Omaha daily bee., 1919-10-16
The North Dakota Bank
(From the New York Times.)

AS corollary OF the closing At Fargo OF
the Scandinavian American bank, which had
loaned $4,000 to the national nonpartisan
league and three subsidiary concerns loan
rather mildly called by the state banking board
excessive and made on unsound security, an
attempt has been made to examine the Bank Of
North Dakota to ascertain what moneys, If
any, have been diverted to illegal purposes"
The examination was ordered at the instance
OF the attorney general, one Of the governors
Of the bank. the other two being the governor
OF the state and the state commissioner Of ag-
riculture and labor.
The Bank Of North Dako.. is perhap. the
most famous and curious Of the institutions es-
tablished by Mr. Townley, the autocrat of
North Dakota and of the nonpartisan league.
In intention or pretense it is an imitation of
the numerous rural credit banks of Europe
banks where farmers artisans, tradesmen can
get cheap money. In effect 1t is something en-
trely different, and it is conducted according
to rules unknown in any code of banking laws
since modern banking began. 1t keeps no re-
serve; at least it IS not bound to. The state
banks have to have reserve amounting to 10
per cent of their time certificates and 20 per
cent of their demand deposits The Bank of
North Dakota, as Mr.. Frank E. Packard, an as
sistant attorney general Of North Dakota, told
the Montana Press association the other day,
can loan out all of its money and keep nothing
to pay its depositors." 1t "can loan all of its
funds to one individual and overdrafts are not
Forbidden Only the legislature can declare
the bank insolvent: All public funds have to be
deposited in it. Thus it is sure of deposits,
amounting recently to some $l6000,0O0. "Yet,"
says Mr.. Packard, while such deposits are be-
ing made, the bank may be insolvent and refuse
to honor the warrants of the political subdivi-
sions making the deposits 1t may continue to
transact business. including the receipt of de-
posts after insolvency. No penalty is attached
to the mishandling of the funds"
This extraordinary bank doesn't have to
publish statements Of its condition No pen
atty can be inflicted upon its officers for making
bad debts or impaired capital Upon depos-
itng the public funds in this bank all public
treasurers and their bondsmen are released
from liability. If the money is squandered or
embezzled, the amount can be made good only
by taxation" Moreover. it is allowed by the
act creating it to transfer funds to other de-
partments, institutions, industries, enterprises
or business projects of the state, which shall be
returned with interest to the bank" That is,
it may transfer the school endowment to the
credit. of any state-owned enterprise from
glue factory to hunlming bird aviary." The
public moneys may be appropriated without Sc
eurity, to any state-owned enterprise. If the
money is lost the taxpayers can make up the
deficiency IF there is deficiency, the state
shifts money from one fund to another and
taxes the people for the deficit" The public
bank examiner and banking boards have no ST.
PeiNoIOH OvCl tlls IHIlu vi MT. lOWIley gen.
lus The directors are not bound to examine
its condition. The bank examiner does indeed
examine, but he reports to the governors, po-
litical body.
The attorney general, who happens to be
unsympathetc with the new banking has called
on the state auditor, likewise an anti-T ownley-
lite, to examine this singular institution and as
certain if there. has been any diversion Of the
public funds The directors of the bank and
the magnates of the nonpartisan league are re-
sstng in the courts this wicked intrusion into
political banking. AS yet the controversy is
sub JUDGE. and one can only direct a reverent
attention toward one of the most eccentric
banks of the world