tion which would materially lessen the stockholder's liability and increase the depositor's safety.

First and foremost the fee system should be abolished. The examiner should be appointed by the Comptroller of the Currency without any dictation from political sources, should be placed on a regular salary basis, and there should be enough bank examiners appointed to do the work properly. What this number should be I would not even care to guess, but I am absolutely certain that the number now employed is so small in comparison with the number that should be employed, that were this plan to be put into effect, there would be nearer two hundred and fifty than seventy-five.

Secondly, these bank examiners should be appointed because they have some ability-because they are fitted for work of this kind, and they should have suitable provision made for assistants. In my own bank, not very long ago, it took three expert accountants three weeks to do what it took a government examiner less than one week to do. It is impossible for a man to examine a bank of any size intelligently without taking an assistant in with him, for the reason that while the examiner is examining one department, the officials, if they care to, can switch the collateral or the assets in such shape as to defy and bewilder the most astute examiner. This is avoided by taking a requisite number of men at the time the examination is started and practically taking control of the bank, when it is in a normal condition.

The practice of having the national bank examiner go over the paper to ascertain its value with an officer of the bank who made the loan is an absurdity. This is where the directors' part in the bank should be made prominent. The directors' names are loaned to banks to give them an air of stability, of strength; yet the directors sign sworn statements knowing absolutely nothing of their own knowledge of the figures therein contained, and the bank examiner seldom, if ever, consults them as to the value of the paper representing the loans of the bank. In every examination either the board of directors, or a committee from the board of directors, should be called in by the national bank examiner; and he should question them concerning the value of the paper, and not rely entirely upon the statements made to him by the active officer who made the loan. It is not a felony for an officer of a national bank to deceive or lie

to a national bank examiner, unless the said officer is put on oath. It would do the directors of a bank good to go over the collateral personally with the examiner every six months. I know of no practical way in which they could keep as closely in touch with the character and quality of loans made by banks of which they are directors as in this simple way, and I am certain that it would add a great deal of value to the government examination.

Regarding the signing of the names on the sworn reports, I doubt if there are many directors who ever take the trouble to look at the books of the bank and satisfy themselves that the figures represented on the statements are correct. I doubt if the majority of directors in national banks understand that the individual deposit ledgers are not audited at all by the national bank examiners. The figures on the pages are gone over, footed up, but no verification is ever asked from the depositors as to the correctness of their balances. This is done in the case of bank accounts, but not in the case of individual deposits, nor would it be practicable under the present way of doing business for the national bank examiner even to attempt to audit the individual ledgers. In this department and in the collection department the public accountants spend most of their time-the departments that are practically avoided by the government examiner. The usual place for defalcations to exist. among bank clerks is on the individual ledgers. The temptation is made easy by the use of the pass book system. There is no more reason why a reconcilement should be taken for a bank balance as to the correctness of the amount of money due them at the end of any one month, than there is to take a reconcilement from an indi→ vidual depositor. Both represent money, both represent trust money. The use of the statement system on individual accounts has an excellent moral effect on the force of the office, and it enables the officers and directors of the bank to know that the individual ledgers are correct and represent the actual amount of money due the customers.

The above are three practical suggestions, from my own point of view, as to how the government examination can be bettered.

There are certain things that the directors of banks can do themselves, which would materially help the government officials; and the first and foremost is that no man should allow his name to be

used as a director of a national bank who does not intend to direct. Figureheads are of no practical use and are a positive detriment in the banking business. The day of one-man banking is past in this country. No matter whether a bank be private, state, or national, no one man knows it all, when it comes to investing other people's money. Comparatively few men make a success individually in investing their own money. How then can one person be capable of investing the savings and accumulations of a number of people? I have heard it stated time and again by both the State Superintendent of banks and national banks and the Comptroller of the Currency, that no national bank or state bank has ever failed when the directors have done their duty.

