in every instance. But no correspondent was found whose advices. would be honored unless covered each time by the sum of his remittance and balance. In other words, the immigrant correspondent merely directs that such and such amounts be paid to the specified parties abroad, to accomplish which he must make immediate payment to the transmitting house.

In accordance with these formal instructions, the banking house in turn advises the payment of the special sums abroad, through European banks with which it has established connections. Because of these connections with banks all over Europe, payment can be conveniently and expeditiously advised with reference to the locality of the payee. Some of the larger immigrant banks, in order to facilitate matters, send a duplicate advice sheet directly to the European agents of their banking houses, and for this purpose are provided with a list of these agents. But distribution of the sums specified is not made until the instructions of the banking house are received.

In Italy, Russia, and Austria-Hungary, as well as in Bulgaria, Servia, Montenegro, and other Balkan states, distribution of immigrant remittances is usually made by postal money order through postal savings banks. In Germany also this is true to a certain extent. Greek, Turkish, Macedonian, and Asiatic remittances are by draft on London, Paris, Hongkong, or other large city. Banks in the first-named group of countries, upon receipt of the advices and instructions, either purchase postal money orders of the designated amounts and mail them to the persons specified or send them registered letters containing the actual amount in currency. For instance, in Austria-Hungary all payments up to 600 kronen (about $120) are made by postal money order and all over 600 kronen are made in currency by registered letter. The European bank receives the customary postal receipt, and forwards it to the immigrant banker. On the outside of registered letters used for this purpose, the exact amount of the contents, according to denominations, is indicated. Inasmuch as mail carriers are required to receipt all registered letters, safe delivery is practically guaranteed. Both registered letters and those containing money orders may be delivered to the payee by a system corresponding to our rural free delivery. Postal orders are readily cashed at the nearest postal station. In Germany they may be cashed by the mail carrier.

The time which elapses between the forwarding of the advice sheet by the correspondent and the delivery to him of the postal receipt sent by the European bank is seldom less than a month. It may be much more than that between the date on which the customer turns his remittance over to the correspondent and that on which he hears from the payee that the money has or has not been received. This is pointed out as showing that a dishonest banker has from forty days. to two months in which to collect money before arousing the suspicions of his patrons.

The method of ultimate distribution of money received by bankers having their own connections abroad is the same. Orders are advised directly to and paid through these European agents without instructions from any American banking house. Payment covering the orders advised is usually made, however, through one of these houses. New York exchange is not purchased directly, but the immigrant

banker sends his check to one of the New York houses with which he deals, and directs that house to issue a draft covering the sum to be transmitted. This remittance is most often in even amounts, sometimes less, sometimes greater, than the total of the orders it is intended to cover. Inasmuch as a balance is usually maintained with the European bank through which the distribution of the orders is to be made, payment of the orders does not necessarily depend upon receipt of the New York draft. However, a limit may be imposed upon the amount of orders that will be paid without full remittance to cover them.

The private form used by bankers employing this more direct method consists of a stub for the proprietor, advice for the European bank, and receipt for the purchaser, or, in some cases, simply of stub and receipt.

This form and the one used by immigrant bankers who transmit through American houses are both open to certain objections. In the first place, there is in reality nothing issued which resembles a money order. The receipt given usually states that the specified sum has been received for transmission, and it is signed by the proprietor of the receiving bank. But there is nothing to indicate through what banking house the money has been transmitted; while the name of the house sometimes appears upon the stub retained by the correspondent, and frequently upon the advice to be forwarded to the house, it never appears upon the receipt given by the correspondent to the immigrant purchaser." Instead this receipt usually contains personal advertising matter which has been added at the request of the correspondent. Again, the sender has no means of knowing that the money has been paid abroad until notified by the payee or until the banker chooses to send him the postal receipt obtained from the European bank. This is not the receipt of the payee, for such a receipt is obtained only by special arrangement, if desired, in case of payment of debt. Furthermore, the advice slips or sheets sent in to the banking house by the immigrant banker do not contain the name of the individual sender nor the date on which the money was received. Therefore the banking house can not know from whom the money was received nor how long the correspondent has kept the money before sending it.

