also verified daily. The monthly work consists in the aggregation of all the events of the month into two sets of columns, which give the general condition. These totals, when posted to the general ledger, form the basis of its trial balance. The trial balance of the general ledger is not precisely identical with the balance sheet contained in the daily cash under the last day of the month, for this reason the general ledger, in its current or normal state, is kept on the basis of cost. No profit or loss, by depreciation or appreciation, is recognized until realized by the actual disposition of the proceeds. Hence, the trial balance of the general ledger is a balance sheet on the cost basis, while the daily balance sheet is on the basis of present market values. There are other duties of a more technical nature, which require much space to describe fully, relating to the valuation of mortgages and investments belonging to the bank, and the ascertainment of balances due to depositors. XXVII. BANK EXAMINATIONS AND REPORTS 1. National Banks. There are several kinds of bank examinations and reports; and we may begin with the requirements of the national and state governments. The national government has the most elaborate machinery for superintending the business of the banks and requiring reports. The chief officer is known as the Controller of the Currency, who is assisted by a deputy and other officials. Besides organizing national banks, as we have explained, he superintends them while they are in operation, and takes charge of them after they fail, or determine voluntarily to retire, for the benefit of depositors, shareholders, and all other creditors. 2. Reports required. - He requires from them reports five times during a year, setting forth their condition. To render the report a true revelation of things, he calls for a report on a past day, and if there is a day, week, or other period when a bank is likely to be worse off than another, he orders a report to be made of that time. Thus, the New York banks have almost annually unusual demands for country bank deposits in September and October. As these are promptly sent, they are sometimes near the verge of the reserve line and occasionally are obliged to take a portion of it to answer the demands of the country banks. At this time, therefore, when they are down to low-water mark, they are always required to make a statement of their condition. This statement is signed by the president or cashier and three directors, who also declare under oath that they believe it to be true. 3. Responsibility of Directors. Before going further, the accuracy and extent of the knowledge of the signing directors may be considered. In almost every case they literally know nothing concerning the truthfulness of the statement signed by them. It is prepared by several of the officials of the bank, the cashier putting together the final figures from memoranda given to him by the paying teller and others, and the three directors attach their names because the law requires this to be done. It may be remarked that this is not always a safe thing for directors to do. If they honestly believe the statement to be true, and have no reason to suspect anything therein, they can not be held liable should it prove to be a fraud; but if they know, or have reason to believe, that it is incorrect, they can not plead innocence and escape. On several occasions directors have knowingly made statements which they knew were false, whereby others, not knowing this, were led to purchase the stock of their bank and pay far more than its worth. Discovering afterward the truth, the purchasers sued the directors and made them pay the full price for their deception. Such statements, therefore, are something more than perfunctory matters, and, if not made in good faith, may bring those who make them into trouble. 4. Special Reports. Besides these five statements, the Controller of the Currency can require as many more as he pleases. If he suspects that a bank is going wrongly, this is one of the first steps taken by him to find out its condition. 5. Deceptiveness of Reports. That the statements thus prepared for the Controller are often false and mislead him has been again and again proved. In truth, if a bank sets out to deceive him, it succeeds in most cases - for a time. Rarely is a wrongdoer caught in the incipient stage of his rascality. Ultimately he is found out; that is the sad history of them all. Besides these reports or statements, national banks are examined by men especially appointed for that purpose, and work under the direction of the Controller. Many of them have served for a long period, and are highly competent; and the worth of their examinations has long been a subject of discussion among bankers. Some contend that their service has been very valuable in preventing and detecting frauds; others, that it has not been worth the cost. Whenever a large defalcation is discovered covering a long period of time, the criticism is at once raised that if prior examinations had been thorough, it would have been discovered. On the other hand, if a rogue can cover up his tracks so well as to defy detection, what is the use of examinations? Admitting that examinations ought always to be made by competent men, may not this be said of them, that, if there is a rogue in a bank who is robbing and yet escaping detection, the examiner is likely sooner or later to discover him? Is not this, in truth, the history of bank examinations? And if the examiner had not been after him, would he not have continued longer and stolen still more? 6. Value of Examinations. Several things more may be said in favor of examinations. One is, they do have a deterring effect; the fear that detection will come keeps many a tempted man from venturing. Another thing may be No matter may be said of them, if there is a wrongdoer he found out. There is always the possibility. how large the bank may be, or slight the examination, if there is any irregularity, it may be discovered. Lastly, irregularities are found in the early stages of which the world has no knowledge; in all such cases a long credit mark may be placed to the examiner's account. On the other hand, too often examiners are appointed who have inadequate knowledge of their work. Such are worse than useless. They drown investigation by others while not investigating themselves. In other cases examiners are swerved from the path of duty by bank officers, are bribed by means of loans to them or gifts of money. The cases that come to the public knowledge are rare; perhaps not all of them are known. Most of the states also have bank superintendents, who are required to supervise the conduct of the banking institutions within their control. Their examinations are not so thorough or frequent as those made by the national bank examiners. In some states they are of no account whatever. Private bankers in all the states except two or three escape on the ground that the state has no constitutional authority to examine them. 7. Judicial Examinations. The courts, too, sometimes take a hand at bank examinations. The special charters of some banks and trust companies require that the courts shall appoint one or more examiners at stated periods to make examinations of their affairs. Usually, these examinations are made with great thoroughness and are worth all they cost. In all cases the banks examined are required to pay for the work. One of the principal objections to national examinations is, examiners have not the time, even if they had the inclination, to do their work in BOLLES: M. B. & F. 18 |