Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1911-05-25
Oklahoma Bank Law
How the Guaranty Law
Puts n Premium on Reck-
less Banking.

After three years OF experience with a
compulsory bank guaranty deposit law,
Oklahoma find itself much concerned with
it's operation. A few weeks ago the United
States supreme court decided that the
state had the right to adopt such a statute,
and, In effect, authorized the common
wealth, n IL saw fit, TO force state bank
to pay assessments to make good the losses
in failed institutions. This Oklahoma has
been doing. An investigation by the State
Bankers association is reported TO show
that sS7s, S52 has been needed In the three
years for use in the guaranty fund, and
that now, with another large bank in the
receivers hands, there must be further
assessment to supply the need OF an empty
treasury. So strenuously do the bankers
object to this that, though at the beginning
seventy national banks took state char
tiers, now fifty have applications pending
for new charters as national banks. They
declare that, except in sporadic instances,
the operation OF the new law has not at
fected the deposits OF the nationals. In
deed at the latest statement they showed
larger gains than did the state banks. They
point out that with an assessment OF /
per cent on the deposits, as Il now pro-
posed, bank with $4,000 capital and $780,
900 deposits would pay 10 per cent OF its
entire investment. wiping out a years
earnings.
The claim that the law has encouraged
reckless banking seems to be justified in
some instances. One failure Of 100000 re-
vealed bad management and the manipu-
latlon Of the guaranty fund in a way that
endangered the entire surplus. other fail
ures have been of banks in which part Of
the fund was invested, thus throwing a
double burden upon the sound banks. Ten
banks have been recipients Of the fund,
which now has a balance of $Se292.
Altogether the Oklahoma law appears to
have many weaknesses and is receiving
severe criticisms at the hands Of those
most interested in It. In the legislatures
Of several states of the northwest and
middlewest during the past winter there
have been proposed deposit guaranty laws,
but none has been enacted into statute
Nebraska, Teaxs, Kansas and Oklahoma
are alone in trying the experiment. Kan
sass law is voluntary, and less than half
the state banks have assumed its provis-
ions. Texas has two optional forms, and
their opinions of its workings Nebraska's
law was not put in operation until after
lno recent supreme court decision, so tnat
It is too early to see its effect in that
commonwealth.
The principle of the bank guaranty has
never appealed to the financial judgment
Of those who believe In individuality in
business affairs. With the human factor
eager to take advantage of opportunity,
efforts to trade upon its provisions are in
evitable. This has in more than one in
stance already been manifest Only COM
bined with such stringent examinations as
would make rascality practically unknown,
and with powers to assist the weak bank
when circumstances Justify, could 1t hope
to maintain permanency. Neither Of these
conditions has yet been attained fully by
states that have adopted the plan. Okla
homa seems to be least successful in es-
tablishing confidence.