Jasper County Democrat, Volume 10, Number 42, Rensselaer, Jasper County, 18 January 1908 — INSURING DEPOSITS IN BANK. [ARTICLE]

INSURING DEPOSITS IN BANK.

Oklahoma’# Plan Promises to Become Popular and Will Spread To Other States. The subject of giving depositors greater security for money deposited in banks is of eepeoial interest at this time, and especially in this locality where so many banks have went broke in the past few years. The Bryan idea, which has heretofore been mentioned in these columns and which is a simple remedy and one that wonld settle the finanoial ills of the country and relieve money stringencies—because no one would

hoard money if they had the absolute confidence in the banks, whioh this would give—is meeting with much support from bankers and others all over the country, and now a Washington dispatch states that Congressman Adair of Indiana, president of the First National Bank of Portland, has introduced a bill providing that an assessment of one-tenth of 1 per cent, shall be levied on the average deposit of all national banks annually for the purpose of protecting depositors against loss. “I have looked up the Comptroller’s reports,” said he, “and find that a tax of oue-twentieth of 1 per cent, on the average deposits would have covered all losses sinoe national banks came into existence. If Congress will pass such a bill as I have offered, states will be foroed to enact like legislation affecting State banks, and we shall have absolute protection for depositors in banks; furthermore, we shall have provided a safeguard against suoh a panic as we have recently been experiencing.” Mr, Adair’s bill provides that when the guarantee fund reaohee more than $5,000,000 the tax shall be suspended temporarily. Representative Chaney, republican, has introduced a bill similar to Mr. Adair’s. Representative Landis is preparing a speech supporting the idea.

The Oklahoma idea, which is on the same lines for state guarantee, is favorably mentioned by the New York Financier, which says: “The insurance of banking deposits through the establishment of a guaranty fond has been discussed in banking conventions and in the press for many years. It has remained for the new State of Oklahoma, however, to provideby legal enactment for the establishment of a fund to protect bank deposits against loss in case of the failure of the institution. The law in question was signed by Governor Haskell on December 17, and becomes operative immediately. Its main provisions are. that a State banking .boa/d. oreated for the purpose, shall have authority to levy on the capital stock of banks an assessment of 1 per cent, of the daily average deposits of each bank The deposits of State funds in bank are exempt from levy. Should the guaranty fund thus provided become impaired through extraordinary drains, the board is empowered to levy special assessments in an amount sufficient to restore the fund to its minimum of 1 per cent. Banka organized in the future are to pay 3 per cent, of their capital to the fund when they begin business, and this assessment constitutes a cred it subject to adjustment at the end of the year on the total of their deposits. In order that there may be no preference shown, national banks in the State may take advantage of the system on the same terms, but if, in the future, the Federal Government shall establish a guaranty fund for national banks, then 90 per cent of the total of the assessment fnnds paid by suoh banks to the State shall be retained by them. * In case of bank failure the banking board will take charge of the insolvent institutions, pay from the guarantee funds whatever amount is necessary to make up the deficiency, and further assessment may be made, the State olaiming a first lien on all the assets of the bank and all liabilities against the stockholders, officers and directors, and against all other banking istitutions, corporations etc., with which the bank may be doibg business. “Stringent prohibition is laid upon loans by banks to their officers, etc., and a reserve ranging from 20 per cent, /is made oompnlsory. Several other important features are included in the new enactment, but chief interest centers in the guaranty clause. It is to be assumed that in fixing the percentage of assessment on all banks the board aoted on statistical knowledge, and that the fund so oreated will be ample for the purpose. One of the objections offered against the establishment of the guarantee safety fond principle in general has been that the removal of responsibility to depositors would tend to make bank officers careless, and it is a fact that with the loose laws which are in* force In many States this objection wonld hold good, The Oklahoma law, however, provides for at least

two examinations a year into every bank, and violations of the law sections is punishable by imprisonment. It is to be anticipate!, therefore, that officers of banks operating nnder this law will be foolish indeed to violate its provisions, and that Oklahoma banks will be carefully and conservatively managed. “A peculiar feature growing ont of the passage of the Oklahoma law is that banks in Kansas, particularly those adjoining the border of Oklahoma, are petitioning far the enactment of similar laws iu Kansas, claiming that the superior features of the new enactment will tend to draw business from them to the banks in the new State. If Kansas passes such a law it ia only reasonable to anticipate that Nebraska and other adjoining States will oonsider the question seriously, and*, thus we have a spread of the Oklahoma principle, affecting many States which have never considered the anbjeotas of immediate importnno *•

Thev Chicago News speaking of Oklahoma’s-law guaranteeing bank deposits in that State, and of efforts in Illinois, Eentuoky, Mississippi and Lousiana in the same direction, says: “It is fair to assume that other States besides Oklahoma soon will adopt the the policy of guaranteeing against loss to depositors in Statebanks. If the plan on trial R roves satisfactory to those director interested one must think that it will give to banks whose deposits are thus protected an advantage over competing banks. ; “The plan should receive attention from bankers everywhere, sinoe it might prove very benefioial or very harmful to any one of them by largely increasing or seriously depleting his deposits. It is conceivable that in such a time of general anxiety as was last November enormous benefits would accrue to those banks whose depositors were relieved of worry by a State or national law guaranteeing them against loss.”