The Red Cloud chief., 1909-01-15
SHALLENBERGER'S FIRST MESSAGE
Urges Passage Of Bank Guarantee Law and Makes Other Recon-.
~nendatenS and Suggestions.

and for a hScd amount.
our state department Of banking has q
complete record for the past eight years
showing the result OF rcceivcrships OF In
solvent state banks. This record shows
that since 1000 "A total deposit of $5i5,-
2GI.2. has been placed In jeopardy by
reason OF the failure OF state banks, From
the assets Of these insolvcnt institutions
deposltors claims have been ~lluuldatcd
until the balance unpaid for the entire
period OF eight years Is Sl9s, 255. % or m
average annual loss Of about S26, 900. 90 to
depositors. Crcditablc as this showing IL.
| feel quite certain that with "A number
W improvements which can be made In
our present law. the percentage Of loss
can still be materially reduced. The
pinimum capital required for the incor-
p~cration of q state bank shout he In
creased to at least SIS, 900. 90. Ban OK
aminatlons should be- made twice n year
instead of once as now required. Ex-
nmincrs should be Assigned to n certain
territory and thus eventually would be-
come familiar with conditions and sccur-
ities In that locality and would acquire
the necessary knowledge as to the worth
o: the bills receivable Of the banks which
they would examine. which Is the essen
tial thing In determining the solvency of
any banking corporation.
Under n guaranty plan which would
make the banks of the state sustain the
losses of the entire system. the bankers
should be given Il share In the control of
the department. The present banking
board, which Is composed OF three officers
elected for an entirely different purpose.
should be abolished and a non partisan
board established to be composed of three
members appointed by the governor each
OF is members To have had at least five
years practical experience In banking and
At least two of them to be actively on
gagged In that business at the time OF
their appointment. a bank COMMISSIONS
should be appointed by the governor with
the approval Of the banking board. who
should have had IN experience In the
banking business equivalent to that re.
CURED OF a member OF the board. and he
should select the necessary number OF
examiners with the approval OF the hoard
OF control. The banking board should sit
In session at Lincoln at stated period.
and be paid for the actual time In ses.
sion. They should have complete con.
troll of the issuance OF charters and tho
general administration of the banking
laws. II has been urged by critics OF tn,
J guaranty of deposits plan that II woul,
lead to the establishment OF too man,
hanks. This would be n serious objec
, ton II such were the result. 1t woul,
greatly strengthen our banking system 1
the banking board were empowered to ex
1.nlgA - ..,,... z..-- IL l.-a.
ance Of bank charters.
The possibilities Of profit to be made 4
= taking other peoples money on deposit
Q loaning II to the public ana Keeping tn
interest thereon is so aluring that n
. times the number of banks Increase NOR
I rapidly than the needs of bushes requir
! with consequent overlonning. hazardou
! risks, extravaganza In buildings and ex
renses with the result that In lean year
failures occur and innocent people SUI
fer. The overissuance Of charters can b.
, In a great measure overcome by Increase,
requirements as to the amount OF capita
stock necessary to be paid I'm by tn,
stock holders before n charter shall Is
sue. The amount required I'm each in
ftance should bear "A proper proportion I,
~ VI At NoWh VI Why VI
which the hank Is to be established. A
!, an example. showing tho manner II
which requirements as TO capital affec
the member Of bank charters issued. 3.94
national banks have been organized sine,
1900 when the requirements OF capita
stock was reduced to s25, 900. 90 ms tn
minimum. This Is 1872 more banks thai
the entire number In existence, when tn
law was changed In that respect. The re
duction OF the minimum capital stock re
Guirement to s25. 900. 90 has doubled In
number OF national banks In eight years
A substantial increase In the amount re
I quired as n minimum capital for the es
t~nblishmont of state banks would hav
a salutuary effect in keeping the numbe
of banks within n satisfactory limit an
also provide greater security to the de
= positors.
! As to the amount of assessment TO b
5 levied I'm order to provide an ajcquat
l fund for the prompt payment OF deposit
4 ors OF insolvent banks, ] would sugges
5 that one-fourth Of one per cent he levle
. upon the deposits as shown at the las
statement published prior to the com
. mencement OF the operation of the law
- anu tnlS uSseSsflenl TO ne tOllOWed VIII
. additional levies In like amount at period
. of six. twelve, and eighteen month
thereafter. After the accumulation OF
r guaranty fund equal to ono per cent o
the average deposits In the guarantee
$ banks. an annual tax OF one-tenth OF on
i per cent should be levied, because 1t l
. necessary under a proper system OF insur
. ance that the prosperous years shoul
pile up n surplus fund to provide for tn
inevitable demands OF less fortunat
times. As an additional security agains
any possible emergency, such as extr
ordinary demands upon the fund tn
board should be empowered to levy a
assessment OF not to exceed two pc
= cent OF the average deposits In any on
year. While this assessment might neve
l be levied, the power TO use II would hav
e n sustaining effect In times OF possibl
panics. Such provisions would result 1
= accommodating In eighteen months wit
the average OF deposits remaining In stat
banks as at present n guaranty fund o
= S642, 35l 90. This would be 1927, o97, 0