be increased, and that he should be glad to be employed. I asked him if he had any recommendations. T have not,' he replied; T must be my own.' I looked at his sturdy form and intelli- gent face, which impressed me so fa- vorably that I sent his name to the Sec- retary, and the next day he was at work as a twelve-hundred-dollar clerk. He was an excellent clerk, competent, faith- ful, willing. Since then he has been a worker in a different field, and become a captivating and most instructive writer. I never see an article from the pen of John Burroughs which I do not read with pleasure, and without calling to mind his appearance when he said to me, T must be my own recommenda- tion.' "
Poor Whitman, the friend of these two gifted men, lived for a long time in
a garret in Washington, where Bur- roughs and O’Connor spent many an evening, while Whitman made his even- ing cup of coffee in a pint cup, and ate his frugal meal off a board held across his knees. He later was given a posi- tion in the office of the Attorney-Gen- eral, and fared better. The three friends were almost inseparable com- panions when not engaged in their office work. “The Good Gray Poet,” of O'Connor, written in defence of Whit- man, is fairly a flame of wit and scorn. Burroughs also wrote a defence of Whitman, which did much to place that erratic poet on the pedestal where he rightfully belonged.
Mr. McCulloch went out of that bu- reau to become one of the few really great Secretaries of the Treasury the country has had, while Knox and Eckels and Dawes became classed among the sound financial men of the day. It has been a great school for bankers and bankers* assistants.
When the Monetary Commission finally makes its report to Congress it is probable it will recommend several changes in the law governing the Comp- troller’s bureau, strengthening his hands very materially. If some one would compile the suggestions made by the different Comptrollers in their reports and put them in book form, they would make a most admirable treatise on cor- rect banking methods. Especially is this true of those of Mr. McCulloch, Mr. Knox, Mr. Eckels and Mr. Dawes. A careful study of those reports by a young man desiring to enter upon bank- ing as a business will give him more valuable information and instruction than he can get through any other means. Some day this work will be
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done, and then bankers will have a text- book of the greatest value.
Comptroller's Bureau.
It was the intention of the framers of the national currency act of 1863 to keep, as far as possible, the office of Comptroller free from political influ-
LAWRENCE O. MURRAY Comptroller of the Currency
ences; hence the term of his office was fixed at five years, and it was provided he could be removed only by the Secre- tary giving in writing to the Senate the cause.* for such removal. This is the only officer of the government whose re- moval must be reported to the Senate with the causes therefor. This was done several years prior to the enactment of what is known in Congressional history as the tenure of office act, which was passed to prevent President Johnson from making removals. He is the only bureau officer in the government who
makes his report direct to Congress and not to the head of the Department.
As a rule, the selections for this im- portant office have been wise and judi- cious ones, and its administration has been free from any scandals, and with the single exception of the stealing of unsigned notes, already noted, there never have been any losses. Where ex- aminers have acted as temporary re- ceivers of banks, and that, too, without bond, the work has been satisfactorily and honestly performed.
The present Comptroller, Lawrence O. Murray, had an excellent training before his appointment. He first en- tered the government service as private secretary to Assistant Secretary of the Treasury Curtis, and later was ap- pointed chief of the organization divi- sion in the Comptroller's bureau. He served for nearly a year as Deputy Comptroller, when he resigned, to ac- cept the position of trust officer in the Trust Company of America, in New York. He remained with that com- pany for three years and was made secretary and trust officer of the Cen- tral Trust Company of Illinois, at Chi- cago. When the Department of Com- merce and Labor was organized he was tendered and accepted the assistant sec- retaryship, and in April, 1908, ex- changed that for his present position.
T. P. Kane, Deputy Comptroller, has had twenty-three years' experience in the bureau, and is, perhaps, the best posted man in the country on the na- tional banking system. He was private secretary to one of the Assistant Post- masters General, when, in 1886, he ac- cepted the same position with Comp- troller Trenholm. He served in the same capacity during the administra- tions of Comptrollers Lacey, Hepburn, Eckels and Dawes, and in 1899 be was made Deputy Comptroller, and has now held that office for ten years, a much longer period than any other Deputy. So thorough is his knowledge of the. system that in 1908 Secretary Cortel- vou requested him to prepare for sub- mission to the National Monetary Com- mission suggestions as to what amend-
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ments the law needed. He prepared an elaborate paper on this subject, care- fully digesting each section of the law, and when the Commission met in Wash- ington he was requested by Comptroller Murray to attend the sessions of the Commission, explain the workings of the law, and the reasons for suggesting the various changes. He did so, and the Commission highly complimented him for the manner in which he had furnished it with all the information called for.
Willis J. Fowler, the Second Deputy, has been connected with the bureau since 1886. Early in his office career he was assigned to work incident to as- sembling and analyzing statistics for the Comptroller’s reports to Congress, and by reason of his knowledge of the printing business, to a general super- vision of the issue of the reports. In 1901 he was promoted to the position of chief of the organization division, and in July, 1908, to a Deputy Comptroller- ship, the appointment being made by the President, at that time. In a later act this appointment, like that of the First Deputy, was lodged in the Secre- tary, and Mr. Fowler was reappointed. In the absence of the Comptroller and First Deputy Comptroller he acts as. the official head of the bureau.
The working force of the bureau is divided into three divisions — of organ- ization, of reports and of redemption, each under a competent chief. To the first is assigned the work of receiving all applications for charters and the issuance of certificates; to the second, the handling and tabulating all re- ports of the conditions of the associa- tions, and to the third, the supervision of redemption of notes.
P0WER8 AND DUTIE8 OF THE COMP- TROLLER.
The office of Comptroller of the Cur- rency is one of the most important of the minor offices of the government. Upon his efficiency and watchfulness depends, in a very large degree, the in- terests of the depositors in the national banks. The bill-holder is protected by
the deposit of bonds to secure the circu- lation. The Comptroller carefully watching over the impairment of the capital of the banks, from any cause, whether it is from excessive loans, or other bad management, is guarding the interests of the depositor, and by his firmness in forcing the directors and stockholders to promptly make good any such impairment, he frequently saves the depositors from loss. By tact and good judgment, coupled with firm- ness, on many occasions he has been able to save banks from failing, and in other cases has materially aided in the work of reorganization to such a de- gree that no loss was incurred.
Much depends upon his exercising due discretion in all cases where the capital has been impaired or where the bank has made excessive loans. He can only intervene in a drastic manner when certain circumstances arise, and they nearly always arise when it is too late to save the bank, or the depositors from meeting with loss. Occasions arise when if permitted by the law to inter- vene he could effect a saving to both depositors and shareholders, but as the law stands, when he finds a bank with an impaired capital, he must give the bank officers a certain time to make the capjtal good, knowing from the circum- stances that it cannot be done, yet un- der the law he can do nothing until the expiration of the time, and all the while the bank goes on receiving money from its depositors, piling up its liabilities. He gives the warning, but if the officers fail to heed his warning, he is power- less to act with the promptness neces- sary.
An inefficient Comptroller, or one lack; ing in tact and judgment, might work untold injury to a bank, and all con- nected with it. He exercises the au- thority to look into the security on loans, and pass upon their sufficiency, and if in his judgment the security is not sufficient to require the bank to de- mand additional security or call in the loan. This, in the hands of an incom- petent person, or one lacking in sound judgment, would be a dangerous power.
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His position fs that of a supervisor of banks operating under the national sys- tem, and as a supervisor he should be a man of sound discretion, neither hasty in his conclusions or judgments, nor careless and indifferent. He should have such a standing with the banks that his mere warning would be suffi-
THOMAS P. KANE 1st Deputy Comptroller of the Currency
cient to call for active and quick re- sponse from the banks.
The law is not “a rope of sand/* as Comptroller Murray seems to think. It *may need strengthening in some parts, but a Comptroller has it in his power to enforce all the regulations he may adopt under the law, and while the banks may be at fault sometimes, they are not always in the wrong, and the blame for the non-enforcement of the law may occasionally rest on the shoul- ders of the Comptroller. He alone makes the selection of the examiners, and if they are not the right kind of men, he is alone responsible, and not
the banks. If he, unfortunately, as officers will occasionally do, selects the wrong man, it need take but a short time to convince himself of that fact, if he is in diligent touch with their work, and he can promptly remove the in- efficient or careless subordinate.
It is a position which requires the head to be in constant and close touch with every department of its workings, and the interests of thousands of de- positors as well as those of the share- holders depend upon his vigilance. It is an onerous and responsible position, and those who lose through the failure of a national bank ajre frequently too quick to blame him for the loss. If he should hastily close a bank that is really solvent, he occasions a very great in- jury to the shareholders; if he gives a bank a little too much leeway, and it proves insolvent, he causes a loss to the depositors that might have been saved by a little more promptness of ac- tion. He has the power to have the affairs of a bank examined at any time when he has any reason for believing that its business is not conducted in a safe way.
His duties are not confined wholly to issuing circulating notes to the banks and redeeming those sent in for can- cellation, and watching the interests of the government to see that it suffers no loss from an over issue of notes, or through the depreciation of the bonds deposited to secure the note-holders. If that were all, his responsibility would not be so very great, for it would be an easy matter to prevent an overissue of circulating notes, and as the deposited bonds are those of the government they are not likely to depreciate in value so as to cause a loss to the government in redeeming the notes, for the govern- ment will always have to pay par value for its bonds.
But by virtue of his office he has, in a certain degree, an oversight of the in- terests of all depositors in the national banks. In fact, he is not alone the Comptroller of the Currency, but is the government's supervisor of all banks doing business under the national au-
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thority. The fact that they are or- ganized under government authority gives them a certain credit and stand- ing with the public, and it is the duty, so far as may be possible, for the gov- ernment to see that such credit and standing is not impaired. Hence the necessity of careful selection in naming a person for this high office.
The Comptrollers have not always been of the same mind on every ques- tion connected with the banking law, the administration of their office, or as to amendments to the law, but they have uniformly favored the national cur- rency as against that issued directly by the government, and have all been in favor of strengthening the powers of the Comptroller in certain directions, and of a widening of the opportunities for entering into the National Bank System.
On the question of retiring the gov- ernment notes, Comptroller Knox, in his report for 1876 called the attention of Congress to the heavy expense the gov- ernment was necessitated to undergo in maintaining its notes at par, and said that a point must finally be reached when the banks should issue all the credit currency.
In 1897 Comptroller Eckels reviewed the whole situation in an elaborate and very able report, and made a strong plea in favor of retiring the govern- ment issues. Unlike Mr. Knox and others of his predecessors, Mr. Eckels favored a bank note currency, issued on the assets of the banks, and this has found much favor in certain quarters, but is just as warmly opposed in other sections.
Mr. Eckels was followed in office by Mr. Dawes, equally as able a financier, but of a totally different opinion on the subject of asset currency. His argu- ment was peculiarly able and backed up and supported by numerous carefully prepared tables. His contention was that such a course would result in great loss to the depositors. Mr. Dawes was also an advocate of the doctrine that note-holders should not be preferred creditors of a bank.
Powers and Duties of the United States Treasurer.
The Treasurer is the only other officer in the Treasury Department who* has much to do with the banks.
In the original law establishing the Treasury Department it was provided that there should be a Secretary, an as- sistant to the Secretary, a Comptroller, a Register and a Treasurer. The Treasurer was made the custodian of all the moneys of the government and paid them out on the order of the Sec- retary. Until the administration of President Jackson his duties and re- sponsibilies were not very arduous, but when the deposits were withdrawn for the United States Bank and scattered around among the “pet” banks, his cares and worries increased out of pro- portion to the dignity of his office* When an independent treasury was finally created, his office became one of great responsibility and great impor- tance. He became in fact, as well as in name, the chief disbursing officer of the government, and such he is now, with the added care of the hundreds of millions of money kept constantly in the treasury vaults.
He is the trustee of the bonds held to secure national bank circulation, and is the redemption agent for national bank currency, as well as for all United States notes. His vaults are the great show place of Washington and but few visitors to that city fail to go through the corridors and peer through the grated doors and gaze on the great piles of coin and other currency stored there- in. On days when the building is open a pretty constant stream of visitors can be seen going to look at the vaults.
There has always been a sentiment in some parts of the country in favor of retiring the national bank currency and substituting therefor notes of the gov- ernment. At one period this feeling was very strong throughout the coun- try, and it found its main help in that direction in the Treasurer’s office. John Jay Knox in his “History of Banking,” in referring to the act of June 20, 1874, says :
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“The act of June 20, 1874, was orig- inated through the influence of certain officials in the Treasury upon that por- tion of Congress who were in favor of the legal tender notes. This kind of influence is often very much more po- tent than is generally suspected. The tendency of all government bureaus is to magnify their own importance. The
WILLIS J. FOWLER Deputy Comptroller of the Currency
position of the national banking bureau in the Treasury Department was at the commencement very strong. With Sec- retaries Chase, Fessenden and McCul- loch, the legal tender note was but a temporary expedient, while the national bank currency was to be the permanent money of the country. With Boutelle and Richardson the importance of the legal tender note as a financial factor in increasing the power of the Secre- tary, began to gain on the national bank note. This tendency began to be felt in the subordinate offices.
