98 National Bank Failures.
security for the real merit of his examination, has a disagreeable duty to perform. He enters a bank, which by all the world is supposed to be well conducted and solvent, and to be managed by honorable men, respected and looked up to by the whole community. His position, however, is that of a Censor, and it does not permit him to assume what the world supposes. On the contrary, to make a good examination, he must take nothing for granted, and quietly act on the ground that something is wrong. "Suspicions are the sinews of the mind" in this case, and an examiner without them cannot expect to detect mismanagement or defalcation. The position requires tact as well as technical skill — tact not to offend unnecessarily or disturb friendly relations, and skill to bring to light all that should be discovered — and undoubtedly requires a high class of mind in the one that fills it well. Bank examinations are not the only security provided in the law, and it is ridiculous to assert that the Directors, stockholders and depositors should throw aside or neglect to use all the other means which the law provides to enable them to protect themselves, and rely entirely upon the Government examinations, which in the nature of things must depend for success on the sagacity of one individual.
The framers of the National Bank Act, while they did all that they could to protect the depositors and stock- holders of national banks, as has been seen, were still not perfectly sure but that failures might sometimes occur. This feeling doubtless arose from a knowledge on their part of the weakness of human nature, and of the imperfections of systems of Government. That they felt in this way, is indicated by the fact that they have provided, also, a method of protecting, as far as possible, the depositors of national banks that do fail. They have provided for the appointment of receivers and for a distribution, under Government control, of such assets as can be collected from the wrecks of the failed banks. The stock-holders of such banks are subject to the penalty of being compelled to contribute, if the deficiency in the assets requires it, an amount not exceeding the par value of the shares of stock held by them in addition to the amount already invested in such shares, to the fund necessary to pay depositors. This of itself would seem sufficient to be careful and place a live Board of Directors in charge of a large fund, considering the manner the stockholders of the Pacific National Bank of Boston kicked and squirmed when this provision of the law was applied.
The experience of the past has been that bank officers have concealed all their operations from the proprietors, and when failures have occurred everybody has been astonished. As an additional safeguard to meet this secrecy an organization has just been perfected in New York which is a step farther in commercial agencies than has ever been attempted. From one of their printed circulars it is ascertained that they propose to keep in pay a corps of detectives and other agencies, "as a check upon defalcations and embezzlements by bank Presidents, and Cashiers and other officials." But it is not exactly clear who will watch the detectives.
