[Volume XXV
THE CHICAGO BANKER
6
This Bank has been in continuous existence since 1810—nearly one hundred years. It has always given effective service to its clients and has never failed in their protection. Conservatively managed banks and persons having business in Pittsburgh are cordially invited to open accounts.
J. M. RUSSELL 1st Assistant Cashier
J. D. AYRES Assistant Cashier
GEO. F. WRIGHT Auditor
me
Rank oiPiitsbiirsli
-■-^NatiorLal JLAssociation w
WILSON A. SHAW President
JOSEPH R. PAULL Vice-President
W. F. BICKEL Cashier
“THE BANK THAT HAS GROWN UP WITH PITTSBURGH”
Capital $2,400,000	established isio	Surplus $2,900,000
.	.	President
. Vice-President .	.	. Cashier
Assistant Cashier Assistant Cashier Assistant Cashier Assistant Cashier Assistant Cashier
C. H. HUTTIG .
W. B. WELLS
G.	W. GALBREATH 3. R. COOKE
D’A. P. COOKE R. S. HAWES
H.	HAILL .
J. F. FARRELL .
3rd NATIONAL
OF ST. LOUIS BANK
Capital, $2,000,000	Surplus, $2,000,000	Deposits, $31,000,000
---------- ACCOUNTS SOLICITED -—--
payment by New York banks of deposits originating in unsecured loans to stock market gamblers.”
Whatever affects bank deposits affects also the clearings. Overcertified checks may form a large proportion of their immense volume. They may be, and probably are, stuffed to such an extent as to render them a worthless gauge of banking transactions. In place of being a measure of real business they may only illustrate the facility with which bogus business can be created. A disclosure of the total amount of overcertified checks passing through the New York Clearing House in a single week might be electrifying. To get the aggregate amount of them passing through all the clearing houses in the United States weekly would be impossible, and well, perhaps, that it is so. Very few banks, large or small, would care to make a return of its overcertified checks. Nevertheless, they are almost universal, and I have found traces of them in the farthest West.
As to one typical case I can speak positively, having obtained the particulars from one of the parties concerned. A farmer had endorsed a bill for a friend who defaulted on it. One sold his property and lodged the proceeds in the bank which held the endorsed bill. The bank did not wish to press him on the bill while there was any hope of the drawer meeting it. In order to enable him to make use of his own money it gave him a certified check, which he undertook, in writing, not to part with for twelve months. But long before the year was up he passed the check through another bank, and the certifying bank, after some demur, had to pay it. Such free-and-easy banking is not at all uncommon in the small towns of the V est. Banks there will take risks rather than miss business. And the certified check is a most convenient instrument for assisting a customer in a temporary difficulty.
But it has also many legitimate uses. At land sales, for example, certified checks are the customary form of payment. They are extensively used for remittances. A ten-thousand dollar bank in Nebraska or Dakota, with correspondents in most of the neighboring towns, can render valuable service to local traders by certifying their checks. It is easier for them and cheaper to the remitter than a bank draft. Much of the business which is done in England by means of bank drafts is (Continued on page 28)
in circulation, masquerade as bona fide banking capital. They help to swell the enormous deposits which the New York clearing banks report week by week. To that extent these returns are fictitious and misleading. The deception they practice is not limited to the individual banks or to New York itself. The whole country is mystified by it, and the international money market as well. These weekly returns have been long suspected of manipulation. The charge has, in fact, been more than once made against them, but specific proof is now available. The above writer proceeds to point out that fictitious deposits are a necessary result of overcertified checks. He says: “These overcertified checks find their way into other banks and help to swell the deposits of New York banks to huge proportions. And Mr. Bryan would make banks all over the country, in St. Paul, Duluth, Omaha, and Kansas City, responsible for such New York bank deposits. Depositors in our local banks would thus, in the end, be sureties for the
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ing the Morse loans, he was asked if he had been aware of the fact that Mr. Morse had several times overdrawn his account. “There is not a broker in Wall Street who does not overdraw his bank account daily,” answered Col. Thompson, and he added: “They have no way of knowing what they are going to win during the day.”
A “straight” bank dealing only with “straight” customers may certify checks freely, but to crooked people the practice offers many openings for crookedness. And there can be no doubt that it is often abused, sometimes on a very large scale. That is one of the discoveries now looked for almost as a matter of course in important failures. The law against overcertification is found in such cases to have been systematically ignored. No prosecution under it is ever reported in the press. On the contrary, the press has only now begun to demand its enforcement. For the first time in my observation bank examiners are being reminded that such a law is on the statute book. Practically, it is a dead letter.
A public examination of the directors and officers of the National Bank of North America —the Morse bank which precipitated the crisis of last October—is now going on. Gross misdeeds of various kinds are being brought to light, among them cases of reckless overcertification. I am saved the trouble of commenting on these by the abundance of native criticism which they have evoked. The Minneapolis dailies are particularly outspoken. One of them thus pithily points the appropriate moral:—“The trial of Charles W. Morse, now in progress in New York, shows the need of keeping banks out of stock speculation. It also shows how futile are the laws we already have for that purpose. It is illegal to certify a check for more than the drawer has on deposit, but that is just what is charged in the !Morse Case, and it is common notoriety that the law is being violated every day, and is as complete a dead letter as any law could be. It is well known that brokers have their checks certified for many times the amount of their deposits, and only occasionally are such acts exposed.”
If the effects of this abuse did not extend beyond the guilty parties it would do quite enough injury to the credit of American banking. But it has much farther-reaching consequences. Overcertified checks, when put