Gale Encyclopedia Of American Law 3Rd Edition Volume 1 P53 docx

gave something in exchange for the forged check. If the depositor’s NEGLIGENCE was a factor in the forgery, the bank can be excused from the liability. A bank is also responsible for determining the genuineness of the endorsement when a deposi- tor presents a check for payment. A bank is liable if it pays a check that has been materially altered, unless the alteration was due to the drawer’sfault or negligence. If a bank pays a check that has a forged endorsement, it is liable for the loss if it is promptly notified by the customer. In both cases, the bank is entitled to recover the amount of its loss from the thief or forger. A drawee bank that is ordered to pay a check drawn on it is usually not entitled to recover payment it has made on a forged check. If, however, the drawee bank can demonstrate that the collecting bank was negligent in its collection duties, the drawee bank may be able to establish a right of recovery. A bank can also be liable for the wrongful dishonor or refusal to pay of a check that it has certified, because by definition of certification it has agreed to become absolutely liable to the payee or holder of the check. If a bank has paid a check that has been properly revoked by its drawer, it must reimburse the drawer for the loss. Drawer Liabilities A drawer who writes a check for an amount greater than the funds on deposit in his or her checking account is liable to the bank. Such a check, called an overdraft, sometimes results in a loan from the bank to the drawer’s account for the amount by which the account is deficient, depending on the terms of the account. In this case, the drawer must repay the bank the amount lent plus interest. The bank can also dec ide not to provide the deficient funds and can refuse to pay the check, in which case the check is considered “bounced.” The drawer then becomes liable to the bank for a handling fee for the check, as well as remaining liable to the payee or subsequent holder of the check for the amount due. Many times, the holder of a returned, or bounced, check will impose another fee on the drawer. Loans and Discounts A major function of a bank is the issuance of loans to applicants who meet certain qualifications. In a loan transaction, the bank and the debtor execute a PROMISSORY NOTE and a separate agreement in which the terms and conditions of the loan are detailed. The interest charged on the amount lent can differ based on many variables. One variable is a benchmark interest rate established by the Federal Reserve Bank Board of Gover- nors, also known as the prim e rate, at the time the loan is made. Another variable is the length of repayment. The collateral provided to secure the loan, in case the borrower defaults, can also affect the interest rate. In any case, the interes t rate must not exceed that permitted by law. The loan must be repaid according to the terms specified in the loan agreement. In case of default, the agreement determines the proce- dures to be followed. Banks also purchase commercial papers, which are commercial loans, at a discount from creditors who have entered into long-term contracts with debtors. A creditor sells a COMMER- CIAL PAPER to a bank for less than its face value because it seeks immediate payment. The bank profits from the difference between the discount price it paid and the face value of the bond, which it will receive when the debtor has finished repaying the loan. Types of commercial paper are educational loans and home mortgages. Electronic Banking Many banks are replacing traditional checks and deposit slips with electronic fund transfer (EFT) systems, which use sophisticated computer tech- nology to facilitate banking and payment needs. Routine banking by means of EFT is considered safer, easier, and more convenient for customers. Many types of EFT systems are available, including automated teller machines; pay-by- phone systems; automatic deposits of regularly received checks such as paychecks; automated payment of recurring bills; point-of-sale transfers or debit cards, where a customer gives a merchant a card and the amount is automatically trans- ferred from the customer’s account; and transfer and payment by customers’ home computers. When an EFT service is arranged, the cus- tomer receives an EFT card that activates the system and the bank is legally required to disclose the terms and conditions of the ac- count. These terms and conditions include the customer’s liability and the notification process to follow if an EFT card is lost or stolen; the type of transactions in which a customer can take part; the procedure for correction of errors; and the extent of information that can be disclosed to a third party witho ut improper GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 508 BANKS AND BANKING infringement on the customer’s privacy. If a bank is planning to change the terms of an account—for e xample, b y i mposing a fee for trans- actions previously conducted free of charge—the customer must receive written notice before the change goes into effect. Banks must send account statements for EFT transactions on a monthly basis. The statements must have the amount, date, and type of trans- action; the customer’s account number; the account’s opening and closing balances; charges for the transfers or for continuation of the service; and an address and telephone number for referral of account questions or mistakes. EFT transactions have become a highly competitive area of banking, with banks offering various bonuses such as no fee for the use of a card when the account holder meets certain provisions such as maintaining a minimum balance. Also, the rapid growth of personal and home office computing has increased pressure on banks to provide services online. Several computer soft- ware companies produce technology that can complete many routine banking services, such as automatic bill paying, at a customer’shome. Banks have a wide range of options available for notifying a customer that a check has been directly