The fact that the bank's investigating com mittee enter into possession and assume entire control of the bank's affairs, which they retain without interference or interruption until they have thoroughly satisfied themselves that the books of the bank are correct and its affairs precisely as represented, affords assurance against fraud and clerical errors. It would seem wise that all banks should cause such examinations to be held; where this is not expedient the same methods should be pur sued by the directors. If any illustration were desired showing the necessity for rigid super vision and thorough examination it may be found in the astonishing story which has ap peared in. the public journals. The fact is dis closed that a woman not engaged in business and not known to possess tangible assets was able to obtain from at least one bank, with a reputation for conservatism, loans of four times the capital stoc.lc of the institution It is a good plan, when an investigation is being made by National or State bank exam iners, to appoint a committee of the clerks to co-operate with such officials for the purpose of verifying the investigation.
A theft which had wide newspaper publicity, both because of the very large sum stolen and the prominence of the bank in the city of New York, was where a receiving teller was found to be the thief, although the directors had abso lute confidence in his integrity. He used part of the receipts of one day to cover the short age of the day preceding.
In one bank two individual bookkeepers were in conspiracy with a dealer. They al lowed the depositors to draw out more money than they had deposited by covering up the defalcations by false entries.
The officer in charge of the exchange de partment in one case entered drafts issued by him for a less amount than the face. To il lustrate: A $5,000 draft was entered by him as $1,000, and, as he had charge of the °recon cilement)) the difference was transferred from one account to another. If a ledger is manip u.lated,.or a certificate of deposit register fal sified, it is difficult to discover the fraud.
It is a wise proceeding to compel all em ployees to take a vacation without notice .each year, so that others may become acquainted with their duties. In this way, sometimes, de falcations lave been discovered.
In past experience there.has been found no more satisfactory preventive against fraud than the changing of employees, without pre vious notice, for a short time, from one depart ment to another, at least once a year. A con stant inquiry should be made as to the conduct and habits of all persons employed by the bank. Such inquiry may not make a weak man strong, but good resolutions may be strengthened by the knowledge that the penalty of wrong-doing will be surely and promptly inflicted.
It is only a truism to say that good bank management and thorough examination are wholly impossible in the absence of a definite system, which enters into every phase of in dustry. We find it everywhere. The manu facturer who does not know in detail his stock on hand at any time is in as dangerous a posi tion as an engineer without a steam gauge. His steam may be low—the machinery of his business will suddenly stop. His pressure per haps is high—all his capital tied up in stocks means an explosion—and the receiver gets the pieces.
Necessity of Method.— To a right and safe banking system method is a necessary pro tection. Unsystematic banking. is not only a paradox, it is a contradiction in terms. Sys tem economizes hme, excites invention, ex pands energy, concentrates power and. accel erates results. Without system, determination wealcens, purpose crutnbles, failure is sure. Subtract system from banking and chaos is left In banIcing there is no middle ground between order and confusion, between cosmos and chaos. System, applied to banking, should make it easy for the manager to have its con dition constantly before him. Emphasis has been placed upon the value of examinations conducted by banic clerks. But in view of the close relationship of these institutions to the public welfare and the further fact that they are virtually the creation of the Federal and State laws, it is evident, not only that banks should be examined by officials of the respective governments, but that the examinations should be of the most searching character. A good bank will court investigation. Whether it is true or not, as a recent writer has said, that "bank examiners arc not called upon to play the it is assuredly true that they should discharge their duties with thorough ness and with a realizing sense of their duty to the So far as practicable they must sec to it that collusion at the time of examina tion, between teller and discount clerk or other officers, is made impossible, and that neither cash nor vouchers are made to do double duty in the hands of the dishonest, as has been done. It may not be assured that either Na tional or State or directors' examinations will form an infallible guarantee against dishonest practices. But what may justly be expected of these examinations, together with such as the bank officials may themselves institute, is that they will reduce losses through error or fraud to a minimum. No known system affords any guarantee of faultless management; but the best system rigidly applied will produce the best results possible; and for this the public have a right to look.