Bank director

“ Gould, supra, 223 N.Y. at 111-117, 119 N.E. at 240-241 (the fact that bank director never attended board meetings or acquainted himself with bank's business or methods held to be no defense, as a matter of law, to responsibility for speculative loans made by the president and acquiesced in by other directors) . Thus, all directors are responsible for managing the [A824] business and affairs of the corporation. [NJ35] N.J.S.A. 14A:6-1 (Supp.1981-1982) ; 1 G. Hornstein, Corporation Law and Practice § 431 at 525 (1959) . ”

“ The distinguishing circumstances in regard to banks and other corporations holding trust funds is that the depositor or beneficiary can reasonably expect the director to act with ordinary prudence concerning the funds held in a fiduciary capacity. Thus, recognition of a duty of a director to those for whom a corporation holds funds in trust may be viewed as another application of the general rule that a director's duty is that of an ordinary prudent person under the circumstances. ”

“ Each group of banks is to choose two directors: a Class A director, who is to be an active banker representing the stock-holding banks, and a Class B director, who must be actively engaged in commerce, agriculture, or some other industrial pursuit in his district. The board of directors of each member bank is to elect a district reserve elector. Candidates for the position of director of a Federal Reserve Bank may be nominated by any member bank ”

“ Besides these guarantees of fidelity, the additional requirement is that each director shall own in his own right at least ten shares of the capital stock, and when appointed or elected shall make oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of the association, and will not knowingly violate, or willingly permit to be violated, any of the provisions of the act under which the association was formed. ”

“ And this defendant alleges that if any liability attaches to him as a director or stockholder of said bank for any act done or duty neglected as set forth in said amended petition or otherwise, that such liability is determined and controlled by the national banking act concerning the management of national banks; and that, in determining the liability of this defendant, there is necessarily involved the construction of said national banking act relating to the duties of directors and stockholders of national banks. ”

“ The mass of the Bank directors are merchants of experience, employing a considerable capital in trades in which they have been brought up, and with which they are well acquainted. Many of them have information as to the present course of trade, and as to the character and wealth of merchants, which is most valuable, or rather is all but invaluable, to the Bank. Many of them, too, are quiet, serious men, who, by habit and nature, watch with some kind of care every kind of business in which they are engaged, and give an anxious opinion on it. ”

“ The position of the Bank directors is indeed most singular. On the one side a great city opinion—a great national opinion, I may say, for the nation has learnt much from many panics—requires the directors to keep a large reserve. The newspapers, on behalf of the nation, are always warning the directors to keep it, and watching that they do keep it; but, on the other hand, another less visible but equally constant pressure pushes the directors in exactly the reverse way, and inclines them to diminish the reserve. ”

“ There is surprisingly little favour shown in the selection; there is a great wish on the part of the Bank directors for the time being to provide, to the best of their ability, for the future good government of the Bank. Very few selections in the world are made with nearly equal purity. There is a sincere desire to do the best for the Bank, and to appoint a well-conducted young man who has begun to attend to business, and who seems likely to be fairly sensible and fairly efficient twenty years later. ”

“ Legislation in this country has also concerned itself with the duties of bank directors and the enforcement of their performance, and with the relations of bank officers to their banks, particularly those involved in borrowing for their own uses or for firms or corporations in which they are interested. ”

“ The manager is a hired man, sworn to do his utmost to protect the credit of the bank, trained for many years in its service, familiar with its history and its policy, anxious to guard his own reputation and character against criticism. Under these circumstances it would be remarkable if he did not fix the amount of his bank's reserve nearer the ideal figure—if an ideal banking reserve is possible—than could possibly be done by a body of lawmakers or of any other men outside the bank. ”

“ He usually receives directly, or through the subordinate officers of the bank, all moneys and notes of the bank, delivers up all discounted notes and other securities when they have been paid, draws checks to withdraw the funds of the bank where they have been deposited, and, as the executive officer of the bank, transacts most of its business. ”

“ The unique powers of commercial banks to accept demand deposits, provide checking account services, and lend against fractional reserves permit the banking system as a whole to create a supply of 'money,' a function which is indispensable to the maintenance of the structure of our national economy. ”

“ The only organisation which I can imagine to be effectual is that which exists in the antagonistic establishments. The great private banks will have, I believe, to appoint in some form or other, and under some name or; other, some species of general manager who will watch, contrive, and arrange the detail for them. The precise shape of the organisation is immaterial; each bank may have its own shape, but the man must be there. The true business of the private partners in such a bank is much that of the directors in a joint stock bank. ”

“ The greater the banking capital in any section, the easier it will be for the people of that section to carry on and enlarge their business.
The Loan Department is not only the most important, but it is the money-making end of the bank. If it makes no loans it will pay no dividends. If, on the other hand, it makes bad loans, it will go out of existence.
It can be understood readily that the successful bank officer, whose duty it is to accept or reject loans, must be a person of large experience and wide knowledge of men and affairs. He must be an excellent judge of human nature. ”