deposited into her or his account. If a customer has arranged for automatic payment of regularly recurring bills such as mortgage or utility bills, the customer has a limited period of time, usually up to three days before the payment is made, in which to order the bank to stop payment. When the amounts of such bills vary, as with utility bills, the bank must notify the customer of the payment date in sufficient time so that there is enough funds in the account to cover the debt. If the customer discovers a mistake in an account, the bank must be notified orally or in writing after the erroneous statement is re- ceived. The bank must investigate the claim. Often, after several days, the customer’s account will be temporarily recredited with the disputed amount. After the investigation is complete, the bank is required to notify the customer in writing if it concludes that no error occurred. It must provide copies of its decision and explain how it reached its findings. Then the customer must return the amount of the error if it was recredited to his or her account. A customer is liable if an unauthorized transfer is made because an EFT card or other device is stolen, lost, or used without permission. This liability can be limited if the customer notifies the bank within two business days of the discovery of the misdeed; it is extended to $500 if the customer fails to comply with the notice requirement. A customer can assume unlimited liability if she or he fails to report any unautho- rized charges to an account within a specified period after receiving the monthly statement. A cust omer is entitled to sue a bank for COMPENSATORY DAMAGES caused by the bank’s wrongful failure to perform the terms and conditions of an EFT account, such as refusing to pay a charge if the customer’s account has more than adequate funds to do so. The customer can also recov er a maximum penalty of $1,000, attorneys’ fees, and costs in an action based upon violation of this law. The expansion of the INTERNET in the mid- 1990s allowed banks to offer many more electronic services to their customers. Although this form of business with banks is certainly convenient, it has caused a considerable concern regarding the security of transactions conducted in this manner. Although laws designed to prevent FRAUD in traditional banking also apply to electronic banking, identifying individuals engaged in fraud can be more difficult where electronic transactions are concerned. On the federal level, the Electronic Funds Transfers Act, 15 U.S.C.A. §§ 1693a et seq., provides protection to consumers who are the subject of an unautho- rized electronic funds transfer. The Gramm-Leach-Bliley Financial Modern- ization Act, PL 106-102 (S 900) November 12, 1999, also modified federal statutory provisions related to electronic banking. Under this act, banks must disclose the fees they charge for use of their automated teller machines. If the consumer is not provided with proper fee disclosure, an ATM operator cannot impose a service fee concerning any electronic fund transfer initiated by the consumer. Furthermore, the act requires that possible fees be disclosed to a consumer when an ATM card is issued. Interstate Banking and Branching In late 1994 the 103d Congress authorized significant reforms to interstate banking and branching law. The Interstate Banking Law (Pub. L. No. 103-328), also referred to as the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, provided the banking GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BANKS AND BANKING 509 industry with major legislative changes. The Interstate Banking Act was expected to acceler- ate the trend of bank mergers. These mergers are a benefit to the nation’s largest banks, which were expected to see savings of millions of dollars resulting from streamli ning. FURTHER READINGS Adler, Joseph. 1995. “Banking without Glass-Steagall? Look Overseas.” American Banking Association Journal (May). Bunditz, Mark. 2006. Consumer Banking and Payments Law. Boston: National Computer Law Center. The Bank Bailout Plan of 2008 S ince the creation of the Federal Reserve System in 1913, the U.S. government has played a significant role in regulating banks and promoting the stability of the financial sector. Besides overseeing the activities of banks, the government created the FEDERAL DEPOSIT INSURANCE CORPORATION , which insures the money of depositors. However, the credit squeeze of 2008 and the accompanying collapse of major banks and other financial instructions led to what has been called “the bank bailout plan.” Congress enacted and President GEORGE W . BUSH signed the Emergency Economic Stabilization Act of 2008 (EESA), Pub. L. 110-334. EESA established a program called the Troubled Asset Relief Program (TARP), which gave the TREASURY DEPART- MENT the authority to purchase or insure up to $700 billion of troubled assets. By the end of 2009, many of the affected banks had regained their financial foot- ing and were paying back the TARPP funds to the Treasury. Despite this ap- parent success, critics of TARP argued that it had overpaid for the troubled assets. Moreover, the Obama adminis- tration had failed to make meaningful reforms of the financial industry. The source of the 2008 financial meltdown, which government officials claimed almost brought the U.S. and world economies to collapse, was the decision by the FEDERAL RESERVE BOARD following September 11, 2001, to lower interest rates on the money it lends major banks. The U.S. economy had slipped into a mild recession following the terrorist attacks, and the Fed hoped to stimulate it by making money more available. The Fed’s hopes came true when the cheap money led to low home-mortgage rates. Low interest rates, combined with sub-prime, adjustable mortgages, allowed individuals who could never qualify for financing to own a home. Many indivi- duals bought houses with little or no down payments and bought houses that were more than they could truly afford. The subprime mortgages in turn were pack- aged and “securitized” by investment