The Falls City tribune., 1911-01-20
Guaranty Deposit law


was enacted in 1909, was not put into
operation for the reason that it was
taken into the courts to test its va
lidity.
The Supreme Court of the United
States has just passed on the Law
and held it constitutional. 1t will
therefore soon be in operation in this
state.
II thus becomes a matter of interes
to all. w consequently reprint a
short article upon the same giving
its principal features, which appeared
in the Tribune April 9, 1909.
The last legislature enacted a law
which was known as the Guaranty
Deposit Law. Inasmuch as many
people are bank depositors and as the
legislative reports will not be in prin
for some time, it is we'll that a brief
synopsis of the law be published.
The law has legislated out of exist
ence all private banks. There were
only a few of them in the state, but
after July LIST. when the law goes into
effect, there will be none.
After that date we will only have
State and National banks. National
banks are incorporated under the ma
tlonal laws, and the guaranty deposit
law will not apply to them.
Il will not mater what name a bank
may have, whether it be a County
bank, or a City bank, or a State bank
they will all be state banks, and sub
jet to the guaranty deposit law.
The law throws many restrictions
around the management of state
banks. which did not exist before.
1t stipulates the amount of capital
which shall be necessary to start a
bank in cities of different classes Fo
instance no bank could be started in
Falls City with a smaller capital than
$35, 600.
In all new banks the cpital must be
paid up in full before starting. One
third of it may be invested in a bank
building and furniture, but the bal
ance must be in cash.
All stock holders are liable for as
much more. as they have stock in the
bank. For instance, if a mar had
$1,000 stock in a bank he would be Ii
able for another $1,000.
There can not be a less number of
directors for any new bank than three
and each director must own at least
4 per cent of the stock.
There are usually at least five direc
tors in every bank, so the board Of
directors will usually own at least
one fifth of the bank and hence be
financially and personally interested
in the good management Of the bank,
Ne bank is allowed to lend more
than 20 per sent of its capital and
surplus to anyone firm, corporation o
individual.
No bank is allowed to enc any
money at all to any of its active off
icers. and no director can borrow any
money from his own bank unless a
majority of the board of directors
have consented to the same, and such
consent must be recorded in the
banks minutes.
Every bank is compelled to keep on
hand or on deposit with other solvent
banks at least 10 per cent of its de-
posits, and 6 per cent of its deposits
must be in ash in the vaults of the
bank.
No bank is allowed to lend more
than eight times its capital. no matte
what its deposits may be.
No bank is allowed to borrow more
than two-thirds its capital stock, ex
cept for the purpose of paying its
depositors.
To enforce these restrictions, bank
examiners are appointed, They
must be men who have had not less
than three years active experience in
a bank, and must be expert account