Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1922-11-06
play after the real damage has been

oAkSI Liz ICol Ndl1lAS0 lbdo well
done. a.,
OF course, the purpose Of the guar
antee, Is to insure that the 'depositor
gets his money. It would have that
effect SO long as the theory were re-
stricted to comparatively few banks,
but the economists point out hat to
extend the plan nationally would pro-.
'duce a situation where there would,
not be enough money>to sc around to
pay the depositors and therefore the
guarantee would be practically worth
less. ST.. .
How it. Worked in Oklahoma.
An interesting study Of just how
the system works can be made with
the state of Oklahoma an a subject.
Oklahoma in 1902 enacted legislation
guaranteeing bank deposits In state
chartered banks. A. fund was GREAT
ed by assessing the banks in proper
ton to their deposits. It was expect
ed that the banks so guaranteed
would attra ct Increased deposits and
more than a hundred national banks
left the national system and reorEan-
lied as state banks to take advantage
ofIthe system. y,
One. of the first effects was to slim
ulate the organization of new banks.
When the system was introduced
there were 495 State banks. At the
close Of 1921 there were 622s state
banks. ECONOMISTS agree hat too
many banks are in Themselves a
weakness and the comptroller OF the
currency has announced that he Will
move very cautiously in authorizing.
the Organization Of new national
banks. /,
During the existence of the system
95 Oklahoma banks had to be closed
by the authorities because of weak
ness. The guaranteed deposits Of
these banks aggregated s11,o5o,ooo.
The sum available in the guarantee
fund was only $~3,645.000.t In such.a
case. the law provides that the state
may issue warrants-that is, borrow
on the public credit In order TO pay
the depositors. Thit shifts the bur-
den of bad bank.ngfo the, Whole body
of taxpayers who must meet the in
terest on the borrowed money. Also;
the first money that comes into the
exhausted guarantee fund must be
paid out to meet the guarantee on the
banks already failed, 40 there is no
fund to protect additional failures,
once the fund Is exhAu<.ed.
States which now have or until re-
Texas, Kansas Nebraska North Da-
kota, Washington, South Dakota, and
Mississippi. The experience has been
chiefly unhappy With all Of them, al
though O~klahomats experience is ~
garded as the worst. s5s1
The general opiniln, Of banking Off
'.lals. economists, and government au-
thor1ties is that THE deposit guarantee
theory 10 unspund and tendsftoo much.
to the sort Of banking which Old Man
!Burfey of Prince George county ex-
.|perienced. When he. got his freedom
from slavery he took the First money
he earned, $500, and deposited 1t In
q savings,bank which-had opened Its
doors shortly after the Civil war for
the express purpose Of attracting the
earnings of the negroes. After some
years, and aftet adding, from time
Ito time,sito his deposit, the old man
wanted to buy a mule and went to the
bank, asking for his money.
The bank man said,N Burfey ex-
|plained, that didn't have no money
Iip the bank. u, asked him how con1e
when I had been putting It tlS;re right
lAlong. He said the interest Just nat
urally eat 1t UP.
ANSWERS TOsSUEsTIoNs
tEEyN SLtsTr 49,. 81 .4-V.s.akr~