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his own, he could offset it against a private debt due the bank.

27a. Public deposits should always be carried as such, both for the protection of the bank and its creditors, and for the protection of the officer.

27b. It has been held that where a public officer is prohibited by statute from "loaning" the public funds, he will not be liable for a violation of the statute if he deposits the money in bank, even though at interest, provided the money is always subject to his order. Baker v. Williams & England Banking Co., 70 Pac., 711, 42 Oregon, 213. If it is made unlawful by statute for him to deposit the money in bank or in any but designated banks, and a bank not authorized receives a deposit from him, the bank will be liable to the State as a trustee with funds of the public, and the amount can be recovered in full. Brown v. Sheldon State Bank (Iowa) 117, N. W., 289. If the bank be insolvent, however, only so much as can be traced can be recovered in full, and the government is creditor for the balance. Commissioners of Crawford County v. Strawn, 157 Fed., 49.

28. There is nothing in the laws relating to national banks which will prevent a national bank from becoming the depositary for State, county or city moneys. The question is whether the laws of the State allow or prevent deposits in national banks. Bank v. Ferguson, 48 Kan., 732.

29. Public Moneys of the United States-The Revised Statutes of the United States provide as follows:

Sec. 3620.

"It shall be the duty of every disbursing officer having any public money intrusted to him for disbursement to deposit the same with the Treasurer or some one of the assistant treasurers of the United States, and to draw from the same only as it may be required for payments to be made by him in pursuance of law; and draw from the same only in favor of the persons to whom payment is made,

and all transfers from the Treasurer of the United States to a dis. bursing officer shall be by draft or warrant on the Treasurer or assistant treasurer of the United States. In places, however, where there is no Treasurer or assistant treasurer, the Secretary of the Treasury may, when he deems it essential to the public interest, specially authorize in writing the deposit of such public money in any other public depository, or, in writing, authorize the same to be kept in any other manner and under such rules and regulations as he may deem most safe and effectual to facilitate the payments to public creditors."

It will be noted that the above section permits the Secretary of the Treasury to authorize deposits in other public depositaries in places where there is no Treasurer or Assistant Treasurer. These depositaries must have been previously designated by the Secretary of the Treasury as provided by Sec. 5153 of the Revised Statutes of the United States, as amended by the act of March 4, 1907:

"All national banking associations, designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the Government; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the Government, as may be required of them. The Secretary of the Treasury shall require the associations thus designated to give satisfactory security, by the deposit of United States bonds and otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government: Provided, That the Secretary shall, on or before the first of January of each year, make a public statement of the securities required during that year for such deposits. And every association so designated as receiver or depositary of the public money shall take and receive at par all of the national currency bills, by whatever association issued, which have been paid into the Government for internal revenue, or for loans or stocks: Provided, That the Secretary of the Treasury shall distribute the deposits herein provided for, as far as practicable, equitably between the different States and sections."

30. The regulations of the Treasury Department provide, under the statutes, how public deposits shall be received and kept. Any national bank desiring to be designated should write to the Secretary of the Treasury

for information as to how it should proceed to be designated and authorized to act as a public depositary. The Treasury Department furnishes no forms for application, but if an application is received by the Department the applicant will be advised whether it is worth while seeking designation. Local necessity for such depositary and the political and public backing count for much. designated full instructions will be furnished.

If

31. Since the act of May 30, 1908, national banks acting as depositaries must pay at least 1% interest on public deposits.

Sec. 15, Act of May 30, 1908:

"That all national banking association designated as regular depositaries of public money shall pay upon all special and additional deposits made by the Secretary of the Treasury in such depositaries, and all such associations designated as temporary depositaries of public money shall pay upon all sums of public money deposited in such associations interest at such rate as the Secretary of the Treasury may prescribe, not less, however, than one per centum per annum upon the average monthly amount of such deposits: Provided, however, That nothing contained in this Act shall be construed to change or modify the obligation of any association or any of its officers for the safe keeping of public money: Provided further, that the rate of interest charged upon such deposits shall be equal and uniform throughout the United States."

