Credit investigations of names outside the bank's home city are made by mail. Occasionally, in special cases, the bank may get the assistance of its branch offices in other cities to investigate a name, or it may send a traveling credit investigator into an area. But the investigation of names in the home city is done by credit investigators, in addition to investigation by mail and telephone. If, for example, the bank is located in Federal Reserve District Number 2, the subsection (of the domestic section) of which this district is a part will have segregated in it a group of credit investigators and will have a special assistant in charge of them. There will be, say, a dozen of these investigators, ten of whom may each handle all names in the flour, feed, grain, hay, fruits, vegetable, produce, poultry, and meat trades; another may handle all the names in the clay products, glass, glassware, table ware, bottles, woodenware, diamonds, watches, and jewelry trades, etc. The other two investigators may be special men whom the chief may send into any trade on special investigations as occasion may require.
Passing upon Loans and Discounts When an application for a loan or discount is made by a pros pective account, an investigation is instituted by the credit de partment through personal interviews with banks with which the applicant has been doing business and through trade circles and any other channels that may present themselves. When the applicant is a customer or correspondent bank, a statement is made up by the various departments, showing the name of the applicant, the amount of accommodation requested, the highest amount of credit given last year, amounts now loaned or under discount, the amount of credit outstanding with the foreign divi sion and the maturing dates, the average balance for recent months and the corresponding balance last year, and the present balance.
The credit information, together with the " offerings " and the letter requesting the loan, is submitted to the proper bank officers who in such a bank as that described above would be the officers in charge of the territory in which the borrower is located. Cer tain banks have a special discount committee, variously composed of directors, officers, and department heads; in smaller banks the board of directors may pass upon the loans and discounts in dividually. The offerings may be submitted formally upon offer ing slips or in an offering book in which the offerings are entered. The loans and discounts are usually passed upon by a proper officer and approved later by the discount committee by attesting the offering book or discount register, or by formal vote of the board of directors, made part of their permanent records. The
ultimate responsibility for all loans and discounts rests upon the board of directors. The bank extends to the applicant what is called a "line of credit" or a specific loan or agrees to discount or purchase certain paper.
To Whom Credit Information Is Furnished The credit information is, of course, for the use of any depart ment or officer of the bank needing it. One of the functions of the credit department is the daily clippings service. Every man in the department may be required to read a different morning paper and items of credit interest are marked and clipped. Particular attention is given to the death and obituary column, business embarrassments, judgments, financial notes, changes in firms or corporations, and changes in the amount of capital and surplus carried. If the death of a customer is published, notice is sent to such departments as the check desk bookkeeper, paying teller, certification, signature, loan, customers' securities, discount, and auditor; and the item is filed in the customer's credit record.
Letters of inquiry on commercial paper names and on various other credit matters are received from customers and other banks, and are answered by letter or telegram, as requested. If the department has no file for the particular party named, a credit investigation is started and the customer advised that he will be informed fully upon completion of the investigation. These letters of inquiry often contain requests for information on a score or even a hundred names; less detailed reports are made to such letters. The miscellaneous inquiries are on a wide variety of subjects and often cause considerable trouble and expense in obtaining the required information. The bank may not charge for this service of answering inquiries unless it has to employ the services of a special bureau or obtain information by telegraph or cable, and then it may charge only the additional expense.
Occasionally the credit department is requested by an out-of town correspondent to purchase paper for their account, paper bearing either a name of their own selection or one to be selected by the department. The department usually selects the notes of a customer of the bank when it is asked to make the selection. Frequently, also, the department is asked by correspondents to obtain lists of offerings for them from note-brokers, and to signify its approval of such offerings by checking on the lists the names which it considers good; the lists are then forwarded to the cor respondents and they make the final selection and buy by direct order to the broker.