332 POPULAR SCIENCE MONTHLY. 



dustry that may be offered by the oversanguine or the knavish. 

 And the. attempts to obtain discounts by the oversanguine and 

 the knavish are not limited to the offer of paper in excess of the 

 amount abundantly necessary to cover the movement in any par- 

 ticular line, but they frequently exchange notes, or in other ways 

 obtain paper from a colleague which represents no legitimate 

 business transaction, but by the discount of which they obtain 

 needed funds. 



As unpredicted circumstances may, at unforeseen times, cause 

 unusual demands to be made upon a bank's deposits, it follows 

 that a bank's loans should not be for long periods. In actual 

 practice the average duration of notes is sixty days, and banks do 

 not like to accept paper running longer than four months under 

 any circumstances. Different notes coming due at different times 

 bring into a bank day by day funds which it can use to discount 

 new notes, or which it can retain in case of contingency requiring 

 it to keep more money on hand than usual. 



It is evident that a bank should not only be reasonably certain 

 that the prospective exchange of effort which is the immediate 

 cause of a loan should produce enough under ordinary conditions 

 to cancel it, but that in case of contingency that is disastrous to 

 the products immediately concerned the property of the signers 

 and indorsers of the note not covered by other obligations be suf- 

 ficient to liquidate it. But in these days, when a concern's prop- 

 erty is not always visible and its incumbrances frequently con- 

 cealed, a knowledge of its actual resources is difficult to obtain. 

 It has happened that financial tricksters, by operations in several 

 banks, knowledge of each of which has been kept from the others, 

 have gained possession of funds far beyond the extent to which 

 their resources entitle them, and in such a case, when any one 

 bank suspects that it is being victimized, there is the temptation 

 for it to conceal this knowledge from the other banks, that the 

 unworthy customer may not be prevented from obtaining loans 

 from them, wherewith he can repay the advances made by the 

 bank which has begun to suspect him. 



Perhaps the possibilities of unwholesome financiering which 

 must finally result in loss to the banks and disturbance to all the 

 communities concerned can best be illustrated by a definite ex- 

 ample traced throughout its ramifications. 



From a region rich in deposits of coal a railway extends to 

 docks where coal is loaded into vessels for shipment to remote 

 markets. A corporation controlled by a coal operator and the 

 president of the railroad leases the docks, and engages in the pur- 

 chase and shipment of coal. The railway is financially weak and 

 the corporation without working capital. But the corporation 

 buys large quantities of coal, giving four months' notes that ag- 



