could safely re-open for business, that the Commissioner have the authority to turn it over to the stockholders. It matters not whether this appointive power is left with the Commissioner or the courts, so long as some provision is incorporated in our statutes, providing for the appointment of a temporary receiver, in order that a bank in case of the possibility of its re-establishment may be turned back to the stockholders, rather than oblige the Commissioner or the receiver to proceed to close up its affairs, as at present seems to be necessary. I might add that other States have like provisions. Requiring Majority of Directors to be Residents. In my annual report for the year 1907, I recommended that the law be amended in the direction of having a majority or quorum of the board of directors reside in the city, village or township where the bank is located. The experience of the department has been, where a board of directors is composed of non-resident members, infrequent and irregular meetings obtain, and therefore, the directors are not as intimate and familiar with the details of the bank's affairs as if they were residents. I would, therefore, again recommend that such an amendment be made to the law in this respect. I wish again to reiterate what I said in my last report, that the banking department can only exercise its functions in the detection of infractions of the law and require its enforcement; the directors' paramount duty is to see that no violations of the law occur, and to see to it that the bank's business is safely and honestly transacted. TRUST COMPANIES. I beg to call attention to the recommendations made in the annual report of this department for the year 1907, with reference to amendment of the law regulating the business of trust companies. CONCLUSION. Generally speaking, the financial institutions over which this department has supervision are in a healthy and prosperous condition, as is evidenced by the statistics contained in this report. The effect of the panic has been overcome and normal conditions again obtain. All of which is respectfully submitted. Commissioner of the Banking Department. OPINIONS OF THE ATTORNEY GENERAL. On account of the importance of the subject of excessive loans I deem it advisable to again publish the construction of section 52 of the Banking Law in this regard as submitted to this department by the Attorney General in the year 1903: Lansing, Mich., May 23, 1903. Hon. George W. Moore, Commissioner of Banking, Lansing, Michigan: Dear Sir-I am in receipt of your communication of the 19th inst. referring to the General Banking Law of this State, and requesting my opinion upon the following questions: "First, How much money may the directors of a bank loan to any person, or company, or corporation, or firm, by a two-thirds vote of its board of directors? Second, How much money may any bank loan on any one line of commercial paper? Third, May a bank increase the first named line by the bond or personal endorsement of the officers or directors of a firm, company or corporation, or by the assignment of value as collateral?" In considering these questions I desire to call your attention to section 6141 of the Compiled Laws, being section 52 of the General Banking Law of this State, which provides in part as follows: "The total liabilities to any bank of any person or of any company, corporation or firm for moneys advanced, including in the liabilities of the company or firm the liability of the several members thereof, except special partners, shall at no time exceed one-tenth part of the amount of the capital and surplus of such bank; but the discount of bills of exchange drawn in good faith against actually existing values and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed : Provided, however, That the foregoing limitations shall not apply to loans on real estate or other collateral securities authorized by this act: Provided, however, That by a two-thirds vote of the directors the liabilities of any bank of any person, or company, or corporation, or firm may be increased to a sum not exceeding one-fifth of the capital and surplus of the bank." It is evident that this limitation was borrowed from the National Banking Law, section 5200 of the Revised Statutes of the United States. providing as follows: "The total liabilities to any association, or any person, or of any company, corporation, or firm for money borrowed, including in the liabilities of the company or firm, the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such association actually paid in; but the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed." This provision, as found in our General Banking Law and also in the National Banking Law, has never been construed by the courts in so far as it relates to the particular question submitted by you. The Supreme Court of Pennsylvania, in the case of O'Hare v. Second National Bank of Titusville, 77 Pa. St. 102, referring to this provision in its application to National banks, makes use of the following language: "Evidently the limitation of the indebtedness to the one-tenth in the 29th section, was intended as a general rule for conducting the business of the bank; a rule laid down from experience to regulate its loans for its own best interest and those of stockholders and creditors, not a rule to regulate its customers. It was, as remarked in Fowler v. Scully, a regulation to prevent these associations from splitting on the rock which has ruined so many banks, to-wit, that of lending too much of their capital to one person or firm. The intention being to protect the association and its stockholders and creditors from unwise banking, we cannot suppose it was meant to injure them by forbidding recovery of the injudicious loans." In Vol. 29 of the Amer. & Eng. Ency. of Law, 2nd ed. p. 382, we find the following with respect to the limitation found in the National Banking Law: "The object of this provision of the statute was to guard National banks from the hazard of speculative loans, but it contemplated and permitted to an unlimited amount the discount of paper used and required in facilitating the transfer of property and money in the transaction of the legitimate business of the country." Citing Oswego Second National Bank v. Burt, 93 N. Y. 244. It was evidently the intent of the Legislature, in enacting the provision above referred to, as found in the banking law of this State, to guard the banks organized thereunder from the hazard of speculative loans, and to prevent such banks from advancing or loaning too much of their money to any one person, firm or corporation, and in construing the statute with respect to the exception, it is necessary to keep constantly in mind the purpose of the limitation, and not to construe the provision relating to the exceptions therefrom in such a way as to destroy the force and effect of the limitation itself. The exceptions to which I refer relate to the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, and which, in my opinion, should be strictly construed and should be held to apply to no transaction that did not clearly and fully come within the provisions of the statute in this particular. Black on Interpretation of Laws, 275. I find that the questions which you submit for my consideration are quite fully considered in Pratt's Digest, pages 93-94-95, in their application to national banks, but I am unable to concur in some of the conclusions reached which do not seem to be based upon judicial decisions, |