This section is from the "Practical Banking" book, by Albert S. Bolles.
This officer is elected by the board of trustees, and holds office at their pleasure. He may or may not be a member of the board, but it is customary that, he should be. His department is the custody and management of the investments of the bank, but, as the senior officer present, he exercises a general direction over all departments. The cash deposited in banks is principally under his control. He, or the secretary acting for him, directs the deposits to be made in different banks. Checks on the banks are signed by him and by the secretary, and countersigned by the president. He is the proper of ficer to collect interest or rent due the institution, to receive payment for obligations which mature, to receive applications from borrowers, and to lay before the board of trustees all matters pertaining to investments which may require their action. The principal investments of the bank, as permitted by law, are—1st, loans on pledge of stocks; 2d, stock investments; 3d, mortgage loans.
The kinds and amount of these various classes of investments are guarded by law, which differs in the various States. In the New England States loans may be made upon bills receivable as security, which is not the case in this State. In some States loans may be made upon bank stocks or railroad stocks.
The First of these classes, loans on pledge of stocks, are considered as a temporary investment. The loan cannot exceed par, and there must also be a margin of ten per cent. These loans are made upon the sole discretion of the Treasurer, as it would be impracticable, in case of a loan from day to day, to await the action of the board at its monthly meeting. The borrower deposits the securities, the treasurer is responsible for seeing that they are genuine and that they are sufficient, and for their custody. He takes from the borrower a voucher, and also a note, which are at first embodied in one document, afterwards separated. The raising and lowering of the rate on such loans is also at his discretion, and if the loan should not be paid, principal or interest, when due and demanded, it is his duty to sell the stocks pledged as collateral security, as prescribed in the note, and to account properly for the proceeds. It is also his duty, in case of the depreciation of the security below the legal margin, to make a call for a sufficient part of the loan to bring it within the margin.
Second.—Stock investments. These are usually voted by the board, but the practical business of buying and selling is effected by the treasurer. The board usually authorizes a purchase at not exceeding a certain price, or a sale at not below a certain price, and it is the duty of the treasurer, of course, to obtain the most advantageous terms possible for the bank, and his contract, even if it should be contrary to the vote of the board, would bind the institution. These securities are frequently of the class known as coupon bonds, where each maturing amount of interest is represented by a small promissory note attached to the margin of the bond. These bonds and their coupons being payable to bearer, there is greater danger in case of theft than from registered securities. The treasurer is, therefore, usually instructed to convert any coupon bonds, which may be purchased, into registered. As an expert in the money market, the treasurer is expected to submit to the board at its meetings all desired information as to what appear to be the most profitable investments. When the interest on the stock investment matures, the treasurer attends to its collection through the regular channels, referring to the register of interest due, kept by the secretary.
The law of the State of New York permits Savings banks to invest only in the following stocks and bonds: 1, United States bonds, including District of Columbia 3.65's; 2, New York State bonds; 3, bonds of any State in the Union which has not during ten previous years defaulted on principal or interest; 4, bonds (if issued in pursuance of a State law) of any city, county, town or village in the State; 5, any interest-bearing obligations of the city or county in which the bank is situated. In loaning on collateral security, the banks are restricted to the same classes of bonds.
Third.—Mortgages. A person desiring to borrow from the bank upon his mortgage on real estate, fills out the application, which contains spaces for a full description of the property and other information concerning the proposed loan. This is, in the first instance, investigated by the treasurer, and in a great many cases declined by him at once. He is understood, by custom, to have a veto upon such applications as seem out of the question. If the loan appears advantageous, and within the limits prescribed by law, the treasurer submits it, with others, in a list at the next meeting of the board; a printed copy of the list, giving a brief description of the security in each case, being laid before each member. If the loan is accepted, and the application forwarded to the attorney to whom the applicant is then referred, and the title is, by the latter, pronounced good, the treasurer draws the bank's check in favor of the attorney for the amount of the loan. He will receive from the attorney the application, with the receipt of the borrower endorsed thereon. Also the bond, the insurance policy, the mortgage, when it has returned from the office of public record, and the abstract of title when it has been copied. It is his duty to examine each of these documents, to see that the correct amount has been paid upon the voucher, to see that the bond is in accordance with the vote of the board, that the insurance policy is in one of the companies selected by the bank, and made payable to the bank as mortgagee, that the mortgage describes the property correctly, and that the abstract is properly certified to by the attorney. He furthermore sees that the documents are appropriately filed under the serial number of the mortgage.