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ness 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, and which, in my opinion, tend to defeat the very purpose of the limitation. It is an elementary proposition recognized by the courts with respect to statutory or constitutional inhibitions, that you cannot do indirectly that which you are prohibited from doing directly. In their application to commercial paper, the terms "loans" and "discounts" are synonymous. Amer. & Eng. Ency. of Law, Vol. 21, 2nd ed. 381. The question who is borrower is not always to be determined from the position of the parties as they appear on the paper. The borrower may be the maker or the endorser. Pratt's Digest, 94. Our statute provides that in the discount of commercial or business paper actually owned by the person negotiating the same, it shall not be considered as money borrowed: The application of this provision, in my opinion, relates exclusively to the person negotiating the paper. The statute contemplates that he alone shall be considered as not receiving a loan from the bank. With respect to the maker of such paper who is primarily liable, if such maker has received credit at the bank to the full limit imposed by law, the bank should not be permitted to discount such paper, as in that event the liability of the maker would exceed the liability permitted by the general banking law, and if such a transaction should be permitted, it would indirectly defeat the very purpose for which this limitation was imposed.

In determining the questions submitted by you I realize that there may be some doubt as to the proper construction of these provisions in the absence of any judicial determination as to their proper meaning. In view of the fact that the several barks of this state organized under the general banking law, are subject to state supervision, not only for the protection of the banks themselves, but for the protection of the persons doing business with such banks, the laws relating thereto should be construed in such a manner as to afford such protection in every possible way, until such time as the courts may determine otherwise.

In answer to your first question, I would therefore say that in my opinion the amount which the directors of a bank would be authorized to loan to any person, or company, or corporation, or firm, by a two.thirds vote of its board

bank, and it would be immaterial whether such loan was secured or unsecured, excepting, of course, loans on real estate or other collateral securities authorized by the general banking law.

In answer to your second question, I would say that the same rule would apply to any one line of commercial paper that would apply to any one person, company, firm or corporation.

In answer to your third question I would say that in my opinion it is immaterial whether such loan is secured by the bond or personal endorsement of the officers or directors of the firm, company or corporation, or by the assignment of value as collateral, except where such loan is made upon real estate or other collateral securities recognized by the general banking law. In this connection I call your attention to the rule laid down in the Amer. & Eng. Ency. of Law, Vol. 21, 2nd ed., page 382, to the effect that "Drafts may be bona fide bills of exchange drawn upon actual existing values within the meaning of the statute, though not accompanied by specific bills of lading in each case. It is sufficient if they are drawn against property previously consigned and existing either in its original form or in the shape of proceeds of sales in the hands of the consignees." This rule, of course, applies to the federal statute. The state and federal statute being identical in this particular, unquestionably the same rule would apply to a bank organized under the general banking law of this State.

Respectfully yours,


Attorney General.

The year has been a very prosperous one for the banks of Michigan, there have been no failures and the foregoing reports show large gains in both commercial and savings deposits.

At the last session of the legislature section 39 of the banking law was amended so as to require two examinations of all State banking institutions during the calendar year. As this amendment did not take effect until May 16, I have not been able to make two examinations of all banks this year. The number of examiners has been increased, however, to provide for at least two examinations in 1906. This will enable the Department to keep in closer touch with the institutions and should produce good results. This amendment meets with the approval of the bankers of the State from whom the Department has received hearty co-operation in its endeavor to secure a careful compliance with the provisions of the statutes governing their operation.

I shall not at this time suggest any amendments to our excellent banking act, leaving that for consideration in my next annual report.

I desire to acknowledge the efficient services rendered the Department by Deputy Commissioner Wm. Donovan, the examiners and other employes. Very respectfully,

En W Moors



Comparative abstracts, giving the volume of business as shown by the last reports of Michigan State banks called for in the years 1889, 1890, 1891, 1892, 1893, 1894, 1895, 1896, 1897, 1898, 1899, 1900, 1901, 1902, 1903, 1904 and 1905, as made to the Commissioner of the Banking Department.

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$47,354,277 90 ($56,950,395 68 $65,191,972 53 $82,649,533 48 $73,156,116 80

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$47,354,277 90 $56,950,395 68 $65,191,972 53 $82,649,533 48 $73, 156, 116 80

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