The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1923-01-19

anty Fund. For example, deposits
otherwise secured" are not guaran-
tecd by the law and it is the rule in
other states, and is our contention
that deposits, on which a greater
rate of interest than that permitted
by law has been promised or paid,
are not guaranteed but are in fact
loans. Another class of claims that
has been rejected by the auditors is
where stock promoters and Ike Sc
curity statesmen have exchanged
notes for certificates Of deposit, it
being claimed that SUCH transactions
are in fact but an exchange OF cre-
dit and do not come within the law.
In short, the Commission proposes
to treat all deposits as unsecured
by the Guaranty Act that are legally
created or received in the ordinary
and usual course of banking busl-
ness as generally understood.
Referring to the item of CUES
toned Deposits" shown in the state
ment submitted herewith: Of this
amount 1861 ,656.79 are redeposits,
so-called, by the bank of North Da-
kota, made by the Industrial Com
n ission with full knowledge Of the
condition of these banks. 1t is claim
ed that such redeposits are variously
secured and for these and other
reasons, we contend that the Guar
anty Fund is not liable thereon
eve find that after a bank is clos
ed, the assets depreciate very rap
idly The reason for this is appar-
ent; the personal element is immed-
lately eliminated; the receiver has
very limited authority, his power
probably restricted to collecting and
receipting for m oney, and to realize
as rapidly as possible upon the as
sets; he may not use any of the
funds collected for the purpose of
protecting other assets, and general
w received is without funds; If
ne has made even more than fea-
sonable attempt to collect on the
securities in his hands, he is finally
apt to let matters drift somewhat,
both on account of his lack of pow
err and lack of results of his efforts,
until finally he collects sufficient
funds to pay mis- own expenses and
! lets it go at that. Many of those
owing closed banks do not feel the
same moral obligation to pay or at
tempt to pay as to a going bank.
The holders of first mortgages on
real estate are not inclined to ex-
tend the time of payment of inter-
est and principal to the same ex-
tent as when the security is under
the control of an open bank. We
| nd that the depreciation of the as
sets increases rapidly, and for this
reason We have concluded, and, in
many cases recommended, that an
early sale, in bulk, be made Of the
assets Of these banks.
Notes Gone
"The greater portion of the good
notes of the closed banks are in the
hands of bills payable holders, held
as security for obligations Of the
insolvent bank. Any bank before it
closes has exhausted every resource
toward collecting it's paper, as we'll
as it's capacity to borrow, with the
result that the best paper is invar-
iably found as collateral to loan
from the correspondent bank, while
the notes left in the bank are slow
and largely uncollectible. Much of
this collateral SO pledged for loans
has already been foreslosed upon and
the title passed to the owner Of the
bills payable, which nearly always
is some correspondent bank in a
large city. Several of these institu-
tions have sgnified their willing
ness to accept the amount of their
rclaims with interest and expenses
and release the collateral, provided
it is for the benefit Of the, closed
bank and has the approval of the
Guaranty Fund Commission. The
right of the Guaranty Fund Com
troll for the purpose of salvaging or
purchasing these assets has been
questioned, and while legal opinions
have been rendered to the Commits.
sion to the effect that it can use
funds for this purpose, still it ha.
been done only in special cases and
to a very limited extent, and in
such cases the Commission has de-
posted the necessary money in some
legal depository as a special depos.
it, with instructions for such depos.
tory to use this money to purchase
such assets, to hold them in trust
and collect them for the benefit OF
the Guaranty Fund.
Loans Made
"The report herewith submitted
discloses that there were loans
amounting to $8,56S, 10000 in closed
banks, and by determination based
on the ratings obtained by the Com
mission, the value of these loans
considered good and collectble is
$3,S50,258.00, SO that the good and
collectible notes in these closed
banks are worth approximately, &C.
cording to the ratings, but forty-foul
cents on the dollar. The create,
amount Of these notes is pledged as
collateral for money borrowed
which amounts to approximately ST..
677,040y00 including estimated inter.
est and expenses.
"The question Of having the Guar.
anty Fund Law amended to permit
the use of the fund for. the purpose
OF purchasing the assets outright
has been discussed generally, bu,
it is realized that there is danger
in delegating such power to any
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