New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1915-04-09
Gregory Says Deposits
May Be Safeguarded
with Surety Companies.
NO CONFLICT WITH
PREVIOUS OPINIONS
Insurance Point Not Covered by
Bonaparte and Wickersham,
Says Attorney General.
From Tie Tribune Bureau. ]

Washington, April S.-Leaving no
further doubt as to the legal right OF
national banks to guarantee deposits
through arrangements with bonding or
surety companies. the text Of the opin-
ion Of Attorney General Gregory, the
gist Of which was published in The
Tribune day before yesterday. was
made public to-day BY the Treasury
Department
The opinion of the Attorney General
was given as the result of an inquiry
from the Controller of the Currency
In this request Williams construed the
opinions of two former Attorneys Gen
eral, Bonaparte, in 1908. and Wicker
sham, in 1909, as forbidding any such
plan of guaranteeing deposits.
Attorney General Gregory, however,
held that these opinions were not in
him that the surety company plan was
legal.
1.-THE opinion Of July %, 1908. con-
STRUNG the Oklahoma State Banking
Act" said the Attorney General, ode
termined that a national bank could
not lawfully participate in the plan
contemplated by the act for the guar.
antee Of deposits, because it involved
essentially q guarantee to the de-
positors Of other banks that they
should be paid in full-a contract
which was deemed beyond the powers
of the bank to make. The opinion OF
April 6, 1909, held that national banks
in the State Of Kansas could not avail
themselves Of the bank depositor's
guaranty law of that state. The in
quiry, upon the answer to which the
decision rests, was whether an &C
ceptance Of the provisions Of the Kan
sas law would 60 control the conduct
of thc affairs OF national banks "a to
expressly conflict with the laws Of the
United States.
"The language employed in the opin-
ions of July 2S, 1908. and April 6, 1909,
TO the effect that national banks are
without power TO contract for insurlng
that depostors shall be paid in full,
was used in the course Of argument
merely, applied to n question which
it was not necessary TO determine, and
may be disregarded so far as incon-
sistent with this opinion.
1.-THE law confers upon national
banks such incidental powers as are
required to meet all legitimate de-
mands of the banking business and to
enable them to conduct their affairs
safely and prudently within the scope
Of their charters
Mr.. Gregory then construed the sec
ton providing that national banks
shall give satisfactory security, by
the deposit of United States bonds and
otherwise" for public moneys deposit
ed with them as a recognition Of the
existence of the power on the part OF
national banks to give security for de-
posits. He pointed out that the ability
Of a bank to secure deposits depends
upon the confidence Of depositors or
the belief that their deposits are Sc
cure. He continued:
"A contract of insurance or guar
anty, such as described in the question
submitted, may afford protection to
depositors by securing the perform
ance Of an obligation on the part OF
the bank which otherwise might not
be performed. And it is not unrea-
sonable TO believe that such contract
at the same time may prove valuable
10 the bank because of the confidence
il may assure. No reason is perceived
for prohibiting q national bank, in the
discretion of its directors, from 80 Sc
curing its depositors, or for denying
to the bank such benefits as they be-
believe may accrue in the form OF in
creased confidence resulting from such
q contract"