The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-04-09

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upon them to enable the bank to meet its OBJ
hgatlons as they matured in the ordinary
course of business; recourse to borrowing was
necessary TO meet these obligations. The
bank owed on Dec. Il for money borrowed
to meet it's ordinary obligations they
tured over $500, 000 If the bank had not
been able to borrow it must have suspended
long before it did. H(Testimony of William
Dawson, Jr., and William A. Miller.) This
| fact is important as showing the character
OF the banks assets There is much other
testimony that leadssto the same conclusion.
While 1t may not be proved that the value of
the assets is less than the amount Of the
banks liabilitiesl it is conceded that there is
very little feewaB and that very much of the
DanK paper that isfcalled good is at present
uncolleetahle. The bank had very unusual
amount of bad paper,
Second-Besides the deposits subject to
check on Dec. Il, amounting to $727 .ss5.1o.
demand certificates of deposit amounting to
| $94,744, CASHIERS checks fa 500 1856, and the
amounts due to- banks and bankers there
were time certificates of deposit past due to
the amount OF about 500 900. These certif-
| Gates bear interest only to the time of ma
| turlty, and the bank could reasonably expect
| to be Obliged to meet them on maturity. The
other deposits were all due and payable but
1t is not expected of a bank that it have on
| hand at all times sufficient cash to meet all
| It's demand obligations. The bank had in
| cash on Dec. Il. the sum of $31 948.63. 1t
was DEBTOR to the clearing house that day
| IN the sum of s62, 72803. These facts tend 10
| snow that very little was lacking to make the
Dec q, 1896.
Third-The state banking law requires
cash reserve of 10 per cent of the deposits.
On Dec 81 The deposits were. 81, 357 21S.7 70
| Cash required by law. ....... 235, 721.S7
Actual cash in bank. 3,94S.63
The same relative situation had existed on
each day during December. While the law
required IL per cent cash reserve the bank
had less than per cent While this state of
the cash reserve may not be important On
! the question of solvency or insolvency, it GER
| talnly has. decided bearing on the question
whether or not the bank was in a safe con-
oltlon. The small percentage of cash alone
/ would indicate that matters were all
right, but the fact that the law fixes upon
/ III per cent required cash reserve, would
seem to show that a bank that carried at no
I lme Tor a month a cash reserve of more than
per cent was not in a safe condition.
Fourth-The' bank had violated at least two
conditions of the state banking act.
! A. The total liability of William Dawson,
ST., had exceeded for long time 10 per cent
! of the aggregate amount of the capital stock
and surplus, in violation of section 10. The
| capital stock and surplus was 500 co., The
| direct liability of the president William Daw-
| son, ST., was at least $97 coo. His liability as
indorser exceeded $500 900.
b. The reserve required by section IS was
20 per cent of all the banks immediate habili-
ties 10 per cent in cash on hand and 10 in bal
ances due from solvent banks At no time
| from Aug 20 to Dec. o. did the bank APP
prOach compliance with this provision. Sec
| ton Is provides that when the reserve shall
be below 20 per cent, the bank shall not make
|
Minnesota made Iloans and discounts each
day while its reserve remained impaired.
Section 20 of the act provides that on be-
coming satisfied that any bank had violated
any Of the provisions Of this act,' the super
intendent Of banks may take possession, a re-
ceiver be appointed, and the bank closed
The bank, then, could have been closed by
the superintendent of banks on any day in
! September. The officers knew that the bank
might cease to be going concern at any
minute. They must have known that it
a pOiOp
ment the superintendent OF banks discovered
the continuous and aggravated violations Of
the law, and performed his duty
Fifth-The daily balance against the Bank
! of Minnesota in the clearing house was fire.
quently more than the bank could pay without
borrowing. The loans by the First, Merchants
and German American were made to enable
! the bank to meet these clearings. Without
the aid of these banks, the Bank of Mime
sofa would have,been compelled to close long
! prior to Dec. u The advances could have
been refused any day. The three banks
had the option of declining to make further
advance at any time. No legal obligation
rested upon them to loan any particular
amount; had Mr.. Bailey, as trustee refused
| to advance money on the 21St or on any prior
day when the clearings were heavily against
the bank, the Bank of Minnesota could not
| have gone through the clearing house and
would have been forced to close its DOORS
| The fate of the institution rested upon the
continuation of loans from banks that were
under no obligation to make them, and while
this may not mean insolvency, it shows to
the ordinary mind that the condition of the
Bank of Minnesota was not safe.
SiXth-The officers Of the bank resolved IN
suspend on the morning of Dec. %. Condi-
tons were no more unfavorable then than
on the 221st, or previous days in December
Why, then, did the bank close on the 22nd
rather than on the 21stl or 18th, or indeed on
any day in Deeember? There hhad been alb
solutely no change for the worse in the
banks condition. William Dawson, Jr., ad-
mits this, and says the bank closed as soon
! as I'VE thought we could no longer 90 on
doing business" Asked why they closed on
the 22nd rather than on an earlier date, he
gone on the 22ud; | will say that my courage
had gone" There appears to have been no
other reason than this, and it follows that
the bank had kept open for several DAYS on
| the courage of its officers" The condition
Of the bank in other words, was such that it
would have been closed long before Dec %
had 1t not been for this stimulus t'the cour-
age of its officers"
Seventh-The bank was insolvent on the
22d. The evidence shows this to my mind.
The officers knew it, for they resolved to
doing business" CLOSED because we thought
p the bank insovent on the ed" (Wm Daw-
/ son, Jr.) What had happened? Nothing
whatever in the way of a change in the
banks condition. But at $50 on the 21st
William Dawson, Jr., told F. A. Seymour
/ that he wanted to go over the situation with
him Seymour and Dawson talked with Mer-
RAM and Bailey; they afterwards called on
J. W. Lusk, r. A. Smith and w. r. Mer-
g. ram. Inc subject dnQer discussion at these
conferences was the closing of the bank.
Z Nothing to the banks condition was
/ discovered that might by It's officers They
were advising with other bankers as to
! whether that condition would justify them
in keeping up business. The other bankers
thought they could, but In spite of this en-
enlargement. the officers determined at 10 As
| on the 22d to suspend. 1t Is not case where
a sudden loss or misfortune changes a solvent
institution to ancinsolvent one, but one where
! courage" false hope and perhaps. pride
have kept open an institution that should
have been closed1lOng before.
My conclusion Is, therefore, that the con-
dition of the Bank OF Minnesota on Dec. q
was such that it was hopeless to expect that
| II could continue as going concern that
| this condition was known to the officers Of
| the bank and concealed from the persons who
made deposits ON that day. that in receiving
| deposits on that day the officers of the bank
| were guilty of such fraud that the depositors
contracts of deposit; that having rescinded
the title to the checks and money deposited
in the depositor and not the bank and
the depositor may recover his property II he
can trace it into the fund in the hands Of
the receivers
Judge Bum then proceeds to discuss
| Identification, etc The claimants
draft and money deposited by them on
Dec q, may follow and recover their
property, provided they are able 10
| Identify 1T in the mass in the hands Of
the receivers.
The right to recover rests on the
ownership of the property. The claim
ant is not entitled to preference over
other creditors, on account of the ma
ture of his claim.
The modern rule is that when the
| claimant shows that his money oarno