The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1899-07-16
Statement of the Case.

were.
"First-As to whether an officer of a
state banking corporation organized
under the general banking law may
be permitted to ave an Overdraft at
such bank, the same being wholly IN
secured, in excess of 10000; and if
such a transaction is in violation of
the law, in what manner shall 1 pro-
ceed to enforce a compliance with the
law?
"Second-In computing the amount
hat a state banking corporation, or
ganized under the general law of the
state, nay loan to a mercantile cor
pOration. should the amour of loans
made to the individual members of
such mercantile corporation be added
to the sums loaned direct to- the cons
pany, for the purpose of determining
whether or not a sum in excess of 10
per cent of the capital stock of the
bank has been so loaned TO such mer-
camille company"
Law Cited and Contrued.
Replying to the first query, Deputy
Attorney General Lee directed atten-
ton TO section $40 of the revised stat
utes, and stated that under the prOvi-
sions of this section it is clear that a
state banking corporation cannot per-
nit one of its officers to have. either
secured or unsecured, an overdraft in
excess of so. 900, and that such an act
would vacate the office of such officer
and subject the corporation 10 the pro-
visions of said section 800.
In reply to Examiner Andersons
second question, the attorney generals
opinion cited section $50 of the revised
statutes and added:
Under the provisions of this section
l am of the opinion that it was intended
to limit the maximum liability of any
corporation to a banking corporation
for borrowed money, TO 10 per cent OF
the paid up capital stock of such bank,
and that in computing such amount the
sums loaned to the individual members
of the corporation necessarily should
be computed. the anne as if such loans
were made direct TO the corporation,
otherwise the law might be so easily.
evaded thai 1t would be practically
worthless. If a mercantile or other
business corporation may borrow the
full l. per cent specified. and, in addi-
ton thereto, the several officers and
stockholders may borrow additional
sums. there is nothing TO prevent n
such business corporation from borrow
ing the entire capital stock of the bank.
Evidently the purpose of this statute Is
to prevent banking corporations from
loaning their capital stock, in excess
of 10 per cent to any single individual,
firm or corporation, II the law cannot
be evaded by the individual members of
such corporation being permitted to
borrow in excess of the 10 per cent.
Enforcing the Law.
Concluding. the attorney general ad-
vised hat the secretary of state, upon
becoming satisfied nat any bank has
violated anv provisions of the law, in
GLIDING the provisions above set out,
-.- H. AFNAr-ayr annarn m
ply to the district court for the appoint
ment of a receiver to take charge of
and wind up the business of such bank.
During the recent session of the leg
iSlature two unsuccessful efforts were
by these banks to have the law
amended TO permit banks having a cap
ital of $780, 900 or under =. loan up TO %
per cent of shch banks capital and
surplus to any one firm, corporation or
individual. and the expected legislative
relief not coming the bank in question
and its borrower will now encounter
with the state officials, unless
the offenders mend their ways.
Bank and Borrower Sound.
As to the bank in question, Examiner
Anderson said it was in excellent shape,
with plenty of available and
few. if any. bad debts. The borrower
has ample means to Secur the bank
loss, but the question, as the at
torney generals opinion on the facts
presented shows, is one of plain and
persistent violation of the banking
The borrower has stated, so the
examiner said, that he could any
day get money from either of two banks
this city OF pay off his unsecured
overdraft at his own bank. but he felt
hat such a course would be humiliat-
ing himself to his co-directors.
Bank Examiner Anderson refused to
the case any further, stating
hat he had no object in view but to
his duty without hurting, if it
S avoidable, the standing of any bank.
Other Violations of Law.
The examiner added, however, that
he felt constrained TO go after some
banks 81 the state for not keeping
heir reserve funds up to the required
after having been repeatedly
warned to not allow the lawful limit TO /
De reduced. Another matter, too, that
nay call for legal action on his part.
S the fact of a bank loaning one of
is directors s15, 200, exceeding the law
ul limit of $4,000. The loan in cues
was made recently on ample Sc
.uritv on the Dretext that the director
S me- an officer of the bank