The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-09-28

clearing house organizations, which IS
most excellent plan. 1t has so many ad-
vantages that great good is hoped for
from its trial.
Above all. the directors of a bank should
most closely scrutinize the loans to Of
flcers and other directors, and see that
they are kept down to not only legal but
safe amounts
Far the most frequent cause of bank
troubles, in fact, the almost invariable
cause of bank failures, is the granting of
credits far beyond the legal and prudent
limits to the officers or to one concern or
group Of allied concerns, generally owned
and managed by the officers or directors
of the bank or in which they have. di-
rectly or indirectly. some large pecuniary
interest.
Is In Grave Danger.
When a bank Is In anything approaching
this condition. 1t is in grave danger for
its entire safety depends on the success
of outside enterprises, and the man who
should protect the bank has perhaps
greater interest in protecting the other
concern. 1t is probably the most common,
serious derelietion of duty on the part of
directors to allow such a condition as this
to gradually obtain In a bank. It may
sometimes be done honestly as the re-
suit of bad judgment only but in my ex-
perience it is the most frequent cause of
dishonesty and fraud among bank Of
fieers. L do not remember a case where
bank officer had the moral courage to let
loans Of this kind carry down his bank
without resorting to crimes of some kind
to conceal or postpone the catastrophe,
in hopes that some fortunate circumstance
might intervene to save him and conceal
his fraud.
am aware that 1t is sometimes advis-
able and necessary to secure as bank di-
reetors men who can control important
accounts and bring business to a bank. [
am not objecting to this, when 1t is done
In good faith and the business is for the
real interest of the bank. 1t is not good
business or good banking, however, to
have men on the board whoSe interest
lies in borrowing from the bank more
than they should prudently or can legally
loan, or who would, under any circum-
stances be tempted to risk large sums
of the money of the bank to protect their
own interests, rather than those of the
bank. No man who would accept place
on bank board under such circum-
stances can be proper member of it.
No New Responsible ities.
It may be urged that If bank directors
are to be held to such a strict accounta-
bility 1t will be difficult to -.--> the right
kind of men to serve on bank boards. My
reply to this is that 1t is no new respon-
sibility l am trying to create. 1t already
exists in the law as 1t has been construed
by the supreme court. Nothing you or l
can say or do will change this. If what l
may say shall cal this fact home to bank
directors and prompt them to fuller
realization of their duties and RESPONSE
bilities, I shall be content. The purpose
OF this article is to emphasize the fact
that the responsibility of bank manage
ment is, under the law, placed upon the
board of directors. and upon them alone.
Not only the money of the shareholders
but that of the depositors, is put In the
care of the directors of a bank, upon the
faith that they are not only honest, but
that hey are diligen and competent Any
man who accepts place on a bank board
must accept this responsibility, and take
an oath he will diligently and honestly
manage the affairs of the association. He
thus adds a moral to his legal obligation,
and is bound, in all honor and good faith,
10 observe his oath and obey the law