On one occasion a prominent member of Congress, who was at that time president of a national bank, called at the Comptroller's office for a conference in regard to several excessive loans that had been made by his bank with his knowledge and consent. These loans had been freely criticised by the Comptroller and their reduction to the legal limit was insisted upon. He took exception to the criticisms on the ground that the loans were considered perfectly safe, as all such loans are claimed to be, and in addition were well secured. He contended that they were the very best loans in the bank and that it was necessary for his bank to extend the accommodation in order to retain the business of these customers. The attention of this law maker was called to the fact that following his election as a director each year he had taken an oath that he would not violate or knowingly permit to be violated any of the provisions of the national banking laws. He admitted that these loans exceeded the legal limit and that they were made in violation of law with his knowledge and approval, and in answer to an inquiry as to how he reconciled himself with his conscience in thus deliberately violating the law, he replied, after some hesitation, that "he had not considered the matter in that light before." He was told that Congress made the laws and that it was the sworn duty of the Comptroller to enforce an observance of them without exception, and that the Comptroller had no power to waive a provision of the statute or to relieve or absolve him from the obligation of his oath of office. He finally declared that he would have the loans reduced to the limit and that thereafter while he was president of the bank he would not make or permit to be made any loan in excess of the legal limit.
This incident is related simply to illustrate the conception that some officers of banks have of the obligation they assume, morally and legally, when they swear once each year that they will not wilfully violate or knowingly permit to be violated any of the provisions of the national banking laws. Unfortunately, they are not all as scrupulously honest in this respect as the director referred to, or as the Quaker directors of a national bank in Pennsylvania, who qualified their affirmation not to violate the law by adding the words "except as to the limit of loans."
Arthur B. Spear, cashier of the Oberlin bank, was indicted and convicted for making false entries in the books of the association for the purpose of deceiving the bank examiner and the Comptroller. Spear certified that according to the records of the bank Mrs. Chadwick had a certain deposit in the bank when the fact was she did not have any. It was alleged at the trial of Spear that he made the false entries by direction of the president, but that he had not profited in any way by the transaction. Beckwith, the president, having died before the trial of Spear, the brunt of the affair fell upon the latter. He was sentenced to the penitentiary for a term of seven years, but his sentence was commuted by the President before completion.
In the liquidation of the bank under the receivership, the losses on assets compounded or sold under order of the court, amounted to $246,561. An assessment of one hundred per cent. was levied upon the stockholders, of which amount $47,171, or over seventy-six per cent., was collected, and seventy-seven per cent. was paid to the depositors and other creditors, amounting to $236,928.41.
The receivership was finally closed June 30, 1913.