32. Deposits By Certain Postmasters-Section 3847 of the Revised Statutes of the United States provides that:

"Any postmaster, having public money belonging to the Government, at an office within a county where there are no designated depositaries, treasurers of mints, or Treasurer or assistant treasurers of the United States may deposit the same, at his own risk and in his official capacity, in any national bank in the town, city, or county where the said postmaster resides; but no authority or permission is or shall be given for the demand or receipt by the postmaster, or any other person, of interest, directly or indirectly, on any deposit made as herein described; and every postmaster who makes any such deposit shall report quarterly to the Postmaster-General the name of the bank where such deposits have been made, and also state the amount which may stand at the time to his credit."

33. Where a postmaster has funds thus deposited they

are at his own risk. If the bank fails the Post Office Department looks to the postmaster for payment, though he must carry the account not as an individual personal account, but as "Postmaster." "Postmaster." Neither the United States nor the postmaster can claim payment in full before other creditors are paid by the receiver. While the bank is liable if it permits the postmaster to make an improper use of the money, yet, if the bank fails, there is no "trust fund" which must be paid before other creditors, unless the money can be followed into the hands of the receiver. If the bank has given security for the deposit the security can be sold and the Government make a claim also for the amount of the deposit, as a general creditor. It may be that the amount realized from the security, together with pro rata dividends on the full amount of the deposit, will more than pay the claim, in which event any excess must be returned; but if the security does not bring sufficient to pay the claim, for the balance, the Government, like any other creditor, must rely upon the dividends for payment. And the United States is not a preferred creditor on any claim it may have. Cook Co. Nat'l Bank v. U. S., 107 U. S., 445. But a lien attaches on all the assets of a national bank until the circulating notes are paid or provided for.

If the postmaster settles with the government he has himself a claim against the bank and in that event, being himself a creditor of the bank, he could offset this claim against any debt he personally owed the bank. Until he has settled with the Post Office Department, however, the United States has the right to the dividends on the deposit.

Note that this section deals with postmasters within a county where there are no designated depositaries, treasurers of mints, or Treasurer or assistant treasurers of the United States. On these deposits the postmaster

and every other person is forbidden to demand or receive interest.

34. The only other sections of the Revised Statutes which it is necessary for us to notice here, as relating to public moneys of the United States, are Sections 4046, 5488 and 5497:

Penalty for Misapplication of Money Order FundsSec. 4046:

"Every postmaster, assistant, clerk, or other person employed in or connected with the business or operations of any money-order office who converts to his own use, in any way whatever, or loans, or deposits in any bank, except as authorized by this Title, or exchanges for other funds, any portion of the money-order funds, shall be deemed guilty of embezzlement, and any such person, as well as every other person advising or participating therein, shall, for every such offense, be imprisoned for not less than six months nor more than ten years, and be fined in a sum equal to the amount embezzled; and any failure to pay over or produce any money-order funds intrusted to such person shall be taken to be prima facie evidence of embezzlement; and upon the trial of any indictment against any person for such embezzlement it shall be prima facie evidence of a balance against him to produce a transcript from the money-order account books of the Sixth Auditor. But nothing herein contained shall be construed to prohibit any postmaster depositing, under the direction of the Postmaster-General, in a national bank designated by the Secretary of the Treasury for that purpose, to his own credit as postmaster, any money-order or other funds in his charge, nor prevent his negotiating drafts or other evidences of debt through such bank, or through United States disbursing officer, or otherwise, when instructed or required to do so by the Postmaster-General for the purpose of remitting surplus moneyorder funds from one post-office to another, to be used in payment of money-orders. Disbursing officers of the United States shall issue, under regulations to be prescribed by the Secretary of the Treasury, duplicates of lost checks drawn by them in favor of any postmaster on account of money-order or other public funds received by them from some other postmaster."

35. Unauthorized Deposit of Public Money-Sec. 5488.

"Every disbursing officer of the United States who deposits any public money intrusted to him in any place or in any manner, except as authorized by law, or converts to his own use in any way whatever, or loans with or without interest, or for any purpose not prescribed by law withdraws from the Treasurer or any assistant treasurer, or any authorized depositary, or for any

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