The Cause of Bank Defalcations and Failures.
By T.
Edward P. Moxey is an official of the United States department of justice, whose duties require him to seek and compile evidence against the crooked bankers of the country. It was upon his evidence largely that John R. Walsh, the bank president and bank wrecker of Chicago, was put behind the bars. His testimony will play an important part in the trials of Alfred H. Curtis and Charles W. Morse who are under indictment in New York for embezzlements and defalcations in the National Bank with which they were connected. His work of this kind has led him to be a close student of the causes underlying so many embezzlements and fraudulent transactions in the banking world. Mr. Moxey places fast and luxuriant living at the head of the evils which are causing a wave of dishonesty to pass over the nation. To use his own words, he says the cause of it is “the gorgeous hotels and restaurants, the bars, the gambling-houses, the myriad theaters, the palatial apartment houses, the turning of night into day, the flood of money in New York upon which this life is borne along, the craving for vast incomes by which alone such a life can be lived.” “To say that even a bare majority of the tens of thousands of men who nightly swell the crowd of amusement-crazed spenders, who live in $5,000 apartments, and whose touring-cars congest the streets, are doing this with money which is honestly theirs, is absurd. They are not earning this money; they are either juggling other people’s cash or they are gambling with their own. When you can go into a restaurant at two o’clock in the morning and behold $60,000 worth of women’s gowns at the tables and $3,000 worth of food in process of consumption, something is wrong. And when you observe half a million dollars’ worth of automobiles waiting to take this one supper crowd to their homes—or elsewhere, you may be sure there is queer bookkeeping somewhere.” “It is not only this sort of life in New York, but in a more sinister way the sight and example of it, which is bringing about a degradation of the sense of common honesty throughout the country, that the American asset, the ‘New England conscience,’ has become an object of jest. And as I said, New York is to blame. As in all other matters, theatrical, literary, and artistic, the other cities and towns take their cue from New York. As New York lives, so they all wish to live. To-day in towns as small as 25,000 population there are springing up all-night grill rooms with Hungarian orchestras, wherein the young business men of these communities must foregather if they are to be in the social swim with their local smart set.” “The young banker or business man in the smaller community comes to New York. He is taken in hand by his business acquaintances here and shown about the town. His hosts spend money on a scale which dazzles him. They take him to luxurious hotels and cafes where they and the head waiters know each other by name and where he is introduced to a scale of living fit only for men of millions. He wonders how his friends manage to share in this prodigality, and bit by bit he finds out. They tell him funny stories of transactions which, reduced to a proper financial analysis, are defalcations pure and simple or, at best, plain gambling. ‘Everybody does it,’ they say; ‘it’s part of the game.’ And back to his home town goes the young banker, filled with dreams of sudden wealth and all the gay life that goes with it.” “And let me make my opinion emphatic that the laxity with which the criminal laws of our land are enforced by many of the judges of our courts has much to do with encouraging bank officers to misuse the funds in their keeping. There are many direct causes for bank defalcations, but the primal cause is the desire for luxury fostered in the great cities. Of late years the chief immediate cause is the using of the bank’s funds to promote enterprises in which the bank’s officers have interested themselves.” It must be admitted by all well-informed persons that Mr. Moxey has stated the facts in regard to existing conditions. Most of the old men, and many of the young men, have still the old-fashioned honesty. But the new generations that are coming on are yielding more and more to the glitter and gaiety of the age, and are seeking to learn the questionable art of getting money quickly, regardless of methods, so that the fast life of extravagance and luxury may be indulged. Men should not be at a loss to understand what the inevitable outcome of such a course must be. T.