The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-03-31
REPORT OF THE INVESTIGATION
INTO FIVE THAT RECENTLY
SUSPENDED.
LAWS HAD BEEN VIOLATED.
FOUR OF THOSE CONSIDERED ARE
CLAIMED TO HAVE BEEN
USING WEAK METHODS.
Report Adopted by the HOuse-Dis-
cussiOn as to What Is Needed
ON Spencer's Bill.

Chairman Henry Feig, of the special
joint committee, named Feb. to inVes-
tigate the causes which led to the sew
eral bank suspensions in this state,
submitted the report of the committee
to the house and senate yesterday al
most Immediately after the opening Of
the morning sessions. It was adopted
without comment.
The report is bulky affair." and af-
fixed thereto was a transcription of the
evidence upon which it is based. Much
time and care have been given to this
very important matter, and the house
listened nearly half an hour to the
reading Of the report, which will not
be printed in the journals of the house
and senate. The committee consisted
of Representatives Feig, Head, Cray,
Scott and Brusletten and Senators Nc
Arthur, Thompson, Wyman, Hanson
and Sheehan. Representative Feig, the
chairman, and Mr.. Scott, of st. Paul,
were made the chairman and secretary
respectively of the committee. Assist
ance was rendered the committee by an
expert accountant, H. NJ. Temple, of
st. Paul. Among thirteen suspended
institutions in the Twin Cities, includ-
ing the Citizens Bank of Redwood
Falls, the committee selected five
banks, three in ST. Paul and two in
Minneapolis, for special investigation;
they were the Bank Of Minnesota, Min
nesota Savings bank and the Alleman-
MIA bank, of st. Paul, and the Washing
ton and Scandal banks, of Minneapolis
The committee reports that the prin-
aiy1
First-As to whether or not assignments
and receiverships had been brought about by
weak speculative or inexperienced manage
ment.
Second-Or by insufficient state supervision
Third-Or by weak and defective laws of
this state.
Fourth-Or by all combined, and,
Fifth-For what reason the laws of this
state governing this class of corporations are
weak and inadequate.
The report goes on to say that an
swering the first Of the questions the
committee diScov ered that four of the
banks examined revealed weak meth
oGs, using the term in its broadest
sense and basing the wcrd weak"
upon the fact that dishonest methods
are weak methods. Not only did some
Of these banks make false statements
to the bank examiner, but also to the
general public. 1t was discovered that
number of these banks had falsifed
their records; in a certain sense these
weak and dishonest methods, the COM
mittee cor cludes, have been the cause
lading up to the failure of some of
the banks examined.
According to the committee no spec
ulative investments have been made
with the bank funds in the matter Of
specializing in grain and stock futures,
but some of the banks examined re-
Vealed investments in real estate, ac-
ou1red under loans, which brought to
these banks large amounts of real
property out of proportion to the
amount Of capital of the bank This
was largely the cause of the failure of
one of the banks examined. No mex
per1ence or lack of knowledge Of
banking methods and laws governing
such institutions were discovered, but
a marked experience was manifested
by officers in charge in the manner in
which they conducted the finances of
the institution to the serving of their
own personal ends" Along this line
specific violation is charged of the law
which forbids bank directors directly
or indirectly using funds or making
leans in any other manner than that
permitted of persons outside the bank
and also as to the amount of these
loans to certain individual officers and
directors.
The reports says: I'm one bank ex-
amined a director and officer owed the
bank over 500 900 directly, and con-
tlngent liability of over $400, 900, which
was nearly so per cent of the capital
and permanent surplus of the bank,
In another of the banks examined, an
officer and director borrowed 25 Der
cent OF the capital and surplus and
another officer and director of the same
bank over 20 per cent, thus making 4
total OF over one half. In third it
n- Ch l.
were made to officers and directors
much in excess of the legal limit and
practically with no security or en-
dorSement or guarantee.
In defiance of that provision of the
statute which read to the effect that
no officer or servant of a bank shall
borrow the funds or deposits in any
manner to use in their private bust
ness 1t was discovered that certain Of
hcers and trustees were borrowers d.
rectly and indirectly in an amount
$3.50 in excess of the capital and sur
plus of such bank.
Relative to the making Of false state
ments it was found that a correspond
ent OF certain bank was charged on
the books with 100000 and an institu-
ton In which the banks directors were
interested was credited with 500, 900;
and IT was part of the testimony that
no such monies were paid in by such
directors at the time said entry was
made on the books nor deposited with
the banks correspondent and that such
entry was made apparently to deceive
not only the bank examiner. but the
general public.
in another instance, covering the re-
view of another of the banks, an over
draft was exhibited by the ledgers Of
such bank, which was suppressed in
the report to the bank examiner. This
was done by deducting it from the
total amounts of deposits found in such
ledger.
Examination revealed in still another
Instance the case Of a bank which had
sold, or rediscounted, nearly $250, 900 of
their best notes receivable, and their
liability on such paper was not shown
upon the books Of the bank This bank
had been rediscounting paper for some
months prior to its suspension, a fact
which was not disclosed in the reports
made to the bank examiner. This was
a false statement, not only to the bank
examiner, but to the public, for the
reason that the bank Endorsed such pa
per and nowhere on it's record was such
contingent liability shown
In an examination Of the affairs of a
bank organized under the General Act
of 1867, Chap. %, as amended, it was
possession, that although the books
called for cash on hand to an amount
of over $4,000, the receivers turned
over only one dollar in current funds.
The balance Of the items making up