“ Among private people they are the principal depositors in the Bank; they are therefore particularly interested in its stability; they are especially interested in the maintenance of a good banking reserve, for their own credit and the safety of their large deposits depend on it. And they can bring to the court of directors an experience of banking itself, got outside the Bank of England, which none of the present directors possess, for they have learned all they know of banking at the Bank itself. ”

“ In Chapter II, on the choice of a banker, an attempt was made to show why a customer should select a strong institution whose working resources are plentiful, and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic. The shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors. ”

“ Upon his theory of duty, the only need for directors of a national bank is to meet, take the required oath to administer its business diligently and honestly, turn over all its affairs to the control of some one or more of its officers, and never go near the bank again, unless they are notified to come there, or until they are informed that there is something wrong ”

“ The directors have further authority given them to establish offices of discount and deposit, wheresoever they shall think fit, within the United States, or the territories thereof, and to commit the management of the said offices, and of the business thereof respectively, to such persons, and under such regulations, as they shall deem proper, not being contrary to law or the constitution of the bank ”

“ These mixed banks have quite beaten the old banks, composed exclusively of pure bankers; it is found that the board of directors has greater and more flexible knowledge—more insight into the wants of a commercial community—knows when to lend and when not to lend, better than the old bankers, who had never looked at life, except out of the bank windows. ”

“ We need not discuss here whether or not this policy be essential to modern banking; but it is quite evident that the small man of business has lost a good friend in the old-fashioned country banker, whose place has not been taken by that person of peculiar views and training—the bank-manager or clerk-in-charge, whose urbanity must be more than painful to those would-be borrowers without security who ask for bread and are politely offered—a stone. ”

“ The remedy is this: a certain number of the directors, either those who have more spare time than others, or those who are more ready to sell a large part of their time to the bank, must be formed into a real working committee, which must meet constantly, must investigate every large transaction, must be acquainted with the means and standing of every large borrower, and must be in such incessant communication with the manager that it will be impossible for him to engage in hazardous enterprises of dangerous magnitude without their knowing it and having an opportunity of forbidding it. ”

“ Associations organized under the act of Congress to carry on the business of banking are required by the express words of the act to transact their usual business at an office or banking-house, located in the place specified in their organization certificate, and no individual officer ought to be allowed to leave his bank and go elsewhere to make large contracts without the instruction of the directors. ”

“ It is known that the directorate of that bank interlaces in personnel with ten, twenty, thirty, forty, fifty, sixty boards of directors of all sorts, of railroads which handle commodities, of great groups of manufacturers which manufacture commodities, and of great merchants who distribute commodities; and the result is that every great bank is under suspicion with regard to the motive of its investments. It is at least considered possible that it is playing the game of somebody who has nothing to do with banking, but with whom some of its directors are connected and joined in interest. ”

“ And it is furthermore evident, that the Bank, which is met at every turn as an agent in all transactions, which governs credit, regulates the currency, animates or checks at will the activity of commerce by narrowing or widening the channels of circulation, the Bank, which by its numerous branches is, like the fabled polypus, everywhere present, the Bank with its funds, its centralisation, its trusty creatures, is certainly an anomaly, which may become big with danger. ”

“ It said it is not the duty of the cashier and president to make such contracts, nor have they power to bind the bank, except in the discharge of their ordinary duties. All discounts are made under the authority of the directors, and it is for them to fix any conditions which they may think proper in loaning money. The court defines the cashier of the bank to be an executive officer, by whom its debts are received and paid, and its securities taken and transferred, and that his acts, to be binding upon a bank, must be done within the ordinary course of his duties. ”

“ By vote of the directors, and the approval of the comptroller of the currency, the bank will reopen for business on Saturday, the 18th. Every effort has been made to put the bank again into a sound and solvent condition, and the stockholders have been called upon to pay an assessment of 100 per cent. on their stock, thus making the depositors' balances secure and available. The bank will be run on strict business principles and in the interest of its customers and stockholders, and, while thanking you for past favors, we solicit your confidence and support for the future. ”

“ A national bank can 'exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt ”

“ The management has been successful; the directors are capable men, and the investments pay a fair dividend. Now suppose someone, the least responsible person in the corporation, were to come forward with a new, untried system of banking and should insist upon its adoption and even threaten the existence of the bank if his plan should be rejected. ”

“ By the present constitution of the Bank, the attention of its sole rulers is most apt to be diverted from the Bank's affairs just when those affairs require that attention the most. And the only remedy is the appointment of a permanent and influential man, who will have no business save that of the Bank, and who therefore presumably will attend most to it at the critical instant when attention is most required. ”