banks; mortgage-backed SECURITIES be- came lucrative financial instruments, though the worth of them was tied to the ability of homeowners to make their payments. The dramatic growth in the value of homes suggested to some economists that the United States was experiencing a REAL ESTATE bubble rather than a period of solid, sustained expansion. They feared thatanytypeofeconomiccontraction would lead to higher interest rates for subprime adjustable MORTGAGE holders and a high number of home foreclosures. As the economy started to tighten in 2006, the fears of these economists began to be realized. Many new homeowners could not pay skyrocketing monthly payments and foreclosures increased. Even long- time homeowners were affected because they had refinanced their homes for the low interest rates but took adjustable rate rather than fixed rate mortgages. Des- pite these signs, banks continued to sell these risky mortgages and financial products. When investment bank Bear Stearns moved towards BANKRUPTCY in early 2008 because of the shrinking value of the mortgage-backed securities, the Federal Reserve stepped in, assumed $30 billion of its debts and forced a sale of the bank to JPMorgan Chase for a price that was less than the value of the Bear Stearns’ Manhattan skyscraper. In August the federally sponsored entities Freddie Mac and Fannie Mae raced towards insol- vency. Freddie and Fannie were central to the U.S housing market, holding mort- gages that diminished in value every day. On Sep tember 7, the Treasury Department took control of both entities. The long-respected investment bank Lehman Brothers was next. Unlike Bear Stearns, the government refused to step in, forcing it into bankruptcy on Septem- ber 12. On September 16, the American International Group (AIG), one of the world’s largest insurance companies, re- vealed it was teetering on financial ruin. AIG had insured risky securities that were tied to securitized mortgages. The federal government feared that if AIG col- lapsed, it would produce a domino effect as banks that had insured its securitized mortgages would be left with toxic assets that had little value. The government essentially bought AIG for $85 billion. As these events unfolded, the STOCK MARKET dropped almost 500 points and individuals withdrew about $140 billion from their money-market funds, sparking fears that there would be a run on the banks. On September 18, Treasury Secretary Henry Paulson, a former Wall Street investment banker, announced a three- page, $700 billion proposal to bail out the banks. He proposed that the govern- ment buy the toxic assets from the largest banks, which could stabilize their finan- cial position. Members of Congress were skeptical, in part because the three-page GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 510 BANKS AND BANKING Carnell, Richard Scott, Jonathan R. Macey, and Geoffrey P. Miller. 2006. The Law of Banking and Financial Institutions. New York: Aspen. Farrell, Cathlyn. 2008. Law and Banking. Washington, D.C.: American Bankers Association. Lovett, William A. 2005. Banking and Financial Institutions Law in a Nutshell. St. Paul: West. Timberlake, Richard H., Jr. 1993. Monetary Policy in the United States: An Intellectual and Institutional History. Chicago: University of Chicago Press. CROSS REFERENCES Bank of the United States; Federal Deposit Insurance Corpora- tion; Federal Reserve Board; Glass-Steagall Act; Securities. proposal was scant on details and gave Paulson total, unreviewable control over how he spent the $700 billion. Because these events occurred during the 2008 presidential campaign, politics also fac- tored into the debate on the proposal. On September 29, the House of Repre- sentatives voted down a modified version of Paulson’s plan. The stock market lost nearly 9 percent of its value after the vote was taken, the worst decline since 1987. Congress took note of Wall Street’s reaction and reached a compromise. The House passed the bill on October 3 and sent EESA to President Bush for signing. As the United States began to confront its problems, the banks of Europe and Asia were forced to deal with the crisis as it played out around the world. The TARP program was set up to handle the disbursement of the $700 billion. The law defined “troubled assets” to include residential or commercial mort- gages and any “securities, obligations, or other instruments that are based on or related to such mortgages” originated or issued before March 14, 2008. The secu- ritized mortgages clearly were the prime “toxic assets” that burdened the balance sheets of the major banks. EESA released $250 billion to the Treasury immediately, with the president authorized to release $100 billion more. For the remaining $350 billion, the Treasury had to notify Congress of its intent to use the money. Congress had 15 days to pass a resolution denying the Treasury the authority to do so. Paulson originally intended to hold AUCTIONS for the trouble assets but finally decided it would be better for the gov- ernment to loan the money. TARP man- dated that the Treasury receive non-voting stock f rom the banks in return for the TARP funds. Congress also was outraged at the enormous bonuses paid to bank execu- tives for acquiring these toxic assets. The TARP contained language that banned banks that a ccepted TARP money from offering incentives that encouraged “un- necessary and excessive risks” to its top executives. For senior executives hired in the future, the banks were banned from offering lucrative SEVERANCE packages. TARP also was intended to help homeowners avoid FORECLOSURE. The Treasury was required to set up a program to achieve this objective but details were sketchy. Secretary Paulson had no interest in implementing this provision, telling Congress that TARP “was not intended to be an economic stimulus or an economic recovery pack- age.” Congress was concerned with how the Treasury would run TARP, so it established the Financial Stability Over- sight Board and a Congressional Over- sight Panel. A February 2009 report from the