Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1919-10-08

whole business is coming to a settlernent.-New York
Review.
THE PUBLIC'S INTEREST
tn. sc,idity and safety Of any bank doing business IN
North Dakota lie the concern not only of it's officials.
stockholders and depositors. but OF the general public as
we'll. The entire credit Of the state is involved in the Sc
curity Of its banking Institutions The failure of one bank,
no matter from what cause, inevitably causes a feeling of
doubt and uncertainty In the minds Of many people with
reference to banks IN general and this is bound to react
unfavcfably on the entire business situation. Not only is
the banking situation disturbed, but the credit Of indtvid-
uals is affected and because CT this disturbed condition 1t
becomes more difficult for the individual to obtain loans
necessary for the prosecution of his cwn legitimate en-
terrrisee.
Papers which have sought to make a political issue
OF the closing of the Observation-Disclosures bank Of Fargo
have sought to make 1. appear that, because, az. they have
alleged. its reserves are up to the figure required under
the state laws, the bank was necessarily solvent That
contention is without foundation, as the solvency of the
bank depends on the character Of its entire assets, and not
on its reserves alone. The state law restricts the amount
which can be loaned 70 any individual or institution to Is
per cent OF its capital stock and surplus of the bank. The
purpose OF this law is clear. It is intended to have the
banks loans distributed In such a way as to minimize
whatever risk there maybe in the handling of legitimate
credits. 1t is not desirable either in the banking business
or in many other lines that all ones eggs should be in one
basket. According to the reports made by the banking
authorities who have been investigating the case OF the
Fargo bank, the loans have been made as follows:
Consumers Stores Observation-Disclosures
Nonpartisan League ................ ~14s.S25-cs
League Exchange .................. ~6e.18s-zs
Publishers National Bureau ........ ~47,s5o.eo
Ia addition to these some aixtesn other items are tab
ulated. the loans running from S4T. 600 dofn to a little over
s,oec. The banks capital stock is $4,000. its surplus
SO. oec. ana the largest single loan which it could legally
make vas 50. oco.
In the effort to show that the law has not been VIC
lated the banks defenders maintain that the loans above
enumerated were individual loans secured by indtv11al pa
per, the well known checks. notes, etc, which have been
gathered up indiscrdninately b. league organizers through
out the state. Does anyone believe that the bank has dealt
with tn. individuals whose paper it holds. that it has loan
ed them the money, that it has investigated their stand
ing, and has ascertained that their credit is good? Such
a contention would be absurd on its face. Whatever the
legal status OF the affair may be the bank has not dealt
with these individual makers Of checks and notes.
The public has an interest in this matter both from
the standpoint OF the states credit, and from the stand
point Of their direct interest in the subject through the
loan guarantee system Depositors in this bank have been
treasured on the ground that-the state, through the loan
guarantee fund, would make good any shortage which
might develop in the banks assets. The purpose Of this
found is of course to protect depositors. But the money
that is devoted to this purpose does not come out of the
air. Il comes out Of the deposits of every Individual who
haa money in >bank. A guarantee fund is maintained by
payment from each bank according to the amount Of that
banks deposits 1t is in effect a tax on bank deposits and
directly or indirectly the tax will be passed on to the indi-
vtduals whose funds are being protected. and they must
pay the price Of that protection. The more numerous and
the greater in amount the losses are the higher must be
the tax collected to make them good. An insecure banking
system can not be made secure to the depositors without
q large tax. Consequently it is the depositors at large who
must suffer for every unsound banking act which results
in a loss. There is no escape from this.
The people Of the state. therefore, have a direct fl
nancial interest in this and all other matters pertaining to
the banking Of tho state. They have a right to demand
that the affairs OF this protected bank, which are now under
in Investigation. shall be probed thoroughly and that what
ever illegal methods have been employed in this or other
banks shall be stopped, and they should not permit their
atten. on to be diverted from this requisite by cries Of po-
Itical persecution.