“With legal tender notes the Treas- urer's office, which had charge of the preparation, signing, issuing and re- demption of these notes, gradually ac- quired more power. The Treasurer was a much more important official with greatly increased patronage. The hand- ling of the United States notes caused him to be in more frequent consultation with the Secretary. The office of the Comptroller of the Currency did not tend to establish such close relations. In fact, there were from a very early day two factions in the Treasury De- partment, the legal tender faction and the national bank faction. The former, whenever they had opportunity, did what they could to prevent the retire- ment of legal tender notes and the sub- stitution therefor of national bank cur- rency. Many of the most effective ar- guments against the banks were fur- nished to members of Congress from this source.”
Since the above was written by Mr. Knox there has been less of that strife between the two offices, owing, possibly, to the fact that the status of the two currencies has been more definitely fixed. The amount of the outstanding legal tenders has been permanently de- termined, and that of national bank notes is now without limitation. There may come a time when the government will call in its legal tender notes, leav- ing the banks to supply all the circula- tion except silver and gold certificates.
There will always be some friction between government bureaus whose du- ties are similar, and while the govern- ment has a note outstanding, unless they are placed under the same authority which supervises the national bank cir- culation, this friction will continue in some degree. Some day Congress will be wise enough to consolidate the cur- rency of all kinds under one jurisdic- tion.
The Treasurer is very closely identi- fied, however, with the banks in another way. It is from money under his con- trol that they are so frequently relieved in times of money stringency. It is
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true that he makes deposits or with- draws them on the order of the Secre- tary, but under the law the Treasurer alone is the custodian of the funds of the government, and it is possible he might have the right to refuse to de-
posit or to change deposits. Such a question has not yet arisen, and the au- thority of the Secretary in such matters has not been questioned.
{To be concluded .)
BANKING AND COMMERCIAL LAW
Conducted by John J. Crawford, Esq., Author Uniform Negotiable Instruments Act
RECENT DECISIONS OF INTEREST TO BANKERS
ACCMMODA TION INDORSERS— ORDER OF LIABILITY.
In re McCORD.
UNITED STATES DISTRICT COURT, S. D., NEW YORK, FEBRUARY, 1910.
The mere fact that indorsers are accom- modation parties, and known to one another to be such is not sufficient to change the general rule that prior indorsers are liable to those who are subsequent; but for this purpose it is necessary to show a specific agreement that they shall be liable ratably.
TN the matter of William McCord, A bankrupt. On review of decision of referee.
Holt, DJI,: I am not able to con-
cur with the conclusion of the referee referee in this case in respect to the eight notes which remain in controversy. Seven of those eight notes were made by the Meers Artificial Leather Com- pany, and were indorsed by McCord, the bankrupt, by Frank Squier, and by two or three others; each indorsing for the accommodation of the makers. The other note was made by H. & J. T. Slade, and indorsed by McCord and Squier; each indorsing for the accom- modation of the makers.
The money received from the discount of these eight notes was paid either to the Meers Artificial Leather Company or to the Manufacturers* Mercantile Company. Neither McCord nor Squier ever obtained any consideration or bene- fit for his indorsement. On each of these notes McCord’s indorsement was prior to that of Squier.
At the maturity of these notes, Squier was called upon by the holders to pay them, and did pay them. He subse- quently went into bankruptcy, and his trustee in this proceeding has proved for the full amount of the notes against the estate of the bankrupt.
The referee has held that McCord, Squier, and the other indorsers were all accommodation indorsers, and that each knew that the others were such, and for that reason he has held substantially that all these accommodation indorsers are sureties as between themselves, and that each is liable only for his proportionate share of the amount due on the notes. The referee has accordingly reduced the claim of the trustee of Squier from the total amount paid on the notes, for which the claim was filed, to the bank- rupt’s proportionate share of such amount.
It is undoubtedly well settled that ac- commodation indorsers can, by agree- ment among themselves, restrict the lia- bility of each to his proportionate share, or, indeed, make any other arrangement as to their liability to each other which they see fit to make. But it is, of course, fundamental in the law of com- mercial paper that, in the absence of any such agreement, an indorser who pays a bill or note has recourse against each prior indorser for reimbursement.
I do not understand that the mere fact that indorsers are accommodation indorsers, and known to each other to be so, is sufficient, without proof of an
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express agreement, to change the gen- eral rule of law that prior indorsers are liable in solido to subsequent indorsers who have paid a note. There must be, as I understand the rule, a specific agreement, as between the various in- dorsers, that they shall only be liable ratably. If there is no such agreement, the law fixes their liability in accord- ance with the order of the names on the paper. (McCarty vs. Roots, 62 U. S. 432; Easterly vs. Barber, 66 N. Y. 433; Kelly vs. Burroughs, 102 N. Y. 93; Egbert vs. Hanson, 34 Misc. Rep. 596, 70 N. Y. Supp. 383). Each of these accommodation indorsers indorsed each of these notes in the same order. McCord, the bankrupt, indorsed first, the others next, and Squier last. In the absence of evidence of a specific agree- ment to the contrary, the order of the indorsements indicates an understand- ing between the indorsers that Squier, if he paid the notes, was to be entitled to recourse against each of the others, and that McCord, being the first in- dorser, in substance guaranteed each of the other indorsers against loss. I have read over the evidence, and there is no proof of any specific agreement between the indorsers.
I think, therefore, that under the fundamental principles governing the law of mercantile paper and the express provisions of the Negotiable Instru- ments Law, §§ 55, 114, 118, Squier’s trrustee is entitled to prove his claim against the bankrupt’s estate for the full amount paid on the eight notes in question.
PAYMENT OF CHECK OF CORPO- RATION NOT PROPERLY CO UNTERSIGNED.
ELLIS vs. WESTERN NAT. BANKetal. WESTERN NAT. BANK vs. LOUIS- VILLE TRUST COMPANY et al.
COURT OF APPEALS OF KENTUCKY, JAN*
19, 1910.
Where the by-laws of a corporation re- quire its checks to be signed by the presi- dent and countersigned by another officer of the corporation, the drawee bank, having knowledge of the by-law, has no authority to pay checks signed by the president alone.
T ASSING, «/. opinion) :
(Omitting part of the The evidence in this
case has taken quite a wide scope, but the real issue is a comparatively nar- row one, being confined to the question as to whether or not the check upon which the bank undertook to withdraw $1,000 from the account of said insur- ance company was so drawn that it could properly be held to be the act of said insurance company.
It appears from the record that in order for the insurance company to re- ceive the sanction of the insurance de- partment to commence business, it was necessary that it have on hand a certain amount of cash, and, as the company did not have this necessary amount of money, an arrangement was made with the bank by J. V. Reed and Stuart E. Brannon, two of the promoters of said company, by which they executed their joint note to the bank for $1,000, the net proceeds of which was placed to the credit of the insurance company, and this sum, supplemented by the amount of the discount, made up the $1,000 which the president of the insurance company attempted to pay by the check out of which this litigation grows.
The by-laws of the insurance com- pany provide that all checks on the de- posit of said company should be signed by the president and contersigned by one of two other designated officers. The bank was advised of the existence of this by-law, and, in fact, had en- tered into an agreement with the insur- ance company that the checks were to be honored only when so drawn, signed, and countersigned.
Under this arrangement, thirty-seven checks were drawn by the insurance company and honored by the bank. The check which is the subject of this litiga- tion was number thirty-eight, and it was signed by the president of the insurance company alone, and was made payable to the bank for the purpose of paying off and satisfying the Reed and Bran- non note. When presented to the bank it was honored, and the note was paid.
At the time this check was drawn, the other officers of the insurance company.
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whose duty it was to countersign it, re- fused to do so. The fact that it was not signed and countersigned as all the other checks had been was of itself, in the absence of any special contract and ar- rangement in regard to the signing of these checks, sufficient to have put the bank upon notice that this check was not such authority as would warrant it in paying out the funds of the insurance company thereon. But here we have a positive agreement between the bank and the insurance company that the checks were only to be honored when signed by the president and countersigned by one of the other officers of the insurance company, hence, no check which failed to measure up to these requirements as to the signatures of the officers of the insurance company could bind the insur- ance company or protect the bank against loss if paid by it.
The note in question was not the debt of the insurance company. It is true that certain of the promoters of said company had borrowed this money on their individual indorsements for the company to enable it to begin business, but the name of the insurance company did not appear upon the note which was executed to raise this money, for if it had it would have left the company in no better position than it was (toward complying with the requirements of the law) before the note was executed, for the law required that it have so much cash on hand over and above any lia- bility.
As between the insurance company and the bank, the insurance company was not liable for the payment of this debt, and the suggestion that, even though the check was not properly drawn, the bank should nevertheless be permitted to retain the fund because it had been used to pay the debt for which the insurance company was liable, has no application here.
The bank had contracted with the in- surance company that the funds of the latter should be withdrawn from the former only upon checks signed and countersigned in a certain particular way. The check in question not being so drawn, the bank was without author-
ity to charge the account of the insur- ance company therewith. The bank was no more authorized to charge this account with this $1,000 check, signed by the president of the insurance com- pany alone, than it would have been to charge the account of the insurance com- pany with the checks drawn by the pres- ident thereof in his individual capacity. And when it paid out the money on this unauthorized check, it paid out, not the money of the insurance company, but money belonging to the bank. This be- ing true, the chancellor properly held that it was answerable to the receiver for the benefit of the creditors of the insurance company for the full amount thereof.
PROMISSORY NOTE— BONA FIDE H O L D E R— INDORSE- MENT “WITHOUT RECOURSE ” —STATEMENT OF CONSIDER- ATION.
BANK OF SAMPSON vs. HATCHER.
SUPREME COURT OP NORTH CAROLINA, DECEMBER 1, 1909-
The fact that a note discounted by a bank is indorsed by the payee “without recourse” does not impair the bank’s title as a bona fide holder.
Nor will the fact that the nature of the consideration is stated on the face of the paper have this effect.
r I 'HIS was an action upon a promis- sory note executed by the defend- ants to the order of C. S. Lothrop & Co., and indorsed by the payees “with- out recourse” to the plaintiff bank at a discount of ten per cent. The de- fendants alleged that the note was given in a transaction in which de- fendants had bought from the payees the right to sell a “safety cash lock” and that there had been a breach of war- ranty as to the value and salability of such lock, and claimed that this de- fense was available as against the bank.
Hoke, «/.: There was no evidence
tending to establish any breach of con- tract at the time plaintiff became in- dorsee for value of the note sued on the testimony showing that the locks were not ordered by defendant until
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June or July following, and the defects complained of were not disclosed until some time thereafter. Nor was there any testimony amounting to legal evi- dence to show that the plaintiff bank was interested with the payees in their transaction with defendants otherwise than as indorsees of the notes, nor to show fraud on the part of the bank in connection with the matter, or any knowledge or notice of it. On the contrary, while the trade was made in the law office of H. A. Grady, Esq., who was at the time vice-president of the bank, it appears that said Grady and the cashier of the bank had made a con- tract with Lothrop & Co., similar to that of defendants, and had taken the precaution to inquire as to the busi- ness standing and solvency of the payees, and had received assurances that both were good, and there was noth- ing offered to show that these assurances were untrue.
