All of these questions and many others of a like nature an examiner should be familiar with, in order that he may pass intelligently upon the paper, contracts, agreements, collateral and securities held by a bank.

The third and perhaps the most important qualification that an examiner should possess, and the one on which the Comptroller must depend the most in respect to the reliability of his report as determining the true condition of a bank, or its solvency or insolvency, is the accuracy of his judgment as to values. Bankers, as a rule, are very optimistic in regard to the value of the assets of their banks and seldom will admit that any of the loans and discounts or other resources of the institution are questionable or worthless. It is incumbent upon the examiner, therefore, to determine to the best of his ability, and through the most reliable source of information, the actual value of the paper, collateral, securities and other assets which constitute the resources of the bank upon which reliance must be placed to liquidate its liabilities to depositors and other creditors in full.

Before reaching any conclusion in this respect, the examiner should confer fully and freely with the officers and directors of the bank in regard to any asset which he has reason to believe is not worth its face value, or the amount at which it is being carried on the books of the association. He is expected and required to give full consideration to any representations which the officers and directors may make in regard to such assets, but he should not be influenced against his judgment in reporting any asset otherwise than what he believes to be its actual worth. The examiner may occasionally err in his conclusions, but not so frequently as do the officers or directors. Being a disinterested party, if he has taken the pains to inform himself in regard to any asset of doubtful value, his estimate usually proves to be more reliable than that of the bank's officers, and if he errs at all it is generally on the side of prudence and safety.

Good judgment is a quality that can be tested only by results. It cannot be determined otherwise. Men may honestly differ in opinion as to the value of a bank's assets as in respect to anything else. The examiner is always honest in his opinion, because he has no reason to be otherwise. Unlike the representatives of the bank, he has no personal interest in the assets which he estimates below the value placed upon them by the officers and directors, and his means of determining their worth are equally as good, and frequently better than that of the officers of the institution which owns or holds them. If the officers and directors of a bank were as honest with the examiner as the examiner is with them there would be less difficulty in arriving at the true condition of affairs and the interest of the bank would be better subserved thereby.

Directors, as a rule, are desirous of showing as large a surplus and profit account as possible for their institution, and are very reluctant to admit any losses or depreciation in values which would diminish this account. Some are influenced in this respect by a desire to make a good showing in their published statements as being indicative of successful and profitable management. Others are actuated by the less commendable motive of giving the stock of their institution a book value which it does not actually possess, and as those who trade in such stock have no means of determining its actual value other than that shown by the bank's published statements, upon which the market value is usually based, it is incumbent upon the Comptroller and the examiners to require banks to reduce their surplus and profit accounts in amounts equal to the losses that may have been sustained upon loans or discounts, or by depreciation in the value of other securities held. And any officer or director of a bank who, knowing such losses or depreciations to exist, signs a sworn statement representing the surplus and profits greater than they actually are, makes a false report of the condition of his bank, to the injury of anyone who purchases the stock at a valuation based upon such published statement.

In the case of Chesbrough et al v. Woodworth (195 Fed. Rep. 875) it was held that-

The making and publishing by a national bank of the reports required by statute are not merely for the information of the comptroller, but are to guide so much of the public as may have occasion to act thereon, and one who buys from another stock in the bank in reliance upon a false report of its condition and suffers damage thereby has a right of action against any officer or director who, knowing its falsity, authorizes such report under Revised Statutes 5239, which makes them individually liable for damages sustained by the association, its stockholders, "or any other person."

In the case of Thomas v. Taylor (224 U. S. 73) the United States Supreme Court held that -

The fact that a statement of the condition of a national bank is not made voluntarily, but under order of the Comptroller of the Currency, does not relieve the directors from liability for false statements knowingly made therein.

It behooves the honest and conscientious banker, therefore, to co-operate with the examiner in his endeavor to correctly estimate the value of the bank's assets, instead of disputing with him the existence of losses which he knows as well as the examiner have been sustained, and to charge such losses off when instructed to do so by the Comptroller.

The fourth qualification necessary for an examiner to possess to insure an effective discharge of his important duties, is force of character, tact and discretion.

In many banks there will be found some one man who dominates its policy or dictates its management. Unfortunately, there are too many instances of this kind. He will be found either as one of the bank's executive officers or a member of the board of directors. He is usually a strong and forceful character, pronounced and fixed in his views, accustomed to having his own way, in some instances affable, plausible and diplomatic, in others arrogant and unreasonable, unwilling to accept suggestions, or, if seemingly accepting them, with no intention of adopting them; resentful of any interference with his plans or purposes, regardless of law or the Comptroller's regulations. If he does not own a controlling interest in the stock of the bank, which enables him to have his own way in its management, without interference by the directors, he is usually possessed of sufficient plausibility and persuasiveness to influence other members of the board to adopt his views.