Safeguarding would seem that under the circumstances no argument was required to establish not only the necessity for adequate safeguards in the shape of stringent statutes, but that measures should be provided to insure strict conformity on the part of the bank officers and directors to the requirements of the banlcing laws, thus safeguarding the depositor against abuse of privilege or cnminal carelessness. The attainment of this object is sought by the provision in national and State legislation, as the case may be, requiring official examination and the publishing of a statement of a bank's condition from time to time as the authorities may deem expedient. There is but one proper bank supervision, and this includes mental alertness to discover the very best methods for despatching business with celerity, for insuring correctness, for guarding most ef fectually against errors, and to render tamper ing with the books most difficult and detection most easy. It means, too, economy in the use of time— the article which so many squander lavishly as if, like the waters that pass o.ut from between the mute lion lips of the Nile fountains, it was to flow on forever. Super vision means, also, such oversight as makes the manager thoroughly familiar with the business of the bank, so that he can upon occasion com rnand the fullest information regarding a new department of the business at a moment's no tice. The years of a bankees work in the dis charge of his heavy responsibilities are not many at the most. From the time he assumes the direction of the affairs of a bank to the time when his own ledger must be closed, a very few decades intervene. When that time has come and he either passes from all work or puts down his pen and vacates his chair for a younger man, it becomes evident that the super vising banker— be he president, or cashier — whoever he may be and whatever his offidal designation—should be able to hand over to his successor not only the assets of the bank unimpaired, but an intelligible working system such as will enable the new manager to familiarize himself with the details of the busi ness and discover the exact situation with the least delay. But this can only be accomplished by the inauguration of a system as nearly perfect as may be, which, with its comprehen sive method of safeguarding checics, will re quire of him less devotion to such details as it is the province of his subordinates to super vise. That is to say, the more perfect the system in practice the more time will the manager have for the exercise of his judgment upon the most important questions coming be fore hitn. It is here that the test of the most efficient bank official lies. Take, for an illus tration, the work of supervising the loans made' on real estate.
Expert It has been held, and is indeed held by many knowing no other method, that to ascertain the value of prop erties submitted as collateral for loans recourse must be had to some qualified expert, generally some one engaged in buying and selling real estate. The judgment of such an authority has been, and is, accepted as conclusive on the security offered, and determinative as to whether the report shall be favorable or adverse to the loan. But here the question arises, Who shall guarantee the expert? — for experience has too often shown that his judgment may fail, or it may be discovered that the expert was consciously or unconsciously interested in advising the loan; the applicant may have been a friend of his, or—and such cases have been —it may be his own device for getting a loan by applying through the concealed interest of another party. But suppose a more excellent
way is to be found by which the bank can be rendered reasonably certain as to the value of the property, that a clear title can be given, that it has real existence as described, both as to environment and prospective value; if he be a wise banker, will he not take advantage of that safer and saner method? And let us sup pose, further, that in this way our banker is kept informed regarding specific localities, as to whether they are advancing or retrograding in value, whether the interest is kept up—is it not clear that a banker who has such expert advice is not only freed from duties that would other wise needlessly weigh upon him, but that his services are to just this extent made more valuable in that with less time expended in searching for details and technicalities he has more time to devote to other important duties? Needless to say, we are not pleading for a title guarantee company or other corporation; we only say this—that where the services of these or kindred institutions are warranted by the business of the bank—and it must be small institutions where the volume of business does not warrant them — such facilities carrying guarantee of perfect safety should be utilized by the prudent banker.
Systematic Examinations Essential.— But be supervision ever so thorough, it cannot serve its proper purpose without a system of right ex amination— rather of examinations. Unceas ing watchfulness can only be maintained through proper investigations, not only to detect fraud but errors of judgment. The usual examina tions of books are of but two kinds, those of the directors, and those of the official examiners of the National or State government as the case may be. Of these two methods, that of the directors, when rightly conducted, is most im portant, and for the obvious reason that the directors are better informed as to the value of paper and local securities than the official bank examiner, as a rule, can be. That the examinations made by directors are too often superficial and goes without saying. Of course, in the examinations by the directors, the revision of loans is most important, enabling the board as it does, when conducted in a business spirit, to detect improper advances on an insufficient collateral or inadequate endorse ment. It is here the examination should be most thorough, so that the presence of ((weak') paper, which often becomes such after the loan has been made, may be discovered and rem edied. Obviously in such an examination every piece of paper must begone over as to time of maturity and collateral, which latter should invariably be produced. Collaterals should all be carefully examined with reference to their proper assignments to the bank, so that there may be no question about its ability to exercise a legal ownership, if necessary. The ticklers, the discount book, and all books pertaining to this most important branch of bank, should be carefully investigated, and the precise facts ascertained. The liabilities of the bank, its deposits and cash on hand, the character of the depositors and borrowers, the condition of the individual and general ledgers, the bad debts of the bank, including especially notes past due, over-drafts when permitted—all these and more should be investigated by the board, and this without bias to any officer or employee of the bank; all of them who discharge their duties faithfully will be glad of an examination which will result in enhancing the appreciation and increasing the confidence of the board as to the value of their services.