There are several well-considered decisions of the court which support this view of the facts in evidence, among others, Farthing vs. Dark 111 N. C. 243, and Applegarth vs. Tillery, 105 N. C. 407; and our statute on the sub- ject (Revisal 1905 § 2205) is conclu- sive: “Sec. 2205. Actual Know-
ledge Necessary To Constitute Notice Of Infirmity. To constitute notice of an infirmity in the instrument or de- fect in the title of the person negotiat- ing the same the person to whom it is negotiated must have had actual know- ledge of the infirmity or defect or knowledge of such facts that his action in taking the instrument amounted to bad faith.” It has further been held with us (Evans vs. Freeman, 142 N. C. 61,) that the form of the indorsement “without recourse” does not affect the question, and the defense indicated in the counterclaim can only be sustained, if at all, on the ground that at the time of the indorsement the plaintiff bank was cognizant of the fact that defend- ants* obligation arose out of an execu- tory contract, and was aware of its terms, and when there was nothing in such contract restricting the negotiabil- ity of the notes, nor to indicate fraud or
imposition or an existent breach, and the correct doctrine is against the defense suggested on the principle stated and upheld in Mason vs. Cotton Co., 148 N. C. 492. Even when such a notice ap- pears on the face of the note, the au- thorities are against defendants’ posi- tion. (Seigel vs. Trust Savings Bank, 131 111. 569* Ferriss vs. Tavel, 87 Tenn. 386. Bank of Commerce vs. Barrett, 38 Ga. 126). The only decision we find which tends to support a contrary view is one in our own Re- port*. (Howard vs. Kimball, 65 N. C. 175). An examination into the facts of that case will disclose that the assignee of a note which expressed upon its face that it was given as purchase money of a certain tract of land, not only had actual notice of the defect of title at the time he purchased, but he had taken a deed for such defective title from the original vendor, and held same to be conveyed to the vendee when the note was raid. The case, there- fore, is undoubtedly well decided, but in so far as the opinion gives counte- nance to the position that a defect of title is available against an indorsee for value of a note for the purchase money from the fact, and from that alone, that the note on its face is ex- pressed to be for the purchase money of land, or a given tract of land, the case is not in accord with the better considered decisions. As an authority for such a position, it was in effect dis- approved by a subsequent decision of this court, in Bank vs. Michael, 96 N. C. 53, in which a note of that kind was held to be “negotiable”; the term “ne- gotiable” being used in the sense that an indorsee for value without notice ultra became the owner of the note unaffected by the equities and defenses existent be- tween the original parties to the con- tract.
Our present statute on the subject would seem to put the matter at rest. Revisal 1905, c. 54 § 2153. This, be- ing one of the sections defining what constitutes negotiability of notes, pro- vides: “Sec. 2153. What Promise
Unconditional. An unqualified order or promise to pay is unconditional with-
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in the meaning of this chapter, though coupled with ( 1 ) an indication of a particular fund out of which reimburse- ment is to be made, or a particular ac- count to be debited with the amount; or (2) a statement of the transaction which gives rise to the instrument. But an order or promise to pay out of a par- ticular fund is not unconditional/ *
There was no error in the charge of the court or in the trial of the cause, and the judgment below is affirmed.
No error.
CASHIER— LIABILITY FOR ACTS OF ASSISTANT CASHIER.
RIO STATE BANK vs. AMONDSON.
SUPREME COURT OF WISCONSIN, DECEM- BER 7; 1909.
The by-law of a bank provided that “The cashier shall be responsible for all the moneys, funds, and valuables of the bank, and shall give bond with securi- ty .. . conditioned for the faithful and honest discharge of his duties as such cashier, and that he will faithfully apply and account for all such moneys, funds and valuables,” etc.
II eld. that he was liable for any shortage in the funds of the bank, though such shortage had occurred through mistakes or malfeasance of the assistant cashier.
T^HIS was an action by the Rio State Bank to recover of its f orm- er cashier, $59-80, alleged to have been received and never accounted for. The defendant denied any shortage, and also alleged that if shortage in fact occurred it was in his absence, when the bank was in charge of an assistant cashier, and hence that he was not responsible therefor. The action was tried before a jury. It appeared: That the defendant became the cash- ier of the bank upon its organization in the fall of 1900, and remained such until January 30, 1905. That at the time he was elected and entered on his duties a by-law of the corporation, which was known to him, provided that: “The cashier shall be responsi-
ble for all the moneys, funds, and valuables of the bank and shall give bond with security . . . conditioned
for the faithful and honest discharge of his duties as such cashier, and that he will faithfully apply and account for all such moneys, funds, and valua- bles/’ etc. That he gave a bond con- ditioned in the words of the by-law. That another by-law of the bank pro- vided that the assistant cashier should be responsible for all such sums of money, property, and funds as might from time to time be placed in his hands by the cashier, or otherwise come into his possession, and should also give bond for the faithful discharge of his duties. That Charles Caldwell was ap- pointed assistant cashier and gave bond, but that he was in other business, and only acted when he was requested to take charge of the bank during oc- casional absences of Mr. Amondson. That during the year 1904, the bank books showed three shortages of cash which have never been and could not be explained, viz.: January 10th,
$10.80; May 31st, $20; and October 11th, $29 — making a total of $59-80. That upon other days, distant in point of time from the shortages, there were certain excesses of cash found, called “longs,” amounting to $74.50, which never had been, and could not be, ex- plained. There was evidence tending to show that the assistant cashier, Cald- well, was actually in charge of the bank on the days when the shortages occurred, and, as this was the only question of fact in the case, the court submitted to the jury, asking in effect, as to each shortage, whether 11 occurred while the assistant cashier was in charge. The jury answered, “Yes,” to each question, and the court upon mo- tion rendered judgment for the plain- tiff for the amount of the shortages, notwithstanding the verdict, from which judgment the defendant ap- pealed.
Winslow, C. J.: The action is
brought upon the contract of employ- ment, not upon the bond. The trial court granted judgment for the plain-
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tiff non obstante, for the reason that he deemed the defendant’s liability was fixed by the by-law, and in this conclusion we agree. The by- law whose terms he knew, and which became a part of his contract, provided that he should be “responsible for all the moneys, funds, and valuables of the bank.” Words of broader meaning could hardly have been used. They indicate unmistak- ably the intent of the corporation to place the whole responsibility for the safe conduct of the bank’s business upon the shoulders of the cashier, whe- ther the actual transactions should be carried on by him or by subordinates. This intent appears all the more plainly by comparing the liability thus placed upon the cashier witn the limit- ed liability placed upon the assistant cashier by the other by-law referred to in the statement of facts. Whether the cashier is made an insurer to that he would have to replace funds destroyed by fire or taken by robbery is a ques- tion not involved in the case and hence not decided. We are fully satisfied that the language was intended to, and does, fairly cover losses resulting from mistakes or malfeasance of the cashier or his subordinates.
The proof here showed that, accord- ing to the books of the bank, kept by the defendant and his subordinates, $59-80 had been received by the bank which had never been accounted for in the cash. In the absence of explana- tion (and none was offered), this was prima facie proof that moneys of the bank to that extent were missing. The fact that on other and different oc- casions there was more cash in the drawer than the books called for can- not affect the defendant’s liability. He does not claim to have paid it in, and, if others paid it in without re- ceiving credit for it, those others are the ones to whom the bank is liable for it, if to any one.
Judgment affirmed.
BANK'S RIGHT OF SET-OFF- DEPOSIT MADE FOR SPECIAL PURPOSE.
WAGNER vs. CITIZENS’ BANK & TRUST CO.
SUPREME COURT OF TENNESSEE, NOVEM- BER is, 1909.
As the relation between a bank and its depositor is that of debtor and creditor, the bank has the right to set off a balance due the depositor against his indebtedness to the bank.
But this right does not exist where with the bank’s knowledge and consent the de- posit is made for a special purpose.
' I 'HIS was a suit by T. H. Wagner, A as trustee in bankruptcy of the Wilcox Furniture Company, against the Citizens’ Bank & Trust Company to re- cover the sum of $6,110.98 deposited with it by the bankrupt. When the bankruptcy proceedings were commenced the furniture company was indebted to the bank in the sum of $7,363, and the bank claimed the right to apply the entire deposit to the payment of this debt. The court found from the evi- dence that the fund deposi ed was ac- cumulated as the result of auction sales of the furniture of the bankrupt, and that it was understood by the bank that this fund was being deposited with it as a special fund for pro rata dis- tribution among all the crediters.
McAllister, J.: (Omitting part of
the opinion) :
The defendant bank bases its right to a set-off on section 68a of the bank- ruptcy act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3450]), as follows:
In all cases of mutual debts or mu- tual credits between the estate of a bankrupt and a creditor, the account shall be stated and one debt shall be set off against the other, and the bal- ance only shall be allowed or paid.”
In the case of New York, etc.. Bank vs. Massey, 192 U. S. 138, the Supreme Court of the United States, in dealing with the clause just mentioned, says: “Section 68a of the bankruptcy act of 1898 is almost a literal ieproduc- tion of section 20 of the act of 1867.*’
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In Sawyer vs. Hoag, 17 Wall, 610, in construing section 20 of the act of 1867 (Act March 2, 1867, 14 Stat. 526, c. 176), the court said as fol- lows:
“This section was not intended to enlarge the doctrine of set-off, or to enable a party to make a set-off in cases where the principles of legal or equit- able set-off did not previously authorize it.”
The general rule is that the relation of the bank to the depositor is that of debtor and creditor, and the bank is the debtor of the depositor. (Harris vs. Bank, 110 Tenn. 249.)
“The bank holds a lien on the de- posits in its hands to secure the repay- ment of the depositors indebtedness, and may enforce that lien as the debts mature by applying the debtor’s de- posits upon them, thus setting the two off against each other.” 3 Am. & Eng. Ency. of Law (2d Ed.) p. 835.
It is also stated:
“The right of the bank to apply de- posits to the extinguishment of the de- positor's indebtedness as it matures grows out of the doctrine that relation- ship between the bank and the deposi- tor is that of debtor and creditor.” 3 Am. & Eng. Ency. of Law (2d Ed.) p. 835.
But it is well settled that a bank does not have “a lien upon special de- posits or monies deposited for a specific purpose, as for collateral security, or for the payment of a particular debt.” 3 Amer. & Eng. Ency. of Law (2d. Ed.) p. 837, and cases cited.
Again it is said:
“The proposition that th°re is no right of set-off against a trust deposit, nor any lien for the trustee's personal debts, is axiomatic.” 3 Am. & Eng. Ency. of Law (2d Ed.) p. 837, and oases cited.
In State vs. Corning State Sav. Bank, 128 Iowa, 597, it is said:
“Where a bank, which was a creditor of an insolvent estate, received a de- posit of funds from the receiver, it oould not apply such funds on its
claims, nor plead such claims as an offset against the deposit.”
In State Bank vs. McCabe, 135 Mich. 479, it is said ;
“Where the bank deals with a de- positor as trustee, and recognizes funds standing in his name as trust funds, knowing them to be such, it cannot ap- propriate them to the payment of the trustee's individual indebtedness to the bank.”
This question arose in Re Davis (D. C.) 119 Fed. 950, wherein an in-
solvent partnership sold its stock of goods, and, by its direction, the pur- chaser deposited its price in the bank, taking a receipt therefor, showing that the money was to be prorated among the several creditors of the firm as their interests might appear. Subsequently, on petition of creditors, the partnership was adjudicated an involuntary bank- rupt. After said adjudication, the bank undertook to apply the money so deposited on certain notes of the firm held by it and another creditor, with- out the consent of the depositor or the bankrupt, and to refuse the demands of the trustee therefor. Held, that the bank held the deposit in a fiduciary ca- pacity as a trust fund, which precluded it from asserting an adverse claim there- to after the bankruptcy as against the trustee.
Among other things, the court said:
“Upon the merits of the controversy, would the bank be in position to suc- cessfully contest the right of the trustee to the money? Its ability to do so would depend upon its right to apply the fund to its own use. While a gen- eral deposit by a merchant of money in a bank creates the relation of debtor and creditor, and authorizes the bank to use the money as its own, such re- sult does not obtain when the deposit is made for a special purpose, as, for example, to be paid to creditors, as was the case here.”
In Wilson vs. Dawson, 52 Ind. 515, it was said:
“It is a general rule that funds de- posited in bank for a special purpose, known to the bank, cannot be withheld
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from that purpose, to the end that they may be set off by the bank against a debt due to it from the depositor.”
In Lynam vs. National Bank, 98 Me. 448, it appeared that:
“In June, 1902, the Standard Granite Company sent to each of its creditors, including the Belfast Na- tional Bank, a circular letter, stating that it was unable to meet its obliga- tions. A few days later in the same month it called a meeting of its credi- tors, at which meeting the Belfast Na- tional Bank was represented by one of its directors. At this meeting a com- mittee of three creditors was appointed, with instructions to secure, if possible, the discharge of certain attachments which had been placed upon the prop- erty of the granite company. On Sep- tember 4th; following, the directors of the granite company passed a resolu- tion, admitting the inability of the com- pany to pay its debts, and its willing- ness to be adjudged a bankrupt on that ground. On the day following, the granite company sent to the Belfast National Bank a deposit of $800. At that time the granite company had a balance of $1.04 standing to its credit on the books of the Belfast National Bank. The intention of the Standard Granite Company in making this de- posit of $800 was that it should be held by the bank until a trustee in bank- ruptcy for the granite company should be appointed; but no notice of such intention was given to the bank, and the deposit was credited to the account of the granite company and added to the balance of $1.04 then standing on the books of the company.