panel claimed that the government had greatly overpaid for the toxic assets. It had paid $254 billion for assets valued at $176 billon. As TARP got off the ground, the U.S economy had taken a drubbing. It is estimated that $8 trillion of wealth was wiped out in the stock when measured from its highest point in the decade. Though TARP did stabilize the problem banks (nine banks took TARP money in return for stock), it was rumored that the incoming Obama administration might nationalize some of the troubled banks. That was not the case. Instead, Treasury secretary Timothy Geithner, who as head of the Federal Reserve Bank of New York played a key role in the fall 2008 with the bailout program, announced that it would perform “stress tests” on the 19 largest U.S. banks. The government wanted to know whether the banks were sufficiently capitalized to weather more declines in the economy. The results of the tests were promising. Ten of the 19 banks needed additional capital totaling $75 billion. Starting in March 2009, some of the banks returned to profitability. Then in June, 10 banks were allowed to return their portion of the $700 billon TARP funds. They paid back to the government a total of $68 billion. The zeal with which the banks returned the money was primarily based on extricating them from government oversight and restrictions on executive pay. By September, Geithner reported to Congress that the TARP program was winding down and that more banks would likely repay their bailout funds. Though the bank bailout appeared to be successful in stabilizing the largest banks, financial reform regu- lation legislation was having a slow and difficult journey through Congress. Moreover, though the public came to the rescue of these private banks, credit remained tight in late 2009 for businesses and individuals alike. FURTHER READINGS Gasparino, Charles. 2009. The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System. New York: HarperBusiness. Goodman, Peter. 2008. “Taking Hard New Look at a Greenspan Legacy.” New York Times. October 8. Morris, Charles. 2009. The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. New York: Public Affairs. Phillips, Kevin. 2008. Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. New York: Viking. Sorkin, Andrew Ross. 2009. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves. New York: Viking. Varchaver, Nicholas, and Katie Benner. 2008. “The $55 Trillion Question.” Fortune. September 30. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BANKS AND BANKING 511 v BANKS, DENNIS J. Native American activist, organizer, and protest leader Dennis Banks (Nowacumig) helped found the influential AMERICAN INDIAN MOVEMENT (AIM). Under his passionate leadership in the late 1960s and early 1970s, AIM championed Native Ameri- can self-sufficiency, traditions, and values. How- ever, its demand for federal recognition of century-old treaty rights led to violent clashes with authorities, and the FEDERAL BUREAU OF INVESTIGATION (FBI) branded AIM an extremist group. In turn, illegal actions by the FBI led to Banks’s acquittal on charges stemming from his role in AIM’s occupation of Wounded Knee, South Dakota, in 1973. While heightening nation- al awareness of Native American issues, Banks faced prosecution several times. He spent nearly a decade as a criminal fugitive, receiving a form of political ASYLUM in California from then governor Jerry Brown before surrendering in 1984 and serving a shortened prison term. Since 1978, Banks has led a Native American spiritual organization in Kentucky called Sacred Run. Banks was born April 12, 1937, in Leech Lake, Minnesota. His difficult early life began during one of many periods of upheaval in federal policy regarding Native Americans. Like many Anishinabe Ojibwa, or Chip pewa, chil- dren, he was sent at the age of five to schools operated by the federal Bureau of Indian Affairs (BIA), and he spent part of his childhood being shuttled between boarding schools in North and South Dakota. The BIA mana ged such schools in accordance with a landmark change in federal policy kno wn as the Indian Reorganiza- tion Ac t of 1934 (25 U.S.C.A. § 461 et seq.). Under the terms of this so-called NEW DEAL for Indians—a plan for tribal government that many traditional Native Americans had resisted—schools were to have been improved over those in previous decades that sought to Christianize or “civilize” their pupils. But the schools still deemphasized Native American culture by forbidding the speaking of the Ojibwa language, Lakota. Thus, like many of his generation, Banks lost his nativ e tongue. At the age of 16, Banks joined the U.S. Air Force and served in Japan. Discharged in the late 1950s, he returned to Minnesota, where he faced the same problems as young Native American men continued to face in the 1990s and the 2000s: alienation from his culture, Dennis Banks. AP PHOTOS. ▼▼ ▼▼ Dennis Banks 1937– 1930 2000 1975 1950 ◆◆◆◆◆ ◆ ❖ Indian Reorganization Act of 1934 1937 Born, Leech Lake, Minn. 1939–45 World War II 1950–53 Korean War 1953–59 Served in U.S. Air Force 1961–73 Vietnam War 1968 Founded American Indian Movement (AIM) with Clyde Bellecourt 1969–71 Occupation of Alcatraz Island by AIM members 1966 Convicted for buglary, sent to Stillwater State Prison 1973 Riot at Custer County courthouse; AIM takeover of Wounded Knee 1978 Formed Sacred Run, a Native American spiritual organization 1975–83 Lived as criminal fugitive; given political asylum in California 1984–85 Served sentence for 1973 riot 1992 Appeared as Mohawk warrior in the film The Last of the Mohicans ◆ 2004 Ojibwa Warrior published GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 512 BANKS, DENNIS J. unemployment, poverty, alcoholism, and crime. “I was heading down a road that was filled with wine, whiskey and booze,” Banks later recalled. “Then I landed in prison.” In 1966 he was convicted for burglarizing a grocery store and began serving 31 months of a three-and-a-half- year sentence in Stillwater State Penitentiary, in Minnesota. In prison, Banks met fellow convict Clyde