The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-03-31

QuSSttOu anu tuIOWS lhS Dia1tfc anu re-
sponsfbilitY upon the law governing
the duties of the public examiner. Aft
er reciting the law touching the exam
nation Of banking institutions at con-
siderable length, a portion Of the tes-
timony take-l is Incorporated In the
report. In answer tos one of the ques-
tons asked, Bank Examiner Kenyon
told the committee that his assistants
were competent, but that it was the
most difficult matter lin the world to
determine the value Of assets and paper
In bank. He continued, after a some
what evasive answer as to the suffi-
cheney of his force: Now, the usual
course Is to ascertain that (the value
OF bank paper from the bank officers
AS to whether a further examination
should be made outside of the bank.
when we find a bank in difficulty, we
try to ascertain that from the adjoin-
ing banks, and such inquiry as that
IS made very cautiously AS to MAX
Ing more frequent examination, why
It would need more force, but where
there Is no impairment of capital we
do not attempt these outside examina-
tons" In commenting on the idea
OF greater liberality on the part of
the legislature Mr.. Kenyon said that
doubling the force of the examiners
would permit of an inspection of the
banks once every six months.
The examiners get 81 800 a year, said he
to increase their number would give us two
advantages. Now we divide the state and Dive
Mr.. Compton the outside country banks. to
MT. Lonergren the city banks and II would
AUNT the shlftlng of one man from one place
10 another IN the course of a year and we
could get the opinion of two different examin-
ers OF the situation Of banks. In the course
pa OF year or two / could get the opinion of
Jour men, which would, perhaps disclose
dlHerent condition CO the banks. I very rare
~ make an examination, myself. The office
work is very iaborious. and SO constant that
l do not get out. There is great deal of
responsibility in the matter
ASKED what in his judgment had led up to
the failures OF the five banks referred to in
the report, Mr. Kenyon said: 1.-THE deteriora-
tlon In the prices of merchandise and real
estate. especially real estate Now we will
take one bank, for instance; they were OBJ
Nged 10 make one loan of $35, 600 to protect
themselves, second mortgage on an estate
valued at $1C6CG0. The first mortgage was
$4,000 They thought that in the course of
Few months they would be able to get their
money out of it. The piece of property is NOT
worth the first mortgage. could cite you
numerous instances in regard to real estate
IN the same way" Mr.. Kenyon was asked
whether he did not think there was little
too much one man power?" He replied that
he thought that there had BEEN and as
remedy he recommended that where the d.
rectors or officers of a bank borrow any
money in excess of amount such as the
law permits, that that amount shall be as
sessed to stoekhe !ders; if that were adopted
he believed that the present practice would be
efectually stopped He was also in favor of
the clause which makes it a felony so he told
the committee, to the assets of the prom
erty of bank unlaWfully.3,
Discussing savings banks and their meth
DDS of evading the law, Mr.. Kenyon. said:
''They come at it in two. Ways. there are threa
banks in this state which are operated with
capital which they say is not deposits. This
money the directors can borrow and / am
unable to say that this is not correct. The
attorney general informs me that by a special
law such banks are permitted to invest their
capital. Mr.. Kenyon was asked whether at
the time OF the embarrassment of the Mime
scta Savings bank he advised that sixty days
notice be demanded. o'No4sir" was his renIv
I'VE did not know anything about the Mime
sofa Savings bank, ,as we had four other
banks on our hands at that time" When
asked whether it was true that in the exam
nation of the Minnesota Savings bank made
in 1895 the report was not filed with the gov
ernor for over year, his answer was 1T
was not. We were very busy at the time I
trust the committee will realize the position
L am In now. We have banks that we are dis
cussing the question of capital and until we
get that adjusted | do not care to turn that
over to the governor without saying So
In explaining the fee system Of his depart
ment he declared that the banks paid for
their examination each year whether they
had it not. The fees ran from $40 for a
$4,000 bank up to SIS for a 5000 900 capitalize
ton, and were paid annually. The annual
receipts from this source amounted to a.
little over 81, 200. 81. -5.i-s --
The slipshod methods which have character
! lied the department in some particulars, were
shown in testimony One instance cited was
CALI for a statement made UPON a bank at
the close of business Dec. is, 1896, which the
bank ignored. s,r st.
| The testimony taken by the committee
brought to light the fact that the bank ex-
aminer's department clipped for a newspaper
in the city where the bank is located state
ment purporting to be report of the bank S
condition which had been filed in the re-
ceptacle usually kept for bank statements in
the examiners office. 1t was disclosed to the
committee that this bank in such printed
statement did not rectte true condition of
! its affairs. There was no further testimony
to show that the bank examiner had applied
the legal penalty for the non-fulilment of
such neglect. This bank suspended in the
early part of January Of this year. This same
bank had an excess of $4,000 of re-dscounted
notes which were outstanding and which were
not disclosed on its books as contigent liza
bility.
Touching upon the point of weak and de-
feCtve laws for the conditions of rottenness
which it inspected. the committee considers
the laws are at fault. mo reference is made
in these laws, covering the duties of direc-
tors says the report, "and it is apparent
to your committee that one of the principal
causes leading up to -thesssuspension Of the
banks examined is the absolute lack of in
terest and the absence of honest supervision
on the part of the directors Of the affairs of
such banks; and it is further apparent to
your committee that 1T is not to be Won
dered at in the absence of law governing
and restricting directors, that they did not
pay more attention to their duties and such
demands as might have been made upon them
by the examiners department" The report
further quotes Chapter 145, General Laws
which revises the. laws relating to
banks of discount and deposit, and then
comments: 1T would appear to your COM
mittee in this connection that, inasmuch as
Chapter las of the General Laws of 1895 was
an act to revise thee laws relating to banks
of discount and deposit, and
feaf tS Sd ne 3 into effect bsb August
amenable to the provisions of such act and
it was disclosed to this committee that the
directors OF these banks had complied with
that feature of the law requiring directors to
take oaths, as found in section of such act
they have violated the provision of their oath
of office. No penal clause is included in the
act of 1895. covering the violation of the laws
relating to duties of directors
Continues the report: 1T would appear to
be the sense of your committee that this APP
parent defect can be corrected by the enact
ment of law that will properly punish the
directors, trustees, officers of banks of
banks of discount, savings banks and other
monied institutions. organized under the law
of this state. who do not faithfully and
honestly discharge the duties of such trust
as prescribed by the laws of this state
The report finds that a number of the
banks examined failed to keep accurate and
proper records of the proceedings of the
count committees. officers and directors of
the banks in question, with one exception,
were found to be borrowers of the capital of
such bank, much in excess Of the 10 per
cent limit as prescribed by law Also that
the inability of the banks to realize promptly
on these loans was one of the direct causes
Of the suspension of these banks. In addi-
ton the report states in this connection that
it is possible where there is a large number
of directors and a nominal capital in the
bank that when so disposed the directors can
legally borrow practically the entire capital
and entire surplus of such institution.
In passing upon the character of the present