“At the time this deposit was made the granite company was indebted to the bank to the amount of several thou- sand dollars. On the day following the making of this deposit of $800, a petition in bankruptcy was filed against the granite company, and it was duly adjudged a bankrupt, and one Lynam was appointed and qualified as its trustee in bankruptcy. Said trustee made a demand on the bank for the $800, which demand was refused; the bank claiming that it would offset the
deposit on the past-due notes of the granite company.
“For some time past, all the efforts of the granite company . . . and
that of its creditors had been to ob- tain a distribution of its assets equi- tably, and to that end the first attempt was to discharge the attachments. Honest dealing on the part of the granite company, which is to be pre- sumed, required that all of its assets should be husbanded for the benefit of all of its creditors. Pending the ef- fort to obtain an assignment or ad- judication of bankruptcy, it had $800 in money, which it intended to retain, and ought to retain, as part of its gen- eral assets. As some time would elapse before it could be thus administered, it was deposited in the bank, really for safe-keeping. All these facts were well known to the bank when it re- ceived the deposit. It knew it was not intended as a payment, and did not treat it as such. The bank could not fail to understand that it was intend- ed that this money should be added to the other assets for the general benefit as it equitably ought to be. It cer- tainly understood that the granite com- pany, under the then existing circum- stances, would not voluntarily subject this portion of its assets to a set-off by the bank, to the injury of other creditors.
“Upon consideration of all the cir- cumstances, and the situation of the parties, we think it a fair inference that the bank understood that the de- posit was intended only for safe-keep- ing, to be ultimately appropriated for the benefit of all the creditors of the granite company, and that in fact it was a deposit in trust for that purpose. And it being charged with such trust, the plaintiff, as trustee in bankruptcy, is entitled to recover.”
We are of opinion that these authori- ties are applicable in the present in- stance. It distinctly appears on this record that the funds accumulated in the defendant bank were deposited for a special purpose with the knowledge and consent of the president of the bank; that the funds could not be
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checked out by the president of the furniture company without the signa- ture of J. L. M orison, representative of the creditors* committee. The fund thereby became a trust deposit for specific purposes, with the knowledge and consent of the bank, and the latter had no right of set-off in said fund against the bankrupt's indebtedness to the bank.
Counsel for the bank relies on sev- eral cases as announcing a contrary doctrine, namely, (New York County Bank vs. Massey, 192 U. S. 138. Clark vs. Northampton Nat. Bank, 160 Mass. 26. Lowell vs. International Trust Co., 158 Fed. 781, 86 C. C. A. 137).
In Bank vs. Massey, supra, the court said:
“It cannot be doubted that, except under special circumstances, or where there is a statute to the contrary, a deposit of money upon general ac- count with a bank creates the relation of debtor and creditor. The money deposited becomes part of the general f unds of the bank, to be dealt with by it as other monies, to be loaned to cus- tomers and parted with at the will of the bank, and the right of the de- positor is to have this debt repaid in whole or in part by honoring checks drawn against the deposits. It creates an ordinary debt, not a privilege or right of a fiduciary character.”
But in that case the facts did not show a deposit for a special purpose, with the knowledge and consent of the bank, but only a deposit in the ordinary course of business. In such a case the authorities are uniform that the bank has the right to set off its notes against the deposits.
In Clark vs. Northampton National Bank, supra, the case seems to have turned on a finding of fact by the lower court. The court said as follows:
“The amount of the notes is to be set off against the balance due on ac- count of the deposits at the time of the commencement of the proceedings in bankruptcy, unless the deposits made after March 8, 1892, were to be con-
strued as made with a view to give a preference or to effect a fraudulent transfer of property, contrary to the statute relating to insolvency, or as made upon a trust for the creditors. Whether these deposits were made in violation of either section 96 or sec- tion 98 of chapter 157 of the Public Statutes was a question of fact, and the court, trying the case without a jury, has found that they were not so made. On the facts found by the court, the rulings on this part of the case were right.
“We are not certain that the excep- tions set out all the evidence. Enough, however, is recited to show that the plaintiff had some ground to contend that after March 8th the bank knew that the business of the Florence Tack Company was being carried on with a view of converting its assets into cash for the benefit of its creditors, and that the company must either effect a compromise with its creditors or go into insolvency. The money received after March 8th ought perhaps to have been specially deposited; but this was not done, and the account of the tack com- pany with the bank continued unchanged in form. There is evidence that the defendant's cashier understood that, after March 8, checks were to be drawn only to ‘pay the help' of the company; but there is also evidence that checks were in fact drawn for other purposes and were paid. There appears to be no doubt that the officers of the bank knew of the insolvency of the company on March 8. Still it is a question of fact whether the transactions between the company and the bank after March 8, were had under an implied contract or understanding on the part of both parties different from that which exist- ed before. The [lower] court has in effect found that after March 8th the money continued to be deposited and checks to be drawn on the same under- standing as that which existed before that time; that is, upon the understand- ing that the relation of the parties con- tinued to be the ordinary one of a de- positor with a bank of discount and de- posit. We cannot say, as a matter of
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law, that this finding was wrong. It was for the court below to draw the proper inferences of fact, and the ex- ceptions disclose no errors of law.”
In Lowell vs. International Trust Co., supra, it was said:
“Portions of the propositions submit- ted to us by the trustee allege that the bankrupt had been insolvent for a con- siderable time, and that during that period it had been struggling along with its business, with some support from its creditors, and with an under- standing between the International Trust Company and some other cred- itors, by virtue of which all of them, including the International Trust Com- pany, should receive certain pro rata benefits out of whatever funds might come from the Thomas & Pike Coal Company. Therefore, it is claimed that the funds now sued for are held by the International Trust Company in a quasi trust, enforceable by the trustee.”
The court held: “A trustee in bank-
ruptcy has no interest, which he can enforce for the benefit of the general creditors, in an arrangement between
the bankrupt and certain creditors, by which money deposited with one, which was a bank, was to be held in trust and distributed pro rata between them, and which was not prohibited by the bank- ruptcy statute.”
The facts appearing in Lowell vs* International Trust Co. are very dif- ferent from the facts presented on the present record. There the trustee was seeking to enforce a contract between the bankrupt and certain creditors. In the present instance the fund was ac- cumulated in defendant bank for the benefit of all the creditors, and the bank had become a party to the ar- rangement. In the present case the trustee clearly has a right to recover a fund which had been deposited by the bankrupt for the benefit of all the creditors.
We are therefore of opinion that the bank is estopped, by its conduct and by its agreement with the other creditors, from asserting any right to a set-off against the funds derived from the sales of the stock of the furniture company, and that the decree of the chancellor so holding was correct; and the same is affirmed.
NOTES ON CANADIAN CASES AFFECTING BANKERS
[Edited by John Jennings. B.A.. L.L.B., Barrister, Toronto]
BANK AND BANKING— INSOL- VENT BANK TAKEN OVER BY ANOTHER BANK— AGREE- MENT AS TO— VALIDITY OF AGREEMENT— POWER OF DI- RECTORS TO MAKE AGREE- MENT-BANK ACT , 8.s. 99-11L
IN THE MATTER OF THE ONTARIO BANK AND BANK OF MONTREAL (15 O. W.
R., p. 913).
The Bank of Montreal at the request of the Ontario Bank undertook to meet the liabilities of the latter as they fell due, and in order to assist the Bank of Montreal to do so the Ontario Bank agreed to hand over its available commercial assets for that purpose, the Bank of Montreal having full authority to realize upon these assets as it might see fit. The Ontario Bank war- ranted that the assets handed over were worth $16,249,080.46 and that the notes and
other liabilities of the bank did not exceed $15,272,271.22. The Ontario Bank agreed to place its office, staff, etc., at the dis- posal of the Bank of Montreal and do all in its power to carry out the terms of the agreement. The advances of the Bank of Montreal were to bear interest at the rate of six per cent., and if there were a sur- plus after payment of the liabilities it was to credit the Ontario Bank on the final adjustment of accounts with $150,000 for the indirect benefit received. The principal objection to the validity of the agreement urged was that it was in reality a transac- tion of sale by the Ontario Bank, and a purchase by the Bank of Montreal, of the assets of the first named bank; and that it fell within the provisions of secs. 99 and 111, inclusive, of the Bank Act, and was not legally made or consummated in ac- cordance wth these provisions, and was ul- tra vires.
The official referee held, that the agree- ment was binding upon the Ontario Bank and its shareholders. Britton, J., affirmed
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the referee in order that an appeal might be taken to the Court of Appeal.
The Court of Appeal held, that the transaction was beneficial and advantageous alike to depositors, holders of bills and notes in circulation, and to the other credit- ors, and to the shareholders, and that in the actual working out it enabled the property and assets of that bank to be dealt with and realized without the very serious sacrifice, which but for the arrange- ments made, would have been inevitable.
'T'HIS was an appeal by the liquida- tor of the Ontario Bank and by W. J. McFarland and others, share- holders, of the bank, from an order of the Hon. Mr. Justice Britton, whereby he affirmed the decision of the official referee with respect to the mode of proof of claim preferred by the Bank of Montreal as a creditor of the On- tario Bank. The appeal was heard by the Court of Appeal (Sir Charles Moss, C.J.O. ; Osier, Garrow and Mac- laren, J.J.A.).
The judgment of the Chief Justice is as follows: In course of the enquiry
by the official referee into the claim of the Bank of Montreal as a creditor of the Ontario Bank, a question was raised as to the form of the claim, and as to the nature of the proof in sup- port of it, turning upon the terms of a certain agreement between the banks, the validity of which was questioned on behalf of certain shareholders. And, as appears from the referee's certifi- cate, he with the consent of counsel representing all parties concerned, pro- ceeded to determine in limine the ques- tion whether or not the agreement in question was valid and binding in whole or in part upon the Ontario Bank and its shareholders and he determined and found that it was valid and binding so as to form a sufficient basis for taking the account.
The principal and indeed the only substantial objection to the validity and binding effect of the agreement, urged on behalf of the appellants, was that it was in reality a transaction of sale by the Ontario Bank, and a purchase by the Bank of Montreal, of the assets of the first-named bank, and that it fell within the provisions of secs. 99 to 111,
inclusive of the Bank Act, and was not legally made or legally consummated in accordance with those provisions, and was ultra vires. The referee was of opinion that the transaction did not fall within tjie provisions of those sec- tions, that it was an arrangement which was within the powers of the board of directors to enter into ; that it was bind- ing, and that the Bank of Montreal was entitled to make proof of its claim against the estate of the Ontario Bank upon the footing of it.
It is of course common ground that the transaction in question was not car- ried through in conformity with the requirements of the above mentioned sections of the Act. The question is whether it was of such a character as to call for compliance with those re- quirements.
In considering the question and view- ing the circumstances attending and surrounding the entering into the agree- ment in question, the first thing that strikes one as very apparent is that there is no intention on the part of any of the parties concerned to enter into and carry out a transaction which would involve recourse to the provisions of these sections.
The circumstances under which it was entered into; the utter inability of the Ontario Bank to make immediate pro- vision of meeting or redeeming the cir- culation, the failure of efforts towards an arrangement for amalgamation with the Royal Bank of Canada, the obvious impossibility of inducing any bank with knowledge of the condition of af- fairs to enter into any such arrange- ment, and the urgent necessity for speedy and effective action, the only means by which the effects of the im- pending calamity could be minimized and made to entail the least possible loss to the shareholders, repel any such no- tion. It is manifest that nothing was further from the minds of the parties than the intention at this time when prompt and immediate measures were imperatively called for, to do some- thing which would have the effect of tieing up all the affairs of the bank until the sanction of the shareholders
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and the governor-in-council could be obtained.
It is abundantly clear that the trans- action was beneficial and advantageous alike to the depositors, the holders of bills and notes in circulation and the other creditors and to the shareholders and that in its actual working out it has enabled the property and assets of that bank to be dealt with and realized without the very serious sacrifice that but for the arrangements made would have been inevitable. That in enter- ing into it the directors acted in good faith, and in what they believed to be the best interests of the bank and its shareholders, seems beyond question. Was it one within the scope of their powers and authority?
The arrangement is evidenced by the instrument dated October 13, 1906, un- der the corporate seals of the respective banks. And from it must be gathered, if it is to be gathered anywhere, the con- clusion that the transaction was as con- tended for by the appellants. A fair reading of the whole instrument, giving to each part its proper effect in relation to the remainder, and bearing in mind the evident object and intention of the parties leaves no reasonable doubt as to its meaning and effect.
The strongest ground in favor of the appellants' contention is the use in No. 2 of the operative clauses of the ex- pression “purchase by way of discount and of rediscount at the rate of six per cent." But if these words are incon- sistent with the general aim and scope of the instrument, not much force is to be attributed to them, and they should not be permitted to govern.
