The Glasgow courier. [volume] (Glasgow, Mont.) 1913-current, 1920-07-02
STATE BANKING PLAN
IS PROVEN FAILURE
MANY STATES HAVE TRIED THE
EXPERIMENT WITH DISAS-
q TRoUS RESULTS
NORTH DAKOTA NOT NEW
History Records That These institu.
tons Were PoIiticaIized and This
Influence Made the Principal
Security for Loans

The state banking plan as exempli-
fled in North Dakota is not q new idea
and many such ventures on the part of
various states has resulted in disas-
trous failures, according to the Mon
tan Development association Official
Bulletin, copies of which have been re-
ceived here.
Business men familiar with bank
ing methods and fundamental princi-
pies have ever been friendly % the
North Dakota idea of a state bank
says the Bulletin. 'The Dakota bank
was organized primarily for the pur-
pose of lending money to farmers on
land, and financing the state-owned in
dustrieS. Two million dollars in bonds
were issued to provide it with capital.
All of the state, county, township and
other public funds must be deposited
in this bank, which has the authority
to redeposit funds in other banks
which it selects. Mr.. TOwnley die
tates who shall be manager Of the
bank.
"The institution has been political
lied from its inception, and it is not
difficult to see the tremendous lever
age and the wonderful capacity for po-
litical influence which the bank has
provided. Only 100000 Of it's $34,-
100000 has been loaned to the farm
ers. The bank has been removed from
public inspection, and the only means
the public has of gaining knowledge
of it's affairs is through statements is
sued by the manager Of the bank. The
state auditor has been refused admis-
sion or any knowledge of the affairs Of
the institution.
even in the dark history of similar
state operated banks, so high-handed a
measure has never before been perpe-
trated, and it is true that one of the
most dismal chapters in American
banking history Is that which records
the creation and collapse of banks
owned and managed by the states.
"The league always says that the
business mans attitude toward the
state banking plan is dictated by "Big
Business" But here are the facts
which really lead him to his conclu-
sions.
1.-THE Bank of the Commonwealth of
Kentucky, chartered in 1920, began
with brilliant prospects, and a capital
Of $3,OOO,OOO; the project ended in dis
aster in 1880, after a controversy
which nearly ended in revolution.
1.-THE State Bank of Alabama, nearly
a counterpart for the North Dakota
institution, designed to hold all the
states funds and distribute them as
evenly as possible over the state, de-
generated into a political melee, in
| which the hotel keepers of Tuscolusa
became the principal influences in de-
termining its policies. When it's affairs
wound up, its assets netted about $1O,-
100000 toward reducing the bonded
debt of the .t.te nas $1,000 Q was {
| dead loss, n addition to the public
funds originally set aside for It's use
mississippi has had three similar
experiences. Despite two earlier fail
ures, in 1888 the Union Bank Of Mis-
sissippi was organized with $15,OOO,OO(
capital, negotiated through bonds Of
the state for which the credit Of the
state was pledged. The bank ran -four
years. Around this bank a system OF
satellite banks was organized, similar
to those instituted in North Dakota
At the end of four years the whole
system fell, a huge and shapeless
wreck S4S, OOO, 900 of loans were never
paid, SOB, 100000 of notes and deposits
were never redeemed. A famous his.
torian says: The condition at the time
beggars description. Society was brOk'
en- up from it's very foundations, every
body was in debt without any possible
means Of payment, lands became
worthless, and the ommOn return
upon legal processes against debtors
was in the very abbreviated form OF
G. T. T. (gone to Texas).'"
The experiment resulted in failure
also in Arkansas, Illinois, Tennessee
Louisiana, Georgia, Vermont. Missouri
Delaware and the Carolinas. Misfor
tune beset the pathway Of all, and
according to the association, the prin'
cipal factor in these failures, as his
tory records 1t, is that these institu'
tons were po~liticalized. They were
used for political purposes, and politi
cal influence was the principal security
upon which the loans were made.
"In the light Of these facts" con
tinues the Bulletin, business mer
would not be favorable to the NORTH
Dakota state bank plan, even if its
affairs were in the hands of the besl
financiers of Il country. Is it any
wonder that they are not enthusiastic
when they know that the affairs OF
the Bank Of North Dakota, with its
S34, 1000, 900 Of assets and the faith o.
the state pledged as security for its
operations, are in the hands of Arthur
G. Townley and a coterie of irresponsi
| BILE socialists whose individual historic.
are principally written in the bank