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 de- 
posit 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 trus- 
tees 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 any- 
thing about the business of the bank or the re- 
quirements 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.