But in truth they are not inconsistent, for they merely describe a species of dealing with a particular class of se- curities which is quite as consistent with a pledge as an absolute sale. It was just as necessary for the purposes of a pledge for advances as for the pur- pose of a sale out and out that the prop- erty in and control of the securities should be vested in the Bank of Mon- treal. And to speak of a purchase by way of discount is simply to state the effect in law of discounting.
In Hart on Banking, 2nd ed., p. 617, it is said that it is convenient to bear in mind that the word “discount" is often used in very elastic and compre- hensive sense. This is followed by a quotation from the judgment of Mr. Justice Story in the well considered case of Flecker vs. Bank of the United States, 21 U. S. R. (8 Wheaton) 338, at p. 350, in which occurs the follow- ing passage: “If therefore the dis-
counting of a promissory note accord- ing to the usage of banks be a pur- chase . . . it is a purchase by way
of discount." In an earlier passage he observed, “But in what manner is the bank to loan? What is it to discount? Has it not a right to take as evidence of the debt which arises from the loan? If it is to discount, must there not be some chose in action, or written evi- dence, of a debt payable at a future time which is to be the subject of the discount?"
In these passages the learned Judge appears to fairly describe what was contemplated in the purchase by way of discount and rediscount set forth in the second clause of the agreement. Every other clause is consistent with the idea of advances, and some are entirely at variance with the notion of a sale of assets and nothing more. Many of the ordinary elements of a sale and pur- chase are not to be found which it is inconceivable would be omitted if that was the intention.
The power of persons carrying on the business of banking to obtain ad- vances and to transfer by way of pledge such assets and securities as are re- quired, has been long recognized. It is a necessary incident of the business of banking. To repeat the language of the learned author of Lindley on Com- panies, at p. 289, of the 6th ed., quoted by the referee. “A power to borrow is so necessary to a banking company that its directors can scarcely be deprived of it; and there are several cases in the books in which their power was held to have been exercised so as to bind the company." Some of these cases have been referred to by the referee and in particular the decision of the judicial
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committee of the Privy Council in the case of Bank of Australasia vs. Breillat (1847) 6 Moo. P. C. 152. The plaint- iff bank in that case was not consti- tuted nor were its powers defined by statute, as in the case of Canadian banks. But there is nothing in the Bank Act which affects or controls that general power which is really a part of the general law merchant.
As the referee has pointed out, a bank in addition to all the specific matters set forth in sec. 76 of the Bank Act, is au- thorized to engage in and carry on such business generally as appertains to the business of banking. And, by secs. 19 and 29, the board of directors is in- vested with wide and extensive powers of management and disposition over the stock, property, affairs and concerns of the bank, and over all such matters as appertain to the business of a bank.
These properly and naturally draw to them the essential power and au- thority to take such steps as may seem necessary to protect the interests of the bank, and amongst others to obtain such advances as may appear to be called for by the necessities of the occasion.
It was, therefore, not beyond the power of the Ontario Bank or the au- thoritv of its board of directors to en- ter into an arrangement with the Bank of Montreal, whereby that bank should advance the funds necessary to meet the calls made upon the other and to enter into such suitable and necessary arrangements as were proper to secure the reimbursement of such advances.
And such was and is the nature of the agreement in question. If that be so it seems unnecessary to enquire whether some of its provisions were such as could be enforced against the On- tario Bank.
They appear to have been designed with a view of conserving the resources of the Ontario Bank and disposing in the most advantageous manner of the available assets. The objections made to them appear to be satisfactorily dealt with and disposed of by the referee
and there appears to be no reason for differing with him in his conclusions.
The appeal fails and should be dis- missed.
PROMISSORY NOTE— PROCURE- MENT OF SIGNATURES OF MAKERS BY FRAUD— DIS-
COUNT BY BANK— PAYMENT MADE ON ACCOUNT BY PER- PETRATOR OF FRAUD BE- FORE MA TURITY— HOLDER
IN DUE COURSE— ACQUISI- TION BY PLAINTIFFS FROM BANK— LIABILITY OF MAK- ERS CONFINED TO BALANCE PAID TO BANK BY PLAINTIFF —NO TICE OF FRA UD— CIR- CUMSTANCES PUTTING PLAINTIFFS ON ENQUIRY- LIABILITY OF PAYEE TO IN- DEMNIFY MAKERS— COSTS.
GRAHAM VS. DRIVER (l O. W. N., p.
767).
'T'HIS was an action to recover the amount due on a promissory note for $1,500, made by the defendant, in which the defendants other than Fos- sett claimed indemnity from Fawcett againsjt their liability to the plaintiffs. The note had been discounted by Faw- cett at the Traders Bank of Canada at North Bay and was obtained by the plaintiffs from that bank. The de- fence was that the note was obtained from the defendants through the fraud of Fawcett and that the defendants were affected with notice of the fraud. Fawcett was the owner of a stallion which he was endeavoring to sell to a syndicate of farmers and obtained their signatures to the note in question by fraudulent representation in each case that they were signing an application for one share of $100 in a syndicate of fifteen persons, to be formed for the purchase of the horse.
Judgment (Teetzel, J.): I find
upon the evidence that all the defend- ants (other than Fawcett) were induced to sign the paper in question upon the false and fraudulent representation of Fawcett and that none of them was
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aware that he was signing a promissory note for $1,500 and that by reason of the fraud practiced by Fawcett, the paper which purports to be a promis- sory note was not a valid promissory note in his possession as against any of the defendants.
Almost immediately after Fawcett had obtained the signatures to the note, he discounted it at the Traders Bank at North Bay, and received the pro- ceeds thereof. Some of the defendants learned of this fact the next day after the note was discounted, and immedi- ately thereupon caused an information to be laid against Fawcett, charging him with obtaining the note by fraud and false pretences. Fawcett was brought before the Magistrate at North Bay and, after some evidence had been given, the case was adjourned and his counsel proposed to take up the note at the bank and have it surrendered to the defendants, and on July 9, 1904, the note being dated June 27, 1904, payable ten months after date, Faw- cett paid to the bank on account of the note, two sums of $599-25 and $200, which payments were indorsed upon the note over the initials of the acting man- ager, and Fawcett promised that he would, in a few days, pay the balance to the bank, so that the note could be returned to the defendants.
The criminal proceedings were ad- journed from time to time, and were eventually dismissed.
Instead, however, of Fawcett paying the balance upon the note, he proceeded to arrange to have it taken up by the plaintiffs. In September, 1905, the plaintiffs paid to the bank the balance of the note, less the two sums of $599-25 and $200, and paid the $799-25, less the discount charges, to Fawcett.
The bank were undoubtedly holders in due course, within the meaning of section 56 of the Bills of Exchange Act.
Sec. 57 of the Act provides that “a holder whether for value or not, who derives his title to a bill through a holder in due course, and who is not himself a party to any fraud or any
illegality affecting it, has all the rights of that holder in due course as regards the acceptor and all parties to the bill prior to that holder/*
There is no pretence for saying that the plaintiffs were parties practised upon the defendants by Fawcett, so that undoubtedly whatever rights the bank possessed at the time of the de- livery over of the note to the plaintiffs, the plaintiffs thereupon acquired. The only interest that the bank had in the note at the time, was the balance of $700.75 remaining unpaid.
The plaintiffs, however, claimed to
recover not only the amount
they paid to the bank, but the $799*25 paid to Fawcett. I think their right to claim the latter sum depends on whether or not they were affected by notice of the infirmity of Fawcett’s rights under the notes, as it does not appear to me competent for the plaint- iffs to rely upon the title of the bank to the note for any amount beyond the balance due to the bank at the time the note was delivered to the plaintiffs.
It was Fawcett, and not the bank, who induced the plaintiffs to take over and rediscount the note, and when the note was presented to the plaintiffs through the agent of the bank at Allis- ton, it bore the indorsement of the two payments above mentioned ; and the examination of the plaintiff, Knight, discloses that he was made aware that these payments had been made by Faw- cett in consequence of some trouble that had arisen between himself and the makers, and that the payments and indorsement had been made after the note was discounted. He said that Faw- cett had explained that there had been some dissatisfaction by the makers, that he knew the note was given in payment for a horse, and that with the luiowl- edge that the payments had been made in consequence of some trouble between Fawcett and the makers, he caused his solicitors ... to enquire into what the trouble was . . . and . . .
he learned, as he says, that they were trying to go very far with Mr. Faw- cett in the matter — “I understood the makers were taking some action against
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BANKING LAW
29
Mr. Fawcett.” He does not say that he heard Fawcett had been arrested, but I think the fair inference is, that both he and his solicitors were aware of this fact before he paid over any money on the note. . . . He believed there
was no foundation for the trouble, as he had confidence in Mr. Fawcett.
I think the facts and circumstances . . . establish that the plaintiffs
before they acquired the note were aware that the defendants had charged Fawcett, in a criminal proceeding, with having obtained the note by false pre- tences and fraud, and if, after that, the plaintiffs without communicating with the alleged makers of the note, chose to acquire it, I think it must be held that they acquired it under such circumstances as to affect them with knowledge of the facts destroying the validity of the note as against the de- fendants. . . . The plaintiffs, when
they took the note, were under the cir- cumstances under which the note was given, and they therefore were affected with notice of the illegality of the note, and therefore as to the interest in the note acquired from Fawcett, the plaint- iffs are not holders in due course.
It was urged by Mr. Johnston that the $799-25 paid by Fawcett was paid as security for his bail, and was in- tended to be held as bail for his ap- pearance before the Magistrate; but I find . . . that the money was not
paid as bail, but was paid directly to
the bank on account of the note, and was intended to be credited on the note as payment in part discharge of it.
Whether the payment was made un- der such circumstances as would amount to duress does not seem to me to affect the question of the plaintiffs* right to disregard it as a payment actually made by Fawcett. . . . He never
pretended to them that the payment was void because of duress or that it was a deposit for bail.
As between the plaintiffs and de- fendants, the judgment will therefore be in favor of the plaintiffs for $700.75 and interest from June 27, 1904, at six per cent, per annum until April 30, 1905, and at five per cent, per annum since that date.
Now as to the claim by the defending defendants against Fawcett who suf- fered judgment in favor of the plaint- iffs by default, I am of the opinion that, the defendants* loss having been occasioned solely by the fraud of Faw- cett, they are entitled to judgment against him, indemnifying them against the amount recoverable against them under this judgment by the plaintiffs and also against their costs of defend- ing this action, together with costs of the issue between them and him.
As between the plaintiffs and the de- fending defendants, I think there should be no costs of this action, as each has only had a partial success.
REPLIES TO LAW AND BANKING QUESTIONS
Qiattiom In Banking Law —submitted by subscribers — which may be of sufficient general Interest to wsrrant publication will be answered in this department
RIGHT OF ADMINISTRATOR TO DEPOSIT TRUST FUNDS IN HIS OWN NAME
Brooklyn, N. Y., June 10, 1910. Editor Bankers Magazine:
Dear Sir: The following point came up ■between a friend and myself, both of us clerks in a bank. If John Brown, person- ally known to the bank, should present let- ters of administration and a State Comp- troller’s waiver for the account of Mary Brown, and receive the balance due in full In cash upon his receipt as administrator, and then turn the cash back into the bank
and open an account in his own name, can the bank accept the account and not be liable to the estate?
Yours very truly,
J. G. L.
Answer: An administrator has the
right to the possession of the funds of the estate, and, while it is customary for executors and administrators to open bank accounts in their names as such — and this is always required when a surety company is on the bond — yet there is no rule of law that makes this
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THE BANKERS MAGAZINE
course indispensable. An administrator may, without violating any rule of law, open the account in his individual name, though he must not mingle therein his own funds with those of the estate. And in paying his checks the bank may pre- sume that he is discharging his duties, unless it has some notice that he is mis- applying the trust fund. If, for ex- ample, he should make one of his own notes payable at the bank, then very plainly the use of the money to pay that note would be a waste of the estate, and
as this would be obvious to the bank itself, it would be liable for any of the money applied by it to that purpose. In allowing an administrator to open an account in his individual name, the bank would always run the risk of being charged with notice of any misapplica- tion, and hence the only safe course is for it to require that the account be kept in the name of the administrator as such. The customary form is: Estate
of A, B administrator.