Bellecourt, also an Ojibwa. The two men and others founded AIM in July 1968 with several goals in mind. They wanted to address the problems that beset their people and find solutions to basic needs such as housing and employment. To help Native Americans live successfully off reservations, they would start so-called survival schools. But fundamentally, they wanted to preserve their vanishing culture. AIM’s emblem was an upside-down U.S. flag, what Banks called the international distress signal for people in trouble. When the first AIM chapter started in Minneapolis in 1968, Banks would often use a police radio to guide him to the scene when officers were arresting Native Americans. Intending to prevent police abuses, he was frequently arrested on charges of interference. This kind of tough, streetwise advo cacy helped spread the movement, making Banks, Belle- court, and another AIM leader, Russell Means, heroes to many of their generation. Over the next four years, the movement spread to all 50 states and to Canada. The organization’s political message had widespread appeal for Native Americans who felt betrayed by the federal government’s Indian Reorganiza- tion Act. Not only was this new deal perceived as no deal, but many believed that it opened the way for massive federal land grabs of Indian territory on which valuable minerals were located. Banks and his fellow leaders decided to reclaim former Indian territory, announcing that they would symbolically “retake the country from west to east” like the “wagon train in reverse.” The militancy of their claims was soon demonstrated. In its first act of protest, on November 4, 1969, AIM seized the abandoned federal prison on Alcatraz Island, in San Francisco Bay, California. Two hundred acti- vists claimed the island as free Indian land and demanded that an educational and cultural center be established there. In ironic press statements, they announced the establishment of a Bureau of Caucasian Affairs and offered to pay the U.S. government $24, in mockery of the 1626 purchase of Manhattan Island from Indians by Dutch settlers. The occupation, which lasted 19 months, stirred up considerable publicity. The U.S. House of Representatives passed a JOINT RESOLUTION directing President RICHARD M. NIXON to negotiate with the activists, but his administration’s offer to build a park on the island was laughed off. U.S. marshals ultimately arrested the activists still on the island in June 1971. In April 1971 Banks led several AIM members in a week-long takeover of the Fort Snelling Military Base, in St. Paul. Seizing an abandoned building, the group announced that it intended to start an Indian survival school there. Senator Walter F. Mondale agreed to negotiate with Banks, but before he could, a federal Special WEAPONS and Tactics (SWAT) unit arrested the protesters. Around the United States, other occupations of government property took place as AIM chapters demonstrated against broken treaties. As a white backlash against the protests began, several Indians were beaten or shot. Charges of MAN- SLAUGHTER brought against white attackers usually ended in acquittal, inflaming the Indian move- ment. It maintained that little or no help was forthcoming from the BIA or the FBI. In response, car caravans converged on Washington, D.C., on November 2, 1972, in a protest rally dubbed the Trail of Broken Treaties. AIM presented a 20-point proposal demanding that the government revamp the BIA, recognize Indian sovereignty, restore the power of Indians to negotiate treaties, and create a review board to study treaty violations. A group of 400 protesters seized the BIA building; clashed with riot squads; and, renaming the facility the Native American Embassy, ransacked files that Banks said con- tained evidence of federal mistreatment of Indians. Banks told reporters, “We are trying to bring about some meaningful change for the Indian community. If this is the only action that will bring change, then you can count on demons- trations like this 365 days a year.” On November 6, the Nixon White House agreed to negotiate. After two days, Banks’s followers departed in return for the appointment of a special panel to investi- gate conditions on Indian reservations. But within a wee k after the takeover, federal funding was cut offforthreeofAIM’s survival schools. In early 1973, a turning point occurred in Banks’s life and the direction of AIM. On WHAT WE HAVE DONE , WE DID FOR THE SEVENTH GENERATION TO COME . WE DID NOT DO THESE THINGS FOR OURSELVES [ BUT] SO THAT THE SEVENTH GENERATION MAY BE BORN FREE . —DENNIS BANKS GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BANKS, DENNIS J. 513 February 6, he led an AIM protest 200 strong in Custer, South Dakota , after a white man accused of killing an Indian in a barroom brawl was charged with INVOLUNTARY MANSLAUGHTER. Banks met with local officials, but when the slain man’s mother, Sarah Bad Heart Bull, tried to enter the courthouse, she and other Native Americans were beaten by the police. A riot ensued, in which AIM members set fire to police cars and the chamber of commerce office. For his role in the Custer incident, Banks was charged with ARSON, BURGLARY, and mali- cious damage to a public building, all of which he denied. But his radicalization was complete. “We had reached a point in history where we could not tolerate the abuse any longer,” Banks later explained, “where mothers could not tolerate the mistreatment that goes on on the reservations any longer, they could not see another Indian youngster die.” Three weeks later, Banks, Means, and other AIM members took over the town of Wounded Knee on the Pine Ridge Reservation in South Dakota. For Native Americans, the town has a bitter place in history: it is the site where, in 1890, 300 unarmed Sioux men, women, and children were massacred by the Seventh Cavalry of the U.S. Army. Banks and Means hoped to invoke this symbolism by seizing the town by armed force and issuing new demands. They wanted the federal government to investigate the BIA and to address treaty