RATE OF EXCHANGE.

The rate of exchange offered by correspondents depends upon the rate furnished them by the large banking houses. Many immigrant banks receive the rates of several houses and select the cheapest. To the rate offered them these banks add commissions varying from 1 to 3 per cent or more for small orders, that is, less than $20, and from one-half of 1 to 2 per cent on larger orders. The average commission realized is from 1 to 2 per cent. The rate is widely different among banks in different parts of the country, and varies even among those in the same locality. Some bankers maintain a steady rate despite the market fluctuations, and a few from time to time publish rate sheets to which they adhere closely. But as a general rule the immigrant correspondent bases his charge upon the rates offered him by the banking houses, or, as one banker stated, according to the amount the customer is willing to pay.

RELATION WITH BANKING HOUSES.

The relation which exists between the immigrant banker and his transmitting house is not a close one. While these transmitting houses supply their immigrant correspondents with their own moneyorder books, rate cards, and printed forms, they do not regard them as their agents. Although ostensibly allowing them to sell their paper, they do not hold them under bond, do not require any reserve or balance, and do not guarantee the payment of their orders until remittances sufficient to cover them have been made. They permit immigrant bankers to use their names, standing, and financial integrity as a means of securing business, but they assume no responsibility for them and exercise no supervision over them.

Little discretion is exercised by the banking houses in accepting immigrant bankers as correspondents. The representatives of one or two of these houses testified that in most cases references were required of the immigrant banker. While this may be true in some instances, it is known that money-order blanks are often sent to unknown persons upon mail applications only. The apparently indiscriminate manner in which unregulated and irresponsible steamship agents, real-estate agents, saloon keepers, grocers, and boarding bosses are granted the privilege of transmitting money abroad through reputable firms was a matter of more or less general comment in every community in which this investigation was conducted.

A reason for this lack of care is that the banking house itself is fully protected from any loss which may arise out of the dishonesty of its immigrant correspondents. This protection is assured to the bank by two circumstances: (1) The paper which is issued to the immigrant banker is not in a legal sense the paper of the banking house, and the purchaser of the order has no evidence of the transaction beyond the personal receipt of the proprietor; (2) the payment of an order is never advised abroad until the issuing bank has covered it with an acceptable remittance.

A certain result of the present system is an almost insurmountable difficulty in fixing the responsibility in case of loss or fraud. Payment abroad is practically assured in all cases in which remittance to cover the order is received by the forwarding house, but whether or not such remittance is made rests solely with the immigrant banker. For those desiring to retain the funds, various subterfuges are at hand to explain the delay. The purchaser of the order has no means whatever of fixing the responsibility for its nondelivery, and there is no doubt that advantage is taken of this fact.

UNSOUNDNESS OF THE SYSTEM.

The danger connected with banking of this character is obvious. Reviewing the leading features as they have been outlined, the following stand out as evidence of insecurity:

1. Immigrant banks are usually unauthorized concerns, privately owned, irresponsibly managed, and seldom subject to any efficient supervision or examination.

2. They deal with a class ignorant of banking methods, distrustful of American institutions, and easily influenced by the immigrant banker.

3. The affairs of the bank and of the proprietor are, as a rule, indistinguishable. As far as legal restrictions or the demands of his patrons are concerned, the proprietor is at liberty to use the funds of the bank for his own purposes. If he is a saloon keeper or grocer, he may make indiscriminate use of the bank deposits in the conduct of the saloon or grocery. The temptation to speculate with or to use for living expenses the funds intrusted to them has also proven the downfall of many of these bankers.

4. In general, the proprietor's investments are the only security afforded the patrons of his bank. The funds of the bank become the proprietor's personal investments, and there is no limitation as to the character or extent of these investments. If the proprietor has no investments the patrons of the bank have no security. Neither capital nor reserve is required, and, as a rule, neither is found.