FOREIGN BANKING AND FINANCE
Conducted by Charles A. Conant
BANKING AND HOARDING IN INDIA
' I 'REMENDOUS sums of gold and **■ silver are known to be hoarded in India, and but little use is made of these metals by the natives as a basis for bank credits, as it is the custom with the more advanced nations. Comment- ing on the conditions in India a recent number of the London Statist says:
“The people of India, speaking gen- erally, are entirely devoid of all bank- ing facilities. There are, of course, Presidency banks which cater for the commercial community, and there are exchange banks which serve the foreign trade. But, speaking generally and broadly, banking is quite unknown to the Indians outside the great towns. The agricultural population, which practically is the Indian population, has to depend almost altogether for banking accommodation upon village usurers, though quite recently people's banks have been introduced here and there. Over and above this, from time imme- morial, India has hoarded gold and sil- ver. Sometimes immense sums in ac- tual coin are hoarded, but most general- ly the practice is, with regard to the small people, to put their savings in the form of ornaments to deck out their women-folk. The accumulation of sav- ings or hoardings must be almost in-
credible. On November 26, 1892, we published in this journal a table show- ing that in the thirty-three years ended with the preceding March there had been imported into India and kept in the form of gold and silver the enor- mous aggregate of <£356,32 1,000. Now hoarding had been going on from time immemorial before that, and has been going on ever since. Therefore, the mass of gold and silver accumulated in private hoards of all kinds must be in- credibly great. But it is hardly neces- sary to point out that this habit of hoarding is uneconomical in the last degree. The amount of gold and sil- ver accumulated during the thirty- three years just referred to was at the rate of over ten and three-quarter mil- lions sterling per. annum. It is obvious that if that vast sum had been laid out in enterprise it would have immensely improved the condition of the people; whereas, hoarded mainly as ornaments, it served no other purpose than to gratify feminine vanity. Still, it is im- portant to remember that there is in the country a hoard of the precious metals and precious stones of incredi- ble amount, which if it can be drawn forth, may in the future prove of in- calculable benefit.
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KNAIflH, NACHOD & KUHNE
BANKERS
NEW YORK LEIPZIG
■ — MEMBEB8 NEW YORK STOCK EXCHANOE ■ =
Dealers In High Grade Bonds Issue Letters of Grodlt and Traveler’s Checks Avallahle Everywhere Foreign Exohange — Cable Transfers Commercial Credits
Interest Paid on Deposits Subject to Check
PRINCIPAL CORRESPONDENTS
ABROAD
Parr's Bank (Limited) London Credit Lyonnais, Paris Dresdaer Bank, Berlin Knauth. Nachod A Kahne, Leipzig
IN THE UNITED STATES Corn Exchange Bank, New York Philadelphia National Bank, Philadelphia First National Bank, Chicago Crocker National Bank, San Francisco
The Elements of Foreign Exchange
BY FRANKLIN ESCHER
A BOOK FROM WHICH THE MAN WITHOUT TECHNICAL KNOWLEDGE CAN POST HIMSELF
A short, practical treatise on foreign exchange designed to supply the need for a book from which a working knowledge of Foreign Exchange can readily be obtained. Carefully avoiding technicalities and confusing terms, the author explains his subject in language so simple and plain that it can be understood by everybody.
Why exchange rises and falls as it does, what can be read from its movements and how merchants and bankers take advantage of them, the effect that these move- ments exert on the other markets — these and like questions are taken up in the first part of the book. The second part describes intimately the practical operation of exchange and the exchange markets, and contains special chapters on arbitrage, in- ternational trading in securities, the financing of export and imports, gold shipments, and other important phases of the subject.
The happy combination of a thorough, practical training in foreign exchange and long experience In lecturing on the subject at New York University, has made it possible for the author to plan and write his book In such a way as to make it of a great value both to the practical business man and the student.
The Bankers Publishing Company
253 BROADWAY
NEW YORK
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FOREIGN BANKING AND FINANCE
31
JAPAN’S IMPROVED CREDIT
'T'HE success of the new Japanese ^ five per cent. $55,000,000 loan, which was issued at ninety-five, serves to call attention to the improved credit of Japan. A recent issue of the Lon- don “Economist** gives the following statistics regarding the various Jap- anese Government issues, the figures being stated in pounds sterling:
|
Year |
Rate of |
Issue |
Present |
|
|
Issued. |
Amount. Interest. |
Price. |
Price. |
|
|
1899... |
. 9,000,000 |
4 |
90 |
96% |
|
1 902 . . . |
5,104,107 |
5 |
100 |
101 |
|
1904... |
4,075,000 |
6 |
93% |
. . |
|
1901... |
5,430,000 |
6 |
90% |
|
|
1905... |
13,500,000 |
4% |
90 |
99% |
|
1905... |
9,000,000 |
4M* |
90 |
99% |
|
1905... |
5,850,000 |
4 |
90 |
96% |
|
1907... |
11,442,500 |
5 |
99% |
103% |
|
1910... |
. 10,450,000 |
4 |
95 |
. . |
From these figures it will be seen that in addition to receiving a fair rate of interest, the investors in Japanese Government securities have reaped a substantial profit through the apprecia- tion in the prices of their securities.
The proceeds of the new loan are to be applied exclusively to the conversion and redemption of the five per cent, war loans of 1895-96, amounting to 43,000,000 yen, and the 50,000,000 yen loan of 1901-02.
BRITISH CAPITAL INVESTMENTS
A CCORDING to the London Statist, British investors subscribed in 1909 for a larger quantity of new se- curities than in any previous year, and fully reestablished Great Britain’s po- sition as the world’s banker. In 1910, it is declared by the same authorities, British investors will -provide a still larger amount of capital for new enter- prises throughout the world than they did last year.
The amount of new capital sub- scribed in the whole of 1907 was £130,- 000,000. In 1908 the total rose to $206,000,000, in 1909 to about £214,- 000,000, and now, in the first four months of 1910, the subscriptions have reached £118,000,000.
In the British investments placed in
foreign countries for the first four months of the current year, the United States leads all other countries, with £21,570,496, or more than one-third of the total foreign investments. Argen- tina and Brazil follow with a little more than £7,000,000 each.
CONVERSION OF THE MEXICAN DEBT
D ECENTLY the National Bank of Mexico and a syndicate of Ameri- can and European bankers presented to Finance Minister Limantour a proposal to convert the Mexican Government’s five per cent, foreign debt into a new loan bearing four per cent. The amount of the debt is $218,000,000, and it represents a consolidation of various loans made between the years 1888 and 1893, and bearing five or six per cent, interest, the consolidation of these loans having been made in 1899-
The conversion will effect a consider- able saving of interest and will afford another striking evidence of Mexico’s improving credit under the wise admin- istration of President Diaz, efficiently seconded by Finance Minister Liman- tour.
BRITISH CAPITAL IN ARGENTINA
*T\ISCUSSING this subject lately, the Buenos Aires Herald saysr “Many attempts have been made in recent years to estimate the total amount of British capital invested in Argentina. It is, of course, impossible to arrive at anything but an approxi- mate figure ; but there is substantial ground for the statement that the ag- gregate sum very considerably exceeds £300,000,000, and that £350,000,000 is probably nearer the mark. At the end of January, 1909, it was calculated that British money invested in Argen- tine securities quoted on the London Stock Exchange exceeded £252,700,- 000. The South American Journal has revised these figures, and estimates that at the end of last year the total of Argentine securities admitted for deal- ings on the London Stock Market had
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THE BANKERS MAGAZINE
increased to £280,722,000, showing an increment of £28,000,000 in less than twelve months. This total, naturally, does not represent the full amount of British money which has found its way to the Argentine; but it affords an ex- cellent basis of calculation. As a mat- ter of fact, a small proportion of the securities quoted in London may be held by foreign investors, though the per- centage is not of sufficient importance
to necessitate any appreciable deduc- tion for present purposes.
“Of the total of £280,722,000, a sum. of £79,880,300 is invested in the bonds of the Argentine National Government and the State authorities, £167,014,500 is in railway stocks and bonds, and £33,827,000 is in miscellaneous under- takings; and already the total has been considerably augmented since the calcu- lation was made.” -
TRUST COMPANIES
Conducted by Clay Herrick
TRUST COMPANIES AND THE CENTRAL BANK
"DELIEVING that it would be of in- terest to the readers of The Bankers Magazine to know the feel- ing of trust company men regarding the establishment of a central bank, th£ writer addressed to about fifty leading trust company officials in different parts of the country letters asking their views on the question:
“Is the proposed central bank a de- sirable thing from the standpoint of the trust company?”
The responses to this inquiry devel- oped the fact that not many of the gen- tlemen addressed feel disposed at this time to commit themselves in print as to their opinions on the subject. Enough of them have favored us with their views, however, to show the various opinions current in the trust company world and to demonstrate that this sub- ject is being studied with interest and with intelligence by the officers of the trust companies. Following are the letters which we are authorized to pub- lish:
From Lawrence L. Gillespie, vice-presi- dent Equitable Trust Company, New York, and chairman of the executive committee, trust company section , American Bankers * Association .
J have your favor of the eighteenth in- stant asking me to reply to the question “Is the proposed central hank a desirable thing
from the standpoint of the trust company?”
In reply I would say that I have read a number of recommendations with reference to a proposed central bank, but am not aware that any plan is definitely before the community to the extent of distinctly specifying the conditions and methods by which it is to be organized, managed and controlled.
Furthermore, there seems to be some di- vergence of opinion as to the exact form of business which it will undertake and the duties which it will perform. In other words, as I understand it, the question to which I am replying is “Is a central bank a desirable thing from the standpoint of a trust company?”
Furthermore, with reference to “the trust company,” any such discussion is likely to become involved through an ambiguity of terms. This is because there is no single class of trust companies recognized in all the States except by name. The trust com- panies with which I am familiar differ in accordance with the laws of the several states in which they are respectively lo- cated, and vary further in accordance with the class of business offered to them by their communities.
In such a discussion we are, therefore, dealing with two uncertain terms. Trust companies under whatsoever conditions and laws they may be operating are surely de- pendent for their success upon the confi- dence winch they create in their communi- ties. As financial institutions any altera- tion of public opinion or sudden hazards created by financial disturbance are cal- culated to injure them and retard their successful development. Stability in the fi- nancial world as stability in the political w'orld necessarily works for their benefit.
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TRUST COMPANIES
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It would seem, therefore, that a central bank so organized as not to throw prepon- derance of influence or benefit in the hands of any one group or class of men in the country, and able to act in the interest of sound financial institutions throughout the country at times when they are especially called upon for expansion in their resources, would be for the benefit of the country at large and as such would benefit the trust companies which are now playing such an important role in the financial guidance of the country. It would be my judgment, however, that the closest kind of scrutiny and study should be devoted to the minute consideration of the charter and by-laws under which such a central bank could un- dertake the extraordinarily important du- ties which would necessarily devolve upon it.
From Oliver C. Fuller , president The Wisconsin Trust Company of Mil- waukee, and vice-president trust com- pany section, American Bankers 9 As- sociation.
Replying to your request for my views upon the question “Is the proposed central bank a desirable thing from the standpoint of the trust company?” If a central bank is a desirable thing from any standpoint is a desirable thing from the standpoint of the trust company.
Any system or agency through which our volume of currency can be made to expand and contract according to the changing needs of commerce would be a good thing for this country. In my opinion it matters not whether this be accomplished through a central bank, through a system of clear- ing-houses or by some other method, so that it be accoraplshed, and whatever will accomplish this will benefit every class of financial institution.
From Breckenridge Jones, president
Mississippi Valley Trust Company, St. Louis.
Your question — Is the proposed central bank a desirable thing from the standpoint of the trust company? — is so general that it can only be answered in a general way. The central bank idea in itself is a good one, if it can be safeguarded against poli- tics, the domination of any certain class, and the other obvious dangers; but, if under our system of government it is im- possible to pass a satisfactory law, then we will have to find some other plan of financial reform. Unless I was presented with a definite plan showing the details worked out, I could not intelligently come to a conclusion as to the desirability of the central bank from the trust company stand-
point. I feel sure that any plan which dis- regards the necessary place that the trust company has in the modern community can- not succeed.
From John H. Holliday, president Union Trust Company, Indianapolis.
I have yours of the sixteenth, asking for my views on the desirability of a central bank from a trust company standpoint. I am much like the old woman who attended a revival and was asked by the preacher if she had religion. “Well, I dunno, some- times I think I have and then again I tliink it’s the worms.” I “dunno” whether I have anv views until I know what powrers the bank will have and as Dundreary used to say, “that’s what no fellow can find out.” As a general proposition whatever will make a stable and elastic currency will be desirable for trust companies and every- body else. That’s about as far as I can go.
From John J. Gannon, president Hiber- nia Bank fy Trust Company, New Orleans.
I regard the proposed central bank as a desirable thing from the standpoint of the trust company, and personally I am very much in favor of same.
From William A. Wilcox, secretary and trust officer Scranton Trust Company, Scranton , Pa.
I regard the proposed central bank as an undesirable thing from the standpoint of the public. Our trust company receives no deposits and does no banking of any kind but confines itself to the execution of trusts. I do not see how it would have any special effect on us as a trust company except that we would be prejudiced as the public generally would be.