violations, and they denounced recent tribal elections as corrupt manipulations by white U.S . citizens. As national attention focused on the growing army of some three hundred FBI agents and U.S. marshals, and the armored personnel car- riers surrounding the militants’ fortifications, gunfire was frequ ently exchanged. Over 71 days, while the government ordered surrender without AMNESTY, the town was held. “We laid down our weapons at Wounded Knee,” Banks told the press from within the stronghold, recalling the 1890 massacre. “Those weapons weren’t just bows and guns, but also a sense of pride.” The takeover ended on May 9, 1973. Penta- gon documents later revealed that the U.S. Army had readied a vast military arsenal to clear out AIM members, including more than 170,000 rounds of ammunition, grenade launchers, explosives, gas, helicopters, and jets. In the end, however, casualties were limited: two Native Americans were killed and several wounded; three members of the government forces were wounded, including one agent who was para- lyzed. As a condition of surrendering, AIM was once again promised a federal investigation of its demands, but none was forthcoming. Banks and Means were prosecuted on ten felony counts each in a dramatic eight-month trial in St. Paul, during which federal marshals used mace on courtroom spectators. The defendants alleged that their takeover of Wounded Knee was justified by the govern- ment’s violations of the 1868 Treaty of Fort Laramie—a pact in which the Sioux Indians had been promised government protection for ending their armed resistance. But the case against Means and Banks foundered on revela- tions that the FBI had used illegal wiretaps and had chan ged documents, among other illegal- ities, in mounting its prosecution. On Septem- ber 16, 1974, all charges were dismissed. Although Banks acted as a negotiator during the mid-1970s, settling disputes between Native Americans and authorities, other aspects of his life soon changed for the worse. In July 1975 a South Dakota jury convicted him on charges of riot and assault with a deadly weapon for his role in the 1973 riot at the Custer County Courthouse. The conviction carried a maxi- mum sentence of 15 years in prison. Before sentencing, Banks heard prison guards say he would not last 20 minutes in the South Dakota State Penitentiary. He fled , only to be arrested by FBI agents on January 23, 1976, in northern California. A massive petition movement sup- ported by the actors Jane Fonda and Marlon Brando appealed to Governor Brown on Banks’s behalf. Brown reduced Banks’s bail, refused EXTRADITION requests from South Dakota, and informed authorities there that he was protect- ing Banks because of sworn statements that Banks’s life would be endangered if he were imprisoned. Banks lived freely in California, serving as chancellor of the two-year Indian college Deganawidah-Quetzalcoatl University, until the 1983 inauguration of Republican gover- nor George Deukmejian ended his asylum. Banks then took sanctuary on the Onondaga Reservation in New York. Because reservations in the state are not under federal jurisdiction, the FBI chose not to arrest him as long as he remained there. After nine years as a fugitive, Banks gave himself up to state authorities in South Dakota in fall 1984. His request for clemency was denied, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 514 BANKS, DENNIS J. and he was sentenced to three years in prison. After his PAROLE on December 9, 1985, he spent time on the Pine Ridge Reservation, where, through his success at persuading Honeywell and other companies to locate factories there, employment doubled. But his legal troubles continued. Banks had been charged with illegal POSSESSION of dynamite stemming from the 1975 arrest of his wife, Kamook Nichols. A lower court dismissed the charges in 1983 on the ground that Banks and three other defendants had been denied their SIXTH AMENDMENT right to a SPEEDY TRIAL , and a second federal court upheld the ruling. But on January 21, 1986, the members of the U.S. Supreme Court, in a 5–4 vote, held that their rights had not been violated, because they were free without bail and not under indictment during the 90-month delay in their prosecution. Banks pleaded guilty on March 8, 1988, and received five years’ probation. Also in 1988, Banks’s autobiography Sacred Soul was published. In 1994 Banks led the four-month “Walk for Justice.” The purpose of the trek from Alcatraz Island in San Francisco to Washington, D.C., was to publicize current issues regarding Native Americans. Banks continued to serve as director of Sacred Run, an organization he founded in 1978 to address Native American spiritual concerns. Since then the Run has become an international, multicultural event that carries the message of the sacredness of life and of humankind’s relationship to the earth. By 1996 Banks had led runners over 58,000 miles through the United States, Canada, Europe, Japan, Australia, and New Zealand. Banks has had roles in movies including War Party, The Last of the Mohicans, and Thunderheart. A musical cassette, Still Strong, featuring Banks’s original work as well as traditional Native American songs, was com- pleted in 1993 and a music video with the same name was released in 1995. As of 2009, Banks continues working toward the release of Leonard Peltier. Peltier, an Ojibwa whom Banks considers to be a political prisoner, was convicted in 1977 of the MURDER of two FBI agents during a gunfight in Oglala, North Dakota. In addition to supporting the Peltier defense and other issues concerning Native Americans, Banks sits on the board of directors for the Nowa Cumig Institute and travels and lectures in the United States and abroad. FURTHER READINGS Banks, Dennis J., with Richard Erdoes. 2004. Ojibwa Warrior: Dennis Banks and the Rise of the American Indian Movement. Norman, Oklahoma: University of Oklahoma Press. Churchill, Ward. 1988. Agents of Repression: The FBI’s Secret Wars against the Black Panther Party and the American Indian Movement. Boston: South End Press. Sayer, John William. 