162. Investments

It is not the purpose of this section to advise financiers as to the kinds of securities in which the funds of the bank should be invested, but to suggest some methods of taking care of them after they have been purchased.

The essential characteristics of a good system are: (1) safety; (2) ease of access; (3) collection of interest and principal at maturity; (4) compilation of schedules and statistics.

The kinds of securities to be considered under this head are bonds, stocks, bonds and mortgages, deeds and other papers. The only safe place to keep the securities is in a safe within a fire and burglar proof vault. It should require the presence of two people to open the safe when the securities are negotiable. Bonds and mortgages and deeds are or should be matters of official record, and their loss is only a matter of inconvenience. Stocks should be registered in the name of the company. Many banks and trust companies in and near the large cities, especially those occupying rented offices, prefer to have small safes and keep their reserves and investments in the vaults of safe deposit companies. The rule requiring that two persons be present when the box is opened should be more strictly enforced in cases of this kind than when they are kept in the bank's own vaults. Ease of access should never be favored at the expense of safety. Coupon bonds must be taken out twice each year and the coupons detached. Where large blocks of bonds are held, it is best to file them with reference to interest date, that is, to keep in one compartment or on a shelf all bonds having coupons maturing in January and July and in another compartment or shelf all bonds having coupons maturing in June and December. Each compartment should be arranged alphabetically.

Bonds are received in various shapes and conditions, but if a bank once starts the practice of keeping all bonds flat, it will never revert to the old method of folding, rolling, etc. The bonds should be filed between stout manila boards and be bound with straps of webbing. A small tag, bearing the name of the bond should be fastened to the edge of the board in a conspicuous place.

We hardly dare suggest that bonds and mortgages could be kept in flat files, so long have lawyers been folding these documents once in the middle and then once again and "backing" them on the approved side. Yet who has not sincerely wished for a revolution in this method when endeavoring to gain some information from a fifty-page abstract of title? The task of "digging out" the information is a serious one unless the lawyer has been considerate enough to append an epitome of his investigations. If the abstract is an old one, it is impossible to peruse it with any degree of comfort, and important facts are sometimes missed. However, other papers, such as insurance and title policies are always folded and backed, and it is better to conform to custom in this case than to oppose it. There is this consolation, that after the records are once prepared, there is very little occasion to refer to the papers, except to endorse on the bond a payment on account of principal.