From H . C. Harvey, president Ameri- can Bank fy Trust Company, Hunt- ington, W. Va.
We arc in receipt of yours of the eighteenth inst. asking our opinion as to whether a central bank would be of any benefit to a trust company. We do not see wherein a central bank could be of any benefit to either us or the country at large. A central bank might work in a foreign country where it is no larger than one of our states, but in a great nation like this and with our form of government, we be- lieve a central bank would be detrimental to us. We believe the government alone should issue all the money.
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E , A, Wyld, vice-president Security Savings fy Trust Company, Portland, Oregon,
In reply to your question: Is the proposed central bank a desirable thing from the standpoint of the trust company? In the different proposals and arguments cover- ing the central bank, there is nothing to show that the desirability or otherwise from the standpoint of the trust company has ever been taken into consideration, and those in favor of the plan have ap- parently considered it only as a means of providing circulation in a time of emer- gency. The writer therefore is of the opinion that a central bank would have a tendency to create an advantage in favor of national and strictly commercial banks, as against trust companies. As the matter has been presented up to the present time, it seems impossible under our present methods to establish a central bank that would prove satisfactory or creditable to the country generally.
From P. C. Kauffman, vice-president
Fidelity Trust Company, Tacoma, Wash,
I am heartily in favor of the enactment of the necessary legislation that would pro- vide for the organization of a central bank for the following reasons:
In October 1907, without a moment's warning the banks of the Pacific Northwest found their reserve balances cut off entirely, and they were forced to depend solely upon the actual coin they had in their vaults. It was evident at once that but very few days would elapse till this coin would be ex- hausted and the banks either obliged to suspend payment or throw themselves upon the mercy of their depositors.
Prompt action, however, was taken by the banks in the large clearing-house centers, providing for the hypothecation of their liquid assets and issuance thereon of clear- ing-house emergency currency certificates, which were used locally in place of gold, silver, national bank notes or legal ten- ders. The banks in the smaller cities and interior counties followed the example of these clearing-house associations and issued a similar emergency currency, and thereby this most important crisis in our financial history was tided over until confidence was restored and the ordinary flow of business was resumed.
The lessons of that period have shown the value of united effort, and also pointed out a way to the proper solution of the currency question. Irregularities of the 1907 move- ment were only condoned by the emergency that called it forth. The temporary cur- rency certificates were poorly printed, has- tily issued and liable to counterfeit and possible overissue. “I have no lamp,” said Patrick Henry, "by which my feet are
guided save the lamp of experience,” and the people of these United States can well take the experience of the trying times of 1907 as a lamp with which to guide themselves in similar darkened periods. One danger of that period was the fact that the cur- rency was issued by so many clearing-house associations, under different rules and with indifferent protection.
By the establishment of a central bank) which should be a bank of banks, with large capital (not less than one hundred millions of dollars) owned by the banks of the coun- try an« not individuals, and which should not be authorized to enter into direct banking competition by receiving deposts, but which should have full power to re-discount the notes or other securities of the banks of the country and either give credit therefor or issue currency thereon up to an agreed upon amount (which currency should be printed from plates engraved under government supervision, with heavy penal- ties for counterfeiting) it is scarcely within the bounds of probability that a panic simi- lar to that of 1907 could ever again visit this country. The people would have thorough confidence in the currency so is- sued, as they would know that it would be not only secured by the deposit of liquid collateral, but in addition would have the backing of the bank's enormous capital.
It would, however, be necessary that agen- cies or branches should be established in practically every large clearing-house center of the country, agencies rather than branch- es, where the banks of the respective dis- tricts could deposit the collateral or the notes that they desired to re-discount. The managers of these agencies would, of course, be much more competent to pass upon the value of the collateral than could the officers at the head of the institution, and as emer- gencies of that kind that would require the issuance of currency would also require immediate action, local managers could de- cide quickly and advise the central bank of the securities so deposited, whereupon the central bank could at once give the bank depositing the same, credit, or forward the amount of currency desired.
Another reason calling for the establish- ment of agencies is that without them it would be necessary to forward securities or notes direct to the central bank, thereby running risk of loss by long trans- mission by mail, destruction by fire en route, or delay in their receipt and, possi- bly, release of indorsers from their lia- bility.
Of course the details would have to be worked out thoroughly, but I am satisfied that the prevailing sentiment in the Pacific Northwest is in favor of the organization of a central bank, to which should be en- trusted the entire currency-issuing power of the country, and can say, from conversation with many of our leading bankers, that the plan proposed by Geo. M. Reynolds, of
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TRUST COMPANIES
85
the American Bankers’ Association at the Chicago convention, September 19, 1909, meets with general approval.
Care should be taken in drafting the law to keep the central bank entirely free from both political and Wall Street influences, for that reason I am satisfied that the best location for the central bank would be in the city of Chicago. I see nothing in the history of the First and Second United States Banks that should make us fear to take hold of this important question. I am satisfied that a plan can be drafted which will eliminate all the faults attendant upon both these organizations. Those of us who favor a central bank must recognize that we have a campaign of education before us in order to remove the fear that now seems to pervade the country that such a bank, if formed, would either become the tool of one or the other of the great polit- ical parties, or a medium through which the bankers of Wall Street would monopo- lize the finances of the country.
Variety of Opinion.
The differences of opinion reflected in these letters are further apparent in other replies to the inquiry, which were not written for publication; while a number of the latter indicate that the writers do not consider themselves well enough posted on the subject to write an opinion. Taking all the replies to- gether, about the same number defi- nitely favor and definitely oppose the general idea, while a majority consider it impossible to form an opinion on the general idea alone, believing that so much depends upon the particular forms of the details that it will be necessary to have the full plans before a decision can be reached. It is un- doubtedly a safe inference that a large number of trust company officials are holding open their opinions on the cen- tral bank idea until such time as a defi- nite and fully detailed plan is submit- ted for consideration.
The Proposition Too Indefinite.
Indeed the sentiment most common in the letters is that the proposition is thus far in too indefinite a shape to make possible the forming of judgment; while the opinions expressed seem to justify the inference that the writers regard the unknown details as being potentially of much more importance than the general idea itself. In other 2
words, the general idea of a central bank exercises neither attraction nor repulsion — it is immaterial in itself — but the kind of a central bank to be proposed is the crucial question.
There appears no general predispor sition to either favor or oppose a central bank merely as a central bank. Sev- eral of the writers state that they con- sider it of little consequence whether greater stability in our financial sys- tem, with elasticity of our currency, be brought about through a central bank or through some other medium, so long as it is actually secured without the in- troduction of new evils and dangers. This suggests the query whether the central bank advocates are not wasting time in endeavoring to spread the gen- eral idea instead of working out and submitting a particular plan. The op- position appears to be based mainly on anticipated details; while most of those who express themselves as in favor of the general plan do so with reservations as to some of its possible features.
Effect on Trust Companies.
The replies do not indicate a feeling that the interests of the trust companies would be affected except as the general public and the other financial institu- tions would be affected. The interests of the trust company are identical with the interests of the community in which it is located. In common with others it would profit by a more elastic currency and a more stable system; and it would be harmed by any innovations detrimen- tal to the interests of the general pub- lic. Whatever would be good for the country would be good for the trust companies.
On the other hand, so far as any new system may be carried out through the instrumentality of financial institutions, the important position which the trust company now occupies in the financial world cannot be overlooked. As Mr. Gillespie points out in his letter above quoted, there are many varieties of trust companies, and the direct interest of a trust company in the problem will depend much upon the kind of business it does. If its business is exclusively that of executing trusts, its interest will
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THE BANKERS MAGAZINE
be that indirect interest in which the whole community shares. If banking is an important part of its duties — and this is the actual fact with the vast ma- jority of trust companies — then it has the same direct interest in the problem that any state bank has. Its interest differs from that of the national bank only because the latter now issues cur- rency. In brief, the trust company is an integral and important part of our present financial system, and, as Mr. Jones puts it, “Any plan which disre- gards the necessary place that the trust company has in the modern community cannot succeed."
Deserves Study by Trust Company Officials.
It must follow that the progress of the central bank agitation ought to be
followed with keen interest by trust company officials. Their common inter- est with the general public and their particular interest as officers of finan- cial institutions make it a duty to be thoroughly informed as to what is pro- posed. The matter is of quite as much importance to them as to commercial bankers. If proposed plans involve dangers of political graft or of control and monopoly by special interests or particular classes, the trust company will find it essential to oppose those plans; and if a scheme be developed which, unattended by such dangers, offers reasonable promise of giving us a currency that is at once safe and elas- tic, that will meet the needs of our ever growing commerce and industry, the trust company should be in the van of the forces of reform.
SAVINGS BANKS
Conducted by W. H. Kniffin, Jr.
THE TELLER AND HIS TASK
GENERAL ORDERS AND IDENTIFICATION By W. H. Kniffin, Jr.
iir I ^*HE man with a camera eye," who, A having once seen a face never forgets it, and who will pick his man out of a thousand, and whom disguises and the changes resulting from age cannot deceive, has recently been ap- pointed to a responsible position with the American Bankers' Association That “camera eye" made him a good detective, but it would have made him an equally good hotel clerk or bank teller, especially a savings bank teller, whose function it is to deal with the multitudes and not get his people mixed. The teller in the bank of discount deals with a limited few, and frequently; the savings bank teller deals with thousands, and infrequently; and to photograph mentally every depositor would be a feat only for those with camera eyes; and these worthy gentlemen are scarce. In
fact, the savings bank does not ask its tellers to identify the depositor in per- son, for back of him is a cabinet full of little drawers, and the drawers full of cards, and with such an outfit he is ready for all comers.
It has been suggested by some that a scheme of photographing every de- positor be devised so that, unconscious- ly, the new patron, while signing his name, would also have his picture “took." This method is being used by large concerns like the electric light and telephone companies, who furnish their men with cards upon which appear their signature, the seal of the company and a photograph of themselves, so that in making collections, the authority is clear and unquestioned. Finger prints have also been advocated, similar to the manner used by the police, and it is un-
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SAVINGS BANKS
87
Qfrm
dd ieua^/tan de4e ^ ' v ^ '
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my futme, tn fieUan at 4y aided duty executed, any maney naea ad deteajSlet due me at tde Qfa# (^t&adjS^td (^ndtttutian l t&avinyt an ticcaunt (2fia. -^^.~3..J£^2^ . Qfoa ttand^cl td made
detedy and tde fauoed ta act myte^d ada eantinues
Witness,
77
Form I— Standing order for payment of money without altering the form of pass-book. New Bedford (Mass.) Institution for Savings
doubted that eventually this will be adopted in banks, especially in dealings with foreigners.
Identification.
There are other and frequently bet- ter methods of identification than the
Form 2— General order for withdrawing funds. Card form 3x5. East Side Savings Bank, Rochester, N. Y.
mere signature, as important as this may be. The family history is a valu- able help, and the one who would and could forge the signature might not be able to furnish the other details of fam- ily record. One large bank in New York requires all depositors upon with- drawing money to give the present resi- dence at the bottom of the order. When the signature is compared, this is noticed, and if the address has changed, note is made of the same. This is a very good idea, for while cases are on record where money was fraudulently drawn
by answering all the test questions and signing the name correctly, it is ex- tremely doubtful if the holder of the book in these instances could have given off-hand the former addresses of the depositor, especially when they have frequently changed. A fellow obtained possession of James Wall's book on the Emigrant Industrial Savings Bank, and by writing to Wall, ascertained his pedigree, even going so far as to ask the name of the ship he came over in. This formed part of the identification questions, and thus fortified, he man- aged to get Wall's money by his fa- miliarity with these facts; but had the bank also required him to name Wall's previous residences, it might have pus- zled the swindler.
There are little tricks in identifica- tion that often are safe, and save the depositor considerable trouble. In the
Form 3 — Permanent order for payment of dividends. City Institution for Savings, Lowell, Mass.
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THE BANKERS MAGAZINE
&ttoto All IKiw m
Thai I
Depositor No. J 6 J with ike Western Sating Fund Socutt Of Philadelphia,
have made, constituted and appointed, and bp three presents do make, constitute and appoint
to be K*y true and
lawful attorney for ***** and in Keyname to ask, demand and receive from the said Society,
standing to 2<*y credit on the books of the said Society, and upon receipt thereof, or any part thereof, in /e^y name to execute and deliver to the said Society good and sufficient receipts or acquittances Jor the same.
IN WITNESS WHEREOF \ ^ have hereunto set t^yhand and seat 7 ^ day of A.D.
\9oy
(Dn^IMw «t*a Mn.) Seated and delivered m the pretence of at:
,a^a
m
N. B. — The pam-book of the depositor most be presented at the office at the time of demanding payment, unless previously left thereat for settlement.
