A bank has no power to deal in real estate, except for incidental purposes. It cannot invest in real estate for the mere purpose of investment. The banking laws usually set out for what purposes a bank may hold real estate, but such purposes are always of a merely incidental sort.
To buy real estate for purposes of investment, or speculation, is no part of the business of a bank. Its power to deal in real estate is very limited. It may purchase, hold and sell real estate only in an incidental way. Two general divisions of the cases where it properly holds real estate, might be made (1) cases in which it purchases and holds real estate for the purpose of providing itself with a home; and (2) cases in which in the protection of its interests it finds it necessary to take real estate. The National Bank Act provides:
"A National banking association may purchase, hold and convey real estate for the following purposes, and for no others:
First. Such as shall be necessary for its immediate accommodation in the transaction of business.
Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted.
Third. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings.
Fourth. Such as it shall purchase at sales under judgment, decrees or mortgages held by the association or shall purchase to secure debts due it."
It will thus be seen that a bank cannot deal generally in real estate, but may only acquire and hold it when it needs it (as for a home) to enable it to carry on its business, and when it finds it necessary to take it in satisfaction of debts previously contracted, or at an execution sale, etc.
A bank has no rights to loan money on real estate, though it may for debts previously contracted, take mortgages in good faith, for purposes of security in order to protect its loan. But the United States court has held that where a National Bank loans money on real estate, the bank's power cannot be questioned except by the United States, and the mortgage as between the parties, may be enforced.
Unless permitted by State Law, a bank cannot loan money on real estate. It may indeed take mortgages as a further security for debts previously contracted, where the original loan was made in good faith. The United States Supreme Court however has held, that if a national bank exceeds its power in this respect and loans money on real estate, the mortgagor cannot raise the question and the mortgage may be enforced. The United States may in such case call the bank to account for abusing its authority and exceeding its charter powers, but the parties cannot object.167 Under some state laws, loaning money on first real estate mortgage security is permitted.
Generally speaking a bank has no power to deal in personal property, except as it needs the same to enable it to carry on its business, or as it acquires the same for the purpose of protecting its interests.
Generally speaking, a bank cannot buy and sell goods or personal property of any description, except as it may need such property, or must take it to protect its own interests. It needs its equipment and its office paraphernalia, and such things it may of course buy, but it is not a merchant and cannot buy up personal property, and cannot put its funds for purposes of investment or speculation into personal property of any sort. Thus it cannot buy and sell stock or bonds, although it may always receive such stock or bonds, or indeed any personal property when necessary in the protection of its interests, as to secure or receive payment of debts previously contracted.