Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-04-05

'ther constitutional provision: Article
81 Of the amendments to the constitu-
ion 30 amends section 1872 Of the
original constitution as to authorize
he issuance of unsecured bonds to
he extent of 100000 certain real
estate bonds, and bonds secured by
zeal and personal property of state
owned utilities up to $4,000, 900. 1t
provides as follows:
Could Not Make Loan.
Ono future indebtedness shall he
incurred by the state unless evidenced
bS a bond issue. which shall be au-
by law for certain PURPOSES.
I'VE have previously referred
to the fact that the Bank Of
North Dakota has borrowed ST.
O0O! 200, thereby. of course, be-
coming indebted in hat sum. IL
Is doubtless authorized by the
hank act to borrow money. If IL
could borrow $l.0OO,O 900, pleds-
ing bonds held by il as collateral.
it could borrow such greater
sums as its business seemed Ia
warrant without collateral Or
with whatever collateral there
be demanded by the lender. and
6 ISS~A ~ WI ' IL.
the contentious of tho petitioner
arc correct. the state would. TX
liable. Not only would tho static
be liable, but tho creditor could
obtain 4 Judgment only against
1t which nc could satisfy only by
resort to the state treasury. be-
ing denied access to the u
of the bank. Thus, the limita-
ton contained in article 81 OF tho
amendments whic< was adopted
at the same election as article
/. 81. authorizing the state to en-
gage IN business, would be er-
f~ectually nullified.
, Would Make "Sky Limit
Some attempt is made to show
debtedness does not apply where, a!
a result Of the transaction, there i!
corresponding amount of fund
available for meeting liabilities. Con
ceding that this argument is 10 SOM
extent applicable where a municipal
corporation desires to borrow none.
for an authorized purpose and wher'
it already has certain funds in tn
treasury applicable to outstanding oh
legations so that the debt limit ma,
be properly calculated by subtract
ing from outstanding debts the avail
able funds in the treasury, (Ander
son VS.. International School Nstric
No. 5, SO N. D. 41S, 1856 n. W. 54). i
is clear that it has no application t.
such a. situation as that presepte.
piled to the borrowing power of tn
state in it's present circumstances
considering the bank as the state, i
is obvious that the language no fu
ture Indebtedness shall be .incurre'
by the state unless evidenced by
bond issue, which shall be authorize
by law for certain purposes mean
nothing. There would be no limit. a
every exercise of the power to borroy
would simply result in %increasin
available funds and the transactio;
could be repeated ad infinitum.'
How 1t Would Work.
A concrete example may serve t
illustrate the fallacy Of the argu
ment. If the: funds on deposit, pub
lie or otherwise, in the Bank o
North Dakota seemed to the manage
ment to Justify It. the bank Nigh
purchase $5,000,O00 of the bonds o
the mill and elevator series. /
would still owe to the depoators tn
amount of deposits thus invested, bu
Inc state WOu!u oWe Inc pAHA d lin
sum. Then the. banA might :borro,
s 1900, 900 elsewhere, 2ledging thes
bonds as collateral, in which ever
the state, if petitioners argument j
sound, becomes indebted TO the exten
Of 100000, only $S,0Q0;6O0 o
which is represented by bonds. The
this $4,000, 900 could be used to bu
nor bonds to serve as collateral TO
another loan. ana SO on. What the
constitution: