MISMANAGEMENT AND OTHER TROUBLES 75
and finance committee seemed unable to check
him.
PROCEDURE IN MAKING LOANS
The charter required a reserve of one third of
the deposits as an available fund for immediate
use. This was to be kept in the bank or on deposit
 in other banks. But after the amendment
of the charter in 1870 the actuary, counselled
by the finance committee, used this fund for
general banking purposes, and soon had the
whole of it tied up in miscellaneous loans and
investments of poor character. It was said later
that no paper was so worthless that it would not
pass at the Freedmen’s Bank if it had some
trustee or friend of a trustee behind it. Loans
were made on individual notes endorsed by trustees
 who had no deposits in the bank and no
property in sight and who under the law should
not have endorsed any paper accepted by the
bank.
An example of trustee action in regard to loans
may be seen in the case of Zalmon Richards, a
trustee, who had an accommodating custom of
endorsing the notes of borrowers, and who was
finally ruined because of this practice. After the
failure of the bank, Richards came before the
Congressional investigating committee to testify
about conditions. Richards did not know anything
 about the business of the bank or the requirements
 of its charter, yet he had been a
prominent trustee. The following extract from
his testimony will serve to illustrate his com-3
 Bruce Report, p. 161; Douglas Report, p. 77.