Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1910-04-05
TREASURER BROWN
GIVES SUGGESTIONS
FOR BANKING LAWS
At Present There is No Law
Preventing Directors From
Borrowing all Their Banks
Surplus for Personal Uses

The report of State Treasurer ]. Pope
Brown for the year ending December
81 1909, which will be submitted to the
governor and the general assembly at
the next session, has been finished, and is
released for publication. 1t is very
interesting paper. 1t contains a thor
ough and comprehensive statement of
the states finances, cites facts and fig
ures to show that prosperity in Georgia
is on the rapid and steady increase, and
points to some very startling peculiari-
ties in the laws regulating state banks.
The office of state treasurer is a double
one, the incumbent being also state bank
examiner. This branch of Mr.. Browns
duties has been looked after in a most
creditable way. and perhaps the most
important portion of his report is that in
which he calls attention to two signifi-
cant facts concerning state banks and
the laws governing the same.
One is that there is no law in Georgia
to prevent the directors of a bank from
borrowing all the capital and surplus
and using. ii for personal purposes, pro-
vided they comply with certain condi-
TONS The treasurer makes no bones
about intimating that these conditions
don't amount to much.
The other is that number of branch
banks in Georgia have been established
and that according to the comptroller
generals ruling there is no law specifical-
ly forbidding such a venture
The treasurer's language in reference
to these points is as follows:
DIRECTORS CAN BORROW.
While there might be some criticisms
as to the conduct of certain banks
throughout the state, on the whole their
management speaks volumes for the
ability and integrity of those in control,
and it has been extremely gratifying 10
find them all in line with this department
to the end that they may be kept in a
healthy condition. However, upon eX-
animation of reports sent in by the
bank examiners, l have found where
banks were being conducted in a manner
not in accord with my preconceived ideas
as to the functions of a banking institu-
ton. 1t never occurred to me that a
bsnk should be operated, first, for the
benefit of it's directors, but in some in
stances. upon examination of the reports
OF the hank examiner. I was absolutely
astounded to discover that the entire
capital stock and surplus had been used
by the directors of the banks, and my
establishment was intensified when
found that there was no law to prevent it.
1t is contrary to the old banking laws.
but the new act provides that no director
shall borrow in excess of certain
amount except upon certain con-
ditions. When these conditions are COM
piled with they can then borrow all the
money the bank has and not violate
any law. 1t never occurred to me, how
ever, that directors of bank should
be authorized or justified in using the
entire capital and surplus of a bank to
promote their own individual enterprises
to the exclusion of others who might
come in competition with them
ELECTING DIRECTORS.
I have also been astonished to find that
the stockholders of banking institutions
would select a board of directors who had
a very small per cent of the stock in the
bank and leave all matters connected with
the bank entirely in their control. While
the stockholders have certain protection
under the law, and expect to be pro-
tected to a certain extent by this de-
partment, / would respectfully suggest
to them that they be more vigilant as
to their own affairs and as to whom they
select as directors of their business.
QUEER BRANCH BANKS.
I was also surprised to find that we
had a number of branch banks operated
in the following manner: With, say, S15,-
600 paid in capital, the bank in A is es-
tablished. thereupon the Bank of B will
be established as a branch bank of A
with no additional capital, and so on.
In this way, we might have an intermin-
able number of branch banks established
throughout the state with a paid in cap