New-York tribune., 1908-08-02
NO WILDCAT BANKING
GUARANTEE NOT LEG4L.
attorney General Bonaparte De-
cIarcs Oklahoma Plan n gainst Lac.
from The Tribune Bureau. ]


Washington Aug Attorney General Bona
parte has nuliffed the Oklahoma schepe for
guaranteeing bank deposits, as far as national
banks concerned. holding. in a long de-
cisicn given at the instance of the Controller
of the Currency and published to-day, that 1t
is Illegal for the officers of any national bank
TO enter into such an agreement is contem-
plated by Section of the Oklahoma statute
and that persistent and wilful action to this
effect the part of any such bank Will be just
cause for the forfeiture of its charter
Several national banks in Oklahoma had al
ready entered into such agreements. but they
will promptly be ordered to withdraw by the
Controller of the Currency, under penalty OK
forfeiture of their charters.
A Treasury official charged with carrying out
the law said to-day:
ASIDE from the illegality of the procedure
II ruinous from the standpoint of good
banking The responsible and the irresponsl-
bic bankers the honest and the dishonest
would be intimately commingled under the
state law that safe banking would be fmposs1-
ble that it would be fraught with danger t"
the entire financial system of the state. because
the guarantee OF deposits would foster dishon-
est liberties with those deposits and lead to
q ever increasing system of wildcat banking
In his opinion the Attorney General SAYS:
The statute of Oklahoma to which you call
my attention creates a state banking board
COMPOSED of certain designated state officers.
and requires the said board to levy against the
capital stock assessment Of l per cent OF the
banks daily average deposits with certain de-
ductions, upon each and every bank organized
and existing under the laws of this state Th1s
assessment is to constitute what is designated
as a ''depostors' guarantee fund, and additional
assessments are to be levied against the capital
stock of the banks, proportionately TO the
amount Of their deposits, so as to always main
tain the fund at the designated amount
!
law rule of public policy forbldding a de-
positor in a national bank from obtaining tnsur-
ance on the solvency of the bank and the con-
sequent payment OF his debt in accordance with
its legal import; but the business of insuring
deposits is wholly separate business from that
of banking. and a corporation organized for the
latter business would have no greater right to
embarrass its funds and risk its credit in the
former than il would have 10 engage in life IN
surance, fire insurance, or casualty or marine
insurance.
Moreover it is to be observed that the bank,
and not the depositor, pays the premium, or the
equivalent of a premium. if the system of guar
antee established by the Oklahoma law is to be
regarded in the light of an insurance, and upon
this assumption therefore, the question would
be whether the stockholders Of national bank.
constituting they do the corporation, are
authorized to embark in the business of insur-
ing their depositors against loss through the
methods forth in this state statute. in con-
sideration, presumably, of the Increased amount
OF deposits which they would thus obtain. |
find provision of the national banking law
authorizing any such action on their part and
be essentially foreign to the legitimate functions
of a national bank instrument of govern
ment.
II is generally recognized that national bank
has no power guarantee the obligations of a
third party unless in connection with a sale or
transfer OF its own property and as an incident
70 the banking business.
It has been argued that the tank in this case
would not guarantee the obligations of other
banks. but would only agree to put the State of
Oklahoma. through its banking board. in funds
to make effectual such a guarantee on its part.
7 hiUL iC q U-if q
/ have not overlooked the fact that by the
terms of the proposed contract between the
bank in question and the state or its banking
board. the said bank agrees to do nothing which
shall be in conflict with the federal laws; but
this provision is not relevant for the entire con-
tract is ultra wires for a national bank. and pro-
hibited by the necessary intendment OF the stat
I hold that such is the fact with respect TO
the contract proposed in this case: that IL is
Illegal for the officers of any national bank 10
enter into such an agreement as is contemplated
by Section of the Oklahoma statute. and that
persistent and wlful action TO this effect the
part of any such bank would be just for
the forfeiture of its charter.