Just what the duty of a director is is a most important question. I am a firm believer that what is left to five or ten or twenty men to do, is not so well done as what is left to one person. For that reason I believe the active officials in banks should run the banks and have considerable to say as to what the policy of the banks shall be. I believe firmly that the advice and counsel of five or ten or twenty men is valuable to any active official in the bank, and ought to be sought for by that official and not avoided. In other words, I believe that it is the duty of the directors to advise, to consult; that it is the duty of the officers to carry out the policy outlined by the board of directors; and if that policy or advice cannot be followed consistently by the officer, then it is his duty to resign, because it is the directors to whom the depositors are looking for the safety of their funds entrusted to the bank. That is the duty of the directors to the officer, and of the officer to the directors.

The directors have a duty to perform towards themselves, and I know of no way that they can discharge that duty intelligently other than to have an expert examination of the bank in which they are directors, at such time and in such manner as they deem best, with no knowledge whatever given to the active officers of the bank as to when that examination shall be made, and the report of said examination to be made to the directors themselves. This matter is one which simplifies itself according to the size of the bank. The smaller the total footings the simpler the examination, the easier it is for the directors to satisfy themselves that everything is correct. It is also the duty of the directors to know whether or not the

officers of their banks are engaged in speculative ventures, and are giving more time to outside business affairs than they are giving to their own bank; for I believe firmly that the time has gone by in large institutions, when it is possible for active officials in banks to give their best attention and energy and interest to the business of their bank, if their attention is absorbed by their personal interests elsewhere. Either the business of the bank should be important enough and the remuneration sufficient to attract active men to fill these positions of trust; or the officials whose attention is on outside matters should be permitted to devote their entire time to their own affairs, without the annoyance necessarily entailed upon them by devoting any attention to the interests of the depositors who are leaving their funds with them, under the impression that they are being safely looked after.

What we need in the banking business to-day more than anything else is some old fashioned men, with high ideas of honor and integrity; whose minds and attention are not all taken up with getting rich quick; who will give their entire attention to the business of running the bank in the interests, not of themselves or of a clique with whom they happen to be associated, but in the interests of the people who place their savings with them.

In conclusion I wish to state that while I believe the methods employed by the government in examining national banks should either be materially changed, or the government examination abolished altogether, I do not believe in shifting one's responsibility to the government, as I am no believer in paternalism. The matter of a safe conduct of the national banking business does not rest upon the government officials; it rests upon the directors in the national banks, who must discharge their obligations to the stockholders who elected them, and to the depositors whom they represent, in an honorable, businesslike, and up to date manner.

WHERE WAS THE BANK EXAMINER?

ADDRESS DELIVERED BY S. R. FLYNN, PRESIDENT OF THE NATIONAL LIVE STOCK BANK OF CHICAGO, BEFORE THE ILLINOIS BANKERS' ASSOCIATION, AT PEORIA, SEPTEMBER, 1902.

THE national-bank examiner is not perfect, but he is better than he was, and can be made better than he is. The past decade shows vast improvement in the character of service rendered by examiners. Further improvement is possible as to men and methods, but perfection is no more possible in the field of government inspection than in any other department of public or private business, where men and the methods of men prevail. It is the fashion in some circles of darkness to attribute to the examiner all the ills that result from bank failures. In fact, it is no exaggeration to say that there are some who still hold the opinion that the national-bank examiners were the responsible cause of the panic of 1893. The question, "Where was the national-bank examiner?" was the stereotyped query of 1893. Every time a national bank failed it was: "Where was the examiner ?" Some presumably intelligent people were rather inclined to the belief that if the bank examiners had done their full duty there would have been no bank failures, indeed no panic. If the national-bank examiner could perform a modicum of the service demanded by unreasonable critics, it would be difficult to compensate him with earthly rewards, in cash or honor. However, earthly reward has been, is now, and always will be quite sufficient to compensate the examiner for all he can do and for all that reasonable men will expect him to do.

There was a time, not so very long ago, when the examiner made his report on a piece of paper no bigger than a postage stamp. In those days banks were not examined; they were merely viewed. Indeed, they were not always viewed. Not infrequently the visiting examiner arrived and left on the same train, contenting himself with five minutes' conversation at the railroad station with an officer of the bank. The examiner had wired ahead instructing the officer to meet him at the train and to bring him a trial balance. There have been cases, where the examiner did not even visit the town. He made his examination by correspondence, avoiding the tedium of travel. Strange that bankers submitted to such imposition! But then, some of them did not want to be examined, while others