The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1921-01-12
New Banking Laws
Asked by Farmers
WILKINSON MEASURE PROVIDES
DIVIDENDS FOR DEPOSrTORS
AND BORROWERS.

DIVIDENDS FOX DEPOSIIOKS
AND BORROWERS.
(By Charles B. Cheney.l
Cooperative banks, new wrinkle
in finance in Minnesota, are authoriz-
ed by the terms Of the farmer pro-
gram bill recommended for passage
late yesterday by the house commit
tee on markets and marketing, and
now on the house general orders. This
feature of the bill only came to the
attention of many members when it
was reported out by the committee. It
created some excitement and some
difference of opinion, indicating that
the provision will draw some fire when
it is taken up by the house next week.
It is claimed by these members that
the bill might torpedo big hole in
the present banking laws of the state.
The question these "sho.v me" mem
bers are asking is-what is a cooper
ative bank, and how is it going to be
run? Will it operate under the CO.
operative law, or will it be subject to
the general laws governing state
banks
Colonel R. Wilkinson, chairman of
the farmers program" committee,
which framed the bill, says there is
no ambiguity in the measure.
s'The only change it makes" he said
today, "is to permit banks to be organ
lied under the cooperative law. They
still would have to get their charters
from the state board, would be subject
to inspection and to all the rules re-
garding reserves and loans. The only
difference between an ordinary bank
and bank organized under this law
would be: The cooperative bank would
pay not more than per cent dividends
to stockholders, and any additional
net profits would be distributed as
patronage dividends to the customers
of the banks"
Asked how this would operate, Col
onel Wilkinson said dividends would
go not only to depositors, but to bor-
rowers from the bank. There is moth
ing in the act, however, to cover this
specifically. The bill is revision Of
the law governing cooperative asso-
citation, and it's first provision is as
follows:
"A cooperative association, society,
company or exchange may be formed
for the purpose of conducting any
agricultural, dairy, mercantile, min
ing, telephone, manufacturing mech
'nical banking or trust and loan bus
less upon the cooperative plan."
The words banking or trust and
loan" are the new matter in the pend
ing bill. Elsewhere, in section Z, the
provisions of the present law as to dis
tribution of profits are restated. Ten
per cent of annual net earnings must
be set aside for reserve fund until
this fund equals 80 per cent Of the
paid up capital stock, and this may
be increased to 100 per cent. Not more
than 5 per cent of the net profits may
be used "as an educational fund for
teaching cooperation. Annual divi-
dends are not to exceed s per cent.
Additional net profits" the act
says, shall be disbursed by uniform
dividends based upon the amount of
purchases from the association by
stockholders and upon the wages and
salaries received by the employees.
Nonstockholders shall receive divi-
dends upon purchases equal to one
half the amount paid to stockholders,
which may be paid in the carital stock
of the association"
There are some further provisions
but not applicable to banks.
Some members of the house who
have studied the bill say that it would
create studied the bill say that it would
create privileged class of banks, SUBJ
ject to the cooperative law instead of
to the general banking laws Of the
state Such a bank. thew assert
might be used to raise money to run a
cooperative enterprise, and might
lend up to any amount to the one bor-
rover Colonel Wilkinson SCOTS at this
Interpretation of the law, but the SUBJ
ject is being investigated carefully.
The bill is the first one of the 'farm-
ers' program measures to come out
of committee for action by the house.
Another important provision is the one
looking to federation of cooperative
organizations into stock companies
which would act as terminal selling
agencies. An amendment placed on
the bill yesterday in committee would
increase the amount of stock one CO.
operative association Nigh hold in
such federated selling agency from
$1,000 to $4,000. This is in line with
the recommendation in the message of
Governor j. A. O. Preus, who urges
this method for farmers elevator COM
panies to market their shipments in
the Minneapolis Chamber of Com
uanrea