Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1905-05-27
Disregard of Law Against Loan
ing One Person Over 10 Per
Cent Capital Stock
THE BROWN CASE ON TRIAL
Defense Claims Statute Governing the
Amount Loaned Any One Person is
Commonly vioIated-Brown Borrow
cd see,ooo-The Capital Stock Was
Only $4,000.
to Timcs-Republlcan.


cd which the defense claims Is quite
common in the banking business, but
is in direct violation Of the law, was
brought out yesterday afternoon in the
trial of w. l.. Brown, president Of the
First National bank of Storm Lake,
who is being tried by the federal au-
thorities on the charge Of making false
entries in his books and making false
reports to the comptroller Of the cur
rency
The point in question related to the
law prohibiting any national bank
from lending to any one person more
than 10 per cent Of its capital stock.
Four Loans of Over $1,000.
In the case of the First National
bank of Storm Lake, the loan to one
person according to the law, ought not
to exceed $4,000, the capital stock be-
ing $4,000. Notwithstanding this,
Brown in his report to the comptroller
OF the currency for November IL, 1909,
gave various entries which are in ex-
cess OF this amount. but which the at
torneys declare were accepted by the
comptroller of the currency without
any criticism.
Individual loans exceeding $1,000 and
reported to the comptroller of the cur
rency are as follows:
Crookston Realty Company ..$22,752.15
Lucie w. Smith ..,....... $4,000
W. y. Brown -............. 1929
u. ~. DlsSon ................ 1921 SO
When asked IL there is not a law
which prohibits loans of this amount
by bank having only $4,000 of stock
George "A. Scott. Browns attorney, de-
clared that there is such a law.
But" he continued, such things
are frequently done by banks and the
mere fact of Brown including these
loans in his report to the comptroller
OF the currency shows that he feared
nothing"
Reynolds Disputes Scott.
Was the closing of the First Ma
tional bank of Storm Lake ,by the
Washington authorities based on these
entries?" he was asked.
ON, no!' was the reply.
On what was it based, then?"
Il cannot tell" was the answer.
When questioned by the Tribune re-
garding this system OF financiering
Arthur Reynolds, president of the Des
Moines National bank, and a Witness
in this case, declared that every bank
does not do such a thing.
"A few banks do make loans of this
character he said. but they are very
few, indeed. 1t is short sighted pol
icy for bank to do business in this
manner and no sound institution cares
to indulge in it, OF course there are
times when some man with excellent
security wishes to make big loan for
short time and bank let's him have
the necessary money. But the practice
is not favored by reputable banks"
Brown Borrowed $4,000.
Abner j. Wilson, receiver Of the
bank, took the stand when the case
was brought UP yesterday afternoon
and before the court adjourned i'm the
evening the direct examination was
brought to a close, and cross exam
ination begun.
The evidence for the most part con-
sisted OF comparison of the reports
OF Wilson as receiver and Of Brown
to the comptroller for Nov. IL, 1903.
The two reports showed a wide diff
ference. When. called upon by the
prosecution, Mr.. Wilson substantiated
some Of the statements in his reports
by various vouchers, papers and books.
He testified that the figures in his
report were obtained by examination
of the bank books alone and from no
other source.
In the matter of loans exceeding 10
per cent of the capital stock, Mr..
Wilson testified that he found Brown
had borrowed s69,912. while in
Browns report the figures opposite
this entry were but s7,592.2s.
Mr.. Wilson, to prove his statement,
gave an tented account of the var
ious items, which, when totaled,
eaualed the figure he mentioned.
This big difference between the fig
ures of Mr.. Wilson and that of Brown
in regard to the money the latter had
borrowed from the bank created quite
a sensation when Mr.. Wilson testified
to it. The itenizing Of the accounts
took up the greater part of the after
noon The lawyers for the defense
said that the difference lay in the
classification of the accounts and that
all would be made plain before the
case Id completed.