5. Men who operate these banks, particularly saloon keepers, labor agents, grocers, and boarding bosses, are often ignorant and without any conception of the responsibility imposed. Even recently arrived immigrants find it easier to embark in the banking business than to enter other occupations which, though less responsible, are nevertheless subject to regulation. Methods employed by bankers of this class are often very loose and unbusinesslike. Such records as are kept are usually wholly inadequate and confused. Many of the immigrant bankers, notably steamship agents, advertise in a manner that is at least misleading, if not actually fraudulent and illegal.

6. Immigrant banks are radically different from other financial institutions. They are rarely savings or commercial institutions, and they can not be considered foreign-exchange houses in the true sense of the word. Their chief functions are the safe-keeping of deposits and the transmitting of money abroad, and from the nature of these functions methods have arisen which are open to serious objection.

(a) Evidence of the deposit of money for safe-keeping is often inadequate, useless, or entirely lacking. No reserve or other security for the depositor is required. There is absolutely no preventive or check against absconding. The amount of the deposit is usually too small to warrant the bringing of suit in case of refusal to pay. Deposits are very seldom subject to check. As a rule they are left for safe-keeping without any restriction, except that they are subject to withdrawal upon demand, as to the manner in which they shall be kept, or to what purpose and extent they may be used by the person to whom they are intrusted.

(b) The purchaser of a money order receives no satisfactory evidence of his cash deposit. His receipt does not bear the name of the remitting house whose money order has been sold, nor is this house advised of the name of the purchaser. The remitting house does not assume any responsibility for its correspondents, and is fully protected in case of loss or fraud through them. But for the purchaser there is no such security. It is very difficult for him or anyone to fix the responsibility in case of loss or fraud. During the period which must elapse before the purchaser can hear from the payee, often as long as six weeks or two months, a dishonest banker has ample time to accumulate and abscond with a large sum of money.

FAILURES AND DEFALCATIONS.

At the time this investigation was carried on the immigrant banking business was not in an entirely normal condition. It had not, at that time, fully recovered from the effects of the financial panic of 1907-8. To a certain degree, however, this was fortunate, because the recent period of financial depression undoubtedly served to accentuate the evils of the system. It brought out many failures and abuses that would not otherwise have come to light. It is likely that in many cases proprietors having no dishonest intent, other than that involved in a temporary misappropriation to their own ends of the funds intrusted to their care, would have eventually settled with their creditors had they not been forced to meet the sudden and, in some instances, totally unexpected demands which were made during the course of the panic. But just here lies the reason for the condemnation of the system. Even though abuses are not intended, there are no safeguards to prevent them. The extraordinary number of failures and defalcations which have occurred in the past, and particularly during the recent depression, substantiate the conclusion that this system of banking is fundamentally unsound. There is scarcely a community in the country with an immigrant population of any proportions which has not its record of immigrant-bank failures.

Occasionally a national, state, or savings bank closes its doors, but it is seldom the case that the bank's depositors lose any considerable amount by the failure. They almost always receive something, and frequently their deposits are paid in full. Upon the failure of an irresponsible immigrant banker, however, there are seldom any funds or resources to which the creditor may have recourse. It is invariably the case with concerns operated by men of this character that failure or abscondence means disaster to hundreds of small depositors.

The close alliance between the steamship agent and the banker has been remarked upon before. The former is usually the medium through which the latter is established. In the words of a prominent immigrant banker—

thoroughly irresponsible persons secure with apparent ease the agency for some lines, open up a money-order business, advertise themselves as bankers and agents, receive deposits for a time, and, as perhaps planned, abscond with the money intrusted to them.

Another leading immigrant banker, in condemning a system which allowed an alien fugitive from justice, or a clerk dismissed for dishonesty, or any such untrustworthy person to establish himself as banker, complained of the ease with which men of this character procured the agency of certain second-class lines for the purpose of setting themselves up as bankers. The manager of the foreign department of a leading banking house declares:

The steamship and immigrant banking business are almost inseparable. As a matter of fact the sale of foreign exchange follows upon the establishment of a steamship agency and rarely comes before. In view of this important relation it would appear that the steamship companies are entirely too free in the manner in which they establish agencies. A public suggestion to that effect might be a healthy one.

But if the steamship companies are to be blamed for the apparent freedom with which they grant agencies to irresponsible persons