The true Democrat. [volume] (Bayou Sara [La.]) 1892-1928, 1914-05-23
THE FoREHANDED MAN.
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vas by organizing a state bank.

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was by organizing state bank.
A bank commissioner is quoted by
Mr.. Cooke as saying that the heaviest
losses might have been avoided If the
records of certain men who applied
for state-bank charters had been more
carefully scrutinized. For time state
banks offering guaranteed deposits
gained rapidly In comparison with ma
tional banks that could not come into
the guaranty system.
Then came some Indifferent crops,
a let-up in the real-estate boom, and a
day of reckoning. 'Twenty-seven state
banks, with about seven million dol
lars of deposits, have failed since the
system was inaugurated-or have liqui-
dated by the aid of the guaranty fund.
These failures, after liquidating the
good assets of the insolvent concerns,
have thrown a loss Of about two mil
lion dollars on the guaranty fund
The result is that state banks have
been assessed about one per cent a
year on their average deposits-which
is equivalent to tax of five or six per
cent on their capital; in fact, some
banks have paid a full fourth of their
capital in assessments, and the fund
still has-or had when Mr.. Cooke
wrote-unpaid warrants outstanding.
Politics Mixed With Banking.
OF course the state banks vigorously
objected to such heavy assessments;
quite a number of them, in fact, have
left the state system and reorganized
as national institutions in order to
escape the very burdensome assess
ments for the guaranty fund. To re-
lieve the banks the law has been
amended, the fund being reduced to
two per cent of deposits instead Of five,
and the regular assessments, after the
first three years, limited to one-flfth of
one per cent Of deposits each year.
More important still, the manage
ment of the fund and of the state bank
ing system has practically been turned
over to the bankers themselves. The
State Bank Association will name
three persons from whom the govern
or will select one to be bank commits
sioner, and nine persons from whom
the governor will select three other
members of the State Banking Board.
This situation has been pretty wide
ly advertised as proving that guaranty
of bank deposits Is failure-but it is
very clear that the system got into
trouble in Oklahoma because the law
was faulty and badly administered; in
fact, nearly all the losses to the guar
anty fund arose from the failure of
four or five city banks which had been
most recklessly conducted.
If the banks had been properly in
spected before their admission to the
guaranty system and the unsound ones
rigidly excluded; if thorough inspec-
ton had been practiced thereafter;
and if no new charters had been is
sued except to men who were clearly
| fit to manage banks and for locations
where there was real need of addition.
al banking facilities, the guaranty of
deposits would probably have worked
successfully.
And there is one point that critics of
deposit guaranty overlook: All the
losses from state-bank failures In Ok.
lahoma have fallen on the banks.
Though there have been over score
of failures, depositors have lost moth
ing. This probably explains why
even in the opinion Of critics of the
system-there Is no immediate pros
pect that the law will be repealed; in
fact, the critics agree that depositors
in Oklahoma are so little disturbed by
a bank failure that the banking board
frequently has to look them up and re-
quest them to come and get their
money. That complete confidence on
the part Of depositors is not an alto
gether bad thing for banking system.
The Oklahoma commission no doubt
showed its political complexion by
trying to bolster up and nurse along
insolvent institutions by use of the
guaranty fund-instead Of squarely
facing an unpleasant situation; but it
by no means follows that all commits
sions must do likewise.
Under the amended law the issuance
of bank charters is put entirely within
the control Of the board, and the bank
commissioner can Ak the rate state
banks may pay on deposits, thereby
discouraging speculative banking. With