Restoring public confidence;

              82 HASKINS & SELLS November
Restoring Public Confidence
THE financial world recently was startled
by the failure of a New York Stock
Exchange firm which enjoyed an enviable
reputation of long standing. The failure,
according to newspaper reports, was caused
by defalcations of a partner whose mis­doings
perhaps were as sensational in char­acter
as any of record. His misappropria­tions
were not confined to property of the
firm. They extended to securities of
customers.
The case has aroused more than usual
public interest. The reading public awaited
with curiosity the findings of public
accountants engaged in determining the
extent of the defalcation. Customers of
the unfortunate firm may be presumed to
have been anxious rather than curious.
The other partners, doubtless, endured
with bated breath the period of exami­nation
and the results thereof which were to
decide their financial fate. Now it devel-opes
according to a statement of the credi­tors'
committee that the capital of the
partners has been exhausted and $1,400,000
in excess of available firm assets will be
required to settle claims against the firm.
It is sad to think that a partner should be
guilty of breaching a trust. Whatever
disdain one may feel for an employe who
defaults is negligible compared with the
ineffable contempt merited by a person in
high place who violates confidence. Again,
it is depressing to feel that there can be no
sentiment in business relationships. One
likes to think of long and faithful service,
intimate daily contact of associates, and
frequent evidences of character, as factors
which promote confidence among men and
neutralize some of the hardness of formal
business life. But experience every now
and then deals a body blow to such phi­losophy
and makes it seem that in business
nothing may be taken for granted.
The defalcation in question comes as
more of a shock, because the malfeasance
proceeded, apparently, from an individual
whose standing and demeanor were unques­tioned.
He appears to have been trusted
implicitly, otherwise it is difficult to see
how he could have accomplished his un-benign
purposes. The loss is said to have
run into several millions, to have exhausted
the firm's capital and involved securities of
customers; not a pleasant situation to con­template
by a copartnership wherein the
personal estates of individual members
may be seized to make good losses of the
firm.
The brokerage houses handling securities
have, in this ill-timed misfortune, received
another setback in their efforts to regain
public confidence. The past two years
have been trying ones for legitimate con-