1997. Ghost Dancing the Law: The Wounded Knee Trials. Cambridge: Harvard Univ. Press. Smith, Paul, and Robert Warrior. 1997. Like a Hurricane: The Indian Movement from Alcatraz to Wounded Knee. New York: New Press. Weyler, Rex. 1982. Blood of the Land: The Government and Corporate War against the American Indian Movement. New York: Everest House. CROSS REFERENCE Native American Rights. BAR ASSOCIATION An organization of lawyers established to promote professional competence, enforce standards of ethical conduct, and encourage a spirit of public service among members of the legal profession. The mission of a bar association is fre- quently described in the words of ROSCOE POUND, legal scholar and dean of Harvard Law School from 1916 to 1936: “[To] promote and maintain the PRACTICE OF LAW as a profession, that is, as a learned art pursued in the spirit of a public service—in the spirit of a service of furthering the administration of justice through and according to law.” Bar associations accomplish these objectives by offering continuing education for lawyers in the form of publications and seminars. This education includes instruction on recent devel- opments in the law and managing a law practice successfully as a business. Bar associations en- courage members to offer PRO BONO legal services (to provide legal services at no cost to members of society who cannot afford them). The asso- ciations develop guidelines and rules relating to ethics and PROFESSIONAL RESPONSIBILITY and enforce sanctions for violation of rules governing lawyer conduct. They also offer attorneys the opportu- nity to meet socially to discuss employment prospects and legal theories. The International Bar Association, based in London, is for lawyers and law firms involved in the practice of INTERNATIONAL LAW. In the United States, bar associations exist on the national, state, and local levels. Examples are the AMERI- CAN BAR ASSOCIATION (ABA) and the FEDERAL BAR GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BAR ASSOCIATION 515 ASSOCIATION on the national level, the New Jersey State Bar Association and the Florida Bar Association on the state level, and the New York City Bar Association on the local level. Some law schools have student bar associations for the student body as a whole, and distinct, smaller bar associations for students with a common ethnic background or an interest in a specific area of practice. In a majority of states, membership in the state bar association is mandatory for those licensed to practice law. When lawyers are required to join the bar in order to practice law, the bar is said to be integrated, or unified. Integration is generally accomplished by the enactment of a statute giving the highest court of the state the authority to integrate the bar, or by rule of that court in the exercise of its inherent power. In effect, lawyers are not free to resign from an INTEGRATED BAR, because by doing so, they lose the privilege to practice law. The modern U.S. bar association traces its beginnings to the mid-nineteenth century. At that time, the practice of law was largely unregulated. People in need of legal services had no assurance that the lawyers they hired had had even minimum legal training. To address this situation, leaders of the legal profession began to organize self-governing bar associations to establish standards of education and of professional conduct. The first Code of Profes- sional Ethics was formulated by the Alabama State Bar Association in 1887. The ABA Canons of Professional Ethics followed in 1908, and were subsequently adopted in whole or in part throughout the United States. These canons were revised and expanded in 1969, as the Model Code of Professional Responsibility, and again in 1983, as the Model Rules of Professional Conduct. The ABA amends the Model Rules periodically as necessary, and states are free to determine whether to adopt these amendments. In addition to the rules, both the ABA and state bar associations issue ethics opinions, which are advisory statements regarding the application of an ethical rule. Although these opinions are not binding as law, they are often persuasive when reviewed by a court. Major issues of concern to bar associations in the 2000s included: n A perceived decline in professionalism among lawyers, manifested by a decline in civility and professional courtesy. n The preservation of due process and other constitutional rights in light of the wave of international anti-terrorism sentiment. n A conflict between lawyers’ ethical respon- sibilities and their business interests. Critics within and outside the legal profession complain that some lawyers seek out clients using unethical methods, and engage in LITIGATION of questionable merit i n the pursuit of personal profit rather than in the interests of justice. n The politicization of bar associations and the preservation of judicial independence. On some occasions, bar associations have taken positions on hotly contested social and political issues. Critics argue that the conflict within the membership over these issues distracts bar associations from their primary duty of regulating the practice of law. n Tort law reform. Bar associations continue to oppose any en actment of federal legisla- tion that would preempt state tort law in such areas as PRODUCT LIABILITY,medical LIABILITY, and automobile liability, includ- ing federal initiatives aimed at creating maximum allowable damages in tort cases. FURTHER READINGS American Bar Association. Available online at https://www. abanet.org/home.html (accessed May 16, 2009). Hamilton, Bruce. 1995. “What Makes a Great Bar Associa- tion.” Arizona Attorney (January). Martin, Peter A. 1989. “A Reassessment of Mandatory State Bar Membership in Light of Levine v. Heffernan.” Marquette Law Review 73 (fall). Pound, Roscoe. 