This section is from the "Practical Banking" book, by Albert S. Bolles.
There is a protective feature in many accounts which prevent banks from losing by overdraft; we mean when dealers have notes deposited for collection. For, when paid, they are posted to the credit of their owner, and may make up a deficit in his account. Bank officers will sometimes admit temporary overdrafts in anticipation of the maturity of collection notes; or, what is better, make transient loans, holding them as collateral, by which the irregularity of overdraft is avoided. The receiving teller takes no cognizance of this source of recuperation unless he finds a necessity to resort to it.
The word "foreign" is applied by banks in New York City to all others. Most of the banks located there receive, on deposit, individual checks on banks at a distance. Merchants in Buffalo, for example, remit their checks on banks in that city to their creditors in New York, and there they are received as cash, perhaps, deducting enough to cover the exchange and the expense of collecting. They may be returned not good after several days, and, in such a case, the depositor must promptly redeem them. The interval between their deposit and their return is long enough to permit the dealer to close his account and leave the bank in the lurch. It follows that the receiving teller is practically discounting paper all the time.
Drafts on individuals and on private bankers in New York are received on deposit, but this throws on the bank receiving them Ihe trouble of collecting them, while rendering it responsible for endorsements in which it has no interest. Dealers, therefore, are required to scrutinize and to collect them on their own behalf. The deposit teller must examine the bank notes received, lest counterfeit ones be taken. When the State banks issued notes there was such a great variety of them and they were often so poorly made that it was an easy thing to make counterfeits and to put them into circulation. It has been far more difficult to counterfeit the Government issues, and those of the National banks.
There are publications whose special function consists in describing counterfeits, and the deposit teller should study constantly such sources of information. "A man sent us a bill," said a cashier to the writer, not long ago, "that had been stolen before signature. Our clerks picked it out at once; they had been notified concerning it." The National Bank Act requires that every National bank officer receiving a counterfeit or stolen bill shall cut it, or brand it, or stamp it "counterfeit" or "fraudulent," as the case may be. With the note in question the cashier said he did not wish to do this, because he might lose ten or twenty dollars. So he notified the depositor that the bill might be returned to him and sent it to the Comptroller of Currency at Washington for redemption. When it came back it was cut in many places, and stamped, "stolen," "stolen;" "bad," "bad." As soon as received the cashier sent it to the depositor, and wrote to him that the bill could not be credited on his account. He was very angry, and said he would like to know what conceited fellow in the department undertook to say that the bill was stolen. How could he know that it was ? The cashier simply replied that the clerks had picked the bill out when it came over the counter, that the information was derived from a counterfeit detector, a copy of which was sent to him.
Not infrequently a claim is made by some depositor for a larger sum than that with which he is credited. How these differences arise is often mysterious. The deposit teller then makes a general and thorough revision of all his figures, checking them off by his deposit tickets and going over his additions. If the error cannot be discovered in this way, he sends a letter to each dealer whose deposit may possibly have been erroneously entered, and if the error still remains undiscovered the cashier is informed, and perhaps the directors at their next meeting. The search is continued as long as there is any chance of detecting their error.
Gibbons says there is a loose practice with some banks with respect to a deficit or excess of cash in the daily accounts of their tellers. Small sums accrue, which are thrown together in a box or drawer and applied to the payment of small deficits. These are not noted on the face of the day's transactions. He objects to this mode of conducting a banking business, and well he may. Nothing short of exactitude should be allowed in commercial accounts, and especially in a bank. A ledger account should be opened with each teller, in which any surplus should be credited under its actual date, or any deficiency charged, and this might be periodically balanced by a transfer to profit and loss.
When deposits are made the depositor sometimes waits until the counting is finished; on other occasions he leaves immediately. Some banks, though, require the dealer to wait until his deposits have been counted in his presence. Sometimes deposits are left containing the dealer's count on them; if they are, when the recount is made, should there be a deficiency, the depositor must abide by the teller's count.
Depositors have a book in which is written on one side the dates and amounts of their deposits, and on the other the amounts that have been checked out and the dates when this was done. The depositor presents this book whenever he makes a deposit, and the amount is written therein. It is the general practice to write up these books at varying intervals of a month or more.
The receiving teller rarely receives forged checks, as he transacts business only with the regular dealers. Of course a dealer may determine to be a knave, and to practice a fraud on a receiving teller, but happily such cases are very infrequent.
Toward the close of the day depositors multiply in number. "First come first served" is the rule; a row is formed, and the last comer must take his place at the end farthest away from the receiving teller. Formerly, when the State banks issued notes, and counterfeiting was a more general practice, the business of assorting and counting bank notes was a more difficult practice than it is at present. No assorting is done now when notes are received. The teller merely watches sharply for counterfeits. Afterward the notes are assorted into packages of various denominations without regard to the bank issuing them. Such is the perfection of the National bank-note system, that the note of one bank is as good as that of another, and hence there is no occasion for noticing their parentage.
The checks on country banks are handed over to the corresponding clerk, who lists them in his letters and in mail blotters for charge to the appropriate banks in the collection ledger, unless they are on dealers of their own bank. In that case they are often charged directly to the general account of the dealer.