Form '4— Power of attorney for withdrawing money. Western Saving Fund Society,
Philadelphia
first place, where the depositor cannot write, if he has a scar of any sort that is permanent, this is a good test; also if there is a peculiarity about him that is noticeable. Registered letters ad- dressed to the depositor, initials in hat, marks on clothing, monograms on jewel- ry, etc., often play important parts in the process of identification.
But frequently other and better tests are desirable, as where the signature is radically different (as is often the case), and where other lines of identification are unsatisfactory or impossible. In
such cases it is customary to ask other banks in which he might have account to verify his signature, and recognizing that they may also ask like favors, the request is usually granted. Some banks have proper forms for this purpose, as will be seen from Forms 5 and 6. A simple illustration will suffice: Mr. B. has a deposit in a savings bank, and for some reason or other the bank has not obtained his signature (as often hap- pens unless accounts are refused where this cannot be furnished). He wants to draw some money. Upon comparison.
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SAVINGS BANKS
39
the teller finds no signature recorded or a discrepancy, and advises Mr. B. that he will have to furnish credentials. Upon being advised that a bank identification is the most desirable and often the easiest to obtain, he goes to another bank in which he has deposited for some time and asks them to certify to his signature. This they willingly do. His signature is taken in the proper place and he has no further trouble. The same is true among banks of discount in
N*. .
Union Dime Savings Institution,
Brondw*,. 32d It S‘«th Av«nu«.
Now York. N Y /# 4f*/\
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Form 5 — Identification form used when sig- nature is in doubt. A good form. Union Dime Savings Bank, New York
vouching for the character of new de- positors wishing to open accounts. But money in hand being the only credential with savings banks, such introduction is not required.
General Orders.
There are numerous reasons why two names should be on a pass book. Rea- sons connected with death, sickness, absence from home, convenience, gifts of money, etc. And the public has been duly educated up to the value of
such accounts. There are also reasons why the owner of the property should retain absolute control over the same as long as he lives. There are likewise good and sufficient reasons why one hav- ing a single name account should per- mit another to draw practically at will against it, yet not have any interest in the funds on deposit before or after death. Frequently old people or those living at a distance from the bank pre- fer to entrust the drawing of money to some member of the family, a relative, or an attorney.
In order to vest another with power to draw money from a savings bank, one of three courses may be taken: First,
the change of the account to a joint or trust form, by closing the old and open- ing the new account, as was discussed in the April Bankers Magazine. Sec- ond, to file a general or unlimited order with the bank. Third, and similar to the second method, is by power of attor- ney. A bank would not, in law, be bound to recognize a simple blanket or- der and allow the holder to draw at will, but would be obliged to recognize such a wish by a power of attorney properly drawn.
A general order is to all intents and purposes an order for the balance in full, payable as directed by the one au- thorized to draw. The order is, of course, revokable. At times, a depositor will be convenienced by giving another power to draw dividends only. (Form 8.) In Massachusetts, under the insur- ance law, the banks are permitted to charge the premiums against the de- positor’s account. This, of course, would necessitate authority from the de- positor to make the charges.
Powers of Attorney.
But in the matter of power of attor- ney, the bank is bound to know that the power is revoked by the death of the depositor, and such orders are neces- sarily accompanied with some risk. In the case of Hoffman vs. Union Dime Savings Bank (New York Savings Bank Cases, p. 62), probably the best power of attorney case, so far as sav-
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THE BANKERS MAGAZINE
ings banks are concerned, in the New York courts, it was held that unless the holder of the power was vested with some interest in the fund that caused it to survive the death of the principal, the power was revoked instantly upon the death of the depositor. The bank, there- fore, should have made inquiry if the principal was alive before making pay- ment, and in failing to do so, assumed the risk of establishing in the holder such interest as caused it to survive.
After a long contest in the courts, the bank was able to show such an interest, and payment was finally sustained, but the case twice went against the bank. When such orders are filed, more than ordinary care should be taken to ascer- tain the fact of the depositor's still be- ing alive before making payment.
The proper thing to do in the matter of powers of attorney is, of course, to make notation on the signature card, “Power of Attorney in William Smith. See files." Filed among the powers of attorney will be this document. Banks not having to refer to the signature at every transaction could make notation on the ledger account. And in both cases this might be done on the pass book in lead pencil. The signature of the one holding the power should also
be taken, as a matter of identification. Where the account is closed by one transaction, proper identification only would be necessary.
Where a general order is filed in “home-made style," as, for instance, “Please let my sister Emma draw what- ever money she wants on my account, and oblige, etc.," and the bank cares to recognize such orders, a transparent envelope the size of the ordinary check would come into play, and the order could be inserted therein, with reference to the same on the account. Where the filing is done by accounts and not by months and days, the general order may be filed in its proper place and all sub- sequent orders attached thereto.
On account of the annoyance caused by these general orders, many banks re- fuse to honor them, and insist upon changing the account. Powers of attor- ney, in the light of the Hoffman case, surely ought to be avoided as much as possible. A little argument is all that is necessary to show the depositor the wisdom of doing some things, and they are usually agreeable to anything that will accomplish the result desired. And a joint or trust account will usually answer every purpose and fully protect the bank.
Form 6 — Verification of signature used when references as to correctness of signatnre are requested. A matter of courtesy only. Bowery Savings Bank. New York
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“ROBINSON CRUSOE’S FATHER”
NO piece of fiction that has ever come from the pen of an Englishman is more familiar than the story of Rob- inson Crusoe and his weird and inter- esting experiences on his lonely isle. Whether such a man ever had such ex- periences, or whether he ever had a real father or not, is of no consequence — he certainly had a “story book” father, whose name was Daniel Defoe
In a very clever and highly creditable brochure, issued in commemoration of the centenary of the founding of the first savings bank in Scotland, mention of which was made in this department in the May number, the Williamsburg Savings Bank of Brooklyn has ascribed the honor of conceiving the savings bank idea to Robinson Crusoe's “literary” father.
Defoe was born in 1661, and em- barked as a hosiery merchant and later as a tile dealer, failing in both and losing considerable money, but event- ually paying all debts. Thereupon turning his attention to literature, he was imprisoned for talking too much. , Whether he conceived the savings bank idea among other schemes while in prison is a matter of conjecture, but his fertile mind was working overtime, and he is credited with advocating the edu- cation of women, as well as a scheme to modify the bankruptcy laws and im- prisonment for debt. He saw the value of good roads; drew up a scheme for a marine insurance society, a friendly so- ciety and a savings bank . Just where Robinson Crusoe came in, is not a mat- ter of history, but at any rate, when he was about 28 years of age he drew up a plan for an organization similar to our mutual savings bank, except that it was to be conducted by the Government.
The scheme provided that wage- earners pool their weekly savings and place them in the control of the Govern- ment, receiving interest thereon, and in old age an annuity. “I desire,” said Defoe, “any man to consider the pres-
ent state of the kingdom, and tell me if all the people of England, old and young, rich and poor, were to pay into one common bank four shillings per an- num a head, and that four shillings duly and honestly managed, whether the overplus would not in all probability maintain all that should be poor, and forever banish beggary and poverty out of the kingdom?”
As a matter of fact and of history, the first savings bank in New York (Bank for Savings) found it impossible to ob- tain a charter from a rantankerous leg- islature until it was shown to be a scheme to ameliorate the condition of the poor, and as such it was authorized to do business.
The savings bank of to-day, of course, insures nothing, — it simply con- serves, and takes care of a man's own insurance accumulations, and invests them for his own account. Defoe's scheme did r.ot bear fruit until after his death, but the Germans saw virtue in the plan, and after thinking about it for fifty years (as Germans are wont to do) they established a savings bank at Brunswick, which proved so successful that others were organized, both in Ger- many and Switzerland. In 1797 Jeremy Bentham revived Defoe's scheme in England, and with some improvements, proposed to establish “frugality banks.” The Rev. Henry Duncan, of Ruthwall, Scotland, became interested in the movement, and the first savings bank in Scotland, whose one hundredth anni- versary was celebrated June 8-10, 1910, in Edinburgh, came into being. The movement* spread rapidly and crossed the Atlantic in 1816.
Due credit and honor therefore be- longs to this “dreamer,” not only for conceiving a most delightful romance, but also the most efficient instrument for “encouraging habits of thrift and in- dustry among the masses,” the world has yet known.
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PRACTICAL BANKING
BANK EXAMINATION BY DIRECTORS
By C. F. Hamsher, Assistant Cashier of the Savings Union Bank of
San Francisco
“DANK directors can be held respon- sible for their failure to direct. Such is the t«ext of a decision handed down by a New York court.
It is not to be expected that in banks with a board of directors composed of the leading financiers of the country that these men will lay aside their many business affairs and personally conduct periodic examinations. Fortunately the modern audit by chartered accountants has been established, and afTords them relief.
But the banks in the small commun- ity and distant from the large city with its firms of chartered accountants, can- not afford to avail themselves of this method, owing to the expense. In these communities the directors are seldom such busy men that they cannot spare the time to make the examination. Even then it is difficult to get a good exam- ination by the directors. Why?
The writer believes it is because they do not know how to conduct an examina- tion, with perhaps a little hesitancy in investigating too closely into the man- agement of the officials they have chosen to manage their bank. However, the law says the examination must be made.
Comptroller of Currency Murray found that few, if any, directors have ever read the National Bank Act. Such would be found true of directors of banks organized under State acts.
It should be the duty of officials of a bank to acquaint the members of their board with the main points of the law, if they have not and will not read the act in its entirety.
For the guidance of directors in their examination, the following simple plan might be followed:
The greater portion of the time of an examination should be put in, in a proper counting of the cash, and the
42
examination of the investments. Just as far as is possible, such an examina- tion should be made without the pres- ence of the managing officials.
Count Cash.
The first thing to do in examining the bank would be to take possession of the cash, and the best time to do this would be after the closing hour of the day, or before the opening hour in the morning.
The amount of cash actually counted would depend on the size of the bank. If the bank were small, keeping per- haps twenty or thirty thousand dollars on hand, all should be counted, but in a bank carrying hundreds of thousands of dollars, this would be a physical im- possibility without assistance.
In a bank of large size, the count shown on any sealed sacks of coin re- ceived from other banks, the clearing house, or from sub-treasuries or mints should be accepted. Of sacks not so sealed, select occasional sacks at ran- dom, verifying the bank's own count. If this is proven in a number of sacks it would be reasonable to suppose the marked contents of all sacks to be cor- rect.
The value of each sack may also be ascertained by weighing the coin in- stead of counting it, if accurate scales are available. One thousand dollars in gold coin should weigh 3 lbs., 10.971 oz. ; one thousand dollars in silver should weigh 58 lbs., 14.83 oz., and one thousand dollars in half-dollars should weigh 55 lbs., 1.83 oz., avoirdupois.
If a large amount of bills is held, occasional packages should be selected at random, as in the case of the coin in sacks, and the contents as marked on the strap verified by count.
After counting the cash, compare
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PRACTICAL BANKING
4 S
total with the cash shown to be on hand by the books of the bank. Here take a copy of the bank's daily statement, and check the totals of all other accounts against the amounts reported by the bank. If any discrepancies were re- vealed, they should be shown in the report.
In the counting of the cash, an op- portunity will be given to learn the practice of the bank as to cash items. Ascertain if it is the practice to carry odds and ends of memorandums as cash items; to carry checks to prevent over- drafts; by the officers for personal ex- pense accounts.
Investments.
Upon the safe or unsafe investment of funds depends the safety of deposits and the profit to stockholders, and as this represents about three-fourths of the resources of the bank, nearly as large a proportion of the time would be put in under this heading. Under it would come the loans, discounts, bonds, warrants, etc.
These should all be listed and ex- amined, together with all collaterals and securities, and all mortgages securing loans should be examined especially to see if they are properly recorded, and the proper lien according to law.
If any of the assets were kept else- where than in the vaults of the bank being examined, the records of the bank should be verified by mail, if imprac- ticable for same member of the exam- ining board to do so.
Loans and Discounts.
All large borrowings should be noted, and inquiry made as to the credit of the makers, the value of the collateral and security.
Note should be made of all excessive loans; loans to directors, officers and employes especially, if contrary to law; all companies having loans in which officers, directors or employes are inter- ested; all loans past due more than thirty days, with reason why; all loans on which the interest is unpaid for more than six months (unless the note
should specify annual payment of in- terest) ; all loans of such apparent age as to lead to suspicion, and inquiry as to why not paid, reduced in amount, or renewed; any doubtful or bad loans re- vealed by age, nonpayment of interest or depreciated security.
Bonds.
A comparison should be made of the book value, with the market value, and any material depreciation reported; as- certain if