1953. The Lawyer from Antiquity to Modern Times. St. Paul, MN: West. Warren, Kenneth J. 2003. “Multijurisdictional Practices Call for New Mo delRules.” TheLegal Intelli genc er (F ebr uary2 0 ). Young, Don J., and Louise L. Hill. 1988. “Professionalism: The Necessity for Internal Control.” Temple Law Review 61 (spring). CROSS REFERENCE Continuing Legal Education. BAR EXAMINATION The bar examination is a written test that an individual must pass before becoming licensed to practice law a s an attorney. A license to practice law within a state or federal jurisdiction is gene- rally premised upon admission to that jurisdic- tion’s bar (a collective professional association of attorneys and counselors) by meeting its criteria, including passing that jurisdiction’s bar examination. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 516 BAR EXAMINATION Bar examinations are regulated by states, and their specific requirements vary from state to state. Generally, they cover numerous legal topics and consist of multiple-choice questions and/or essay questions; many jurisdictions addi- tionally require a test designed to assess an examinee’s fundam ental lawyering skills in a hypothetical situation. Each state has an interest in protecting its citizens by ensuring the quality and competency of lawyers who receive licenses to practice in the state. In addition to requiring bar candidates to pass a difficult and comprehensive test of subs- tantive lega l knowledge, most jurisdictions also require proof of graduation from an ACCREDITED LAW SCHOOL and successful completion of a character background review. With few excep- tions, only people who satisfy these strict requirements and are licensed by a state bar may practice law in the licensing state. Critics of this system of ATTORNEY licensure argue that its true purpose is to reduce competition between lawyers by regulating the number of lawyers admitted to the bar. Historically, lawyers have played an active role in determining who, and how many, would join their ranks as members of the bar. This tradition predates the U.S. Constitution by more than six centuries, when Eng lish courts governed who would be allowed to practice law. Courts have long relied on the rationale that the integrity and competency of practicing atto r- neys directly affect the quality of justice dispensed. The U.S. legal system has adopted this rationale. Before 1828, states allowed practicing attorneys to determine the competency of prospective attorneys. Strict rules developed by lawyers at that time typically required an individual to obtain a college degree and work several years as an attorney’s apprentice before being admitted to the PRACTICE OF LAW. Because attorneys controlled who would get apprentice- ships, the general public perceived the system as catering to the elite. A decline of elitist attitudes surrounding the election of President ANDREW JACKSON in 1828 prompted a change in the attorney licensing system. State legislatures divested the authority granted attorneys and reclaimed control of bar admission standards, which became far less stringent and far less exclusive. Apprenticeships remained the most common form of legal study, but by 1860, only nine states required any form of LEGAL EDUCATION for ADMISSION TO THE BAR . Written bar examinations, when required, were cursory. By the late 1800s, a surge in formal law schools spurred a decline in legal apprenticeship programs. A new wave of interest in improving standards of legal education and bar admission prompted the founding of the AMERICAN BAR ASSOCIATION in 1878 and the American As socia- tion of Law Schools in 1900. These groups encouraged tougher bar admission standards, including the requirement that all bar candi- dates compl ete a written examination used to assess their fitness to practice law. In the early 2000s, every state offers a bar examination. Administrative bodies established in each state generally govern the standards and parti- cularities of the bar examination. In keeping with the tradition of attorney self-regulation, these boards usually are made up, at least in part, of licensed attorneys. The boards deter- mine what legal topics will be covered; what types of questions will be asked; what grading methods will be applied; and the locations, dates, and times of examinations. Nearly every state requires, as one component of the exami- nation, the Multistate Bar Examination. The Multistate Bar Examination contains 200 multiple-choice questions covering six legal topics: contracts, CONSTITUTIONAL LAW, CRIMINAL LAW and procedure, evidence, real property, and torts. Examinees have six hours to complete the exam, or 1.8 minutes for each question. This computer-graded test is offered twice per year, usually in February and July. The test questions change each time the examination is given, and score results from the multistate examination taken in one state may be transferred to other states’ bar admissions committees. According to the National Conference of Bar Examiners (NCBE), as of 2008, only Louisiana and Washington did not include the multistate examination as part of their respective bar examinations. The average raw score, according to the NCBE, has hovered between 125 and 130 out of 200. Most states al so require bar candidates to complete a test of their knowledge of state laws. Examinees usually take this portion of the exam on the day before or after the Multistate Bar Examination. This state-specific examina- tion often contains essay questions or multiple- choice questions or a combination of the two. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BAR EXAMINATION 517 . PHOTOS. ▼▼ ▼▼ Dennis Banks 19 37– 19 30 2000 19 75 19 50 ◆◆◆◆◆ ◆ ❖ Indian Reorganization Act of 19 34 19 37 Born, Leech Lake, Minn. 19 39–45 World War II 19 50–53 Korean War 19 53–59 Served in U.S. Air Force 19 61 73 Vietnam. $55 Trillion Question.” Fortune. September 30. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION BANKS AND BANKING 511 v BANKS, DENNIS J. Native American activist, organizer, and protest leader. Members of Congress were skeptical, in part because the three-page GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 510 BANKS AND BANKING Carnell, Richard Scott, Jonathan R. Macey, and Geoffrey