Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-01
BANK DIRECTORS LIABILITY
IN FAILURES IS ANALYZED
Deputy Controller of Currency
Defines Responsibility
to Public.
Cites Law Safeguarding De-
positors Against Losses
Due to Crime.

In addition to the distinction and
prestige of being q bank director, the
cost is sometimes heavy. During the
past three years the Treasury Depart
ment has recovered $2,400,000 from
bank directors who were held liable In
bank failures, r. q. Await, deputy con-
troller of the currency, told the Central
States Bank Management Conference
In session here. His address on the
Duties and Responsibilities Of Bank
Directors" proved unusually 1llumina--
the banking field. Mr.. Await said:
1.-THE experience Of the comptroller''s
ONCE has shown conclusively that many
bank directors have little or no con-
ception of their duties and responsible
tiles and that some directors ignore
their duties even when called to their
attention.
1.-THE Economic Policy Commission Of
the American Bankers Association in
its report to the Houston Convention in
1927 recognized the importance Of the
regard thereto but the lack Of knowl-
edge Of their responsibilities still re-
mains the cause Of many bank failures.
why do we place such emphasis on
the duties and responsibilities of bank
directors as compared with other cor
porations? Directors of private corpor-
atoms, as rule, have as their principal
object the interest and protection of
what may be termed their partners In
business, stockholders, and also the
bondholders. The directors Of the banks,
quasi public corporations, have their
first duty to the depositors Of these in
stitutions and this duty comes above
their duty to the stockholders. They
ora IN the 1nafJ1ra If fr11QfooQ
when the depositor places his money
In the bank he in effect says: In con-
sideration Of receiving my money and
any interest paid, you can have its use,
but only on the condition that its use
conforms to the safeguards provided by
law Such safeguards are not the mere
mechanical safeguards surrounding the
proper custody of funds, but cover all
the many phases Of banking, provided
by statutory enactment or court deci-
sion. On whom does the responsibility
OF this contract fall?-the directors.
Banks Built Around Directors.
"In most banking laws, and particu-
larry the national law, the whole struc-
ture Is built around the directors. II
Is the director Of the member bank who
is held responsible for violations of the
Federal Reserve act by the provisions
Of that act.
"The director Is required by the ma.
tional bank act, when elected or ap-
pointed, to take an oath that he will
so far as the duty devolveS on him
diligently and honestly administer the
affairs of such association and will not
knowingly violate, or willing permit II
be violated, any Of the provisions Of the
act.
obviously the law did not contem-
plate that a director should be figure
head; that he should attend rneetingr
merely to get his directors fee, and
in this connection was told recently
by q president of bank that it was
necessary to increase the directors fee
In order to get some of the directors OF
that particular bank to attend meetings
Ia procedure that certainly should be
unnecessary.
There are two main divisions Of
directors liability-statutory and COM
mon law" Mr.. Await said. "Under the
statutory may be listed such liabilities
as loans in excess Of the limit as fixed
by law; injury or damage to persons
relying on false reports of conditions
of a bank; dividends paid out of other
than net profits, after deducting there
from all losses and bad debts; payment
of dividends or making of loans when